Henry Adams reflected on changes in America in about 1904: “The American boy of 1854 stood closer to the year 1 than to the year 1900.” Charles Eliot commented on the range of knowledge among some Americans in 1854: “We are accustomed to seeing men leap from farm or shop to court-room or pulpit, and we half believe that common men can safely use the seven-league boots of genius.” Those days are long gone.
As VDH says, and as we have written as well, Americans don’t know much about the world that existed in the days of Adams and Eliot. The world seems magic now, because of technology; it hardly was magic back then.
The ignorance is not just sad, it’s actually perilous. To take a mundane example, technology has permitted the elimination of inventory everywhere in the global supply chain. How large are the buffer inventories of gasoline, fruits and vegetables, meat, canned goods, and so forth, in case some serious disruptions should occur? A month or two, like the SPR? What happens when the gas and the cheeseburgers run out after that?
Charles Eliot advocated a new curriculum in higher education that focused on specialization. This time in our view would benefit by more respect for the generalist of 1854. It is colossally arrogant to think that there will not be a breakdown in the supply chain at some point. And the consequences of arrogance are not pretty. If there’s a Plan B for the US in such a crisis, we haven’t heard of it. And offshoring so much of America’s needs to foreign lands heightens the risks in our perilous present.
Charleston wants to deepen its port by 5 feet. George Will:
The first container ship reached Charleston in 1966, carrying 600 containers. Today the port receives ships carrying more than 9,000. By 2014 there will be 1,200 “post-Panamax” ships — marvels of naval architecture, floating mountains — built for commerce after the canal widening. They will carry up to 18,000 containers. The widening, says Jim Newsome, CEO of the South Carolina State Ports Authority, will be “the biggest game-changer in the history of containerization”…70 percent of imports from Asia arrive at West Coast ports and are distributed inland by truck and rail. But shipping is the cheapest transportation per mile and will become cheaper with post-Panamax ships, including those coming here.
Newsome says the study for deepening Savannah’s harbor was made in 1999. It is 2012, and studies for the environmental impact statement are not finished. When they are, the project will take five years to construct. “But before that,” he says laconically, “they’re going to be sued by groups concerned about the environmental impact.” A Newsome axiom — that institutions become risk-averse as they get challenged — is increasingly pertinent as America changes from a nation that celebrated getting things done to a nation that celebrates people and groups who prevent things from being done.
Newsome says that because of labor costs — in constructing and crewing ships — America has essentially no deep-sea shipping industry. This is a facet of the de-industrialization of the nation.
“China is expecting foreign trade growth to slow this year to around 10 percent amid a grim outlook for exports…Last year, China’s foreign trade grew 22.5 percent to $3.6 trillion…exports in December rose 13.4 percent, down slightly from November’s growth rate.” And from Bloomberg, “Growth may ‘trough’ at 7.5 percent in the three months through March and 7.6 percent in the second quarter.”
According to the BLS, the “labor force participation rate” — the ratio of the number of people either working or looking for work compared with the entire working-age population — is now 64%, down from 65.7% when the recession ended in June 2009. That’s the lowest level since women began entering the workforce in far greater numbers several decades ago. If you adjust for this drop, the unemployment rate would be close to 11%, instead of the official 8.5%.
The drawdown is not occurring in a vacuum, but is the bookend of a loud new ‘reset’ / ‘lead from behind’ strategy that deprecates traditional allies like Britain and Israel while failing miserably in outreach to supposedly new neutrals like Syria and Iran — all in a landscape of bowing, apologizing, and Cairo speechifying. All of these developments serve as force multipliers to the military retrenchment and confirm the impression of our enemies that the world is now entirely negotiable in a way not true four years ago.
