Before readers throw brickbats at me, I’m just acting as the messenger for two articles, one by Harvard’s Kenneth Rogoff, the other by the Financial Times’ Martin Wolf. Each points out that the US is taking a proportionately bigger hit than other big economies post crisis, particularly in terms of unemployment. And this is actually more than a bit perverse, since the normal course of action for a country in the position of the US (chronic current account deficits, high debt levels) is to depreciate the currency and/or increase import barriers, and renegotiate and restructure debt.
Both articles are of the view that the US public is going to lose patience with continued high unemployment, which amounts to exporting demand for the benefit of foreign manufacturers. Effectively, both contend it would behoove our trade partners to help solve this problem, because if they don’t, our response is likely to be unilateral and driven by politics rather than sound policy.
Rogoff at Project Syndicate (hat tip Mark Thoma) gives an overview:
G-20 leaders who scoff at the United States’ proposal for numerical trade-balance limits should know that they are playing with fire. The US is not making a demand as much as it is issuing a plea for help.
According to a recent joint report by the International Monetary Fund and the International Labor Organization, fully 25% of the rise in unemployment since 2007, totaling 30 million people worldwide, has occurred in the US. If this situation persists, as I have long warned it might, it will lay the foundations for huge global trade frictions. The voter anger expressed in the US mid-term elections could prove to be only the tip of the iceberg.
Protectionist trade measures, perhaps in the form of a stiff US tariff on Chinese imports, would be profoundly self-destructive, even absent the inevitable retaliatory measures. But make no mistake: the ground for populist economics is becoming more fertile by the day.
Some readers may scoff and say the US deserves to suffer; after all, the US made and sold toxic mortgage products all over the world. But the UK has a financial sector even larger relative to GDP than the US, and certainly no better behaved (London, not the US, was the home of the structured investment vehicle business, a an important piece of the mortgage machinery; as we discuss in ECONNED, bonus gaming by Eurobankg exploiting Basel II rules was another key component). Yet UK unemployment has been markedly lower than ours.
Similarly, the reflex of blaming US overconsumption is simplistic and misses how some of our trade partners gamed the international currency system. As Martin Wolf tells us:
First, today’s huge accumulations of foreign currency reserves are not a market phenomenon: they are the product of government decisions (see chart). They could be justified, initially, as a way of creating insurance against shocks. But these reserves have gone well beyond that, as the modest decline during the crisis of $470bn, or 6 per cent of the total, showed. Second, the repeated evidence that the world economy is unable to use large flows of surplus savings in a safe and effective way cannot be ignored. Finally, the world of today has massive excess capacity. That makes adjustment by deficit countries alone hugely undesirable, as Keynes would surely have argued.
Wolf’s third point is critically important. The US has operated as an engine of demand (which was partly fuelled by borrowing) that helped our trade partner keep their factories running and preserve employment. I doubt our failure to act to address this is due to altruistic concerns about raising the standards of living in China and Bangladesh; it no doubt instead is rooted in policies overly friendly to big corporations and financial firms (big banks like big international money flows; they produce a lot of opportunities to nick fees and suggest transactions). But the result was short term beneficial to exporting countries (arguably least so Germany, who has a fair number of high value added exports with no ready substitutes), but it put them in the position of being dependent on US demand.
Some have argued that China has changed from export dependence to investment dependence. But exports still constitute a meaningful proportion of GDP growth, and its investment spending is now less productive that that of the supposedly scelerotic US. So this model is reaching its limits.
Both Rogoff and Wolf contend that the US proposal to cap current account deficits is not a bad one; Wolf spends a fair portion of the piece discussing how the concept might be refined. I think the concept is fatally flawed by being voluntary (look how well the voluntary Kyoto accords have worked). And even though China has voiced general support for the idea of moving in that direction (which almost comes off as an enthusiastic embrace, compared to their usual vitriol), this could just as easily be a cynical maneuver to get the US demand that China let the renmnibi rise off the table. After all, any accord like this would take years to negotiate and still would have few to no teeth, giving China ample time to continue on its current path.
Rogoff did offer some concrete suggestion of measures exporters could take now to reduce trade imbalances with the US; they mainly take the form of ending abuses:
Still, even if other world leaders conclude that they cannot support numerical targets, they must recognize the pain that the US is suffering in the name of free trade. Somehow, they must find ways to help the US expand its exports. Fortunately, emerging markets have a great deal of scope for action.
India, Brazil, and China, for example, continue to exploit World Trade Organization rules that allow long phase-in periods for fully opening up their domestic markets to developed-country imports, even as their own exporters enjoy full access to rich-country markets. Lackluster enforcement of intellectual property rights exacerbates the problem considerably, hampering US exports of software and entertainment.
A determined effort by emerging-market countries that have external surpluses to expand imports from the US (and Europe) would do far more to address the global trade imbalances over the long run than changes to their exchange rates or fiscal policies. Emerging markets have simply become too big and too important to be allowed to play by their own set of trade rules. Their leaders must do more to tackle entrenched domestic interests and encourage foreign competition.
Yves here. The “free trade” mantra is a big part of the problem. As William Greider has pointed out, we do not have a system of free trade, but managed trade. Our counterparts have operated with clear objectives of preserving employment and running trade surpluses, and many have succeeded. If we try to emulate that model, or simply move to a balance, we created disruptive consequences for our trade partners. Some argue that the Fed’s QE2 is designed to tank the dollar and pressure our trade partners. The evidence strongly suggests that the Fed does not give much heed to the trade sector, but it also appears read to let the dollar fall as collateral damage, so the disruption abroad by QE2 is more likely to be seen as an unfortunate side effect than a primary objective.
Rogoff and Wolf both seek to preserve the current order by having the surplus countries exercise more restraint. Wolf sounds an optimistic note:
The role of the G20 is to give cover for the needed discussions between the incumbent and prospective superpowers. If China were to set itself the goal of raising demand and so eliminating its current account surpluses, ideally via higher consumption, the Chinese people would be better off and so would the rest of the world. The US should simultaneously commit itself to long-term fiscal consolidation.
Meanwhile, the role of the other heads of governments of the G20, in Korea next week, is to promote the necessary agreement. If they succeed, they will demonstrate one of the biggest benefits of multilateralism: it is a way to manage conflicts between the greatest powers.
Unfortunately, the lesson of the 1920s and the 1960s is that major incumbents tend to push international monetary arrangements to their breaking point, since domestic imperatives inevitably trump international ones. We can hope for better, but as a betting person, I’d plan for the worst.
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the last part of the post appears to be missing.
Whoops, no, just a stray sentence fragment from earlier drafting, will delete pronto.
it make perfect sense that the US’ unemployment should be proportionally higher…easy credit from the globe supported US housing industry, so now with the huge collapse in investment in housing, the us will lose jobs not only in construction but all the jobs that were supported by the housing sector…also each country should only look out for itself. china and the us have always pursued self benefiting policies but for now it seems that china has outmaneuvered the us
Agreed. That’s what I think that is the thrust of what Yves is saying. Maybe it’s time we started looking out for us as in the U.S.. I can’t vote in China’s elections, but I can vote in the U.S. and I want my representatives to act in my interests and expect China will do the same.
I have nothing against the average person in China.
On the contrary I am ashamed at the way multi-nationals have exploited them for dirt cheap labor, to line their filthy, greedy selfish, pockets.
Nor do I approve of the way their communist government has aided and abetted the exploitation by forming an unholy partnership with the multi-nationals.
Think, if the Chinese government would institute a descent minimum wage for its people. It would make Chinese goods more expensive and less competitive globally, but in turn, the Chinese people would have greater purchasing power to sustain their economic growth domestically. They would also be able to buy more goods from abroad and this would go a long way in restoring global trade balances. Of course this won’t happen because if the Chinese took to the streets and demanded fair wages, their government would gun them down, and that, my friends, is what I hate about the Chinese government and that’s why I think they need a whipping for.
I don’t oppose the Chinese people, I oppose their government’s part in the unholy relationship with multi-national off-shorers and their government used to exploit them. Slap tariffs on all goods created using slave labor and restore balance to our trade relationship.
Let Americans concentrate on doing what is in our citizens best interest, and expect China to do what they think is in China’s best interest, and stop apologizing for it.
Avg John said: “Of course this won’t happen because if the Chinese took to the streets and demanded fair wages, their government would gun them down, and that, my friends, is what I hate about the Chinese government and that’s why I think they need a whipping for.”
A movie coming soon to a movie theater near you?
Perhaps my meaning would have been clearer if I had said:
Avg John said: “Of course this won’t happen because if the Chinese took to the streets and demanded fair wages, their government would gun them down…”
A movie coming soon to a theater near you?
You may well be right. We are reasonable people. Perhaps too reasonable. First we send a clear message to Washington that were mad as hell and aren’t going to take it anymore by voting the rascals out. Check. Then we wait and see if the message sinks in. In progress.
If things don’t change for the better, perhaps America’s pain threshold will finally be reached and we will take to the streets.
Then we will find out if our sons, daughter, brothers and sisters in the military will gun down their own in the interest of a small group of wealthy elite interest.
Remember, the Soviet Union fell without a shot because their government could simply not serve the interests of their people any longer, and I have heard it said the U.S. would fall several decades later under the weight of its own corruption.
If things continue on this path, who knows, we may find out what America is made of.
“First we send a clear message to Washington that were mad as hell and aren’t going to take it anymore by voting the rascals out. Check.”
Check? ??? Didn’t you see the election results?
Swapping between the blue and the red teams of the Corporate Party every 2 years sends a different message – we’re too dumb to vote the rascals out.
http://www.ritholtz.com/blog/2010/09/you-vs-corporations/
History ryhmes. Ask yourself some questions and draw your own conclusions. It seems Yves has with the last statement of her article.
What monetary model does the world operate on again? What is one of the side effects of the bust cycle?
Is somehow this time is different than 1907 and 1929? And how about all of those fine “policy” makers and bankers that assisted the mandraking since Nixon/Kissinger?
Think they are going to turn themselves in and say they are sorry?
How about the Chinese, think of what they do to white collar criminals in their country. Think they really want more of them to integrate into their culture? Still think they are going to fully Pong?
‘Lackluster enforcement of intellectual property rights’
Rogoff is trapped in a world of academic delusion. For almost everyone in India, China and the developing world ‘intellectual property rights’ is a completely foreign concept, for it is based upon the legal structures of monopoly capitalism.
Monopoly capitalism is not natural, or morally right, but a form of rentierism that in sum has drained the Western middle class dry.
Monopoly capitalism is not natural, or morally right, but a form of rentierism that in sum has drained the Western middle class dry. purple
Bingo! And the chief monopoly is the government backed banking cartel in the government enforced monopoly money supply which steals purchasing power from the all money holders including the poor.
Yves: “[Rogoff and Wolf] Each points out that the US is taking a proportionately bigger hit than other big economies post crisis, particularly in terms of unemployment.” This linkage presented by both authors, of present unemployment levels and trade balances, is simply a false one, regardless of other issues with trade flows. I slam into this incongruity at the start of their discussions to the point that it’s difficult to engage with the rest. The countries presently experiencing high unemployment all have a) high internal debt levels directly caused by b) property asset bubbles which they actively abetted. The US, Spain, the UK, Ireland: these are the areas where unemployment has spiked. These are the areas were bubbles spiked. These are the areas which refuse to cram down their ridiculous debts to their own titans of wealth who promoted said bubbles. And none of these areas will see substantial employment gains until the clean their own Augean debt stables. Not coincidentally, there is much eagerness to shift the blame . . . .
