<HTML> <HEAD> <TITLE>Re: [PEN-L:8381] good news!</TITLE> </HEAD> <BODY BGCOLOR="#FFFFFF"> [Well, I'm always up for some crisis-talk, Doug! One thing ya gotta say here is that no specific reason is given in the whole spiel. More crisis-mongering below ... ]<BR> <FONT SIZE="2"><BR> ÝNot only will today's good times roll<BR> Ýlonger than ever before, according to this<BR> Ýview, but the traditional cycle of boom<BR> Ýand bust will never be the same again.<BR> ÝEconomic expansions of the future will<BR> Ýbe longer than they used to be, and the<BR> Ýanguishing interludes known as<BR> Ýrecessions will be milder, shorter and<BR> Ýrarer ...<BR> <BR> ÝBut this time, many experts say,<BR> Ýthings just might be different. One sign:<BR> ÝThe American economy proved<BR> Ýimpervious to the financial crisis that<BR> Ýstarted in Asia in 1997 and spread to<BR> Ýmuch of the rest of the world. <BR> <BR> [Here again, our optimists miss the little matter of globalisation. America did not do well despite the awful mess in SE Asia; they did well because of it. They had the institutions and the size to bring the mess about, confine it to those countries, and make sure core finance didn't have to pay a penny for it. They copped the fleeing capital, they copped the lower prices, and they copped the region's productive assets at 15 cents in the dollar. Is it really not that simple?]<BR> <BR> ÝThe case for a brighter economic future rests on<BR> Ýseveral observations: <BR> <BR> Ý* The Federal Reserve, learning from past mistakes,<BR> Ýruns the nation's monetary policy more effectively than<BR> Ýbefore. Last fall, for example, the Fed suddenly reversed<BR> Ýcourse and cut interest rates at the first signs that overseas<BR> Ýfinancial turbulence was hurting U.S. credit markets. <BR> <BR> [Surely they did not think they would actually raise interest rates at such a time? Anyway, US national accounts remain ever a greater nest of hornets, no?]<BR> <BR> Ý* Computer technology has revolutionized the way<BR> Ýprivate industry manages the flow of products and<BR> Ýmaterials. Disruptive pile-ups of unused goods and<BR> Ýbottlenecks caused by shortages--historically major<BR> Ýcauses of economic instability--appear to be less of a<BR> Ýthreat these days. <BR> <BR> [Is it true to say that first-world depressions of the past have been brought about by slow distribution? And are there not substanmtial inventories around the world, not of stuff for which there is unmet demand, but of stuff for which there is no effective demand at all? Oz has $70 billion of it stashed away just now, and there's a fair bit in Europe, and I read somewhere that several Asian economies are bouncing back as producers to a much greater extent than they are as consumers.]<BR> <BR> Ý* The bond market has become an increasingly<BR> Ýimportant shock absorber. With abundant information at<BR> Ýtheir fingertips, private investors are better able to<BR> Ýanticipate Fed policy shifts--and their quickness in<BR> Ýadjusting interest rates accordingly helps keep the<BR> Ýeconomy on an even keel. <BR> <BR> [What's so new in bond markets, anyway? And you'd need to live on Jupiter not to know a 0.25% hike is universally expected on Wednesday. I've been getting that in the paper, meself. Not that new a medium, really.]<BR> <BR> Ý* The increasingly important service sector is less<BR> Ýprone to wild ups and downs than the factory-dominated<BR> Ýeconomy of yesterday, suggesting that service employees<BR> Ýmay be less vulnerable to layoffs than their factory<BR> Ýcounterparts. <BR> <BR> [So much of this 'post-industrial' economy's history has unfolded during bull runs, that one could easily make the mistake of assuming the booming service sector has profoundly transformed markets. If one were not to make that moot assumption, one would have to admit we haven't really seen what happens to service employees when the bears are out.]<BR> <BR> ÝBond investors, for instance, are behaving in a similar<BR> Ýmanner to purchasing managers or even Federal Reserve<BR> Ýpolicymakers: All can respond to events in the real world<BR> Ýmore effectively than ever with the help of the Internet,<BR> Ýround-the-clock news and information about global events<BR> Ýand specific industry concerns. <BR> <BR> [Another assumption at work! We might want to define 'information' as a lessening of uncertainty. But that doesn't make it so, does it? My regular pronouncements on the economy over these last three years have been 'information', haven't they? Certainly hope no-one here treated them as a 'lessening of uncertainty'! More communication can make for less certainty, too, no? Isn't that what this chaos stuff is all about? Even if there are unusually reliable sources, and if most people do have access to them, might it not be that they are reliable because they take a hand in making the news? If so, we might have, say, a Bloomberg taking the place of the hidden hand, no? I'm not saying that leads to a worse scenario, but I guess neo-classicists would see this as worrying.]