Recession's over!

Hah, you wish. That mutual fund tanks more and more every month, doesn't it. At any rate, I'm back!

Oh the economy...
I wish Paul Krugman would've taken Larry Summers' job. Obama really screwed us over with his stupid Clintonian economic team, with still plenty of bush hold-outs. Oh I'm far from being an expert on these matters, but I do know that feeding the rich, greedy fatcats who got us into this mess — think sub-prime loans, short-selling stocks to undercut active companies, etc. — more money sure as hell isn't gonna solve this. Obama also isn't realizing that it's a systematic problem — time for a re-haul... you know, that CHANGE he had promised a few months ago.

Ben Bernanke has to be sacked; I know neither an intelligent conservative or liberal who is happy with his performance leading up to and now into this recession. We must not be afraid to shake things up a bit, especially since we're already so far downhill — and this may only be the start of our descent. Joseph Stiglitz really needs to be brought in to do some damage control. This is a must-read from Harper's I've been meaning to post for a while now. Quite important to see how much the Bush administration directly fucked up this country (except for the rich) during their eight years, and how we cannot just shove the knowledge of such greed and mismanagement under the rug. It's time to face our demons.

There's also a very good video to understand this whole financial mess (and it's easy to connect the dots from where the video leaves off, i.e. international downturn caused my America's own woes). Oh and to top all this off, Europe's making a fool of itself by not doing what it does best: public sector spending! C'mon, learn some lessons from previous recessions!

And is anyone else annoyed at how much attention the rich are getting in the media? You'd think the people who will easily weather the storm when many are losing their livelihoods. Oh, one more thing though, where's the bailout money going? I hope to see more stimulus bills though for job creation, education, infrastructure, etc. It worries me how amazingly shortsighted politicians are about cutting spending in such vital areas with long-term effects.

Nearly a trillion dollars, and where is it going?

First of all, a happy new year to all my readers. This is In Perspective's first post of 2009; too bad we aren't starting the year on a better note.

The $700bn bailout is just one big mess, benefiting the institutions that brought the financial system into this crisis mode in the first place. We need government spending to stimulate the faltering economy, but this is the wrong way to go about it. There is little to no oversight where billions of taxpayer dollars are going. This is a disgrace, plain and simple. Worse yet, while there were articles about the initial GAO report (albeit pushed to the back of the news section, incredibly enough), the media has once against failed to challenge the Bush administration to make sure these flaws in the bailout are fixed in time; the White House has dodged the spotlight, and thus the pressure. Congress also deserves its great share of blame, handing out the money without figuring out an endgame first. The financial institutions who received this generous (worth somewhere in between the nominal GDPs of Turkey and the Netherlands), practically no-strings-attached handout remain silent on where the money's even going.

I'm legitimately angry because it's my generation that will be paying for the effects of all this insane government spending. The interest on the trillions of dollars of loans taken out from Japan, China, Britain, and other countries adds up year by year, we dig ourselves deeper and deeper into this deficit of trillions.

I'm hoping the upcoming Obama administration will bring enhanced oversight of Wall Street and beyond — such a shadowy area of the American economy. While I think this rushed bail-out was the wrong way to go about things, government-sponsored programs helped pull America out of its last major economic funk: the Great Depression of the '30s. However, despite what one might read in the news rags these days, that was an economic crisis many times more severe than the current recession. Amidst all this financial downturn, one hopes people will learn the lesson of reaching for gold that just isn't there; perhaps our system free-wheeling free-marketism that was born in the 1980s will begin to be scaled back, but people can only learn so much...

The dreaded recession, one year on

At last, the recession is made 'official'; officially the US economy has been in recession for a whole year.

Forbes reports:

The keeper of the business cycle books, the National Bureau of Economic Research, announced Monday what economists have been saying for a long time--this is a recession. And, NBER says, it's been a recession since December of 2007.

The economic crisis is putting a stranglehold on the global economy in general and the American economy specifically, but I may just have to verbally assault the next person who compares it to the Great Depression. What we're looking at is NOT the Great Depression, but at the same time it's no temporary (i.e. a few months) downturn either.

And while we're all looking after our money and jobs, let's also keep the environment in mind. It's priceless. Even if you're constrained to thinking in terms of money, imagine the long-term economic devastation from lost of usable soil, pollution, lost of forestry, etc. not to mention global warming.

How a 'plumber' named 'Joe' shook up the election

His first name isn't actually Joe. He isn't a valid plumber. And he still has back-taxes to pay.

