Like Gulliver tied to the ground by many fine Lilliputian threads, the US economic colossus struggles in vain to profit from world free trade and the fiat currency dollar. The only way we can have the illusion of wealth is via handing out dollars to be stored in many FOREX holdings overseas. The unbalanced trade will eventually end but what will we be like when this happens?
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ΩΩThis is a key question. The British economic newspaper, the Economist, thinks that the huge US GDP is a sign of strength rather than weakness. So they feel the US empire will float on this sea of red ink for a long, long time thanks to being ‘big’. This is just plain silly. If the US GDP reflects consumption of foreign manufactured goods, this isn’t a good thing. Just as there is no real ‘inflation’ but rather, the force of money flowing from one sector to another, some being more destructive than others, the GDP is wealth model is very flawed. It reflects CONSUMPTION not PRODUCTION. First, a snippet of the British article:
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Growth: Still the one | The Economist
WILL America always be the world’s foremost economic superpower? Probably not. No empire maintains their superior position forever. So it’s more of a question of when rather than if America is overtaken. But I’m not convinced the end is nigh just yet.
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I agree. The end certainly isn’t here—-yet! But when is it? I still place my money on the Chinese 50 Year Plan scale: since this was launched in the mid-1980′s, it will come to fruition in about 2025-2030. My only caveat is, the US is so suicidal, it may collapse ahead of schedule.
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. One of the ways in which a country’s economic superiority is measured is by looking at its share of world GDP. If America falters in this category, who will replace it at the top of the list? China’s GDP growth rate is much higher than America’s (even when it’s not in a recession). But that does not necessarily mean China will overtake America. GDP growth is driven by three factors: technology, labour, and capital. China is currently employing lots of labour and acquiring capital. But over time, adding more capital or labour does not add much growth because each has diminishing returns. Much of China’s impressive growth comes from opening its market and experiencing a large catch up.
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HAHAHA. China does not have to replace the US by having the same size GDP as the US. All they have to do is DISPLACE the US by forcing us to have a much smaller GDP. The US will have lost this game once we no longer have a huge GDP. Who has it instead isn’t the question. No one could have it! It could simply see a smaller global GDP.
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The other issue is, what is the US GDP, anyway? The answer is obvious: it is unbalanced in favor of global consumption and is not a sign of great power and strength but rather, tracks our debt accumulation since much of this GDP is red ink, not US capitalized production.
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. China also lags behind America in terms of economic leadership. (HAHAHAHA) America hosts an exceptionally dynamic marketplace where new business and technology thrive. (And is instantly offshored to pirate islands or moves to Asia!) Being a centre of innovation ensures sustainable long-term growth. (A totally false assumption, over time, even the innovationing –making fun of the English teacher editorial here!–moves to Asia, too.) It is not obvious yet whether China’s market is a place where creativity and entrepreneurship can thrive. In the 1960s many thought the Soviet Union’s impressive growth would spell doom for America. But ultimately the inability to create a healthy innovative market, stalled growth and led to the Soviet demise.
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ΩΩNo one, absolutely no one thought Soviet industry would doom US industry. The only thing the Soviets produced up to par or better than us was military stuff like nuclear bombs and missiles. And guess what? The top US high tech industrial export products are….military stuff, just like the Spartan Soviet State! I can remember past propaganda!
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ΩΩThe US boasted that we made better refrigerators, autos and washing machines and the US working class was richer and better off than Soviet workers! Our domestic economy was supposedly superior. Russia couldn’t make consumer goods!
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ΩΩWell, now we don’t make consumer goods. We hate our own consumer goods and consider them to be inferior to Asian or European consumer goods. The free trade deals we made over the last 50 years has steadily undermined or outright totally destroyed US native industries or transferred ownership of US production to foreign powers. The profits from even our home-based industries flow to Asia and Europe, not recycle inside the US.
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ΩΩAs for the banking innovations: they have been particularly destructive of US industrial production capital systems. These are not good things but bad things. They enabled debt accumulation while simultaneously destroying capital production systems! Far from making us stronger, these financial innovations were pure poison. Even today, with a number of European powers such as Germany barking at us that our banking innovations are pure poison and we better stop it, the US political class thinks that these same destructive things are our salvation, not our killers. So we aren’t stopping any of this.
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ΩΩInstead, poor Obama trots dutifully out of the Shell to say really, really stupid things. He wonders why his golden voice now fails to move the masses. But then, he has to look at the messages he is now giving. Just like in the warmongering right wing Nobel Peace Prize speech, he is telling us we must have more poison, more of the things that are killing us because this is the Plan.
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Obama’s ambitious export plan may rekindle free-trade battle – washingtonpost.com
The president acknowledged the formidable barriers to his goal: doubts in Congress over new free-trade agreements, misaligned currencies that make Chinese products cheaper on global markets, and continued weakness in global demand, all problems that could dwarf efforts to promote U.S. products and services abroad.
. But, Obama said in a speech, “in a time when millions of Americans are out of work, boosting our exports is a short-term imperative.”
. “We are at a moment where it is absolutely necessary for us to get beyond those old debates. . . . Those who once would oppose any trade agreement now understand that there are new markets and new sectors out there that we need to break into if we want our workers to get ahead,” he said.
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ΩΩEvery time we enter a new market, we are wiped out by Asia and Europe. This has happened over and over and over and over again. Like Charlie Brown trying to kick Lucy’s ball, the US public runs for the export ball, swings a leg in a mighty swoop and then collapses onto its back, the trade ball still firmly in Lucy’s iron grip. She then blames Charlie Brown while grinning to herself with glee.
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ΩΩHistory is adamant here: the US has NEVER balanced trade in the last 50 years by ‘opening new markets’ or ‘more free trade’. It is crystal clear that free trade, like our financial innovations, is a POISON, not a balm. It is wrecking all our systems, not fixing them. Not one American has saved his or her job due to free trade. On the contrary, the collapse of the US workforce is directly due to free trade and can’t be fixed except with protectionism.
