Archive for April, 2011

BretonWoods outlook dark for America

Friday, April 15th, 2011

The George Soros-backed Institute for New Economic Thinking’s just-concluded Bretton Woods weekend conference of leading economists didn’t actually focus on America’s future, but the sum of the discussions produced a pretty grim outlook.

The current political and cultural polarization of the country was seen as probably worse today than at any time since the outbreak of the Civil War exactly 150 years ago. The geography of this polarization is also similar to that of the Civil War period and the issue of a powerful federal government versus states’ rights remains pretty much the same.

The polarization today is being propagated by wealthy and powerful elements on Wall Street and elsewhere that fund bitter, attack dog politics and sharply polarized media commentary.

The power of big financial and corporate lobbies is such that they overwhelm reform efforts with huge lobbying campaigns. The effort to regulate the banks and establish accountability for them has failed to a large extent. The Dodd/Frank law that is supposed to re-regulate the banks fails badly because the reform of the banks to date has involved actually making them bigger and fewer. The biggest 50-odd institutions are being designated as too big too fail, but are not being subjected to any rigorous or vigorous oversight and regulation.

By dint of being understood to be too big to fail these banks are effectively in a position to “short” the government, meaning that they can essentially force the government to subsidize them by pursuing risky investment policies that the government must then support. The cost of capital of the big boys is lower than that of the medium and smaller fry by reason of the “too big to fail” designation. Thus, they will eventually squeeze the other banks out of the game. So bye bye community banking and ever getting to a real person at the end of the endless telephone menus.

But it gets worse. Americans are far too indebted and are trying to repair their personal balance sheets and cutting consumption to pay down debt. But this is retarding recovery and forcing the government to spend more in order to keep some kind of growth going and unemployment falling. To avoid falling back into recession, the government spending will have to continue for quite some time. But this will exacerbate the U.S. trade and current account deficits and increase overseas dollar holdings.

The rest of the world is pretty strongly dedicated to export-led growth. The Germans are forcing the rest of Europe to deflate and the only way for Europe to get any growth is through exports. China says it wants to rebalance its trade and focus more on domestic consumption led growth. It’s nice that China wants to do this, but it will be extremely difficult if not impossible in practice for China actually to reverse its export led policies.

The result is likely to be a continued shift of the production of tradable goods and the provision of tradable services outside of the United States to off-shore locations.

These trends will see a continued erosion of America’s ability to provide a good, middle class standard of living at home and to extend security abroad.

The really smart people have already put their wealth in gold bars and moved to New Zealand.

To the original:

Blog Status

Friday, April 1st, 2011

Friends, it has been a time of huge change for me.   On February 22nd, the city of Christchurch in New Zealand, where I’ve lived since November of 2009, was devastated by a 6.3 earthquake just under the city.   My apartment was rendered unlivable and my work building was also judged unsafe to enter.

It’s been a trial and a time of new beginnings and endings.

My wife of 20+ years, Sharon, and I decided to complete our divorce action which has been sitting open and uncompleted since July of 2009.  We’d no sooner decided this on February 21st, than the earthquake occurred here the next day and my southern world world was tuned upside down as well.

Tomorrow, I get on a plane and fly back to the US for the first time in nearly 18 months for a month’s visit.   I’ll be seeing friends and family all up and down the US west coast.  And, on April 26th, I’ll be sitting down with Sharon in her lawyer’s office near Seattle to complete the divorce action.

This is not how I ever expected or wanted our marriage to turn out – but, there it is.   Life is nothing, if not change and, endings lead to new beginnings.

So, there’s some grieving for what I’ve lost, both in that marriage and here in the city of Christchurch and there are some new beginnings.

My urge to write and to Blog will return – is returning – and I will start this up again.

My best wishes to all.