LCACM

G20 Urges 'Balanced Global Demand'; China Says 'No'

The US voters need to wake up to perils that lie ahead caused by the huge trade deficits. A number of candidates in the Presidential primaries brought up these trade imbalance issues but did not get anywhere in the primaries. The voters preferred to vote for the media annointed Obama with help from super rich campaign donors. Now Obama has to worry about getting reelected and campaign funds. At this juncture it is safer for him to listen to the oligarchs and ignore Chinese trade malpractices, as he will be relying on the oligarchs to provide him with the necessary re-election funds. In return he will have to take orders from the oligarchs who profiteer by importing Chinese goods to take advantage of the US market.

The Bush Legacy Market Returns

President Clinton initiated NAFTA and since then we have had a slippery US market, constantly sliding into recessions. So he is equally to blame for the current crisis, as he helped create the huge trade deficit that has made lower interest rates useless as far as igniting the economy is concerned. When a tire has a leak, all attempts to inflate the tire will fail until the leak is fixed. President Clinton had partly fixed the Budget leak(deficit) but he made a new leak (deficit) by introducing NAFT., Some of the President Clinton's administration officials who created the leak by supporting NAFTA are now in power, so it is unlikely that the leak can be fixed.

Return of Weimar Monetary Policies?

In Asia for the long term they invest in their children and grandchildren's education.

October 9, 2008: Remember the Date - This is Huge

During the last 2 decades most of the Capital Spending growth has happened in foreign countries and not in US. As a result the US worker does not have the productivity edge they enjoyed 20 years ago. The result of this is that their job prospects and consequently credit ratings have become much lower, and we see the consequences. There are only 2 ways to sort this out a) Longer term solution would be to impose tariffs proportional to the wage differential between US and it's trading partners. Goods from Europe will see much lower tariffs compared to those from Communist China where slave wages are paid. b) The other is to devalue the US currency via Bailout induced liquidity injections, so that the US real wages tend towards those of Communist China. Free Market ideological rigidity precludes Solution (a) so Solution (b) is being tried. This will lead to yet another liquidity bubble similar to the Internet Bubble and the Housing bubble, only larger in magnitude and more severe in its consequences.