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ΩΩThe question is, why on earth do we have ‘free trade’ when it punishes our middle class so ruthlessly? Well, one thing is certain: it kills unions. This increases the profits of the upper 1% elites. In my previous article about the Citigroup report which honestly says that global free trade has enriched the plutocrats and impoverished the working class in America, the support for free trade is 100% in the ruling elites and their media mouthpieces. Whereas, protectionism is not even debated in the open, much like most of Karl Marx has been cut out of the discussion.
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ΩΩThe destruction of Karl Marx isn’t due to nears of communism, it is due to him talking about how workers create capital production and how capital is connected to labor. This is a very verboten topic due to its obvious explosive conclusions. I am immensely irritated with all the people who, like Ellen Brown, think that our problem is not enough debt at ZIRP prices. We see in Japan, the Land of the ZIRP lending, that the workers have lost tremendous amounts of power and economic clout as the debt load on them via government spending, is soaring. This is very cheap debt and is leaving them all very, very poor. Government debt in ZIRP Japan is now at 200% GDP, the highest of all industrial nations.
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ΩΩWhat we must fix is our industrial base. The global warming people are another hazard to fixing our industrial base. The solution they were all herded into supporting was the insane international energy tax that would then trade in this insane Carbon Derivative Trading market which the free trade elitists boasted, would dwarf even the entire energy stock and commodity markets! Luckily for us, Mother Nature saved us from that insane and destructive market by freezing most of the Northern Hemisphere most of the winter.
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ΩΩThere is an interesting article in Antiwar.com about how free trade first was launched. Here is a snippet:
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Israel’s Lobby Imposes Crippling Sanctions on America — Again by Grant Smith — Antiwar.com
The most relevant example of AIPAC-Israeli government tag-team law-breaking went on display this week in the form of 49 declassified FBI files. (The release of these files didn’t make it into the mainstream news in the US due to Zionist censorship) In 1984 71 major US corporations and worker organizations said “no” to an earlier AIPAC economic power grab (a demand to lower all US import barriers to Israeli products while allowing Israel to continue blocking US exports). Israeli minister of economics Dan Halpern stole [pdf] a US government document containing proprietary information and business secrets supplied by US industries most opposed to the Israel Lobby’s economic power grab. Halpern passed it to AIPAC, which made great use of it to undermine the entire advice and consent process. (This thief now is the Vice Chairman of the Israel-America Chamber of Commerce! And was a top speaker at this year’s AIPAC meeting.) Douglas Bloomfield, AIPAC’s top lobbyist, even made an illicit copy of the classified document after AIPAC was explicitly ordered to return it to the US government (rather than ever do time in jail, Bloomfield now fantasizes about militarily playing the United Arab Emirates off Iran).
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The US trade deficit in 1984 wasn’t the giant sucking sound it is today. The US was frantically negotiating with Germany and Japan to get them to strengthen their own currencies. When Japan noticed that the Israeli Jews were bribing Congress and stealing secrets, they figured, why not do this too? The Chinese were living with me at this point in time and we discussed how vulnerable the US is to foreign lobbyists using US organizations as their home base for destroying our economic systems.
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The Zionists fully support free trade so long as it is totally unbalanced. This is why no US media owned by Zionists show the slightest concern about trade deficits! As I have pointed out in the past, Israel has a huge trade advantage, PER CAPITA, vis a vis the US. On top of this, they get to piggy back ride on Pentagon spending, too. Unlike, say, Japan.
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The aftermath of this earlier economic crime against US industry has now become clear. By locking many US products of export quantity out of Israel, the trade agreement has delivered an $80 billion dollar cumulative deficit (adjusted for inflation) to the US since enacted.
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ΩΩOur founding fathers fretted about divided loyalties. The Tories in the US were brutally driven out due to fears of divided loyalties. Whenever a flood of immigrants came to these shores, the debate about divided loyalties would flare up again. The US has a legitimate fear here. It used to be, once one arrived, one had to apply for citizenship and then swear fealty ONLY to the US. The Zionists hated this and pushed very, very hard for dual citizenship. No citizenship at all would have been ideal.
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ΩΩThey got it. In spades. Now, anyone who wants access to our inner systems can pick up a cheap US citizenship paper while keeping one’s loyalties firmly in a distant land that often is wrecking US domestic systems. This is totally insane. I happen to be a strict person when it comes to sovereignty: if there is no such things as citizen/government loyalties, there is no country anymore.
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ΩΩI see this on the left side of the ledger all the time: a desire to NOT be ‘citizens’ but to be unattached individuals who happen to live here but don’t support the sovereignty of the nation as a whole. On the right, there is a major push to pledge allegiance to a religion rather than a nation. Flag waving aside, there is a strong desire to NOT have a strong sovereign nation but ‘every man or woman for themselves’ type of thinking. This is why the right is totally against helping anyone with social services like national medical care like all sane industrial nations have as a matter of course.
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ΩΩZionists exploit and expand on these forces: that is, we should be loyal to a RELIGION, rather than a secular nation. And that the US doesn’t deserve social services if this conflicts with funding aliens. We are told, we must save Haiti and Darfur. But not Detroit. There is still a muddled middle that wants desperately to be patriotic and to be USA all the way. But they also hate our own industrial systems and hate US production. All of this is exploited to prevent protectionism from taking root.
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ΩΩWhat is worse, we can’t export out way to prosperity. First of all, exporting more military stuff as well as grains and other commodities, won’t fix our industrial base at all. All money raised by selling commodities will be spent on…buying imported consumer goods! So we ALWAYS will be behind the 8 ball. On top of this, we can’t export our way out because we destroyed our native shipping industry long, long ago when we began this stupid ‘free trade’ mess.
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Bottlenecks Threaten U.S. Export Boom – WSJ.com
Minnesota farmer Wayne Knewtson has 2,000 acres of soybeans, and soy-milk makers in Vietnam eager to buy his crop. The only problem: delays of three and four weeks in shipping them. His customers “are not happy,” Mr. Knewtson says. And because he doesn’t get paid until the beans arrive in Vietnam, he has had to take out a loan to cover expenses on his farm….
