Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

[FRED]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

Personally, I find the little typos kinda charming... the ideas are so clear and compelling, they are like the little nicks that the Chinese deliberately put on the bottom of fine porcelain... because perfect things are not of this Earth.

I do a lot of professional editing, and the only way I have found to minimize typos is to read and edit the final draft printed on paper. Trying to find typos on a computer screen does not work. I think there is some interaction with eye-flick blindness and flickering of the screen. Some of the things I have missed are just amazing.

I learned from a professional proof reader to read the copy backwards, sentence by sentence, from the end to the beginning. Thanks for the print and read trick!

Also, if you are using MS Word, even if you have grammar and spell check on automatic, you still may have to manually force the checks at the end by selecting from the menu. Word will then suddenly notice problems it did not flag previously.

Thanks for this tip, too!

[c1ue]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

The US has never been afraid to act in its best interest and will continue to do so. Most other contries have deferred to this behavior in the past. Bretton Woods/Plaza show that this is the case. Just because ithe US is now a debtor and not a creditor, there is no reason in my mind that this self-interested behavior won't continue. I think we may differ on what this means to USCorp going forward. It seems that you feel that the US options will be limited and that the rest of the world will have an enforceable claim on US wealth. I believe they do have a claim on that wealth and that the US will be wounded, I just think the US likely won't pay up and there is not much the world will be able to do about it and most everyone else will be hurt more.

That a nation act in its own interest is not surprising. What I've laid out repeatedly is that the creditors to the US had more to lose in the past thus were willing to be 'taken advantage of' in the 70s (BW exit) and 90s (Star Wars debt restructure).

What you still have yet to answer is why these other nations would give the US another 'advantage' when there is negative net benefit in doing so.

You are simply reiterating the belief that EJ noted in the article: that the US as the biggest consumer can still get away by screwing its creditors/suppliers.

EJ in the article also noted that the US isn't going to be the biggest consumer anymore. US consumption is dropping and will continue to fall as long as the massive Internet/Real Estate/Obamafed debts continue.

And if you think other nations will just cough up their labor and materials under threat from the US military, well, you'd first have to show how the US gets out of Iraq and Afghanistan gracefully - i.e. not as an obvious loser.

By reducing the debt to GDP ratio and allowing the US to limp along for longer, so the transfer of technology to China can continue. It also assists in the long term decline of US global power, which has strategic value for China.

This argument might be sensible for China, but China itself cannot fund the entirety of the US debt - not even half of it.

China's trade surplus with the US is probably only going to be around $200B this year - compared with $250B in 2008.

That's worth about 10 weeks of Treasury sales at the 'official' pace, and about 5 weeks worth at the $2T/year pace. And we have at least 15 months more to go at this pace.

Who is going to buy the remaining 42 or 47 weeks? The Fed's $300T facility is good for another three months.

Furthermore China has been overall maintaining or even dropping its overall US debt: China's corporate and agency bond holdings are in free fall.

Clearly China is not doing all it can to support the vast Obama spending.

While I've said in other posts that clearly China is going to 'play nice' by recycling its trade surplus with the US into bonds, it just ain't enough.

Even despite all this the reality is that China can both be a 'good' and a 'bad' creditor: it can both minimally fulfill its obligations as a US creditor AND benefit from other nations being the creditor whip hand - getting the cake and eating it too so to speak.

What were the fruits of the last decade? Technology transfer, the construction of a manufacturing base, increased global power and influence.

It depends on what your definition of technology transfer is.

If you mean factories to assemble iPods, then yes.

If you mean state of the art defense, electronics, biotechnology, etc etc - there are some examples but overall it is safe to say that the leading edge stuff is still very well controlled by the US technology transfer regulations. But then again, China doesn't need leading edge stuff to be a powerhouse exporter.

As for global power and influence - the dollar was indeed a means to China growing. I don't see how this makes any difference in the future though.

What has the US done for China lately?

If the value in gold of the dollar hoard halves, that doesn't halve its political and strategic value.

If this is true, then there is even LESS reason for China to help the US ease its devaluation transition.

But in point of fact China's government would face a lot of very difficult questions if it allows devaluation of its savings without a fight. Unlike the dumb people in the US, the people in China are well aware of larger geopolitical finance issues.

Monetarization. It's started, it is inevitable. The Chinese will make outraged noises about it, but since it is a slow form of national suicide they may also gloat in private. By acting outraged they can demand compensation in return for the loss of their investments - such as the right to invest in strategic US companies.
It's all about leverage - of the political kind.

