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.

In the Long Run, the Dollar Is Dead

Sunnsea: You have correctly pointed out that the lack of tariffs is causing the current financial crisis in the US. Introduction of tariifs will create jobs in the US and lead to a healthy recovery instead of the low interest rate bubble we are likely to have, under the current policies.
However, your suggestion of combining the Euro, Yen and the USD will lead to a loss of sovereignity for all 3 countries, creating far more problems than it solves. For example, the current meltdown has been magnified due to the interlinking of world economies due to the WTO accords. Free Trade rules have made all the world economies to move in lock step. This interlocking of economies, has allowed a small US housing/loan problem to gain critical mass and mushroom into a World Class economic meltdown. Engineers always strive to keep Engineering structures compartmentalized, so that a crack in one component does not propagate to the rest of the structure. A similar approach, of insulating world economies from each other, needs to be explored to prevent future meltdowns.

Return of Weimar Monetary Policies?

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

The Euro Shows Its Real Colors

There is no choice for US and Europe other than to inflate their currencies. These economies are being devastated by the so called Free Trade ideology. Wall St has coined the word "Proctectionism" so that it can be used to label and ridicule those who propose a saner and Fairer Market. However, the same high priests propounding Free Markets and Cowboy Capitalism have no problem asking the US government to hand them a 700B check. The Free Market can be likened to an Airplane AutoPilot. AutoPilots do a good job of steering the plane when the human Pilot might be asleep at the wheel during long flights, howerver, the Pilot is supposed to take over the controls in treachorous situations such as landing, takeoff, engine fire etc. Deregulation of the last few years is similar to sending a plane full of passengers on a flight without a Pilot, because the Pilot might fall asleep at the controls.

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.