And yet, he has become the recent hero of the McCain campaign (frighteningly backwards economic plan and all) since his name came up in last weeks debate. Not only that, he has helped bolster his ratings in major swing states like Ohio. The media is all over him, even though he's effectively a non-story.
Joe the plumber: one of the most appalling political ploys of this election season (up there with the Obama-Ayers connection).

If there's one thing Americans can't stand, it's taxes. Americans have some of the lowest income taxes in the developed world, and yet, even when we've got a burgeoning deficit and a war to pay for, the thought of raising taxes if only for a few is painful, and, for some, unpatriotic. Because it's unpatriotic to give a slice of your — to be fair — well-earned income to your government.

Heaven forbid the developed country with the greatest income inequality — that's America, folks — tries to bridge the gap with a more fair, graduated tax system that doesn't benefit the wealthy, using the bogus 'trickle-down' claim as an excuse for unfair taxes.

So let's all feel sympathy for a man in the top 4% income bracket ($250,000 per year) who will feel a slight pinch in taxes, in fact, since were fighting one of the most expensive wars in modern history and facing a massive recession, lets give him a tax BREAK. That makes economic sense. Not like he hasn't already gotten a massive one under the Bush administration.

The news media deserves some blame too. Although there has been some skepticism, the outrageous amount of coverage is unwarranted and largely spreads the propaganda the McCain campaign itself is sending out into the mainstream.

Oh, and, for the record Obama was correct in his statement about small business taxes that started this mess. As 'Joe' plans to campaign across America with McCain, warning the masses about the 'socialist' radicalism a fairer tax system would bring more and more ACTUAL "average Joes" are feeling the pinch of the current economic crisis. If only people like Samuel Joseph Wurzelbacher and Sarah Palin could be less greedy and actually give a damn about their own country's economic health instead of accusing their fellow Americans of being unpatriotic.

If American politics has been reduced to feeling sympathy for a man — an invention of the McCain campaign — who has already received more tax breaks than is healthy for this country's economy, then this really isn't the America I want to live in.

RECESSION!

An issue I expect to remain in the headlines — and one that is monitored continually — is the possibility of an economic recession in the United States, thus generating shockwaves in the world markets.

Recent dips in stock markets — in the US as well as internationally (will Asia be hit hard?) — have increased fears about the instability of the American markets, thanks, in part, to the subprime loan debacle (which I will blog more on soon).

I am not an expert in economic matters, but I think it is easy even for a layperson to say that the near future is not bright for the US economy and world markets. After years of prosperity, negative economic trends may be among us. As the World Economic Forum is held this week in Davos, Switzerland there is certainly a contrast between last year's hope — especially in regards to the rise of Asia — and this year's fear. The bigwigs in Davos are worried, as are market analysts everywhere from New York to Hong Kong.

Education and globalization: the case against protectionism

Protectionism is all the rage in the United States nowadays, fueled by xenophobia from nativists (because of hot topic of immigration, especially from Central America), isolationists (partially because of foreign policy fiascoes like Iraq), and, most of all, anti-free-traders (anti-China; those seeking an enemy to blame for the loss of US manufacturing jobs).

America cannot stick its head in the sand just because of some foreign policy screw-ups, a trade deficit and loss of blue-collar jobs to places like China, and the influx of immigrants — many to do jobs Americans probably wouldn't. Pretending a problem doesn't exist or enacting a quick 'fix' isn't the answer. Politically, the Republicans are more anti-immigration; the Democrats more protectionist. But, as many financial experts warn, protectionism or xenophobia is not the answer to America's economic woes. Globalization isn't something new, and don't expect it to go away either.

Bloomberg:

Southern U.S. states should improve workers' skills to compete in the global economy rather than look to trade restrictions for protection, three Federal Reserve bank presidents said.

Barriers to commerce can backfire and hurt the economy as overseas partners retaliate by imposing their own restrictions against U.S.-made goods, the Fed chiefs from Dallas, St. Louis and Atlanta told a meeting of the Southern Governors' Association in Biloxi, Mississippi, today. The Fed presidents didn't discuss the current economic outlook or monetary policy.

``The answer is not protectionism,'' Richard Fisher of the Fed Bank of Dallas said in his speech. ``Rather than labor fruitlessly to protect your constituents from foreign competition, you and your legislatures must prepare them for it.''

Fed officials have been touting the benefits of free trade as members of Congress call for restrictions on imports from China, accusing the world's fastest-growing major economy of keeping its currency artificially cheap to benefit exporters.

The officials' comments don't just apply to the American south, but the whole of America and numerous other developed countries seeing the effects of globalization on the industrial workforce, and the economy in general.

