Economics

Қаржылық дағдарыстан шығармаған қорытынды

Aug 17, 2017 Mohamed A. El-Erian

ЛОНДОН – Он жыл бұрын дәл осы айда француздық BNP Paribas банкі инвесторлардың үш қорда орналастырған ақшасына қол жеткізуін шектеуге шешім қабылдады. Бұл қаржылық дағдарыстың алғашқы күшті сигналы еді, ол бір жыл өткен соң жаһандық экономиканы құлдыратып жіберді. Дегенмен, 2008 жылдың аяғында басталып және 2009 жылдың басында жалғасқан, көпжылдық қасіретке әкелген жаппай экономикалық және қаржылық шығындар дамыған елдерге күтпеген жағдай болды. Олар дамып келе жатқан әлемдегі дағдарыстан тиісті қорытынды шығармай, оларға жеткілікті назар аудармаған еді.

Дамушы елдердің қаржы дағдарыстарын бастан кешкен немесе зерттеген кез-келген адам олардың белгілерін анық білетін болады. Рудигер Дорнбуштың пікірінше, қаржы дағдарыстарының дамуына ұзақ уақыт керек, бірақ олар басталса, олар тез, күштеп және (көрінбейтіндей) қарапайым таралуға бейім.

Көбейе бастаған сәтсіздікке ұшыраған сайын, жағдай молшылықтан ашаршылыққа көзді ашып жұмғанша өзгере алады. Еш бұзылмайтындай көрінген жеке несиелік фабрикалар құлдырап, ал орталық банктер мен үкіметтер қатаң, тұрақсыз саясатқа тап болды. Бұдан басқа, саясаткерлер де жұмыспен қамту, сауда және инвестицияларды құрта алатын экономикалық белсенділіктің «кенеттен тоқтап қалу» тәуекеліне де ұшырайды.

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0 Comments on this paragraph, 73 Comments on this article

Emm Bee Apr 11, 2018

Well of course growth isn't inclusive. Because the massive companies that are winning are winning because they put everyone else out of business. Capitalism works best when wealth is widely spread - and we have the opposite.
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Phil Cartier Sep 12, 2017

Based on how expansion/recession cycles worked before politicians started trying to manage them, relatively short, sharp recessions were followed quickly by quick growth plus a bit- leading to long periods of fairly agressive growth.

If the 2007-8 recession had been handled the same way, with no major government interferences, the stock market would have rebounded quickly due to greatly undervalued capital assets, smaller savers and investors would have been protected to a degree by government insurance programs, and most of the losses would have come from large, liquid, leveraged assets that were not protected, followed by multiple large bankruptcies.

Quite possibly the re-expansion would not have been hampered by the excessive regulatory and "protective" rules enacted by the regulatory agencies that have continued to be a drag on the economy for the last 10 years.
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Frans Verhagen Aug 28, 2017

Part of that growth model is also the unjust, unsustainable and, therefore, unstable international monetary system the transformation of which is clearly in the political class’s court of the global North.
One way of dealing with this U.S. dollar based unstable system is to seriously study the feasibility of adopting a carbon monetary standard of a specific tonnage of CO2e per person, which would bring the world closer to staving off the looming climate catastrophe.
Verhagen 2012 "The Tierra Solution: Resolving the climate crisis through monetary transformation" has made the beginning of the studying the conceptual, institutional, ethical and strategic dimensions of such new global governance system. Stated a noted climate advocate: “The further into the global warming area we go, the more physics and politics narrows our possible paths of action. Here’s a very cogent and well-argued account of one of the remaining possibilities.” Bill McKibben, May 17, 2011
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Mauricio Duran-Loriga Aug 28, 2017

"...timely, targeted, and temporary..."

BRAVO!

Politicians unique objective is re-election. Who cares the herd !

We have tried so many times with human officials. To no avail.

Why don't we try with Artificial Intelligence instead?

In any event, it is almost impossible to reach higher levels of corruption and lower levels of effectiveness !

What could possibly go wrong?
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Richard Graham Aug 26, 2017

policymakers and Wall Street, the City, and all others, have learned the lesson: bubbles are a great way to make money. It worked with the tech bubble in 2001, with the oil bubble in 1979, with the Financial bubble of 2008, and it is working now with valuations off the charts, no profits to match in sight, and a government of distracted fools in the USA and the UK.
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Enrique Woll Battistini Aug 24, 2017

