G'day all,
Some thoughts I've just tried out on the Progressive Economists' List, to
no response. Are they just being polite?
>MP: Am I wrong to believe that the various warning signs are starting to
>cluster closer and closer together?
Me: Nope.
>Worries about energy prices.
Me: Well, this seems to cut both ways, I reckon. Are people
underestimating
the role of crisis-minimised import costs on US growth? We've heard before
that the crisis that most of the rest of the world has been copping has
actually been, in the near term at least, a boon for the US economy. Just
mebbe, for instance, the manufacturing sector's return to seemingly
promising profitability (which, for Geier and Shawki have only just reached
levels normal in the years immediately prior to the 1974 dip) is a function
of low costs of production? Trouble is, the initial foreign currency crisis
ain't a long-term boon at all. The US advantage builds the greenback up
such that the US balance of payments cops a thrashing in a world of toilet
paper currencies (like ours). And it makes domestic labour cocky, too.
And there goes another source of what profitability there has been, I
submit.
But the other side is that the US have large (short term) reserves of oil,
and it's bought and sold in greenbacks. Perhaps high OPEC prices suits the
US economy just fine! As it did back when the likes of State Department
policy wonk James Akins first recommended increased prices back in '73. His
point then was that the rapidly threatening Japanese and European economies
didn't have any oil, meaning higher prices would hit them harder than it'd
hit the States. And, as US Treasury under-secretary William Simon said at
the time, making OPEC a bit richer would be fine, as the proceeds would
eventually be 'recycled' through US finance institutions, anyway. I mean,
ya got all these SE Asian countries, brand new technology (courtesy of the
pre-'97 investment boom) driving their manufacturing sectors' costs down,
and their low currencies threatening US market share and and US national
accounts. Whack oil up a few notches, and the threat goes away.
As long as you don't wanna sell anything overseas, of course ... trouble is,
the US needs that advantage so much right now (absolutely everything
depending on their stock markets, and a lot of foreign money on those
markets, as it does), it's prepared to dump Europe and Asia down the
shit-chute to get it.
Even though they might end up having to support their victims' currencies if
the trick works too well ... so even the other side has an other side ...
>MP: A lack of confidence about the future world order -- suggested by the
>way the World Bank is pretending to listen.
Me: America is on the nose everywhere - from Tokyo to Berlin and all
points south of Miami. That might yet force 'em to pursue their interests
in ever more obvious and unpleasant ways.
>MP: Warnings about bad quality loans. Worries about credit in general.
>
>The ongoing increases in the balance of payments deficit.
Yeah, and both keep getting worse. To quote prudentbeardotcom, "...
defaulted corporate American debt rose to $15 billion for the first half of
this year, and if the Moody's estimates prove accurate, the current rate of
default should ensure that last year's record $23.5 billion is easily
broken." Same in Japan. And then there's unprecedented credit-card debt.
Oh, and America has doubled its current account deficit in less than a
decade (two to four per cent of GDP).
And then there's this from the US Bureau of Labor Statistics: "The U.S.
trade deficit
soared to a record $31.9 billion in July as oil prices climbed to a 10-year
high, the
Commerce Department reported yesterday. The country had record deficits in
trade with China, Japan, Western Europe and Canada. The department said the
July deficit was 6.9 percent higher than a revised $29.8 billion imbalance
in June. It surpassed the old record of $30.4 billion, set in March."
It all depends on the foreigners, doesn't it? They have to keep pumping 1.5
billion dollars into the American markets every single day to keep your CAD
funded, your currency safe, your markets stable, your baby-boomers'
retirements funded, and a world economy with someone to sell its stuff to.
There's quite a menu of things that might happen to turn that tap off, I
reckon.
And when it does, a
chain-reaction-debt-crisis-replete-with-economy-stopping-credit-squeeze
is well on the cards.
Any thoughts, fellow Crashees?
Cheers,
Rob.
_______________________________________________
Crashlist resources: http://website.lineone.net/~resource_base
To change your options or unsubscribe go to:
http://lists.wwpublish.com/mailman/listinfo/crashlist
