At 14:39 17/09/2012, Ed wrote:
I haven't seen much evidence that the FIRE sector is in decline, Keith.
The commercial (high street) banks have already lost large numbers of
staff. This year the same is now happening to investment banks
(e.g.JPMorgans, Goldman Sachs, Citibank, etc). The financial sector
in the advanced countries is now shrinking from 15% of GDP in 2008
(cf 5% 30 years ago) to something nearer 10% already.
(EW) If it is, it'll bounce back and continue to be one of the most
important drivers of US wealth.
Not necessarily. The commercial banks have long since ceased being
the most important drivers of business credit except for the normal
sort of humdrum Small and Medium Enterprises in a locality. For years
past, fast-growing SMEs have been increasingly identified and funded
by venture capital funds (particularly franchises), higher-tech
enterprises by private equity groups and innovation funds, and
existing larger corporations either by stock-splitting and selling or
by issuing bonds (directly or indirectly via investment banks).
(EW) As for US manufacturing, I don't think one can expect much from it.
On the contrary, Asian jobs have been trickling back to Europe and
America for some years now (even including a case of a firm of
labour-intensive cushion makers I described a few months ago). The
latest specialist magazine on these issues, Caixin, is now reporting
that the bounce-backs from China are now beginning to be a flood.
(EW) Far too much of that sector, along with jobs, has been exported to Asia.
It's not just rapidly rising labour costs in China but also the
land-freight proportion of costs (to get the stuff to the ports)
that's now driving thousands of industries to lower-waged Asian
countries, but also back again to higher-waged countries. Google is
going to build its new Nexus in America. Caterpillar and General
Motors are switching plants back. JCB, the highly successful UK
manufacturers of excavators, etc have decided not to establish more
plants in China but to expand here because their main Chinese
competitor, Sany, is now in financial trouble.
(EW) And if there is any recovery in the US, much of it will be jobless.
Assembly lines used to have thousands of people working along
them. Too many of those people have now been replaced by robots.
True enough. But if Western firms had not been able to go to China in
large numbers in the last 30 years then you can be certain that they
would have developed automation at home all the quicker.
(EW) IMHO, the US economy is in a state of long-term stagnation.
True. And Western Europe and Japan. Carmen Reinhart and Kenneth
Rogoff, whose book, "This Time It's Different", and who are the
leading American economic specialists in post-repression recoveries,
talk in terms of well over 20 years for this one. Private consumer
debts are recently showing some signs of recovery, but there are
still massive bank and commercial property debts which are still only
treading water. And then there are still massive sovereign debts (and
increasing with more QE) and the need for future welfare, medical and
state pension costs to be got onto a better funded basis
(EW) Gold standard? Forget it. Countries want to control their
currencies for both internal and trade purposes.
That's the problem! Without some reality-pivot such as a
gold-standard (it doesn't have to be gold) to discipline them,
governments will continue to be tempted to print money whenever
they're in a scrape. (Incidentally, even JPMorgan are now accepting
gold as a full currency.)
(EW) Keeping the value of the Yuan low has been an important factor
in the growth of manufacturing in China. Being bound to the Euro
has exacerbated problems faced by Greece, Italy and Spain. I'm
afraid that central banks and quantitative easing (and tightening)
are with us for the long term.
Until the present lopsided currency system, driven first and foremost
by an inflating dollar (almost 90 of world trade is denoted in US$s)
cracks catastrophically. It could happen in five years time; it could
happen tomorrow without warning just like Lehman Bros cause 2008
crash. World finance is so deeply interconnected and parasitic that
it could crack almost anywhere.
Keith
Ed
----- Original Message -----
From: <mailto:[email protected]>Keith Hudson
To: <mailto:[email protected]>RE-DESIGNING WORK, INCOME
DISTRIBUTION, , EDUCATION ; <mailto:[email protected]>Ed Weick
Sent: Sunday, September 16, 2012 9:33 AM
Subject: Re: [Futurework] FW: For those who believe God's on Wall Street.
At 13:59 16/09/2012, Ed wrote:
I think you can forget about the gold standard, Keith. It's faded
off into history. The ability to manipulate the money supply,
including quantitative easing, is now very much a part of fiscal
and monetary policy.
One thing underlying what has impacted on Sandy Lewis and many
other Americans is the enormous change in the relative positions of
the FIRE (finance, insurance and real estate) sector and of the
manufacturing sector in the American economy. The following chart shows this.
But the FIRE sector is already in decline and manufacturing (in the
US and UK) is already showing signs of recovery. As to resumption of
the gold-standard, if Romney gets in the Republicans will definitely
call for a Gold Commission. Even if Obama does a second term, don;t
discount it. There are several eminent voices now talking about it
-- e.g. Zoellick of the World Bank. Remember also that gold has
never ceased to be a currency at governmental and central bank
level. It only lost use as a trade currency for political (read
American) reasons so that an inflationary dollar could be used instead.
Keith
[]
As the chart shows, manufacturing has slipped from being some 30%
of GDP in the early 1950s to being a mere 11% in 2009. The FIRE
sector, in contrast, has risen from being about 10% of GDP to being
over 20% currently. One disturbing thing about these trends is
that while the manufacturing sector tended to be visible and open,
much of what goes on in the FIRE sector happens secretly behind
closed doors and is therefore much less susceptible to government
control. The decline of manufacturing has had a profound negative
impact on the middle class while the rise of the FIRE sector has
favoured the wealthy and is a major factor in the growing income
inequality in American society.
Ed
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Keith Hudson, Saltford, England http://allisstatus.wordpress.com
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