August 23, 2017

The Seeds of World War III
© Enrique Woll Battistini 2017

Perhaps I am wrong, and misinterpreting history, but I have the strong feeling that all strategies by developed countries with nuclear capabilities aiming to deter each other from launching a nuclear ICBM strike, or retaliate with one, and aimed at discouraging non nuclear countries from becoming nuclear states, are based on sticks, very big sticks, that is, nuclear ICBMs, and threatening language. What happened to the carrots? No carrots. The sticks are greased with Slogans, arrogance, ignorance, incompetent governance, hypocrisy, lies and undisguised hatred these days. The world is at a tipping point, on the brink of recovery or conflagration. There is no grand vision of how the world can be made a better place for all nations and peoples; how America could continue to be great and lead on the world stage; how to deal with anthropogenic climate disruption; how to end extreme poverty and reduce plain poverty; how to further freedom and create justice for all. The obvious fact that in a globalized world, the extremely rich cannot continue to squeeze the life from the extremely poor, and expect their paradise to be endlessly fueled by their victims' hell seems to be sailing past like icebergs crossing the bow of the RMS Titanic. East-West armed religious conflict is boiling in the cauldron of the Middle East threatening to spill over on Europe. Islamic terrorism is dangerously expanding. Something has to give, and history says it will. The seeds of world war III may have already been sown. Hitler seems to be rising; his venomous speeches can almost be heard. Will Mussolini, Stalin, Franco, and Mao, follow?

***

https://www.academia.edu/23094646/OFA_At_the_Brink_of_Recovery_or_Conflagration_The_World_at_a_Tipping_Point_2011111506

https://www.academia.edu/34269176/Facebook_-_Regarding_the_roots_of_the_national_political_controversy_about_confederate_heroes_and_statues_and_monuments_in_public_squares_unleashed_by_the_Charlottesville_confrontation_between_right_wing_extremists_and_moderates_-_2017081701

https://www.academia.edu/26966465/An_idea_set_forth_in_1992_written_up_in_1993_and_upgraded_in_1997_A_Partnership_for_Development_with_the_United_States_of_America_-_1997030103

https://www.academia.edu/15092472/Living_in_Peru_-_Peru_in_Copenhagen_Thoughts_on_The_Right_to_Pollute_-_Does_it_Exist_-_2010102701

https://www.academia.edu/18040396/Living_in_Peru_-_Uses_and_Limitations_of_Michael_Greene_s_Social_Progress_Index_SPI_for_Development_-_2015102202

https://www.academia.edu/13062623/Informal_Proof_of_Thomas_Pikettys_Thesis-2014060802

https://www.academia.edu/12823841/Mathematical_Model_and_Simulation_for_A_Partnership_for_Development_with_the_United_States_of_America_-_December_1999

https://www.academia.edu/12412727/WOLL_-_THE_ROLE_OF_INVESTMENT_PROMOTION_ORGANIZATIONS_IN_THIRD_WORLD_DEVELOPMENT_-_VI_-_2007103102
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Jose araujo Aug 23, 2017

Supreme hypocrisy:

One Hawk that shares the views that has made this recession so long, is now using this failure to validate his views..

One that believes and supports trickle down economics, to be advocating for more inclusive growth...

One that at heart supports an oligarchic administration that is closer to a developing economy, to be criticizing developed economies for not selling their countries to the oligarchs...
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Steve Hurst Aug 22, 2017

The lost lesson of the financial crisis is - you make your money by robbing the natives so you should rob them just the right amount. If you overdo it the natives become restless
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Allen Cookson Aug 21, 2017

Allen Cookson
The delusion that economic growth (increasing real per capita income) is sustainable on a finite planetary habitat, is almost universal among politicians. In engineering and science there may well be a majority of practitioners who understand that growth is unsustainable. In economics one has to turn to ecological economists to find people whose thinking is based on the real physical world. A fundamental problem with present practice is that nearly all money exists as interest-bearing debt to private banks. This debt-based monetary system is doomed to collapse in hyperinflation followed by permanent stagnation. To understand why, read my book "Prosperity, Poverty or Extinction? Humanity's Choices. (pulisher xlibris)
- Jose araujo Aug 23, 2017
  
  Allen, value is a psychological construct. You can say that at most 30% of the current GDP is traceable to physical goods, 70% are services, and psychological attributes.
  
  On the physical side, current technology accommodates any foreseeable growth in the human population. We don't even need new tech, so imagine what can we do with the exponential growth of tech.
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- Jose araujo Aug 23, 2017
  
  Allen, for an advocate of finite resources, you sure are having a hard time to prove it....
  
  You see, with commodity prices lowering, interest rates near zero, how can you advocate for finite resources?
  
  Growth isn't unsustainable, specially because growth is stained in positive expectations.
  
