April 09, 2005

• In the near future we can expect tax reform, fiscal discipline, deregulation, free capital flows, lowered tariffs, reduced public services, and privatization. If this is what we can expect, then I'm all for it.
• The country has been intentionally plundered and will eventually wind up in the hands of its creditors as Bush and his lieutenants planned from the very beginning. Unspeakable crap, really.
• Hee. Amusing that people still believe America is in more trouble than its creditors.
• No one ever went broke by predicting doom. As in all things, the answer is probably somewhere between pollyanna's and chicken little's proclamations. Besides, if it's too late to do anything about it, we'll all find out shortly, won't we?
• "In the near future we can expect tax reform, fiscal discipline, deregulation, free capital flows, lowered tariffs, reduced public services, and privatization." If this is what we can expect, then I'm all for it. Yeah, all those stupid public services! I'm sick of being able to borrow books for free from the library! And having a public fire department! And what's with these stupid public schools? Make 'em pay! Make everyone pay!
• The military isn't a public service...?
• The military isn't a public service...? Excellent question.
• Obviously, this guy has cracked under the strain of the Eternal Question of the Bush administration: Stupid or Evil? Every bonehead move they've made, all you can do is ponder which of those inspired it. I tend to end up in the "stupid" camp myself, more often than not. I just can't believe in some sort of concerted international conspiracy to destroy America. This is mainly because, if America collapses, we'll take the world's economy with us, and I find it inconceivable that someone could actually have a plot wherein they manage to profit from a worldwide depression. That's like a bad James Bond movie. That said, I suspect what we'll see, if the US economy does continue to decline, is the same sort of thing that happened when Japan's economy (didn't) collapse in the 90s. Everyone else just whistles and looks the other way, since acknowledging the collapse would just hurt their own economies. So, to summarize, ignore conspiracy theories if they're in this form: 1)Destroy the World 2)??? 3)Profit!
• This has a lot to due with the colossal shifting of wealth Calling a proofreader to aisle 7...
• Calling a proofreader to aisle 7... Doesn't know the difference between "effect" and "affect" either. Bit sad.
• One has an e before the ffect, the other has an a.
• Criticising the article on spelling seems a little lacking. How about arguing the facts? For mine, I see America as an empire in decline. In historical perspective, it seems to fit exactly into the pattern, except with accelerated timeline. As far as the world economy goes, yes, quite a few countries relying on the USD will be hit, but the rest will simply change to trading in Euros. Whatever happens I'm sure there will be chaos and craziness.
• I guess one metric to take into account is how much this country invests in education vs. what other countries (China, India as two really good examples) are investing in education. Pretty much says it all right there. How can a country compete populated by uneducated, servile, easily misled morons? Sounds like a recipe for third-worldism to me.
• America has fallen to greed, and the greed reaches from the corporations who will plunder the people to the people who are driven to consume, no matter what the cost. As for shrub, I could never see him as evil, he just isn't smart enough to pull it off.. I do see the possiblity that, because he's not very bright, he could easily be manipulated by those that ARE evil. All personal opinions above, based on no facts whatsoever, just gut feelings and paranormal energy...IMHO, YMMV, yada, yada, yada...
• I agree that the US has peaked and is in decline. But something whose economic base and extensive interconnectedness with the world around it steers like an aircraft carrier, for good or ill. The momentum of the real productivity of the US is incredible: a speculation bubble that was arguably larger in terms of draw as a percentage of available liquidity in the US than the bubble in the 1920s that spectacularly burst didn't even push the US into a deep depression. What the doomsayers seem to be counting on is that all of the creditors of the US would rather cut and run, taking a loss, than wait for the slower payoff with interest. People who are most chicken-little that I read are also people who seem inherently distrustful of capitalism to start with, and seem to underestimate the power of the profit motive. Our creditors don't just want what's owed, they want the interest. And forcing an economy the scale of the US to go into receivership or "bankruptcy" simply would force the US to unilaterally cancel part of that debt. And once that happens, any creditor will listen to that little profit-monger in their heart and realize that slower payback is better than none at all. Oh, the decline is underway, but there's too much vested profit interest in the economy that the creditors neither have the appetite, nor the stomach, for a US bankruptcy.