The importance of people of developed countries to learn
As China and other emerging economies are using the mostly-positive forces of globalization to scoop up manufacturing jobs, America and other developed countries are in more need as ever for educated, skilled workers. If jobs are being lost, more need to be filled or created. Since many people cannot afford or achieve a high-level college education, there should be at least some government-run instructions.

More and more people seem to not be prepared for the real world. And as economic globalization increases the US and others are in need of innovative thinkers and service industry workers. Education has to start from childhood and continue through adulthood — from primary school to job training.

Tariffs
For a developed economy like America's, tariffs are counter-productive. They hurt the consumers because they raise prices, and lower competition and quality. They do, however, help the businesses they affect; but, in general, strong tariffs are not a good thing. In addition they are almost always politically-motivated (special interests) and are very rarely used appropriately. Ironically the pro-business politicians in the United States that used to support tariffs now favor their own brand of 'free trade' (e.g. Bush), like CAFTA, but bend the rules now and then.

Fair is (often) free
Note: Just because I believe in free trade, that does not mean I am against regulation, including in the case of fair trade. The exploitation of the poor by the rich is not what the free market is about. Sadly, that's what it has become. On economic issues I am somewhere to the left of the centrist weekly The Economist. Protectionism and idiotic tariffs are not the equivalent to fair trade; the protection of third world workers sorting through our trash is.

Competition troubles at the EU summit

One of the things holding Europe back from reaping more financial successes are the restrictive anti-competition laws and practices. Outside firm A is proposing to buy European firm B, the courts or government step in, deal falls through. Though necessary at times — such as to prevent monopolies and safeguard finances — meddling protectionist measures like these muck up the free market. We are seeing this time and time again, especially as more foreign funds attempt to buy up both successful and failing European firms.

Another issue, is bankruptcy laws in Europe. In America more liberal business bankruptcy laws have allowed new start-up firms like, say, Google and Digg to flourish in the tech entrepreneurial hotbed of Silicon Valley. Perhaps the reason Europe does not have a Silicon Valley of its own is because of its less friendly, more restrictive bankruptcy laws. The lack of new start-ups and fresh ideas indeed feeds into the lack of competition. And competition is a fuel the market economy needs.

This is related to the European Union summit going on right now in that competition and the free markets has been a major issue. Which leads us to Nicolas Sarkozy, president of France, who received the backing of The Economist because of his reformist economical stance. The free marketers' candidate appears to have reservations about, well, free markets at this EU summit.

HAS Nicolas Sarkozy really dealt a nasty blow to the free-market foundations of Europe? The question has caused much confusion at a European Union summit unfolding in Brussels. It emerged on Thursday June 21st that France’s new president had succeeded in removing “free and undistorted competition” from a list of the EU’s core objectives at the top of a new “reform treaty” being thrashed to replace the defunct constitution.
...
During his campaign to become president he presented rival public faces: the pro-business reformer alongside the populist defender of French national interests. The elections won, it is still not clear which of these is the true Mr Sarkozy.

The EU treaty is at the top of this summit's agenda, and is why it is receiving so much attention. Whenever most countries agree, there seems to always be one or two that have their own (selfish) reservations. And yes, for the sake of sovereignty and answering to the voting public, it is important for a country to stand up for what's best for it, but some cases aren't as clear. Sometimes diplomats and leaders should ask themselves, 'Is it worth it to fight for this when there are so many other things I may need to stand up for my country?'

There is, however, good news. Apparently Sarkozy has been convinced to let some things go in his one-man battle against the competition law in the EU treaty. Sarkozy may have gotten "free and undistorted competition" taken out from the treaty's preamble, but

sources in Brussels say a legally binding protocol will be added that protects existing competition law.

So all this fuss over just a superficial word change?

With Mr Sarkozy's change also remaining in place, he will be able to tell the French voters he has defended French jobs.
...
French President Nicolas Sarkozy has already said that there are 13 references to free market competition in existing EU treaties, so the EU's powers over competition would not be changed.

Leaders of the 27 EU states are meeting in Brussels to agree the main parameters for a new EU treaty.

A future conference would then decide the final text.

The treaty is designed to replace the planned European Constitution, which was rejected by both French and Dutch voters two years ago.

France's economy is far too bogged down by regulation and government intervention. The public sector often makes the private sector look tiny. Contrary to the wishes of the old left, such a gigantic public sector isn't good for the workers either: notice how there always seems to be a giant worker's protest going on in France? Even though its government-run health system is arguably better than the United States' — and it's free — French doctors get paid one-third of what their American counterparts take home. The government cannot afford much more. While I am in favor of state-run national health services in many cases, France needs to open up and privatize many areas of its economy.

