You write, "All those Asian nations intentionally suppressed domestic labor unions and working salaries in order to undercut competition for shares of the American consumer market." That is not true in the case of Japan. When he was the Occupation Authority, Gen. Douglas MacArthur initiated a deliberate policy of promoting trade unionism, explicitly to prevent Japanese products from being so cheap they would over-run the American market. And in the 1960s, the Japanese had their famous policy of "income-doubling" aimed at driving up employee earnings very quickly. I think South Korea followed a similar policy. The spectacular gains the Japanese made in the U.S. market came in the 1970s and 1980s, because, I believe, of two things. First, U.S. businesses failed to invest in themselves, especially as the "go-go" years of the 1960s on the big wave of multi-national conglomerates developed into the leveraged buyout banditry of the 1970s. Second, the Reagan administration rejected almost all the unfair trade petitions and administrative actions that were filed by a host of U.S. industries and companies, most notably steel, auto, and the really, really crucial one, machine tools. In short, Reagan simply dismantled what was left of the Hamiltonian program of deliberate industrial policy, and threw the entire U.S. economy open to competition, which was supposed to weed out losers and make winners stronger.
On the collapse of Bretton Woods, most specifically the gold convertibility crisis that led to Nixon's actions, what I guess you are really not supposed to talk about is the role of the City of London and the development of the Euro-dollar "market." The British ambassador to the U.S. actually went to the U.S. Treasury to inquire about getting around $1.2 billion in gold. That's the event that precipitated the infamous Camp David meeting where the idea of breaking Bretton Woods was adopted - the idea of an Under-Secretary of the Treasury at the time by the name of Paul Volcker. I forget the exact figures, and all the intrigue, but it was in a book that came out around 1990 by a foreign exchange trader, and I've been kicking myself for the past couple of years for being unable to find it, and what I wrote about it at the time. Suffice it to say that I believe the British financial elites deliberately detonated the crisis as one of the first exercises in the shock doctrine of disaster capitalism. The idea was to eliminate statist institutions that regulated exchange rates and interest rates, and let those rates float as a way of creating "opportunities" for speculation and arbitrage. I'm pretty sure that the first studies on things like currency futures and interest rate futures were actually done at some British institutions, before being adopted in the U.S. And what few people realize is that the City of London is a larger financial center than New York, and has been for a long time.
In other words, there was a deliberate policy of "controlled disintegration" of the world economy. That was the bill of goods that was sold to Nixon, the loutish fool. William Engdahl's material on the web explicates this history in detail. The problem is that "controlled disintegration" rapidly gets you into the tin-foil hat land of the Trilaterals, blah, blah. "Controlled disintegration" is nothing more and nothing less than radical deregulation, applied on a global scale. And we now know what deregulation was really all about.
This is not to argue that the deficit financing of the Vietnam war was not a problem; it most definitely was. But it was a problem that was exploited to the fullest by the British financial oligarchy, I believe.
An interesting note, that again skirts tin-foil hat land, is that a handful of German and Italian leaders and industrialists who were leading the fight against the "controlled disintegration" of London and Washington were assassinated by terrorist groups or "lone assassins" in the 1970s and 1980s, inclduing Aldo Moro and Swedish Prime Minister Olof Palme. I was really shocked when Perkins' Confessions of an Economic Hitman came out a few years ago, and detailed how "jackals" routinely assassinated opponents of the IMF and World Bank in Latin America and Africa.
As for China accepting dollars for ever: I don't think so. The Chinese seem to be straining themselves to get into a position where they can cut the U.S. loose. But I think they're looking at a much longer time frame than we in America are capable of, with our fixation on daily news and quarterly results. The Chinese are building over 30 urban rail mass transit systems - an equivalent program in the U.S. would be around $3 trillion.
So, it's no surprise that "Britain and America were more interested in remaking the old." The present system was designed to benefit their elites, and elites have NEVER willingly surrendered their prerogatives.
The Chinese Government announced on Dec 24 that it would begin settling trades with neighboring countries in yuan. I guess that was a heck of a "good tidings to all"...it just didn't include the US under "all". It's just a start, but you're absolutely right. The dollar will not be the world's reserve currency much longer. Great post.
48 hours to cross Chicago for freight. Pretty astounding.
I think Obama is simply listening to a series of our corporate pals, this time with a more liberal bent (whatever that means these days) instead of digging out experts people who really know the details on what would be efficient, useful investment and where it needs to go.
It's like corporate lobbyists, philosophy and "who you know" still rule on high and the real experts, the real ones who could make the government effective and efficient....are sidelined.
Great post, I had no idea on rail infrastructure.
