Today I took some pictures at a dead factory in Albany, NY. The state of dilapidation we see here is a constant in this country. Many, many factories from the same era, the WWI to Vietnam War decades, lie in similar ruins. The entire US system is in ruins and this was due entirely and totally to two things: free trade and the need to hide inflation via shipping jobs to cheap labor countries and then importing goods formerly made here in the US. The process depressed wages and turned 20%+ former working class people into the criminal class. So we have fewer factories and many more prisoners than any previous era.
Broken windows, rusted mechanical ductwork, our factories were once the envy of the world and it won us two world wars. Now, we have a very expensive but surprisingly small military which is gold plated and totally misused so it spins its wheels in Afghanistan, digging us deeper and deeper into a yawning grave there. Meanwhile, the production of military materials is sinking our government under a mountain of debts.
This odd looking photo is an abandoned road and ditch grader machine. The concave rearview mirror looked interesting to me so I photographed it. This is what much of our expensive, gold plated cost equipment we used in Iraq and Afghanistan looks like after a few years of abuse and neglect.
But pollution is down. It was moved to Asia. The chimneys in US production systems are draped in vines and are silent sentinels to our industrial past. We can be grateful for the clean air but we have to realize, we pay a stiff price for this air. That is, when our industries vanished, we lost the positive capital accumulation they created. Instead, the US printed money and shipped this to where the factories moved, mainly to Asia.
This brings us to an article in England. Ambrose Evans-Pritchard: Five years on, the Great Recession is turning into a life sentence – Telegraph
But why did the credit bubble happen in the first place? You could argue that it is merely the flip-side of too much saving. The world savings rate has crept up to a modern-era high of 24pc of GDP. That is the most important single piece of information you need to know to understand the great economic drama we are living through.
There is nowhere for this money to go. The funds flood into investment —now a world record 49pc of GDP in China — or into asset bubbles.
So my candidate for chief cause is Asia’s `Savings Glut’, and indeed whole the structure of East-West trade under globalisation.
The emerging powers built up $10 trillion of foreign reserves — ie bonds — in a decade. They flooded the global bond market. That is why spreads on 10-year Greek debt fell to a wafer-thin 26 basis points over Bunds in the bubble.
They also flooded Western markets with cheap goods, driving down goods inflation. Western central banks — in thrall to inflation-targeting — cut short-term interest rates ever lower. They set the price of credit too low, forcing pension funds and insurers to hunt frantically for yield to match their books. The central banks compounded the effect.
None of this was accidental. I noticed way back in the Reagan Presidency that Japan finally figured out how to evade US inflation when we sent our money there to buy Japanese goods. If Japan circulated this money back to the US, it would lose value and inflation would rage here and markets here would lock out the Japanese to fix things.
So, Japan began to squirrel away all their trade profit capital in their FOREX holdings! I explained this to the Chinese who decided it was a very clever idea and so they openly and directly imitated the Chinese methodology. Warnings to our own government about both Japan and China doing this fell on deaf ears.
This pile of loot has lain about in various export-hungry countries now for nearly 40 years. It is gigantic. This is the ‘savings glut’ which has fueled cheap interest rates, falling incomes in first world nations, housing bubbles in every possible place and so on. And this lopsided system which has the US at the dead center being the country with by far the most trade deficit damage, pumping endless money into a system bloated to blowing up with US trade dollars, this is unsustainable.
Eventually, it will break down as the US desperately prints more and more money and now that it can’t sell it all to China, will hoard it all at home in the Federal Reserve. ALFRED Graph – ALFRED – St. Louis Fed
We can see the Reagan peak and collapse along with the Bush Jr. smaller peak and collapse.
We see from this graph that the recovery during the Reagan Years was stronger than later recoveries and these grow increasingly feeble and shorter as time passes due to hollowing out our industrial base. As with the many wars we are being inflicted to participate in, the two main candidates support the same bad actions. That is, they are both free trade and pro-wars with Muslims and a confrontation with China and presumably, Russia. Sad, isn’t it?
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