  Resource scarcity is a myth, there is no such thing has a scarce resource. Even the very few resources that are indeed scarce, have that quality due to scarcity...
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- Steve Hurst Aug 22, 2017
  
  Allen
  
  Fiat money is intrinsically linked to interest which is intrinsically linked to inflation which is intrinsically linked to growth. They are all names for the same thing.
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Wim Roffel Aug 21, 2017

We need to get rid of the dominance of "finance". The financial sector should be brought back to 10% of the economy (instead of about 30 now). That will purge out the casino aspects of it and make the economy less vulnerable for crises. The power of shareholders should be reduced so that asset strippers no longer can attack and dismantle well run companies.
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Paul Friesen Aug 21, 2017

This is very muddled thinking.
The financial crisis caused a lack of demand - not a lack of supply. That is why we got unemployment. And the cure was not to mutter wisely about "structural solutions" but to put in place adequate demand-boosting policies.
The only place where really adequate demand-boosting policies were put in place was China, and it worked like a charm there. China did bounce back quickly, and brought some other countries with it, mostly commodity producers who benefited from China's surging demand.
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Fouad Sayegh Aug 21, 2017

El-Erian always reminds of a boxer in a fixed fight: he lets you know that he knows exactly when and where to throw the K.O. punch,but then he pulls back just when you expect him to to do so.
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peter fairley Aug 21, 2017

Not "Insufficient investments in education". Education gets plenty of money or even too much. Many colleges are still not realistically career orienting their students. They could do a better job with less money, or continue doing a bad job with more money.
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Emilio Zuniga Aug 21, 2017

A pity El-Erian doesn't explain much The failure of current dominant economic thinking. But IT is true that growth crisis in emerging countries in the past had a V type of recovery path. Greece is the best example of the failure to tackle the right simple Keynesian approach to an open economy. The IFM prescrption usually resulted in an overshooting with excess saving to kill excess demand and inflation. But lately they were more understanding that right debt restructuring Was a key component of recovery in order to make Room to higher investment And avoid stagnation. In the US public investment was cut short of adecuade demand push an in the EZ the flawed macroeconómic system made short term policies uneffective
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Fred Carstensen Aug 21, 2017

El-Erian declares (correctly) "they have yet to make sufficient investments in infrastructure, education, and human capital more generally." BUT this is not a recent development. America began to abandon what had been its economic development strategy for 200 years--public sector investments in exactly there areas--in the 1970s! America has been disinvesting in its own future for 40 years. Pete Petersen wrote a memo to Nixon arguing that America--then #1 in education, human capital, and infrastructure--could ONLY remain strongly competitive in the emerging global economy if it sustained and expanded its investments in these areas. Nixon was so impressed he convened his Cabinet to discuss the Petersen memo. And then? We turned away from precisely these investments. America has been undermining its own competitive strengths for 40 years--and when the financial tsunami came and inflicted such damage, America was poorly prepared to come back. And since 2008, we have continued the disinvestment, cutting public sector research further and failing even to maintain, let alone improve, our infrastructure. See Alden, Failure to Adjust. It is a deeply discouraging narrative.

And consider this: just as America was abandoning the very strategies that had delivered such a remarkable history of growth, China and other competitors were adopting it. China in particular modelled this transition to a market-focused economy on the basis of American economic history. See "Made in China 2025" with its focus on research universities and institutes--and you will see China implementing what was one the American Strategy.
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Barry Rosenfeld Aug 20, 2017

El-Erian rightly points to the studied avoidance of dealing with structural changes that would require less dependency on finance and "financialization." Part of it is just plain denial, the desire to avoid recognition of the problem so that it need not be dealt with. Yet, with the main political contributors representing the current economic structure, what else is to be expected? More annoying is the prescriptions of the academic economists who refuse to recognize that their theoretical models specifically ignore structural issues and prefer to play at the margins of stress and adjustment.
- yw yap Aug 21, 2017
  
  Re Barry Rosenfeld: LIKE!
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- Fred Carstensen Aug 21, 2017
  
  Economics works at the margins. Economic theory does not accommodate structural change (or changes in taste, technology, etc., or any exogenous factor) So don't expect more from economists than marginal solutions.
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John Ellis Aug 20, 2017

Erm... inflation has been at historic lows for an extended period. Are you actually aware of this? And no it wouldn't have been a good idea to let the entire US financial system implode.
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Michael Hullevad Aug 20, 2017

The financial crisis is still developing. It has been papered over many times by the central banks. The massive debts will have to be inflated away. Investments in infrastructure is badly needed, solution more debt. It would have been much better to let what can not stand fall.
It would have been painful, but then the slate had been clean!
At the moment we are dragging on with no clear solutions, apart from German 1920ies inflation.
- yw yap Aug 21, 2017
  
  YES! Shld let what cannot stand fall. However those who are calling the shots are likely to be selfish. We gotta take note of that.
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- John Ellis Aug 20, 2017
  
  Erm... inflation has been at historic lows for an extended period. Are you actually aware of this? And no it wouldn't have been a good idea to let the entire US financial system implode.
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Brent Beach Aug 20, 2017

I feel as if I have just read the Executive Summary of an article worth reading. Where is the article itself?
- peter fairley Aug 21, 2017
  