(don't ya love that EP is pure economics and not partisan, one could never get away with criticism, any politician, any party, on the political blogs! ;))
Speaking of economic indicators divorced from reality, this is one. I think you're probably right on the recovery on very mild GDP growth (although Dr. Doom Roubini is saying none with a total 5% GDP decline in 2009) but to me the most odious thing is one can have layoffs going to hit an official (and let's talk about the real unemployment rate!) but an official one of > 9%. I saw 9.2% in the CBO report and many are indicating a 10% unemployment rate.
So, I find the entire definition skewed and only when one has unemployment below < 5% should they be allowed to claim the term "recovery". It's just another thing that bugs me because it's all focused in on the power elites, Wall street instead of the citizens of a nation.
I just ran this post on Fedora 10, 64 bit FF 3.xx (whatever the latest is) and it ran fine.
On Ubuntu 8.04 (Hardy Heron, i386 - 32bit) plus FF 3.05 it crashed.
I use addons: noscript, adblock, better privacy and on any cookies I manually only allow certain domains and have most as session cookies.
(hey, ya all, don't do this at home, it blocks any ad revenue, ya know that 0.00001 cents I get for maintaining the site? ;))
So, here's what I did to fix it:
1. in the terminal, Ubuntu 8.04:
$sudo vi /usr/bin/firefox-3.0
I then added the line:
export XLIB_SKIP_ARGB_VISUALS=1
I put this in after the line in the firefox-3.0 script (that you are editing):
DROPPED-abandoned
I suspect strongly it's the XTERM interaction with flash that is causing the issue for I have even stronger security in Fedora 10 (abet I had to do some funky changes to get flash to work at all) and it worked like a charm and I block a hell of a lot of scripting.
if that doesn't work try turning off visual effects in system->preferences->appearance
if that doesn't work:
$sudo vi /etc/X11/xorg.conf
you might check your settings, like 24 bit depth, no composite.
If you're on 64 bits maybe there is a library issue or something like flash needs 32 bit libs somewhere.
Let me know if this works.
(I think there is also a "firefox" script there which maps any betas which if you do not have firefox-3.0 you might be able to edit also).
The numbers being quoted are the budget deficit, not the operating deficit, and as we all know, there is considerably government spending on wars, banks and the like that occur off-budget. The same article refers to the deficit for the entire 2008 fiscal year as $455 bn. But the government borrowed $758 bn to fund that $455 bn deficit. Cute, huh. More government numbers that are functionally useless.
I'm sure that others would find it very interesting that the aggregate debt issued by the government has shrunk by $150 bn dollars between the first of December and Jan 12. And surprise, surprise, the yields on short-term debt were really hammered in December. I hear the pundits blathering on about extraordinary demand, but what's actually happening is a restriction of supply, possibly coupled with sustained but declining demand. Bid/cover ratios at treasury auctions for short term debt have been dropping ominously.
And of course aggregate debt dropped while government spending on the "budget" outpaced income by some $85 bn. How does that work? I suspect that Paulson is manipulating treasury issuance to smooth out the last days of the Bush mal-administration and leave the Obama administration holding the bag. Honesty and transparency is sadly lacking and its we the people that pay the price.
I don't think there is any problem for anyone who has cash. The assembly plants in America will still get the parts from China if they can pay for it up front.
My concern is the monetary aspects. The world's debt-based currencies requires every growing economies to service the rising debt. At least that is the theory anyway.
If the American consumer (the consumer of last resort) has to retrench then this system starts to break down. How will Asian countries get the hard currency if they aren't selling export goods to get our dollars? How will they create credit without a foundation of hard currency? If they don't have credit how will they continue to expand their economies?
This is sort of on the shaky edge of my understanding of how the world money flows work. But then I'm not sure many people do understand it.
A quick look at the Fed's H.3. report will show you that in December, the Fed injected $219 bn into the banks through an expansion of the monetary base. The banks promptly increased the amount of reserves held at the Fed by $208 bn. That was effective. Inquiring minds want to know just who let that $8 bn slip out the door? Tsk, tsk, such sloppy cash control. And the Treasury's injections of cash into the banks are supposed to be so much more effective than the Fed's because...? What has Ben been sniffing? He knows the numbers just as well as I do.
The exact same thing happened in Japan during the "lost decade" after their housing bubble burst. The Central Bank injected tons of money into the banks, swelling reserves, but not cash flow. I guess the Japan experience is not relevant to the US because, well, we're the US and it works if we do it? Hello, Mr Bernanke, hello. Anybody home? The lights are on, but nobody seems to be there.