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Food is very time-sensitive. Why doesn Vietnam need our food? Well, the Vietnamese who formerly grew their own food are now busy…manufacturing stuff to export to the US for capital profit! Ireland, in the 19th century, was forbidden to export goods to England but was used to export food to feed the rising army of former peasants who were flooding into the cities to work in the new fangled factories of the Industrial Revolution.
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Ireland became poorer and poorer while England became richer and richer. This is an old, old story and why can’t the US understand, we can’t export more food to make up for losing our own production base?
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. …The constraints arise from the unusual economics of transport businesses such as ports and container shipping. U.S. ports, thanks to the huge appetite Americans have developed for goods made abroad, are oriented more to the import than the export trade. So are the big foreign ship companies, which gear their schedules and their routes to American imports, not to exports.
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DUH! Why do exporters need to trouble themselves about our desire to also export? We are COMPETITORS. So if they don’t let us export, all the better. DUH, again. We are in a competition that is brutal and deadly. We lost every round for years and years and are narcoleptic about these losses. The fiction of wealth has been maintained only thanks to granting us more debt.
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The ship glut, instead of providing more vessels, perversely is helping make fewer available. That’s because the glut, in combination with a fall in trade during the recession, cut shipping rates below the cost of operation for some routes. Carriers responded by idling many ships and reducing their trips to the U.S., to save money and try to force shipping rates higher….
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This is classic capitalism! That is, if you have too much of anything including paper money, you make it more valuable by not having as much of whatever it is. For example, previous oil shortages were all political. Countries either boycotted selling of oil or they were embargoed by wars that prevented them moving oil out of their regions. The high cost of insuring shipping also cut oil exports on occasion.
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This article appeared in the Wall Street Journal. Why couldn’t they figure out how capitalism works? DUH.
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. …In October of 2008, he said, there were 70 weekly cargo-ship trips to the U.S. from Asia; now there are 54. CMA-CGM SA of Marseille, France, reduced shipping capacity to the U.S. East and West coasts by 22% in 2009 and stopped sending ships to one port, in Mobile, Ala…
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There were NOT 70 cargo ships leaving with US MANUFACTURED goods. They were filled with grain which is viewed as ‘ballast’ by the owners. For example, many older US East Coast and European cities were paved with ‘paving stones’ which were actually used as ballast to right ships moving goods around in an unequal way.
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. ..The crunch is especially troubling to agricultural exporters, who mostly don’t sell branded products. “There are not enough ships or containers to handle the exports that the world wants to buy from us…Paul Bingham, a managing director at research firm IHS Global Insight, said, “It’s almost unprecedented [to] have a carrier artificially adjusting freight transportation capacity in an attempt to affect the classic supply-demand relationship.”…
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HAHAHA….how dare they do classic supply and demand restrictions! As if EVERYONE hasn’t done this! The entire point of making conglomerations like the Carnegie consortium is in order to control enough of the system so one can monopolize it in various ways and then force profits even in bad times. This is why the US had all those anti-trust laws which were dumped so disastrously. We now are being put back into the monopolist vise.
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. …U.S. ports, meanwhile, expanded import facilities. Georgia spent $500 million between 1995 and 2005 building docks and railyards at the port of Savannah. It also enticed importers to build distribution centers, a model followed by ports in Virginia, South Carolina and New York.
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These vast inroads into our economic system are all government-subsidized. The ports, the transportation systems, the building of foreign-owned factories are all heavily subsidized and this helps them further undermine our native systems. It is bad enough we allow dual citizenship. Now, we can’t understand the difference between foreign domination and national sovereignty. Something the Chinese are exquisitely aware of and work hard to control.
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While some ports, such as Savannah’s, have also kept up export traffic, America’s trading infrastructure grew imbalanced, with a huge capacity to import goods but an attenuated capacity to export them. Loads of grain or corrugated paper leaving the U.S. took a back seat to the DVDs and toys coming in….
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Trading cheap cardboard for expensive electronics is typical here. We had to export something because the ships made more money moving things the other way but since all other Asian sovereign nations would rather slit their own throats than let the US export manufactured goods to them, the things they accepted as cargo have all been cheap commodity goods.
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. …Ship companies, having cut back the frequency of their trips to the U.S., and still under profit pressure, say they won’t increase service again until U.S. imports pick up sharply. They wouldn’t schedule their routes based on U.S. exports unless those rose a great deal, said Tony Mason of the International Chamber of Shipping, a ship-owner group.
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ΩΩSo, how is the Ghost in the White House Shell going to fix this? The Asian shippers from Japan, South Korea, Taiwan, China, Vietnam, India, etc are telling us in no uncertain terms, they will ONLY ship our goods when they have double trade in the opposite direction. All the shipping companies know very well, they have to keep a very sharp eye on their own sovereign powers and they all fully support their own nations and want their nations to be richer at least, the upper classes in their own countries.
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ΩΩThere are lots of goofy conspiracy beliefs on the internet that fatally misunderstand the nature of sovereignty and international cooperation and international COMPETITION. All the rich can be united on various issues while being very competitive on others. The Chinese, for example, are very, very focused on sovereign powers. The US rich are mostly either dual citizens or have their hearts parked outside of the US and don’t give a hoot if this nation goes to hell.
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ΩΩThey figure, the US can be kept afloat for another 50 years via red ink so who cares if things go to hell? This is foolish. The Asian rich people have little desire to keep the US afloat as a military power if the US can no longer suck down Asian trade. The Chinese/Japanese axis of military power looms in the future. After all, the US made very quick allies out of the German and Japanese warriors who often fought to the death!
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ΩΩThe Chinese figure this can happen again, going the other way with China forgiving and embracing Asian partners instead of fighting them off. A lot of Chinese diplomacy aims exactly at this. It may not always succeed but it has made astonishing headway so far. This is why I am so disgusted with the way AIPAC and Israel have joined forces to humiliate openly our Presidents, past and present.