Next bump in the path to a new EU treaty: Poland doesn't want Germany to have too much power. I can sympathize to an extent, since Poland is still being bullied (e.g. energy wise) by Germany and Russia, but playing war card isn't an acceptable move. The trouble is over a voting system of the EU; Poland wants more votes to compensate for lives lost in the Second World War. This Poland versus Germany battle looks to continue, as the United Kingdom throws it's hat into the ring too — questionably at that.

In addition,

draft treaty submitted for debate at the summit makes several concessions to EU member states that had opposed key parts of the planned constitution.

Proposed changes include:

* Removing any mention of the word "constitution"
* Providing countries with a chance to opt out of EU policies in the area of policing and criminal law
* New voting system to approve decisions
* Full-time president of European Council instead of current system where members take six-month turns
* New foreign affairs head and a smaller commission

Correspondents say failure to reach a deal on the treaty would plunge the EU into a fresh crisis as deep as the one that followed the rejection of the constitution two years ago.
...
A draft treaty submitted for debate at the summit makes several concessions to EU member states that had opposed key parts of the planned constitution.

Proposed changes include:

* Removing any mention of the word "constitution"
* Providing countries with a chance to opt out of EU policies in the area of policing and criminal law
* New voting system to approve decisions
* Full-time president of European Council instead of current system where members take six-month turns
* New foreign affairs head and a smaller commission

Correspondents say failure to reach a deal on the treaty would plunge the EU into a fresh crisis as deep as the one that followed the rejection of the constitution two years ago.

Britain has also been the target of some complaint. It has backed out of various areas, seeking special treatment, and the negotiating "has been shambolic, according to one insider", says BBC's Europe editor Mark Mardell.

The summit, at two days long, will end today and the future of the EU and the constitution, or whatever they aim to call it, is at stake. Many quarrels deal with political language, and some are bringing up issues of long ago to their advantage.
To see some countries' stances and what they will attempt to exempt themselves from, and more, see here. The agreement of 27 diverse nations — with political rifts between many of them — is a tough goal. However, the European Union treaty must be tackled before people loose yet more hope.

The politics of budgeting a pseudo-war

The "Global War on Terror" might now be financed directly by the US government. It has already cost well over $600 billion to the United States. The financing falls under so-called deficit spending. America's deficit is already gaping, in part due to the Keynesian economic policies of the current military industrial system, as this Harper's article talked about:

KEY JUDGMENTS
The United States remains, for the moment, the most powerful nation in history, but it faces a violent contradiction between its long republican tradition and its more recent imperial ambitions.

The fate of previous democratic empires suggests that such a conflict is unsustainable and will be resolved in one of two ways. Rome attempted to keep its empire and lost its democracy. Britain chose to remain democratic and in the process let go its empire. Intentionally or not, the people of the United States already are well embarked upon the course of non-democratic empire.

Several factors, however, indicate that this course will be a brief one, which most likely will end in economic and political collapse.

Military Keynesianism: The imperial project is expensive. The flow of the nation's wealth—from taxpayers and (increasingly) foreign lenders through the government to military contractors and (decreasingly) back to the taxpayers—has created a form of “military Keynesianism,” in which the domestic economy requires sustained military ambition in order to avoid recession or collapse.

The Unitary Presidency: Sustained military ambition is inherently anti-republican, in that it tends to concentrate power in the executive branch. In the United States, President George W. Bush subscribes to an esoteric interpretation of the Constitution called the theory of the unitary executive, which holds, in effect, that the president has the authority to ignore the separation of powers written into the Constitution, creating a feedback loop in which permanent war and the unitary presidency are mutually reinforcing.

Failed Checks on Executive Ambition: The U.S. legislature and judiciary appear to be incapable of restraining the president and therefore restraining imperial ambition. Direct opposition from the people, in the form of democratic action or violent uprising, is unlikely because the television and print media have by and large found it unprofitable to inform the public about the actions of the country's leaders. Nor is it likely that the military will attempt to take over the executive branch by way of a coup.

Bankruptcy and Collapse: Confronted by the limits of its own vast but nonetheless finite financial resources and lacking the political check on spending provided by a functioning democracy, the United States will within a very short time face financial or even political collapse at home and a significantly diminished ability to project force abroad.

The deficit continues to grow wider, from trade and massive government spending. While more taxes isn't necessarily a bad thing (a small cost to many equals a large amount of money for government expenditures, which many fail to comprehend a small tax hike would barely affect them) it is how the money is spend that ultimately matters. A more transparent, streamlined spending framework should be put in place, similar to that of the Nordic welfare system.

