Global Economic Vandalism? by Karl Denninger
The Market Ticker
Sunday, February 1. 2009
Posted at 16:40
Global Economic Vandalism?
Grrrrr.......
From the FT today:
The odious US House of Representatives has tagged a Buy American clause onto the Obama administration’s $819 bn (or more) fiscal stimulus bill. If this were to become law, US federal spending would, wherever possible, be restricted to goods and services produced by US companies. The main promotors of this act of global economic vandalism was the US steel industry, but other import-competing industries have lobbied also. It is quite likely that the Buy American net will be cast even more widely when the Senate gets its turn at the fiscal stimulus act.
There is little doubt that the Buy American provisions of the Economic Stimulus Package were to become law, this would amount to an economic declaration of war to the rest of the world. The response of the assembled non-US finance ministers in the Davos made this clear. Retaliation from the EU countries and the rest of the world would follow swiftly. tinyurl.com
Oh really? And with what would they retaliate?
More import tariffs? Like we already have "free and open trade" with places like China, where they're free to export to us and yet our producers face roadblock after roadblock in trying to export to them?
Is not a big part of the current mess a direct consequence of the mercantilism of China, India and many other "low-cost" producers in the world?
Let's define "low-cost" a bit, shall we?
"Low cost" is achieved by paying people the equivalent of 25 cents per hour, while their daily food costs the local equivalent of $3. This has the effect of forcing these workers into company-run barracks because otherwise they can't afford toilet paper to wipe their butt with. They sew us a pair of jeans which we buy for an hour's wages in the United States, but that same pair, sold there, costs them a month's wages. And after luring these employees to the factories they take over their former farmland and destroy it with pollution and industrialization, effectively creating a slave labor class exactly as we did in America during the 1700 and 1800s on the Plantations.
Global free trade eh? Uh, not quite. These same nations have a hodge-podge of subsidies for local producers for their economy, thereby making import from us either uneconomic or, when they can't manage it that way, they put procedural, capital control and other hurdles up that make "free trade" a [n]joke going the other direction.
"Buy American" is perfectly legitimate for government spending in an economic stimulus bill. After all, is not the essential purpose of such a bill to stimulate OUR economy? It is not to stimulate the economy of CHINA, is it?
Those who argue otherwise are in fact arguing that the US Taxpayer subsidize foreign manufacturers. Why would such an argument be made? Because those nations and producers overplayed their hand, overplayed their influence and simply went too far in all things, including an over-reliance on those exports in their national economic model.
Now they are in a vise of their own making as they were full and willing participants in blowing a credit bubble through "sterilization" of foreign receipts - rather than grow their own internal consumption they took the path of least resistance to faux prosperity, just as we did, and are now howling at having to face the costs that have come about as a consequence.
We are in a global mess but the solutions are not found in continuing the stupidity that brought us here. The simple fact of the matter is that if The United States is going to come out of this we must return to the undeniable economic fact that prosperity can only come about from manufacturing, mining and growing things, because the only "free lunch" that exists is found in energy that comes from The Sun.
All other claims of being able to "create value" are in fact false. They are a chimera and fraud, and those who perpetrate such frauds must be brought to account for their lies.
The author, however, hasn't confined his stupidity to matters of trade. He has this to say on monetary policy:
"Given the dismal prospects for real economic activity and the sharp decline of inflation everywhere, the task of the monetary authorities in the US, the Eurozone and the UK is really rather easy: set the official policy rate at zero and engage in large-scale quantitative and qualitative easing."
So the drunk needs more booze eh? You do realize that he's puking up blood and his liver enzyme levels are off the charts, yes?
One more drink may well do him in, but by God, that's your prescription. Just lever it up, pour on the drugs, make it all "feel ok" - never mind that in doing so you will kill the host!
This sort of nonsense is all too common among so-called "economists", and it is dead flat wrong. We cannot solve our economic problems with more of what got us into trouble in the first place, and those who argue for such need to find themselves among the unemployed along with the "Wizards of Finance" that exploited the bubble through fraudulent ponzi-finance schemes that are now all collapsing into a pile of rubble.
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