Japan also embarked upon a decade of government spending on physical infrastructure that failed to pull their economy out of the doldrums. Now we're going to do the same thing, but it's going to work for us because we're the US. The more I hear, the more convinced I become that our economy will be a shambles for the next decade, if not longer. Productive investment is much more than just pouring concrete.
The supply/demand curve even has assumptions- an assumption of scarcity on both sides, that neither side is infinite.
Or rather, that neither side is essentially infinite in comparison to the other side.
A good example of the supply/demand curve breaking down right now is in shipping rates. Demand has fallen off a cliff, supply is essentially infinite in comparison to demand, so some rates are going to zero- or even negative.
That the models get a whole lot better with under 1000 actors than over 6 billion.
That is to say- we're pretty darn good at modeling what happens with small, isolated towns and tribes. We're downright awful at modeling entire industries, countries, and international trade.
To me, that's a darn good indicator of where rationality truly lies: in black-box programming with well defined interfaces. Or to put it in economic instead of Object Oriented terms- in small communities with well defined borders and equal, fair trade laws. Same idea, different discipline.
Good point. The Q3 "real residential investment" number that will be released with the GDP at the end of this month will be the first good leading indicator of the real economy later this year.
that so much effort and resources have gone into saving the financial system, and it's basically financial indicators that are signaling the bottom is near.
The real economy is another story altogether.
And there is no movement toward a fundamental shift away from the oil-for-paper foundation of the economy. Which means another crash in a few years, and resource wars in the next two decades.
. . . we are going to see policies which cannot be made to work have enormous amounts of national effort thrown at them, and the reduction in consumption that will pay for them dumped forward. It is the death throes of empire: when the powers that run it try and save themselves from catastrophe, at any cost.
Any cost, that is, except relinquishing their own system of power. Obama's plan is war and tax cuts with dollar devaluation. It is the same plan that Bush had, only without the potential for oil in Iraq, and with more energy savings here. However, in neither case does the basic plan work. There isn't enough energy savings to be had when, on one hand gas prices must be kept low and we are building more roads and bridges, to pay for a war in Afghanistan that is at similar intensity to Iraq during the surge.
Isn't this just astounding? We have 8 trillion out there, no accounting for any of it and Obama is threatening a veto if he doesn't get the rest of the $350 billion.
I'm sorry but the indicators to me are looking much worse than I assumed during the election (hence my poll question).
You write, "All those Asian nations intentionally suppressed domestic labor unions and working salaries in order to undercut competition for shares of the American consumer market." That is not true in the case of Japan. When he was the Occupation Authority, Gen. Douglas MacArthur initiated a deliberate policy of promoting trade unionism, explicitly to prevent Japanese products from being so cheap they would over-run the American market. And in the 1960s, the Japanese had their famous policy of "income-doubling" aimed at driving up employee earnings very quickly. I think South Korea followed a similar policy. The spectacular gains the Japanese made in the U.S. market came in the 1970s and 1980s, because, I believe, of two things. First, U.S. businesses failed to invest in themselves, especially as the "go-go" years of the 1960s on the big wave of multi-national conglomerates developed into the leveraged buyout banditry of the 1970s. Second, the Reagan administration rejected almost all the unfair trade petitions and administrative actions that were filed by a host of U.S. industries and companies, most notably steel, auto, and the really, really crucial one, machine tools. In short, Reagan simply dismantled what was left of the Hamiltonian program of deliberate industrial policy, and threw the entire U.S. economy open to competition, which was supposed to weed out losers and make winners stronger.
On the collapse of Bretton Woods, most specifically the gold convertibility crisis that led to Nixon's actions, what I guess you are really not supposed to talk about is the role of the City of London and the development of the Euro-dollar "market." The British ambassador to the U.S. actually went to the U.S. Treasury to inquire about getting around $1.2 billion in gold. That's the event that precipitated the infamous Camp David meeting where the idea of breaking Bretton Woods was adopted - the idea of an Under-Secretary of the Treasury at the time by the name of Paul Volcker. I forget the exact figures, and all the intrigue, but it was in a book that came out around 1990 by a foreign exchange trader, and I've been kicking myself for the past couple of years for being unable to find it, and what I wrote about it at the time. Suffice it to say that I believe the British financial elites deliberately detonated the crisis as one of the first exercises in the shock doctrine of disaster capitalism. The idea was to eliminate statist institutions that regulated exchange rates and interest rates, and let those rates float as a way of creating "opportunities" for speculation and arbitrage. I'm pretty sure that the first studies on things like currency futures and interest rate futures were actually done at some British institutions, before being adopted in the U.S. And what few people realize is that the City of London is a larger financial center than New York, and has been for a long time.