Getting past this logical beam cast in my eye by both Rogoff and Wolf, I return to a second logical fallacy embedded in their arguments which is frequently advanced in these issues of trade “balances” [sic]. This is the notion that US demand is both a given and a good thing. One could as easily argue that US demand is excessive and a distorting factor in that a) the US consumes a colossally disproportionate share of global production, and b) we don’t pay for it adequately. Relative to world resources, US demand MUST come down. Part of this, to me, is simply us being smarter about what we buy and how we use our resources. We, as a country, are privileged to be exorbitant because we can get others to take our wooden nickles, but that game is about at an end. It is striking that the ‘solution’ advanced by those privileged to live on the fat end of the balance is for those on the thin end of the balance to fatten up their demand. The logic of nature is that demand falls rather than the rest of humanity follow into the insanity of overconsumption, but modern economics doesn’t have any use for _that_ knd of logic. So to me, this talk about ‘balance’ and ‘fairness’ is simply ideology, a creed that where privilege has alighted there it must remain and everyone _must_ cooperate in remaining it there. That’s the law. What law? The law of, of, of . . . they’ll get back to us on that, with glossy pictures with circles and arrows on the back, but in the meantime what we’re supposed to believe is that ‘those people’ aren’t playing the game right. In my view, the world, world history, and political reality are _none of them_ going to cooperate in getting these econ guys’ equations to come out where they think they ought to come out. Because those equations simply don’t engage with reality. My personal view . . . .
The US population could come up with an industrial policy any time we should choose to do so. We could tax our wealthy, regulate them to keep them from destroying our economy. We could bother to educate ourselves. We are busily not doing any of these things. Why, then, should the rest of the world, having to cope with their problems _and_ our problems, busily advancing their own interests, pay the slightest heed to grossly self-interested advice about ‘fairness’ and ‘balance’ coming from the fat end of the trade flows? I don’t see much logic in that. Because we have a gun to their head? I mean a different gun than the one we have pointed at lots of dustry, non-economic actor heads in SW Asia.
When Anglo-American economic advice on trade starts with what we need to do to improve, I’ll start to take it seriously. As long as it continues in the vein of what everyone else needes to do to improve us, I can’t see that anyone is going to take it seriously.
Richard,
You may be interested in this:
http://arsindustrialis.org/manifesto-2010
I love the smell of [intellectual] gunpowder in the morning. So Swedish Lex, I used to floss my teeth with tracts of like kind to that after breakfast. Takes me back . . .
But the manifesto in it reminds me of a thesis I developed, which, sad to say, yet lies latent as many others. Social criticism of institutional wealth in Europe goes back, as you likely know, certainly to the early Christian era, but more specifically to the earliest popular Christian insurrectionary zealots. In Northern Italy in the 12th century CE for instance, or clearly in the Lollards of England who were a principal source for nascent protest-antism in Germany and Bohemia for instance. Well, what we have in the inception of pre-Marxist socialist thought and practice is a radically secularized version _of the same social critique_. The earlier religious reformers saw Church and feudatory in league, and sought to gain control of the Church as a counterbalance. Having failed at that, the modern revolutionaries rejected the Church as well, but in the same format of argument in effect. There is (to me anyway) an extremely interesting argument in this regarding the compositonal structure of sociologies of knowledge. (A vastly more interesting discussion than yammering on the petty political whingeing of any particular group at any particular time most specifically including my own.) I raise this because it is so easy to see the structural format of a religous appeal in the manifesto you link to, but in secular and radical terms. Of course this is much more evident in Europe where that particular structure of thought is more intact.
But there is a doleful aspect to this particular reading of said manifesto: It is an ideological rather than an analytical commentary, a jeremiad in a real sense. And that same jeremiad, of the incipient rot of the flesh from all the wealthy from the rust of their silver, has been being made for a millennia, literally a millennia, without at any time being predictive regardless of the justice of the perspective. It’s an eschatological document, and so the perennial announcement that the City will open its Gates upon the hill tomorrow at noon sharp is not to be taken as assured . . . . —But still!
And that same jeremiad, of the incipient rot of the flesh from all the wealthy from the rust of their silver, has been being made for a millennia, literally a millennia, without at any time being predictive regardless of the justice of the perspective. Richard Kline
Then who’s buying Viagra? Also, I notice the poor rarely have to adopt children. And why do the very rich jump out of skyscrapers at the prospect of being only moderately wealthy?
Now it is better to be rich than not, all other things being equal, but that is often not the case.
Richard,
Yes – the document is a manifest with a slightly elevated hallelujah component. The merits of the document, and the initiative, are however that they try to look towards a political content that stretches far enough to ensure sustainability in several regards.
My own perspective is that it is well to try to redefine what should be the benchmarks against which the content of future policies are measured. However, simply raising the bar of what is desireable in such a fashion will in no way bring us closer to “better” policies. Instead, focus should be on HOW policies are adopted. Improved governance as opposed to more enlighthened definitions of what is desireable.
Current democracies’ ways of adopting policies are not geared towards achieving outcomes, but instead intertwined with mechanisms to achieve democratic control. By separating democratic control from the mechanisms to adopt suitable policies (e.g. sustainable energy production/consumption) to a greater degree, in the same way that most democracies have separation of powers, would increse the chances of achieving the aims outlined in the manifest.
Brilliant. It is not in the interest of particular bondholders to dismantle the PD’s. They are leaving that job up to the American people themsleves. Of course, since the majority of Americans are not conceptual level thinkers, a more savage response not just domestically but internationally will likely be applied. I suppose TPTB might expect that by the time it all settles down and justice would be served they would be dead of old age. I do believe that this is hubris and that like all crops of such individuals, they too believe they are different.
When Ted Kennedy was asked why he felt Socialism would work this time when history argued otherwise, he simply stated that it was him running it. I’ll have to say one thing, at least the man was upfront and open to debate unlike the misdirection of many of the Senior leadership.
Seems pointless to worry about whether the US is getting its just desserts or not, because there is no one with the authority to impose any notion of justice on the situation. But since the crisis arose largely from a severely unbalanced allocation of US assets, it wasn’t hard to see that the US would be hit harder by the fallout than anybody else. I saw it coming, at any rate.
‘Effectively, both contend it would behoove our trade partners to help solve this problem, because if they don’t, our response is likely to be unilateral and driven by politics rather than sound policy.’
As if theirs isn’t? Well, except for the sound policy part – only the U.S. has voluntarily decided to dismantle itself for the seeming benefit of its trading partner, and as the Japanese and Koreans have (and undoubtedly the Chinese will) proven, making sure that your own economy is job one works pretty well – as long as you can find a sucker to take the other side of the deal. And for all of its flaws, the EU simply isn’t that stupid.
I am curious if any readers of the blog have any views about the extent to which our structural trade deficit is driven by the US dollar being the world’s primary reserve currency. The theory underlying this relationship is called the Triffin dilemma (after the Belgian economist, Robert Triffin). More specifically, does it make sense to posit that any substantial and sustained reduction in that trade deficit depends on dollar’s role as the world’s primary reserve currency being substantially diminished? Finally, it seems all but inevitable to me that if the dollar loses its current reserve status, this should substantially undermine the value of the dollar versus virtually every other world currency.
“it seems all but inevitable to me that if the dollar loses its current reserve status, this should substantially undermine the value of the dollar versus virtually every other world currency”
Yes, which would be a good thing, as it would reduce or eliminate our trade deficit. The dollar is too high because it’s artificially propped up by China, etc.
Research Central Banking and Mandraking or read my other comments here on this thread on this subject.
You really believe the Chinese are to blame? One party sells the rope, the other party willingly buys. Was it the American people themselves believing they actually lived in a free Republic?
Neither of the major American political parties will do away with Global Free Trade. Our trade partners will not voluntarily end Global Free Trade. So very high unemployment is here to stay for a decade, or two, or three.
In the end, Global Free Trade will have been modified just enough to lower unemployment, by just enough to keep Americans from rioting in the streets.
The Democrats had 2 years to solve this problem now it is the Republicans’ turn. Batter up!
Jim,
Our financial overlords conflate “their own special interests” with the more general “interest of the nation.” This confusion is essentially what corporate shills, like renting_heaven in his comment above, always strive for.
If life were only so simple, so black and white, so “us vs. them.”
Unfortunately, it has become all but axiomatic that the ruling elite of a nation is more than willing to sacrifice the welfare of its own rank and file to satisfy its own greed and self-interest. Reinhold Niebuhr observed that the greater the inequality within a nation is, the greater this self-serving impulse of the ruling elite is:
When governing groups are deprived of their special economic privileges, their interests will be more nearly in harmony with the interests of the total national society. At present the economic overlords of a nation have special interests in the profits of international trade, in the exploitation of weaker peoples and in the acquisition of raw materials and markets, all of which are only remotely relevant to the welfare of the whole people.
–Reinhold Niebuhr, Moral Man & Immoral Society
Niebuhr wrote that in 1932. And nothing has changed since. The Mexico Solidarity Network accurately sums up the current situation here:
The neoliberal model represents a globalization of class alliances. The wealthiest 5 or 10% on both sides of the border, those who control the economies and political systems, have more in common with each other than they do with their fellow citizens, and the resulting neoliberal policies reflect their interests. The elites enjoy increasingly strong institutional links, while the rest of us are left with less democracy, fewer economic options, more repression, increased poverty and less sovereignty.
National ego and patriotism are some of the most effective tools of the ruling elite. (In renting_heaven’s comment above, the nation has morphed into the EU.) Under its influence, the rank and file’s interests are sacrificed for the “good of the nation.” Or as Niebuhr observes: “Altruistic passion is sluiced into the reservoirs of nationalism with great ease.” But the interests of the rank and file are not sacrificed for the “good of the nation” at all. They are sacrificed for the good of the financial overlords.
High unemployment and dislocation of the working and middle classes, these are small prices to pay so that our nation’s merely rich can become super rich.
I like to view this situation as a contest between the haves and the have nots. The have nots are ever dissadvantaged quite simply because they have not. In this struggle there is the perennial need for revolution, a leveling of the playing field.
In this current case of financial distress, we are bearing the effects of crisis quite heavenly. That’s just fine, there is no concept of equity that has application in this. Choices have been made. The ignorati have enjoyed the profligate creation of credit money. Now comes the time for reordering accounts and lo, it is the ignorati who suffer most. Will that ever change, I think not and it’s more than a matter of not having learned the lessons of history. It’s a matter of not seeing what is because of the pernicious effect of inflation which clouds their perception with such banalities as the flat screen TV’s and the superbowl etc.
This crisis and its resolution will require a global agreement to discard fractional reserve banking and a demand for redeemable currencies. The entire structure of the global financial system needs to be taken down and recreated.
But then there is this minor reality. There is nowhere to be seen the poltical will nor the understanding of how it is than fractional reserve banking leads to profligate lending which leads to bursting bubbles and the gross misapplication of the factors of production.
In some respects one might say that I’m positing a philosophy. Could be but I don’t see it as such, I see it as a recognition of the reality of human congress. Some people will steal, others will not. As a society, to the extent that we forego the prosecution of theft, we invite more theft. So, it’s a bit more than merely a philosophy of social order, it’s a point of view that requires prosecutions if the philosophical structure is to be maintained.
Now there is this fellow who has some association with the ECB that said something to the effect that people will not change anything unless there is a crisis and that is where we are now. Trouble is, it seems that people do not fully recognize and understand the nature of the crisis.
There is another elephant in the room. We have sold the world a fiat currency and they have bot it. Were it not for our need for oil, we could consider autarky. Now that would really upset those folks in asia and elsewhere.
Are we taking too much of the brunt of this crisis, I don’t think so. I think we need to take more and in that we might be able to rectify the mercantilist policies that have operated to eviscerate our middle class.
What should be occurring, globally, is the improvement of the living standards of our trading partners. That rate of improvement, has actually lagged what is nessary and what should have occurred.
It’s the money system and government sponsored banking cartels that need fixing. Its about achieving fair markets, not some utopian ‘free market’.
Nice comment but I must disagree(?) with this:
This crisis and its resolution will require a global agreement to discard fractional reserve banking and a demand for redeemable currencies. The entire structure of the global financial system needs to be taken down and recreated.
Yes FRL needs to be abolished at least in government monies but we DO NOT want government money to be backed by anything other than its taxing authority. It should be pure fiat so as not to favor any particular private money or private money class such as gold or silver.
Now private currencies WOULD have to be backed by something otherwise no one would voluntarily accept them. Needless to say, no private monies or class of private monies should be accepted for government taxes for in that case the money would be backed by the governments taxing authority.
And I was speaking about Down South but Siggy and F.Beards commentary is salient also.
Thank God someone completely gets it here on this thread and/or also has the spine to call a spade a spade.
