Perspectives on the global economic meltdown (Jan 26 2010)

svinayak · Post by **svinayak** » 22 Aug 2010 02:17

shyam wrote:
Check out the interview of one George Hemminger starting from 12:30. According to him the most disadvantaged people are the middle class and not the lower class.

It is the middle class with too much debt and large mortgage. Debt is the problem.

svinayak · Post by **svinayak** » 22 Aug 2010 02:34

http://www.cassiopaea.org/cass/politica ... zewski.htm

Political Ponerology: A Science on The Nature of Evil adjusted for Political Purposes

by Andrew M. Lobaczewski

Pathocracy is a disease of great social movements followed by entire societies, nations, and empires. In the course of human history, it has affected social, political, and religious movements as well as the accompanying ideologies… and turned them into caricatures of themselves…. This occurred as a result of the … participation of pathological agents in a pathodynamically similar process. That explains why all the pathocracies of the world are, and have been, so similar in their essential properties.

…Identifying these phenomena through history and properly qualifying them according to their true nature and contents - not according to the ideology in question, which succumbed to the process of caricaturization - is a job for historians. […]

The actions of [pathocracy] affect an entire society, starting with the leaders and infiltrating every town, business, and institution. The pathological social structure gradually covers the entire country creating a “new class” within that nation. This privileged class [of pathocrats] feels permanently threatened by the “others”, i.e. by the majority of normal people. Neither do the pathocrats entertain any illusions about their personal fate should there be a return to the system of normal man. [Andrew M. Lobaczewski Political Ponerology: A science on the nature of evil adjusted for political purposes]
The word “psychopath” generally evokes images of the barely restrained - yet surprisingly urbane - Dr. Hannibal Lecter of “Silence of the Lambs” fame. I will admit that this was the image that came to my mind whenever I heard the word. But I was wrong, and I was to learn this lesson quite painfully by direct experience. The exact details are chronicled elsewhere; what is important is that this experience was probably one of the most painful and instructive episodes of my life and it enabled me to overcome a block in my awareness of the world around me and those who inhabit it.

Dr. Lobaczewski left the United States and returned to Poland before September 11, 2001. But his remarks were prophetic:

Nonetheless, the world as yet is not restored to good health; and the remainders of the great disease are still very active and threatening a reoccurrence of the illness.

What “dangerous science was Dr. Lobaczewski carrying with him when he escaped from communist Poland?

He calls it “Ponerology” which the dictionary defines: n. division of theology dealing with evil; theological doctrine of wickedness or evil; from the Greek: poneros -> evil'.

But Dr. Lobaczewski was not proposing a “theological” study, but rather a scientific study of what we can plainly call Evil. The problem is, our materialist scientific culture does not readily admit that evil actually exists, per se. Yes, “evil” plays a part in religious discourse, but even there it is given short shrift as an “error” or a “rebellion” that will be corrected at some point in the future, which is discussed in another theological division: eschatology, which is concerned with the final events in history of the world, the ultimate fate of humanity.

There are quite a number of modern psychologists who are actually beginning to move in the direction of what Dr. Lobaczewski said had already been done behind the Iron Curtain many years ago. I have a stack of their books on my desk. Some of them seem to be falling back into the religious perspective simply because they have no other scientific ground on which to stand. I think that is counterproductive.

Bade · Post by **Bade** » 22 Aug 2010 07:48

Pretty depressing, many seem to be the kind of professional folks who make up the American middle class. A sampling below.

I retired from my job as an aerospace engineer at Lockheed Martin when I was 60. At that time, I had originally intended to wait until 66 or later to take Social Security so the benefit would be as high as possible. I had invested for more than 30 years, and my plan all along was to be taking money out of my IRA.

Why I took Social Security early

ManjaM · Post by **ManjaM** » 22 Aug 2010 08:05

In his new film Overdose: The Next Financial Crisis, Swedish director Martin Borgs, using Cato scholar Johan Norberg's book Financial Fiasco as a road map, warns of the "greatest economic crisis of our age—the one that awaits us."

