Economists Discuss the Global Recession.
 

This is a rather interesting summary of opinions on the global economy: Krugman, Roubini, Soros: "How To Solve The Financial Crisis". It's actually a summary of a discussion among Bill Bradley, Niall Ferguson, Paul Krugman, Nouriel Roubini, George Soros, Robin Wells and several others.

Yep, read it and it's interesting. It sounds like there is no real consensus on whether we will get out of this mess or not. I didn't realize that the financial industry was a large part of the GDP. No wonder it's scary out there.

For eons now the USA was famous for inventing and manufacturing things. Somewhere along the line it changed to manipulation of money to make money; a trend that leads almost immediately to a huge division between the rich and the poor.

Nothing has happened to the US manufacturing base other than we have become more efficient and require fewer workers. Still the largest manufacturer in the world.... produce 2.5 times as much as China.... 20 percent of the world's output.

We never quit manufacturing things.

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NovaScoatian, I was just about to post a link to this article, but see that you beat me to it by several hours. Most interesting! Those are some very intelligent and insightful takes on the current predicament.

Which is why most of our consumer goods are imported. :rolleyes:
Even Apple farms out production. It's why the world economy is in the toilet: Chinese/Indian workers aren't paid enough to afford the products they make, and American workers are losing their jobs. Who's supposed to do the buying? How many cars/boats/computers/etc can a wealthy person buy?

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A rather interesting concluding quote by Bill Bradley:

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I guess not removing the punch bowl is what irrational exuberant is all about.

Are you disagreeing with what I said or trying to change the point?

US manufacturing output has not declined.... not in value, not in units of output, and not in percentage of world production. Do you disagree with that statement? If so, reference please.

Actually the trade deficit is reducing. Imports are still greater than exports but the gap is closing probably due to decreasing demand, falling dollar, and no appetite for investment, and global recession. So imports can't properly explain the situation that is occurring today in the U.S.


http://img505.imageshack.us/img505/7...adedeficit.png
By roncross at 2009-05-25

Units of output???? Name a US manufactured computer. How about a toaster? A radio? An mp3 player? How about hard drives? Blue jeans? Even things that are produced here, like cars, often have the bulk of their parts coming from elsewhere.

When it's difficult to find things that are American made, it's hard to understand why anyone would need to reference data to show that. Sure, we still make things like fighter planes and Apache helicopters, and you can probably find a bean counter (maybe one from Enron or Arthur Anderson) to make a case that our production is as high as it used to be, but I'd be very skeptical.

I don't think imports are the problem. They're just a mechanism used by large corporations to leverage profits out of employees, both here in the US and in the countries where they ship jobs. It's that leverage that can't continue if workers in either country are going to do well. In the US, real wages drop because of it, while in China and India they increase, but too slowly to lift most people out of poverty, and certainly not enough to pay for cleaning up deadly pollution.

US manufacturing output is near the all time high. That is a fact, not a personal opinion.

http://seekingalpha.com/article/1331...-fewer-workers

http://www.cafehayek.com/hayek/2007/...ate-of-ma.html

http://www.uschina.org/public/docume...ufacturing.pdf

http://www.ncpa.org/pub/ba456

Let's talk about the first one since the others basically say the same thing:
But it is proof that America's economy is being undermined! It's not the output that generates the real wealth in a world wide society with plenty of production capacity. It's the jobs! Consumers are workers and workers are consumers. The wealthy are too small a segment of the population to matter as consumers. With the loss in manufacturing jobs comes the loss in wealth.

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Basically cwt, you’re confirming what aehurst wrote, just using different words. ;)

Uhm, greater efficiency = undermining America’s economy?

???
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Of course output is wealth. While we may both agree (or not) that the distribution of that wealth could use a little fixing, to deny production is indeed wealth leaves us with what? Good intentions and left wing rhetoric to distribute instead of goods and services?

We are in a recession and our financial system is broken... agreed... but one should not buy into all the myths about the decline of the US economy. We are still THE major exporter of food, manufactured goods and services to the rest of the world.

If you want world hunger, the quickest way to get there is to shut down US exports of food based on some illogical argument about how free trade is costing us jobs.

Absolutely. Greater efficiency by itself is meaningless. In this case, greater efficiency is being used to sap America's wealth. It's going to multinational (NOT American) corporations that have no loyalty to any country, and certainly not to their employees.

Our financial system is broken because we have this naive belief that if we give the large corporations money, they'll take care of everything. They won't. They'll take care of themselves at the expense of people and the environment, just as they have been doing.

Sure, output is wealth but for corporations, not people.

I think perhaps what worries me most about their predictions is the conflicting policy we're setting up.... i.e. spending to spur growth, and cutting (raising interest rates) to avoid uncontrollable inflation.

