***Paul Krugman summary = will you lose your shirt*** "Can it happen to us?" He asked, meaning, will the USA suffer a crisis like the Asian mess? He tended to include Europe in "us". Though he said USA has special differences such as high immigration, a higher birthrate and the resulting demographic impetus, whereas Europe has a profile more like Japan's. The USA also has low unemployment.
Going over my minimal notes:
He discussed 'multilateral man'. The United Nations ideal. "We need to co-operate to co-ordinate and co-ordinate to co-operate" - a jestful comment about the idea. The internationalist idea. But he pointed out the linkages to the USA economy are tenuous.
He discussed the possible spillover effects between USA and outside influences. 2% of GDP in the USA is external trade so the economies are very separate. Even with various multipliers, it is hard to get a direct economic dependency of significant proportions. There has been an idea, he said, that countries would competitively print money, or devalue, but again, the linkages are tenuous at best - they can operate quite independently. He commented that before the Nikkei crash from 38000, the Japanese and USA stockmarket capitalisations were about equal. Now the USA is about 10 times the size. So the two were not linked in stock market values.
He said there could be a psychological link if there is a big crunch. Sheer fright at looking over the neighbour's fence causing pointless panic on the other side.
There are few targets of weakness evident in the USA economy. But he made a comment to suit our earlier discussion here, to the effect that the blind spot that matters is the one you can't see! Shades of Zen again. So maybe, he said, he doesn't see the blind spot which matters. Just as the pre crisis Asian economies seemed okay to most.
The bottom line of "can it transfer to us" in a domino effect was NO!
Part II was can it self create elsewhere?
Japan has demographics as a driving force of decline. To prove my economic erudition, I should hasten to point out that I was belabouring this point several months ago! Anyway, back on what HE said. Japan has a doctrinaire central bank. They got, despite all you would think, a liquidity crisis.
Europe has similar economic value to the USA. Demographics, savings and a doctrinaire central bank, with the ECU forming, similar to Japan.
The USA has high birth rates, immigration and an undoctrinaire central bank, despite, he said, Alan Green$pan's early support for Ayn Rand's ideas [which he seemed to think was a negative aspect of a person's resume]. So quite different from Japan and Europe.
He was keen to see an unorthodox monetary policy and an unravelling of the IMF approach. However, he suffered the "radicalizing event" in June when the USA intervened to support the Yen. Which he emphasized, has since reverted to it's original low state. The rationale for intervention was to avoid a domino effect, especially while Clinton was in Peking [my word; he says Beijing = I'm sick of people changing names]. The policy was aimed at trying to control investors [which he joked about and finally used the word speculators]. But this was not aiming at the macro necessities.
They were behaving like the 1930s finance ministers who defended the gold standard to the cost of overall policy.
Global deflation? Up until his radicalizing event he thought NO! It would need "serial and parallel stupidity". But now? He thinks the mindset is easy to fall into which would create it. It could happen if attention is focused on symbolic things like exchange rates.
So, "Could it happen here"? "YES!"
And suddenly the lecture was over. Of course there had been a lot more explanation, enlargement, modest self-effacement, jokes plus some uninteresting questions at the end.
He said that USA money flowing into Korea or others couldn't be highly effective because of political and cultural barriers. Contrary to how I had thought the situation would evolve. I guess he is more likely to be right and so far, he has been, because Korea is still in a huge hole and Qualcomm hasn't announced a bargain basement buy of the cdma industry in Korea using freshly printed SuperDs on loan from Alan G$pan.
Maybe he is also right that the Fed and Japan between them will act incorrectly and deflation will be real, despite the necessary condition of prior serial and parallel stupidity. That bowls another underpinning of how I thought it would play out. I'd thought the USA would remain unconnected for the reasons he gave, only 2% GDP linkage etc. But with over the neighbour's fence panic combined with serial and parellel stupidity it looks as though that is more related to wishful thinking than the most likely outcome.
Bloody hell, my new paradigm is looking to be in tatters if he is right. And he has only thought it since June. And he is the MIT hotshot!
But I'm sticking with my pal Alan Green$pan being a good guy. No way is he going to get tangled up with trying to defend currency levels. Let Soros do his palindromic thing.
Krugman said that there hadn't been another definitive case of speculators causing a stampede from which they profited, despite Mahathir's claims over Malaysia's mess. But with Soros warning about Russia right now and the 10% drop in the Russian Nasdaq, maybe that is the second episode before us now.
He also said there was a simple solution for Japan's problems. I think it was benign neglect, but he went on to emphasize how they would get locked into mucking things up via their doctrinaire reserve bank.
But even if he is right and June represented a big fat warning flag. Even if Qualcomm isn't buying up Korean cdmaOne interests on new SuperDs from Alan Green$pan. Even if the money supply has been growing slowly lately. I'm sticking with the USA as the focal point of the new technological world, with secure political, financial, legal, military, demographic and economic parameters, inhabited by civilized, [for the most part], educated and reliable people.
So, [I'm just listening to Tarken saying "Three cheers for Microsoft" who have the best Japanese in a pc! "It is the dopest thing I ever saw". Best on the Web via Explorer. Check it out:
snowadventures.co.nz
Eat your heart out Chris {Reeder!}]
Anyway, so, I reckon:
New paradigm rulz still ok
Dow 16000 Feb 2002
Dow 8000 Feb 1998
Q.com ummmm, well, okay, $80 31 August 1998.
But you better not be sitting on too much margin over the next few months. Oh hell, I hope not, but maybe even the next year or two....
Mqurice
PS: And oil is only $11 a barrel for Dubai traded. Puters are cheap. cdmaOne is avalanching as we speak. The sun is out. The sky is blue. SiGe, optical computing, etc etc.... |