Eurointelligence of today will calm any optimism on the matter, at least as regards what to be expected from Europe:
http://www.eurointelligence.com/index.php?id=581&tx_ttnews%5Btt_news%5D=2943&tx_ttnews%5BbackPid%5D=901&cHash=b7b64e37da
As William Greider has pointed out, we do not have a system of free trade, but managed trade
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If China were to drastically increase its currency, the US would quickly look to produce their stuff in a cheaper place… like Haiti for starters. Ask Clinton, hes has many ideas. The Chinese are no fools, they know Americans are a fickle bunch.
The US dollar is the Reserve Currency. To whom much is given, much is expected. Thus America has failed itself and the world.
“If China were to drastically increase its currency, the US would quickly look to produce their stuff in a cheaper place… like Haiti for starters. Ask Clinton, hes has many ideas. The Chinese are no fools, they know Americans are a fickle bunch.”
Not Haiti. The country is too unstable and factories don’t work well in those conditions. I would sooner put a factory in Afghanistan than Haiti. More likely The Philippines or Indonesia.
I used it as an example because Clinton is promoting it! :)
Fundamentally, the American peoples problem is not lack of jobs but lack of money. If we had practiced genuine capitalism in the US over the past two centuries, we would all probably be independently wealthy by now. I notice the wealthy are not concerned about finding work. One can always find some sort of voluntary work to do, I would bet.
Solution? Debt forgiveness (better: a bailout of the entire population, debtors and savers), as much socialism as is needed in the interim and the adoption of genuine capitalism. As for genuine capitalism, it is NOT based on a government backed banking cartel using a government enforced monopoly money supply. The abolition of that (after debt forgiveness) is the perfect place to start.
One can always find some sort of voluntary work to do, I would bet.
—–
Interesting comment. There is no lack of work, only people willing to pay for it!
Most of us refuse to pay (or skimp) on services that increase our quality of life! Example: pay the nanny as little as possible so one can buy that Mercedes… sending profits and labor out of the country.
Rogoff and Wolf put forth a logical argument (even if Richard disagrees with the logic). Logically, they contend, persistent high US unemployment will lead to political instead of economic push back. For this to happen, though, one or both of the major US political parties have to enact legal policies that would relieve unemployment in the US. That, in turn, requires employeRs — that is, it requires that people be hired to do jobs in some job providing contexts.
So, who will emerge as employeRs? Well, there are only three possible categories of employeRs:
Federal, state and/or local government employeRs. Not likely because the The Party of No has only one objective and it’s not to relieve unemployment. It’s to retake the White House and return the US to Reagan/Bush-ism. Among the holy principles of The Party of No? Government is bad; any form of government spending is bad — including government spending on government jobs.
The non-profit sector: I actually think we’ll see some employment gains — or perhaps less employment deterioration. But, in the end, this sector is too small, and too dependent on government funding (see above) and/or private charity. While the enormous wealth of the top 1% can possibly lead to more jobs in this sector, it won’t make much of a difference.
The private sector: As Yves repeatedly says, most jobs in the private sector come from small businesses – and, in addition to the problems of deteriorating demand, consumers without money and/or credit to spend, etc, small businesses have less, not more, access to the credit/equity they need to expand even if they wanted to. Meanwhile, large businesses are accumulating cash instead of investing it in jobs. And, of course, we have three plus decades of shareholder value fundamentalism directed at cost cutting, outsourcing and so forth. Then, on top of all that, we’ve gone way overboard in the financialization of the economy and the size and sway of the financial sector is not bigger, not smaller (and more influential, not less influential on both the Party of No and the Corporatist Democratic Party).
So, from whence the backlash that will lead to more jobs?
I can’t see it. Yes, if QE2 leads to a cheaper dollar, we will see some growth in exports. But enough to turn what is actually close to 20% true un/underemployment in half or more?
No, instead, if there is backlash, it is more likely to lead to policies that exacerbate unemployment instead of help.. policies from the corporatist elements of both parties as well as the insane elements of the right wing that simply reinforce the power of the paymasters (financial sector et al).
One big exception to all this: War.
Economically speaking, war is nothing more than a tremendously inefficient fiscal stimulus program.
Why not have a massive fiscal stimulus that creates new jobs directly, but also paves the way for future efficiencies? Things like effective mass transportation systems, quality universal education, 21st century green technologies.
There is so much to be done in the US in terms of infrastructure that it is ridiculous that the issue is barely mentioned in public debate. Why? Because of the high level of contempt from a large swathe of the population for government.
If you believe government is dismal, you will be governed dismally.
Why not have a massive fiscal stimulus that creates new jobs directly, but also paves the way for future efficiencies? Things like effective mass transportation systems, quality universal education, 21st century green technologies. Robert Dudek
You have answered you own question. For one, “green technologies” are bogus in several particulars, windmills for instance, IMO. OTOH, I would wish to see massive fiscal stimulus go toward thorium reactors which you might think are bogus.
So you see, we can’t agree on how the stimulus should be spent.
Solution? Send a massive, and I mean massive, “stimulus” check to every American and let them decide on how to spend or invest it. Many would pay off their debt which would help the banking industry too. You could invest in “green technologies” and go broke while I could invest in thorium reactors and get rich (or vice versa). :)
No need to put all your eggs in one basket. Fund any good idea with a little bit of the stimulus and if it looks promising continue putting money into it.
You need to have intelligent people make intelligent decisions. That is, presumably, what they are there for.
Giving money directly to each consumer isn’t a bad idea, but I doubt that is an effective way to build new infrastructure.
I want to emphasize that the role of fiscal stimulus is crucial when there is a lack of demand in the economy. When there is sufficient private demand, fiscal stimulus is unnecessary.
It depends on why the war is being started. For example, Viking invasions were very inefficient for the invaded people but the Vikings probably got more out of it than what the standard of living their geography and climate could give them.
There is a lot of ntrpy built up in he system. The system is based on cheapt oil. The US is a net importer of oil thus it will fight to keep a stranglehold on that resource.
The day it stops protecting that resource, is the day the system will be going through a huge overhaul.
All roads lead to Rome.
“Logically, they contend, persistent high US unemployment will lead to political instead of economic push back.”
There is nothing “logical” about separating economics and politics into two totally separate and distinct realms. The only people who buy into this fictional dichotomy are those who are thoroughly brainwashed into classical economic theory.
And you seem to skip over the part where Richard says “The US population could come up with an industrial policy any time we should choose to do so.”
The United States finds itself in its current despicable condition because of political decisions that were made in the past, decisions that led to the dismantling of its industrial base. These political decisions were made consciously, deliberately, and intentionally to favor the economic interests of one part of the population over another.
War is not the “exception,” but the inevitable end game of this perverse “logic.” The working and middle classes are called upon to sacrifice not only their jobs, but their blood as well “for the national good.” And this sort of depravity has proven to be almost impossible to stop. As Niebuhr observed: “A combination of unselfishness and vicarious selfishness in the individual thus gives a tremendous force to national egoism, which neither religious nor rational idealism can ever completely check.“
“Some readers may scoff and say the US deserves to suffer; after all, the US made and sold toxic mortgage products all over the world. But the UK has a financial sector even larger relative to GDP than the US, and certainly no better behaved (London, not the US, was the home of the structured investment vehicle business, a an important piece of the mortgage machinery; as we discuss in ECONNED, bonus gaming by Eurobankg exploiting Basel II rules was another key component). Yet UK unemployment has been markedly lower than ours.”
The UK unemployment has been markedly lower because the government deficit-spent more. Deficit-spending works until no one is willing to lend you any more money to deficit-spend; that time is apparently now in the UK as there will be “austerity” going forward. Let’s see how the UK performs from now on.
And yes, the US and the UK deserve to suffer more. Given the politicians they have both just elected, that is about to happen.
a said: “Deficit-spending works until no one is willing to lend you any more money to deficit-spend; that time is apparently now in the UK as there will be ‘austerity’ going forward.”
More falsehoods from the austerites. The UK’s decision to inflict austerity upon its working and middle classes is a self-inflicted wound, a political decision made by its financial overlords.
It’s amazing how it’s always the working and middle classes of the UK and US who are called upon “to suffer more,” while the financial overlords party on as if there were no tomorrow.
It’s amazing how it’s always the working and middle classes of the UK and US who are called upon “to suffer more,” while the financial overlords party on as if there were no tomorrow. Downsouth
Bingo! I hope to God that sovereign governments will soon say:
“We don’t need to borrow from anyone; we sill just spend money into existence as needed. Your days of collecting interest from our taxpayers is over forever.”
oops! Spell checkers can only do so much. :)
A missive from Kenneth Rogoff works here:
“You seem to believe that if a distressed government issues more currency, its citizens will suddenly think it more valuable. You seem to believe that when investors are no longer willing to hold a government’s debt, all that needs to be done is to increase the supply and it will sell like hot cakes. We at the IMF—no, make that we on the Planet Earth—have considerable experience suggesting otherwise. We earthlings have found that when a country in fiscal distress tries to escape by printing more money, inflation rises, often uncontrollably. Uncontrolled inflation strangles growth, hurting the entire populace but, especially the indigent. The laws of economics may be different in your part of the gamma quadrant, but around here we find that when an almost bankrupt government fails to credibly constrain the time profile of its fiscal deficits, things generally get worse instead of better.”
Obviously, I understand that the author intends the words “generally” and “often” to be sarcastic in that quote.
That’s the problem with the quote. The words “generally” and “often” are in fact accurate representations of reality. And “generally” and “often” do not in fact lend the certainty to this debate that is required to prove any one course of action obviously superior to another.
“The laws of economics may be different in your part of the gamma quadrant”
I’ve suddenly lost all respect for Rogoff. He implies that he lives in a certain part of the gamma quadrant when in fact all contemporary Earthlings live in the alpha quadrant. The remark would have made sense if he’d written either:
a. “The laws of economics may be different in your part of the alpha quadrant”
or
b. “The laws of economics may be different in the gamma quadrant”
Either his knowledge of various Star Trek variants or his ability to use the English language is sorely lacking. He’s right about the economics though.
“We at the IMF….”
What more needs to be said? The IMF, in its role as international enforcer of neoliberalism, squandered its credibility many moons ago. Paul Cooney puts together a well documented case showing the all too prominent role the IMF played in crashing Argentina’s economy:
Argentina set a new historical mark in 2002, having experienced the largest debt default by any country ever. In order to understand how Argentina could go from one of the most developed countries of the Third World, to experiencing the crisis of 2001 and then enter a depression in 2002 with over half the population living in poverty, requires an evaluation of the last quarter century of economic policies in Argentina. The shift toward neoliberalism began during the dictatorship of 1976, deepened during the Menem administration, and was supported throughout by the IMF. This paper aims to identify why the crisis occurred when it did, but also to understand how the how the underlying shifts in the political economy of Argentina over more than two decades led to two waves of deindustrialization, an explosion of foreign debt and such a marked decline in the standard of living for the majority of Argentinians.
Argentina’s Quarter Century Experiment with Neoliberalism: From Dictatorship to Depression
Rogoff suffers from the same deficiencies that Milton Friedman did. He tries to wear two hats. One is Rogoff the disinterested scientist—-the “economist’s economist”—-as Paul Krugman put it. The other is Rogoff the ideologue. The tragedy is that, just as was the case with Friedman, he uses the considerable cachet he earned from his academic work to further his neoliberal ideology, and in so doing he descends into—-there’s no other way to say this—-intellectual dishonesty. In Friedman’s case his ideological convictions were so overriding that he was willing to bastardize his own academic work. As Krugman explains:
By 1976 Friedman was telling readers of “Newsweek” that “the elementary truth is that the Great Depression was produced by government mismanagement,” a statement that his readers surely took to mean that the Depression wouldn’t have happened if only the government had kept out of the way—-when in fact what Friedman and Schwartz claimed was that the government should have been more active, not less.
Neither the IMF nor Krugman understand economics very well but I’ll take Krugman over the IMF which is just the collection agency for international bankers.
In my opinion, americans miss some interesting points about their crisis. Americans are now blaming others for their own problems but the crisis starts at home.