Anybody else remember the Carter years? Thirteen percent home mortgage rates?

I think you're talking about the Bush years, where spending was ok because it would grow the economy. Now it's not ok because different people are in power.

In any case, the problem is still the same: Corporations aren't trying to do good by the economy, they're trying to do good by themselves. This would be fine if we had a free market, but we don't. The market is controlled (well manipulated, no human organization can control it) by the corporations.

Nope. I'm thinking Carter:

http://www.time.com/time/magazine/ar...921854,00.html

Eighteen percent interest rates and double digit inflation.... following deficit spending, price controls, and an oil embargo.... all inherited from Ford and Nixon.

Nice link, but it's unrelated to what's going on now. Inflation is still low, although the actions of the Bush years will eventually push it up. After all, $3 Billion per week adds up after 5 years, not to mention the $700 Billion he committed us to before skipping town.

I find this an incredible statement. You are basically saying that the US would be better off if they reduced their productivity; that the auto industry should shut down its production lines and build each car by hand thus employing many more workers. The problem with that is that those same workers could not then afford to buy a car.

I was a partner in a small company some years ago (early '80s) that built specialty mini-robots for microchip manufacturing. At that time, only very expensive specialty hybrid chips were assembled, wired, and packaged in the US; virtually all the commodity chips (even CPUs) were wire bonded and packaged in East Asia. (Wire bonding is making the connections between the silicon chip and its package terminals with very fine gold or aluminum wires.) The trade off was simple; to make the packaged chips affordable in the final product, the labor of bonding the chip to its frame and the chip pads to the frame terminals had to cost less than $2.50/hour or the chips were packaged at home.

Virtually all hard drives are manufactured in Singapore so they can be sold for $150 in the US. If this weren't so, you wouldn't be able to afford to buy a computer.

No need to go to that extreme. Henry Ford didn't when he doubled worker pay. He ended up creating the Middle Class!
This is exactly what's wrong with the typical business mindset: We can't pay labor a fair wage or we'll go out of business! The problem is that when all the large companies don't pay a fair wage, eventually everyone goes out of business because the companies have all the money and they're not paying anyone! It's anti-free trade (can't have trade without a fair exchange) and it's a recipe for revolution.

The way to fight inflation is to increase interest rates and restrict the money supply. The way to fight a recession is to decrease interest rates and expand the supply of money. By next year we may find ourselves in a position of bouncing back and forth between the two policies. That what's Soros was talking about in the OP when he said:

Today's monetary stimulus (printing money through increased debt and deficit spending) is tomorrow's core inflation, which calls for exactly the opposite action. A yo-yo effect with potentially disastrous consequences for a failure to accurately identify where the yo-yo is in the cycle.

It is exactly to the point. Yes, 18 percent interest rates are not out of the question if we fail to act at the proper instant to reign in spending and debt.

True, but your implication seemed to be that this is a problem created by the current administration. It isn't. Actually, I don't even blame the previous one (much) for it. I think the real culprit is Big Business, which wants to sell high ($150 for a hard drive) and pay low ($2.50 per hour) that likes to cause the government to deficit spend for the same reason it likes to get people hooked on easy financing: easy short term profits at the expense of everyone but Big Business.

The point was kinda like we've been in trouble before where everything seemed lost and out of control. But, here we are. As a couple of the OPs were saying.... the one thing we have learned is the market is not necessarily self correcting. We need to rethink that one for sure.

Obama inherited this mess, and I find some solace in the fact that the gentleman who helped guide Carter out of the mess in the 80s is Obama's primary economic advisor. What we could not survive over the next year or two would be somebody who thinks the spending spree can go on forever and we'll just grow our way out of it. Obama and crew know better.... there's a big price to be paid and it is just around the corner.

Mastering the short-term AND long-term
 

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Interesting observation, AEH. I don’t pretend to understand macroeconomics, let alone the cause of the current crisis or the solutions it requires. However, let me quote one of the most sober voices and accurate economic thinkers of the last few months, Mr George Soros, and what he says in the discussion summarised in the article:

(my emphasis)
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Aw, shucks. You’ve made the exact same quote and point. I should have read each of the last few posts. :o

Economists are like Norwegians .... they all sound alike.:)

I think the real question is, why is this crisis different? I think that the answer is a combination of dwindling resources and a blind faith in Corporate good will that we didn't used to have. Just give them the money, and all will be well! That faith amazes me, because the people who have it are the first to tell you that corporations are only responsible to their stockholders!