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ΩΩWe lose face every time this happens. Asians are not impressed by this and the embarrassing sight of ‘Wake me up at 3am so I can bomb Iran,’ Clinton wandering from world capital to world capital, begging and pleading and BRIBING everyone to join us in attacking Iran: everyone is eking out trade concessions from her! And sneering at her while making half-hearted promises. This, incidentally, is making the US less and less popular. And we are losing future diplomatic capital. It is bleeding away just like we bled away our industrial base.
We were supposed to reap benefits from shipping our jobs and production overseas namely radically lower consumer prices-leading to a rise in the standard of living even as our wages declined and our jobs outsourced. However, government never stops printing and spending so we the people never experienced the benefit of having our products produced overseas at a fraction of the cost it takes here. Instead of reaping the benefits of rapid DEFLATION of consumer prices and therefore a RISE in the standard of living for all what we got was flat to rising consumer prices and massive un-employment. The Govt. stole the fruits of the labor. Now were up shits creek-no jobs, rising consumer prices, and still inept useless govt. buerecrats in charge. Living on a small farm and heavily arming yourself is not smart. This destroys the division of labor as everyone tries to become self-sufficient. This leads to civil war. What we really need to bring production back to America is radically lower taxes on business, less regulation of small business, abolition of minimum wage laws, and allow the market to set the price of labor instead of some clown in DC. Manufacturers, business’ small and large will come back to America in droves. The Orient is not the best place to do business either is Mexico. We are over regulated, over taxed, and over indebted. How can we compete?
@ralph
“What we really need to bring production back to America is radically lower taxes on business, less regulation of small business, abolition of minimum wage laws, and allow the market to set the price of labor instead of some clown in DC.”
So don´t even tax the corporations is the answer?
The West can´t compete with India or China on mere wages.
Or should we try 50 cent an hour wages, child labour and 7 day work weeks?
The factories are not coming back for decades if ever. Why would the jobs come back? Large multinationals have access to unlimited free labour and unlimited access to all world markets now. And you want to take the taxes away from them too?
What will we have left then?
Protectionism, import taxes and buying domestic is the solution.
Or putting it on the credit card forever if you want to believe that´s a solution.
Example of logic-deprived:
The Federal Court just ruled mercury in vaccines is NOT linked to autism.
Summary on Calgary University Medical site compares symptoms of mercury poisoning with autism.
http://www.nationalautismassociation.org/thimerosal.php
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ELAINE: Correct, there is zero connection between vaccinations and autism. You can’t accept this information due to being propagandized.
JT- You completely miss the entire point. America is inefficient because of OVER-REGULATION, OVER-TAXATION, and OVER INDEBTEDNESS. Protectionism and tariffs will decimate productive capacity further. We wont have any goods to consume. If you want to live in world where all Americans can buy is American made products and we shun the benefits of trade, than I suggest you take a look at what Soviet Russia’s economy looked like 30 years ago. Tariffs destroy production-they decrease wealth. Production shifting to where it is best done is benefical to everyone on this planet. If we had sound money (non-inflationary) the benefits would be seen everywhere. More goods for less money = increase in standard of living. Less goods for more money = impoverishment. Businessman are not the enemy. Government granting monopoly privelage to certain businessman and creating legislation and regulation to bankrupt competition is what we have in America. This is not capitalism of which I speak. That is crony corporate monopolism or “American business”. Free markets and sound money unfettered by government intervention is what will heal our wounds. Its also known as free market enterprise and competition. We havnt had that in over 60 years. Hence our ruined and decimated state of affairs at the present time.
@ralph
“radically lower consumer prices-leading to a rise in the standard of living even as our wages declined and our jobs outsourced”
That doesn’t make sense; how can you detach prices and wages? Things cost what people want to pay for them (if the cost more than people want to pay for them they are never manufactured in the first place), what people want to pay is set by their wage (only, god save us, it may not be; leading to debt, but that’s even worse).
IF your wage goes down or you become redundant then you cant afford anything, period. So how will forrien imports make up for non existing wages? No job, then it doesn’t matter how cheap the imports are. And even if you keep your job then your wage falls, so how do you win in this situation.
“The Govt. stole the fruits of the labor.”
?? The government has been getting smaller sinse the 1970′s, not bigger. The age of big government was the 1950′s when america was prosperous, before free trade. So this makes no sense.
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ELAINE: The Pentagon has grown bigger including the hidden parts that were ‘privatized’ but are paid for by the taxpayers.
I would like someone to explain to me how Germany maintains a unionized ,well paid work force and a trade surplus. I suspect they do it , first of all, by buying only german cars and appliances, etc. and by further exporting the same cars and goods to clueless Americans.
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ELAINE: High VAT taxes and other barriers that are more invisible.
Great stuff Elaine.
Your take on trade is quite distinct – much more nuanced than other decent bloggers I follow (mish, denninger, cr, ritholtz, zh). The mistake I learnt from B-school (one of many!) was to mentally associate the current era of globalisation with Adam Smth’s Invisible Hand. That association is quite false – Smith had a thing or two to say about conspiracies too.
Will be interested to read your take on lehman now that that report is out – unless geithner gets sacked/ indicted, this must mean America has become the biggest banana republic in history?
an example of the absurdity of “free trade” in the us.
there are now a glut of shipping container in the us…over 30 MILLION of them stashed all over the country. Why?
It is CHEAPER for the chinese to MAKE a shipping container and LEAVE it here than return it due to the massive imbalance of trade. So the chinese make a shipping container for around $2,000 and abandon it here. US made containers were selling around 10,000 in volume. You can imagine how many of those the us companies are selling now.
So which is it, ralph? You want lower taxes, no regulations, etc., etc., etc., because only by clearing out all that gummint interference can we reap the theoretically alleged benefits of offshoring all of our productive capacity. Then you turn around and offer *the exact same thing* as the nostrum that will bring all that lost productive capacity back to our shores, where we really want it to be. Is this supposed to make sense?
