Sunday, October 17, 2010
Saturday, October 16, 2010
Reagan's imagery might have worked when we lived on a mostly unexplored planet, without computers, and our complex computer-managed systems. If you didn't like having neighbors, you could just pick up and go somewhere and be by yourself, rugged and individual, and get some peace and freedom. If that world ever existed, and I wonder if it really did, it sure doesn't exist today. Not if you want your kids to go to school, and get proper health care, and get on the Internet and listen to your iPod, etc etc. Sure it sounds nice in a commercial, but you're not actually going to do it, even if you could, and you probably (almost certainly) can't.Scripting News: Our civilization doesn't scale
Thursday, October 14, 2010
And about half of the total loans went to projects run by local authority investment vehicles that are now unable to fully meet their repayments.
These must now be covered by the local governments or with collateral.
And the final 26% of cash may never be repaid.
This is where money went to projects that failed to meet official regulations, faced "serious default risk", or was embezzled, the CSJ report said.
BBC News - Loans to China local authorities 'at risk'
Let me make this perfectly clear, there is no danger at all of the US or EU government in the near term not being able to borrow money from China or other Asian countries until the Private sector can start borrowing again.
Firstly let me make it clear what is behind "sovereign debt". The United States and much of Europe is utterly dependent on debt. This is how the economy works. With the labour movement destroyed in the 1980s real wages have dropped for almost 2 generations. This has been particularly bad in the past 10 years. To keep the "Capitalist" system going working have been given access to easy money to extend their consuming beyond their wages. This is entirely underpinned by rises in housing prices.
But this money in consumption was going to Asia, where people actually do save, and probably save too much. So a kind of relationship relationship between the East and West developed, with underpaid US and EU workers spending their income and borrowing money to buy goods, and the people who make those goods than investing more and more money in the US. Like it or not this pointless circulation of money is all that Capitalism every was or ever will be. It is the full and total nature of Capitalism. Capitalism as a concept is not in the Bible (though Slavery is) or in the US Constitution (where Slavery was also). Capitalism is no moral system, and it has no fixed outcomes, no magic to the market. Capitalism is simply the rapid movement of money from person to person, institution to institution.
If this flow does not work Capitalism does not work. If the players are States or Companies or Charities makes no difference, as long as circulation of money and goods happens the system continues. Is it long term sustainable? Probably not. Is it short term transformable? Definitely no.
The crisis of a few years ago was due to the collapse of the banks which had done precisely what markets always do, they boomed and busted. Anyone who has any questions about this any longer is simply an idiot. Markets are unstable not stable. Some Right Wingers say "well that was not a real free market" is simply playing word games with real people's lives.
When the collapse came the Government of the world had to step in to insure the system simply did not fall in on itself. For the most part they were highly effective. The world so a collapse of the global banking system and yet there were no runs on banks, no collapses of major currencies, and unemployment rose but remained at bad recession levels. Again the current level of borrowing is not sustainable, but it is also not sustainable to keep some one in the emergency room for 20 years. Sometimes crisis situations require massive government debt.
Now some people who for purely ideological reasons want to see government pulled back. Essentially they are saying pull the plug and see what happens. These groups can be broken in to different groups depending on the degree to which they have lost touch with reality. The vast majority are "Post-Soviet Male Syndrome", they simply can not accept that the system of Reagan and Thacher didn't work forever and God would let Capitalism enter crisis. This is the basis for sudden voter demands that government spending be cut,, as long as it is not spending that touches them.
But there are some reasoned positions that play with the fact that this is unsustainable. True the governments of the West can not go on living like this. But the first thing that should tick you off about the its "unsustainable" crowd is that they have just learned this argument. They were not making it about the housing boom 5 years ago in the US and they find it hard to make about the environment. When I hear someone who will say the entire thing, pre-crash and post-crash is unsustainable and we need to learn to live with less I have to say I agree. But that is not what we are hearing.
