Nth, I think some of the confusion is with regard to the standard monetary quick fix for inflation--raising interest rates. The momentum behind the dollar's plummet will make monetary policy somewhat irrelevant. We're talking about a paper manifestation of a paper tiger here. The US is about to lose all of it's street cred.
Because economics and politics are taught separately, students understand the gold backed currency model, but they're not taught the gun backed model. If the US is unable to retain it's standing as reserve currency of the world, through war or threat of war, it's a goner. If it tries to do what it takes militarily, AND it succeeds, it will still self destruct through deficit spending. It's a no win situation.
It doesn't matter what interest rates are, would you invest in the currency of Zimbabwe? Romania? even let's pick a bigger country, Brazil, Argentina? No way, at any interest rate. That's what it's going to look like.
PeakOil is You
THE US Economy Thread (merged)
by threadbear » Wed 30 Mar 2005, 18:41:17
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by nth » Wed 30 Mar 2005, 18:57:24
threadbear,
Gun diplomacy? interesting perspective.
I like Teddy Roosevelt's give carrots and carry big stick.
or something like that.
US has been giving money away in the form of accepting imports from country's it like to help develop. The problem is the exporting countries get addicted. Not even Japan who has the biggest economy of any country beside US cannot say no or grow out of the export business.
Even EU is hooked on US, look at EU financial and insurance companies. Such a large portion of EU's savings are invested in US. If US goes down, there goes EU's beautiful savings rate. Wipeout.
Gun diplomacy? interesting perspective.
I like Teddy Roosevelt's give carrots and carry big stick.
or something like that.
US has been giving money away in the form of accepting imports from country's it like to help develop. The problem is the exporting countries get addicted. Not even Japan who has the biggest economy of any country beside US cannot say no or grow out of the export business.
Even EU is hooked on US, look at EU financial and insurance companies. Such a large portion of EU's savings are invested in US. If US goes down, there goes EU's beautiful savings rate. Wipeout.
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by jaakkeli » Wed 30 Mar 2005, 21:21:50
$this->bbcode_second_pass_quote('nth', 'U')S has been giving money away in the form of accepting imports from country's it like to help develop.
You know, I stopped responding to you because the only responses I was getting were these fantastical platitudes. Arguing with someone who's only learned economics in kindergarten is a waste of time.
Buying something (e.g. importing) is not "giving money away" and it is not "helping someone", unless you're intentionally paying more than what the stuff is worth, which is the exact opposite of what the US has been doing. I mean, well, for example, tomorrow I intend to buy some clothes, some of which will surely be made in China or some other developing country. Am I doing it to "give money away" or to "help" the owner or the shop? Or will I do it to "help" China to develop? No, I simply want some clothes. Clothes from China will be cheap largely because <i>the Chinese</i> have chosen an undervalued currency to keep exports building up.
The one in this transaction who's giving away something of value is not me, it's the Chinese! They're accepting the fact that they're not getting a really fair deal in terms of value, because they know it helps them develop their country. Their dollar peg is just a one huge discount on all their stuff! China is giving away something to the US, not the other way. What you're saying about the situation is just mindless spin (not unlike the posts of those people who have decided to argue that the US will totally collapse just because they don't like where it's going right now; only the direction of the spin is different) that paints things as far away from the truth as possible.
This is, of course, unsustainable, and the party will soon end one way or another. What you've been trying to claim that the whole East Asia will follow the intense export-led growth path, a known dead end, because they're "addicted". But countries don't get "addicted", that's just more spin. You keep citing Japan as an example, but I simply can't understand why on earth you would think the rest of Asia would just replicate Japan's mistakes. They are not idiots and even the big supposedly "communist" country has an army of well-trained economists. They know what happened to Japan and they're not going to screw things up the same way (which doesn't mean that they won't screw things up some other way, of course).
$this->bbcode_second_pass_quote('', 'E')ven EU is hooked on US, look at EU financial and insurance companies. Such a large portion of EU's savings are invested in US. If US goes down, there goes EU's beautiful savings rate. Wipeout.
And I suppose it's just an impossible surprise to you that the European investors are getting away from the US. The markets don't have the confidence in the US that they used to have.
I don't understand where your magic belief on the US comes from. The US is a huge part of the world economy, so if it sinks, most of the world will be seriously hurt. But that's about it. There's no great magic in the US beyond the size and an unsustainable level of imports. The rest is spin that doesn't really explain anything. Remember when Japan was supposed to take over the world in the 1980s? Everyone was going on about how the Japanese strict work ethic, culture, demographics and everything else is so superior, that there is some magic in Japan against which the West will never be able to compete. Then POOOF and suddenly everyone thinks Japan has a rigid work ethic and culture unable to compete with American dynamism, not to mention totally unfavourable demographics with massive aging condemning the country to decline.