Borgs sat down with Reason.tv's Michael C. Moynihan before the film's Washington premiere to discuss how we got into the current mess and what Overdose prescribes to prevent future calamities.

I really dont know what to make of what economists like Peter Schiff, Marc Faber are saying. Peter Schiff was among the guys who were spot on in predicting the 2008 crisis. And he is now saying that stuff will be hitting the fan again in 2012.

Hari Seldon · Post by **Hari Seldon** » 22 Aug 2010 09:56

Radical Britain also forms the leading edge (behind japan) in another way...
Grim future for young workers in 'pensioner ghettos'

Parts of Britain could become retirement ghettos within a generation with three retired people for every four in work, a report warns.

ding ding ding ding
Though yup, I would take such linear extrapolations with some salt only. Still, it is something, mussay...

It is the growing number of those aged 85 and over that will put a particular burden on social services, Mr Horlick warns, as people in this age bracket are more likely to need costly long-term care. At present, most people who own property have to pay for this themselves – usually through the sale of their home – but as their resources are depleted, the local council has to meet these costs.

Many people underestimate the cost of nursing home care: figures show that the average care home costs £36,000 a year, with many private nursing home places in the south of England costing more than £50,000, comparable to a year-long cruise on the Queen Elizabeth liner.

Mr Horlick said: "An ageing population will mean more people will need long-term care. And as medical technology improves, people will live even longer in care, which will present a real challenge for these local authorities. 'Younger people in particular face an enormous burden to meet the costs of those who are in retirement."
{Yes. And what if the so-called younger workers are unwilling or unable or both to bear that burden, eh?}

The Government has set up a Long Term Care Funding commission, which is due to report next year.

To help meet the costs of an ageing population the state pension age will be raised to 66, possibly within five years. The ONS figures show the current ratio is four working adults for every pensioner but this will fall to just three working adults by 2040.

Well, one solution is to import packees - flood refugees by the horde - they'll provide the younger workers, I guess....

enqyoob · Post by **enqyoob** » 22 Aug 2010 13:27

Well... already all H-1 visa workers are paying into the SS system with no benefits unless they switch to PR. Theoretically, expanding this nice system to include a 10% tax on all outsourced work (incl. manufacturing) would fix the SS system, hey? It would increase the cost to manufacturers of getting stuff Made in China, and that in turn would put more pennies into CONUS manufacturing jobs. US-based companies that outsource, would probably be in no position to object, since this may be the only way to have customers in the CONUS who can spare the pennies to buy (or need) purses made in China, per the fine inspiring theses published on this dhaga. A much better deal than an outright cancellation of business licenses or having their buildings and Aston-Martins burned down.

I am sure Schumer & Co must have thought of this, and may be waiting to see the WTO fallout from the H-1 visa fee b4 moving ahead.

enqyoob · Post by **enqyoob** » 22 Aug 2010 15:34

But wow! This is serious!

Bade · Post by **Bade** » 22 Aug 2010 17:40

The comments section of the Telegraph article linked above is quite revealing about the angst the younger 30-40 yr olds have in the developed world, since most will not be able to afford a lifestyle that retired generation is enjoying even now.

chola · Post by **chola** » 22 Aug 2010 19:05

Acharya wrote: Welcome back man. It has been 5 years since you posted.

Five years! I guess it has been that long. Marriage and a child tend to take up a lot of time.

Your perspective on China is needed in BRF.

My views might be biased now, I'm literally in bed with the enemy (Chinese-American wife)

svinayak · Post by **svinayak** » 22 Aug 2010 21:16

chola wrote:

My views might be biased now, I'm literally in bed with the enemy (Chinese-American wife)

That is the reason we need your views now. We need how the mind works.

g.sarkar · Post by **g.sarkar** » 22 Aug 2010 22:14

chola wrote: My views might be biased now, I'm literally in bed with the enemy (Chinese-American wife)

