A brief sketch of our current economic problems. And solutions.

[Tigermoose]

The information technology field is being majorly gutted here in the US as corporations have discovered they can hire Russian and Indian programmers and support staff for a fraction of the salary of a US worker. Don't you just love free trade?

Wall Street is supposed to be an institution to transfer capital from the wealthy into the production of goods and service. This used to work pretty well, but now has grown inefficient for various reasons -- it is now pretty much detached from the real economy of the production of goods and services. I think this inefficiency results from the process that all "signs" go through in their relation to what they are supposed to originally represent. We are in a stage where money only refers indefinitely to other forms of money, rather than to the labor and goods they used to represent in a more direct relationship....and when the world economy pegged itself on belief in the sign of money rather than Gold or Silver (and now it is merely the digital signal of a 0 or a 1), it has become a system based entirely on the belief of the sign.

Only look to Wall Street for guidance if you are interested in "the game." For info. on the real economy that more directly effects you and I, watch the unemployment figures, the price of houses and goods and services, and the cost of energy (oil, natural gas, electricity). Deflation combined with rising energy prices is very very bad. Deflation means that the amount of signs (money) available in the economy is shrinking, which mans it is harder to get a hold of money - this process feeds on itself and deflation gets worse and worse until money is created and placed back into the real economy. My fear is that Greenspan and the Fed will only create and put the money in the financial systems (Wall Street), which are currently inefficient in transferring the money to the real economy.

The lowering of interest rates has kept the real economy from deflating (people refinance their houses and make improvements or buy stuff with this money...and the bank gets to loan more money, which in effect creates money), but Greenspan is reaching a limit where he can't lower the interest rate anymore. Free trade has damaged our 'financial market transfer to the real economy process', because corporations are producing the goods and services in labor markets outside of the U.S., thus making Wall Street inefficient for the US real economy, but better in the short run for the corporate accounting sheets.

Economics 101 theory does not apply well to our current situation, because corporations are multi-national, because of the hyperreal effect of the sign and its disconnection from the real, and because the wealth transfer institution of Wall Street is majorly inefficient to its proper function in the economy (because of reasons 1 and 2).

My solutions: The U.S. government needs to rebuild the U.S. infrastructure based on more energy efficient means. This will transfer money into our real economy and lower the amount of money we send overseas for our energy. We reduce our dependency on energy, then we can reduce our dependency on our mililtary, which would help reduce the our government's debt and our taxes. Tariffs must be in place to discourage corporations from using foreign labor. Foreign worker permits must be revoked to encourage meeting labor needs by US workers (these were issued in mass during the 90s to make up for a shortage in the IT industry, but now they are becoming vampiric and US IT workers are in over-supply). NAFTA needs to be re-examined. Higher education costs must be reduced. Healthcare must be affordable. The US education system is the base of our future economic success. Education must be re-positioned as a privilege rather than a right (still free)-- the students must respect the teachers and authority figures of the school. If they don't like it, then don't be there. Corporations must pass certain qualifications (# of U.S. citizens working, taxes paid, etc) to be considered "American" and to receive the benefits of that status (avoid Tariffs, etc). Otherwise, their charter is revoked and they are considered a foreign entity.

But none of this will occur until we reform the political process which is currently warped by bribes (we call them campaign donations). I suppose if things get bad enough, the politicians will be forced to do these things, but as soon as we're not looking the bribes will again undermine our representational democracy.

For a good site that helps you learn about the nature of money: The Wizards of Money

To learn more about the theory of sign value, look into postmodern theory of Jean Baudrillard.


(I wrote this on my webpage for my family and friends, so I try not to get to academic or theoretical)

Thoughts? Critiques?

[kalian]

1. My comments

"My solutions: The U.S. government needs to rebuild the U.S. infrastructure based on more energy efficient means. This will transfer money into our real economy and lower the amount of money we send overseas for our energy. We reduce our dependency on energy, then we can reduce our dependency on our mililtary, which would help reduce the our government's debt and our taxes."