One important point is the share of gains of productivity who workers gather(or work, in marxist termos, if you wish). In the last 20 or 30 years, the most gains in productivity were catched by the capital and the government. The work have been loosing his share of the rise in productivity.
This fenomenun causes more pain to the workers because they stoped to save (accmulating capital) and are more indebeted. This means that workers (or work) have been living above their means and the credit ilusion had an interesting result. Workers believed that they had better standard of living just because they spent money that only could be earned in the future. Now they lost the earnings, his share of productivity, are indebetd and without hope to benefit from thies advance in productivity.
This fenomenun isnt very well understood today because were living in a great dissonance cognitive. All. Capital and work. Of course thats why the elite catch almost the entire gains in productivity that the government cant take it. And thats why the middle class is disaprearing in USA and the riches more rich.
But now americans wnats to blame others like a scapegoat of their own blindness. That will follow an war. Soon or later.
Best regards.
I forgot to mention an important thing about my previous text. The problem of the inflation. And how governemnt is stolen the working class with the metrics to calculate inflation. But, hey, Its for another time, yes?
Best regards.
“Americans are now blaming others for their own problems but the crisis starts at home.”
No. Chinese mercantilism is a long standing problem (at least 10 years). The reason it’s getting attention now is because of unemployment. The crisis started at home with the housing bubble and its attendant financial shenanigans, but that doesn’t mean we have no right to complain about a long standing problem which is of greater concern now because of domestic problems.
America has known of the Chinese mercantilistic ways for a long time. They could have planned accordingly.
Just like they’ve known for 50 years about the boomer bulge and need for special services when they’d get old, yet never planned for it.
“America has known of the Chinese mercantilistic ways for a long time. They could have planned accordingly.”
Other than substituting “acted” for “planned”, I completely agree. But does letting this problem fester for so long mean we’ve lost all right to complain about it or act accordingly?
“Just like they’ve known for 50 years about the boomer bulge and need for special services when they’d get old, yet never planned for it.”
Contrary to urban legend, it has been planned for. The National Commission on Social Security Reform was 28 years ago, and led to the creation of the trust fund that will largely fund our boomer retirement. Exploding healthcare costs are mostly a matter of uncontrolled costs in general, and have little to do with demographics in particular. Nor is our population aging anywhere as rapidly as say Japan or Italy, so our demographic issues are far less.
Maybe it was planned but it’s underfunded by trillions.
I guess my point is that we, in the developed world, have been exploiting emerging markets workers for a long time, thinking it would last forever.
How could millions of boomers take on extra mortgage debt at 50+ without ever thinking about who would be footing the final bill? Debt depends on future labor. If you’re thinking of retiring in a few years but tack on hundreds of thousands of debt just a couple years before the R date, obviously you’re expecting someone else to pay for your quality of life. If Gen-X and Gen-Y, a baby bust, are graduating with 100K in debt, how could they keep on picking up over priced houses?
Americans en masse are deluded (as is also the rest of the developed world) and they are reaping what they sowed.
Are yopu forgeting american mercantilism? Look to Brasil and they will tell you how americans talk hard to others but theyre worst. Or look to some african cowntries who blame mercantilistics americans lwas.
But hey, you are allwyas the good and others the evil. Call John Rambo, he will help sett you free, americans.
Come one. Do you want discuss american proteccionism and mercantilistic policies? Do you want to discuss wars everywhere where they dont agree with the dollar predatory action?
If americans are open to discuss this as rational human beeings…
I forgot to stress one important fact: how much is important international trade in USA GDP?
Dont buyld sand casteles or use bogeymen to excuse american own incompetency.
Look to american inflation. Do you, american, want that I believe in the current metrics of calculate inflation? When education and health care has a great share of living costs of the people? And the costs are rising like never seen before?
Americans should look to them self before pretending to be the Good and smartes than the rest of the world. Becase one these days…
Americans should look to them self before pretending to be the Good and smartes than the rest of the world. Becase one these days… PJM
Agreed!
BTW, Firefox has a built in spell checker and it is available as a free download.
Dear F. Beard, thanks a lot for the information. I deed we can use some free tools available to correct some errors. Thanks a lot. And I sorry of my bad english, especially when I write very quickly and without editing the texts. Sorry about that.
What americans should learn quickly is this: the world is getting tired of american double standards. And their arrogance and hipocrisy towards others. And that, my fellow americans, it will give you more problems to solve in the future. The world has changed too and a lot. And the world is getting tired of spoiled boy behaviour of USA.
Best regards.
F. Beard,
I don’t find PJM’s command of the Enlgish language, or lack thereof, to be such a distraction.
To me the content of his analysis is on sound footing, so I can overlook the faults in his presentation.
The U.S. exists in a huge, think skinned bubble of perception. Governing elites may still pander to the U.S. in a false show of respect, but that pseudo-respect is not reflected in any other layer of society. The characteristic arrogance and blind moral posturing generally eminating from “America” (which everywhere else means ALL of the Americas, north and south) is a sad joke to the rest of the world. When “American” leaders speak with pride, the rest of us laugh out loud – or dry heave.
This massive deficit of respect is a large and growing obstacle to U.S. prosperity, and is probably even subtly related to unemployment. The country is crashing, and as it bursts into flames the rest of us prepare marshmellows.
PJM: “Are yopu forgeting american mercantilism?”
Describing a country like the US that has long run an increasing trade deficit as “mercantilist” is bizarre. The very definition of mercantilism is a policy of having trade surpluses.
Everyday passes and we dont understand International Foreigns Policy in USA.
Americans (and some british like mr. A E-P) want to blame others by their own mistakes. Now we ear a lot the chinese scapegoat. When, in fact, China is developing the more free trade policy in their history. China is open their borders to more and more cowntries, like in Asia and in Africa, as South America too. Today China is more open to free international trade than USA. As some say: they used american ideology to surpsass north-americans in their own game.
But chinese are deeply trying to develop more ties with the world. Like an world leader shoul be. You can read this, fx:
“Chinese president calls for stronger ties with Europe”
In http://english.cpc.people.com.cn/66102/7187304.html
Or this:
“The prospect of more liquidity flooding into the emerging markets due to the further relaxation of monetary policy in developed economies is causing concern in China, which is already under pressure of expectation of long term inflation.”
In http://english.peopledaily.com.cn/90001/90778/90862/7187168.html
And this chinese ideas are spreading all around the world even in Europe, as the german minister acused USA of dollar manipulation. (Mercanthilistics, right?)
The USA is exporting inflation as never seen before. And mr. Chopper Ben is trying to do more and more, to mantaning anemic american economy alive.
However, Chinese are very active building ties with the rest of the world, using hard capitalism mixing with government intervention.
What are doing USA? What is the international relations policy of USA? Beeing alone in G20 and blaming others by their own mistakes.
That is a crucial north-american erros. One these days USA will be treated like North-Korea: an rogue state.
Americans should se better what is hapenn around the world. He is changing fast and less tolerant with some double standards in USA international policies.
That isnt good. After trade and currency wars comes militar war. Northe-Americans should beware about that before is too late.
“China is developing the more free trade policy in their history. China is open their borders to more and more cowntries, like in Asia and in Africa, as South America too. Today China is more open to free international trade than USA.”
China is very interested in trade relations that can provide them with things they either can’t produce or can’t produce enough of, like oil, copper and soybeans. When it comes to anything that might compete with their exporting sectors, they’re highly protectionist. Far from being free trade, that’s a policy that’s practically the definition of mercantilism.
“The prospect of more liquidity flooding into the emerging markets due to the further relaxation of monetary policy in developed economies is causing concern in China, which is already under pressure of expectation of long term inflation.”
China chooses to import inflation by pegging the RMB to the USD. Tell them to drop the peg and their problems with US monetary policy go away.
“the german minister acused USA of dollar manipulation”
A complaint from the German mercantilists. Talk about double standards.
“The USA is exporting inflation as never seen before”
Which countries are experiencing high inflation due to US monetary policy?
And if various countries are worried about being dependent on US monetary policy, why don’t they move away from the USD as a reserve currency? I’m all for it.
“After trade and currency wars comes militar war.”
Oh please, there’s no reason for trade and currency wars to escalate into military wars. If tomorrow the US were to impose a 40% tariff on Chinese imports, would that be a reason for shooting? I don’t think so.
My dear Alex, I understand some your points of view. However…
“When it comes to anything that might compete with their exporting sectors, they’re highly protectionist. Far from being free trade, that’s a policy that’s practically the definition of mercantilism.”
Are you saying that others countries doenst have produts and services than compete directly with chinese production? Can you explaim me why the toys sector is beeing vanished from chinse industrial production?
No, my dear Alex: China is opening borders with more countries than any chinese regim had in the past. With comoditties producers, like african countries; with otherst asia that compete directly with the same production as chinese and even with developed countries, like Korea.
Is it hard to grasp than China has surpassed USA in the free trade policy? Is it hard to grasp that? Yes, its true. China now is more open to free trade than USA was in his history.
“China chooses to import inflation by pegging the RMB to the USD. Tell them to drop the peg and their problems with US monetary policy go away.”
Yes, they pegged the yuan to the dollar, but theyre changing his currency policies, but what is hard to grasp, like some americans as mr. Krugman, is this crude reality: USA cant compete with the world. Doesnt have competitivity to do that even id the dollar falls a lot, as he did last months. And chinese have their timing not american timing. Chinese doesnt follow american orders and they do when they think must to do.
“A complaint from the German mercantilists. Talk about double standards.”
No, my friend. Let me say this again: mercantilism is a economic system just to promote exports, vanish imports and acumulate money believing that money is enouph to promote better standard of living.
Germany doesnt do that. Germany has open borders where almost europeans can compete in their market.
The problem is other. And your vision is the same as communists. For almost all communists, profits is wrong. For your point of view is the same. High superavits of balance of payemnts is bad, even that surplus is gained in high competitive markets, open markets, super concorrential markets and free trade.
Your point of view is the same as the communists: see the winners as gilt of beeing eficients. Your point of view is the same as the communists. Sorry, it is true, my friend. Only this kind of ideology find gilt the mherit.
“Which countries are experiencing high inflation due to US monetary policy?”
India, for example.
“And if various countries are worried about being dependent on US monetary policy, why don’t they move away from the USD as a reserve currency? I’m all for it.”
Theyre doing. But in the past they suffer from USA, when USA used Wold Bank or MFI, to impose his interests to others cowntries. Like in South America. Or even USA used CIA and others agencies to promote “friendly governments”, using a lot the bogeyman of communism. Like Chile, Argentina, and others.
Now we dont have URSS so the same ideology hasnt supporters around the world. But some methods are even worse. Why USA lied to the world and their allies to invade Iraq? Just to suck iraquina oil? Or to avoid the wish of Saddam to promote the use of the €uro in Iraq? Nobodys really knows why USA invaded Iraq. Even american allies, like Portugal or Germany.
Kind regards.
“Are you saying that others countries doenst have produts and services than compete directly with chinese production?”
Of course they do – why else would China need to be protectionist? In addition to high tariffs on many items (e.g. 25% on car parts) and numerous export subsidies, their deliberately undervalued and manipulated currency has the effect of both a blanket tariff and a blanket export subsidy.
“China is opening borders with more countries than any chinese regim had in the past.”
Given China’s mercantilist and isolationist history, that’s not saying much.
“Yes, they pegged the yuan to the dollar, but theyre changing his currency policies”
They are? Then why is the yuan still pegged?
“USA cant compete with the world. Doesnt have competitivity to do that even id the dollar falls a lot, as he did last months.”
Last few months? Ever hear of the J-curve? It’s a well established fact that it can easily take a year or more after an exchange rate devaluation for exports to increase. Existing contracts, idled or dismantled factories, etc.
“No, my friend. Let me say this again: mercantilism is a economic system just to promote exports, vanish imports and acumulate money believing that money is enouph to promote better standard of living.”
Exactly. Which is why large and sustained trade surpluses mean that a country has a mercantilist policy. Otherwise they’d accumulate less money in forex.
“India, for example.”
India has high inflation because of high growth (8.5%/yr est for 2010). It has nothing to do with US monetary policy. Try again.
“Theyre doing.”
Which countries are moving away from the USD as a reserve currency?