Cholaji,
She will become more Indian than you are, just wait and see. Trust me, I have been there done that.
Gautam
http://www.youtube.com/watch?v=rM9__IGZ ... re=related

pgbhat · Post by **pgbhat** » 22 Aug 2010 23:48

chola wrote:
My views might be biased now, I'm literally in bed with the enemy (Chinese-American wife)

Suraj · Post by **Suraj** » 23 Aug 2010 00:42

Welcome back Chola! Don't worry, you're not the only person here in that boat, err, bed

shyam · Post by **shyam** » 23 Aug 2010 01:02

Suraj wrote:Welcome back Chola! Don't worry, you're not the only person here in that boat, err, bed

Do you have access to mainland views?

chola · Post by **chola** » 23 Aug 2010 01:29

g.sarkar wrote:
chola wrote: My views might be biased now, I'm literally in bed with the enemy (Chinese-American wife)
Cholaji,
She will become more Indian than you are, just wait and see. Trust me, I have been there done that.
Gautam
http://www.youtube.com/watch?v=rM9__IGZ ... re=related

That's very amusing and I've seen goris like that before. But in our case, we're both Americanized (of course.)

The truth is Chinese (actually East Asian) culture do tend to have a fair bit more appeal for the American mainstream than ours. So the pressure is going the other way. Just as desi culture would have more appeal in the UK, Chinese culture has an upper hand here. "Asian" in the US means Chinese-Japanese-Korean to the average person.

There is a strange dichotomy in the US relationship with East Asia. It's a weird but intense love/hate relationship. China is considered a threat. As Japan was before. But in food, the movies, arts, etc. acceptance of their influence is everywhere. The most bizarre manifestation of this was when I was dating my to-be wife, I got nasty looks from white men and was involved in more than one altercation.

My take is that white Americans actually believe that East Asians (or maybe just their women) belong to them. This would explain the US allowing its wealth to be siphoned off in trade surpluses by every East Asian nation out there including China in the past five decades.

I've written before that if we want India to catch up, it would be far, far better for China to remain communist and muddle along for an extended period than it is for it to collapse and be changed by the US into something resembling Taiwan or South Korea. I have no doubt that if China collapses under its own weight, the US will jump in head first and do what it had done for Japan.

chola · Post by **chola** » 23 Aug 2010 02:08

Suraj wrote:Welcome back Chola! Don't worry, you're not the only person here in that boat, err, bed

The best of luck to you too then

Keep a firm grip of things between her, your mother, her mother and every other female between the two families. Otherwise, things can spiral out of control quickly in a comedy of errors and misunderstanding.

My daughter is a great balm though. All tensions dissolve when she is cooing.

ArmenT · Post by **ArmenT** » 23 Aug 2010 04:59

Wall Street Drug Use: Employees Giving Up Cocaine for Pot and Pills

Guess that's a pretty clear sign of the economy going down the drain

ArmenT · Post by **ArmenT** » 23 Aug 2010 05:01

Johann Hari - The Management Consultancy Scam

David Craig gives a typical explanation of what the consultants Actually Do. After getting a degree specialising in romantic poetry, he was astonished to be hired by a prestigious management consultancy, given three weeks training, and then dropped into major corporations to tell them how to run their oil rigs, menswear stores, and factories, for tens of thousands of pounds a pop. In his brave memoir Rip Off! he explains: "We were proud of the way we used to make things up as we went along... It's like robbing a bank but legal. We could take somebody straight off the street, teach them a few simple tricks in a couple of hours and easily charge them out to our clients for more than £7,000 per week." It consisted, he says, of "lies, lies and even more lies."

He worked to a simple model, which is common in the industry. He had to watch how a workforce behaved for a week – and then tell the company's bosses, every time, that they had 30 percent too many staff and only his consultancy could figure out who should be culled. If he calculated they actually had the right amount of staff, he was told by his bosses not to be so ridiculous and do his sums again: where was the money for them in a properly-staffed company? The company had to be POPed – People Off Payroll.

Hari Seldon · Post by **Hari Seldon** » 23 Aug 2010 05:06

Bade wrote:The comments section of the Telegraph article linked above is quite revealing about the angst the younger 30-40 yr olds have in the developed world, since most will not be able to afford a lifestyle that retired generation is enjoying even now.