Good option. Should have been done 30 years ago when the first
oil crisis hit the US.

" Tariffs must be in place to discourage corporations from using foreign labor. Foreign worker permits must be revoked to encourage meeting labor needs by US workers (these were issued in mass during the 90s to make up for a shortage in the IT industry, but now they are becoming vampiric and US IT workers are in over-supply). NAFTA needs to be re-examined."

Sound policies. Unfortunately, US companies won't stand for this
and their campaign donations have a tendency to make politicians
"blind" to these actions.


" Higher education costs must be reduced. Healthcare must be affordable. The US education system is the base of our future economic success. Education must be re-positioned as a privilege rather than a right (still free)-- the students must respect the teachers and authority figures of the school. If they don't like it, then don't be there."

Again, good plan but it won't be implemented. Somebody else posted
an article where there were reports about the US educational
system being "dumbed down" in order to make the US population more
docile and easier to control... Sheeple...

" Corporations must pass certain qualifications (# of U.S. citizens working, taxes paid, etc) to be considered "American" and to receive the benefits of that status (avoid Tariffs, etc). Otherwise, their charter is revoked and they are considered a foreign entity."

Coporations...political contributions...elections....you get the
picture...

[Petrodollar Warfare]

2. I'm convinced the problem is the dollar as the sole reserve currency...

...that has had no restraints since August 1971 when Nixon delinked it from the gold standard (which is large part an outcome created by the massive expenses of the Vietnam war 1965-1970).

You have a good post and touched on many things such as energy (which is a subject by itself) and foreign wage disparities, but I think global credit creation and monetary expansion upon the dollar standard has become *The Problem.* It wasn't for the first 25 years after WWII, but in the last 30 years things have gotten unbalanced.

The world has become *solely* dependent on the US economy as the borrowing/cumsuming monster. The problem is we now have massive debt. We don't save money, but instead squeeze the world of its savings due to the dollar's role as monopoly reserve currency, and the ultimate result circa 2000 is the lack of global aggregate demand to meet current global capacity.

IMO, this must be corrected via a singificant devalution of the dollar, a multiple reserve currency system, and a European and Asia consumer base that can compete with the US, thus balancing the global monetary and creation of a more equitable system.

The problem? The US has the most to lose by far.

We'll have to give up some of what we have to "fix" the global economy. That is the only conclusion that I can rationally deduct. Each American is being subsidized by the world due to our trade deficit - to the tune of approx. US $4000 per year, while the developing countries have no savings to invest in their own assets. Duncan argues our trade deficit is now about $50-60 million per hour. In otherwords, the world is buying up US debt to support our consumption levels, and that is not sustainable. We must begin to export products that other countries want to purchase and *can afford*. Simple in theory, damn difficult in actual application.

Here's an analogy, that person in China, Mexico or ______ developing nation making that pair of "Nike" shoes gets paid $4 per day. Nike prices the shoe at $80 US. So, the US consumer is the only person that can afford it, not the person in the country that makes it. This is different than Henry Ford's boast from 80 years ago that a Ford Model T assembly line worker could actually afford to buy that Model T if they saved a little based on their wages. If Nike wants to make that same shoe here in the US, what would it cost? Well, I don't know, but it would be a lot more than $80 if the person is paid wages in US dollars at ~$6 per hour minimum wage (instead of $4 per day in Mexico)...

The answer according to some like Duncan? A GLOBAL minimum wage. A movement from the current $4 per day to $14 per day over a series of years could help create global aggregate demand, but he does not address the contentious issue of the dollar standard.

Anyhow, I posted this on a earlier forum, and it still warrants mention as I think you may find this infortmation of benefit:

To understand the current global deflationary pressures, I recommend Richard Duncan's excellent book "The Dollar Crisis: Causes, COnsequences, Cures." I read it this month weekend on a long plane trip, and it is perhaps the most easy to understand analysis of the macroeconomic picture = deflationary contraction. Mr. Duncan correctly predicted the Asian financial crisis of 1997-1998 (Thailand was the country he was studying at the time). He predicts the US trade account imbalance will soon lead to a deflationary contraction of the global economy. As this "disequalibrium unwinds" the dollar will face massive devaluation, and that is why I beleive the euro will become the next international reserve currency... but anyhow, this book is very useful and the research is quite impressive.