The unspoken irony is that the military and our anti-terrorism protocols served Obama well when he arrived: he found a quiet Iraq with almost no monthly American casualties, a decimated al Qaeda (largely destroyed in Iraq), anti-terrorism measures that had foiled over 30 plots against the mainland (and were all demagogued by candidate Obama before President Obama embraced them), major powers like China, Russia, and Iran wary of pressing the U.S., allies like Japan, Taiwan, Germany, and South Korea secure under the U.S. nuclear umbrella, and the most seasoned and experienced U.S. military in generations…
The new $500 billion cuts must be considered against the nearly $5 trillion Obama has borrowed since assuming office, in addition to what he will borrow this next year. A defense budget that was tolerable prior to 2008 becomes apparently unsustainable with expenditures for Obamacare, vast new green projects like Solyndra, expansions in food stamps and unemployment insurance, and vast increases in the size of the non-military federal government. At least with the military our money earns safety and deterrence
The college professor continues his work. It’s as though the country elected not Jimmy Carter, but George McGovern. In any event the choice couldn’t be clearer this year. An America that might choose a McGovern administration is both unfathomable to us and, sadly, possible.
millions of Americans remain unaware that this nation is broke –- broker than any nation has ever been. A few days before Christmas, we sailed across the psychological Rubicon and joined the club of nations whose government debt now exceeds their total GDP. It barely raised a murmur -– and those who took the trouble to address the issue noted complacently that our 100 percent debt-to-GDP ratio is a mere two-thirds of Greece’s. That’s true, but at a certain point per capita comparisons are less relevant than the sheer hard dollar sums: Greece owes a few rinky-dink billions; America owes more money than anyone has ever owed anybody ever.
Public debt has increased by 67 percent over the past three years, and too many Americans refuse even to see it as a problem. For most of us, “$16.4 trillion” has no real meaning, any more than “$17.9 trillion” or “$28.3 trillion” or “$147.8 bazillion.” It doesn’t even have much meaning…there is no politically plausible scenario under which the 16.4 trillion is reduced to 13.7 trillion, and then 7.9 trillion and, eventually, 173 dollars and 48 cents…
Our most enlightened citizens think it’s rather vulgar and boorish to obsess about debt. The urbane, educated, Western progressive would rather “save the planet,” a cause which offers the grandiose narcissism that, say, reforming Medicare lacks. So, for example, a pipeline delivering Canadian energy from Alberta to Texas is blocked by the president on no grounds whatsoever except that the very thought of it is an aesthetic affront to the moneyed Sierra Club types who infest his fundraisers. The offending energy, of course, does not simply get mothballed in the Canadian attic: The Dominion’s Prime Minister has already pointed out that they’ll sell it to the Chinese, whose Politburo lacks our exquisitely refined revulsion at economic dynamism and, indeed, seems increasingly amused by it…
Last January, the BBC’s Brian Milligan inaugurated the New Year by driving an electric Mini from London to Edinburgh, taking advantage of the many government-subsidized charge posts en route. It took him four days, which works out to an average speed of 6 miles per hour – or longer than it would have taken on a stagecoach in the mid-19th century. This was hailed as a great triumph by the environmentalists.
Steyn goes on to talk about the regulatory sclerosis that afflicts the country and is so evident over the march of decades. Of course it’s not all bleak. Some companies in the tech sector continue to show impressive growth. But the heavy lifting of massive job creation can’t occur unless government stops its spending binge and gets out of the way of business. 2013 can’t arrive fast enough.
Henry Miller reads from Black Spring. The narrator has been tasked with bringing his Aunt to the asylum:
It always seemed astounding to me how jolly they were in our family despite the calamities that were always threatening. Jolly in spite of everything. There was cancer, dropsy, cirrhosis of the liver, insanity, thievery, mendacity, buggery, incest, paralysis, tapeworms, abortions, triplets, idiots, drunkards, n’er-do-wells, fanatics, sailors, tailors, watchmakers, scarlet fever, whooping cough, meningitis, running ears, chorea, stutterers, jailbirds, dreamers, storytellers, bartenders — and finally there was Uncle George and Tante Melia. The morgue and the insane asylum.