Aha, Bade saar.

So you noticed it too, eh? And the numbers emerging from the debate are crystal clear, eh?

Things will get worse (as in the # retirees/#workers will rise further) before they get better. The social contract, already under strain, may be quite drastically 're-formed'. Only. The elders form a formidable voting bloc - make no mistake. Throwing them under the bus won't be feasible under the current set of rules. Only. However, the young are voting with their feet - leaving for greener pastures - check the out-migration rates in bleak places like East europe and Ireland.

And the collapse of the family structure means that that fundamnetal societal institution of last resort support has simply disappeared from much of the west only. When each person has had 2,3,4 spouses, 4,5,6, children, step-children, co-step-children etc, the notion of loyalty, gratitude, emotional attachment and commitment(just my VVVHOs here) would be markedly different from what we desis are instinctively used to, IMHO.

Chalo, Des too is 'progressing' into that disastrous direction, am told. Time will tell how this will end. Jai Ho.

TonyMontana · Post by **TonyMontana** » 23 Aug 2010 05:08

chola wrote: The truth is Chinese (actually East Asian) culture do tend to have a fair bit more appeal for the American mainstream than ours.

This might be considered crass. But do you think it's got something to do with colour? Colour is a very strong visual que of "closeness". Maybe the east asian's appeal to the white men orginiate in their closer hue of colour?

Hari Seldon · Post by **Hari Seldon** » 23 Aug 2010 05:11

^^^ TonyMontana, are you chinese?

Just wondering since you have a penchant for referring to us Yindians as 'you Indians', 'your economy' etc instead of what we'd expect from Indian origin folks. Of course, we've had pathological cases among PIOs also who've looked and talked down to us quite a lot.

/Not that it matters a whole lot but would help clarify perspective. Thx.

Carl_T · Post by **Carl_T** » 23 Aug 2010 05:51

My take is that white Americans actually believe that East Asians (or maybe just their women) belong to them. This would explain the US allowing its wealth to be siphoned off in trade surpluses by every East Asian nation out there including China in the past five decades.

Don't mean to go off topic. Ok just a little bit.

but this reminds me of this video.

http://www.youtube.com/watch?v=P2ojpefx ... ure=search

[/OT}

Neshant · Post by **Neshant** » 23 Aug 2010 06:39

India's chaotic democracy might actually be better than the money bag democracy going on in the US. At least no single entity, domestic or foreign, can control it due to the chaos.

In the US, presidential candidates are pre-selected by powers that be before they land on the ballot. Even the federal reserve chairman is selected in the same way. Powers that be put a list of 3 pre-selected candidates in front of the president and he's expected to choose one from the list. Thereafter begins a sustained campaign to stuff all levels of govt with goons from the banking & financing sector to influence decision making.

------
Presidential Election or Selection?

http://www.youtube.com/watch?v=lKEM8a-T-bg

Neshant · Post by **Neshant** » 23 Aug 2010 06:42

Carl_T wrote: My take is that white Americans actually believe that East Asians (or maybe just their women) belong to them.

Not to be off topic but I hardly ever see an Asian male with a WF. Its always AF with WM. A few AM friends of mine have expressed frustration. Just like the US is angry with China over the trade deficit, AM are angry with WM over their 'trade deficit'.

Another thing I notice is white couples in the West only want to adopt AF children from China. Never AM.

Carl_T · Post by **Carl_T** » 23 Aug 2010 06:46

Neshant wrote:
Carl_T wrote: My take is that white Americans actually believe that East Asians (or maybe just their women) belong to them.
Not to be off topic but I hardly ever see an Asian male with a WF. Its always AF with WM. A few AM friends of mine have expressed frustration. Just like the US is angry with China over the trade deficit, AM are angry with WM over their 'trade deficit'.

Another thing I notice is white couples in the West only want to adopt AF children from China. Never AM.

Watch the video lol. A discussion about the "trade deficit".