Here's an excellent interview with Richard Duncan:

'Interview with Richard Duncan on The Dollar Crisis: Causes, Consequences, Cures'
http://www.business-in-asia.com/dollar_crisis.html

....and #2 article on the book...

'Asia, its reserves and the coming dollar crisis '
By Richard Duncan 21 May 2003

Author of the new book, The Dollar Crisis, Richard Duncan explains why the dollar is the source of global deflation.

http://www.financeasia.com/articles/E867AEB6-642E-11D7-81FA0090277E174B.cfm

Finally, here's his book on Amazon, which I recommend if you *really* want to understand the problems inherent with the dollar standard, and how the US has sadly become the biggest drain in the global economy by soaking up the world's savings:

http://www.amazon.com/exec/obidos/tg/detail/-/0470821027/qid=1057866318/sr=8-1/ref=sr_8_1/102-3567107-9104949?v=glance&s=books&n=507846

Book Description (from Amazon)

The first book to confront the imminent dollar crisis

Given the current global economic situation, a dollar crisis seems imminent. It is predicted that the series of financial and currency crises in recent years will soon culminate in the collapse of the U.S. dollar, facilitating a worldwide economic slump. This timely and challenging book brings together the origins of this crisis and the solutions that will help counter global imbalance. Filled with in-depth insights and practical advice, The Dollar Crisis is a highly relevant guide for all markets, since the collapse of the U.S. dollar will result in global destabilization impacting capital markets everywhere.

About the Author
Richard Duncan (Hong Kong) has worked as a financial analyst in Asia for more than fifteen years. During his career, he has worked for leading companies such as Salomon Brothers, HSBC Securities, International Monetary Fund, and The World Bank.

[Tigermoose]

4. These changes will happen eventually...they have to, but

I agree that it won't happen in time to stop a major depression in the US until it gets so bad it requires action to prevent a revolution.

Thanks for the comments and book suggestions.

The US took advantage of the hole left by WWII, but now that hole has been refilled and other countries are catching up as we slide further into our decadence.

I have faith in the American people, but they are going to have to wake up. We have several advantages over other countries and cultures which I'm not going to get into here over threat of not being PC, but lets just say Western Civilization rocks when its not trying to subjugate others. We have a strong national identity and a great governmental foundation in the US. We just need to readjust and reform the money out of the process, and we need to start emphasizing the importance of the humanities. We have neglected them for too long in favor of making money! Master your self, and your actions will freely follow.

I do think its time to circle the wagons and look out for Americans first over the interests of the "global village." We need to start focusing on goals instead of just the faults of each other -- in politics and in our interpersonal relationships. America will be a better place in 50 years, but getting there is going to be interesting. Remember: You are as well off as you think you are (Montaigne)

[sirshack]

3. OK....

I need some elaboration on some points:

The U.S. government needs to rebuild the U.S. infrastructure based on more energy efficient means. This will transfer money into our real economy and lower the amount of money we send overseas for our energy.

Based on what kinds of "energy efficient means"? What does that even mean in terms of infrastructure? How much will this cost? And how will it keep money here instead of abroad? Will energy efficiency required to be home-grown?

We reduce our dependency on energy, then we can reduce our dependency on our mililtary, which would help reduce the our government's debt and our taxes.

So, cut military...that's what you mean?

Tariffs must be in place to discourage corporations from using foreign labor.

How do you apply a tariff to foreign labor?

NAFTA needs to be re-examined.

What about it needs re-examination (vague)

Higher education costs must be reduced. Healthcare must be affordable.

So, make things cheaper...makes sense...

[Tigermoose]

5. I said it was just a sketch :)

The U.S. government needs to rebuild the U.S. infrastructure based on more energy efficient means. This will transfer money into our real economy and lower the amount of money we send overseas for our energy.

