by Staff (of Daily Bell) Report
hat tip: Daily Bell
Monday, March 15, 2010
China has succumbed to hubris. It has mistaken the soft diplomacy of Barack Obama for weakness, mistaken the US credit crisis for decline, and mistaken its own mercantilist bubble for ascendancy. There are echoes of Anglo-German spats before the First World War, when Wilhelmine Berlin so badly misjudged the strategic balance of power and over-played its hand. Within a month the US Treasury must rule whether China is a “currency manipulator”, triggering sanctions under US law. This has been finessed before, but we are in a new world now with America’s U6 unemployment at 16.8%. “It’s going to be really hard for them yet again to fudge on the obvious fact that China is manipulating. Without a credible threat, we’re not going to get anywhere,” said Paul Krugman (pictured left), this year’s Nobel economist. China’s premier Wen Jiabao is defiant. … “Some say China has got more arrogant and tough. Some put forward the theory of China’s so-called triumphalism’. My conscience is untainted despite slanders from outside,” he said. Days earlier the State Council accusing America of serial villainy. “In the US, civil and political rights of citizens are severely restricted and violated by the government. Workers’ rights are seriously violated,” it said. “The US with its strong military power has pursued hegemony in the world, trampling upon the sovereignty of other countries and trespassing their human rights,” it said. “At a time when the world is suffering a serious human rights disaster caused by the U.S. subprime crisis-induced global financial crisis, the U.S. government revels in accusing other countries.” And so forth. Is the Politiburo smoking weed? – UK Telegraph
Dominant Social Theme: The Chinese are acting uppity. Too bad for them.
Free-Market Analysis: So China and the West are headed for a protectionist spat over an under-performing yuan? We have some difficulty believing this. China and America in particular have a 21st century symbiotic relationship, though the hostile posturing may be helpful to the political classes. In fact, the rhetoric has apparently been kicked up a notch, according to the Telegraph, as follows: “Beijing [has shown a] willingness to up the ante. It has vowed sanctions against any US firm that takes part in a $6.4bn weapons contract for Taiwan, a threat to ban Boeing from China and a new level of escalation in the Taiwan dispute.”
hat tip: Mises Daily
by Jonathan M. Finegold Catalan
Friday, March 05, 2010
With the United States and much ofEurope buried in public debt, many wonder how world governments will solve their impending budgetary crises. The economics profession has split into two camps: those who promote more spending; and their opponents, the “deficit hawks.” The spenders have been the more vocal, largely due to their dominance in mainstream academia.
Keynesian economists, like Paul Krugman, argue that growing debt will not be a problem given that large government debts are not unprecedented. For example, Krugman argues that the United States ran large debts during the Second World War and was able to pay them off after the war ended. This Princeton professor and Nobel laureate also argues that, because the United States is one of many countries piling up debt, its public debt is justifiable and tenable.
Paul Krugman conveniently leaves out, or fails to apply, some key details. Regarding the Second World War, he notes that the debt was paid off largely because of a cut in government spending. He fails to account for the fact that the most dangerous factors behind the current debt are “unfunded liabilities” — the future costs of welfare and social-insurance programs. As for those other countries building debt, they are also looking at political uncertainty and almost-certain economic collapse.
CARD CHECK: “You have nothing to lose but your chains”
By Mike Whitney
URL of this article:
Global Research, December 9, 2008
Even though the Federal Reserve is now the biggest single participant in the financial system, the myth of a “free market” still lingers on. It’s mind boggling. The Fed has expanded its balance sheet by $2 trillion, guaranteed $8.3 trillion of dodgy mortgage-backed paper, provided a backstop for bank deposits, money markets, commercial paper, and created 8 separate lending facilities to ensure that underwater financial institutions can still appear to be solvent. The whole system is a state subsidized operation buoyed on a taxpayer-provided flotation device which bears no resemblance to an invisible hand. More astonishing, is the massive power grab engineered by the Fed which has taken place without the slightest protest from 535 shell-shocked congressmen and senators. Elected officials have either kept their finger in the air to see which way the political wind is blowing or timidly caved in to Treasury’s every multi-billion dollar demand. It’s flagrant blackmail and everyone knows it. Congressional oversight is an oxymoron.
Anyone who has followed the financial crisis from its origins knows that the Fed’s bloody fingerprints are all over the crime scene. Still, that hasn’t stopped well-meaning liberal economists (Krugman, Stiglitz, Reich) from supporting Bernanke’s increasingly unorthodox attempts to flood the financial system with liquidity (“quantitative easing”) and invoke whatever radical strategy pops into his head. In fact, many of the experts believe that Bernanke should do even more given the sheer size of the meltdown. There’s growing support for a gigantic stimulus package ($700 billion) which will focus on road construction, infrastructure, state aid, extensions to unemployment benefits and green technologies. The Obama camp hopes that government programs and deficit spending will make up for the huge losses in aggregate demand which threaten to drag prices down even further in a self-reinforcing deflationary cycle. Even so, its natural to wonder at the wisdom of giving even more power to the very people who created the mess to begin with and who seem more interested in proving their depression-fighting theories than throwing a lifeline to struggling homeowners, consumers or auto workers. Maybe its time to try something different.