Is America past the point of no return economically?

Ian, I know this is a brutal insult, but “The future doesn’t happen in America any more” sounds like Tom Friedman.

And isn’t the idea of emigrating ironic? Only elites (means or education) have the capacity to do so.

Naturally. the hackneyed Friedman doesn’t do prescient. Have always said they should title his column ‘Chicken Soup for the Soul’

Right now the US’s elites seem to think the way to fix it is to reduce wage costs till they’re competitive with China’s

The age of the nation state is ending economically and financially, or at least that is the plan of international finance and multinational corporations. The New World Order conspiracy theorists are not completely crazy. There is a germ of truth in what they have been saying. The global elite realized some time ago that national boundaries are imaginary lines, as Bucky Fuller called them. They have erased them in their thinking and action and see themselves operating in a new global world order under their control.

These are not necessarily “bad people.” They think that they are the only ones that are in a position to do it and doing so will be better for everyone than realistic alternatives. Like Blank fein, they seem themselves as “doing God’s work.” Of course, they expect to be well recompensed for this contribution since it involves knowledge, skill, and capital risk.

Contemporary economics and finance are not politically territorial in the minds of the elite, who are now living in a global economy and vying with each other to dominate it. So stop thinking of the US and China. They aren’t totally irrelevant since war is political and nation states still go to war with each other. But short of that, they are becoming increasingly irrelevant to the thinking of the elite, other than to manipulate the political process and to circumvent it through international and transnational institutions that are run by unelected and unaccountable technocrats that are in the pocket of the elite and run the world for their interests.

Politicians like Obama may inveigh against this for public consumption, but it is just an act. Privately, they take the campaign contributions and their orders from the elite. Just look at how the US government has handled multinational BP and the Gulf disaster, and you get the picture.

Make no mistake about it, this is a global takeover, just like the EZ was a takeover of Europe by the elite. According to Michael Hudson’s analysis, the end in view is to reduce everyone to debt peonage with the money funneling to the top through compound interest and economic rent. If you are not following Hudson on this, you should be.

This, along with climate change, is going to set the stage for the rest of the first half of this century — unless there is a revolution like cyclical economist Ravi Batra sees coming in The New Golden Age: The Coming Revolution Against Political Corruption and Economic Chaos. Ravi predicted the fall of communism and is now predicting the impending fall of capitalism, similar to Joseph Schumpeter. It is going to be an interesting few decades for those who will be around for it.

If I was really good, I’d embed the old Martha and the Vandella’s hit, ‘Nowhere to Run to, Nowhere to Hide, Baby”. Because I think that is mostly the answer to get out now.
As Lambert says, it will be the Chinese family car, refrigerator, flat screen, dishwasher…and the Indian family and the Indonesian family and so on. Add that all up.
Not that I begrudge them all those little trinkets but unless the ET aliens land and teach us how to place a quartz crystal in the corner of the living room to run all that shit, it is about survivors living at the margins.
The rest is just a discussion of what path you take to get there.

Nation states can still easily trump, and anyone who thinks that China will let global elites do to them what they did to the US has something coming. As for Ravi, well, I have his Great Depression of 1990 book.
Western elites may be “global”, but Chinese elites aren’t.

I agree with you, Ian, and I foresee war clouds developing in the future, and perhaps the not too distant future with the US moving into Pakistan. The US neoconservatives are already agitating to take China out before it gets too powerful, which they see as a US major mistake with the Soviets at the end of WWII.

BTW, the Chinese leadership is not dumb. They know that after the fall of the USSR, they are the next target of the US. They have already been preparing a counter-offense as a defense. See the wikipedia article on unrestricted warfare. Hereis a translation of the book. The US, of course, is well aware of this.

So while there is détente on the surface, the US and China are already at war over who is going to dominate the 21st century. Unless the US stops China, they are going to get crushed economically by the sheer numbers, and China is not going to allow the US to engineer regime change in China.

The same Jeff Sachs that helped the oligarchs rape Russia?

Well said, Tom, well said.

if he is telling the truth

Now why would you assume that of anyone? So 20th century, when millions fought and died for ideas. Now, it’s for the money.

anon2525, it’s going to be who has anyone left. World population is set to shrink big time as climate change increasingly kicks in over the coming decades. It’s not only going to be a matter of less resources but wars over those resources. A lot of the world is better positioned than the US to deal with resource scarcity. Most people in the US think that food comes from the supermarket.

it’s going to be who has anyone left. World population is set to shrink big time as climate change increasingly kicks in over the coming decades. It’s not only going to be a matter of less resources but wars over those resources.