  This is an article in itself, but it is abstract, not specific...not really 'actionable intelligence' that you can put your finger on and later be said to be right or wrong. It is usually right because it is so general. I think this is why Bill Gross and El Erian got in fights, because Bill had to make decisions that could be later seen as wrong, and El Erian was rarely wrong, because always so abstract. I actually think he is wrong this time about education needing more money altho me saying that is a political 3rd rail. Education needs better leadership, not money. Prepare kids for jobs that exists. Less humanities, more mechanics. Then enjoy humanities when you have money for leisure
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- Fred Carstensen Aug 21, 2017
  
  Read Alden: Failure to Adjust. America has been on the road of diminished competitiveness and economic resiliency since the 1970s. The financial tsunami simply exposed how weak America had become.
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- Barry Rosenfeld Aug 20, 2017
  
  Has el-Erian become a tease? I had the same feeling - let down - about the article.
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Doug Carmichael Aug 20, 2017

when will we catch on that growth is a problem for global warming? growth tends to use dnergy. There are paths to growth that are seriously green but we won't find them if we don't look
- yw yap Aug 21, 2017
  
  re Doug: sorry dude! The Trump admin just sanction Mobil Exxon et al to dig or explore in the sea or on land for more oil. So in the short term there will be less green :(
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Odyssios Redux Aug 20, 2017

At the risk of seeming excessively naive, (rather than just acceptably so!) it seems to me the best and fastest way of oiling the wheels of commerce (not finance) is to get much more cash, fast, to consumers. Given that incomes have fallen behind where they were, relatiovely, quite a bit back, it's clear consumption has been severely squeezed, for too long. At the lower inocme end, this is made clearest by the brisk business done by payday loan sharks, for instance

It might aloso help to perusde (ie tax) companies away from using liquid assest to buy back stock, for isntance, rather than for instance raise pay. Increase in share value is of great help to the minority who hold them, as a frction of consumers. But it does nothing to boost consupmprion.

To guard against a lot of what led to 2008, i.e. insane asset price inflation, it'll be necessary to re-introduce real controls such as constituted Glass-Steagal in the US. Timid imitatins of these have been pushed forward, but are again under attack, for political rather than useful economic reasons.

Of course, this utterly begs the question nobody dare ask - to what level can well-distributed global economic consumption be reasonably saflely raised, without 'excessive' environmental damage? This plays too into conswiderations of national governance, wich is corrupt and kleptocratic in far too many places.

In some ways, the purely economic porblems are the easiest to address! Difficult tho htese may be. But unless all are, economies will at best limp along.
- yw yap Aug 21, 2017
  
  re Ody Redux: things will get worse & after that who know what in the Endless Possibilities era? The last line in El-Erian's article i.e. "The ball in the political class's court" is archaic and no longer useful. At least a decade was lost. How many more do we have? :(
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- Fred Carstensen Aug 21, 2017
  
  Yes, increasingly aggregate demand would, in the short run, generate strongly growth--but because of America's increasing competitive weakness, a lot of the demand would result in a surge in imports. America began NOT investing in itself in the 1970s; we have a long history now of failing to investment in education, human capital, and infrastructure. And that failure has continued since 2008--and worsened. Our slow recovery is the product of long inattention to the demands of global competitiveness--and it will likely slow further. See Alden, Failure to Adjust.
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Per Kurowski Aug 20, 2017

Basel II determined that the return on equity for banks, when lending to “the risky”, could result from leveraging the net risk adjusted margin 12.5 times. But, in the case of lending or investing in AAA rated, or in any operation that had the backing of an AAA rated like AIG, then the net risk adjusted margin could be leveraged a mindboggling 62.5 times.

Plus, in the case of sovereigns, like Greece, banks were allowed to leverage net margins infinitely, as European felt they should risk-weigh all EU members 0%.

Suppose there were no such regulations, and it is clear that the 2007/08 crisis would not have occurred.

But this is not debated, as it is highly inconvenient to the regulatory mutual admiration networks.

http://perkurowski.blogspot.com/2016/04/here-are-17-reasons-for-why-i-believe.html
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David Neunuebel Aug 20, 2017

And so what, dear Mohamed, shall we do? We've already voted in the assholes. Anything else we can do now?
- yw yap Aug 21, 2017
  
  re David N.: U are spot-on! "The ball certainly CANNOT be in the political class's court." We gotta find a way to limit the power given to the Presidents, rulers et al.
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John Ellis Aug 20, 2017

Well of course many economists and policy makers did spot the danger signals by mid 2007, they were apparent in the Spring. Even I did. The problem is that when the economy is very highly leveraged no one wants to spook the herd; the financial industry has pecuniary reasons for keeping the balloon airborne; and the administration and its shills are telling everyone it's Goldilocks.

The US economy has about 3.5 billion of cash in circulation (M1) but a whopping 65-70 trillion of credit. Furthermore a large tranche of this has to be refinanced every 1 to 180 days. This is the Achilles heel in all modern economies. All that money could run overnight.