Think of one of those political thrillers where nothing is what it seems, and you realise by the end of the movie that the main actors were playing a game entirely different than what their apparent actions would suggest.
"The Great Game", in this case.

You can see that the Chinese are long the US dollar by a trillion or so - but maybe behind the scenes they are actually short by several trillion more. What price do you put on superpower status?

I don't see what you're getting at. Is anyone outside of the stupid American public unaware that China is growing in financial and military power? That China is a threat to challenge for superpower status in the next 50 years?

The Yellow Peril was all the rage in the 1890s, for crying out loud.

And again, your fatuous assertion that monetization is inevitable doesn't answer the question of how it will occur: will it be in a manner beneficial to the US, or in a manner beneficial to the US' creditors?

I've never said that the US debt will not be deflated away in some manner. The sheer magnitude of the problem dictates some type of default will occur.

What I've said is that the US - being still dependent on foreign goods, foreign credit, and foreign goodwill on the interest being paid on existing debt - is no longer in control of how this default occurs.

The situation now is that the US is very much acting like North Korea.

North Korea: give us your money/oil/food or we'll shoot ourselves in the head via famine amongst the DPRK population and building nuclear bombs

US: give us your money/oil/food/manufactured goods or we'll shoot ourselves in the head via dollar devaluation and building a debt bomb

Last I looked North Korea's strategy has been...sub optimal. For the PRNK as a nation, for the DPRK's people, pretty much for anything/everything in the DPRK except the ruling class.

You're also ignoring the fact that China's trade with Europe is now larger than its trade with the US. Sure, losing some of its monopoly trade surplus with the US would hurt, but then again it is no longer the only game in town.

So I again await with bated breath for some facts to go with the talk.

[atlantafox]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

Thanks for the tip...

Writing is an art form of communicating well with your intended audience. My concern is the overall quality and readability of EJ’s writing.

One consequence, for example, sometimes leads to ambiguous interpretations: easily confirmed by reading some of the posters who think EJ said one thing and other’s claiming EJ said something different. Others have expressed their own concerns to which I concur. Shouldn't we all inspire to higher standards of professionalism?

EJ is brilliant in understanding the underlying fundamentals of our financial malaise; however, writing is not his strong suit - leading to better comprehension for his reader. Having said this, let me offer a possible solution.

EJ lives in an area that boasts some of the best learning institutions in the world. Find a journalism student, possibly one who also minors in Economics to proof, before publishing. There is no need for me to list the benefits, which I hope, should be obvious.

[jk]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

i do not believe that it is in the interest of ANY country for the dollar to be devalued in a "disorderly" way. that's the word they use in all the communiques, and i think that's the word they mean. every government likes to be in control. a disorderly devaluation may be defined as the loss of control by any and all parties.

[Jay]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

What you still have yet to answer is why these other nations would give the US another 'advantage' when there is negative net benefit in doing so.

They don't need to give the US an advantage, it already has it. All of its debt is denominated in its own currency and it controls the lever of the press. The US took the advantage long ago.

And if you think other nations will just cough up their labor and materials under threat from the US military, well, you'd first have to show how the US gets out of Iraq and Afghanistan gracefully - i.e. not as an obvious loser.

I never said this would happen. We are heading toward an era of protectionism that every country is going to have to crawl out on its own from. That being said, every big player wants stability, and since the US holds the keys to the world's currency, it will continue to suck blood from everyone else until the dénouement of this currency chapter. That chapter will likely be very bumpy and could end quickly or slowly depending on the compliance of all involved and as long a black swan doesn't stir the pot. But make no mistake that all want stability and stability equals dollar control, hence more blood sucking. The ships may all sink, maybe even soon, although I doubt it as I see this as a multiyear event, but controlling the dollar is an enormous advantage. I don't see the US ship sinking by itself, do you?

[ThePythonicCow]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

EJ lives in an area that boasts some of the best learning institutions in the world. Find a journalism student, possibly one who also minors in Economics to proof, before publishing. There is no need for me to list the benefits, which I hope, should be obvious.

That would roughly match my experience. Editing is a talent, like many, possessed by few. Whenever I found a good one, I treated him or her kindly. No matter how closely I edited my work, a good editor easily found many "opportunities" for improving it.

