… A Super Committee (Politics) with no courage and that is not in touch with real people and the crisis exhausted majority.
The blunt and offensive failure, out of principal, means two more years of uncertainty. A let down on the theme ‘investing in America’ as the terms about the future remain unknown. Because Forbes 500 companies and the odd SMB don’t know the future terms of business in America, and how to compete against BRIC’s and frontier markets – long-term investments and strategic investments are withheld further or done elsewhere. Period.
The Super Committee, Congress, Senate and the White House just played foul, and American’s (employers and employees) go head-held-low home.
The Anatomy of Global Economic Uncertainty by Mohamed A. El-Erian
The sense of uncertainty prevailing in the West is palpable, and rightly so. People are worried about their futures, with a record number now fearing that their children may end up worse off than them. Unfortunately, things will become even more unsettling in the months ahead.
It is no coincidence that all of this is happening simultaneously. Each development, and certainly their occurrence in tandem, points to the historic paradigm changes shaping today’s global economy – and to the anxiety that comes with the loss of once-dependable anchors, be they economic and financial or social and political.
Restoring these anchors will take time. There is no game plan as of now, and historic precedents are only partly illuminating. Yet two things seem clear: different countries are opting, either by choice or necessity, for different outcomes; and the global system as a whole faces challenges in reconciling them.
Calls for a fairer system will not go away. If anything, they will spread and grow louder. The West has no choice but to strike a better balance – between capital and labor, between current and future generations, and between the financial sector and the real economy.
This leads to the final variable, the role of politicians and policymakers. It has become fashionable in both America and Europe to point to a debilitating “lack of leadership,” which underscores the extent to which an inherently complex paradigm change is straining traditional mindsets, processes, and governance systems.
Unlike emerging economies, Western countries are not well equipped to deal with structural and secular changes – and understandably so. After all, their histories – and certainly during what was mislabeled as the “Great Moderation” between 1980 and 2008– have been predominantly cyclical. The longer they fail to adjust, the greater the risks.
Those on the receiving end of these four dynamics – the vast majority of us – need not be paralyzed by uncertainty and anxiety. Instead, we can use this simple framework to monitor developments, learn from them, and adapt. Yes, there will still be volatility, unusual strains, and historically odd outcomes. But, remember, a global paradigm shift implies a significant change in opportunities, and not just risks.
Mr El-Erian isn’t the only one calling the bluff, … Stiglitz, Krugman, Rosenberg, Koo, Reinhard, Rogoff, Ferguson, …
James Rickards, senior managing director of Tangent Capital Partners, talks about his new book, “Currency Wars: The Making of the Next Global Crisis.” Rickards speaks with Bloomberg’s Sara Eisen and Michael McKee on “Bloomberg On the Economy.”
The Coming Paper War
Basis: Excessive Debt.
Possible Solution: (1) Massive Growth. But not possible because of structural problem etc. (2) Net-Exports. But not everyone can export. Except you are able to export to Mars. (3) Default. Problem is that if everyone does it one at a time, the world economy would face more than one lost decade.
Stealth Solution: Devalue your currency via heightened inflation of long-term. Problem: Not every debtor can devalue their currency at the same time (GBP, USA, EUR). We sit all in the same glass house (world trade, world economy, foreign direct investment, savings, consumer). Further, high inflation is hard to get back into lower territory (see USA 1970′s) and you have to hike interest rate so high that a recession is unavoidable.
‘Without growth, use inflation. Either planned, or by chaos.’
‘Loss of confidence in fiat currency (paper money) = higher Gold price.’
Possible Outcome: (1) Creation of a Multi-Polar Currency as reserve currency (a basket of currencies). (2) Or use SDR (Special Drawing Rights) as reserve currency. (3) Or some sort of Gold backing as anchor (variable one). (4) Or chaos by denial, wishful thinking and kicking the can down the road.
Result: Lot’s of headaches.
‘Fed [Federal Reserve] is playing a linear game in a non-linear world.’
‘Complexity theory: Small changes can have fast and unexpected outcomes. Especially in our complex, interconnected, unstable world.’
The Economist’s current assessment of the situation (video).
Mismatch between Economic and Political Cycles = unintended consequences, policy folly (errors) guaranteed. (here)
Authors@Google: Tomas Sedlacek
Same talks and explanations here;
- RSA – The Economics of Good and Evil (YT),
- Interest Rate = Alcohol (YT),
- Economics & Zombies (YT),
- “Growth” Capitalism is in Crisis, not Capitalism itself (YT).
- What Makes the Wealth of Nations? Part 1 (YT), Part 2 (YT).
- Crisis – Should the Government Be Loser Friendly? Part 1 (YT), Part 2 (YT).
While Everyone Is Making Fun Of The Slovak Republic…. Peter Tchir
The Slovak Republic has 63 billion Eur of GDP with debt of 29 billion. That is only 46% debt to GDP, but they are only rated A1/A+ with S&P having them on positive outlook. Their credit has been on an upward trend. It was A3 back in 2004 with Moody’s and has been steadily clawing its way up. It got their by being fiscally prudent. It hasn’t seen credit improvement by taking on debt obligations willy nilly. Its EFSF guarantee commitment is 7.8 billion euro. That is just over 10% of GDP, which as the high end, but it is 27% of its current debt outstanding. That is a staggering amount of money. If this country had wanted to raise 5 billion and spend it on itself, the quality of life would be much higher. With just of 5 million people, that is about 1,000 euro per person that they are using to support countries that have more benefits than they provide their own citizens. People can pooh-pooh what is going on in Slovakia. They can make fun of how the whole world is focused on this little country, but they are wrong to. This country, like Finland, is being dragged into something they don’t want to do. They are going into debt to provide money to countries who spend more per citizen than they do. Shouldn’t they be spending that money on themselves? Taking on debt to help someone else when they have survived by being responsible makes no sense to a lot of people there.
I am sure there are backroom deals being made, promises that they will never have to make good on their guarantees, but regardless of the outcome of this particular vote, the mood and tone here should give a good indication that any Grand plan will have to be paid for almost entirely by Germany and France. And let’s not forget, this vote, which the world is closely watching, is to approve something that is already obsolete and ineffective. (in full via)
This video has been kicking around online for a few days, but with as these clips are coming to define the movement at Zucotti Park, we felt it important to get this one up.
The post at YouTube says that the partiers in the video are members and guests of the Cipriani Club at 55 Wall Street, a private club with 106 residences.
Here, the 99% get looked down on both literally and figuratively by the 1%. Below is the video. Fast-forward in about 50 seconds. (via)
by Morley Winograd and Michael D. Hais. (via)
PS: I am sick and tired about Sovereign Debt Crisis and PIIGS. Can we finally get over with it? Please let Greece default.