“We were supposed to reap benefits from shipping our jobs and production overseas namely radically lower consumer prices-leading to a rise in the standard of living even as our wages declined and our jobs outsourced. However…”
Hoo yeah, unilateral “free” trade really works! It really does! It just hasn’t been tried properly! The beautiful theory has fallen foul of corrupt bureaucrats and heretical crony capitalists! If we only pass laws (or alternatively, remove all laws!) thereby making men into angels, then it can be implemented properly and work as our holy theorists promise!
Dude, you’re a True Believer. If your defense of the neo-liberal order leaves you sounding just like a Marxist dead-ender, that’s probably a bad sign. Time to do a little empirical analysis and re-thinking. (It’s remarkable how many crypto-religious zealots there are in economic discussions on the web.)
“…government never stops printing and spending so we the people never experienced the benefit of having our products produced overseas at a fraction of the cost it takes here.”
Uh, no ralph. All that government printing and spending and bubble-ginning and those low, low Walmart prices actually did, for a time, fulfill their smoke-and-mirrors duty of hiding the destruction of our economy. The inflation can was kicked down the road. For a while. But the New Economy was a con and a scam from the get-go. You’re mistaking the lipstick on the pig for the pig.
“Tariffs destroy production-they decrease wealth. Production shifting to where it is best done is benefical to everyone on this planet.”
No, not really. Depends on the conditions. Sometimes they’re a good idea, sometimes they’re a stupid idea. Sometimes in our history we’ve used them to our advantage and prosperity, and sometimes we’ve foregone them to our detriment. And vice-versa.
“If you want to live in world where all Americans can buy is American made products and we shun the benefits of trade, than I suggest you take a look at what Soviet Russia’s economy looked like 30 years ago.”
As opposed to living in a world where just about nothing Americans can buy is American made and things are starting to look as seedy and tawdry as the Soviet Russia of 30 years ago. Except with a lot more debt.
“…allow the market to set the price of labor instead of some clown in DC.”
Which market, ralph? The national market? The global market? You think whoever runs the clowns in DC doesn’t dictate how that airy abstraction “the labor market” gets defined and delimited on Planet Earth? (Remember, the value of most labor in libertarian global free market la-la land is about a plugged nickel per hour.)
“Businessman are not the enemy.”
Of course businessmen, per se, are not the enemy. I don’t see anybody here saying that they are. They’re human beings, just like the rest of us – i.e., as prone to self-seeking, corruption, and jockeying to fix things to their own advantage as anybody else – as you have, as a matter of fact, described quite nicely in your comment. Now, it may or may not be a good policy, depending on the circumstances, to reduce this or that tax, or to rescind this or that regulation (and I am surely no fan of excessive regulation of business, a la California). But no program of deregulation is going to turn businessmen into saints, and, unrestricted in any way, they (the big players, anyway) will naturally get up to all the crimes of self-interest that you describe and deplore. Fortunately, negotiating the eternal tensions between natural self-interest and the public good does not require any commitment to either failed fairy-tale socialism or failed tub-thumping free-market fundamentalism.
It’s also important to realise that government boondoggles and free trade go hand in hand. As jobs are lost to slave labour abroad then the socitey losses it’s power of consumption. If that happens there is depression. Factories full of goods that cant be sold. In that case the only way to prevent depression is to have an ‘employer of last resort’, to ensure that some wages are created to replace the ones lost. And so nobily, or incompetently, the government steps in, or people demand it steps in to become ‘the employer of last resort’. Bureacracy and inefficent spending as often caused by free trade. In deed the spending has to be wasteful, purposefully inefficent, because they are trying to stop the ass falling out of labour that’s being decimated by cheaper production abroad, and growing consumption of new middle classes abroad (companies relocate abroad to build customer-bases in countries with growing middle classes, leaving behind countries with srinking ones).
I want to see those wasteful practices stop to you know, but i also know that they are often the last cruch holding the economy up, to some people/classes/races/states they are the last wages avalible. If we kick the cruches away, without first ending free trade, the bottom will fall out of the consumption / production / employment cycle.
“Japanese Prime Minister Yukio Hatoyama said Friday the government needs to take steps against the yen’s recent strength, which doesn’t reflect Japan’s weak economic and industrial conditions. Because of overseas factors, “there has emerged a strong yen that we can hardly believe reflects the fact that Japan’s economy and industries aren’t necessarily strong,” Hatoyama said in a parliamentary session. “I think we need to take firm steps against such yen strength.” Hatoyama even suggested he wants joint international action to push the yen lower, saying, there is a need to “politically cooperate on the world stage.”
Also, Bank of Japan Gov. Masaaki Shirakawa said Friday the central bank aims to stimulate demand by maintaining a low interest-rate environment, but declined to comment on whether the central bank will take additional easing steps next week. “The BOJ is trying to stimulate demand by keeping low interest rates,” Shirakawa said in a parliamentary committee session. Asked about the need to take additional easing steps at its two-day policy board meeting ending next week, Shirakawa declined to answer. The BOJ meeting will be held Tuesday and Wednesday. ”
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ELAINE: I will talk about that later! Yes, this is happening now: China and the US are arguing about the yuan and normally, Japan joins the US in hammering China about strengthening the yuan but now, Japan will switch sides and join China in hammering the US, demanding a weaker yen and yuan. There is a growing alliance here which Americans cannot dare understand!
@emsnews: “Why doesn Vietnam need our food? Well, the Vietnamese who formerly grew their own food are now busy…manufacturing stuff to export to the US for capital profit! Ireland, in the 19th century, was forbidden to export goods to England but was used to export food to feed the rising army of former peasants who were flooding into the cities to work in the new fangled factories of the Industrial Revolution. . . Ireland became poorer and poorer while England became richer and richer. This is an old, old story and why can’t the US understand, we can’t export more food to make up for losing our own production base?”