It might be wiser to discuss interest rates and such in regards to Federal Chairmen, after all, they are the ones to set the rates as Paul Volcker did during the Carter administration. Carter didn't like this but ooh well...what could he do. Alan Greenspan did the same thing to G.H W Bush again to his dislike. In fact G.H. W Bush blamed Greenspan for his lost of the election to Bill Clinton.

And that they did. 90% of manufacturing a chip is in the fab and probe. 10% is cost in the packaging and that includes all the gold wires.

I haven't learned this lesson. The lesson I learned is that we will not let the market self correct! which is very different.

Volcker was who I was referring to as a key advisor to Obama and the guy I am pinning my hopes on to help the administration do what is necessary to keep the ship upright. Agree the Fed Chairmen plays the key roll in setting interest rates, but the President can do much damage with fiscal policy, such as deficit spending, absent some sound advise not to do so.

Point taken.

I see this as the unofficial death of the Middle Class:
http://money.cnn.com/2009/05/29/auto...ex.htm?cnn=yes
People aren't spending money, so we're trying to solve the problem by taking their money away from them. :eek:

Yeah, that'll work. :rolleyes:

Actually I think $28k a year with full benefits IS very much middle class for entry level workers throughout mid-America. Sure, on the left and right coast that's near poverty. Not so around here. And again, that's entry level in a non-core (whatever that means) position so I am assuming the average worker will be doing much better than that.

That $28k is more than the entry level school teacher with a 4 year degree gets in my state.

Wonder how that compares with Asian auto workers?

It was the auto industry (well, Ford) that started raising people's wages, kick starting the middle class, and now it appears to be the auto industry driving them down. This doesn't end with the UAW. Next will be other average workers, including teachers.

Here in Canada, the government contribution to GM's survival amounts to $1.2M per worker for heavily unionized closed shop jobs. Doesn't sit to well with lobster fishermen who are getting something less than $3 a pound this season or a lot of other folks whose industries could use a boost.

I think it's fascinating how so many people who've made tens of millions of dollars per year and failed miserably at their jobs have managed to pit people making tens of thousands per year against other people who make tens of thousands per year.

It's fascinating but it's probably part of the divide and conquer strategy. While we are bickering at each other, they are raking in the dough.

Who do your suppose was actually paying for the six figure income/benefit packages to hourly workers at GM, Ford & Chrysler?

CEOs.

By reducing wages, they expect to be able to increase their wealth by merely keeping their own incomes from falling. So far, it's working well for them.

Well wait until the Wal Mart of the Auto industry takes holds and then wages want even be enough to cover their health insurance. :D

One sector's wage & benefit package was way, way above the norm and their sales could no longer support that. It was time to make an adjustment or go out of business. I don't view that as part of a "vast right wing conspiracy" to kill wages for working people.

To put their old package in perspective, the avg UAW worker's package was twice the median income in my state. Double the wages here. Given it is the customer who eventually pays those high wages, I think the working consumers have good reason to not be upset about it and not see it as an attack on working people.

We are under pressure from foreign competition. We had better get more efficient if we want to earn more in real dollars. Blaming the problems on greedy CEOs and the right wing conspirators won't hack it when faced with reality.

When two out of three was particularly bad...
 

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Common wisdom points at the subprime crisis as the cause of our current predicament. Krugman acknowledges that the "proximate causes of today’s economic crisis lie in ... in the global savings glut created by surpluses in China and elsewhere, and in the giant housing bubble that savings glut helped inflate".

In this article, Nobel-prize winning economist Paul Krugman points to the huge systemic error that was committed when American prudence was thrown out the window.

The peculiar thing is that Fiscal Conservatism (rightfully defined as trying not to spend much more than your income) is not primarily associated with the political party that many believe it is.

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Correction: One sector's wage & benefit package is still way, way above the norm. It is also way, way above their contribution to society. CEOs are sucking the life out of the economy because they are paid far too much. They can't possibly spend enough money to make up for this drain.

We are under pressure from foreign competition that doesn't clean up after itself (more money for the top brass) and pays workers less than half of our minimum wage. Those workers cannot afford to buy the very products they make, which is why our economy's problems become their economy's problems too!



As for the sub prime lending problem, I see that as merely a symptom of the real problem. With real wages falling, Big Business needs consumers to get loans in order to make sales, so it arranges for easy credit. It's a great short term solution, and Big Business never looks past the short term.

Minor niggle: I understand that the deficit started to fall under Bush Senior, and then Clinton continued the good work. Of course, Bush Senior called Reagan's thing "voodoo economics"..... Maybe we should then call this gentleman "the Last of the Republicans"? :) I would also suggest that we are in error when we talk of G.W. as Bush Junior, as if he represents fiscal continuity with his Poppy, he was actually Reagan III-IV.

Yes, Bush Senior was/is a good man.