[Juilen is coming back to answer Rob and Mark... over economics not history I
reassure you]
Rob,
>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.
That concerted intervention Friday plus the paper hinting at a devaluation of
the dollar by 40% from the Fed makes me think that the Fed is a lot closer to
accept to let the dollar fall than six monthes ago. What's the last time they
raised rates, BTW? I guess I'm standing with Mark and Alexandre Faire here
(I did not read him, though).
Which means? If it's also ready to let inflation develop (instead of trying to limit
the decline once it has started by hinking rates to the sky and putting many
financial institutions out of business) while the dollar goes down, this could well
solve both the trade/current account deficit and credit quality/overindebtement
problem. Of course this would hurt the average american's net worth a lot but
do we care about averages? More importantly, that would leave a heavy
energy bill for the USA. Of course these issues would not be solved in favour
of the creditors and this is why this is an unlikely scenario but why can't they
accept a setback after these tremendous gains they made these last
decades?
Happy to see that you re-use my quotations, BTW.
Mark,
>Dollar hegemony has resulted in savage deflationary pressures in the
>world economy outside the US.
That is if you think that the world has not been truely globalized. I would agree
with that but I thought that you thought it had actually been globalized. Sorry if I
confuse you with someone else.
If the world was globalized, a strong dollar would been inflation not deflation in
the non-dollar countries as 1) stronger US demand for goods would bring non-
US exports' non-dollar prices up and as 2) US exports' non-dollar prices
would go up too as a direct result of the strong dollar.
Thus I disagree when you say:
>The two things are
>yin and yang: the present 'bountiful' US economy has been bought at
>the price of stagnation in Europe and Japan, and a holocaust of lives
>and hopes in many other parts of the world.
First, the differences between the USA and Europe are partly statistical
artifacts (once again, remember Gordon?). Second and more importantly, I do
think that the US has been the engine of the world economy lately.
But, and this is a big but the current situation over oil changes this. Especially if
oil goes up more in a few months, the US will be actually taking other's energy
from their "mouth". The US waste has lately been a good things for the other
world economies incapable of producing a decent endogenous growth. But
scarcities may change this.
>The huge increase in
>income and wealth inequality this has produced *is the immediate
>result of fundamental constraints on the capitalist growth model', in
>particular, energy-shortage. ...
Mark, you have a good case for physical limits beign the main economic
factor NOW. My opinion is that you spoil your credibility by saying that it was
so in the past (with the exception of a few years at the end of the seventies,
maybe). Was 10 or 20 dollars a baril expensive? I mean, a baril is something
big. Compare it to the price of milk, f.ex.! But anyway I have argued enough
with you, bringing forward data, about this.
>But energy has not been plentiful
>since at least 1973, and therefore growth has been a mirage for most
>of the world. Growth in social production has been unable to keep up
>with inertial demographic growth. Most people have got worse off. 3
>billion people live on less than $1000 p.a. They are not properly
>housed, have no education or health services, no or inadequate running
>water, no public transport, no life and no hope.
I will not discuss economic growth or $ p.a. since this is useless stats. If you
want to find a plausible physical cause for the real problems, you'd have a
better case in the limits of availability of good land and water p.a. IMO.
Anyway, all these problems are the results of policies as much as if not more
than energy availability. F.ex., how do you explain Algeria with your theories?
>there is now much evidence of renewed fiscal weakness in Asian states
>which suggests this will happen
Another point as to the importance of policies: Seen the spread between
Malaysian vs. US/EU bond rates? Not much financial weakness there, it
seems.
>The Dow has moved sideways along a precipice
>for more than a year now. A combination of factors are at work to drag
>it off, including the effects on the dollar of high oil prices and a
>higher payments deficit. Where are the net benefits to the US in all
>this? What is the future going to be except a slump of the US domestic
>economy more deeper, lasting and dangerous than the 1930s?
First, stop to use that index. Why not use the S&P or the Wilshire? Second and
more importantly, the scenario of the 1930s is not likely to be reproduced
because Greenspan has already demonstrated that he's not ready to raise
rates when a crisis hits but he will instead cut them aggressively and set up
bailouts, japanese style.
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