“But in the past they suffer from USA …”
Now you’re ranting. Whatever the past sins of the US, they give even more reason to move away from the USD. So why aren’t they doing it?
Dear Alex, Im a little tired, so Im sorry about my bad english.
I wish you to say something about what you wrote.
” In addition to high tariffs on many items (e.g. 25% on car parts) and numerous export subsidies, their deliberately undervalued and manipulated currency has the effect of both a blanket tariff and a blanket export subsidy.”
And USA doenst give subsidies and doesnt impose high tarifs to some importations? Are you really closing your eyes to american proteccionism? lolololololol
Come on. Dont use double standards.
“Given China’s mercantilist and isolationist history, that’s not saying much.” [ “China is opening borders with more countries than any chinese regim had in the past.” ]
Do you know that China is a member of the more gigantic free trade area of the world? Did you noticed that? Or you dont read international newspapers?
“They are? Then why is the yuan still pegged?”
Yes, is pegged to a currency portefolio, not only the dollar. In fact, China is overvaluating their currency, but slowly to dont have an external chock. As I say before: they do the things but in their timing. Not following american desires, wishes and orders. How much could cost to chinese economy a forced overvaluation in just some months? Theyre chinese, not stupids.
“Last few months? Ever hear of the J-curve? It’s a well established fact that it can easily take a year or more after an exchange rate devaluation for exports to increase. Existing contracts, idled or dismantled factories, etc.”
Oh god! Japanes suffered the same pression of USA some years ago. The yene was overvalued and what hapenned with american deciti with Japan? Shrank? No, right? I dont know who is more fool: the academics or who believes in their #models”.
“Which is why large and sustained trade surpluses mean that a country has a mercantilist policy. Otherwise they’d accumulate less money in forex.”
lololololol
“India has high inflation because of high growth (8.5%/yr est for 2010). It has nothing to do with US monetary policy. Try again.”
Who is the main trader partner of India?
But, I should notice to you the dollar carry trade. But, Ok! The carry trade only should be blamed when are japanese to stimulate their economy with steroids. hehehehehhh
“Which countries are moving away from the USD as a reserve currency?”
China, Russia, Venezuela, Brasil, and so on.
The latest figures that I checked, it was the city, in London, to replace these countries in their relative positions in dollar reserves. Are britsh really biying dollars? Or the Federal Reserve using some investmnet banks? Who really knows?
Best regards.
“And USA doenst give subsidies and doesnt impose high tarifs to some importations?”
Mostly to select agricultural products. I’ll even admit that the US is almost as bad as the EU in that respect. But as a percentage of the overall economy US protectionism is nothing compared to the Chinese variety.
“Do you know that China is a member of the more gigantic free trade area of the world?”
Actually the ASEAN–China Free Trade Area is the third largest by trade flow – after the EU and NAFTA. As I already mentioned China is willing to engage in “free trade” with countries that have needed raw materials and pose no serious competition to its industry. Nor have you mentioned how Chinese currency manipulation forces other Asian countries (including ASEAN) to keep their currencies artificially low, hence suppressing the standard of living of their people.
“Did you noticed that? Or you dont read international newspapers?”
Believe it or not even here in parochial America some papers have a small international section. And I’ve even been known to read the Toronto Star.
“Yes, is pegged to a currency portefolio, not only the dollar.”
So the Chinese claim, although the composition of that supposed basket is kept secret. Miraculously the yuan is still pegged to the USD, as judged by the actual exchange rates.
“As I say before: they do the things but in their timing.”
In other words, they won’t seriously negotiate or cooperate. Nor do they worry about being many years behind in their WTO commitments. Ok, so why shouldn’t the US impose a 40% blanket tariff on Chinese imports? We could always reduce it in our own time.
“How much could cost to chinese economy a forced overvaluation in just some months?”
Who knows, the yuan is so far from being overvalued that even thinking about it is a fairy tale. OTOH coming to a multilateral trade balancing valuation could be done over years, not months.
“The yene was overvalued and what hapenned with american deciti with Japan? Shrank? No, right?”
First off, it wasn’t just Japan. Germany was also a major problem. And the Plaza Accord worked very well in reducing the US multilateral trade deficit from 4% to 0.5% over a few years – exactly what it was supposed to do.
“lololololol”
So eloquent. Do you have an intelligent rebuttal?
“Who is the main trader partner of India?”
China. Which is why India also complains about Chinese currency manipulation.
“China, Russia, Venezuela, Brasil, and so on.”
So slowly it’s hard to notice. More talk than action. It’s unfortunate – I’m all for moving away from the USD (or any country’s currency) as the world’s reserve currency.
In general, correct analysis. All the comments would have had more impact if you refrained from classifying all Americans as Johnny Rambo. Americans themselves were put to sleep with a debt induced nap.
The summary of America’s issues can be found here: http://ragingdebate.com/economy/can-austerity-produce-recovery-from-the-great-recession . The solutions as Richard Kline suggest can be done. However, that is not in the self-interest of Senior leadership.
And when I say that it does not necessarily mean pure domestic leadership. Financeers do not demonstrate national loyalty. Someone as bright as yourself must have realized this by now. If not, consider it as you also consider solution sets that mitigate the damage of a criminal class that has other “options” than to face forced exit or justice. Get back to me if you want on site/link I provided.
Dear Jason, Thanks a lot for your link. Or links. Theyre good and I wish to point this, because is importante, and I commented here something smiliar:
“The American people have seen this movie before, it was the 1930’s where the merits of Communism over Capitalism were debated by the population when the American model then and now reflect Mussolini Corporatism or simply known as Fascism, a direct alliance between government and business. Vote buying or also known as Socialism has produced at least $60 T in unfunded liability while capital formation has and is continuing to be destroyed which could potentially offset a percentage of cuts in entitlements.”
In http://ragingdebate.com/economy/can-austerity-produce-recovery-from-the-great-recession
In fact, today american political system is more like to Mussolinis economic system (and Hitler, blá, blá, blá), when government is controlled/asscoiate of the financial cartel who sits next door with Federal Reserve. Taht isnt surprisd to read, as I read in Reuters, that inside trading is promoted by the Federal Reserve, when some insiders got an edge against others economic agents.
But in my opinion, americans should me more openly miden to criticism. Why? because some open and genuine criticism is very good to understand our own problems. To find our errors and to try to cut them.
As a old strong believer in USA, I wish veru deeply to see USA reborn. Isnt not good onlye for american people but to all the world. I rather want americans leading the world than others cowntries, where Fredom isnt in the genes of their society.
Thanks again for your interesting links.
Sometimes, we not americans get very upset about some americans nationalists.
Some days agoa an american said something like that: “PIGS screw because they spend too much. They deserve to be bankrot.
But for me, as portuguese and ally of USA, I get very upset with this comments from americans. Why? Because Portugal is getting broken and is spending millions and millions of €uros in Iraq and in Afhganistan to help american policies. And even were cuting spending we dont cut in these special militar operations.
When I read an idiot american talking about my cowntry I get very upset because Portugal is fighting in american war that is a shame, not only for portuguese people but should be to american people too. And when an idiot american wnats to see my people screw but were spending money in american wars, we feel that americanbs should be fighting alone in their own wars.
What are my fellows portuguese soldiers doing in Iraq? Risking their lives and spending peoples money just because americans wuanted sucking iraquina oil and stopping “€urozation” of Iraq economy?
Sometimes is good to know what we are talking about international relations and economics trade beetween USA and the rest of the world. And when USA doenst respet their own allies, careful, my fellows americans. You will be the next “russinas commnustis ” to fight in the XXI century.
USA shouldnt push a lot agaisnt others. Were very careful seeing what is hapenning in USa and the rest of the world. And remeber, allies should treated with respet and the elegance they deserve. Because one these days, USA will be treated like north koreans.
The worls is changing a lot. But a lot.
Best regards.
PJM, I may be wrong, but you seem to suggest that the global economic crisis should be solved by Americans lowering their standards of living. But I think it should be addressed by raising the rest of the world’s living standards. I can’t tell you or your fellow citizens how to go about doing that, as that’s for you and your fellow citizens to decide.
I do know this. The U.S. put a man on the moon in the 60’s. And I’m darn proud of it. We set a goal many thought unachievable and we achieved because we set our minds to it. It was not “one step for America, it was one step for mankind”, and demonstrated what the human race can achieve if they act on their dreams and use their capabilities. Your people, my people, and the rest of the people around the world can do whatever they dream, it’s a matter of leadership and will. Technology should be serving us all, raising us all up.
Of course their are challenges. For example, while I believe that peak oil has been reached, technological advancement has no limits, and innovation is the mother of all invention. Energy is not an insurmountable problem but continuing to rely on oil is. That is, addressing the problems with archaic economic, social and political institutions may serve to protect the interests of the status quo but will not prepare us for the future.
But the solution to our problems lies with each of us, your countrymen and mine. I’m insisting my government act in the interest of it’s people and their general welfare and living standards and expect you and your fellow citizens to do the same. I don’t want to deny the rest of the world a better life, but I do want to protect the future for my children and grandchildren. What good will it serve if we divide the world into 98 % peasantry and 2 % ruling elite?
My dear John ymaybe you should change your view of the world, because of this:
“PJM, I may be wrong, but you seem to suggest that the global economic crisis should be solved by Americans lowering their standards of living. But I think it should be addressed by raising the rest of the world’s living standards. I can’t tell you or your fellow citizens how to go about doing that, as that’s for you and your fellow citizens to decide.”
What I sugest tou you, and others like you, is that youre living with some problems of analysing the world, mixing USA and the Wolrd. As if the american crisis is the alfa and omega of thw Woldr. The world isnt in crisis. Is USA as como tothers developed cowntries. If americancentrism doesnt give ou the open mind to see this, you cant solve american problems.
I will say againt to you: USA is in crisis not the world. The others opinion from you ist that. Opinions about great american achievments that you think that are humanity achievments. But this is only nationalismo and self pride that are talking. Nothing more.
Best regards.
PJM, Well, if global free trade is working for your country and if your country has no trade or budget deficits and you are experiencing healthy economic growth with a bright future, I would suggest you continue with your current policies.
And believe me, I was against the wars in the middle east from the get go. I’m also sick and tired of the U.S. serving as the world policeman. I say bring the troops home, protect our own borders and let the rest of the world protect theirs. So we are agreed on that. It’s an expense I don’t think the U.S. citizen should bear.
My dear John, let me talk with you about this:
“PJM, Well, if global free trade is working for your country and if your country has no trade or budget deficits and you are experiencing healthy economic growth with a bright future, I would suggest you continue with your current policies.”
My cowntry has external deficits almost since 1995. And it wasnt free trade that is the cause. The cause are serveral, but the least is free trade.
My cowntry in 1995 made alot of mistakes. The first one of all was State spending like a crazy, believing that pushing for internal demand was enouph to rise our standard of life. The State and the government spend a lot but the productivity didnt grow as we wish. As some investor knows… When you invest a lot, using thirs money without having the earnings to pay at leats the cost of credit…
Other mistake was having a great fall in our interest rates in our financial system and pushed more for internal demand. That had severa problems, the most, high level of investment but without the promised earnings.
Other mistake was intehrating the €uro and believing on the aacademics, that most believed that deficits doesnt matter anymore in the €urosystem. They believed that this deficits were equilbrated by others euromembers, so it wasnt a problem a all. Do you see, economists from academia are worst than astrologers. ehhehehehehh
Free trade istn the main problem of my cowntry. It was believing that we can have shortcuts to have the same lelel of life than others euromembrs. We tried those shorcuts and were paying for that. It will take time to solve our problems, but we dont blame gemran and chinese for our own mistakes. It was hard to make people change their point of view but now were towards the solution of our problems. And our problems starts and end in our cowntry, in our mind and in our believes.
Kind regards.
JPM, my friend, sorry I can’t reply directly to your comment November 3, 2010 at 4:30 pm, as there is no Javascript enabled link to create the reply panel.
But I want you to know I understand what you are saying about poor economic policy choices and incompetent advise from academic economic experts. I feel much the same way about what has been going on over here.
