Chimerica
Niall Furgusen has a good piece in today’s Washington Post regarding the history making week we just experienced. Deferring the dark economic realities exposed and just considering the election, one might rejoice at the rude and bright jolt of reality crashing the scene and causing quite the ruckus. As one of the talking heads aptly noted, "We’re not talking about lip stick anymore."Indeed. Nausea and disgust pushed me away from the keyboard (prolificity has yet to recover) as I saw so many know nothings fall hard for the amazingly cynical and (when understood) outrageously insulting nomination of Sarah "Twiddledwat" Palin for Vice-President. Only minutes into her RNC speech many (we now know) experienced the same revulsion I felt as she lied and contemptuously mocked what can now be seen as beyond her grasp in life. Obama has already “been there and done that” in a dozen realities Sarah Palin will never see or consider let alone comprehend. The news sites now have ample information about a creature more befitting a freak show than elected office.
The week dramatically amplified public awareness that neither Twiddledwat nor McCain have the slightest education in modern economics. McCain could not have gone farther with the pooch with his Monday “The economy is strong” declaration as Wall Street made world history. McCain continued to dig with gaffe after slip after mistake, from the senseless "shame and blame" damnation of SEC Chairman Christopher Cox (like it’s this guy’s fault?) to the embarrassing shift from a 30-year assault on regulation to declaring "I am a regulator" (oh, the humanity!) to ludicrous statements calling for the de-regulation of health care (great timing, John).
Fueled by public consternation with the Carter Administration, Reagan successfully shifted the Washington culture to one consistent with the conservative idea that "government is bad" and a burden to its people. We needed to "get the government off the backs of the American people." Reagan broke unions, gutted regulation, trashed funding for the arts, education, and other public service institutions. The mentally ill were tossed into the streets and then (predictably) prisons. Care to calculate the return to the taxpayer on that investment? Government = Bad. Corporations = Good. Oh yes, and deficits don’t matter.
Whoops. Now, instead of adults that operate responsibly given freedom, our corporations occur as four-year-olds with their hands stuck in cookie jars crying for mommy government. Should they be allowed to enjoy windfall profits and amass personal fortunes with the accumulated tab left for the taxpayer? What is the political shelf life of that scenario, now brought to light with a $700 BILLION figure on the front page of almost every paper in the country? It is too early today to witness the impending resentment, and $700B is just a start.
Meanwhile, how does a self-respecting Republican look in the mirror now that Iraq and Afghanistan have bitch slapped the world conquering neo-cons bloody and stupid and now that they’re down, undergraduate economics has kicked them in the nuts to where they sound like kids in grammar school? How is GM faring against Toyota? United States bravado is dead.
The existing paradigm of the corporation has become obsolete. Sooner or later (given this past week, sooner, I think) meaningful numbers of citizens will start to understand some of this, but a full blown perspective requires one to go global and consider Chimerica, a name coined by Ferguson and Moritz Schularick in their 2007 paper that distinguishes the combined economies of the United States and east Asia, most notably China (of course) but also India and some others. Calling America "West Chimerica" and China "East Chimerica" yields a rich discussion of the global economy and the major forces at play regarding recent developments.The paper is written at the academic level and includes a little math (McCain wouldn’t understand it), but in a sentence it notes the combination of the cheap East Chimerican labor market with the insatiable (and borrowing into oblivion) West Chimerican consumers. The West continues to borrow and buy. The East doesn’t have to borrow to buy, and they’re buying us.
posted by x4mr at 2:47 PM
13 Comments:
De-regulation, globalization, socialization of risk/privatization of profit, and military adventurism. This country is hemorrhaging cash.
While I would delight in blaming someone for all of this, I am starting to think that the problem is systemic. There just aren't enough sensible people it seems.
Cheap money and lemming like behavior in real estate really put the hurt on. I think it is super kick ass that the lemmings that brought us this mess then jumped into energy, now I can get ripped at the pump while paying with increasingly worthless dollars. I can't wait for 'em to magic up some more to pay for all these bailouts!
Ayn Rand and her fellow laissez faire libertarians may be right that left alone, the judgment cometh, and all the schmucks deserve the bankruptcy her system would mercilessly inflict.
