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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: ManyMoose who wrote (300513)	4/10/2009 9:36:25 PM
From: KLP	Respond to of 793970

From Cato...It Didn't Start Here cato.org by Alan Reynolds Alan Reynolds is a Cato Institute senior fellow and the author of Income and Wealth. Added to cato.org on April 9, 2009 This article appeared in the New York Post on April 9, 2009. At the recent meeting of G-20 nations in London, officials from many nations agreed on one thing -- that the United States is to blame for the world recession. President Obama agreed, speaking in Strasbourg of "the reckless speculation of bankers that has now fueled a global economic downturn." One problem with this blame-game is that last year's recession was much deeper in many European and Asian countries than it was in the United States. By the fourth quarter of 2008, as the nearby table shows, real US gross domestic product was just 0.8 percent smaller than it had been a year earlier. The contraction was twice as deep in Germany and Britain and much worse in Japan and Sweden. In February, US industrial production was 11.8 percent lower than a year before -- while Singapore was down by 22.4 percent, Sweden by 22.9 percent and Japan by 38.4 percent. Like nearly every other recession of the postwar period, this one was triggered by a literally unbearable increase in the price of oil. cato.org What was the mechanism by which US problems were supposedly spread to other countries? It wasn't international trade. The dollar value of US imports didn't start to fall until August 2008, and imports of consumer goods didn't fall until September -- many months after Japan and Europe fell into recession. Indeed, most of the economies that fell first and fastest were not heavily dependent on exports to the United States. Even Japan accounted for just 6.6 percent of US merchandise imports last year, compared with 15.9 percent for both Canada and China -- whose economies fared relatively well. Even if all of the weakest European and Asian economies could plausibly blame all their troubles on the relatively stronger US economy, how could anyone possibly blame banks? There were no bank failures last year in Japan, Sweden, Canada or any other country on this list except Britain. And US and British banks didn't fail until September-October -- at least nine months after the Japanese and European recessions began. Yet it's clearly US/UK banks being fingered as the villains. German Finance Minister Peer Steinbrueck, for example, criticized an "Anglo-Saxon" attitude in America and Britain that encouraged risky lending and investment practices because of "an exaggerated fixation on returns." cato.org But Germany's GDP and industrial production was down 19.2 percent for the year ending in January -- versus an 11.4 percent decline in Britain and a similar US drop. Are we supposed to believe that German (and Japanese) firms are more dependent on US and UK banks than American and British firms? Another problem with blaming the United States is that the timing is all wrong. If the US recession had simply spread to other countries like a mysterious infection, shouldn't the US economy have been the first to start contracting? Yet US industrial production only started to decline from its peak after January 2008 -- long after production began to slow in Canada (July 2007), Italy (August 2007), France (October 2007) and the Euro area as a whole (November 2007). Aside from a one-month uptick in February 2008, Japan's industrial production peaked in October 2007. By January 2008, when both the US and European recessions are said to have begun, the OECD leading indicators were lower by nearly 0.8 points from a year before in the US -- but down 2.3 points in Sweden, 2.8 points in Japan, 2.6 points in Korea and 4.1 points in Ireland. Those leading indicators correctly anticipated much deeper recessions in the latter four countries. And the most famous leading indicator -- monthly stock prices -- peaked in October 2007 in the US and UK, four months after stocks had peaked in Japan and the Euro area. What did all the contracting economies have in common? Not all had housing booms -- certainly not Canada, Japan, Sweden or the other countries at the bottom of the economic-growth list. What really triggered this recession should be obvious, since the same thing happened before every other postwar US recession save one (1960). Alan Reynolds is a Cato Institute senior fellow and the author of Income and Wealth. More by Alan Reynolds In 1983, economist James Hamilton of the University of California at San Diego showed that "all but one of the US recessions since World War Two have been preceded, typically with a lag of around three-fourths of a year, by a dramatic increase in the price of crude petroleum." The years 1946 to 2007 saw 10 dramatic spikes in the price of oil -- each of which was soon followed by recession. In The Financial Times on Jan. 3, 2008, I therefore suggested, "The US economy is likely to slip into recession because of higher energy costs alone, regardless of what the Fed does." In a new paper at cato.org, "Financial Crisis and Public Policy," Jagadeesh Gokhale notes that the prolonged decline in exurban housing construction that began in early 2006 was a logical response to rising prices of oil and gasoline at that time. So was the equally prolonged decline in sales of gas-guzzling vehicles. And the US/UK financial crises in the fall of 2008 were likewise as much a consequence of recession as the cause: Recessions turn good loans into bad. The recession began in late 2007 or early 2008 in many countries, with the United States one of the least affected. Countries with the deepest recessions have no believable connection to US housing or banking problems. The truth is much simpler: There is no way the oil-importing economies could have kept humming along with oil prices of $100 a barrel, much less $145. Like nearly every other recession of the postwar period, this one was triggered by a literally unbearable increase in the price of oil.

To: ManyMoose who wrote (300513)	4/14/2009 8:04:49 PM
From: Snowshoe	2 Recommendations Read Replies (1) \| Respond to of 793970

>>I like Alaska's tax the best. It pays a dividend to every state resident.<< The annual dividend is in serious trouble now that the Permanent Fund has lost 25% in the market meltdown. Oil revenues are crashing under the double whammy of falling prices and declining north slope production. The proposed natural gas pipeline is very uncertain because of the huge gas glut in the lower 48 states. Alaska still has a multi-year savings cushion, but the worst-case scenario includes a zero dividend coupled with severe budget cuts and/or major tax increases. Meanwhile, Governor Sarah Palin is freaking out the legislature by trying to reject 1/3 of the federal stimulus money. It will be interesting to see how this affects her future election prospects in Alaska, since our politicians are expected to bring home the bacon. Earlier I had thought she might challenge newly-elected Democrat Mark Begich for US Senate in 2014, but now I'm not so sure. He's stepping right in to fill Uncle Ted's shoes and grab those federal dollars, and in due time I expect he'll become known as "Excess Begich". Palin may have burned her local bridges to some extent, in favor of a national run. Twt.