No one knew that Tante Melia was going completely off her nut, that when we reached the corner she would leap forward like a reindeer and bite a piece out of the moon. And nobody could think quick enough to stop it. Just like that it happened. In the twinkle of a star. And now I’m going to tell you what those bastards said to me…
They said — Henry, you take her to the asylum tomorrow. And don’t tell them that we can afford to pay for her. Fine! Always merry and bright! The next morning we boarded the trolley together and we rode out into the country. If Mele asked where we were going I was to say – “to visit Aunt Monica.” But Mele didn’t ask any questions. She sat quietly beside me and pointed to the cows now and then. She saw blue cows and green ones. She knew their names. She asked what happened to the moon in the daytime. And did I have a piece of liverwurst by any chance?
During the journey I wept — I couldn’t help it. When people are too good for this world they have to be put under lock and key. There’s something wrong with people who are too good. It’s true Mele was lazy. She was born lazy. It’s true that she was a poor housekeeper. It’s true she didn’t know how to hold on to a husband when they found her one. When Paul ran off with the woman from Hamburg she just sat in a corner and wept. The others wanted her to do something — put a bullet into him, raise a rumpus, sue for alimony. But Mele sat quiet. She wept. She hung her head. She was like a pair of torn socks that are kicked around here, there, everywhere. Always turning up at the wrong moment.
And now she’s very tranquil and she calls the cows by their first name. The moon fascinates her. She has no fear because I’m with her and she always trusted me. I was her favorite. Even though she was a halfwit she was good to me. The others were more intelligent, but their hearts were bad.
Sometimes when she was fired from a job they used to send me to fetch her. Mele never knew her way home. And I remember how happy she was whenever she saw me coming. She would say innocently that she wanted to stay with us. Why couldn’t she stay with us? I used to ask myself that over and over. Why couldn’t they make a place for her by the fire, let her sit there and dream, if that’s what she wanted to do? Why must everybody work -– even the saints and the angels? Why must halfwits set a good example? I’m thinking now that after all it may be good for Mele where I’m taking her. No more work. Just the same, I’d rather they had made a corner for her somewhere.
Walking down the gravel path toward the big gates Mele becomes uneasy. Even a puppy knows when it is being carried to a pond to be drowned.
And here we are today at the end of 2011. Is the country better or worse off? Of course materially much better off — but consider Miller’s first paragraph above. Look at how robust that writing is and how much our discourse has been dumbed down, self-censored, and made purposefully vague today. Here’s to better luck in 2012! HT: MS
Addendum: China is about 100 years behind the USA’s trends in urbanization and agricultural employment. They’re about where we were at the start of WWI, with some notable differences due to technology. Given the vast changes that have taken place and the vast changes that lie ahead, it’s hard to imagine where this country and China will be in another century.
From 1960 to 2010, the share of federal spending going for “payments to individuals” (Social Security, food stamps, Medicare and the like) climbed from 26 percent to 66 percent…
falling military spending — from 52 percent of federal outlays in 1960 to 20 percent today…
In 1960, federal taxes were 17.8 percent of national income (gross domestic product). In 2007, they were 18.5 percent of GDP…
the Forbes 400 richest Americans have a collective wealth of $1.5 trillion. If the government simply confiscated everything they own, and turned them into paupers, it would barely cover the one-time 2011 deficit of $1.3 trillion…
Obama has provided no leadership. Aside from Rep. Paul Ryan, chairman of the House Budget Committee, few Republicans have.
It looks like Mr. Samuelson is writing a contemporary history of America’s financial Armageddon. He has already done the chapter comparing US debt levels to those of the PIIGS. He’s already done the chapter on the ruinous healthcare law, though he was careful to put his criticism in the third person. His criticism of politicians is bi-partisan, but it seems clear enough that he has stronger feelings than he is willing to share in print.
Greece has a spending problem, a revenue problem, something along those lines, right? At a superficial level, yes. But the underlying issue is more primal: It has one of the lowest fertility rates on the planet. In Greece, 100 grandparents have 42 grandchildren – i.e., the family tree is upside down. In a social democratic state where workers in “hazardous” professions (such as, er, hairdressing) retire at 50, there aren’t enough young people around to pay for your three-decade retirement. And there are unlikely ever to be again.