Only true until now; but I disagree after peak oil. I think, a decreasing system would reverse the old paradigm here. I suppose food will be King.
The essential point that is being overlooked here is that China, Japan and Germany are bound together by national loyalty. Of course national loyalty alone does not insure industrial/economic superiority. Such other factors as equitable and stable political systems, cultural superiority, natural resources etc are important.
At this point it appears that American national loyalty is gone forever. We will never again be “one nation under God with liberty and justice for all.”
Elaine,
RE YOUR 50 YEAR PLAN
Comrade Deng Xiaoping made a keen observation in 1992 in his remarks during his inspection tour to south China: Therefore, we must unswervingly adhere to the basic lines of the Party for the primary stage of socialism for the next 100 years and persist in carrying out reform and innovation to ensure enduring vigor and vitality for socialism with Chinese characteristics.
The death of Mao Tse Tung marked the completion of China’s internal consolidation and recovery from Western, Russian and Japanese predatory occupation – despite his gross errors causing much misery to many ordinary Chinese.
His successor Deng Xiaopeng lead China into the new modernization period we witness to day.
China is able to focus on 100 year objectives because it is civilizational state not a nation state as is other countries world wide. Their communist party has earned the mandate to govern without elections as long as the people benefit.
This is the custom in their civilization since their continent was united post the “warring states” era some 2,500 years ago.
Their civilization has witnessed period of enlightenment and decay many times.
THE US
I broadly agree with your comments of willful denial by “experts” on the quality of US GDP and economy as well as trade.
Personally, I view the US Empire as a rogue state attempting to preserve its power by increasingly irrational and violent ways.
The US Justice Report on why Lehman Brothers Collapsed, the grotesque Health Care Reform process, Joe Biden snub in Israel last week, and other manifestation of dysfunctional Washington politics clearly shows an intellectually bankrupt US in terminal decay.
Obama, as was Bush Junior, are left with empty speeches masquerading as “solutions” as your “trade exporting US strategy to solve financial insolvency” clearly shows.
We all need to debate issues to find a way forward.
Unfortunately, I find much of the US conservative tenets to be a major cause of your decline since it puts too much emphasis on adversarial relationships and selfish “cowboys” that is the reason you have 500 families owning nearly half of your economy.
Another sign of decay is the way US civil servants such as the massive Pentagon Bureaucracy etc grow bigger and more inefficient every day.
In other words both the government and Corporations are too big for the health of the US.
What happens in the US effects others worldwide.
Its as if the age of dinosaurs is ending and the mammals are emerging in their new dawn.
Personally, I am a product of western civilization and prefer a western society that can live as an equal to the new China of the future.
I do not want to live in the shadow of a US fascist empire legitimized by military power and “eratz” democratic fig leaf.
That is why I am fascinated by Elaine’s comments and the comments of US readers.
It seems a consus is coalescing across main street USA.
I think facts always matter. Anyone can say anything they want, but it doesn’t make it true. People have their preconceived notions and if something is repeated often enough, people think it must be true.
“?? The government has been getting smaller sinse the 1970’s, not bigger. The age of big government was the 1950’s when america was prosperous, before free trade. So this makes no sense.”
Total government spending in the US has risen from under 10% in the 1900s to low 30% in the 1970s to 44% today. The government is hardly getting smaller – quite the opposite, really – and with no restraint from anyone in either party anywhere, government is only getting bigger.
http://mhodges701.home.comcast.net/~mhodges701/mwhodges.htm
http://www.usgovernmentspending.com/us_20th_century_chart.html
One could argue America is more prosperous (higher GDP per capita and higher standard of living) now than in the 1950s, but it may be a wash since we work much harder and have much more debt now to maintain that higher standard of living.
“Well, now we don’t make consumer goods.”
We’re still the #1 manufacturer of goods in the world (with China gaining quickly), and 60% of our manufactured goods are consumer goods.
http://investing.curiouscatblog.net/2010/02/17/usa-china-and-japan-lead-manufacturing-output-in-2008/
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ELAINE: Over the years, I have explained endlessly that a huge hunk of our ‘consumer goods domestic production’ is FOREIGN OWNED FACTORIES. This is extremely significant is nearly totally ignored by many.
For example, over 30% of US domestic auto production is FOREIGN corporations that colonized the Deep South. Toyota produces here only because this keeps our trade door open to more Toyotas from Japan. That is, less than half of Toyotas sold here are made here! We do not export millions of cars to Japan.
This is why your statistics are false. We are NOT major domestic producers anymore. And you would be shocked at how many formerly American corporations are now owned by foreign consortiums.
K-Bo,
Re: I think facts always matter – agreed.
I accept your comments US Government growing bigger.
The US GDP did grow in recent years until now.
My perspective is how GDP is distributed by income classes, extent of debt driven wealth and indicators of social wellbeing such as prison population and crime rates etc.
The picture is not good.
Re: We’re still the #1 manufacturer of goods in the world – agreed in aggregate terms.
China remains a developing country and its export manufacturing is FDI dominated – agreed.
Curiouscatnet shows declining aggregate US trends with China going up.
How much is the US manufacturing output sans military + mining + oil/gas +agriculture?
The US is a developed economy hence Consumer + industry tools + health products as a % of above total is important for self sufficiency and export revenues?
I understand US FIRE (Finance + Insurance + Real Estate) captures the majority of corporate profits?
What about the market penetration of US businesses worldwide over the last, say, 30 years?
Again, suggesting an unbalanced economy?
What is the picture?
Let me start by asking a simple question here of someone who asserts his authority by being Australian. Why don’t you lighten up a bit chap, let someone else have a say and some space, you are no better than the rest of us and being Australian does not make you very special. It does make you the beneficiary of an immense easy money bubble the cruddy Rudd is now desperately trying to deflate with 4 % overnight rates. Too bad he has as little understanding of economics as you do. Maybe in a textbook higher interest rates slow down the velocity of money circulation. In 2010, 4% attracts hundreds of billions of fake money leveraged a hundred fold and gets you million dollar bungalows in Sidney. Well you wanted to play the fake money game, and the game isn’t over in the fourth inning pal.
