Hi KJC! <<economic problems for the economies in a global leadership...play havoc with the economies of those countries not fortunate enough to survive only on domestic demands. America sneezes, and Argentina gets pneumonia...>> I will try to give the whole picture on a single page.
You are right if you are talking about the period from 1945 to 1972 with Japan/Europe reconstructing and the US economy booming as baby boomers were being raised, your view is correct. But no longer. In post war period, resources from all over the world (tin, iron ore, aluminum, natural rubber and oil to make a car or wood, petrochemicals, pulp and pear to make house) were hauled to be manufactured in what is today the economies in a global leadership position (EiGLP). That's why a sneeze on EiGLP caused peneumonia in the rest of the world.
There was real economic activity in the EiGLP in the post war period and there was need to employ capital there rather than elsewhere. Today there isn't real economic activity ion the EiGLP but they are still hogging capital to support consumption economy. See those USD1.4billion a day need to finance the deficit? Yes, this is capital being hogged.
Capital that could be more productively be employed in countries where infrastructure is needed, (and I am not talking about aid crap. I talk about capital being invested) is employed in building the next shopping mall rivaling a amusement park. Commodities are getting more expensive because the countries from which those commodities come from have not invested in the infrastructure to produce them.
Today if EiGLP stop hogging capital, and this capital is employed where it is needed, the container ships just sail to another harbor. The world will not grind to a halt if the EiGLP stop hogging capital to support private consumption.
Those countries in the periphery worked themselves against their own interests. Through state-distributivism and state owned infrastructure financed by multilateral agencies. Today, they can't no longer own infrastructure and those state owned enterprises are being privatized. Today they can't no longer afford state-distributivism.
State distributivism is 25 air force bases in the state of Texas for an example close to home, air force bases which 25% of them can be closed tomorrow morning without any effect on the US "defense" capabilities mind you. Or Clinton paying for the angora goat farmer subsidies for a state of a senator not to vote against him.
(Shit, I am the only guy in BBR who can tell everyone here. I know the fucking construct inside out and not just little pieces of it!!!)
Now if those countries in the periphery implement some clever economic policies, (like investing in basic education and abandoning universities on their on, stop piling up office space at the water front as these Asians love to do, open their economies and junking stupid local rules from which the local well connected can profit from and stop paying useless civil servants just to use them as an electoral corral. (An example of an electoral corral are 11% of the votes bought by the Germans in Bavaria by paying them farm subsidies)
By they way I will not mention nationalism, religiosism exacerbated (which MQ always talk about but doesn't know how it can go away) not because I forgot, but because basic education will take care of that. Any six years of education to women will do wonders to open the eyes of people that an army of Ph.Ds!!!
Now look to this:
Interest rates at a 40 year low, equities in the dumps, credit quality is improving, sovereign debt risk easier to identify (no country could do an Enron or WCOM), investment is going to the countries in the periphery. It could be just short-lived. (I never underestimate the capacity of those guys of fucking up) but it could set the trend of directing capital flow to the periphery and stop the hogging of capital by EiGLP.
It could even be Jay's TEOTWAWKI |