But, I disagree that global free trade is not one of the problems. I have no power now or in the past over the population growth rates in India, China, and other over-populated countries around the world. But because of their past unchecked population growth, they are in a position to flood the global markets with dirt cheap labor.
I know it is not politically correct (and I will probably being insulted for saying it), but I don’t feel we in the U.S. should pay for this over-population and the poor policy choices these countries have made in the past. As a matter of fact, if these emerging market countries don’t reduce their population growth rates, the global financial crisis will probably only grow and more people will suffer (eventually starving).
The way I see it, if the U.S. worker is forced to continue to compete against basically slave wage labor we will soon become a nation of peasants serving a small group of wealthy elites. Sort of like Mexico. We will become as poor and unable to afford education and health care.
That is why I say we need to institute tariffs to protect our way of life. I have nothing against the Portuguese, Chinese, Mexicans or other peoples. I wish them the best. But you make the choices that serve your countrymen and we will make the choices that serves ours. Hopefully we can negotiate trade agreements that benefit us both.
But your right, complaining to China or Germany about their policies will not serve our interests one little bit. What we have to do is just begin developing the policies to advance our own interest and expect you and other countries to do the same. Hopefully there will be opportunity for us to work together and it will be mutually beneficial.
Regards to you.
P.S. What is the unemployment rate in your country?
Dear Av. John, No problem about your ansewr. Ima getting the same problem, so Ill use this if you dont mind.
Regarding the unemplyment rate in Portugal, oficially is 10,8%, but that is hapenning because the emigration is to high. Were seeing a drain brain in your cwontry with the youth working more and more abroad.
About the called cheap labor of developing world.
My opinion is this. We, developed world, cant compete with these cowntries based in wages. You and me dont want to eran 200 dolares a month. But we can earn good wages if were more productive. I mean, puting more value addedd in our producion. For example, selling capital goods or high tech solutions, and so on.
But to do that we need primary and secondary shools very well managed, where our youth can learn more than moral values of elites or basic math or english. We need schools where they can learn a profession too, for example. In fact, tUSA is having a strong unemployment rate among people who hasnt skills because they lost their former jobs. And to have new jobs, they must to have more skills, learning more things, for example, a second or third language, etc. But to have that we need beter schools. And we, ocident, are loosing this battle. For more and better education. Not in the high level of know how, but in the basic formation and education.
What Germany is doing should ne learned by all of us. For example, there in Germany, elemnatry and secondary schools are managed with companies to give the skills that companies nned to fill their working capital needs. What are doing others cowntries? Like USA for example? ;)
Germany has anothers good examples to teach us. As others cowntries like South Korea. But in sted blaming for the jobs created out side we should to change our societies to be more prepared for the called “sumpeterian principles”.
When you talk about overpouplation in those cowntries I should notice one point to you: our societies needs more population because our social secutiry systems are designed tfor high growth of population. So we cant blame for their rates of growth of population and blaming our self because we dont have population growth to sustain ours “Ponzi Schemes”.
We can learn with the past. For example, Danmark had on problem of low birth rates but they increased their birth rate with better policies. Because our societies are designe do have growth in population.
The main problem of the developing world is this: we pushed for internal demando to avoid crises. Do you remember when some pundits claimed for the “new economy”, where the businescycle was declared dead? Because they claimed that crisis are things of the past?
Why they believed in the endo of the crisis? Because in the last decades we used credit to push our internal demand. Do you remeber when some american politicians claimed that they were pushing for the world economy using american strong demand? That was an error. It was an error because earnings and wages didndt grew enouph to pay the credit, the real asteroids of artificial growth.
So, USA as my cowntry has some common problems. Very similar. And it wasnt the free trade the gilty. Because when we have free trade we have more opportunities as threats. But if the politiciasn and economists are more interested in the nest 4 years we cant expect beter than nasty public policies.
In my opinion, more quickly americans weak up for the real problems that they suffer, more quicly and easy USA surpasses the crisis. In sted blaming chinese (as in the past they blamed japanese, etc) we must to be honest with our self and starting thinking to cut our errors, having better policies and cooperate at international level, to avoid some mistakes from the past. Because what Im seeing is the same mistakes fo Thirties. Later we had that nasty war that took too mucho more lifes than we toutgh to be posible.
That what I really think.
Kind regards.
“PJM, I may be wrong, but you seem to suggest that the global economic crisis should be solved by Americans lowering their standards of living. But I think it should be addressed by raising the rest of the world’s living standards. I can’t tell you or your fellow citizens how to go about doing that, as that’s for you and your fellow citizens to decide.”
So every Indian, African, Chinese and South American should now consume 5-100 times the amount of resources they are using now, and output an equally increased amount of pollution?
No, Americans need to have their standards of living cut by 80%.
Colin, tell that to the people and countries of the world with exploding population growth rates. As far as pollution goes, I have no problem with implementing tough environmental standards at home. But if we do it at home and environmental problems are ignored in other parts of the world, we are once again at a global economic disadvantage.
Becoming a nation of poor peasants isn’t going to solve the problem of food and resource shortages. After all, it’s been the technology developed by affluent, educated countries that has enabled the agri-technology to feed a world of 6 billion people, and led to advances in medicine that have extended our lives.
Sure, a green revolution could create a tremendous economic boom here at home, but to what avail if some parts of the world do not participate. I don’t have all of the answers, but that is one of the reasons I want the U.S. to be as self sufficient as possible. At least, as a voting citizen I have some say over environmental matters. I can vote for clean air, clean rivers, and I can influence and teach my own children to respect the planet occupied by the U.S. But I have absolutely no chance of stopping S. America from stripping their rain forests or stopping the Chinese from polluting their rivers, or setting tax policy that discourages a country’s people from having too many children.
There’s no doubt in my mind that the world would be better served with 3 basic models of automobiles that were safe, fuel efficient, practically designed and cheap, along with a 21st century public transportation system, but that is something we have to decide collectively, and not have some authoritarian regime or figure dictate that to us. Perhaps as time passes and we continue to deplete the planet it will come to that.
Hate to get star treky on you but we need to reorganize the way we live our lives on this planet. Our hope and the solution to our problems lie out there somewhere. The resources of the universe is limitless, and we(humans) need to get busy investing in and training future engineers and scientists to explore it. The time frame for “2001 a Space Odyssey” has passed us by and we have hardly noticed. We need to start dreaming again and more importantly start acting on those dreams, not curl up in a ball to wait until we perish.
Reserve status has not only led to bubbles in the American economy and structural overvaluation of USD. It has also led to massive overinvestment in the US technology sector.
This has put the country a technological cycle ahead of many advanced trade partners and has made the country leading in industries largely based on high value-added ‘intangibles’ with extremely low marginal costs – software, culture, farmaceuticals etc.
But these exports have at least three disadvantages: First, they occur relatively late in the demand curve of developing economies, leaving the US hard pressed to take advantage of emerging markets demand. The overvalued USD doesn’t help.
Second, their production demands highly specific skills and education, squeezing a large part of the workforce out of the labor market permanently.
Third, technology makes most of them easy to copy, i.e. highly dependent on local enforcement of intellectual property rights.
This proves hard to do even in the Eurozone, where the trade surplus with the US would surely take a big hit if its citizens would pay more than just the monthly high-speed internet fee for their consumption of largely American made movies, music and software.
If every Russian, Indonesian, Indian and Chinese would actually pay for his operating system, dvd’s and viagra: America may run a significant global trade surplus.
Seems like the rest of the world is interpreting “Land of the Free” in all the wrong ways.
It has also led to massive overinvestment in the US technology sector. Bas
What an odd statement. The truth is that investment in technology is a very good thing. However, since we have a very inequitable and unstable wealth distribution system (a government backed counterfeiting cartel) then it is all too probable (logically and historically) that the new technology will be used to destroy and kill rather than prosper.
How can a fundamentally sound economic model result in massive “over” or “mal” investment? It can’t, I would bet. Hence we don’t a fundamentally sound economic model.
I was talking, of course, about the IT-boom of the 90s.
Partly because of all those excess dollars seeking returns, investment in the ‘new economy’ largely concentrated in the US, granting American firms a major advantage – even if this eventually led to a major bubble, and destruction of 5 trillion worth of dollar wealth.
… even if this eventually led to a major bubble, and destruction of 5 trillion worth of dollar wealth. Bas
I dispute that much actual wealth has been destroyed yet. Yes, the economy is mal-proportioned but so are children till their bodies finish growing. Real wealth will be destroyed, however; if we don’t soon deal with the mal-allocation of purchasing power.
“If every Russian, Indonesian, Indian and Chinese would actually pay for his operating system, dvd’s and viagra: America may run a significant global trade surplus.”
More likely, they would just develop their own operating systems, and they would consider Hollywood dvd movies to be a luxury which would therefore limit the revenue earned by movie producers.
The fact that they CAN make cheap copies makes these products more ubiquitous than if they had to pay the going rate for the original.
Excellent analysis. Did you think to include that having multinational companies operating in those nations might just make intellectual property that much cheaper to obtain and replicate?
The citizenry of the USA is being punished by a deliberate policy of export of capital, a long standing problem and willful antagonistic prolonged unemployment for the successful Political capture of DC by the Democrats in 2008.
It is a general strike by capital. This is politics 101. The destabilization of a government by economic sabotage domestically is no different than politics pursued against Iran or Cuba or by France against Haiti for its revolution. The simple mechanism is to let the people stew in their own juices of misery and deprivation til they’re mad as hell and can’t take it anymore. See rebranding of GOP by astroturf tea party anomoly. Then, the prudent, heroic republicans stand up to attacks on the intentions of the founding fathers, the Constitution, government gone wild etc. Yves, I know you are an admirer of FDR, this script was essentially written back then by the republicans and hasn’t changed.
If and when the corporations want to reinvest and hire people, it seems clear that profits are no longer the incentive, since these can be underwritten by the Federal Gov in the form of bailouts, recapitalization via opening of the Fed’s borrowing window and allowing Goldman to become a bank, for example. It is the preservation of power and privilege, not economics, not profits, but politics that is driving the pain and suffering. And it is sound policy for the Goldmans and The BofAs and everyone else that gets a pass, while we get foreclosed, sued, garnished, and have lifelong deficiency judgements entered against us, even after losing the car, the house, and just about everything that went with it.
Yves, The acute intelligence you display on the financial economics serves you well, even during this period of discontinuity, yr mind does not miss a beat, it reconfigures itself for the changing conditions you report and analyze on. I don’t think it is the case of “our response is likely to be unilateral and driven by politics rather than sound policy.” As you present it, it is another circumstance amenable to reason, solvable by good economic policy and thwarted by “POLITICS”. Not at all. Politics and policy are one and the same. It is the wielding of power. The process of wielding power is what politics is all about. The policies, sound or not, are the written battle plans of objectives. If you meet your stated goals, then, by definition you have power.
“War is not merely a political act, but also a political instrument, a continuation of political relations, a carrying out of the same by other means,” according to the famous Prussian. The same can be said of disciplining the workforce by a general strike on the part of capital. We all know what economic sanctions are. We all know what boycotts are. They are the weapons you use, by other means than violence. They may evoke violent consequences in the form of beaten wives, abused children or planes flying into IRS offices in Texas. But the goal is the same. To get people back into their docile places now that they can’t shop and work themselves into a stupor. Too much free time may result in undesirable political consequences.
This analysis is excellent too. But mandraking the wealth to the East for forty years is simply about sociopathic greed that is exacerbated by the CB model.
Everything approaching the apex of the establishment of the new reserve currency is about misdirection (wedge issues, China, etc.) so the citizens do not wake up to discover the truth and to blame something else besides the Senior politicians and bankers that made these decisions.
Debt saturation and deficit spending on unsustainable entitlements occurs and the final years before the new host currency (China and look for that in 2013) is established, it is looting of the Treasury and converting them to fungible investments accelerates while the Senior politicans use the funds to buy votes to continue the misdirection. Sometimes Paul, the most powerful truth is the simplest. Muggers tend to find a justifyable reason for their mugging and financeers hold no national loyalty.
Well said.
“Before readers throw brickbats at me, I’m just acting as the messenger for two articles”…
But you actively defend much of what they say.