• I really wish I could understand this stuff better, but I've found that world economics is an extremely complex subject. I have not found a good primer on the Web and I can't get a grip on what X means to Y, or what happens with Q if Z happens. I find that I have to look at the simple stuff to measure what's happening. My findings: 1. Everything I touch lately seems to be Made in China, and many jobs are being offshored. 2. China and India are emerging as major industrial powers, and the soaring crude oil prices are indicating that demand is outpacing supply (the US economy is built on cheap oil; look how much trucking is done). 3. Government spending is out of control and should continue that way through 2008. 4. There is a real estate bubble. A lot of wealth seems to be tightly bound with property values. I guess this is a "poor man's" thermometer but it's about as much as I can be certain of. It's times like this when I wish I'd studied more economics in college.
• so to summarize: blah blah blah Bush blah blah blah Iran blah blah corporate greed blah blah blah China If we survived 12 years of Reagan/Bush Sr. when there was a real enemy of equal power, I certainly think we can survive this. I guess what bothers me is people's complete disconnect from what real hardship is like. We in America today literally live the most comfortable lives of any people in the history of the world, and the real truth is that for 99.9%, very little has changed b/c Bush is in power. I hardly think people in Sierra Leone (to take the example from the other thread) are shedding tears for us.
• drjimmy, have you actually lived in any other part of the world? On what do you base the claim that the US has a high standard of living? And what particular portion of society has this standard of living? Poverty in America is a scourge, and some ethnic groups live below the poverty line. Have you ever been to Texas? Some parts are truly appalling. Sure, on a per capita basis, America has the highest standard of living in the world, but that isn't spread out through the population in a balanced way, the high standard of living only applies to those above a certain wage. In addition, the rival superpower of Russia as an equal during the 80s is baloney. From the end of the 60s onward, Russia, in reality, ceased to be anything like a true rival in economic sense, and likely in military sense as well, despite the scaremongering at home. Nixon & Kissinger were all set to introduce 'detante' which would have ended the cold war 20 years early, had not Nixon been ousted by his own stupidity. It was recognised at least by them that Russia really was no rival or threat anymore. In anycase, comparing the current situation to the Reagan/Bush years really is a strawman. The situations are totally different. As for economics, that really isn't the whole issue. What needs to be addressed are the social and civil factors at work in the US today. Economic collapse isn't the only source of concern, there's social schism & political corruption to figure into the mix.
• What is it, exactly, that would keep middle eastern oil magnates from switching to euros? Answer me that before you totally dismiss this piece. Surely I'm not the only person who's read Bruce Sterling's "We See Things Differently."
• As far as standards of living goes, Vancouver B.C. has one of the highest quality of living indexes on the planet now, the highest polling city in the U.S. came in at something like one quarter of that. In addition I think it's something like 60% of the people make around $14.00 an hour or under. Most of the poverty in this country is concentrated in the southern states where wages are low and the population feels so powerless they are willing to invest their emotional capitol in any snake-oil salesman that wanders by citing God and Country or just simply give up on any hope of ever reaching equity. Better to live on your knees than die on your feet. Wages in this country in blue-collar jobs have been in decline for decades and seems to be steeply spiraling down. I think this article is largely right, regardless of spelling or grammatical errors and matches a lot of what I've been reading over the past few months and years on business, culture, education, the military industrial side of things as well as history. To me it's plain as day: We're screwed. The only point to be argued is when. June/July? Six months from now? A year? I just don't have much hope for anything past that. We live in very interesting times. Too interesting . . .
• Rolypolyman -- I don't claim to have a secure handle on this stuff either, but I have written some stuff that may be useful.
• Nice work scartol. I just gave it a cursory look, but I'll read it in detail tomorrow with my morning tea. We got some talented monkeys around here.