In other words, there was a deliberate policy of "controlled disintegration" of the world economy. That was the bill of goods that was sold to Nixon, the loutish fool. William Engdahl's material on the web explicates this history in detail. The problem is that "controlled disintegration" rapidly gets you into the tin-foil hat land of the Trilaterals, blah, blah. "Controlled disintegration" is nothing more and nothing less than radical deregulation, applied on a global scale. And we now know what deregulation was really all about.
This is not to argue that the deficit financing of the Vietnam war was not a problem; it most definitely was. But it was a problem that was exploited to the fullest by the British financial oligarchy, I believe.
An interesting note, that again skirts tin-foil hat land, is that a handful of German and Italian leaders and industrialists who were leading the fight against the "controlled disintegration" of London and Washington were assassinated by terrorist groups or "lone assassins" in the 1970s and 1980s, inclduing Aldo Moro and Swedish Prime Minister Olof Palme. I was really shocked when Perkins' Confessions of an Economic Hitman came out a few years ago, and detailed how "jackals" routinely assassinated opponents of the IMF and World Bank in Latin America and Africa.
As for China accepting dollars for ever: I don't think so. The Chinese seem to be straining themselves to get into a position where they can cut the U.S. loose. But I think they're looking at a much longer time frame than we in America are capable of, with our fixation on daily news and quarterly results. The Chinese are building over 30 urban rail mass transit systems - an equivalent program in the U.S. would be around $3 trillion.
So, it's no surprise that "Britain and America were more interested in remaking the old." The present system was designed to benefit their elites, and elites have NEVER willingly surrendered their prerogatives.
The Chinese Government announced on Dec 24 that it would begin settling trades with neighboring countries in yuan. I guess that was a heck of a "good tidings to all"...it just didn't include the US under "all". It's just a start, but you're absolutely right. The dollar will not be the world's reserve currency much longer. Great post.
man, your graph on the change of net worth is just eye popping, some pictures are more visual than others and this one hit me.
I just read a blurb on Bloomberg that BoA may get more US federal money to buy Merrill Lynch.
Now, what am I missing here that we give companies money to acquire other companies?
48 hours to cross Chicago for freight. Pretty astounding.
I think Obama is simply listening to a series of our corporate pals, this time with a more liberal bent (whatever that means these days) instead of digging out experts people who really know the details on what would be efficient, useful investment and where it needs to go.
It's like corporate lobbyists, philosophy and "who you know" still rule on high and the real experts, the real ones who could make the government effective and efficient....are sidelined.
Great post, I had no idea on rail infrastructure.
(don't ya love that EP is pure economics and not partisan, one could never get away with criticism, any politician, any party, on the political blogs! ;))
Speaking of economic indicators divorced from reality, this is one. I think you're probably right on the recovery on very mild GDP growth (although Dr. Doom Roubini is saying none with a total 5% GDP decline in 2009) but to me the most odious thing is one can have layoffs going to hit an official (and let's talk about the real unemployment rate!) but an official one of > 9%. I saw 9.2% in the CBO report and many are indicating a 10% unemployment rate.
So, I find the entire definition skewed and only when one has unemployment below < 5% should they be allowed to claim the term "recovery". It's just another thing that bugs me because it's all focused in on the power elites, Wall street instead of the citizens of a nation.
I just ran this post on Fedora 10, 64 bit FF 3.xx (whatever the latest is) and it ran fine.
On Ubuntu 8.04 (Hardy Heron, i386 - 32bit) plus FF 3.05 it crashed.
I use addons: noscript, adblock, better privacy and on any cookies I manually only allow certain domains and have most as session cookies.
(hey, ya all, don't do this at home, it blocks any ad revenue, ya know that 0.00001 cents I get for maintaining the site? ;))
So, here's what I did to fix it:
1. in the terminal, Ubuntu 8.04:
$sudo vi /usr/bin/firefox-3.0
I then added the line:
export XLIB_SKIP_ARGB_VISUALS=1
I put this in after the line in the firefox-3.0 script (that you are editing):
DROPPED-abandoned
I suspect strongly it's the XTERM interaction with flash that is causing the issue for I have even stronger security in Fedora 10 (abet I had to do some funky changes to get flash to work at all) and it worked like a charm and I block a hell of a lot of scripting.
if that doesn't work try turning off visual effects in system->preferences->appearance
if that doesn't work:
$sudo vi /etc/X11/xorg.conf
you might check your settings, like 24 bit depth, no composite.
If you're on 64 bits maybe there is a library issue or something like flash needs 32 bit libs somewhere.
Let me know if this works.
(I think there is also a "firefox" script there which maps any betas which if you do not have firefox-3.0 you might be able to edit also).
