Tuesday, March 22, 2016

Globalization Is A Question Of Values. Lack Thereof.

"Economists know the cost of everything and the value of nothing"

No other country in the entire world believes in *free trade* outside of the U.S., except the UK, which has seen commensurate extreme deindustrialization and the accompanying poverty. The world's largest economies after the U.S. - China, Japan, Germany, France, don't believe any such thing exists, because it's a corporate fabrication...

The real "gold" was always the ability and capacity to produce. Not the metal. The biggest mistake EconoDunces make is not valuing the source and sustainability of income and the accompanying economic multiplier...and of course the "distribution" of resulting wealth, or lack thereof. What did China want out of this "transaction?" They wanted productive capacity. And that's what they got, because that's what they valued, whereas we valued Cappuccinos. When economists said way back in the 1980s we were "transitioning" to a low productivity service-based economy, that is when the adults left the fucking building. Apparently they envisioned a world of $7/hour Chipotle assembly line workers, and no one questioned them on that "vision" of the future...

ZH: March 22, 2016
"Free Trade", Jobs, & Income. It's Not As Easy As We Think"

Yes it is. It's much easier than we think. The problem is we "think" too much and value too little. There is much to agree with in this rambling essay about reserve currencies, trade, exporting dollars etc. Except the conclusion. In the end, there is vast inequality, and the reason why is not difficult to understand. 

Triffin's Paradox: "If you have a generation lazy enough, they'll print money instead of making things"

Good to know. Except the U.S. didn't run secular trade deficits until 1980, so there's no paradox, there are just apologists for stupidity. In 1980 the U.S. was the world's largest creditor nation. By 1990, the U.S. was the world's largest debtor nation. 

In the days of old, nation states ran trade surpluses to accumulate gold reserves. This was as I've said many times, the well known policy of export Mercantilism. Then the enlightened *free trade* Ricardian comparative advantage believers abandoned Mercantilism, but unfortunately not everyone was along for the ride aka. China, Japan, the entire "developing" world. They viewed the global economy as a zero sum game, and corporations were more than happy to accommodate with 10x amplified profits.  

At this stage, in the age of fiat (unlimited) reserve currencies aka. the dollar, the *real* gold isn't the metal, it's the factories and production. It's intellectual property, management capability, engineering expertise. It's not an inert metal.

Until everyone understands that fact, there will be financial, intellectual, and moral bankruptcy enough for all. Central Banks are not the problem, they are a symptom of the problem. They don't create deflation, they merely monetize the output gap, which at present is at 30 year wides, globally. They don't "lower interest rates", they follow the CPI around like trained chimps. After all, Monetarists themselves tell us that inflation is always and everywhere a monetary phenomenon. Only IF the money enters the real economy. Otherwise, it's just chips at the casino. 

None of this is the least bit complicated, except for those who have a goal to obscure the real reason this is all happening aka. corporate profits. And those who don't value what has just been lost.