They are all arguing in terms of continued globalization and in terms of globalization “as it is”, i.e. centered in the USA. Not everybody will agree that is the ideal situation, specially the emerging powers of the BRIC, which, with the exception of Russia, are not in the real ruling club (G8).
There are some lesser points in which I may agree such as sharing the blame for the financial woes with the UK, but there are key points I just cannot accept at all. In particular I got kind of shocked at this:
“If China were to set itself the goal of raising demand and so eliminating its current account surpluses, ideally via higher consumption, the Chinese people would be better off and so would the rest of the world”.
Actually the Chinese people would be better off (in the short term at least) as more consume implies better quality of life to some extent (not a lineal correlation in fact: overconsumption only marginally, if at all, improves quality of life).
But one thing is clear: if we the overconsumption of the “First World” we already have huge ecological problems that seem to have no solution, at least no solution in the current Capitalist and globalist parameters, what would happen if China, demographically as large as all the First World together, would become as hyper-consumist as not the USA but merely Europe? And what would happen if all the “Third World” would (could) do that?
We would multiply the ecological footprint, already gigantic and absolutely unsustainable, by two or three (if China only) or by seven (if all the World would suddenly become hyper-consumerist).
Of course this is plainly impossible: in Capitalist parameters, for some to consume massively others (many more) must suffer exploitation and very bad quality of life. That’s why imperialism, colonialism and class exploitation exist. But this is not even my point here. My point is what if it’d be possible, as these hallucinogenic simple men with a degree say?
It’d be a sudden multiplication of the ongoing environmental catastrophe, and therefore a most rapid erosion or even sudden destruction of the basis on which all the economy (excluding environment) rests on. It would just precipitate the crisis even faster and deeper to levels that certainly no economy theory ever has dared to even consider (well, there may be one or two but they are overwhelmingly ignored). It’d be an ultra-rapid acceleration of the existential (not anymore economic in the monetary or market sense) crisis Humankind is immerse in. And the faster the crisis, the less time to react and correct.
So no possible and doubtfully desirable. What Economics today has to look at is at the destruction that “production” (and consume) causes. There is no production but only transformation. This goes beyond the narrow vision of the so-called economic science, which ignores the environmental parameters: the so called economic science is happy with exaggerated consume because it supposedly drives the economy. But that is just a fallacy: it drives markets and hence the industries and services that sell in those markets, not economy as such.
In the past two centuries or so we have dramatically multiplied our impact, our conscious, semi-conscious or most often unconscious transformation of the environment we are part of. Obviously this has huge hidden costs that each day manifest more and more. The benefit only comes from making private (scarce) what was public and free (abundant), sometimes transforming it but often not even that.
We have to gouge if these transformations and which ones are worth the costs. And we have to think fast because time is running out.
We also have to figure out how to conciliate the old fact that increased productivity destroys jobs. Ideally for Capital no or minimal human work would be needed but that places huge sectors without means of sustain.
So we have to address all that by reducing the working journey, producing and consuming more modestly and more locally. Of course that is not possible in a Capitalist (or “market”) system: it needs thoughtful planning, it needs another way to do things.
And at this point I am overly pessimistic about the possibility that Humankind can do that. So maybe after all it’s not even worth discussing or thinking about it, maybe we should just live hedonistically, if we can, until it all ends. That seems what drives the capitalists of today: rob before the world ends.
Anyhow, bad ideas and no solutions.
If the wars of religion four hundred years earlier had been fought among Catholics and diverse Protestant denominations within Christianity, the great wars of religion of the twentieth century were now fought among socialist, Marxist, fascist, American progressive, capitalist, and other branches of an overarching religion of progress.
–Robert H. Nelson, Economics as Religion
And since the old God of spirituality has been killed off and replaced with the God of materialism, the “religion of progress” has become the religion of perpetual growth, or of perpetual consumption.
What you advocate, and I think with a good deal of legitimacy, is for a new overarching religion, not mere sectarian sparring within the existing overarching religion.
But I’m not sure Yves is willing to take up such an earth shattering, and long range, project. (And this is in no way to be construed as a diminished respect for persons like yourself who are willing to do so.) You are, after all, advocating a complete change of paradigm.
Furthermore, Yves has stated on several occasions that the purpose of this blog is to “promote critical thinking.” Thoughtful people don’t make good advocates. Perhaps nowhere was this more evident than in yesterday’s thread dealing with voting. Talk about “herding cats”!
Perhaps there will be relief around 2070, when some projections have the world population peaking and then slowly declining.
Malthusians always cannot seem to contemplate the solutions. Malthus has been proven wrong, get over it.
Sorry for the sharp critique but I will compliment you on your detail of transformation and net it out saying that mankind now must evolve and rapidly and yes there are solutions there but timing must mirror particular chains of events, as those desiring the status quo beging to shrink in power (even if this just comes down to generation cycles and one getting old and dying off).
Your opinion is similar to George Soros Theory of Reflexivity if I am reading you right. The rubber band of the theory is three hundred years of a 3D model of Central Banking. It has not evolved democratically, it is as simple as that. And since the design is pyramid in nature and not 4D (an example of a 4D model would be Facebook, poor example I know but the best I can come up with in short order). Read more here on this subject if your interested: http://ragingdebate.com/politics/feeling-upset-because-the-american-population-wont-wake-up-as-the-us-falls-apart .
The pain will indeed mount and snap until the model evolves as that is what evolution does, it forces us forward. No amount of kicking or screaming will stop the death toll will simply rise until collective action involving the solutions are created to stop the pain. Therefore, I consider making sure I am hedged against reality. For this time is certainly no different but I do look forward to making it through to the next high time and seeing how the evolution of this grand super cycle manifests itself toward the positive.
Maju,
You have it exactly right. We will need the resources of 7 planet earth’s to allow another 3 or 4 billion people to live the way North Americans and Northern Europeans live today. The economist Steve Keene is very pessimistic about capitalism being able to survive the ecological breakdown which is occurring globally. Our current model shares a lot of similarities with cancer, and we know how that usually ends.
You have it exactly right. We will need the resources of 7 planet earth’s to allow another 3 or 4 billion people to live the way North Americans and Northern Europeans live today. nmtdoc
Nope. That is a red herring. The world has several hundred years of fissile fuel even if we never achieve practical fusion. And with energy and technology anything is possible. The Earth and its resources are not the limiting factor, our economic model is.
“And with energy and technology anything is possible.”
not true, except in Sci-Fi, where the limits on technology are imagination.
“The Earth and its resources are not the limiting factor…
an extreme naive statement (and this coming from a technology buff). The Earth, by association human activity, is always finite. Population growth, absent the first, is not.
“… our economic model is”.
In this we agree, I believe (although given the previous arguments, I’m not sure). Technology is always bound to economics, and politics, if little else than in scaling for practical application.
Such pessimists you guys are! The only real problems Man has are moral ones. For instance, our money system is based on systematic violation of “Thou shall not steal” by the government backed counterfeiting cartel.
Life is a Miracle. Get over it, already, I suggest. Should we be stupid and careless then? No, that would be willful sin. But with normal prudence and diligence we should be able to prosper.
“Life is a Miracle. Get over it, already, I suggest.”
Thanks, I’ll keep that in mind.
not true, except in Sci-Fi, where the limits on technology are imagination. emca
Actually, that seems to be true in the real world too. The Universe is filled with amazing serendipity. To be a pessimist is not to be a realist except in the sense of a fulfilling one’s own prophecy.
Malthusians unite. For Christ’s sake how the hell did we ever make it out of the caveman era? I will tell you Malthusians what your real problem is. Your tolerance for risk is low alongside laziness. You are likely well hedged so there are no solutions right? Hedge for what is needed for old age and then leverage the rest into solutions. No more lame excuses, I am tired of hearing them.
@PJM,
English is a very difficult language even for native speakers! You do very well but I thought you might appreciate a spell-checker.
One thing I have been wondering about is likelihood of US protectionism, following reading comments by one economist here http://www.mindfulmoney.co.uk/1954/economic-impact/global-economy-the-hunt-for-a-way-out-of-trouble.html
From the noises coming out of Washington especially on China/currency wars, it seems like if pushed they might well consider ‘going nuclear’ if nothing else works to smooth out global imbalances. (though I guess a lot of countries might consider that too!) Republicans though are intrinsically against such measures…..assume if they do really well in elections, any chance of protectionism will be very much out of the window?
F. Beard,
Technically that may be true. We may develop other energy sources which then allow us to economically root through every landfill in the world and recycle enough raw materials so we can go on producing and consuming. It’s also possible the idea that technology will save us is the red herring. I do agree with you, however, that our economic model is flawed, and that was really the point of my post. Capitalism is very good at designing, selling, and financing an air conditioner to me because I’m hot. It is not very good at dealing with the environmental issues caused by billions of people using said air conditioner.
Thank you nmtdoc.
Even recycling everything, recycled materials are inferior to raw ones, and continue to degrade each time ’round. Common metals now are way less sound than their equivalents in the 1950s when they were almost entirely made from raw material. There may be lots of oil left, but already the amount of energy it takes to get fuel from the tar sands of Alberta is more than the energy that you can get from the resulting fuel.
“And with energy and technology anything is possible. The Earth and its resources are not the limiting factor, our economic model is.” F. Beard
I certainly agree that with a better economic model we can get WAY more use out of the same resources, and indeed this is vital. Yet, as long as that model embraces growth, it will at best only delay the inevitable truth: that the Earth is the ultimate limiting factor. As our pollution and destruction gets exponentially greater, the ability of the Earth to clean and regenerate gets exponentially less. Eventually, it will simply revoke our lease on it, then go on its merry way existing as it should.
That with enough energy and technology anything is possible is simply goofy. You mock what the Earth does for us in the way of purifying water and creating oxygen, not to mention the effects of climate on crops and the natural richness of soils that we have been degrading for thousands of years. The kicker is that when separated from the natural world – from the living aspect of Earth – humanity looses its will to live and withers in mental infirmity. This is yet another scientific realization that is consistently ignored by mainstream economics – this vital aspect of human existance can not be replaced by technology.
I think it may be more apt to say that our economic model is the factor that will push us against the limits of Earth’s patience (‘resource’ is a fantastically arrogant term when applied to air, water, oceans, forests, and the like), so economics is indirectly the limiting factor. We willingly walk up the gallows and stick our head in the guillotine, but the Earth will ultimately drop the blade.
That with enough energy and technology anything is possible is simply goofy. You mock what the Earth does for us … Birch
On the contrary, I acknowledge the Creator’s Providence and generosity. We should worship the Creator, not His Creation.
But theology aside, the history of technology is the accomplishment of more with less and less. Consider your PC. It’s mostly just cheap metal and plastic with the critical parts made from sand (silicon).
The Creator is The Creation, in every minute bit. Respect it.
The next chapter in the history of technology is the creation of more and more luxurious crap with resources that become harder and more expensive to acquire. Development in linear progression does not necessarily constitute progress, as development creates change.
Computers aren’t getting faster like they used to, to continue your example. That metal alloy super chip has been four years in the future for as long as I can remember now. Instead, we get a proliferation of handy little gadgets so we can be connected to the system everywhere we go, all the time. Thanks.
Inequality promotes luxury and privation. Entropy is as universal a law as any I know. If you don’t maintain all that you’ve gained – and once you’ve gained a lot, there’s a lot to maintain – then you start to loose it… That’s the final chapter of the history of technology. Repeat ad nauseum.
Each time, a chunk of the living planet, our Creator Creation, goes missing. Woops, gall darn, didn’t we have insurance for that?
Just kidding. We all know Raven is the Creator, and he’s just playing games with us like he always does. Trickster!
“There may be lots of oil left, but already the amount of energy it takes to get fuel from the tar sands of Alberta is more than the energy that you can get from the resulting fuel.”
You should replace “already” with “still”. It’s likely that more efficient extracting methods will decrease the costs per unit of tar sands energy.
If I post that nuclear energy is one of the solution I bet NMTDoc that you would respond that the fuel rod storage would clutter the earth killing all of us from radiation. That we would run out of rocks to make metal with to build plants long before we had the energy output required to restart healthy global growth.