Look at it another way: Banks are a mechanism by which old people with capital lend to young people with energy and ideas. The Western world has now inverted the concept. If 100 geezers run up a bazillion dollars’ worth of debt, is it likely that 42 youngsters will ever be able to pay it off? As Angela Merkel pointed out in 2009, for Germany an Obama-sized stimulus was out of the question simply because its foreign creditors know there are not enough young Germans around ever to repay it. The Continent’s economic “powerhouse” has the highest proportion of childless women in Europe: one in three fräulein have checked out of the motherhood business entirely. “Germany’s working-age population is likely to decrease 30 percent over the next few decades,” says Steffen Kröhnert of the Berlin Institute for Population Development. “Rural areas will see a massive population decline, and some villages will simply disappear.”
If the problem with socialism is, as Mrs. Thatcher says, that eventually you run out of other people’s money, much of the West has advanced to the next stage: it’s run out of other people, period…
In Italy, the home of the Church, the birthrate’s somewhere around 1.2, 1.3 children per couple – or about half “replacement rate.” Japan, Germany and Russia are already in net population decline. Fifty percent of Japanese women born in the Seventies are childless. Between 1990 and 2000, the percentage of Spanish women childless at the age of 30 almost doubled, from just over 30 percent to just shy of 60 percent. In Sweden, Finland, Austria, Switzerland, the Netherlands and the United Kingdom, 20 percent of 40-year old women are childless. In a recent poll, invited to state the “ideal” number of children, 16.6 percent of Germans answered “None.”
In China and India, the birthrate of boys to girls is as high as the unnatural ratio of 1.2-to-1, a formula for mischief up to and including war. So Western Europe is broke and disappearing, and the two largest countries on the planet are overdosing on testosterone. We don’t know what this adds up to, but it doesn’t look too good.
The key to understanding the impact of taxes on the economy is to focus on tax rates, particularly marginal tax rates, defined as the tax rate that applies to the last dollar earned. The tax rate determines how much the producer is allowed to keep out of what he or she produces. For example, at a 25% tax rate, the producer keeps three-fourths of his production. If that rate is increased to 50%, the producer keeps only half of what he produces, reducing his reward for production and output by one-third. Incentives are consequently slashed for productive activity, such as saving, investment, work, business expansion, business creation, job creation, and entrepreneurship. The result is fewer jobs, lower wages, and slower economic growth, or even economic downturn.
In contrast, if the tax rate is reduced from 50% to 25%, what producers are allowed to keep from their production increases from one-half to three-fourths, increasing the reward for production and output by one-half. That sharply increases incentives for all of the above productive activities, resulting in more of them, and more jobs, higher wages, and faster economic growth. Moreover, these incentives do not just expand or contract the economy by the amount of any tax cut or tax increase, as a Keynesian stimulus purports to do. For example, a tax cut of $100 billion involving reduced tax rates does not just affect the economy by $100 billion. The lower tax rates affect every dollar and every economic decision throughout the economy. That is because every economic decision is based on the new lower tax rates…
Similarly, regulations impose increased costs on businesses and consumers, and sometimes flat out prohibit productive economic activity altogether. See, e.g., the Keystone pipeline. Academic studies estimate the total costs of regulation in the economy to be rapidly rising towards $2 trillion per year, or $8,000 per employee. That is close to 10 times the corporate income tax burden, and double the individual income tax. When the resulting effects on the economy are considered, the total losses due to regulatory burdens may total $3 trillion, or one fifth of our entire economy.
These regulatory burdens increase the cost of production, and consequently reduce the net return to the producers, reducing the reward for production quite similarly to taxes. They consequently also slash the incentive for production, reducing economic growth and prosperity. Alternatively, reducing regulatory burdens reduces the cost of production, increasing the net return to producers, and so adds to the incentives for production. The result is increased economic growth and prosperity…
These pro-growth, free market economic policies are the opposite of trickle down economics. They all involve decentralized markets, with prosperity welling up from the people to create a rich and prosperous nation.
We left out the partisan elements of Ferrara’s piece. What’s the point? Go into any faculty lounge in one of our top 50 universities, pick out a humanities professor at random, put him in the Oval Office, and you’d get pretty much what we’ve got now in terms of policy views. Add some Chicago-way thuggishness, and you have as bad a situation as the country has faced in many decades. WFB said “I should sooner live in a society governed by the first two thousand names in the Boston telephone directory than in a society governed by the two thousand faculty members of Harvard University.” He didn’t know the half of it.