Singha · Post by **Singha** » 23 Aug 2010 09:15

afaik its easier for bideshis to adopt kids from china than in india. even PIO/NRI couples allegedly face a lot of hassles in adopting kids here. whether its due to unpractical laws or a genuine desire to benefit the kids I am not sure.

and ofcourse colour is definitely a subconscious factor, even if its not spoken openly in polite society. given a chance, would the avg american
couple adopt a danish blonde baby or a indian baby? likewise wouldnt a indian couple feel more close to someone looking like themselves or their relatives?

svinayak · Post by **svinayak** » 23 Aug 2010 11:45

chola wrote:
The truth is Chinese (actually East Asian) culture do tend to have a fair bit more appeal for the American mainstream than ours. So the pressure is going the other way. Just as desi culture would have more appeal in the UK, Chinese culture has an upper hand here. "Asian" in the US means Chinese-Japanese-Korean to the average person.

There is a strange dichotomy in the US relationship with East Asia. It's a weird but intense love/hate relationship. China is considered a threat. The most bizarre manifestation of this was when I was dating my to-be wife, I got nasty looks from white men and was involved in more than one altercation.

This altercation of WM with you is very interesting. There is something to do with self esteem also.
But color of the skin plays a major part in the visual thing. But there is a longer period of interaction for more than 100 years with China and British discouraged Indians inside US and actually lobbyed to make sure Indians dont enter US

Hari Seldon · Post by **Hari Seldon** » 23 Aug 2010 12:15

Wall street job cuts loom
Yup, cry me a bucket. The brazen round of bonuseering that went on in 2009 and in 2008 using taxpoayer direct or indirect (backstopped) monies was essentially skimming the cream off the sunset of the fatcatty days. Or so the story goes. Time will tell. It always does. Even if we don't wanna hear.

enqyoob · Post by **enqyoob** » 23 Aug 2010 12:32

The plunge in Standard of Living (SoL) is indeed shocking. Can you BELIEVE that the next owner plans to level this and put up something (which may be SMALLER there instead?)

Some BRF postors may recognize this nbd.

Megamansion estate sale mainly draws the curious
By Dana Rosenblatt, CNN

Johns Creek, Georgia (CNN) -- Some came for the bargains. Others arrived just to capture a glimpse of a lifestyle from a largely bygone era of decadence and conspicuous consumption.

Technology entrepreneur Larry Dean priced and tagged almost every possession at his former residence, a 32,000-square-foot megamansion appropriately called Dean Gardens.

Parts of the home's architecture, such as the rotunda in the foyer that inspired by the dome of the Brunelleschi Cathedral in Florence, Italy, also were up for bids at the weekend estate sale.

The megamansion was recently sold after sitting on the market for more than a decade. Dean decided to liquidate most all of the home's contents after learning of the new owner's plans to level the palatial estate.

He teamed up with Atlanta-based organization Luminocity, which earned a portion of the proceeds to organize the estate sale. Luminocity is a group that plans to run state-of-the-art light shows in Atlanta, starting in late November, and representatives say some of its proceeds go to various local charities.

The estate sale kicked off Friday evening with a semiformal cocktail party, culminating late Saturday afternoon with plenty of merchandise still available.

The event drew more curious onlookers than serious buyers.

"We've been driving by this house for years and have always wondered what's inside," said Marlisa Grady, who brought her kids Madison and Ryan to the estate sale on Saturday.

"I promised the kids I'd get them something here, as long as it was under $100," Grady said.

The family walked out with an old-fashioned gumball machine for $75, taken from the game room.

The self-made baron of Dean Gardens made his fortune in the early 1970s after starting a financial services software company.

After the company went public and Dean earned his fortune, he and his first wife, Lynda, spent four years and $25 million to create the home of their dreams -- a neoclassical mansion for the nouveau-riche featuring 10 bathrooms and eight bedrooms. It is situated on 58 acres of landscaped Italian and French gardens that rival that of Versailles. The grounds feature an 18-hole golf course, grass tennis courts, an amphitheater and a conservatory.

Soon after the home was complete, the couple split, and Dean was faced with operating costs ranging from $750,000 to $1 million a year.