Good. Thank you for clarifying your point. As for the flawed economic model we agree. Here, you check out this link to it will help you: http://ragingdebate.com/politics/feeling-upset-because-the-american-population-wont-wake-up-as-the-us-falls-apart .
I don’t find PJM’s command of the Enlgish language, or lack thereof, to be such a distraction.
To me the content of his analysis is on sound footing, so I can overlook the faults in his presentation. down south
Point well taken. Yes, PJM’s analysis is very good. I was just trying to be helpful. Heck, my own spelling has gone to hell since I started using a spell checker. And sometimes it picks the wrong word and I use that!
Thanks for sticking up for PJM and vindicating Southern graciousness.
@PJM,
Forgive? I meant no disrespect or embarrassment to you. Please keep pointing out American hypocrisy.
FB
If the unemployment situation continues into the ’12 campaign, and it will, one of the kerfuffles is going to be over free trade v. protectionism with protectionism the populist favorite. This is going to be one of the driving dynamics. The terms of globalization are going to change.
Unemployment is high because, in the 21st century, high-wage jobs require education, or at least specialized training, at reasonable cost.
This is not new. The serial bubbles of 1996 to 2007 merely concealed it, and delayed the impact.
If only the rest of life were as simple as this: we will either find a way to provide relevant education to everyone at reasonable cost, or we will continue to decline. It’s the crucible, the only thing that really matters, 10x more important than anything else, and provably so, based on the experience of other nations.
Ummm, all labourers should receive an appropriate proportion of the wealth they create, not just the highly educated ones. Road builders and textile workers are no less valuable to society than lawyers, dentists, or computer techs. Septic and industrial waste workers should be paid better than anyone else in society, bar none.
Education can be a good thing if it’s done right, but it certainly should not be a condition of a living wage. The problem here isn’t so much a lack of education or rapidly advancing technology, it has more to do with diminishing wages of the functional working class and skyrocketing wages of the rentier and CEO classes.
I’ve always found it sick that as you work your way up the highrarchy of a workplace – from dishwasher to manager – you do less actual work yet receive more pay. Youth are exloited as badly as ever, the abuses are more subtle and entrenched.
Is the US Taking Too Much of the Brunt of the Crisis Aftermath?
By the “US” you must mean to say the peon class. The criminal banker class seems to be doing just fine.
I meant to post this here. Sorry.
Wonderful. The more opportunities to offshore manufacturing jobs the better.
Perhaps the Republicans or even the Democrats would like to try bringing back the 4.7 million we have offshored so far. Is reshoring a word? I would prefer that approach for either or both parties. The one that does will get my vote in the next elections in 2012.
http://topdownandbottomup.blogspot.com/2010/09/can-we-bring-back-millions-of-exported.html
How does one post a link here so it’s clickable?
Chicbee
You read my mind.
In line with the topic of post, I yesterday Netted this article from BusinessWeek, Business Looks to Republicans to Block Rules, Taxes mentioning ‘Free Trade’:
“Republican control of the House may provide the best chance to pass free-trade agreements with South Korea, Colombia and Panama since they were approved by President Bush in 2007. Obama has shied away from pushing the deals in Congress as drafted amid high unemployment and opposition from some fellow Democrats and labor unions.”
further:
“For companies such as Caterpillar, UPS, Boeing Co. and Citigroup Inc., getting the agreements passed would broaden access to markets abroad, with the South Korean deal alone boosting U.S. exports by $10.9 billion a year, according to the U.S. International Trade Commission.”
and lastly:
“With almost $68 billion in two-way trade, the deal would be the U.S.’s largest free-trade pact since the North American Free Trade Agreement in 1994 and may be critical to helping Obama meet his goal of doubling American exports in five years.”
(the reference to NAFTA may be the more ‘critical’ element of this analysis)
The article though is worth reading in full as it gives an idea the direction this country might be headed in the near future.
Oh joy, more “free” trade. Now that Obama has sufficient cover thanks to Boehner, it’s sure to pass.
In Bill Moyers: “Welcome to the Plutocracy!” he quotes Socrates, “To understand a thing you must first name it.”
Let’s name it correctly: RIGGED trade.
http://www.truth-out.org/bill-moyers-money-fights-hard-and-it-fights-dirty64766
I would say I enjoyed reading the linked article, but I don’t think enjoyed is quite the right word:
“Great wealth was to be gained through monopoly, through using the State for private ends; it was axiomatic therefore that businessmen should run the government and run it for personal profit”
/Mark Hanna, first modern political fund-raiser, friend and unabashed champion of great personal wealth, force behind William McKinley’s ascent to U.S. President, philosophic precursor of our own Karl Rove…
that only we had such honesty today.
Obama: Foreclosuregate? What Foreclosuregate? What We Need is Electric Cars
http://www.practicalstate.com/?p=3149
Cheers
Wonderful. The more opportunities to offshore manufacturing jobs the better.
Perhaps the Republicans or even the Democrats would like to try bringing back the 4.7 million we have offshored so far. Is reshoring a word?http://topdownandbottomup.blogspot.com/2010/09/can-we-bring-back-millions-of-exported.html
The wealthy in the US can do with a little less. How’s that
Part of the problem with laying the blame anywhere is that even though [nearly] everyone in the financial system participated, the thinking upon which the financial fiasco was allowed to happen was called the ‘Washington Consensus’. We [ie, America] had it all figured out. All the rest of the world had to do was follow our lead. We ‘are’ the reserve currency after all, we can’t mess this up.
It’s hard for the rest of the world to discern properly what was malfeasance and what was stupidity. After a while it gets to be that ‘good faith’ in the negotiating process is doubted. And with the method for change to come from subscribers of the Washington Consensus – Rubin, Geithner, Summers, et. al… It is hard for some to see that there’s room for a new kind of consensus – even among those tasked with devising one. We need someone in there with excellent negotiating skills. Remember the deal Geithner et al. got us with AIG/Goldman etc.? Not quite shrewd enough.
As far as the on-going crisis is concerned – America obliviously stayed the toxic course. How do you maintain respect in that case? Sending in Geithner and his flunkies to negotiate any of this, is a sort of insult to begin with. No offense, just being real. The rest of the world expected change and they got the same-ol-same-ol. No new ideas, no getting out the river of denial.
Now, Yves, with all due respect… Wolf and Rogoff think that Geithner’s idea was no big deal. But that’s not how it was received internationally. To Germany for example it was a big deal. Some thought the idea was effectively ratcheting up the currency war. There are more elegant approaches.
Toward the end of your article you reveal exactly why QE might be perceived as a furthering of financial warfare:
“The evidence strongly suggests that the Fed does not give much heed to the trade sector, but it also appears read[y] to let the dollar fall as collateral damage, so the disruption abroad by QE2 is more likely to be seen as an unfortunate side effect than a primary objective.” -Y.S.
The Fed appears ready to let the dollar fall as collateral damage? [As I’m sure you know] Because the dollar is the reserve currency, this effects everyone through commodities. Yet we [America] will unilaterally decide that the strength of the dollar [and what spirals from it] is collateral damage? Perhaps some will see it as an unfortunate side effect. Others will see it as a violent manipulation of the markets. [In the sense that many people will suffer from inflated commodity prices… not those investing in them, but those consuming them.] It’s a tight rope to walk indeed.
“Wolf and Rogoff think that Geithner’s idea was no big deal. But that’s not how it was received internationally. To Germany for example it was a big deal.”
Because Germany closely protects its trade surplus. They don’t want any other countries cutting in on their action.
“Some thought the idea was effectively ratcheting up the currency war.”
If by “ratcheting up” you mean fighting back, then you’re right. People who say “ooh, we shouldn’t have a currency war” forget that we’re already in a currency war, and have been for at least a decade.
“There are more elegant approaches.”
Name some.
Well, If you are really asking, thank you…
The more elegant approach would have been to give the situation we find ourselves in the due respect it deserved. Which meant – putting ‘fixing’ the economy ahead of healthcare, etc. But there were political reasons for putting the same guys that – oops – missed – the housing bubble/foreclosure/mortgage crisis barrelling down on us – into the positions where they can perform the endgame of squeezing the fraud through the system undetected. So that didn’t happen. Moving forward I would stop doing same. And stop sending the same eyes to see new things.
To think that the world is somehow rude by not respecting Timmie, please, give them more credit than that. Team USA comes with scales over their eyes.
As far as how the world responds to things – if fighting back is what you want, war is what you get. If cooperation is what you want – do your homework and come with a sense of reality. We can’t just erase away billions of dollars worth of debt and collateral and not have to work it through. The my-way-or-the-highway schtick is over for the US.
I want to apologize for naming names. These are the names everyone already knows, I should feel free to speak. It’s just that previously I have defended some of the same names. Something, upon further review, I wish I hadn’t done. So now I guess it’s more of a clarification than anything else.
I really, really hoped. But that’s not enough. Reality sets in. It’s time for a new approach. No kidding.
Also, please and thank you.
No need to apologize Anon for changing positions when things don’t work. That is what investors do. We all have the right to change our mind and if you are scared because you are then it means America is already in tyranny. So evolve the model on your feet and expect the opposition to such that always occurs or serve on your knees.
Exactly. Lolz. I think you mean, needs? Freudian slip perhaps.
Thank you for reaffirming the need to be adaptable to the situation as it presents itself over time. Amen, brother.
Oh … I get it. At first I thought you said … evolve the model on your feet and expect the opposition to such that always occurs to serve your knees.
Uh – no, the slip is mine. Double lolz. I try to serve standing up, btw.
Same old blame China game. Pretty tiring. As if they are holding a gun to our heads forcing us to buy trinkets.
And if you are going to blame china as mercantilists, why not start with Japan, who are the original strip miners of american manufacturing and jobs, and have accumulated such massive holdings of US debt given their small population?
It’s absolutely america’s fault, and in fact, americans should be thankful there isn’t more pain due to the US stealing outright from the rest of the world via CIA coups, outright wars, and bully economics. Americans deserve every bit of the pain for being so stupid and “electing” governments that intended to destroy itself.
“Same old blame China game. Pretty tiring. As if they are holding a gun to our heads forcing us to buy trinkets.”
No, the US is to blame for tolerating Chinese policy. Of course if we smartened up and said they have six months to start revaluing the yuan according to a serious plan or we’ll impose 40% tariffs, many of those decrying the “blame China game” would criticize US actions from the top of their lungs. Seems like you can’t win with some folks, but who cares. Lenin was right about the ubiquity of useful idiots.
“And if you are going to blame china as mercantilists, why not start with Japan, who are the original strip miners of american manufacturing and jobs …”
What is this, the 80’s? Seen that new “Back to the Future” movie yet?
“Americans deserve every bit of the pain for being so stupid and “electing” governments that intended to destroy itself.”
If, as you put it, we “elect” rather than elect our government, how is the average American to blame? Can’t have it both ways.
Are you aware that the Chines Yuan is pegged to the dollar?
Yes, that’s part of my point.
Some real truth there but who controlled the media? A lot of the Russian people didn’t support the Bolsheviks and believed Communism was going to be better after there financial system was raped by insiders.
I will not permit you to blame the American citizens. They were not there in a December evening in 1913 in the halls of Congress when only a few were present and Kennedy died attempting to liberate the country. I think you are much smarter than you let on.
The article characterizes the biggest factor driving the current unemployment problem.
Trade by definition should be a balanced exchange of goods and services. For whatever reason, trade with the U.S. has been severly out of balance for decades. If the imbalance persists indefinitely, then what was supposed to be a mutually beneficial symbiotic relationship becomes more like that between a leech and its host. Eventually the host runs out of blood (dollars) and dies, after which the leech starves as well.
The US may be hurting now but in the long run, imbalances hurt all sides.
The US can keep printing money as long as it needs to. The difference between the US and Zimbabwe is that the US can produce it’s own goods if it has to. If the rest of the world wants to give away their goods, keep their labor cheap, the US will buy. Whenever the price in US dollars does eventually go up, the US will go back to producing its own damn goods. In the mean time the US middle class disappears, the US gets to look 3rd world, a sea of poverty with little islands of wealth here and there … unless a US regime with the guts to start a trade war gets into power as a result of voter churn.
But the QE will continue as long as it has to. Whoever gets Bernanke’s job will do it too.