Instead of having so many bureaucratic hoops and loopholes, more checks are needed. At the same time money should be able to go directly to where it is needed. This is a daunting task for a government so large and powerful as the American government, but it is feasible in the long run. Like with any reform, however, it needs a starting point in order to get the ball rolling. Basing the economy on a military-industrial complex system is dangerous in more ways than one. It increases a nation's militarism, thus crumbling aspects of its democracy, and restricts the economic base of said nation. Open government and good economics often go hand in hand.

US tries to block progress on climate change agreement

Every nation but the United States seems to be rightfully worried about global climate change. The warming of the earth is not a light topic, and it is morally negligible for the US to continue blocking any progress wished to be made on the subject.

The US is trying to block sections of a draft agreement on climate change prepared for next month's G8 summit.

Washington objects to the draft's targets to keep the global temperature rise below 2C this century and halve greenhouse gas emissions by 2050.
...
With UN talks struggling to move beyond the current Kyoto Protocol targets, the G8 summit is seen as a key opportunity to regain political momentum.

It appears all other members of the G8 are taking global warming very seriously — Shinzo Abe, Angela Merkel, and Tony Blair among them — even conservatives.

The fourth IPCC report has come out. It says greenhouse gasses can be brought down to non-dangerious levels, for relatively low costs.

COSTS OF STABILISATION
IPCC assesses the likely impacts on global GDP by 2030 if cost-effective routes are used
Stabilisation between 445ppm and 535ppm would cost less than 3% of global GDP, it concludes
Between 535ppm and 590ppm would cost 0.2-2.5%
Between 590ppm and 710ppm would bring anything between a net benefit of 0.6% and a net cost of 1.2%
Different greenhouse gases have different impacts on warming per volume; total concentrations are expressed as the equivalent in parts per million of a certain volume of CO2 (ppm CO2-eq)
Current concentration is about 425ppm CO2-eq

So this newest report offers some optimism on tackling climate change. One should keep in mind the vast impact and speed of global warming. For example, it is predicted that by 2100, the Arctic will have ice-less winters.

The economics of climate change are complex, and ideas like carbon trading are hated as much or more than they are revered. Offsets — an aspect of carbon emission trading — are also seen as a cop-out by some as they can allow the country to get around tackling the real emissions problem. Ultimately greenhouse gas trading schemes may just have to do. Taking action on climate change really is the only economic option.

Greed is a basic human urge, and to get the support of the wider population, politicians must find some way to make climate change a 'sexy' issue. The other option is to use massive fear to accomplish political goals like George Bush has after 9/11. Al Gore seems to have picked up on the tactic, albeit in a more Hollywood manner. Policy makers must also refrain from crying wolf as it is, so that when climate change does come around full force people will believe them and appropriate actions can be taken.

It is no surprise of course that climate change is set to hurt the poor the most. The wealthy nation's pleasures often come at the cost of the poorer nation's well being. For example, in the case of Africa, global warming's potential impact is very worrying, especially for such a poor and already troubled continent.


We already know full well that climate change is happening, and that humans are greatly encouraging it. Now the governments of the world, even the US, must take action.

technorati tags: kyoto, g8, bush, al+gore, climate+change, global+warming, science, fear+politics, africa+warming, blair, merkel, abe, IPCC

Chinese stocks tank, causing global chain reaction

BBC News

AP (via Forbes):

Stocks had their worst day of trading since the Sept. 11, 2001, terrorist attacks Tuesday, briefly hurtling the Dow Jones industrials down more than 500 points on a worldwide tide of concern that the U.S. and Chinese economies are stumbling and that share prices have become overinflated.

The steepness of the market's drop, as well as its global breadth, signaled a possible correction after a long period of stable and steadily rising stock markets, which had not been shaken by such a volatile day of trading in several years.

A 9 percent slide in Chinese stocks, which came a day after investors sent Shanghai's benchmark index to a record high close, set the tone for U.S. trading. The Dow began the day falling sharply, and the decline accelerated throughout the course of the session before stocks took a huge plunge in late afternoon as computer-driven sell programs kicked in.

The Dow fell 546.02, or 4.3 percent, to 12,086.06 before recovering some ground in the last hour of trading to close down 416.02, or 3.29 percent, at 12,216.24, according to preliminary calculations. Because the worst of the plunge took place after 2:30 p.m., the New York Stock Exchange's trading limits, designed to halt such precipitous moves, were not activated.

It was inevitable, in some way or another, not only because markets have their ups and downs, but also on account of the record highs the Dow Jones and other stock exchanges have reached recently. Only last year did Japan's Nikkei stock exchange nearly collapsed from massive trading, buying and selling.