Check out this chart. This is going to have worldwide ramifications.
Whatever you have posted here keeps crashing my Firefox on my Linux machine. Doesn't seem to be a problem on the Mac.
they are still valid, one can have a delta function in a supply/demand "curve". If anything it proves the model of supply/demand curves.
The numbers being quoted are the budget deficit, not the operating deficit, and as we all know, there is considerably government spending on wars, banks and the like that occur off-budget. The same article refers to the deficit for the entire 2008 fiscal year as $455 bn. But the government borrowed $758 bn to fund that $455 bn deficit. Cute, huh. More government numbers that are functionally useless.
I'm sure that others would find it very interesting that the aggregate debt issued by the government has shrunk by $150 bn dollars between the first of December and Jan 12. And surprise, surprise, the yields on short-term debt were really hammered in December. I hear the pundits blathering on about extraordinary demand, but what's actually happening is a restriction of supply, possibly coupled with sustained but declining demand. Bid/cover ratios at treasury auctions for short term debt have been dropping ominously.
And of course aggregate debt dropped while government spending on the "budget" outpaced income by some $85 bn. How does that work? I suspect that Paulson is manipulating treasury issuance to smooth out the last days of the Bush mal-administration and leave the Obama administration holding the bag. Honesty and transparency is sadly lacking and its we the people that pay the price.
I don't think there is any problem for anyone who has cash. The assembly plants in America will still get the parts from China if they can pay for it up front.
My concern is the monetary aspects. The world's debt-based currencies requires every growing economies to service the rising debt. At least that is the theory anyway.
If the American consumer (the consumer of last resort) has to retrench then this system starts to break down. How will Asian countries get the hard currency if they aren't selling export goods to get our dollars? How will they create credit without a foundation of hard currency? If they don't have credit how will they continue to expand their economies?
This is sort of on the shaky edge of my understanding of how the world money flows work. But then I'm not sure many people do understand it.
A quick look at the Fed's H.3. report will show you that in December, the Fed injected $219 bn into the banks through an expansion of the monetary base. The banks promptly increased the amount of reserves held at the Fed by $208 bn. That was effective. Inquiring minds want to know just who let that $8 bn slip out the door? Tsk, tsk, such sloppy cash control. And the Treasury's injections of cash into the banks are supposed to be so much more effective than the Fed's because...? What has Ben been sniffing? He knows the numbers just as well as I do.
The exact same thing happened in Japan during the "lost decade" after their housing bubble burst. The Central Bank injected tons of money into the banks, swelling reserves, but not cash flow. I guess the Japan experience is not relevant to the US because, well, we're the US and it works if we do it? Hello, Mr Bernanke, hello. Anybody home? The lights are on, but nobody seems to be there.
Japan also embarked upon a decade of government spending on physical infrastructure that failed to pull their economy out of the doldrums. Now we're going to do the same thing, but it's going to work for us because we're the US. The more I hear, the more convinced I become that our economy will be a shambles for the next decade, if not longer. Productive investment is much more than just pouring concrete.
The supply/demand curve even has assumptions- an assumption of scarcity on both sides, that neither side is infinite.
Or rather, that neither side is essentially infinite in comparison to the other side.
A good example of the supply/demand curve breaking down right now is in shipping rates. Demand has fallen off a cliff, supply is essentially infinite in comparison to demand, so some rates are going to zero- or even negative.
That the models get a whole lot better with under 1000 actors than over 6 billion.
That is to say- we're pretty darn good at modeling what happens with small, isolated towns and tribes. We're downright awful at modeling entire industries, countries, and international trade.
To me, that's a darn good indicator of where rationality truly lies: in black-box programming with well defined interfaces. Or to put it in economic instead of Object Oriented terms- in small communities with well defined borders and equal, fair trade laws. Same idea, different discipline.
Goes completely bust. It's going to be a hungry summer. I'm going to plant lots of zuchini....
Good point. The Q3 "real residential investment" number that will be released with the GDP at the end of this month will be the first good leading indicator of the real economy later this year.
that so much effort and resources have gone into saving the financial system, and it's basically financial indicators that are signaling the bottom is near.
The real economy is another story altogether.
And there is no movement toward a fundamental shift away from the oil-for-paper foundation of the economy. Which means another crash in a few years, and resource wars in the next two decades.
Isn't this just astounding? We have 8 trillion out there, no accounting for any of it and Obama is threatening a veto if he doesn't get the rest of the $350 billion.
I'm sorry but the indicators to me are looking much worse than I assumed during the election (hence my poll question).
that is amazing, so what happens after this, global supply chain plain goes out of business?
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