‘In the 1960s many thought the Soviet Union’s impressive growth would spell doom for America. But ultimately the inability to create a healthy innovative market, stalled growth and led to the Soviet demise.’
Oh, that’s great, quote the Economist, a magazine that last had something to say in Bill Clinton’s first term. Maybe you can go and push over a kindergartener for an encore. It is stupid for the Economist to sum up the twenty year history demise of the Soviet in one sentence. It is even stupider if the Economist does not know what caused it, not even in the slightest.
Finally, China is in a very bad position. I know it is very very difficult for you to understand, but China has been played by Geithner and Bernanke. Their food inflation is running at close to 6% a month now. I know that you failed at CIA, but you should understand that this is very very bad. While Bernanke prints as much money as he wants, the fake money is hitting China and all her clients, including Australia. China played their hand by keeping the peg to the dollar, but it was an extremely foolish decision. America does not play by fifty year plans or forty nine year plans or thirty four year plans. Next year, China will be in a trap that will break their leg. Do not even talk about China and regional politics. You have never been to Asia so you do not understand these things. You can gather the facts that there is a hostile nucular (full credit for the correct spelling to George W. Bush) power that we are destabilizing in front of their eyes. This is Pakistan and it is on their border. I do not mean to pound the obvious for European readers who know geography – my apologies. Then there is the other nucular power that we are destabilizing on their northern border. This is another failed state. Should that failed state join with South Korea, China will have a much stronger and unfriendly competitor. Japan join China’s orbit? The only orbit the Japanese are joining is the nucular ballistic one.
China had a chance when Putin, furious at the sneak attack on the civilian population by the maniac in Georgia offered to hold joint naval exercises with China, a tour of the Pacific fleet at Lushun and recognition of Chinese territorial claims in the South China Sea leading to joint patrols of the Sea. Instead, Hu went for the fake Bernanke money and decided the America was going to help rip Russia apart so China could take over. Wrong move by Hu. Worse for him, he will not admit his mistake and correct it. Power does not come from fiveteen dollar DVD players. But then again, you know everything, and Hu should listen to you and build more alarm clocks.
Pay attention,
You are right – I am no authority and simply airing an opinion for feed back.
Yes, Australia and Kevin Rudd does not have answers as does the US. Kevin directed stimulus to people rather than banks which was better than Obama.
But you are right we do have a bubble that is worse than the US and it will go bust some time.
We are on the same trajectory as the US.
I am not convinced that Bernanke and Geithner has “snookered” China but it is only an opnion.
Yes, China is not 6 foot tall and is also full of contradictions and flaws.
My opinion is simply that China came from a worse position and is getting better whilst the US came from a better position and getting worse.
I thought blogs are to exchange ideas and try to understand better what is going on?
I can understand your irritation than an Aussie is putting forth opinions in what is a US blog.
Therefore I can be accused for being intrusive and impolite – for this I apologise.
I will gladly cease my comments should you insist that I do so. But I will continue to read because it is interesting.
Please advise.
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ELAINE: Mr. Pay Attention pays no attention to anything I write. This ridiculous person often accuses me of not saying things when I say things and he claims I don’t notice things which I happen to write extensively about. In other words, I think he is either lazy or insane or both. I can’t decide. Maybe you can help me figure this guy out.
You are correct about China going up while the US goes down. During the Great Depression, all nations fell backwards. But the US fell the least and recovered the best and took over the world and won not one but two major wars with major industrial powers at the same time and barely broke into a sweat! Now, we can’t battle barely armed civilians in distant, poor lands.
@ralph
“More goods for less money = increase in standard of living. Less goods for more money = impoverishment!”
Ok. No problem then. But where does the money come from in this equation?
Mastercard? Visa?
What about Germany then?
They have I´d say of the top of my head 20% higher taxes, extremely strong unions, welfare state and government healthcare…
They have no housing bubble (maybe this is due to East Germany) and are doing great.
Germany:
Overtaxed; yes. Overregulated; hell yes.
They just export more than import.
We are now at a crossroad:
*the huge demand peak that came from the 2 billion people entering the world markets from communist countries is over.
*the huge demand provided by US going deeper into debt is over (housing, household items , consumer goods from china etc)
US exporting its way to trade balance is not possible. Nobody can buy that much stuff.
US just printing the money as the only world reserve currency?
Seems to work so far.
US still seems to still have the ability to export its inflation.
So maybe you can pump this baby up with inflation one more time.
I don´t know.
I do know it will NOT mean more goods for less money or better standard of living for any blue or white collar worker.
We are in serious trouble:
http://www.heritage.org/Research/Reports/2010/03/Obama-Budget-Raises-Taxes-and-Doubles-the-National-Debt
Aussie – please go on commenting. I don’t know why pA’s got such a bug up his butt about your comments – I find nothing arrogant in them and tend to agree with a great deal of what you say.
“Personally, I view the US Empire as a rogue state attempting to preserve its power by increasingly irrational and violent ways.”
Looks that way from here, too. There is a U.S. Empire (or whatever sticklers for terminology want to call it), and then there is us, the American people, who are irrelevant to what you correctly describe as an intellectually bankrupt leadership.
What you are hitting on with your comment about “500 families owning nearly half of your economy”, is that the U.S. is willfully being transmogrified into just another Latin American kleptocracy – California is the future. (Vast underclass, squeezed or non-existent middle, and vast wealth at the top. Sweet living if you’re at the top.)
“We are on the same trajectory as the US.”
I think all Western nations are beset with insane leaders who can’t sell out their own people fast enough, in the name of greed and/or some dotty potty mishmash of half-baked ideologies sludging up their brains from their university days. Non-westerners laugh at them, but we’re the ones who’ll pay, not our crazy leaders, who’ll go right on living sweet.