You’re changing your words and arguments. First you said that the U.S. is going to get “crushed economically by sheer numbers”, then you say that “world population is set to shrink big time.” These appear to me to be saying opposite events will occur. Perhaps you could clarify.

Also, if the other country is getting “crushed economically by sheer numbers,” then your country has achieved its ends and doesn’t need a “war over resources.” Conversely, if there is going to be a “war over resources,” then it would appear that there won’t be any “crushing economically by sheer numbers.” Trade and war are at odds with each other. (Perhaps you meant to say “crushing militarily by sheer numbers”? Of course, that would be silly, too. There is no “crushing” a nuclear superpower — there is, at best, Mutually Assured Destruction.)

The economic problems that the US is experiencing now are in no small measure due to its military adventurism, and “very serious people” are now talking about putting military spending on the cutting block.

Other “very serious people” (the ones who benefit from the military budget) will likely have something to say about their being put on the cutting block.

“Very serious people” also said that the U.S. was being hurt economically by the fact that the country’s industry had to pay the cost of health care/”insurance”, and that it had to be reformed to fix the problem. Other “very serious people” beat back those “very serious people” and kept the status quo (see your or my rising health “insurance” bill).

“Very serious people” have noted that the “financialization” of the U.S. economy has put an enormous amount of the country’s resources, both monetary and human, at work on parasitic activities instead of productive activities. Other “very serious people” beat back those “very serious people”, got an enormous bailout, and got the situation declared to be “the new normal.”

Without praising or commending the military budget, my observation is that the economic problems the U.S. is experiencing is in fact in small measure due to military adventurism. If some of the other drags on the economy were fixed, it could still afford Iraq and Afghanistan (not that it should). It paid for the 45-year-long Cold War.

What it might not be able to afford is the cost of transitioning off fossil fuels.

The first meaning is that China is the economic and political gorilla coming on the scene. It the weight of its GDP is going to be huge as it develops its consumer economy.

I expect that it will not be able have that large a GDP and that it won’t be able to develop its consumer economy. Not because they aren’t planning to or because they don’t have the people to do it, but because this is not 1900 and China (the land mass) is not the U.S. land mass. So, they don’t have the fossil-fuel resources that the U.S. had then (the world’s largest) and they don’t have the ecological space (a century of room for burning all of those fossil fuels).

Too many people are looking at the current circumstances and thinking they’ve seen this movie before. It’s 1900 and the U.S. is playing the role of economic giants Germany/U.K/France and China (and India) is playing the role of the strong rookie coming on the scene as the U.S. did then.

So, they don’t have the fossil-fuel resources that the U.S. had then (the world’s largest) and they don’t have the ecological space (a century of room for burning all of those fossil fuels).

Coal is primarily used as a solid fuel to produce electricity and heat through combustion. World coal consumption was about 6,743,786,000 short tons in 2006[17] and is expected to increase 48% to 9.98 billion short tons by 2030.[18] Chinaproduced 2.38 billion tons in 2006. India produced about 447.3 million tons in 2006. 68.7% of China’s electricity comes from coal. The USA consumes about 14% of the world total, using 90% of it for generation of electricity.[19]

http://en.wikipedia.org/wiki/Coal

Without praising or commending the military budget, my observation is that the economic problems the U.S. is experiencing is in fact in small measure due to military adventurism. If some of the other drags on the economy were fixed, it could still afford Iraq and Afghanistan (not that it should). It paid for the 45-year-long Cold War.

As a monetary sovereign issuing a nonconvertible floating rate currency the US is not financially constrained and never need be concerned about affordability. However, it has to be concerned with its balance sheet because that affects the exchange value of the dollar and that affects the price of oil in dollars. The real constraints on a fiat currency are price stability (inflation/deflation) domestically and exchange rate variability that affects the relative pricing of imports and exports.

As a huge net importer of oil, the US has to pay attention to exchange rates and therefore its balance sheet and current account balance. It does not have infinite financial flexibility. Military adventurism is very bad for the balance sheet, since it greatly increases the deficit, reducing other options, e.g., domestic programs, if it wants to maintain the affordability of oil. Oil is the wild card in the world, and the US is vulnerable here, since the economy is so oil-dependent.

Most Americans still believe they need to have a depression in order to become poor. This has been proved false. The Elite looked at Thailand and other such countries and liked what they saw. A small island of inter-connected wealth concentrated in gated communities with pools and palm trees able to draw on a vast reserve of hungry, obedient labor sitting off-stage at their disposal should they need to increase production. These wealthy hold all the strings covering military, political and resources.