• (IANAE. The following is all garbage.) About China cutting losses and running-- China will have to absorb some fairly severe losses whatever happens. The debt default itself is not as big a deal as the certainty of the loss of American markets for Chinese products. Will the Chinese leadership be able to weather such a huge downturn? We'd need an expert on Chinese politics to comment, but my impression (as a perennial layman) is that it won't. It is in the Chinese government's best interest to keep buying our t-bills and pretend everything is fine. About the dollar peg-- letting the Yuan, and all Asian currencies pegged to it, appreciate against the dollar is, I would claim, very likely. There have already been comments from pretty high up that moving from the dollar to a basket of currencies is the right approach for China. China is resistant to removing the peg because of the American markets again, but there are two important pressures in favour-- (a) the growing Chinese middle class who would like to be able to afford more European or Japanese products, and (b) the increasing likelyhood that these American markets might start to evaporate anyway due to global competition or just diminished purchasing power of Americans. China is already making inroads in European and South Asian markets. Furthermore, it is actually not clear to me, as an American, how much the forced undervaluation of the Yuan is helping America. I would be glad to see a more market-driven valuation. (All this doesn't even mention oil. If oil is going to be traded in Euros from now on, and particularly if oil is going to keep getting more expensive to buy in dollars, China must free its currency or peg it to the Euro or something.) About blaming Bush et al -- they were only catalysts. The Clintonian surpluses were largely fictional because (a) they were during a bubble economy, and (b) they were funded by tax increases that no Republican government would stand for. We can be back to a Clintonian state if Bush repeals his tax cuts, but tax cutting is not a negotiable platform during a Republican term, certainly not with the present breed of steadfast leaders with unwavering resolve. The price we are haggling over is which social services to cut in order to fund the tax cut. If Americans didn't hold such contradictory demands--we must have a Republican government, but we also want our social services--then we might conceivably have killed social security and gotten a bargain. Unfortunately it seems that we will be going deeper in the red in the forseeable future.
• Yes, by most standards of quality of life - which is not GDP, but life expectancy, infant mortality, etc - the US comes in significantly below many other first world nations. I like the US. Compared to most developing countries, it is a very comfortable place to live. But it is a false but so often perpetuated myth that it has the highest standard of living in the world. First world countries with strong social safety nets (Scadinavia, Canada, etc) consistently provide a better quality of life for the majority of the population, as shown by such surveys as the UN's Human Development index or simple stats like life expectancy and infant mortality. I quoted some stats here, with links. The CIA factbook is my friend - with it and the OED, I'm ready for almost any question. Except for all those pesky ones not in there... / and now back to your discussion of economic apocalypse.
• Oh - and I'm pretty sure 18th century gentry men in England were more confortable. Not the women, they had those petticoats and stays to lace into, but the men had really loose trousers, no underwear, got to eat tons and drink the night away. The male actors from Tom Jones swore that their costumes were the best clothes they'd ever hung out in. Gout was a problem, though.
• So is there a reason to believe this other than some warped desire to believe it? The US isn't on a great economic track right now, I'll agree with that. But this is not the end of the world. The Canadian debt-to-GDP ratio in the late 80s/early 90s was scary. Second worst in the G7, actually, behind Italy. The US isn't anywhere near that. Just as Canada pulled itself out of debt in the mid-90s, the US can do it too. It'll only get harder as time wears on, but the Chicken Little cries of today only discredit the people who make them, and will continue to do so as they are proven wrong. Fortunately, we only have to wait a few months for this one.
• (And about the devaluation of the dollar. Sure, it's not a great sign, but it's not the end of the world when you compare it to similar devaluations in the past 30 years in other countries. Hell, Canada works as a means for comparison for that one, too.)
• Just consider the less pleasant meaning of "Ownership Society." We are about to the the owned.
• I can't speak about the other chicken littles, but I don't care if I'm "discredited" or not. Many of us chicken littles, me most among them, have no credibility to start with. If you are paying serious credence to anonymous voices on the internets, you really need to get your head examined. As someone mentioned higher up, we'll know about the economic doomsday scenario soon enough. In 2002 many of my Republican friends predicted that I and the entire anti-war contingent would eat crow when the Iraq operation smoothly transitions Iraq from a brutal dictatorship to a democratic example for the rest of the middle east. Now the same people tell me that my predictions of economic doom are unwarranted. As I was clearly wrong in my prediction of the Iraq outcome, so am I clearly wrong in my economic forecast.