Of course, in our political reality "mommy government" will rescue the very losers that condemn her as being a burden on their backs. All credibility of that ring wing song just fell to pieces. Starting now we all laugh when some right wing jerk talks about the burden of government.
Now we have the burden of corrupt, inept, and greedy corporations who get theirs and leave the nation with the bill. Effective now, isn't every company a potential taxpayer burden? Who else do we have to bail out? Who don't we have to bail out?
Hey, x4mr, let's start our own company. We can call it XNAV. You can be president and I'll be director of marketing. You can make $10B/year and I'll make do with only $3B/year and let's go $25B in debt traveling the world and buying Republicans the whores and cruises they love (just like Abramoff).
Then we can just go belly up, keeping the billions we've saved, and leave the tab for the losers that work for a living and pay taxes.
In 2012 I'll tell President Palin I watched an episode of ER. That should get me Surgeon General.
The world has changed in the past decade. There’s been a steady transfer of wealth away from the United States in a shift most Americans have not yet grasped.... Let’s be clear: this is an American mess forged by the American genius for new-fangled financial instruments in an era where the mantra has been that government is dumb and the markets are smart and risk is non-existent. The responsibility for undoing the debacle is chiefly American, too.
But this thing is global. Not just US corporations wet their wicks at the orgy.
But toxic mortgage-backed securities were pedaled by plenty of foreign banks. And the decision to pour $85 billion of U.S. taxpayers’ money into the rescue of American International Group (A.I.G.), the insurance giant, followed appeals from foreign finance ministers to Henry Paulson, the Treasury secretary, to save a global company.
Democrat Barney Frank said Paulson got calls from finance ministers all around the world saying he had to save A.I.G. According to Frank, they should have been asked to contribute to the pot.
Frank said on "“The Charlie Rose Show:" "I don’t think the European Central Bank should be free to spend the Federal Reserve’s money and not put any in."
You reap what you sow. Nobody’s itching to help the Bush administration. When asked why other countries weren’t coming forward with money to help with the bailout, Frank stated, "I think it’s a perverse pride thing. We don’t ask for help. We’re the big, strong father figure. But let’s be realistic: we’re no longer the dominant world power."
I've been reading about "credit default swaps" which appear to be at the center of the problem in the financial markets. No one seems to be able to precisely explain these so called "instruments" except that they are some kind of "insurance" between banks and were believed to minimize overall risk and enable the easy credit of the last several years. As long as defaults were low and no one had to pay these things, everything hummed along. However, increasing defaults in subprime mortgages started the tremors that have been going through the house of cards built on esoteric and unregulated financial instruments. These credit default swaps have "value" and are traded in financial markets, apparently being bought and sold all day by entities who could not back them given that they are actually some kind of "insurance."
Last year the "value" of the credit default swap market was 45 trillion dollars. Yes, 45 trillion.
I suspect that in the coming weeks we will be learning a great deal more about the out of control financial markets as the government is forced to analyze the depth and complexity of the problem. I think it is safe to say that there is an immense amount of debt masquerading as wealth.
The immediate problem, of course, is that credit markets are frozen and confidence is non-existent. The deregulators, of course, always set up the taxpayers to pay for the "too big to fail" safety net for corporations.
It is hard right now to imagine how America is going to transition itself into the 21st century. A soft landing would have been nice, but now it is impossible. And, as usual, those who are responsible for doing this to the American people will never pay for it.
Try to imagine a Gore presidency in 2000. It is almost impossible, isn't it? It takes more imagination than most people have.
Anon is absolutely right. The Republican enabled gluttony feast is not limited to US companies.
In their insatiable greed and complete disregard for America, the Republicans gave the store to foreign corporations as well. Trillions and trillions of dollars have been squandered thanks to the Republicans who thought nothing of destroying the solvency of the entire nation for the short term personal gain of a few friends.
What irony and what hypocrites. The fat Republican cats just turned the country to socialism. As the horrible reality unfolds, in order to survive the USA will have to nationalize entire industries.
