The new economy and Global liquidity?
The new economy in America, is build on mass distribution technology, flexible labor structure, and modern business management technology (Refocus and re-engineering). The theory is demand side economy is all the economy, and that is obsolescense and replacement. The supply side is the production and service capacity which we build. Not goverment spending. The welfare system the government provided is the foundation of a minimum economy. Then capitalism system can build upon that bare existance economy.
Without the safety net provided by governments, the global economy can not perform seamlessly. Famine and poor, peace can not exist. Revolutions started in the 18-19th century, just to get better livelihoods. So, why should it be different today?
We now have more experience, in providing for people who at one time or another, fell in bad times. But, looking around the world, you see government of a dictator nature still uninformed. They still try to wipe out hunger with guns. They could, but who wants to be the last man on earth, without the society to provide the neccessities of life. Man can not live on an island alone. We depend on each other.
Global liquidity has been changed to money wired here and there at any instance. Control on the borders of each country is not effective any more. One day money pours in, the next day money can all be withdrawn. How can any one be safe? Self sufficiency! If liquidity is sufficient inside your own border, then, small portion of money flowing in and out is no big deal.
How do countries cotrol liquidity, steady currency exchange rates. Fluctuation invite people to gamble with your currency, and can cause an inbalance. Interest rates often were thought to be a liquidity control factor, by attracting foreign investors. In reality, interest rate attraction soon becomes ineffective, because investors seldomly have surplus liquidity. If they do, they are fickle. Next interest rate change will get all those surplus money. England has been raising interest rates to attract investors, so far they kept on repeating interest rate increases and only got bad results for their economy. The sin of high costs of money will show up, sooner than a year or two. |