Their future is immutably secure. No more vagaries of capitalistic fortunes. Crony capitalism in other words. Upward mobility is non-existent. There’s not even a chance of some carpet-bagger meeting and marrying his way into wealth. Entry prices at the nightclubs populated by these elite start at $70 with $15 a drink. About a 1/4 of a month’s local wages. Entry to bars and resorts similarly excluding. If the Beautiful People ever feel the need to “slum it”, there’s always the endless source of all levels of prostitution in which to dabble. A psychopath’s dream come true.

I said that the economic problems of the US are in no small measure the result of military adventurism

I think I understood that. My reply was in other words they (the economic problems) are in small measure — the other factors swamp them. That is, the problems are not in no small measure — they are in small measure. The difficulty of negating a negative. Otherwise, I think we’re in basic agreement. Michael Hudson provides much needed historical perspective, along with economic analysis.

The US may be capable of rationalizing keeping out immigrants, but it has been about as successful at it as keeping out drugs.

Agreed, but you were writing about the consequences of the tropics turning to deserts. In that case, it is not 12 million immigrants over a decade or more. You’re talking about tens or hundreds of millions of immigrants. I expect that the response to that would be qualitatively different from what has been done so far, although I don’t know what form it would take.

If you can build a factory overseas which produces the same goods for less, meaning more profit for you, why would you build it in the US?

A more interesting question to me is “Is Krugman correct in his description of a China as a mercantilist state, and, if so, is his prescription of tariffs the correct one, given China’s demonstrated intent not to adjust the yuan’s exchange rate? And, if that prescription is correct, then will the U.S. gov’t follow through on it?”

Because if you know the answers to those questions then the answer to Numerian’s question becomes trivial: You would build would build the factory in the U.S. because the premise is false: you cannot build a factory overseas which produces the same goods for less.

It could afford to pay for the Cold War because it had the natural resources and the industrial base to produce the weapons and feed and otherwise supply the military, not because it owns the printing press. If the U.S. had only had the natural resources and industrial base of, say, Latvia or Portugal then it could not have afforded a multi-decade, multi-trillion dollar building and maintaining of the military that it did. A printing press with lots of ink and paper on hand won’t change that.

This is ultimately true, since economics always comes down to real resources. But faced with having to borrow from the banks, Lincoln chose instead to print greenbacks. They were accepted and the goods were provided in exchange for them.

Alas, you all know this, and we all know this will never happen. The president & the congress have no interest in reducing unemployment. Real wages begin declining in 1979.

Don’t worry — Obama will have some explanation, though — “Not in the American Tradition”, or some other words that he pulls out of his ass. You’ll feel much better when he’s done talking. Or some people will.

Europe fully intends to follow the same route — cut public spending & govt services to the bone, fire thousands/millions of govt workers, privatize everything, reduce or eliminate pensions, raise the retirement age, tax workers to pay for debt, & eliminate entirely taxes on the rentiers’ sources of income.

Hopefully our (working) friends in Europe can create enough opposition to arrest the neo-liberal plan to eviscerate them, because god knows Americans will vote for their own doom ’til the end of time.

In Ecuador this week, the police did not take kindly to “austerity” measures. I wonder whether it will give any central bankers or politicians pause if they think that “austerity” might lead to a strike/protest that escalates to a coup.

Yes, that is what I meant when I wrote above, “Make no mistake about it, this is a global takeover, just like the EZ was a takeover of Europe by the elite. According to Michael Hudson’s analysis, the end in view is to reduce everyone to debt peonage with the money funneling to the top through compound interest and economic rent. If you are not following Hudson on this, you should be.”

Economic rent, broadly speaking, is taking a bigger slice of the pie without making the pie larger. Land rent (feudalism), monopoly rent (industrial capitalism) and financial rent (financial capitalism) are about taking a bigger slice of the pie without enlarging the pie. That bigger slice makes others’s slices smaller, i.e., the workers that actually do the producing.

This was essentially Marx’s insight, but there are non-Marxian ways of addressing it, e.g., taxing away economic rent and otherwise disincentivizing it. But that involves gaining control of the political apparatus now in the hands of the rentier class as a result of legalized bribery (campaign finance and lobbying) and cronyism (the revolving door).

http://en.wikipedia.org/wiki/Coal

Understood. Nevertheless, it does not contradict or add to what I said:

China today does not have the fossil-fuel resources that the U.S. had in 1900 (the world’s largest)

China today (and everyone else) does not have the ecological space that the U.S. had in 1900

Luce was correct — it was the American century. It would be silly to dispute that. China will not have a corresponding Chinese century. They don’t have the resources (among other reasons) and they don’t have the “room.” There won’t be a second “American century,” either. There won’t even be Business As Usual.