• "The reports of my demise have been greatly exaggerated"
• (fuyugare, the remark about people being discredited wasn't aimed at you, but at the sort of people who get paid to write that sort of thing, such as the author of the linked article. On the other hand, you have "deficits don't matter" lefties who are, I think, equally wrong.)
• The fascinating thing about modern America is that "deficits don't matter" is not a lefty plank. I'll leave you to guess which of our parties is pro-deficit.
• As someone who knows very little about economics, I have nevertheless always thought of these systems as dynamic and even organic. However, in recent times I've had the nebulous feeling that something's amiss with the underpinnings. Can't articulate it, though. I appreciate the measured debate here.
• The Canadian debt-to-GDP ratio in the late 80s/early 90s was scary....Just as Canada pulled itself out of debt in the mid-90s, the US can do it too. Yup that's right! And it's easy too! All you have to do is have a marginal income tax rate of 50% for everyone whose income is more than US$45,000. Cuz that's what we got up here in the frozen but fiscally responsible North. That's how we Canadians did it. Oh yes, and you also need to do all this during the longest economic expansion of the last century.
• How does that work, Sb? I though I had read that the top tax bracket in Canada is currently lower than the US - something like 29% or something. That's federal - but provincial tax wouldn't go to federal debt in any case.
• I remember looking at some articles in Business Week and The Economist which were predicting the downturn which is happening now. At that time they were saying it was going to happen early in the next century. They were also championing the rise of China and India's industrial/technology base as well. Wish I could reference those articles now. As we all know, this remains to be seen, but all the puzzle pieces seem to be falling into place quite nicely. Or quite badly, as the case may be.
• For the record, here are Canadian federal and provincial tax rates.
• As someone who knows very little about economics, I have nevertheless always thought of these systems as dynamic and even organic Hang on to that feeling. I am personally extremely skeptical about macroeconomics as a 'science'. It's astounding how often economists seem to completely overlook the 'human factor', and commit themselves to what amounts to ideology. Plus there's the fact that you can always find at least two eminent economists with completely different theories for any given scenario. Problem is that when one is wrong, entire countries go in the toilet.
• Silly conspiracy theory. Everybody knows that the real reason Bush et. al. aren't worried about tanking the world economy is that if all goes according to plan, the Rapture will take place before the worst of it hits. Duh.
• place your bets on when/if the US attacks Iran
• An alternative to the quick crash scenario: the slow crash. Very interesting article... if you like doomporn.
• The Canadian debt-to-GDP ratio in the late 80s/early 90s was scary....Just as Canada pulled itself out of debt in the mid-90s, the US can do it too. And it's easy too! All you have to do is have a marginal income tax rate of 50% for everyone whose income is more than US$45,000. Well, the Liberals did it while wasting money all over and still keeping Canadian living standard at/near the top of the world. It doesn't look all that hard. 50% tax rate for incomes highter than US$45,000? Would not hardship make even if it were true.
• In the near future we can expect tax reform, fiscal discipline, deregulation, free capital flows, lowered tariffs, reduced public services, and privatization. If this is what we can expect, then I'm all for it. What about when the disenfranchised outnumber you a thousand to one? Are you all for that? Fiscal disciplpine from the current crop of assholes is a myth. Deregulation and free capital flows? Sure, where the capital flows into the pockets of a select few and the rest can go to hell. Reduced public services and privatisation is code for more of the same shit. Taxes, public services and government programs that help the unfortunate and the low men on the totem pole is the price we pay for a functioning society. This, "I got mine, everyone else is on their own" bullshit only gets you so far.
• JB, the current tax rates are lower than they were in the late 90s. From Dreadnought's link (thanks Dread), the combined federal/provincial marginal tax rates in Ontario are 31% for someone with income of US$45K. They are 40% for someone with income of US$90K. And you're right, the provincial part of this won't reduce the federal deficit. OTOH, the provinces have some pretty big deficits of their own (excepting Alberta).
