Tag Archives: financial advisor

What Oil Price Is Sustainable?

oil productionMy Comments: Buying gas for your car at the pump is now an adventure fraught with uncertainty. Is the price going up or is it going down? What can I expect the next time I need to fill the tank? Is there a station on the other side of town willing to lower their price to get more customers? Does it make sense to drive all the way over there to save 3 cents on every gallon?

Some people simply don’t give a damn, or have enough money that the question is irrelevant. But for many, it’s a weekly quiz that surfaces every time the needle on the gauge moves toward the empty side.

So as someone who understands the dynamics of supply and demand, the two primary drivers of price, this lengthy explanation helped me better understand what is going on as I stand with hose in hand, watching the dollars add up.

There is no simple explanation. The article presented has lots of charts and lots more text to wade through. So if this is your cup of tea, you can get to the source and finish it there.

May. 8, 2015 by The Value Portfolio

Summary
• The cost of oil production represents a lower limit on prices for the long term.
• Many major oil producing countries need higher oil to balance their budgets.
• Lower oil prices will lead to faster-than-anticipated growth in demand, leading to a quicker recovery.

Introduction
While many of my articles talk about individual oil companies, lately, I have been writing more about oil markets as a whole. After my article about the potential effects of the release of Iranian oil, the goal of this article is to try and provide a bottom limit for long-term oil prices.

To those wondering what to do with this information, it simply means if oil goes below this bottom limit, buy it.

15-05 Crude Oil per gallonAs many of you know, the last year has not been kind to oil prices or commodities in general. After hitting highs of near $110 a barrel for Brent a year ago, prices fell by over 50% to lows near $50 in January. Prices then bounced back before bouncing down again in mid-March to ~$55 a barrel. Since then, prices have shown a nice recovery towards $65 per barrel.

Simply put – part of the world’s oil supply was not profitable at $50 a barrel. However, now that prices have recovered, the goal of this article is to determine what is a lower-end cut-off for oil prices – what is the lowest point at which the world’s oil production is profitable.

Balancing The Budgets

Unlike the United States, most other countries in the world are not trillions in debt. This is especially true for oil countries. Thinking of countries like Saudi Arabia and the United Arab Emirates, one thinks of the enormous wealth generated by oil production.

Still, the lavish spending of these countries means that they need high oil prices to balance their budgets. Looking at the above graph, for the 35 million barrels per day produced by these countries (roughly 40% of the world’s oil budget), only Kuwait and Qatar can balance their budgets with current oil prices. In fact, many of these countries rely on oil prices of around $100 to cover their costs.

What does this mean? Traditionally, Saudi Arabia along with OPEC as a whole was seen as an oil price controller. When prices went down, OPEC would step in through cutting production in order to help keep prices higher. This is part of the reason why oil prices recovered so quickly in 2008.

However, this time is different. This time, Saudi Arabia does not want OPEC to cut production, they want prices to remain low. Saudi Arabia is hoping to use its significant financial assets to drive on competing U.S. producers while keeping oil prices low.

Drawing a conclusion from the data, we see that in the long term, the need of OPEC to balance its budgets mean that oil prices of roughly $100 are necessary, with $80-$90 representing an overall lower bound.

CONTINUE-READING

The Obamacare Curse: What If, This Month, the Republicans Finally Get What They Want?

healthcare reformMy Comments: After 6 years and counting, I’m still waiting for a valid, alternate idea to come from the political right. As an insurance agent for 40 years, and having sold individual and group policies for many of them, I understand many of the dynamics involved. Why is it not in our best interest as a nation to have a healthier, longer living, productive citizenry? If you truly believe that, then find a way to make it happen.

By Jonathan Chait May 20, 2015

Last summer, two Republican-appointed federal judges ruled, against the furious dissent of the Democratic appointee, in favor of what had theretofore been viewed as an outlandish lawsuit designed to blow up Obamacare. The unexpected progress of the lawsuit, hatched by anti-Obamacare activists at a right-wing think tank, filled conservatives with sudden Schadenfreude. They had lost every previous opportunity to finish off universal health care: a 2009 vote in the House, a 2009 vote in the Senate, another 2010 House vote, and, in 2012, both a lawsuit and a presidential election. Now they had yet another chance to drive a stake through the hated centerpiece of Barack Obama’s domestic legacy.

