Busted: Bankers and The Global Economy

November 7, 2010

Obama Admits Decline of US Dominance

Filed under: business, corporatism, economy, globalization, government, money, politics, recession — Tags: , , , , , , , , , — digitaleconomy @ 6:27 pm

Today, President Barack Obama said that the USA was no longer in a position to “meet the rest of the world economically on our terms.”

Speaking at a town hall meeting in Mumbai, he said,

“I do think that one of the challenges that we are going face in the US, at a time when we are still recovering from the financial crisis is, how do we respond to some of the challenges of globalization? The fact of the matter is that for most of my lifetime and I’ll turn 50 next year – the US was such an enormously dominant economic power, we were such a large market, our industry, our technology, our manufacturing was so significant that we always met the rest of the world economically on our terms. And now because of the incredible rise of India and China and Brazil and other countries, the US remains the largest economy and the largest market, but there is real competition.”

“This will keep America on its toes. America is going to have to compete. There is going to be a tug-of-war within the US between those who see globalization as a threat and those who accept we live in a open integrated world, which has challenges and opportunities.”

President Obama disagreed with those who saw globalization as evil. He did warn that protectionist impulses in the USA will get stronger if Americans don’t see trade bringing in gains for them.

“If the American people feel that trade is just a one-way street where everybody is selling to the enormous US market but we can never sell what we make anywhere else, then the people of the US will start thinking that this is a bad deal for us and it could end up leading to a more protectionist instinct in both parties, not just among Democrats but also Republicans. So, that we have to guard against.”

President Obama noted that America could not continue to promote trade at its own expense at a time when economic power in India and China is rising. “There has to be reciprocity in our trading relationships and if we can have those kind of conversations – fruitful, constructive conversation about how we produce win-win situations, then I think we will be fine.”

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October 12, 2010

U.S. on the Way to the Third World?

Everyone is talking about unemployment, but nobody is talking about the long-term reality of the U.S. economy. Wall Street is playing investment games with agricultural commodities to make money, which is now impacting prices apart from traditional supply and demand. This translates to higher prices despite a poverty-stricken economy. Food processors and manufacturers are cutting products sizes and raising prices, which means that Americans continue to get the short shrift on all sides.

Then there are the jobs. This month the U-6 category from the Bureau of Labor Statistics (a measure of unemployment that includes those who have stopped looking for work)  jumped to 17.1%, yet another red flag.

Also, consider the U.S. trade deficit that sends billions of dollars overseas to foreign countries, never to return, evaporating into the global economy. The deficit means that the Fed will print more money to add to an already robust global dollar supply.

The nation has another banking crisis, where it has been revealed that fraudulent foreclosure documents were signed without evaluation. This could plunge both the the mortgage industry and the banking industry into another “too big to fail” bailout. Who are we kidding? Messy lawsuits could be the order of the day as buyers and investors seek redress for damages, either real or imaginary. All this financial pressure will undoubtedly influence exporting more jobs outside of America to cut corporate costs. That is why you are hearing all the media hype about Americans not being trained enough for sophisticated jobs that they no longer qualify for. They are preparing you for the ugly truth, even if the reasons are really fiction.

Many Americans struggle to pay for necessities now as those prices continue to rise. Food basics are once again on the rise. Food processors are likely to pass that on American consumers. To counter all the bad news, the Fed is considering creating inflation with the hope of boosting the economy. Printing more dollars to send overseas is hardly a solution. Printing dollars to keep those dollars here is the only viable solution, but hardly an option since most corporate shareholders only care about the bottom line as they send the bulk of their work to cheaper labor markets. Whether that bottom line rests on foreign factories or in American ones doesn’t matter to them.