• The fascinating thing about modern America is that "deficits don't matter" is not a lefty plank. Yeah, the left/right terms mean next to nothing in an absolute sense. People in my poli sci classes think I'm horribly right wing because I think deficits do matter over the medium term and because I don't like inflation. JB, the current tax rates are lower than they were in the late 90s. This is true, although I can't see a problem with high taxes for a limited time after a period of total fiscal irresponsibility. Those higher taxes went to pay for debts that should never have been run up in the first place. Canadians wanted to spend money they didn't have, and it had to be repaid. Then, when the deficits disappeared, taxes were lowered. I don't see a problem with this. Americans today are living on borrowed money. It will have to be repaid eventually.
• I guess one metric to take into account is how much this country invests in education vs. what other countries (China, India as two really good examples) are investing in education Err... are you looking at federal spending in the US? Almost all of the spending is state or local. Total public K-12 spending was $382 billion in 2000, or about the same as defense spending in 2004. Depending on what you count, public spending on higher ed was a further between $60 billion and $86 billion in the same year, and as near as I can tell that doesn't count federal tax expenditures on higher-ed credits and the like.
• 1. Everything I touch lately seems to be Made in China, and many jobs are being offshored But: Almost everything you touch is piddly shit. Clothes, toys, low-end consumer electronics are all shifting towards China, Indonesia, etc. The idea that "everything" is made in China, and consequently nothing is made in the US, is as silly as the idea that nothing gets made in Europe. The US doesn't manufacture anything. Unless you want to count the millions of cars. And the car parts. And the commercial aircraft. And the military aircraft. And the microprocessors. And the chip fabs. And the farming equipment. And the mining equipment. And the machine tools. And the pharmaceuticals. You could spin a similar tale for Europe. Except for cars and chips, most of what the US (or Europe) sells you're not in the market for, because you don't have a few million bucks to blow on machine tools, or a few hundred million to a billion on a new chip fab, or a hundred million or two on a new 777 or A380. And just one sale of a 777 or A380 "counteracts" one hell of a lot of underwear, happy-meal toys, and $60 dvd decks. As far as jobs go, well, fine, but I hope you're willing to count all the jobs at the various Honda, Nissan, Toyota, BMW, and Benz plants in the US as ones that were outsourced from Japan and Germany.
• Then, when the deficits disappeared, taxes were lowered. I don't see a problem with this. I don't either! In fact that's the way things should work. And that's why what the Americans are doing is likely to end badly. Sadly it's going to take down a lot of other economies with it. We saw the same massive buildup of debt in Japan in the 80s. Their reward: the Nikkei plunged 60%. If that replays itself in America, it's Dow 4000. Tons of starry-eyed mutual fund investors get their shorts blown off. They will end up wearing barrels. But it being America, it'll be cute, stylish barrels.
• Well said, Xeny!

• Xeny: The idea that "everything" is made in China, and consequently nothing is made in the US, is as silly as the idea that nothing gets made in Europe... [rest snipped]

  The US spends 6% of its GDP more than it earns. Explain that before you shoot down the straw men.
• Slightly off topic, but do we lack employability skills? I think most of us do have some/most of the them, here, but I've seen a number of comments in other forums (and some in this one) where people complained that their jobs weren't entertaining, or some such. Are we so "unpolished" in the US that its causing some of the flow of jobs off-shore? Does the Protestant work ethic still exist, here?
• Be afraid. Just don't be very afraid - according to The New Yorker.
• Gloomy market data hits Eurozone - Catastrophe looms.
• I have a basic question - how do Americans spending on credit (individuals or the government) make the dollar go down? (as in the New Yorker article)
• Well, this may be a step in the right direction. And before you get all irate about protecting shareholders, you need to realize that most pension funds are invested in stocks. As shareholders. So Joe Worker may get some relief.
• The Decline of the American Dollar and Oil Hegemony