Leave? I’d love to get the hell outa Dodge, but where? I can’t see a safe haven anywhere.

Is Hudson’s statement correct, that “financialization” is largely responsible for the U.S. trade balance moving into deficit?

I think that what Hudson is saying here is that a chief factor in the accumulation of the CAD was import purchases on credit due to 1) the wealth effect from the housing bubble, and 2) using houses as ATM’s through HELOC’s. Income was not sufficient to support this kind of spending binge, nor were savings, and people weren’t selling assets either. They were borrowing to support spending. The other factor that Hudson mentions elsewhere is military expenditures from 1) military Keynesianism (there is facility in just about every congressional district to ensure votes for military expenditure) and 2) military adventurism, with the Iraq war of choice to the fore.

The aim of financialization as Hudson describes it is to turn every possible stream into financial rent — housing, autos, durables, education, health care, etc., so that FIRE gets a pie of the pie on all income and spending.

Actually, the Chinese workers are getting squeezed, and it’s the Chinese elite that is getting the bigger pieces of the pie, just like in the US. Looks like they are copying us. See Michael Pettis and Andy Xie (pronounced between “she” and “shay”) on this, for example. Part of the problem is that Chinese wages are not rising commensurate with productivity gains, just like the US.

That’s why I said “certain sectors.” And insofar as they are not deindustrializing, they cannot meaningfully be said to be copying the USA.

Yes, but people ordinarily don’t compare their own well-being to the relative proportion of the pie they get. I fervently wish they would, but they don’t. As long as Chinese politicians are “making the pie higher” for the residents of Beijing, Shanghai, Guangzhou, etc, etc, the Chinese public at large will make common cause with their leaders, even if there is a narrow elite that is further catapulted.

The price for this will most assuredly be paid, but not in any time frame that suggests the development of common interests between the Chinese public and the American public against the leaders of both.

Mandos, this is true. People in general don’t know what’s going on economically unless it impacts them in the wallet or rice bowl. But economists that look at the numbers can see how the pie is divided and what this implies for nominal aggregate demand. NAD is a primarily function of incomes, and secondarily credit, since income is required to service debt. Of course, in the US credit is the driver and problems arose when increasing debt obligations became unsustainable relative to income growth. Something similar is happening in China in RE, although there is not the home equity loans that ultimately brought the US down when housing prices decelerated. But the rising Chinese middle class is being taken by the regional officials maximizing land value and the financiers setting terms.

The global problem in a nutshell is overcapacity owing to inadequate effective demand, resulting from not from lack of capital but lack of productive investment. Productive investment has been replace to a large degree with rent-seeking, resulting in wealth extraction chiefly through economic rent — land rent, monopoly rent, and financial rent. For example, a major portion of the extraction in China at present is through land rent, as the gains from privatization flow to regional officials and financiers, even though there is huge oversupply of housing that would negate this in a perfectly competitive free market. But people cannot just buy houses with cash; they need financing on the terms offered.

I can assure you that the residents of Beijing … do not by and large consider themselves to be the victims of their current elites, and for good reason

Similarly, the residents of NW Wash. D.C. and the surrounding suburbs in VA and MD have among the lowest unemployment rate in the country. It’s good to be near the center of the decision making.

These [coporate executives/ major shareholders, etc] are not necessarily “bad people.”

They are sociopaths.

The where could be Thailand; tropical (no winter heating), no property tax on paid-for houses, food is cheap, public transportation is cheap, no income tax on outside income, good and cheap medical services, and a very friendly people.
Malaysia is open to westerners as is Kampuchea and both are relatively inexpensive as well.
It’s a big world out there and there are many opportunities for educated westerners.
That said; I find it odd so few actually make the move. For me it’s almost 8 years and counting…

anon2525 PERMALINK
October 5, 2010
The where could be Thailand…
Your perception of Thailand is completely at odds with the post above that describes that country as “A psychopath’s dream come true.”
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

That is the most twisted view I’ve ever heard/read. My perception is based on living in “the real Thailand”; not some western enclave of spoiled rich.
I’ve lived here 8 years, live in the country (not a big city), speak the language and have found a very good life here. I taught English for 5 years (here) before I retired and would offer that my view is probably more in line with the reality of the country and culture.
I write books and grow Habaneros and Jalapenos.
I can’t help another’s perception and have no interest in trying to change it.
I will say this: With rare exception, I have found the westerners who do live here to be the kind of people I avoid. Cheers.