That's all just spin. The real economy is about numbers, not magic. You can't build an economy on hype. Even if investors can be momentarily fooled by it, it never works in the long run. Right now the US is in a consuming glut that gives the illusion of a special magic to all the hypers out there, but unsustainable things don't go on forever, so it will eventually come to an end. I'm betting on a hard landing - which means a big POOOF and a switch of spin to whoever seems to be doing best at the time.
And you know why I'm betting a hard landing? It's because the dumbasses in charge of the US believe there's some special magic about it that will allow the US to ignore everything that's known about economics and run numbers that would have the Americans themselves laughing and/or screaming at any other country if their economy looked that bad. They <i>could</i> avoid it, but they won't, because they're the "faith-based" administration and things just can't go wrong if they're in charge. Besides, they'll oppose the solutions because of ideology. (Budget deficit? Bah, a nice tax hike would take care of that and still leave the US a lightly-taxed country. Now how likely is that?)
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by marko » Wed 30 Mar 2005, 22:49:02
$this->bbcode_second_pass_quote('nth', 'I')f you don't mind, can we explore in greater detail, if you don't want to talk about minute details, that is fine, but it really doesn't make sense according to what I learn.
Nth, you may have noticed that I don't post so often. This is because I do not have a lot of time for posting. So, I will be unable to respond to your detailed queries, other than to say that the classical economics that informs your queries does not apply very well to the present situation because it 1) tends to consider national economies as autonomous units, which they certainly are not any longer, with our global economy; 2) assumes that national economies are based on the production of goods and services with real value, whereas the US economy is increasingly based on debt and IOUs; and 3) assumes that the supply of goods can expand infinitely in response to demand, which is demonstrably false for nonrenewable resources.
Classical economics is based on the relatively simple national economics of the 19th century, when economies were based on the production of tangible goods and a gold standard, rather than on a multiplication of promissory notes that have no chance of ever being redeemed. Therefore it is nearly useless in coming to grips with our present predicament, in my opinion.
If you want to pick one of your queries and put it to me, I will answer it in detail, but I honestly don't have time to answer all of them. This is not because I am not interested, but because I have a full-time job, I have other interests (among them preparing myself for the collapse in concrete ways), and I require 8 hours of sleep!
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by nth » Thu 31 Mar 2005, 14:20:50
jaakkeli,
Actually, you misconstrued my position.
Just because I actually studied economics and not just read about it, doesn't make me believe US economy is some magical thing and that the world have to depend on US. On the contrary, I believe other countries should not be dependent on US. What I see, is that the countries are all falling into the trap.
I believed US economy is unsustainable. I believed in PO, thus I am here. I believed we are running out of resources and not just oil. I believed we will enter a recession and follow some kind of cycle of growth and recession that will cause a big shift in the way we live. I have to believe in these things if I believed in PO. It is hard to imagine a non PO believer will spend any time here. It is also hard to imagine if you believed in PO, you can live life normally after PO.
I do believe there are solutions, but US is not moving in that direction. I don't believe US is some magic. There is no magic. They do things to profit themselves. They being corporations not the people of US. The people don't benefit individually when they get laid off and their factories get send overseas.
Your specific example of China is a classical Marxist view. Marxism is great at criticing capitalism. I just don't agree with their communism as the right solution, but I do agree with their criticism. But back to your view, you have to understand that these countries that chose to follow the export led growth are getting help from US and other developed nations and it is on the whims of these developed nations to decide who they want to import from. There are more countries wanting to be exploited than there are factories to give out. And the factories are not being given out by who is the lowest bidder. Politics is what dictates where the factories go. Of course, businesses will be profitable and that is almost guarantee by the way the contracts are negotiated.
I actually looked at this in depth and not just read theories and news articles.
What do these export oriented countries get in return for providing exploited labor? They gain technology and knowledge and working capital. And also, is it just a coincidence that most leaders of these countries are all rich and tyrannical? I don't think so.
Actually, you misconstrued my position.
Just because I actually studied economics and not just read about it, doesn't make me believe US economy is some magical thing and that the world have to depend on US. On the contrary, I believe other countries should not be dependent on US. What I see, is that the countries are all falling into the trap.
I believed US economy is unsustainable. I believed in PO, thus I am here. I believed we are running out of resources and not just oil. I believed we will enter a recession and follow some kind of cycle of growth and recession that will cause a big shift in the way we live. I have to believe in these things if I believed in PO. It is hard to imagine a non PO believer will spend any time here. It is also hard to imagine if you believed in PO, you can live life normally after PO.