The evidence is now overwhelming that any unregulated company will soon be a welfare case at the feet of already strapped tax payers after management runs everything into the ground. Soon it will be necessary to shove red tape so far up the ass of every business that the CEO can't park without filling out a form.
We now know what CEO's do if they are not baby sat like three year olds. We need to watch every move of the slimy bastards. The Republicans handed them the keys to the US Treasury and they stole every penny. Thanks to the Republicans, every company must now be viewed as a hardened criminal on a mission to steal every penny it can wrestle from any loophole or opening to screw the American taxpayer.
Here is a glimpse into the future from today's broadcast of "Democracy Now:"
Beginning in October, the Army plans to station an active unit inside the United States for the first time to serve as an on-call federal response in times of emergency. The 3rd Infantry Division’s 1st Brigade Combat Team has spent thirty-five of the last sixty months in Iraq, but now the unit is training for domestic operations. The unit will soon be under the day-to-day control of US Army North, the Army service component of Northern Command. The Army Times reports this new mission marks the first time an active unit has been given a dedicated assignment to Northern Command. The paper says the Army unit may be called upon to help with civil unrest and crowd control. The soldiers are learning to use so-called nonlethal weapons designed to subdue unruly or dangerous individuals and crowds.
Yes, the plundering regime has found its formula for taking over everything and consolidating power in the hands of a few corrupt billionaires.
Krugman has a good article today:
Cash for Trash
Villainous scum are taking over the country. The military will be necessary to guard the palaces and massive estates of the corporate gods.
This is the state of our great republic: We've nationalized the financial system, taking control from Wall Street bankers we no longer trust. We're about to quasi-nationalize the Detroit auto companies via massive loans because they're a source of American pride, and too many jobs — and votes — are at stake. Our Social Security system is going broke as we head for a future where too many retirees will be supported by too few workers. How long before we have national healthcare? Put it all together, and the America that emerges is a cartoonish version of the country most despised by red-meat red-state patriots: France. Only with worse food.
Admit it, mes amis, the rugged individualism and cutthroat capitalism that made America the land of unlimited opportunity has been shrink-wrapped by a half dozen short sellers in Greenwich, Conn. and FedExed to Washington D.C. to be spoon-fed back to life by Fed Chairman Ben Bernanke and Treasury Secretary Hank Paulson. We're now no different from any of those Western European semi-socialist welfare states that we love to deride. Italy? Sure, it's had four governments since last Thursday, but none of them would have allowed this to go on; the Italians know how to rig an economy.
Check your traffic. This entry has gone national.
DD,
Not sure what you are talking about. All blogs by virtue of the internet are "global."
If you got here from a google search, that's not particularly new.
I like the nail through the egg.
This month has all but put the nail in the coffin of faith in the free market. Now we have everyone (except Ron Paul and a few others) saying the free market "won't save us" and "won't work" and "can't be trusted."
This is big. Effective today any statement that the market is the way to do things is DOA. Those who used the free market argument to line their pockets are now caught with their pants around their ankles.
Belief in the free market just became quackery.
Anon,
If you think this market is "free", I would respectfully disagree. This market has been rigged by the greedy and rapacious and helped along by "regulators" with blinders and open, grasping hands.
Those who were charged with the oversight of regulations designed to protect those who trust took the money and flushed their responsibilities down the maw of "Uncle Sam won't let us down".
Taxpayer bailout absolutely does not equal free market.
What about our market is free or ever has been free? The closest thing to a free market in the United States is the weekly farmers market and swap meets.
Privitization is a government program. Period. Raytheon competes with Boeing to build missles paid for by taxdollars. In this case there is a consumer of one.
Nonprofits and corporations receive govt. checks.
As X4mr so rightly shows on this blog over and over again, the business of economic development, downtown redevelopment, and a host of other "projects" are also government programs.
Tell me what about our economy is NOT about government involvement (good or bad)?
So conservatisms mantra of low taxes and low spending and less government is simply BS.
I have declared conservatism as a philosophy is dead. Kaput. Gone.
All its premises are false. Even when in total power, the GOP can't make it work. So who can?
JOHN MCCAIN???!!!!???? That is the savior of conservatism?
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