Next month, the Supreme Court will rule on King v. Burwell. If all five Republican appointees support the plaintiffs (there’s no chance any of the Democrat-appointed justices will take the lawsuit seriously), some 7 million Americans will quickly lose their insurance. The prospect that this will occur has induced a wave of panic — not among the customers at risk of losing their insurance, who seem largely unaware, nor even among Obamacare’s Democratic supporters, but among Republicans. The chaos their lawsuit would unleash might blow back in a way few Republicans had considered until recently, and now, on the eve of a possible triumph, they find themselves scrambling to contain the damage. It is dawning on the Grand Old Party that snatching health insurance away from millions of helpless victims is not quite as rewarding as expected.

Unlike the Obamacare lawsuit that failed three years ago, the latest case is not based on a radical legal theory. Instead it is based on a novel reading of legislative history. The law allows states to set up their own exchanges to sell insurance to those who don’t have it through employer coverage, Medicare, or Medicaid. If states don’t establish an exchange, the federal government sets one up for them and, as it does with the state exchanges, offers customers tax credits. The trouble is that the law authorizing tax credits defines the exchange as “established by the state.” This ambiguity — does “by the state” not also mean the federal government? — was a technical omission. Many other parts of the law indicate its intent to make tax credits available to customers on the federal and the state exchanges alike.

The plaintiffs are led by a Vietnam veteran in Virginia named David King who makes $39,000 a year and objects to having to purchase insurance on a federal exchange. He would be exempt from this requirement were he not eligible for the tax credit — his $275 monthly payment would rise to a disqualifyingly unaffordable $648 — and this exemption, his lawyers argue, was exactly Congress’s intent. Without tax credits, the insurance would be unaffordable to most customers, triggering an actuarial death spiral that would destroy the individual insurance market in any state that attempted it. The plaintiffs insist Congress created the threat of self-destructing federal exchanges to coerce states into creating their own. (Disregard the copious evidence that the law’s drafters, and officials at the state level in both parties, believed federal exchanges would include tax credits.)

The lawsuit works more on the level of an elaborate prank than as a serious reading of the law. And yet it stands at least some chance of success — it only needs to persuade Republican-appointed judges. That prospect has grown suddenly unnerving because, unlike previous Republican efforts to strangle the law, the current one comes as Obamacare is functioning extremely well. Premiums on the exchanges have come in well under projected costs, customers report higher satisfaction with their coverage than those who have employer-sponsored insurance, and overall medical costs have grown far below the projected rate. It is one thing to take away a scheduled future subsidy, of which most intended beneficiaries are unaware. It is quite another to take away a benefit they’re already using.

Should the court side with King, wiping out tax credits for residents of the 34 states with federally run insurance exchanges, Obama will propose a simple alternative: Congress should pass a law correcting the drafting error that sparked the lawsuit. Problem solved.

From the standpoint of Republicans in Congress, of course, this would represent the opposite of a solution. The party remains doctrinally committed to the complete destruction of Obamacare. In the past, conservatives have rejected even partial changes to the law on the grounds that anything making Obamacare less onerous amounts to collaboration. This doctrine will now put Republicans in the position of endangering the lives of sick Americans who will lose access to their medical treatment.

Senator Ron Johnson of Wisconsin appeared on a conservative talk-radio show last month to raise awareness of the party’s dilemma. Obama, he told host Jay Weber, will unleash a public-relations campaign to highlight the Republicans’ cruelty. “And of course, he’ll have the ads all racked up with the individuals that have benefited from Obamacare on the backs of the American taxpayer,” he said. “He’ll have all those examples as well, so — ”
“And the sad-sack stories about who’s dying from what and why they can’t get their coverage,” interjected Weber.
“Right,” agreed Johnson.
Senator Ben Sasse of Nebraska has likewise warned that a successful lawsuit would create problems. “Chemotherapy turned off for perhaps 12,000 people, dialysis going dark for 10,000. The horror stories will be real,” he wrote in a Wall Street Journal op-ed. For decades, medical deprivation of this sort used to be a uniquely American fact of life, at least among industrialized countries. Obamacare has turned it into something different: an actual political problem for opponents of universal health insurance.