It's the hefty maintenance, says Dean, that prompted him to sell what he calls his legacy.

Dean had received several offers during the 15 years his home was off and on the market -- including one rumored to be from Michael Jackson.

Dean wouldn't comment on who had expressed interest, saying only that all the offers had been "flaky" until the one he accepted several weeks ago.
...organizers say Dean took a heavy loss.

..rumors.. actor and filmmaker Tyler Perry is the new owner are true, said one estate sale organizer, ... plans to level the property to build a more energy efficient and sustainable residence

Attendees took pictures of the mansion's extravagantly appointed rooms that were aptly named the Moroccan room, the Egyptian suite, the French Bedroom, the Contemporary room, the Asian suite and gardens and the 1950s game room.

Some attendees said the opulence of Dean Gardens is over the top given the current economic climate.

"Big mansions are a thing of the past. People want something more economic," said Marcia Foltz, who came to the estate sale with her daughter, Katy Foltz.

Throughout the event, an upbeat Dean mingled with shoppers and oglers in his former home, accepting offers on everything from $10 demitasse espresso cups to a 24-karat gold sink for which he paid $88,000.

The gold sink resembled "Flavor Flav's mouth," joked Joan Rivers during an episode of the TV program "How'd You Get So Rich?" featuring Dean.

Until its doors were open to the paying public (ticket prices ranged from $50 for one day to $100 for two-day event), Dean Gardens had been an enigma of opulence and kitsch.

..
"I remember there was a promotional video [that described it] as the most amazing home recently built in America, and it's a living up to every single expectation I ever had -- wretched excess," Mallchok said wryly.

Dean, a thrice-divorced grandfather of eight, says he's not sentimental about saying goodbye to anything, ..a sense of relief that he'll be living there for only one more month.

"I grew up in a house with four rooms the happiest kid you've ever seen," Dean said. "And now I want to go back to a four-room house."

Find this article at:
http://www.cnn.com/2010/LIVING/08/22/ge ... tml?hpt=C1

Neshant · Post by **Neshant** » 23 Aug 2010 14:49

Wall street job cuts loom

Fewer parasites could be just the stimulus the real economy needs.

ShivaS · Post by **ShivaS** » 23 Aug 2010 16:04

My close friends son (telugu) married his class mate from Yale who is from Taiwan.
Both are Ph. Ds in Bio Chemistry.

I was haapy for my friend because he completely reconciled to this love marriage even though he would have liked it to be an arranged marriage like his own. But the couple had to wait almost 5 years to come out and tell elders of both sides

chola · Post by **chola** » 23 Aug 2010 17:36

Acharya wrote: This altercation of WM with you is very interesting. There is something to do with self esteem also.

In college, she was a tennis player and swimmer who wore bare midriffs in the spring and summer. I would put my arm around her waist when we were out. Blacks would give me the thumbs up. East Asian men were weirdly neutral. But whites would give me hard stares and sometimes try to talk to her while I was there. It made no sense to me but it certainly made me more willing to press her against me than not. I wasn't backing down from such inane stupidity and I ended up in a few fights.

But color of the skin plays a major part in the visual thing. But there is a longer period of interaction for more than 100 years with China and British discouraged Indians inside US and actually lobbyed to make sure Indians dont enter US

There is no doubt that the longer period of interaction had an affect. But I think there is also a more intense interaction because of wars. A lot of American blood was shed in Far Eastern wars from WWII to Korea to Vietnam. Those wars also brought a lot of American men in close contact with East Asian women.

Yes, skin color do play a part. We must know a half-dozen gori couples with Chinese daughters. So why adopt from half-way around the world when there are lots of American kids languishing in foster homes and institutions? It has to do with the fact that American children available for adoption are mainly black and hispanic.

Skin color has an impact in the desi community as we well know. I knew that my parents would have less opposition to a white or Asian girl than if I had brought home an African-American girl. I knew my mother and aunts were anxious to see what our child would be like. Would she be more tamil in skin tone or chini? My daughter turned out a nice wheatish.