Some questions I have (to consider):

Is this a mere technical glitch from the 'computer-driven' trading?

Is it an indicator of weakness of markets in Europe and China?

How will this incident affect the year to come?

Did Chinese stocks fall because of a natural up-down pattern, or was it a sign?

Did stock regulations help prevent an even worse episode?

Should we let the market be free and fluctuate on its own?

Is this a one-time kind of event, or will we be seeing more extreme falls or rises?

Is the US and its market too dependent on China (after all, China's markets triggered the chain reaction)?

Does this tie into dynamic globalization?

Ultimately: Was this a mere 'correction' in the inflated stock prices or an indicator of the global economy?

technorati tags: dow+jones, nyse, china, united+states, economics, global+economy, news, stock+market, stock+exchange

Unbalancing the budget

Bush calls this cutting and balancing the federal budget? By lessening the over-inflated big government spending, I think not. No doubt the Iraq war dominates the budget, but still...

Washington Post:

President Bush sent to Congress a $2.9 trillion budget plan that would dramatically increase military spending -- including an extra $245 billion for the wars in Iraq and Afghanistan -- but squeeze federal health care programs and most domestic agencies to achieve his goal of eliminating the deficit by 2012.

The proposal seeks to make permanent the tax cuts enacted in 2001 and 2003, costing the Treasury an additional $374 billion over five years. And it would slice nearly $96 billion over five years from Medicare and Medicaid, the government's health care programs for the poor and the elderly. The proposal would also cut spending at eight federal agencies -- including the education, environment and interior departments -- to below fiscal 2006 levels.

Bush said his budget proposal "shows we can balance the budget in five years without raising taxes." The budget is "realistic, it's achievable and it's got good reforms in it," he said.

Credit: Washington Post

The projected five-year cost of extending Bush's tax cuts comes on top of $1.1 trillion that the cuts have already cost since 2001.

The proposed budget asks Congress for nearly $100 billion more for the wars in Iraq and Afghanistan in fiscal 2007 -- on top of $70 billion already provided -- and $145 billion for fiscal 2008, which begins Oct. 1. For fiscal 2009, there is a forecast of $50 billion, with no funding projections beyond that year.

I think it is pretty easy to 'balance the budget' if you cut a chunk of spending out. Too bad that chunk had to be important. It's funny that this is the president calling on Congress to be responsible with the budget. These tax cuts have been worthless, helped people who really don't need the financial help, and are overall a horrible way of gaining political capital when people are so gloomy over the economy anyways. One small group of unemployed people can make more of a poltical difference than a large group of political apathetics (of whom there are far too many in the US).

Decreasing domestic spending and important programs like those in the health care sector and social security is certainly not a wise move on behalf of this militaristic White House. This is a trend that has continued ever since this president took office — and he seems to be proud of it. What I find amazing is that the American people have OKed Bush's large defense spending and lack of attention to domestic issues, even those relating to national security (on the domesitc front)! May I point out that the Democrat's win last November was not only — contrary to many accounts — because of Iraq, but the economy, of all things, was a huge factor in what party people voted for according to exit polls. Going further this shows that not only do the vast majority of politicians vote by party lines, but even the people they represent, the voting population, do. There is also the issue of the US economy not actually being as bad as many seem to think. I have doubts over whether the Dems would have won if people had not voted for their individual candidate, judging them on their merits, and not what party they were of. I guess that's what happens in a two party system more than in a system allowing farer political representation for groups and even ideologies.

For more on President Bush's FY 2008 budget, see the US government's OMB website. Keep in mind everything from Bush's "war on terror" spending to his social security policy to his education cop-out stance.

Update: One hope for government spending transparency lies in the upcoming creation of a website that allows the public to see where their tax dollars are going. It'll be fun to call politicians — whomever they may be — on their rhetoric about the budget and spending. Of course it will also be frustrating to see Bush isn't lying too much about the earmarking Congress does, not that he doesn't prohibit pork barrel spending (he wants the people to believe that he is doing the opposite of what he is actually doing!).

technorati tags: bush, 2008, budget, fiscal+year+2008+budget, OMB, government, united+states, politics, white+house, democrats, spending, economy, news

State of the US economy: better than you think

One thing I find funny lately is the notion that the United States economy is going downhill. It’s just not true. People from both parties and ends of the political spectrum are bombarding each other, saying that their opposition is worsening the economy. Anti-free trade people attack for example pro-free trade people for trade deficit bringing the American economy to its knees; anti-Iraq war people attack Iraq war hawks for hurting the economy with the massive cost of the war; people both against welfare in the US criticize it for harming the economy. The list goes on and on.
The Washington Post reports that 2006 wasn’t actually too bad of a year.