Neither Johnson nor Sasse has a real plan designed to stop those horrors from taking place. Instead, their aim is to give Republicans a way to divert the blame onto Obama. The party is circulating contingency plans to temporarily restore the tax credits in exchange for crippling the law in other ways. Phil Gramm, the former Republican senator turned conservative-think-tank “visiting scholar” and financial-industry lobbyist, has proposed that Republicans pass a bill to temporarily extend the credits in return for eliminating the law’s regulations prohibiting insurance companies from rejecting old or sick customers. Competing proposals by Johnson and Sasse would likewise weaken Obamacare’s insurance regulations, ultimately destroying the law’s functionality. Gramm even acknowledges that his plan “would put Obamacare on the path to extinction.” Obviously, Obama is not going to sign a bill that puts Obamacare on the path to extinction. The purpose is simply to give Republicans a talking point — they can say they passed a bill and blame Obama for vetoing it. But odds are that Republicans will fail to unify around a bill that can pass both houses of Congress with only Republican votes, because some will deem even a bill that causes Obamacare’s eventual demise unacceptably conciliatory.

At that point, it will fall to the states to either establish their own exchanges or watch their individual-insurance markets collapse. Neither option is terribly attractive for Republicans. The former means surrender. Doing nothing means sowing chaos, deprivation, and death. Will Republicans let this happen? Many Republican-led states have already declined to participate in the law’s expansion of Medicaid. But conservatives are always enthusiastic about cutting programs that aid the vulnerable. They have historically been more reluctant to cut middle-class programs like Social Security and Medicare. Plus the exchange plans not only have buyers; they also have sellers: insurance companies. Even some Republicans eager to throw middle-class people off their insurance may blanch at the prospect of inflicting pain on the insurance industry.

Fear of change has been the right’s most powerful weapon in the health-care wars since they began under Harry Truman. Seeing their weapon turned against them is a frightening sensation, one they are likely to experience many times again.

*This article appears in the May 18, 2015 issue of New York Magazine.

Iraq’s Least Worst Options

asstooheavyMy Comments: If I had to personally make definitive decisons about the US role in the middle east, I have absolutely no idea what would be in our best interest. That’s why they don’t pay ME the big bucks.

But history has made us the world’s only policeman. Since I have no idea about what I’ll have for lunch tomorrow, knowing how any definitive decision will play out is also an unknown. You might have a clue, but you do not “KNOW”.

I’m willing to accept that Bush and/or Cheney had “honest” reasons for taking us into Iraq. If the reasons WERE “honest”, however, then their judgement as leaders is seriously in question. There was either bad judgment or their reasons were “dishonest”.

Today, the self styled Islamic caliphate called ISIS needs to be destoyed to the extent possible. But short of killing hundreds of thousands of people, military action is not going to do much good. The ones we don’t kill will be permanently pissed off, further jeopardizing our men and women and our future treasury. Money can be replaced, but not lives.

So I worry about it. But I don’t want to condemn or praise those seeking higher office today because they might have voted differently. What’s done is done. I’d much rather worry about what is in our best interest as a nation going forward.

The other evening I witnessed a fascinating dialog between Barney Frank and Chris Hayes. The conclusion I heard was an agreement that from time to time, intervention IS in our best interest and should be made. On the other hand, in hindsight, invading Iraq was a mistake.

Virtually all the “candidates” in the GOP fail to answer the basic questions posed to them about what we did in Iraq. Their confused answers means they are simply not ready for prime time. They had to have rehearsed their possible answers and yet still came across like deer caught in the headlights. Surely we can do better than that.

“If we want to defeat ISIS, we are going to have to accept some outcomes we don’t like.”   By Fred Kaplan / May 19 2015

The fall of Ramadi, the strategic center of Iraq’s Anbar province, doesn’t necessarily signal the triumph of ISIS, but it does mean that President Obama and various regional leaders can no longer dodge some uncomfortable choices.