This short-sided thinking is unsustainable at best, even as corporations seek government funding because they are unwilling to take risks in the U.S. marketplace. They seek that money only because the U.S. government is stupid enough to offer incentives to those that don’t really need the cash. It just pads the bottom line for larger corporations, as that money evaporates forever with little reward for Americans. Meanwhile, the media continues to boast that small business is responsible for a robust economy, even as the U.S. government penalizes small business. Enjoy the new American third world and the decline of the nation in favor of funding multinational corporations.

May 14, 2010

Big Business & Consequence of Economic Recovery

Because of the way that the United States economy is structured, every article of good news is almost always balanced by an equally troubling fact of economic life. Despite the prospects of a growing recovery in the eyes of many, we are now confronted with the latest trade deficit statistics.

As the economy improves, established business and some people are spending more money. The unhappy news is that the nation is spending more on imported goods than the rest of the world is spending on U.S. goods.

The latest statistics show that U.S. exports rose 3.2 percent during the month. Authorities equate this to a seasonally adjusted $147.9 billion. Imports increased by almost the same percentage, rising to $188.3 billion, resulting in a trade deficit of $40.4 billion for the month of March. This an increase of 2.5 percent compared to the prior month, the highest trade imbalance in dollars in 15 months.

Much of the trade imbalance is due to the cost of  addictive imported oil, which points to the need for more effective national energy policy. The recent gulf oil spill has put a bit of a monkey wrench into what government says are short-term plans.

The largest winners in this trade process are the Middle East, followed by China. While consumers ultimately decide what they will buy, the big decision makers in all this hocus-pocus is Big Business, either through Corporate America, Multinational Corporations and large retailers like Wal-Mart. Responsibility doesn’t stop there. Even small mall shops bear a burden in supporting cheap foreign goods. In fact, no business is free from supporting cheap foreign goods over American goods. That die was cast in the 1990s. Even now, corporations are constantly trying to lower their bottom line and increase profits exponentially. Most of the time, they don’t care how they do it.  As a result the nation spends more than ever on foreign goods to support the desire for cheap stuff. Unhappily, because of corporations, much of that cheap stuff isn’t really cheap. It is being marked up by Big Business, made more desirable through glitzy advertising. As a result, quality of goods is often being reduced as well.

Corporations are not being encouraged to use goods produced in the United States. In fact, there is little incentive to produce goods in the U.S. when insanely cheap manufacturing sources can be found overseas. Politics is often involved with the notion of “saving America.” Any economic sustainability for this nation must involve corporations and businesses that do business in America.

It has been posited by many that consumers must demonstrate more discipline. While consumers do vote with their dollars, they often have little choice in the matter, especially in this decade. It isn’t simply about tightening spending and buying American goods. Corporations that do business in America must comply as well for the nation to succeed in putting down a continued national trade imbalance. Any other approach is simply magical thinking.

September 16, 2009

Double Dip Recession or Recovery?

Filed under: corporatism, credit, economy — Tags: , , , , , , , , , , , , , — digitaleconomy @ 7:55 am

Global industrial production now shows clear signs of recovering at least when comparing the current ‘recession’ with the Great Depression. During that time, a decline in industrial production continued for a full three years. The question remains regarding final demand for this increased production. Will renewed demand actually materialize or did the U.S. government create a small bubble with $2 billion “Cash for Clunkers” program? Will consumer spending, especially in the US, remain weak, causing the increase in production to go into inventories? If production simply falls into inventories, this will result in sharp cut backs and result in a return to recession. The labor market combined with ailing business credit and finance in the U.S. does not hold out much promise for an end to the recession. Will the Obama administration jigger with credit markets to somehow expand credit markets?

Global stock markets and investment banking and profiteering have mounted a sharp recovery since the beginning of the year. Still, the decline in stock market wealth remains even greater than at a comparable stage of the Great Depression. The downward spiral in global trade volumes has abated. This may be due to the return of the old ways of doing business that President Obama has decried publicly in the last few days. Data exists for June that shows a modest uptick in trade, but  the collapse of global trade remains dramatic by the standards of the Great Depression.

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