Based on what kinds of "energy efficient means"? What does that even mean in terms of infrastructure? How much will this cost? And how will it keep money here instead of abroad? Will energy efficiency required to be home-grown?

It means building more comfortable and enticing public transportation systems. It means attracting commuters to live in the cities instead of the suburbs to reduce gas consumption. Cost isn't as much a concern in a deflationary period..because to get out of deflation you need to create money in the real economy before anything gets better, but it would be beneficial for the government implement a special gas tax to help pay for it as well as encourage people to buy more fuel efficient cars or use public transportation, etc. Hopefully some innovations in energy conservation will allow for more efficient automobiles. Solar, wind, nuclear energy will not really adequately replace fossil fuel technologies, but they can help reduce the dependency somewhat.

We reduce our dependency on energy, then we can reduce our dependency on our mililtary, which would help reduce the our government's debt and our taxes.

So, cut military...that's what you mean?

Well, its not as much as cutting the military as looking for efficient ways to reduce the amount of government spending on non-productive costs. If we are more self reliant, we do not need to be stationed all across the world to ensure open access to foreign markets and their natural resources.


Tariffs must be in place to discourage corporations from using foreign labor.

How do you apply a tariff to foreign labor?

Companies that do not qualify as U.S. corporations (having to meet certain requirements such as % of labor pool are U.S. citizens), will have to deal with tariffs in being able to sell their goods to U.S. consumers. This is an incentive to be an American corporation who hires American labor and pays American taxes.


NAFTA needs to be re-examined.

What about it needs re-examination (vague)

The fundamental assumptions that NAFTA is founded on (such as free trade is paradise on Earth) have shown themselves to be faulty assumptions. The US manufacturing and white collar base is being gutted because of treaties like Nafta, but foreign labor isn't correspondingly buying products made in the USA as was promised.


Higher education costs must be reduced. Healthcare must be affordable.

So, make things cheaper...makes sense...


Its more a matter of shoring up the foundations of your society. Uneducated and unhealthy societies aren't very productive or efficient in increasing the well-being of their citizens. Smart, healthy people tend to innovate and do well economically. We are a fat and lazy society, and will soon get our asses kicked unless we pull our head out.

[sirshack]

9. Response

It means building more comfortable and enticing public transportation systems. It means attracting commuters to live in the cities instead of the suburbs to reduce gas consumption.

Cities are quite expensive to live in. I live in one now.

Cost isn't as much a concern in a deflationary period..because to get out of deflation you need to create money in the real economy before anything gets better, but it would be beneficial for the government implement a special gas tax to help pay for it as well as encourage people to buy more fuel efficient cars or use public transportation, etc.

So raise taxes with the hope that people will by hybrid or take public transportation?

Hopefully some innovations in energy conservation will allow for more efficient automobiles. Solar, wind, nuclear energy will not really adequately replace fossil fuel technologies, but they can help reduce the dependency somewhat.

How much do you think such these vehicles would cost to produce and market? How much is a hybrid automobile now compared to an econo-box Toyota Corolla or Ford Focus?

Well, its not as much as cutting the military as looking for efficient ways to reduce the amount of government spending on non-productive costs.

What does the government produce?

If we are more self reliant, we do not need to be stationed all across the world to ensure open access to foreign markets and their natural resources.

So some may argue that we should expand oil exploration here at home...how would you respond?

Companies that do not qualify as U.S. corporations (having to meet certain requirements such as % of labor pool are U.S. citizens), will have to deal with tariffs in being able to sell their goods to U.S. consumers. This is an incentive to be an American corporation who hires American labor and pays American taxes.

This is something that would have to be very carefully implemented with your plan, and here's why: You want to encourage people to buy hybrid or alternative fuel vehicles, and do so buy raising taxes on gasoline. Guess who are currently the top producers of such vehicles: Honda and Toyota...both foreign companies (yes, they do employ US citizens...like I said....very careful implementation). You run the risk of essentially out-doing yourself by killing people with high costs. And it wouldn't be unusual for other countries to simply put a retaliatory tariff in response to any tariff imposed on them, making our goods to expensive to sell abroad.