That plays out in the larger society as a whole. Whether it is a good thing or not, my wife attracts attention when I take her to corporate events. Beyond the fact that she is rather tall -- 5'6" and wears 3' inch heels -- and slim (she returned to form within six months after child birth), I know our contrast in skin color attracts looks. I know we have more of a spotlight than the white-white or desi-desi pairings.

Hari Seldon · Post by **Hari Seldon** » 23 Aug 2010 21:00

Mike Pettis on the looming threat of trade war (FT)

After jumping to $42bn in May, the US trade deficit rose to $50bn in June, a number not seen since the summer of 2008 and never before mid-2004. As it continues rising there will be renewed criticism about US consumers embarking on another ill-judged buying spree, but this time the finger-waggers will be wrong. The surge in the trade deficit is the automatic consequence of a shift in global trade imbalances.

Five countries or regions have largely driven these imbalances in the past decade. Three of them – China, Germany and Japan – run huge trade surpluses on which they are dependent for domestic employment growth.

Counterbalancing them have been the two trade-deficit champions – the US and trade-deficit Europe, dominated by Spain, Italy and Greece.

The financial crisis has undermined the precarious decade-long equilibrium between these blocs by forcing trade-deficit countries to reduce debt, especially household debt. As they do, the excess demand they provide to the rest of the world must decline. Trade-surplus countries, which depend heavily on this demand to absorb their excess capacity, have resisted this adjustment fiercely by trying to maintain or even increase their surpluses.

They are succeeding.
...
But global trade must balance. The rest of the world will have to absorb, with rising trade deficits, the combination of rising surpluses among surplus champions and declining deficits in trade-deficit Europe. Given its openness and financial flexibility, the US will, in practice, absorb most of the adjustment, its trade deficit rising inexorably – until Congress implements vigorous anti-trade policies. The US lacks the industrial, currency intervention and interest-rate management policies available to the main trade-surplus countries, and so will be forced to use other forms of trade protection – tariffs and import quotas.

This should not be allowed to happen….It is up to the surplus countries to ensure their urgent dependence on foreign demand does not result in a collapse in the willingness of deficit countries to continue providing that demand…

Trying to avoid sharing the cost of the necessary global adjustment is how the major economies reacted in the 1930s, and those policies are widely and correctly referred to as beggar-thy-neighbour. We know how that game ends.

Yves smith adds:

Pettis gives a useful bill of particulars: even though China has moves to liberalize its currency further (a measure we derided as a headfake), its small steps have been more than offset by continued extension of cheap credit to domestic companies, with the result that they are even more competitive, thanks to continued government intervention, than before. The recent and likely continued fall of the euro has been a boon to Germany. Japan has, relatively speaking, been a good sport, allowing its yen to rise, but it appears to be on the verge of intervening.

Pettis sees these imbalance worsening until they become intolerable, and he anticipates that the US Congress will (as in the 1930s) act as the heavy. But from his vantage, the proximate cause of a trade war, US retaliation, would not be the underlying cause, which is surplus countries pushing an unsustainable arrangement to its breaking point. But in a perverse way, this is understandable, since in past financial crises, the surplus countries have found adjustment much more painful than the debtor nations. But trying to forestall the inevitable may make the eventual dislocations even more severe.

Good summary overall. Nothing new for regulars of this dhaga though, I daresay.

Hari Seldon · Post by **Hari Seldon** » 23 Aug 2010 21:01

^^^ The desi-cheeni coupling color contrast and all is very interesting indeed. Am sure Nukkad or even better the L&M thread would welcome more detailed deepdiving only. Thx.

SwamyG · Post by **SwamyG** » 23 Aug 2010 21:43

A perspective article onlee.
A Tale of Two Economies: Germany vs. America

One key factor is that Germany is still an industrial powerhouse. Its industrial sector makes up about one-quarter of its total economy. And it's not just an export story - German imports are also surging. German imports in June surged to a record 100 billion euros thanks to confident consumers.