<BR> <BR> Ý"Financial market participants--and people who buy<BR> Ýand sell goods--are able to make quicker and more<BR> Ýintelligent decisions," he contended. <BR> <BR> [Quicker, yeah. More intelligent? Why? More communication channels, makes for more participants, representing a wider range of wealth and interests, and a wider range of knowledge and experience. This might as easily result in yet another way for money to find its way from threadbare pockets to corporate wallets? Millions could lose their shirts whilst the S&P 500 shows hardly a hiccough overall. And millions without shirts makes for a social problem on its way to being an economic problem.]<BR> <BR> ÝSohn might have been talking about Jay's Luggage, a<BR> Ýretailer based in Canoga Park. Its managers rely on<BR> Ýcomputer technology provided by Retail Technologies<BR> ÝInternational, a Sacramento-area firm, to track which items<BR> Ýare selling and which are not--and to gauge their own<BR> Ýpurchases accordingly. <BR> <BR> [Well, this is an advantage for IT-rich large firms over small firms and IT-poor firms - but the competition within these levels hasn't changed, has it? For the large IT-rich, all their competitors would now also be 'gauging their purcheses accordingly'. Where's the big difference here?]<BR> <BR> ÝMultiplied throughout the gigantic U.S. economy, such<BR> Ýexamples translate into smoother-running supply channels,<BR> Ýfewer items that gather dust on warehouse shelves, more<BR> Ýprofitable retailers and happier consumers. They also help<BR> Ýshield workers from layoffs caused by bottlenecks in<BR> Ýproduction when shortages caused by inadequate planning<BR> Ýbring assembly lines to a halt. <BR> <BR> [So now there are new reasons to lay people off. So what? The assertion that increased efficiencies lead firms to keep staff they might otherwise have dropped sounds in need of just a tad more substantiation than this, no?]<BR> <BR> ÝThe Internet, meanwhile, is matching up sellers who<BR> Ýonce would have been saddled with excess inventories<BR> Ýand buyers who would have searched unsuccessfully for<BR> Ýthose same goods. <BR> <BR> [More a promise than a significant empirical truth, surely? Is net-commerce this significant yet? And a purchase made over the internet is not necessarily a purchase that would otherwise not have been made, either.]<BR> <BR> Ý"You might have a surplus of something in Los<BR> ÝAngeles that somebody needs in Zimbabwe," noted Jon<BR> ÝSchreibfeder, an inventory management consultant in<BR> ÝDallas. "You stick it on an airplane, and it's there in 48<BR> Ýhours." <BR> <BR> [As if the reason for LA surpluses not finding their way to Bulawayo was ever one of poor communication! 'It' is there in 48 hours if someone in Zimbabwe can pay for it. As it ever was.]<BR> <BR> ÝOthers give much of the credit to the Fed for the<BR> Ýupturn's strength and longevity. Since the 1980s, the Fed<BR> Ýhas fought inflation with great success, making it virtually<BR> Ýimpossible for firms to pass on price hikes and further<BR> Ýrestraining wage increases, said Mickey D. Levy, chief<BR> Ýeconomist with Bank of America Corp. in New York. <BR> <BR> [Inflation can be fought, or it can be exported. Which has it been since the 1980s, and how firm is the US fed's control over the chaoplexy that is the rest of the world?]<BR> <BR> ÝAs a result, he maintained, companies have been under<BR> Ýtremendous pressure to become more efficient and<BR> Ýproductive. <BR> <BR> [Efficiencies and productivities that might have something to do with half a billion unemployed world-wide and just maybe a spot of underconsumption pressure abroad?]<BR> <BR> ÝQuestions remain. With lifestyles changing, economists<BR> Ýwonder whether the service sector will remain a source of<BR> Ýstability in hard times if well-heeled yuppies cut back on<BR> Ýrestaurant meals, international travel and other nonessential<BR> Ýspending. <BR> <BR> [But they just said ... ] <BR> <BR> ÝNor is it clear that the historic causes of recession<BR> Ýshould be dismissed. Typically, past recessions have been<BR> Ýignited by external shocks, such as skyrocketing oil<BR> Ýprices, or by Federal Reserve decisions to push up<BR> Ýinterest rates to kill inflation. Few would suggest that the<BR> ÝUnited States is immune from a future surprise, which<BR> Ýcould range from a war to financial turbulence to year<BR> Ý2000 computer snags in foreign countries. <BR> <BR> ['External shocks' is old language. What's external to an economy that's spent half a century aggressively getting its grubby fat fingers in every pie? 'Out there' is where an increasing proportion of consumers live and where an increasing slab of capital equipment is supposed to be coming from. All those differential experiences at the hands of globalism produce just as many differential political responses, that much more chaos in the system, and that much less discretion for the Fed.]<BR> <BR> Ý"Clearly, our ability to have extended expansions is<BR> Ýmuch greater now than it ever has been," said Joel L.<BR> ÝNaroff, an economic consultant in Philadelphia. <BR> <BR> [Isn't there something somewhere about there being an equal and opposite force for every ability to have extended expansions? Anyway, back to the evil of banality ... ]<BR> <BR> Cheers,<BR> Rob.<BR> </BODY> </HTML>
