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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (107989)	2/6/2010 12:31:08 PM
From: arun gera	Respond to of 116555

>Personally I think the who global economic system is going to collapse.> Couldn't the world financial system converge towards a new equilibrium with adjustment in the relative currencies of the world? Of course the currency fluctuations will kill private industry all over the world driving many of them into the arms of individual country governments. At some point, when currencies stabilize a little, the new global trade flows will create opportunities for a different set of industries. -Arun

To: mishedlo who wrote (107989)	2/8/2010 1:57:47 AM
From: axial	Read Replies (4) \| Respond to of 116555

"Do you propose we pay it back? How? Personally I think the who global economic system is going to collapse. Government to Government obligations may be negotiated away and canceled." --- Second part first: [1] If the US can't break the current political logjam there is no hope. [2] "Borrow and spend" appears to be the only economic strategy approved by both parties, and voters. If (as the recent Massachusetts victory seems to indicate) US taxpayers - corporate and individual - believe they shouldn't have to increase taxes to pay for their programs and reduce debt, there is no hope. [3] If the US continues to overextend itself and declines austerity there is no hope. [4] Global economics is prejudiced by global finance. Systemic risk and the possibility of failure is pervasive, and not confined to the US. However, transnational financial mechanisms such as derivatives are not risk aversion; when events go bad, they are systemic accelerants. [5] Finally the events following this meltdown may be a test: a test that fiat-money interventionist economics cannot pass. --- However, assuming the US had the required courage and discipline to take appropriate steps, the following is applicable: austerity [A] Less than 30% of debt is external. [B] A back-of-the-envelope calculation says that payments around 10% of GDP could reduce debt to zero in 50 years. That would be the same schedule by which the UK and Finland repaid the US - with pauses - after WWII. Remember that the US insisted on repayment. [C] Program costs could be reduced by clawbacks. For example, retired individuals whose income exceeds $100,000/yr year should be willing to accept reduction or elimination of benefits. [D] Government and administration are inefficient almost everywhere; costs are excessive; compensation and perks for legislators, managers and staff needs realignment. The same applies to private industry, but that's not relevant to debt reduction. [E] Defence costs need no explanation. Nor does massive pork-barrel overspending, useless and counterproductive subsidization, etc. [F] Taxation with payment directly to debt reduction is mandatory. --- Agree that other global events may intervene. We're on the edge. The epicenter of this disaster is the United States, its economics and finance. The US, its financiers, lawmakers and voters have shown no desire make necessary reforms. Since that's the case, austerity is coming no matter what. The choice for the US? Austerity with honor, or without. Jim