[Tigermoose]

10. You are reducing my argument to specific black and white instances

I'm not trying to answer the details, but to put out an overall plan that can be a guidepost for the details to strive towards. When you are at the beginnings of a large project, you can't fetter and worry about a few specific problems that might occur, or you'll never get underway and work towards the greater goal, and along the way you provide solutions for the specifics that arrive.

Cities are expensive, but that's why we need to redesign them -- so they will be less expensive than the costs of commuting large distances.

Increasing the gas tax is just one possible solution that would have to be looked at and study. Hybrids are just a start towards a more fuel efficient means of transportation -- not the magic pill.

Car costs - Government incentives and social stigman will help promote fuel efficiency once people are educated about the magnitude of the energy crisis. Foreign companies don't want to produce them? Fine, we'll build our own....but other countries will be in the same boat as us in the energy crisis, and thus foreign manufacturers will respond to the crazy-high price of gas by making more efficient transportation.

The government produces educated minds, construction projects such as the transporation system of the United States, a legal system that keeps our society functioning, an efficient postal service that is essential to business, energy and water for public and private consumption, the regulation of things subject to the "tragedy of the commons," and perhaps the biggest product is ORDER. The military too is an important aspect of government, but things that go boom tend to destroy rather than create products that benefit society's economic growth (unless of course it is allowing access to foreign natural resources, but then a cost/analysis must be done to verify the cost of war is worth it...and it rarely is). A benefit most rarely think about with the military is that it does help create ordered minds willing to work within society's limits, so that's also a plus -- but still, we spend too much on a global empire that won't be necessary if we restructure our country's trade, infrastructure, and energy needs.

Oil exploration here at home. Go for it. But we've already been looking for decades, and in the 70s the U.S. hit its peak oil supply, and since then oil and natty gas exploration has been turning up a much larger ration of dry wells and cannot keep up with our current energy needs. Now...areas such as the Alaskan Wildlife area -- we have to weigh the costs and benefit. Is a year of cheaper gas worth destroying an environment formed over thousands of years? I personally don't think so, but I know a lot of Americans are selfish-dumbasses, so no doubt it will be exploited for its tiny supply of oil as oil becomes scarce.

And I never said this plan was easy, but neither is an extended depression and period of famine and poverty that is going to occur if we don't start doing something about it.

Yes. Sacrifices will have to be made.

[Code_Name_D]

7. I can offer some answers for the energey question any way.

I presented two threats "Getting ugly with energey policy" that looked at this on the previuse forum.

Perhaps it is time that I resubmit these threads. But I haven't done any thing to update them sences they were last posted. (Uh, its on the to-do list, some where beetween #46,600 and #56,700

[jafap]

6. good ideas

but obviously it is impossible to explain things in a brief sketch.
I am reminded of what Edward Bellamy said about his "nationalization". He said that people were no less greedy and selfish than they were under the old system, but that the new system had stopped rewarding people for being greedy and selfish.
We need to stop admiring and encouraging people for being a$$holes. Our world and our nation have serious problems, and one of the most serious is the powerful group of people who are not trying to solve problems, but see them as opportunities to line their pockets.
Of course, all I have are a bag of platitudes, and cannot say how we are supposed to get there.
I like the distinction that ALF makes in a 10-10-220 commercial. He is looking at the other person's cards, and the other guy says: "That is smart" and he says "no it isn't. It's cheating". Too many in this country don't think there is a difference. It is all about winning, as KU's new athletic director says WIN means Whats Important Now. Competition and success are our national diseases.

[Tigermoose]

8. I definitely agree with you...

mankind will always screw things up eventually. Nothing lasts forever because of man's shortcomings. Humanists need to realize this truth, as do Marxists and others who think their spiffy new system will solve everything. Our challenge is to face with courage the times of breaking and rebuilding, and do it in such a way that promotes the general welfare of the people rather than the privileged few.