To be fair to US policy makers I don't think they have yet forgotten this particular lesson which El-Erian is commingling with other issues like income inequality which fundamentally a political problem which right now Republicans seem intent on exacerbating rather than solving.
- yw yap Aug 21, 2017
  
  re John E.: "...exacerbating rather than solving", and since they have gotten back into the wagon, they will want to carry on partying and lead the rest to Taklamakan. Just think that the world cannot be run by the political class?
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- John Ellis Aug 20, 2017
  
  Oops M1 should of course have been 3.5 Trillion! Apologies for any distress caused.
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Ibrahim Abu Ahmad Aug 20, 2017

There is nothing flawed about any growth model. What happened in the recent crisis was pure greed. The business schools failed to teach this.
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B Wilds Aug 20, 2017

With the markets sporting a glow from all-time record highs that are being made week after week it might be a good time to revisit the concept of irrational exuberance. We must consider the possibility we may be nearing the end of a 37-year run that will completely upend everything most people have come to believe about the economy. Since 2008 all growth has been built on a mountain of debt.

Those of us who have doubted and repeatedly predicted the collapse of this so-called recovery remain wrong because we have underestimated both the breadth and size of the global intervention of central banks and governments. Nobody in their right mind would have ever anticipated the sheer magnitude and scope of what has become a worldwide phenomenon. The article below questions when the burden of global debt will cause Atlas to shrug.

http://brucewilds.blogspot.com/2017/03/when-will-atlas-shrug-burden-of-global.html
- yw yap Aug 21, 2017
  
  Irrational Exuberance was/is perpetrated by the 1-10% who control the so-called (financial) wealth. The other 90-99% just watch the world is going down the drain from all the exuberance. There is simply a poor risk-reward allocation. If continue, there will be an uprising against the Establishment. Pls do not feel so safe :(
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Tin Man Aug 19, 2017

A species that evolved to prioritize short-term threats is pretty much doomed to ignore a long-term threat until it is too late.
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Ariel Tejera Aug 19, 2017

Financial crisis have historically been global, and that trend is only becoming stronger. Since 1932 we assume that they propagate and affect everybody. The point is that this constitute a challenge to the autonomy and singularity of Nation States. Indeed, to effectively prevent catastrophic disruptions, Central Banks have been coordinating together, and the bigger the threat, the more cohesion they need. With increasing autonomy of central banks relative to their respective governments, their kind is emerging as a globalized club with no higher authority other than the global imperative of keeping the Financial System working and their currencies delivering their elementary purpose. As this trend continues, the weight of nations governments acting separately will deteriorate more and more. The bad news is that the world currently lacks any democratic mechanism to control such a global beast.
- yw yap Aug 21, 2017
  
  re Ariel T.: think U are right! There is a genuine lack of cohesion or cooperation. Almost everyone is pulling or tugging. Something will give way. E.g. some currencies will probably collapse/disappear?
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M M Aug 19, 2017

The ball is in the policy makers and in the vested interests court and not the politicians. Without a redistribution of wealth and in some cases, adjustments (downwards) to assets prices, the 1% shall inevitably loose everything when the next crisis hits and all the seeds for such a crisis are already in the system. So willingly or unwillingly the 1%, the vested interests, the lobbyists, the policy makers and the politicians (in exactly this order) shall ultimately pay a very high price as a result of a lack of concrete and sound growth measures.
- M M Aug 21, 2017
  
  Hugh, Policy Makers, unlike Politicians, do not have time to sleep, to fool around, to give lectures and speeches and media interviews, do not play golf, etc. Politicians are just rubber stampers..
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- Hugh Fullerton Aug 20, 2017
  
  Using the term "politicians" should include the policy makers and the reps of vested interested, not just the political parties. Yes, all three have crucial roles. But if you think the 1% will be most affected, you're probably wrong. The lower 50% or so are most affected by economic crises. Yet (per Piketty), if wealth and income were not so badly distributed, the impact could be softened. Indeed (in response to an earlier poster), we could have green growth, benefiting those who need it most, while limiting the damage to the environment, global warming, etc. In the U.S., clearly this is impossible under current conditions. Instead, we are damaging the environment and debasing living conditions without significant growth.
  - Phil Cartier Sep 12, 2017
    
    Piketty's analysis was based on a false assumption. He only considered cash income. In almost all developed nations lower income folks receive a large fraction of their income in services and transfer payments that were not counted as cash income. Middle class people receive almost all their income as cash payments, less taxes, social security, etc. This ignores the value of the government provided services. In really poor areas much of the "income" is in barter and shared resources, and also not counted as cash income.
    
    The wealthiest people can control their cash income through investments and capital gains.
    
    The result is that Piketty greatly distorted the "wealth" of the various classes. While the wealthy still control unconscionable amounts of money they don't put it into useful social investments such as libraries, schools, and other public facilities like the "robber barons" of the late 19th century did. Instead they devote their philanthropy to "causes" such as climate change, world health, environmental justice, social change, politics, and other nebulous causes that only rarely have significant effects.
    