Iraqi Prime Minister Haider al-Abadi’s decision to let 3,000 Shiite militia men amass outside Ramadi to prevent ISIS from moving further eastward toward Baghdad (and even possibly charging into the conquered city to battle the jihadists head-on) is the clearest sign yet that there is no longer a viable Iraqi army. Its ranks have been whittled away by corruption, incompetence, sparse pay, and lack of allegiance to the Baghdad government.

Obama and his top generals have warned Abadi not to rely so heavily on Shiite militias, which are controlled by Iran. In the battle for Tikrit in March—in which ISIS forces were ousted by a coalition of Iraqi soldiers, Sunni militias, Shiite militias, Kurdish peshmerga, and U.S. bombing runs—American commanders threatened to withhold their air power unless the offensive was led by Iraqi soldiers and no Iranians were on the battlefield. The players complied (though they still quarrel over which faction was responsible for the victory).

But in Ramadi, where Iraqi troops and Sunni militias swiftly folded under fire, the pretense won’t hold. Shiite militias, mainly the Badr forces, will lead the way by default, and Obama will have to decide whether to hold back, out of some principle, or hold his nose and send in the smart bombs.

Before deciding what to do about Ramadi, Obama—or any other leader with a stake in the fight—first has to decide what outcome he prefers. Since all plausible outcomes are lousy, this means deciding which outcome sickens him the least.

Obama and the leaders of every nation in the region want to see ISIS crushed or contained. But they’ve gone about it half-heartedly because they dread the side effects of doing it with gusto. ISIS is as strong as it is, only because its leaders know and exploit its foes’ dilemmas.

For instance, one potent way of fighting ISIS would be to energize and unify the armies of Iran, Turkey, Syria, and the Kurds. These are the forces that fear ISIS the most and could fight it most effectively. But there are serious obstacles to forming this alliance. The United States and the Sunnis in the region (including Turkey, the Kurds, Saudi Arabia, Egypt, Jordan, and the Gulf States) do not want to help Iran expand its influence. Nor do they want to bolster Bashar al-Assad’s regime in Syria; in fact, they want to see Assad toppled (preferably by the U.S. military, so they don’t have to bother). Meanwhile, the Turks don’t want to let the Kurds swell with too much swagger.

Finally, ISIS itself is a Sunni organization; it has thrived, especially in Iraq, by co-opting local Sunni tribes, whose leaders fear domination by Shiites (including Iraq’s Shiite-led government) even more. To beat ISIS requires neutralizing its sectarian appeal, and that means driving a wedge between the ISIS jihadists and their less militant Sunni enablers. But a coalition that includes Iran or Syria might push Sunnis more firmly into ISIS’s corner—and might keep such Sunni-led nations as Turkey, the Gulf States, and Saudi Arabia from joining the alliance to begin with.

Analysts have noted that mobilizing Shiite militias to fight ISIS in Ramadi would intensify sectarian tensions. This is true, but every option that involves fighting ISIS would intensify sectarian tensions. The real question is which options stand a chance of hurting ISIS the most while sharpening sectarian tensions the least. Or, from the standpoint of the United States and the anti-ISIS leaders in the region: Which options might hurt ISIS the most while raising the specter of side effects—the expansion of Iranian influence, the swelling of Kurdish separatism, the bolstering of Assad’s regime—the least?

A more basic question: How would these leaders rank the range of outcomes, including “ISIS wins,” “Iran controls southern Iraq,” “Assad survives,” “Assad is overthrown” (but by whom?), and the rest? Which outcomes are intolerable, which are merely disgraceful, and could the leaders live with some of the latter in order to preclude the former?

“Assad survives” is probably the biggest nonstarter, not least because he may be on the verge of falling. One word from President Vladimir Putin or Ayatollah Ali Khamenei, and Assad would be gone. The challenge is to give Putin or Khamenei an incentive to pull the plug. Secretary of State John Kerry’s recent meeting with Putin in Sochi was held, in part, to explore possible terms of such an arrangement. The handshake must have been unpleasant, maybe even disgraceful, but if it leads to the ouster of Assad, which in turn would prod the Turks and Saudis to crack down harder on ISIS, it would have been worth the nausea.