What we are hearing is that government debt is unsustainable and nothing else. No comments about regulation of banks, market complexity, changed global conditions, or even the climate.
Well actually in response to this the answer is fairly simple: Where else is China going to put its money? It won't invest it in the "free market" right now because the private sector is too weak. It won't invest it in its own local governments because they are too risky. They might buy gold but Asian government like investing in governments, and the best governments to invest in are in the US and the EU.
Really both nations have a advantage they should fully embrace: democracy and the rule of law. These two factors, which are mostly absent in the developing world make US-EU government debt a very attractive option for Asian investors, actually in a time of risk the best investment they have. Asian banks are sitting on trillions of dollars and Euros. They have no where else to safely invest that kind of money right now and they have no interest in watching those currencies lose their value.
There is a risk of our governments becoming to indebted to Asia, but essentially the private sector already did that and any forced movement from public to private right now would just make that situation worse. We would be borrowing money from Asia to drive our economy at higher interest rates and lets be fully honest, in the end the tax payers will have to cover it in the end.
Better to continue the current levels of debt as the economies in the West continue weak growth. The current situation of weak growth is far better than the utter collapse of 2008-2009, a collapse that a US tax cut did nothing to prevent I recall. When the private sector has gotten its debt worked out a bit better than the process of reducing public sector spending can be considered.
Though I don't really think we should be looking at saving via cuts to the public sector. Like it or not the age of actual Socialism is here. The present world economy is underpinned by China's state managed economy. Older populations in the West grow more and more dependent on state pensions and state health care. We are entering a more normal period after a friend flirtation with radical free markets, and that period is over.
A key case to watch will be the UK. The current Conservative government has, for some strange reason, decided to act as if the IMF had inflicted huge austerity on it. Probably because the rich in the UK are treating the rest of the nation the way the rich nations treat poor nations in the IMF. The UK shows that the global condition is repeated again and again at local levels. London's relationship to Manchester is the same as to India. I think that actually the UK economy will not only face 2 years of low growth, even recession, and massive job loss, but at the end of it nothing will be accomplished. Tax revenues will be further down because of the loss of jobs and the cut back of consumer spending, and it the end the UK economy will have a smaller public sector what it destroyed its private sector under Thacher. Under the Tory and New Labour governments the Private Sector became the service sector, which produced few good jobs. Only public sector spending is keeping millions of British out of total poverty. The process of destruction of most of England will continue and go faster but at the end a UK with less public services and spending and a strong pound is not going to attract investment in to factories and other businesses that make jobs, since the pound will be too strong and consumer spending too low.
BBC News - Schwarzenegger drops in on David Cameron
Best Quote, that Schwarzenegger was going to help Cameron "terminate" the debt.
Despite Gov. Arnold Schwarzenegger's promises to reduce California's indebtedness, the state's debt has nearly tripled during the seven years he has been governor.
Monday, October 11, 2010
"Do you want your representative in Congress to fight for more government spending in your congressional district, in order to create jobs; or do you want your representative to fight to cut government spending, even if it means fewer jobs in your district?"
9/22 - 10/3/10
"In general, would you rather have the federal government provide more services, even if it costs more in taxes, OR, the federal government cost less in taxes, but provide fewer services?" Options rotated
more in taxes
less in taxes
9/22 - 10/3/10
Saturday, October 02, 2010
As it happens, governments can't go bankrupt - they can only default on their debt. But I'm not just being pedantic. The facts are that on the eve of the election, the UK still had an uncontested triple-AAA credit rating, and the market was demanding an interest rate of just 3.9% to lend the government money, compared to 3.7% for US bonds and 3.1% for Germany. (That UK rate might have been higher had investors not been expecting a Tory victory, but the average yield for the previous 12 months was about the same.) Whatever you think about the fiscal mess that the coalition inherited, these are not the characteristics of a country on the "brink" of bankruptcy or default.