Another factor in Germany's strong economic performance is that it was wise to ignore American economic "advice". German leaders ignored American government leaders like Tim Geithner and American economists who all urged Germany to not work so darn hard, go on a spending spree and pile up debt like America in order to stimulate its economy.

However, instead Germany focused on the basics. It encouraged work and productivity and focused on making products that other nations around the world actually need and want. It did not focus it efforts on leisure activities or creating the latest 'cool' tech gadget.

The contrast between the two economic philosophies could not be sharper and neither are the economic results.

'The age of wisdom and the age of foolishness' indeed.

Added: As usual, please read comments section to get additional gyaan.

Carl_T · Post by **Carl_T** » 23 Aug 2010 21:59

That article is very poorly reasoned without any economic logic or intuition to back it up. Just a note on Germany's surging economy and then a few comments about how they focus on important products unlike the US. What are the structural and incentive changes that led to this? What were the changes in economic policies? How did tax rates and government expenditures change?

How would Germany do with a stronger euro and without US or Chinese consumption?

ramana · Post by **ramana** » 23 Aug 2010 22:08

Two articles on life in US:

Atlanta puts everything on sale at City Hall East

and

For govt mortgage mod program, new numbers show old problems

SwamyG · Post by **SwamyG** » 23 Aug 2010 22:10

Another perspective for whatever it is worth. I am no expert in economics let alone human behavior or the functioning of brains. Why our economy is on the brink of going down the tubes...forever

I know all the highlighting makes this too gaudy...what to do.

We all focus on addressing here-and-now emergencies because we have no choice. What limits our options are not outside events, such as economic downturns, but internal events that go on inside our brains. As a neuroscientist, I've learned that our brains are hardwired to avoid near term threats and to ignore long term opportunities , because our brains are identical to those of our distant ancestors who faced a daily struggle for survival. When our brains evolved into their present form, about 50,000 years ago, the environment was incredibly harsh and risky, limiting life expectancies to 20-25 years. Diverting attention from day-today survival in those Paleolithic would have invited disaster. Neuroscientists call this hard wired preference for quick fixes over long range pursuits , temporal myopia: everything past the immediate future looks fuzzy, or even invisible, and is therefore irrelevant.

And what would such a cure look like? Let's start by looking at disease that afflicts us. The fundamental problem with America's economy is a decline capabilities and motivation of our workforce. True economic growth-not the artificial kind spurred by fiscal policy-stems from innovations such as Google's search engine that create entirely new businesses and markets. Such innovations grow out of technological advances, which in turn emerge from earlier scientific discoveries.

And where do cutting-edge technologies come from? Modern Economists such as Paul Romer, Robert Lucas and Robert Barro, argue that technical innovations ultimately spring from the cognitive abilities of "human capital" (people) who attain these abilities through education and training.

We can pull out of this dive, however, if we see through our temporal myopia to some hard facts: we'll never motivate the majority of America's youth to give up "cool" careers that promise to make lot of money for "nerdy", un-cool science and technology careers that require hard work in school. We have simply grown too comfortable as a society and lost the fire in our belly. {isn't this the complacency that some gurus, monitoring civilization/empire cycles, talk about?}

I believe that Americans are unlikely to notice, let alone react to such a stealthy threat, and that the only answer is to reach out to future Americans, in places like China and India, who don't yet know they're going to be Americans some day. Let's gear up a recruiting system that combs secondary schools in China, India, Russia, Europe and South America for top science and technology talent, just as college football programs look for the best high school athletes. We'll offer these kids-who do have fire in their bellies because they've grown up in countries that haven't gotten complacent-full scholarships to American colleges and a fast track to US citizenship once they complete their studies. This will, in the long run inject new vitality into our workforce and our economy and help cure our deep economic ills.

SwamyG · Post by **SwamyG** » 23 Aug 2010 22:11

Carl: You read the comments section of that article, no?

Carl_T · Post by **Carl_T** » 23 Aug 2010 22:16

Yes I did, comments are indeed interesting, I was referring to the article in my post though. It is that there are lots of articles predicting the decline of the US without the analysis to back it up, that's all.