The Middle East is a mess—the product, in part, of the post–Cold War disintegration of borders that were imposed by colonial powers nearly 100 years ago in the wake of World War I. The rise of ISIS, its ability to thrive even though it’s surrounded by powerful nations that dread its aspirations, is a symptom of this mess.

Those who believe that Obama caused these troubles, or that they can be solved by a few thousand American ground troops, are so naive and shallow that we can only hope that none of them wins the White House or advises the candidate who does. For one thing, “a few thousand ground troops,” in fact, means many more: They would need air support (including transport planes and helicopters), bases, supply convoys, and a headquarters, plus additional troops to protect the troops, bases, convoys, and headquarters.

For another, what are these troops supposed to do? And which would have the larger effect—the additional firepower that they could bring to bear against ISIS or the additional recruits that ISIS could rally to kill Americans in the name of jihad?

Logistics, intelligence, airstrikes to help local anti-ISIS forces on the ground—this is what the United States can best offer. Officers and analysts on the ground say that airstrikes terrify many ISIS fighters, who tend to attack in swarms, which provide concentrated targets for a bomb. These sources confirm a report in the New York Times that ISIS launched its crucial attack on Ramadi during a major sandstorm, when pilots (of airplanes or drones) could not have seen its movements on the ground below.

But even in clear weather, airstrikes alone aren’t sufficient. ISIS mingles with the locals (in some cases, they are the locals), making it hard for pilots to distinguish friends (or neutral innocents) from foes. Ground assaults are needed, too—by other locals, who are more likely to speak the language, understand the situation, and wrest away the allegiance of those in the ISIS’s grip or sway.

ISIS isn’t that mighty. It apparently took control of Ramadi with 400 fighters. The surrounding nations could easily rid the region of this gnatlike pestilence if they overrode their short-term fears with their long-term interests. This is easier said than done, of course. But there is no other solution.

Biggest Retirement Mistakes

cookie jar

My Comments: This is a dramatic headline, intended for those of us already retired or thinking about it. Most of us already understand that “retirement” today is very different from what it was 25 years ago. The changes that we see are influencing my life and millions of others.

Many people plan on supplementing their retirement funds by working past 65, but this plan may not be as sound as it seems. Bloomberg’s Suzanne Woolley breaks down the expectations and often unfortunate truths of working through retirement.

The video, which lasts about 60 seconds, appears on a web site that features many videos by a Barry Ritholtz and if you click the image just above, you should be able to see and hear it. I haven’t asked Barry for his permission so I may get in hot water, but hopefully he’ll not give me a hard time as the intent is to help you as you wrestle with the idea. Using a video is my attempt to present ideas using visual and audio rather than have you simply read some words. Let me know if you have issues with any of this.

The Importance of Long Term Care

My Comments: As always, this is a difficult conversation for many of us. But that won’t make the issue go away. That only happens when you ultimately leave the building.

I encourage everyone to take a few minutes to watch two short videos. The first one is accessed by clicking on the image above. It lasts about two minutes.

Here’s the gist of the problem: Americans today are facing one of the most critical and overlooked health and retirement securities – long term care. Each day, 10,000 baby boomers are turning 65 and 70% of those who live past 65 will need a form of long term care. Rob Lowe and Maria Shriver have partnered with Genworth, an industry leader in long term care insurance, to raise awareness around the need for long term care planning.

The partnership generated an educational video series, “Conversations That Matter: Maria Shriver and Rob Lowe” about the impact of aging in America and importance of long term care planning. (That started with the video you saw above.) Both Rob and Maria have personal experiences in caregiving that articulate why they feel compelled to encourage viewers to have “the talk” with their family and friends even if it’s not now in your comfort zone.

The second video is behind this image. ltc-costs

It’s designed to give you an idea of what it costs to have insurance, mindful that it comes in many flavors, some of which you don’t need. It lasts a little over nine minutes and comes to you from the American Association of Long Term Care Insurance. I hope you find all this helpful if you’ve not already attempted to solve the problem or died without needing long term care.

There are dozens of similar messages out there but these are from credible sources . If you are interested, I can recommend people from whom you can get more information.