    The middle class receives the least return on their labor mainly because they are the largest class and relatively give the most to the government and receive the least back in direct benefits. This problem played directly into the last presidential election.
    
    The poor receive the largest returns since they rarely have to pay taxes and can much more back in other benefits
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Alan Gillman Aug 18, 2017

Understood but l believe that the growth story happens at a local level not a national level. I've just read Jane Jacobs' Cities and the Wealth of Nations (written in 1985 and still fresh) and policymakers could really learn from her focus on import-replacing activity and the avoidance of transactions of decline. It's actually practical and evidence-based.
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Kamil Bayye Aug 17, 2017

Does the West need the historical long term growth of 3-4 percent? The West may have reached a turning point where 1-2 percent growth is good. Assuming a peaceful world, societal well being can be improved by focusing on non-GDP aspects of life.
- Fred Nicol Aug 18, 2017
  
  The problem with low growth is the size of the unfunded obligations of government, mostly for social programs. These unfunded promises were made on the assumption that growth would be maintained. Without growth it will be difficult, if not impossible to maintain social programs at anticipated levels. This will strain "domestic tranquility."
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Gunnar Eriksson Aug 17, 2017

"The ball is in the political class’s court."
There is no doubt so, but how do we change the minds of those with ability, education and financial resources?
The situation of the "West" reminds much of Ming China 1640, politics got more and more ugly and people looked the other way. Zhang Dai is very much us.
http://www.nybooks.com/articles/2007/12/20/ravished-by-oranges/
- yw yap Aug 21, 2017
  
  Re Gunnar E.: Good reference re Ming. Though the Ming Dynasty did not do very badly, they were not popular. The Tang Dynasty was revered becoz they practised openness and embraced the world via sharing (both ways).
  
  Some big nations today are going into Protectionism and guess that's a bad idea!
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Fred Nicol Aug 17, 2017

One problem is that "infrastructure" is a class of various things, not a single thing, and there are different political views about which of the various things money should be spent on.

Likewise "education" is different things to different people. I am an engineer and while I have, and value, a much more well-rounded classical education than most engineers I still regard a large part of grievance and victimization studies in college today as useless drivel.

I believe that the lack of agreement on particulars about "infrastructure and education" has been the factor holding the spending back and I do not expect that problem to be solved soon.

There is a lot of "China envy" on both sides of the political aisle.
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Paul Daley Aug 17, 2017

Good article, but the problem emerged from a misuse of the power of seigniorage, which was used to drive a wedge between asset prices and income flows both before and after the crisis. If you want to control that, you need to move the power of seigniorage back to the Treasury and leave Central Banks to operate with the common reserves of their members and any loans they can negotiate from the Treasury. That will put all the powers necessary to handle the crisis in one pair of hands, and eliminate the temptation to pass the buck. It, of course, does not guarantee that the crisis will be well-handled, but it will give the people a chance to fire those who fail. No longer will they have to watch in horror as central banks ricochet from one mistake to the next.
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Jerry F. Hough Aug 17, 2017

Berle and Means needs to be re-read. Economic pollicy-makers are first concerned with their own self-interest. They want power in Central Banks, not in parliaments and those who elect them.

The central concern of US policy-makers (the team led by Robert Rubin that was inexplicably brought back by a terrible President whose Treasury Secretary Jack Lew in his second term (!) was head of Citi's "alternative investments" division in the worst days.) was to save banks like Citi and Goldman and then to have zero rates so companies could borrow at zero rates to buy back shares and pump up their P/E ratios. Read the unbelievably great memoirs of Sheila Barr.

Their zero rates produced a tripling of the market and flat wages for all but the top 10%. They also promoted illegal immigrantion and refugees and permits to keep service wages down. They had outrageous tax rates for hedge funds because of donors like Soros and for high-flying FANG stocks of Silicon Valley because they are such a big part of the S & P.

But political crises are like financial. They take a long time and then can work with great force. We now have a great President. That is why the Establishment is so hysterical. He already has had a successful transition to one of the most historic and good changes in foreign policy in our history. He is decislvely ending 15 years of wonton mass killing of Muslims in the Middle East with a firm alliance with our natural secular ally in Moscow who is threatened by Islamic terrorism. That alliance and economic incentives to China has brought Korea under control.

Domestically, he is building the necessary coalition for immigration reform. He has killed Ryancare, and we can pray that he gets an irresponsible enough budget and tax cut to give us a fiscal stimulus that is large enough. And I think he is going the right way to move towards a tolerant melting pot America instead of an utterly divisive "diversity" policy.

Like the great actors like FDR and Reagan, Trump has enclosed it in great theater--Russian relations are the worst ever, anti-Muslim rhetoric, supposedly irresponsible language about nuclear weapons, verbal support for Ryancare to put the blame on Ryan and Cruz, and endless distracting tweets.