The ECB has drastically lowered its standards for the collateral it accepts for these loans, so banks get to offload some very risky assets. The cash they’ll receive will generate a superficial improvement for banks — cash is considered the least risky asset to hold. But to move beyond a temporary solution banks have to lend the cash out in order to generate earnings. The cash itself would not earn enough interest to repay the 1 percent rate on the loans.
One of the most talked-about options for generating profits would be buying more European government bonds. European politicians and other advocates of this plan paint it as a win-win scenario. Banks generate earnings by purchasing higher yielding sovereign debt, such as Spain’s or Italy’s
So the ECB is accepting compromised collateral, possibly at par, and may encourage the banks to buy even more compromised debt. That’ll work! We flash back three years to the dark days of late 2008. The de-leveraging process still has a long way to go, and the can is still being kicked down the road.
banks snapped up €489 billion ($639 billion) in cheap loans from the European Central Bank on Wednesday, a sign of just how hard or expensive it has become to borrow from each other. The huge demand for newly available three-year loans comes as fears rise that heavily indebted European governments could default and force banks and other bond holders to take big losses…
The loans to 523 banks surpassed the €442 billion ($578 billion) in one-year loans extended in June 2009, when the global financial system was reeling from the collapse of the U.S. investment bank Lehman Brothers. It was the biggest ECB infusion of credit into the banking system in the 13-year history of the euro. The ECB wants banks to use the money to help pay off or refinance some €230 billion ($300 billion) in existing loans early in 2012…
it was far higher than the €300 billion ($392 billion) expected…”The good news is, the ECB’s efforts to increase liquidity are working,” said Jennifer Lee, an analyst at BMO Capital Markets. “The bad news is, high demand for the loans creates worries that banks are urgently in need of funds to boost liquidity.”
Let’s do some arithmetic. Much of the €489 billion goes to refinance some €230 billion coming due next month. So there’s €259 billion of net additional liquidity spread among 523 banks. Not that much on a per bank basis, but the largest amounts are no doubt concentrated in the largest institutions.
Still, this is a drop in the bucket, compared to some estimates of the needs of the banking system, and it does nothing at all to deal with the €2.6 trillion sovereign debt problem. Question: what happens when the debts begin to mature and liquidity starts coming out of the system?
North Korea’s young and inexperienced next leader will lean on a seasoned inner circle headed by his aunt and uncle to guide him through the transition to supreme ruler. Kim Jong Un, who vaulted into the leadership role with the death of his father, Kim Jong Il, made his public debut as anointed successor only 15 months ago. Since then, the whirlwind political campaign has barreled ahead…
The late Kim Jong Il had 20 years of preparation at the side of his father, North Korean founder Kim Il Sung, who died in 1994. Experts say that because Kim Jong Un doesn’t have that kind of experience, the youngest member of the political dynasty will need the brains and political brawn of his father’s closest confidants before formally taking power…
two close, trusted family members and political power brokers have emerged as Kim Jong Un’s main protectors: paternal aunt Kim Kyong Hui and her husband, Jang Song Thaek, who have risen to the top of North Korea’s political and military elite since the succession campaign began two years ago. Both 65, they also have the weight of seniority so important in a society that places a premium on age and alliances.
The AP joins Ted Turner and Eason Jordan in the big suck-up to just about the most vile place on earth. Probably better to quit than to write neutral-to-positive prose about a country that routinely starves its own people.
The eclipse of Keynesian economics proceeds. When Keynes wrote “The General Theory of Employment, Interest and Money” in the mid-1930s, governments in most wealthy nations were relatively small and their debts modest. Deficit spending and pump priming were plausible responses to economic slumps. Now, huge governments are often saddled with massive debts. Standard Keynesian remedies for downturns — spend more and tax less — presume the willingness of bond markets to finance the resulting deficits at reasonable interest rates. If markets refuse, Keynesian policies won’t work.