The U.S. economy turned in a surprisingly strong performance last year, new data show, growing 3.4 percent despite higher interest rates, high oil prices and the sharpest housing downturn in 15 years.

The report from the Commerce Department, showing that economic growth picked up in 2006 from the 3.2 percent growth of 2005, dispelled any lingering doubts about the momentum of the economy going into this year. Many economists predict growth will slow this year, but gone are the recession worries of last summer.

I am not arguing that there are not plenty of problems with things like inflation, interest, manufacturing jobs (especially auto), oil and energy, trade deficit, and the housing market, but the US economy in general is still holding strong. Just the fact that the economy is doing well means a recession or slump in the economy may be all but eminent. There are always cries of wolf by economists and market annalists; we can neither believe all of the fearful predictions nor can we dismiss each one.

Economy and Iraq are the two issues that brought the Democrats into power in last November’s elections. Of those two issues, the domestic one — the economy — has been the one less covered by the media. It was arguably just as significant to voters according to exit poll data, but a war and foreign policy disaster makes for more sexy news I guess. Nonetheless, ‘free trade’ and ‘fair trade’ have been hot issues for a long time now, and many people haven’t a clue what either one means; political jargon plus macroeconomics does not make a good topic a layman could grasp.

The American economy is doing fine. No doubt it could easily be worse. One thing politicians need to remember is that no matter how many tax cuts they give the middle class, no matter how much they want to isolate the United States from global trade, the best thing they can do for the economy is education. The US and many other developed, industrialized nations are at a point where the agricultural sectors have largely turned to manufacturing (c. Industrial Revolution) and now, in the information age, manufacturing jobs will need to convert into services jobs. A person who would have been a potato farmer in 1800, a factory worker in 1950, would now find the best job security in being a programmer for Google or a designer for Ford. Of course, service sector jobs — even the ‘elite’ jobs like those in the medical profession — are being outsourced. Eventually the sectors and shared trade between countries will need to balance out.

More on so-called free trade soon.

technorati tags: trade, free+trade, united+states, economy, news, economics, market, commerce

Crouching tiger, not-so-hidden dragon

China’s economy grew by a massive 10.7% in 2006, defying many expectations as well as frightinging some and making some update their clocks counting down to either China's being crowned as a superpower or the collapsing of China's economy and/or government. Who knows about 2007…

China’s economical boom has surprised many, on multiple counts. Too much focus is put on India 'catching up', how a democracy should eventually crush an autocracy. There is, of course, a dark side often not seen in the pages of the Wall Street Journal: the extreme poverty and lack of development in these two massive Asian countries. The statistics say yes, the theories say yes, but India has yet to show China who’s boss. China is, of course, more developed. A benefit to pseudo-communism? Probably not, but India needs to make a lot of their urban areas more acceptable to businesses.

So will China reign supreme? It is loony to think any global superpower (empire) — including the United States, I might add — can be a superpower forever. The United Kingdom has been a great power or higher for many hundreds of years; the Roman Empire, which had power on an enormous scale, lasted hundreds of years more, but still eventually crumbled. Technology, it is said, is key to power, as is society. I think three people who have written some interesting things on the topic are Niall Fergruson, historian, Joseph Nye, Jr., a political theorist, and Ian Bremmer, a political analyst. Fergruson specializes in empires; Nye in power in general; Bremmer has a ‘J curve’ theory (see image below) that’s intriguing.

A graph of Ian Bremmer's J curve. Credit: Bremmer's Eurasia Group.

Maybe, in this modern day when it seems impossible for any superpower to fully extend itself, let alone become a full-blown hyperpower or empire, it is best not to think of China as the next superpower. The next great power — if it is not already — yes, but ‘superpower’ might require too much speculation about China’s future. They have energy needs, and do not use their needs very efficiently. If North Korea sloppily collapses that may be a huge problem for China not because of communism — which neither state really practices — but because of the human problems; things like refugees. China itself also may face the problem of stability. China has defied Bremmer’s ‘J curve’ by finding a way across the curve (from closed to open), albeit slowly, without falling to the bottom into instability. Anyway that is a taste of China and its rise to prominence on the political and economical global scale. It goes without saying China will remain a major topic as we enter 2007; they will be hosting the Olympics in 2008 so it will be interesting to see how that affects the country’s openness.

I think the Chinese leadership is doing a surprisingly satisfactory job at managing their bulging economy, but they need to really work on the human rights (never forget: the 1989 Tiananmen Square massacre). Until then, the best thing to do is wait and, as responsible human beings, do our best to help those in China without collapsing their society. If China can continue to walk the open-to-closed J curve tightrope, and manage to stay high on the stability axis, things could work out fine.