David Cameron’s ‘Little England’ is a Myth

My Thoughts: As you know, I have a bias toward England and a bias away from right wing politics. The re-election of Cameron as Prime Minister at first caused me to envision woe and gloom as the next few years rolled by. It still may, but harsh reality from time to time results in a shift toward rational thinking. I hope this proves to be the case for the land of my birth.

Gideon Rachman May 11, 2015

When Angela Merkel won re-election in 2013, the outside world saw her success as a sign that things were going well in Germany. But David Cameron’s decisive victory in the UK’s election last week is receiving a much more sceptical press overseas. A Washington Post headline proclaimed: “Election may set Britain on a path to becoming Little England”. A New York Times columnist upped the ante by announcing: “The Suicide of Britain”.

Many Europeans, meanwhile, are incredulous and angry that the new Cameron government is now certain to hold a referendum on whether Britain should leave the EU. And the surge of the Scottish National party, and the potential implications for the unity of Britain, is attracting attention across the world.

As one Indian analyst harrumphed to me: “How can the UK still claim to be a major power, when the country is on the brink of falling apart?”

Some British leftwingers share this disillusionment, interpreting their side’s electoral defeat as a sure sign of a deep national malaise. The argument that the UK election has revealed a badly troubled country is easy to make. But it is also wrong.

Of course, a British exit from the EU (Brexit) and a Scottish exit from Britain (Scexit?) are both possibilities. But it is much more likely that in five years’ time, when this new government leaves office, the United Kingdom will still be a united country and will still be a member of the EU. The UK will also continue to be one of the most outward-looking countries in the world and is likely to remain among the fastest-growing economies in the west.

The EU referendum to which Mr Cameron is now committed is certainly a mighty gamble, and one that he has taken largely to appease his own party. The renegotiation of Britain’s terms of membership is unlikely to yield more than a fig leaf to allow the government to campaign to stay in the EU.

The strong likelihood is that the Brits will then vote to stay in Europe. There have been four opinion polls on the subject in the past month and they have all shown big majorities for remaining a member of the EU.

Of course, the tortuous process of renegotiation, further chaos in the eurozone, and the referendum campaign itself, could all change minds. Some analysts point out that, in recent years, referendums on the EU have been unexpectedly lost in countries such as France, Ireland and the Netherlands. But those were all decisions on changes to European treaties, which limited the risk of a protest vote. Brexit would be a much more fundamental choice — and the Brits are unlikely to take the risk.

If Britain votes to remain a member of the EU, that will remove a potential trigger that the SNP might pull: to demand another referendum on independence for Scotland.

Last week’s general election results, in which the SNP won all but three of Scotland’s 59 seats, has created the impression of an irresistible surge of support for independence. But, even now, only about half of Scots actually voted for the party.

Expressing nationalist sentiment in a general election is a risk-free way of venting emotion. Voting for independence would be quite another matter since it would raise — once again — difficult questions about currency unions and tax revenues.

The economic case for an independent Scotland has, in fact, taken a bad blow in the past year as the oil price has plunged. Such tiresome considerations would come back into focus, if and when Scots were asked to vote for independence. In the next five years, some of the gloss is also likely to come off the SNP since all dominant parties eventually generate an opposition.

One legitimate foreign anxiety about the UK is that, even if the country does not actually break up, it is likely to go through a period of acute introspection as it tackles difficult questions about national identity, the constitution and economic austerity.

The notion, common in Washington, that Mr Cameron’s Britain is a smaller actor on the world political stage is hard to argue with. The House of Commons vote in 2013 to reject military action in Syria increasingly looks like the moment when Britain decided that it was going to turn in its deputy sheriff’s badge and leave the US to play the role of world policeman alone. The Iraq and Afghan wars have sapped Britain’s will for foreign wars and that is reflected in declining defence budgets.

But a willingness to drop bombs on the Middle East is not the only measure of internationalism. And the idea that Mr Cameron’s Britain is turning into a sleepy and cramped Little England is very wide of the mark.

London is now probably the most globalised city in the world. Some 37 per cent of its residents were born overseas. It is a hub for finance, transport, culture, tourism and a host of other industries. And while London is a unique place, Britain as a whole remains a trading nation by instinct, and a magnet for people and capital from all over the world.