I do believe there are solutions, but US is not moving in that direction. I don't believe US is some magic. There is no magic. They do things to profit themselves. They being corporations not the people of US. The people don't benefit individually when they get laid off and their factories get send overseas.
Your specific example of China is a classical Marxist view. Marxism is great at criticing capitalism. I just don't agree with their communism as the right solution, but I do agree with their criticism. But back to your view, you have to understand that these countries that chose to follow the export led growth are getting help from US and other developed nations and it is on the whims of these developed nations to decide who they want to import from. There are more countries wanting to be exploited than there are factories to give out. And the factories are not being given out by who is the lowest bidder. Politics is what dictates where the factories go. Of course, businesses will be profitable and that is almost guarantee by the way the contracts are negotiated.
I actually looked at this in depth and not just read theories and news articles.
What do these export oriented countries get in return for providing exploited labor? They gain technology and knowledge and working capital. And also, is it just a coincidence that most leaders of these countries are all rich and tyrannical? I don't think so.
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by nth » Thu 31 Mar 2005, 14:43:00
marko,
I am not sure where you get your notion of economics, but the economics that I refere to are based on global trade and the free capital flow. The economists are all peered reviewed and based on latest statistics available. Most are written before 2000, so based on 90's and prior data.
Don't get me wrong. US currency devaluation is not what I have a problem with. The problem that puzzles me are two things- one that it is not in their economic interest to help US; the second is that you paint a scenario where US just sits there and let all this happen. You ignore all the rules and procedures that have been put in place to prevent these things from happening. It is one thing to believe those rules don't work, but it is another to ignore them.
The first one might be that we just disagree, but in your argument, you mistakenly made the impression that don't make sense. Like currency devalues and the way you explain it sounds like all currencies devalue and not just US. I don't think that is logical, and I think you are thinking of something else... more like buying power is decreasing, which is different than currency devalue. You clarify this in your later posts that it is buying power and that EU will retain buying power. Yes, I agree with you about that. That is not caused by currency valuation- the decreasing buying power is what causes currency devaluation not the other way around, but that is semantics, I guess.
The second one has to do with your explanations, but since you don't have time, then we can just ignore your mechanisms on how the world economies will collapse.
I am not sure where you get your notion of economics, but the economics that I refere to are based on global trade and the free capital flow. The economists are all peered reviewed and based on latest statistics available. Most are written before 2000, so based on 90's and prior data.
Don't get me wrong. US currency devaluation is not what I have a problem with. The problem that puzzles me are two things- one that it is not in their economic interest to help US; the second is that you paint a scenario where US just sits there and let all this happen. You ignore all the rules and procedures that have been put in place to prevent these things from happening. It is one thing to believe those rules don't work, but it is another to ignore them.
The first one might be that we just disagree, but in your argument, you mistakenly made the impression that don't make sense. Like currency devalues and the way you explain it sounds like all currencies devalue and not just US. I don't think that is logical, and I think you are thinking of something else... more like buying power is decreasing, which is different than currency devalue. You clarify this in your later posts that it is buying power and that EU will retain buying power. Yes, I agree with you about that. That is not caused by currency valuation- the decreasing buying power is what causes currency devaluation not the other way around, but that is semantics, I guess.
The second one has to do with your explanations, but since you don't have time, then we can just ignore your mechanisms on how the world economies will collapse.
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THE US Economy Thread (merged)
by Graeme » Tue 07 Mar 2006, 00:28:23
US government near to debt limit
$this->bbcode_second_pass_quote('', 'U')S Treasury Secretary John Snow has told Congress to raise the government's credit limit in order to avoid having some of its operations shut down.
The government needs Congressional authority to borrow and the total accumulated debt is now close to its limit of $8.2 trillion (£4.7 trillion).
If the limit is not increased, the government could find it difficult to pay debts or borrow money.
Congress is expected to agree to an extension, averting any debt crisis.
$this->bbcode_second_pass_quote('', 'U')S Treasury Secretary John Snow has told Congress to raise the government's credit limit in order to avoid having some of its operations shut down.
The government needs Congressional authority to borrow and the total accumulated debt is now close to its limit of $8.2 trillion (£4.7 trillion).
If the limit is not increased, the government could find it difficult to pay debts or borrow money.
Congress is expected to agree to an extension, averting any debt crisis.
BBC
Human history becomes more and more a race between education and catastrophe. H. G. Wells.
Fatih Birol's motto: leave oil before it leaves us.
Fatih Birol's motto: leave oil before it leaves us.
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