The economists , led of course by the worst of them who destroyed Yeltsin's great reform, Harvard's endowment (ask Mohamed), and the Americam financial system, Larry Summers, and the second worst in Krugman , are the most hysterical of all. Thank God. Otherwise I would be in despair.
- Steve Hurst Aug 17, 2017
  
  Jerry
  
  Unfortunately Trump could not differentiate between right and left at Charlottesville when even Bannon could. How is that going to create a tolerant melting pot
  - Phil Cartier Sep 12, 2017
    
    Read his speech. He distinctly differentiated between the far right and the far left and excoriated both properly. The media cherry picked their misleading quotes.
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David Punabantu Aug 17, 2017

Adam Smith's market doctrine is based on supply and demand. The underlying axiom is country X produces good X and is bought by currency X belonging to country X. If country Y wanted good X it has to change its currency Y into currency X to buy good X. That is why a Euro cannot directly buy goods from the US until it is changed into a US dollar hence Exchange Rate. But for Africa, Latin America, Asia that is not the case as seen in the London Metal Exchange. Africa's, Latin America's, Asia's mineral wealth on the LME that handles most of the world's non ferrous metals only allows the US dollar, the Sterling pound, the Japanese Yen, the Euro to buy Africa's, Latin America's, Asia's mineral wealth adding that wealth to the US dollar and the LME accepted Currencies. In 2015 the Chinese reminibi was added to the list while African, Latin America, and Asian currencies minus China and Japan are banned in this so called age of free markets and trade liberalisation. Trade liberalisation and free markets for whom? Do such policies follow the tenets of the market doctrine or corrupt it? It adds Africa's, Latin America's, and Asia's wealth in value terms to the US dollar. Another issue is the IMF fixed cross rate system. The cross-rates appear day in and day out, in value terms, in many national currencies. This implies that national money markets have the same money market currency liquidity and trade volumes to produce the same cross rates as observed between Britain and the United State of America. On the February 16th 2017 the Indian Rupee traded at INR0.01495 per US$1, while the Sterling pound was at INR0.01199 per £1, giving a IMF cross rate of 1.24. The Japanese Yen on the same date stood at JPY¥0.008782 per US$1 and JPY¥0.007033 per £1 giving a cross rate of 1.24. The Canadian dollar also on the same day had CAD$0.76569 per US$1 and CAD$0.61420 per £1 to give 1.24 as it's IMF fixed cross rate. The Chinese Yuan against the US dollar stood at CNY¥0.145541 per US$1, and CNY¥0.116789 per £1, on the same day to give a IMF cross rate of 1.24. The Mexican Pesos, Brazilian Real, South African Rand, on the same day like all currencies across the world had 1.24 as the IMF cross rate fixed on the US dollar and Sterling pound.
The reality on the ground is that Zambia, Britain, Canada, India, Japan, China, Mexico nor the EU has the same level and volume of trade to give credibility to the IMF fixed cross-rates. In fact, the demand of the Euro or the Zambian Kwacha, Euro against the US dollar and the British Sterling pound and other African, Asian, Latin American currencies in relation to trade, within their money markets, gives exchange rates that are outside the IMF fixed cross-rate system. There is no competition here with IMF fixed cross rates. It must be noted that IMF MD Mr. M. Gutt at his Harvard University address on the 13th February 1948 noted that the indirect exchange rate of the US dollar to the Sterling pound was £1 per US$2.6 as US$1 equalled 600 Lire and £1 equalled 1,560 Lire, while the direct Sterling pound-US dollar rate stood at £1 per US$4. American found it cheaper buying British goods via Italy. The IMF ruled in favour of Britain as if Italy's money markets had the same inflows as London's money market
A new reply to this comment has been posted.
David Punabantu Aug 17, 2017

