More economic troubles ahead?

[mithriltabby]

Bill Moyers’ interview with Kevin Philips was sufficiently interesting that I bought Philips’ book, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism and moved it to the top of my In stack.

He traces the roots of our current financial crisis, and brings up some data points I was previously unaware of. I knew that bad deregulation made it easy for subprime loans to be packaged up and sold off as financial instruments while hiding the actual risk, that the ratings agencies had engaged in a “race to the bottom” to put their seal of approval on bad investment pools, and that the SEC in 2004 waived its leverage rules for the Big Five Investment Banks that Are No More. (And lest anyone think that Democrats are blameless in this mess, Phil Gramm may have been instrumental in drafting the Commodity Futures Modernization Act of 2000, but Bill Clinton signed it, and the Clintons are quite cozy with Wall Street.) Philips notes that the Consumer Price Index was tinkered with in the late 1990s to camouflage inflation, and compares it to old-style debasing of currency, and that Bernanke suspended the publication of M3 statistics in 2006, also hiding indicators of inflation.

The book compares our current situation to historical examples of other world economic powers that passed their Zenith, such as Hapsburg Spain, the maritime Dutch Republic, and imperial Britain before WWI. We seem to be following a historical pattern: financialization (the shift of the economy from doing things and making things to finance), an intensification of religious fervor leading to conflicts with science, imperialism and military overreach, excessive debt, and (in the later two cases) the energy infrastructure becoming obsolete. There are many examples from our past three decades of “collusions between political permissiveness and financial recklessness”, receiving government rescue every time the voters felt threatened.

He points out the sources of our troubles: a quasi-religious faith in the efficient markets hypothesis, debasement of the statistics that help us steer the economy, the use of the “prosperity gospel” to anaesthetize voters who might otherwise have been more skeptical at the polls, and securitization to hide risky assets. He also looks at impending problems, taking a hard look at energy security, and the risks of some of seeing some of our trading partners decide to rethink policies like Bretton Woods II, or OPEC pricing oil in dollars. There will be a shift of economic power to Asia in this century, and if we aren’t careful, that shift will be abrupt and (for us) rather unpleasant.

He has little good to say about either political party, noting bipartisan trends of dynastic politics that selecting for working the system rather than doing good work, but still hopes that we might manage to eventually move the nation toward being a high-value-added manufacturer and exporter comparable to Germany, Japan, or Switzerland. Overall, a sobering read.

Comments

[kalimac.livejournal.com]

The details were not known to me, but this thesis has been in broad circulation ever since the US manufacturing industry started to collapse.

[elissa-carey.livejournal.com]

Normally things like this would bore me to tears, but this sounds fascinating. Coupled with an interview on NPR's "Fresh Air" I was listening to on the way home yesterday, I find myself more interested in general. I think what I would most like to glean from this is not a finger (or a whole hand) to point for blame, but hints for a way out of this mess -- what kinds of changes could we make as a nation that would best serve us (both within our current system and within any system we could reasonably hope to replace it) to pull us out of this mess.

[mithriltabby]

At a friend’s last winter solstice ritual, each person in the circle was asking for a blessing in the coming year, and I asked that humanity be collectively given the wisdom to make better choices. It was the summer solstice when I remembered that and considered just how much policy-wonk reading I’d been doing lately, and realized I did volunteer for it...

[altra.livejournal.com]

Just yesterday I was reading about people looking to move the financial capital elsewhere. China being one of the top contenders.

However, I worry with the way China likes to regulate and manipulate through various politcal and unofficial moves that it may be a risk of another kind that we'd have to contend with.

[roseembolism.livejournal.com]

Arrgh- that "anonymous" comment was from me. Disregard it.


Q: What's the difference between Clinton and a moderate Repulican?
A: Im not sure. IS there one?

We may or may not be past our economic Zenith, and may or may not be going through some rocky economics in the short to medium term. The problem is it's almost impossible to tell until at least some decades after the fact.

The good news is that in the long term, all of the countries mentioned above are doing well and are prosperous, even if they have less international influence then they once did. In the short to medium term, one might consider moving to Canada once it becomes a part of the EU, or possibly start lobbying for California to join in a commonwealth with Canada- and hence join the EU.