Song stuck in my head right now: Thom Yorke’s “Harrowdown Hill”. It has both a profound sound and meaning. Read more about the song’s interesting background in this Wikipedia article.

technorati tags: china, india, economics, j+curve, politics, international+relations, power, nye, fergerson, bremmer, superpower, global+power, news, in+the+news, politics, analysis

Inside the WEF's Davos 2007

Some of the worlds most powerful and recognizable figures have been meeting in Davos, Switzerland over this past week discussing everything from climate change to currencies. Davos 2007 is a meeting of the World Economic Forum. At first glance it may just sound like a meeting of economists, albeit at one of the nicest ski resort areas on earth. When one takes a closer look one sees a conference with influence that can measure on a massive scale. The likes of British Prime Minister Tony Blair, rock star/activist Bono, United States' Sen. John McCain, the globally influential Google's Chairman and CEO Eric Schmidt, Microsoft head Bill Gates, US Sen. John Kerry, and German leader Angela Merkel are all in attendance at the WEF meeting, and are joined by non-Western dignitaries such as the Chinese economic minister in addition to Brazil’s re-elected President ‘Lula’ de Silva. I find it amazing how many blogs are talking about Davos, and how many of them are newsblogs not run by individuals, but by news organizations like the BBC, CNN Money, The Economist, The Guardian, Comment is Free, Newsweek, Huffington Post, Financial Times, and the International Herald Tribune, and the New York Times. Le Monde (translated) and the Wall Street Journal have also joined the party. Davos ’07, like the World Economic Forum itself, is obviously elite — which is why there has been opposition to it, just like there is opposition to the G8, WTO, and other governmental and economic conferences.

The World Economic Forum's meeting may now be over, but its reverberations still feel the news atmosphere and international zeitgeist. I said earlier in this post, climate change seems to be a topic on everyone’s mind at Davos. Global warming will have not only a disastrous human and environmental impact, but obviously an economic impact too — as the Stern Review confirmed. If precautions are to be taken against things like greenhouse gasses, it would be better for those precautions to be taken now than later, when they would be even more costly. If I was a political leader in country X, it would be more economically and otherwise effective to work to prevent the effects of human-caused climate change sooner rather than later; the cost — in money and lives — would be all the more higher the longer I wait. That being said I’d look for dampers on global warming sooner rather than later. Let’s say country Y waited 40 years until they took any action their climate change battle. By then the environmental consequences have a massive malevolent potential and the cost of working to save what has been lost by global warming and work against the problem at its core would be more expensive than if that country had done it 40 years prior.

One major story relating to Davos on the climate change front. BBC News:

UK Prime Minister Tony Blair has told the World Economic Forum a major breakthrough on long-term climate change goals could be close.

Germany is taking center stage in the push for moderate globalization and has been a major player in European and world politics lately. Angela Merkel, the center-right German chancellor, has done well at balancing all the different forces of globalization — from human conflict and terrorism to climate change — in her recent agenda. Another international relations topic revealed more at Davos is that the United States is not nearly as ‘all powerful’ as it used to be, at least in regards to global economics. There’s a great IHT opinion piece on the matter.

This year's theme at the World Economic Forum annual meeting here — "the shifting power equation" — confirms the view of many participants that power is draining away from the United States to multiple centers as countries from Brazil to China move beyond "emerging" market status to establish themselves as major players on the world scene.
…
Far from some kind of conspiracy of the global elite plotting the future as they whisk down the Alpine slopes, Davos is in fact a back-end barometer of their evolving worldview. It does not break new ground but consolidates opinion. It does not generate new trends but codifies them into conventional wisdom. That is its power and its importance.

There is also hope for (BBC News) what is called the Doha round (The Guardian) of trade talks between the developed and developing nations. The Doha round ended without agreement earlier in 2006 and was seen as a failure of both sides of the developed/developing fringe. Skepticism should still be used for these trade talks, but if Doha does gain progress from the recent push at Davos, one may hope a positive outcome is reached. Some have gone far enough to say 2007 is going to be a ‘good’ year (BBC News) for economies in general. (As you can tell from the abundance of linking to the BBC News site, there is a lot of good Davos news there as well as at the afore-linked blogs and news websites.)


Updated with more links to sites covering Davos '07.

technorati tags: trade, economics, blair, merkel, germany, uinited+states, davos, doha, world, economic, forum, economics, world, news, in+the+news, current, politics, world+trade, globalization, climate+change, global+warming, wef, davos+2007