Adam Smith's market doctrine is based on supply and demand. The underlying axiom is country X produces good X and is bought by currency X belonging to country X. If country Y wanted good X it has to change its currency Y into currency X to buy good X. That is why a Euro cannot directly buy goods from the US until it is changed into a US dollar hence Exchange Rate. But for Africa, Latin America, Asia that is not the case as seen in the London Metal Exchange. Africa's, Latin America's, Asia's mineral wealth on the LME that handles most of the world's non ferrous metals only allows the US dollar, the Sterling pound, the Japanese Yen, the Euro to buy Africa's, Latin America's, Asia's mineral wealth adding that wealth to the US dollar and the LME accepted Currencies. In 2015 the Chinese reminibi was added to the list while African, Latin America, and Asian currencies minus China and Japan are banned in this so called age of free markets and trade liberalisation. Trade liberalisation and free markets for whom? Do such policies follow the tenets of the market doctrine or corrupt it? It adds Africa's, Latin America's, and Asia's wealth in value terms to the US dollar. Another issue is the IMF fixed cross rate system. The cross-rates appear day in and day out, in value terms, in many national currencies. This implies that national money markets have the same money market currency liquidity and trade volumes to produce the same cross rates as observed between Britain and the United State of America. On the February 16th 2017 the Indian Rupee traded at INR0.01495 per US$1, while the Sterling pound was at INR0.01199 per £1, giving a IMF cross rate of 1.24. The Japanese Yen on the same date stood at JPY¥0.008782 per US$1 and JPY¥0.007033 per £1 giving a cross rate of 1.24. The Canadian dollar also on the same day had CAD$0.76569 per US$1 and CAD$0.61420 per £1 to give 1.24 as it's IMF fixed cross rate. The Chinese Yuan against the US dollar stood at CNY¥0.145541 per US$1, and CNY¥0.116789 per £1, on the same day to give a IMF cross rate of 1.24. The Mexican Pesos, Brazilian Real, South African Rand, on the same day like all currencies across the world had 1.24 as the IMF cross rate fixed on the US dollar and Sterling pound.
The reality on the ground is that Zambia, Britain, Canada, India, Japan, China, Mexico nor the EU has the same level and volume of trade to give credibility to the IMF fixed cross-rates. In fact, the demand of the Euro or the Zambian Kwacha, Euro against the US dollar and the British Sterling pound and other African, Asian, Latin American currencies in relation to trade, within their money markets, gives exchange rates that are outside the IMF fixed cross-rate system. There is no competition here with IMF fixed cross rates. It must be noted that IMF MD Mr. M. Gutt at his Harvard University address on the 13th February 1948 noted that the indirect exchange rate of the US dollar to the Sterling pound was £1 per US$2.6 as US$1 equalled 600 Lire and £1 equalled 1,560 Lire, while the direct Sterling pound-US dollar rate stood at £1 per US$4. American found it cheaper buying British goods via Italy. The IMF ruled in favour of Britain as if Italy's money markets had the same inflows as London's money market.
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Steve Hurst Aug 17, 2017

The Sheriff may have been a lousy Sheriff and may still be little better but the biggest problem was the gang of bandits who rode into town and are still in town. Not many ended up in jail. There remains, it would seem, little option than to brush the bandits down and tell them to self regulate.

What 'growth' is evident is apparently the result of the growth of massive public debt. Remove that debt from the equation and the situation is anything but healthy. I think you can kiss goodbye to your economic model because after 10 years it still is not delivering anything other than inequality growth and debt growth.

The icing on the cake is the ageing population, a factor which will affect nearly everyone -
For the UK (and the figures will be similar of other developed economies) - Between 1991 and 2011, life expectancy increased by more than four years for both men and women to 82.6 and 85.6 respectively.
But the number of those years spent with substantial care needs rose much more rapidly, from 1.1 to 2.4 for men and 1.6 to three for women. (Lancet)

This achievement in life expectancy is ahead of the UK's ONS graph of forecasts -
By 2039 period life expectancy at birth is projected to reach 84.1 years for males and 86.9 years for females, an increase of around 4 years since 2014.
By 2039 cohort life expectancy at birth is projected to reach 93.9 for males and 96.5 for females, almost 10 years longer than period life expectancy.
By 2064, cohort life expectancy at birth for females in England is projected to reach 100 years, 99 in the UK, Wales, and Northern Ireland and 98 in Scotland. (Office for National Statistics)

The ageing population will need 1%+ of GDP so you need 1%+ growth just to stand still

There are some very fundamental influences at play and political policy is just one. Some real costs are not escapable. As nothing is being resolved you can expect movement at the ballot box. If wildcard candidates such as Macron in France and Trump in the US, to name two, do not deliver the ballot box will again demand action. I would give Macron zero chance of meaningful reform and Trump appears to have delivery issues.

Basically widespread consumer disposable income drop due to inequality is screwing a consumer based economy model which has been the driving force for over a century. I see nothing in the article which can address that problem which is a very basic one.
- yw yap Aug 21, 2017
  
  Certainly agree that the bandits are still in town and merrily having a good time at the expense of the meek folks managed by the political class. Sigh.....
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Melvin Hardy Aug 17, 2017

Great substance here. Aspirationally, If our global political classes would more appropriately lever our global corporate and financial classes toward more such global infrastructure, education, health and capital investments, our global GDP would expand exponentially with the collateral benefits of wider popular inclusion in the global economy, with its inherent and concomitant advance in global social cohesion.
Melvin Hardy, Columbia SIPA, 1975
- Steve Hurst Aug 17, 2017
  
  Melvin
  
  If the issue is inequality driving economic flatlining then the answer is redistribution. For redistribution to occur sources have to be identified and secured and that is the first problem in an environment of widespread interconnectivity and ease of capital flow. Then you have to have a socially acceptable redistribution model,the second problem. Neither mechanisms exist. Growth under rising inequality will not resolve the problem and its a very real problem
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