The US is owned not by 500 US families but by 500 FOREIGN families. The Toyota factory family sent a top family member here to defy Congress in the brake failure hearings, for example. There are many such families who live far, far away and control a great deal of our country. Israel comes to mind here, too. Very much so.
BEIJING (AP) — China’s premier expressed concern about the U.S. dollar and called on Washington on Sunday to take “concrete steps” to reassure Beijing about the safety of its huge Treasury bond holdings.
“Any fluctuation in the value of the U.S. currency is a big concern for us,” Premier Wen Jiabao said at a news conference.
“We cannot afford any mistake, how slight it is, when running our financial assets,” he said. “I would like the United States to take concrete steps to reassure investors.”
China has pressed Washington to control its yawning budget deficit and prevent inflation that would erode the value of the dollar and China’s holdings.
The premier said Treasury values were a matter of the “national
The U.S. has never been ‘one nation under God with liberty and justice for all’. That is merely a noble ideal to strive for. (And for grammar critics, ending a sentence with a preposition is O.K.)
The real history of the U.S. has been a virulent and ongoing struggle between various groups to balance things out towards that ideal. One problem currently high on the agenda is that liberty and justice can not exist when the criminals make the laws.
Putting ‘God’ in the pledge is controversial because people have such diverse and passionate concepts of what that word even means. For some it may mean Love, to others it may mean life-force, (even some atheists will grant this) and of course for some it may mean Jesus or Allah and nothing but. Originally, the colonies were pretty much religious sects, and religious Americans are probably correct that the Framers never intended the First Amendment to be a weapon with which to quash every public expression encompassing a religious idea. They were, however, aware of the need to be on guard against religious extremists that insist on bending all to the will of [insert deity of choice here].
The only thing the U.S. can boast in the way of exceptionalism is a legal framework that, theoretically at least, has the idea of universal human rights written into its DNA. Unfortunately, a liberal constitution is ripe to be exploited by those that seek to profit by abusing their status, position, and the ignorance of others. So, putting the theory into practice is always a struggle. But, this I know, hatred and greed are the enemies of liberty and justice.
Elaine and Borealis,
Thank you.
No one knows the future.
Nonetheless, both the US and China will have an impact on how the future unfolds.
The US has reached an inflection point that will determine the nature of your future society.
I simply hope your internal dialoque translates into something beneficial to the western world. Whatever your position, the US of 300million people possess an excellent constitutional DNA and decent ordinary people.
Australia is a small country and simply lucky in economic terms.
The EU remains an experiment with growing pains. Its future remains promising?
China will rise and be an different civilisation we need to live with and understand. It is dangerous for any great nation to be too powerful compared to others – this is our human flaw.
Hence the west needs to get rid of its baggage and become sufficiently powerful as a collaborative peer in the new future.
@Aussie, I think your perspective is right on, and keep on sharing it, please. You’re right – income distribution and “sharing” of wealth is horrible in the US and going in the wrong direction (if you believe equitable distribution is the goal). “Well-being” is such a tricky thing to measure. You really need to get to know a lot of people in different communities to make that judgment, so I can’t. But there are lots of problems and a sense that things aren’t quite right, for sure.
You’re right again (or at least I agree) that the FIRE segment of the economy is too big. They really don’t PRODUCE anything – it’s kind of like economic parasitism on the rest of the productive economy (as Michael Hudson would say). Many say big government is another wasteful, inefficient and non-productive part of our economy, redistributing wealth (which unfortunately probably is needed to some extent), spreading destructive wars, granting some well-connected corporations near-monopoly status, and creating numerous onerous regulations and taxation that hampers business. So the US is not the best climate for a productive economy. I remain optimistic for the future, while trying to plan for the worst.
The internet is a good forum for sharing ideas, even if there are many interesting personalities full of arrogance, rudeness, fear, paranoia, and all the other human foibles.
@Angela, you said you aren’t afraid of communitarianism, but you sure do seem to write about it a lot in fearful terms. What’s so interesting about the “timing” of a Huffington Post piece by your arch-enemy Etzioni from July of 2008? I do thank you for introducing us to the concept and for someone to keep an eye on as a major player. But how long will you keep obsessing about it? If it’s no immediate threat to you, then let it go.
Elaine, you’re right that foreigners own more of US productive assets than before, and “control” or have created 12 of “US” manufacturing jobs. However, we own more of foreigners’ assets and are building factories overseas as well. What matters is the balance of foreign direct investment (FDI), similar to the balance of trade. Unlike trade, the US is actually doing well in the FDI department. We’re investing more abroad in foreign assets than foreigners are investing/buying/building our assets.
http://en.wikipedia.org/wiki/Foreign_direct_investment
You are right that as the US lives beyond its means (via trade and government spending), we must sell off more of our assets to foreigners to finance our deficits. Eventually they will own us if we keep running perpetual deficits. Fortunately, that is a long ways away.
12 percent, that is.
Well, we are going to get an answer from the Supreme Court this summer on whether the right to bear arms is a personal right binding on the states.
The petitioners have compelling stories about how their Chicago neighborhoods have deteriorated and they fear for their lives daily. The court struck down the D.C. ban in 2008. These facts, along with the plain text of the Second Amendment, make it appear likely that a right to personal firearms will soon become firmly established in constitutional jurisprudence.
Now, getting the government to actually obey the law is another matter.
That last news article is way scary. It’s as if our entire distribution chain is owned by the competitor.
This whole globalization is a disaster from the start. The quicker we end this the better. The question is, can we?
@Angela, you want me to explain a stupid, repulsive comment by a man Christian Anton Mayer (Carl Amery), who was a German environmentalist and happened to be 1 of the every 6 people in the world who is Catholic? What can I say? Stupidity knows no religious boundaries. The man certainly isn’t a true Christian if he believes that. Are you saying he represents the teachings of the Catholic Church, or that he is a Communitarian, or that some environmentalists are crazy, or what?