Politics may be pushing the country to look inwards. But the more powerful social, technological, demographic and economic forces will continue to put Mr Cameron’s Britain at the forefront of globalisation.

Luddites Fear Humanity Will Make Short Work of Finite Wants

LudditesMy Comments: A conversation yesterday with a good friend resulted from her comment about the absurdity of Obamas’ suggestion that college education should be free for all students. Mindful that some of them will not qualify, and some will not want a college education, I argued that it was a great idea, that many employers today cannot find workers with the skills necessary to get the work done. Rather than stifle employment, a free track to acquire additional skills will, in my judgment, result in a net economic gain for all of us.

Walter Isaacson / March 3, 2015 / The Financial Times

If new technologies really cut jobs, we would all be out of work by now, writes Walter Isaacson

Ada, Countess of Lovelace and Charles Babbage understood the potential of technological innovation.

Lord Byron was a Luddite. The Romantic poet’s only speech in the House of Lords defended the followers of Ned Ludd, who were smashing the mechanical looms in England during the early 1800s because they feared the machines would put people out of work. Back then, some believed that technology would create unemployment. They were wrong. The industrial revolution made England richer and increased the total number of people in work, including in the fabric and clothing industries.

Byron’s daughter Ada, Countess of Lovelace, was more prescient. On a trip through the English Midlands, she admired how punch cards instructed the looms to produce beautiful patterns, and envisaged how such cards could enable the numerical calculator being designed by her friend Charles Babbage to process not just numbers but words, music, patterns and anything else that could be encoded in symbols — a computer, in other words.

Today’s pessimists predict that these computers will put people out of work. These latter-day Luddites are also wrong. Technology can be disruptive. It can eliminate jobs, from weavers to buggy-whip makers. But 200 years of data show it improves productivity and increases wealth, leading to more demand and new types of jobs.

Take those mechanical looms. They were invented just after 1800 by Joseph Marie Jacquard in Lyon. Did that end up reducing employment in the textile industry in eastern France? No. Two centuries later, Lyon is Europe’s top centre for high-tech textiles. The city is the home of the Textile and Chemical Institute, 40 labs and schools, 140 companies and 10,000 textile jobs. Nor did the machines destroy employment in England, as Lord Byron feared.

The combination of computers and the internet began transforming our economy decades ago. The “app economy” is the latest example. It began in 2008 when Steve Jobs yielded to the advice of his team at Apple and decided to let outside developers create apps for the iPhone. The global app economy last year was worth $100bn, more than the film industry. This is an industry that did not exist seven years ago.

Apps and other advances in technology have helped create new forms of work, such as the “sharing economy” in which enterprising folks can rent out rooms on Airbnb and provide rides on Uber and Lyft. Likewise, online marketplaces such as Amazon and eBay have recreated the kind of artisanal cottage industry that existed in the pre-industrial age. If you have a good recipe or can make a cool product or service, you can find customers. If you create a book or song, you now have ways to self-publish and distribute. If you dream up a new specialism — ethical hacker, pet psychologist, nutrition coach? — you have a chance of finding takers. More than 600,000 people nowadays earn a living by selling on Amazon and eBay.

If new technologies reduced the total number of jobs, we would all be out of work by now. But times of technological advance have been times of job creation. Last year, as whole new waves of robotic systems were introduced, the US added 3m jobs. The unemployment rate hit a six-year low, and average hourly earnings for private sector workers rose.

Be wary of those who lament the demise of jobs for checkout clerks and meter readers, as if preserving such jobs will lead to a healthier economy. This Luddite fallacy is based on a presumption that there is only a set amount of goods and services people want. If technology permits those things to be produced more efficiently, Luddites argue, there will be less work to do. In reality, technology leads to an increase in productivity and wealth. That in turn leads to increased demand for goods and services and thus more jobs, including ones in fields we can barely imagine.

The writer is chief executive of the Aspen Institute and author of ‘The Innovators

http://www.ft.com/intl/cms/s/0/9e9b7134-c1a0-11e4-bd24-00144feab7de.html#axzz3TRNNs64q