Countries then lose control over their economies. They default on maturing debts or must be rescued with loans from friendly countries, the International Monetary Fund (IMF), government central banks (the Federal Reserve, the European Central Bank) or someone. There are other reasons why Keynesian policies might fail or be weakened. But they pale by comparison with the potential veto now posed by bond markets. Ironically, the past overuse of deficits compromises their present utility to fight high unemployment.
There is no automatic tipping point beyond which a country’s debt — the sum of past annual deficits — causes bond markets to shut down. But Greece, Portugal and Ireland have already reached that point, with gross debt in 2011 equal to 166 percent, 106 percent and 109 percent of their national incomes (gross domestic product), according to IMF figures. Heavily indebted Italy and Spain could lose access to bond markets…
In 2012, the American budget deficit is projected at 7.9 percent of GDP; Greece’s is 6.9 percent; Italy’s 2.4 percent. In 2012, U.S. government borrowing — the deficit plus renewing maturing debt — is estimated to be 27 percent of GDP; Greece’s is 24 percent; Ireland’s 19 percent. On the plus side, the U.S. debt-to-GDP ratio is smaller than Europe’s worst. Also, a “safe haven” effect — reflecting the size of the U.S. economy and past political stability — contributes to America’s good fortune…
Americans seem to think they’re invulnerable to a bond market backlash. Economist Barry Eichengreen, a leading scholar of the Great Depression, is dubious: “Given low interest rates and the still-weak U.S. economy, it will be tempting for the U.S. government to continue running deficits and issuing additional debt. At some point, however, investors will recognize this behavior for the Ponzi scheme it is…If history is any guide, this scenario will develop not gradually but abruptly.”
We left out the parts where Samuelson tries to add balance to his article by citing the other side. It’s as though he wrote the piece for the edification of his fellow writers at the Washington Post who continue to believe that arithmetic doesn’t matter and that unfinanceable deficits are financeable if only we click our heels together three times. What part of EU can’t they understand? More evidence that even failed religions die hard.
as the Founders knew, it is unwise to give people more powers than you would like them to use. There ought to be a law, I think, that in order to regulate something you have to have some understanding of it. And when people are saying things like, “This is just the rogue foreign Web sites” and “This only targets the bad actors” and “So you want universities to host illegal pirated versions of copyrighted content?,” it’s enough to make you claw out large fistfuls of your hair. No! No! Nobody is hosting anything.
This bill would require service providers to cut off access to entire Web sites where users are deemed to be engaging in copyright infringement, not take down stolen content they posted themselves. That’s already against the law. But no one seemed to be able to express this. When you have a signed letter from the engineers responsible for creating the Internet pointing out that this bill would jeopardize our cybersecurity, balkanize the Internet and create a climate of uncertainty that would stifle innovation, it seems odd to ignore it.
As a general rule, when the people saying that this will have a horrible, chilling impact on something are the ones who created that thing in the first place, and the people who are saying, “Oh, no, it’ll be fine, it only targets the bad actors” are members of the Motion Picture Association of America, it seems obvious whose opinion you should heed.
The bill has now been amended to exclude .com, .net, and .org and only target those darned foreigners, which of course illustrates just how idiotic the bill is. Pirate Bay, anyone? Our question is this: why, after the horrible overreach of government during the past three years, is there a potential majority in Congress to give even more power to the government? Have these people learned nothing at all?
new home prices in Beijing fell 35pc in November from the month before…A fire-sale is under way in coastal cities, with Shanghai developers slashing prices 25pc in November – much to the fury of earlier buyers, who expect refunds. This is spreading. Property sales have fallen 70pc in the inland city of Changsa. Prices have reportedly dropped 70pc in the “ghost city” of Ordos in Inner Mongolia.
The growth of the M2 money supply slumped to 12.7pc in November, the lowest in 10 years. New lending fell 5pc on a month-to-month basis…The Shanghai index has fallen 30pc since May. It is off 60pc from its peak in 2008, almost as much in real terms as Wall Street from 1929 to 1933…
“There is so much spare capacity that they will start dumping goods, risking a deflation shock for the rest of the world. It no surpise that China has just imposed tariffs on imports of GM cars. I think it is highly likely that China will devalue the yuan next year, risking a trade war,” he said. China’s $3.2 trillion foreign reserves have been falling for three months despite the trade surplus. Hot money is flowing out of the country…
consumption has fallen from 48pc to 36pc of GDP since the late 1990s. Investment has risen to 50pc of GDP. This is off the charts, even by the standards of Japan, Korea or Tawian during their catch-up spurts. Nothing like it has been seen before in modern times…China is hooked on credit, but deriving ever less punch from each dose. An extra dollar in loans increased GDP by $0.77 in 2007. It is $0.44 in 2011.
That’s because so much of the debt has been poured into real estate projects and similar ventures that aren’t very productive. A fellow said: “every province in China is Greece.” We seem to be on the verge of finding out if that’s true.
Ambrose Evans-Pritchard in the Telegraph (here and here):
a flim-flam treaty? The deal is not a “lousy compromise”, said Angela Merkel. Well, actually that is exactly what it is for eurozone politicians searching for a breakthrough. It tarts up the old Stability Pact without changing the substance (although there will be prior vetting of budgets). This “fiscal compact” is not going to make to make the slightest impression on global markets, and they are the judges who matter in this trial by fire…
there is more discipline for fiscal sinners, but without any transforming help…There is no shared debt issuance, no fiscal transfers, no move to an EU Treasury, no banking licence for the ESM rescue fund, and no change in the mandate of the European Central Bank…there is no breakthrough of any kind that will convince Asian investors that this monetary union has viable governance or even a future…
the disaster was caused by current account imbalances (Spain’s deficit, and Germany’s surplus), and by capital flows setting off private sector credit booms. The Treaty proposals evade the core issue…
Europe will now have its austerity union, a revamped Stability Pact. Budgets will be vetted “ex ante”. Structural deficits will be capped at 0.5pc of GDP. Sinners will be punished automatically once they break the 3pc limit, and submit to suzerainty. Commissars will tell them how to treat trade unions, what to tax, and what to spend.
It is not remotely a fiscal union. There will be no joint debt issuance, no EU treasury, no shared budgets, and no fiscal transfers to regions in trouble. “The agreement hard-wires pro-cyclical fiscal austerity into the institutional framework of the eurozone, with no quid quo pro to move gradually to debt mutualisation.” said Simon Tilford from the Centre for European Reform.
As they rush from crisis to crisis, the Eurocrats don’t seem to be thinking of second and third order effects of what they are doing. (Let’s leave aside for the moment that the money may not be close to enough, and that the proposals don’t really have much to do with appeasing markets, since they apparently don’t like or care about markets much.)
What do you suppose happens if southern Europe has perennial austerity budgets imposed by Germany and France: (a) riots and civil unrest; (b) large migrations from the Hooverville countries to northern europe and hence unrest in the north; (c) things even worse than (a) and (b)? Final point: all this rushing around and there is no treaty — a first draft won’t be available until next week. What a mess.
I’m a very rich person. As an entrepreneur and venture capitalist, I’ve started or helped get off the ground dozens of companies in industries including manufacturing, retail, medical services, the Internet and software. I founded the Internet media company aQuantive Inc., which was acquired by Microsoft Corp. in 2007 for $6.4 billion. I was also the first non-family investor in Amazon.com Inc. Even so, I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate. That’s why I can say with confidence that rich people don’t create jobs, nor do businesses
Andy Stern gave Hanauer’s 2008 book a very positive review. Yep, that Andy Stern. Hanauer’s probably a fine fellow, but his Keynesian belief system is just wrong, particularly for our time and circumstances.
This graph is hard to read but it is worth focusing on. The black line is the ratio of employment to population. The percentage is to the left of the graph. It has stabilized at around 58.5%, though it is way below the peak of 64% in the late 1990′s. During the last decade, construction, technology, finance and service industries added jobs, but the US shed 7-8 million manufacturing jobs. Part of that makes sense, but is it really necessary that we now have 166,000 fewer jobs in the computer industry than we did in 1975, when the first PC shipped?