[centsless]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

Re: proofreading

Count every "F" in the following text:

FINISHED FILES ARE THE RESULT OF YEARS OF SCIENTIFIC STUDY COMBINED WITH THE EXPERIENCE OF YEARS...

How many did you count? Enjoy

And thanx again for a wonderful discussion. I find the ideas here so engrossing that errors do not distract in the slightest.

[c1ue]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

They don't need to give the US an advantage, it already has it. All of its debt is denominated in its own currency and it controls the lever of the press. The US took the advantage long ago.

Again you fail to address the problem that the US needs $1B/day MORE debt to pay for its ongoing trade deficits, and $3B/day to $6B/day MORE debt to pay for US federal deficit spending.

In comparison existing debt service interest payments are only $1.5B/day or so.

Printed dollars WON'T work for these future payments unless the counterparties are willing to accept them.

I frankly cannot understand how this is an 'advantage'.

I never said this would happen. We are heading toward an era of protectionism that every country is going to have to crawl out on its own from. That being said, every big player wants stability, and since the US holds the keys to the world's currency, it will continue to suck blood from everyone else until the dénouement of this currency chapter. That chapter will likely be very bumpy and could end quickly or slowly depending on the compliance of all involved and as long a black swan doesn't stir the pot. But make no mistake that all want stability and stability equals dollar control, hence more blood sucking. The ships may all sink, maybe even soon, although I doubt it as I see this as a multiyear event, but controlling the dollar is an enormous advantage. I don't see the US ship sinking by itself, do you?

The other nations want stability but will not give up their own sovereignty in order to preserve it. For one thing, their own populations aren't going to accept that - or don't the events in Japan mean anything to you? The dismantling of a 53 year leadership?

As for the US sinking by itself - actually I DO see it happening. A mature and measured policy to handle the problems the US created for itself in the past decade or three would be one thing, but what we have seen and continue to see is anything but mature and measured.

Or will you argue that the TARP, the stimulus package (I), the big bankster bailout, the escalation of military activities in Afghanistan, and so forth are signs of a mature and measured US policy response?

[ThePythonicCow]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

Re: proofreading

Count every "F" in the following text:

FINISHED FILES ARE THE RESULT OF YEARS OF SCIENTIFIC STUDY COMBINED WITH THE EXPERIENCE OF YEARS...

$ echo 'FINISHED FILES ARE THE RESULT OF YEARS OF SCIENTIFIC STUDY COMBINED WITH THE EXPERIENCE OF YEARS...' | sed 's/./&\n/g' | grep -c F
6

[necron99]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

Absolutely fascinating comments on a very good post.

EJ asked about the format -- Like the others, I vote yes. I wouldn't want to see it dominate the site, but as an occasional tool for keeping things fresh, it's great. The interview format seems to encourage a slightly different viewpoint... perhaps, returning to the basics of the argument and/or taking into account the mixed degree of understanding of a broader spectrum of viewers... rather than the omniscient-narrator format. Works well, (but sometimes I also log on to iTulip to seek omniscience. )

The typos derail me for a few seconds, but they're not usually hard to figure out, nor are they usually so frequent as to be annoying. (Occasionally they are, but not usually.) A bit of editing might be an improvement, though. Perhaps Mooncliff's comments alone might do the trick!

[herbkarajan]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

good read here "
The US Can't Unilaterally Inflate"

http://ndknotepad.blogspot.com/2009/...y-inflate.html

[Chris Coles]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

Absolutely fascinating comments on a very good post.

EJ asked about the format -- Like the others, I vote yes. I wouldn't want to see it dominate the site, but as an occasional tool for keeping things fresh, it's great. The interview format seems to encourage a slightly different viewpoint... perhaps, returning to the basics of the argument and/or taking into account the mixed degree of understanding of a broader spectrum of viewers... rather than the omniscient-narrator format. Works well, (but sometimes I also log on to iTulip to seek omniscience. )

The typos derail me for a few seconds, but they're not usually hard to figure out, nor are they usually so frequent as to be annoying. (Occasionally they are, but not usually.) A bit of editing might be an improvement, though. Perhaps Mooncliff's comments alone might do the trick!

Here in the UK it is usual for a senior exec to get themselves an Ace secretary; who in turn is worth their weight in pure Gold.. My fear is that pressurising him in this way might push EJ into trying to work with someone that inadvertently imposes THEIR interpretation of events upon the text. I remain convinced that we should recognise the slight imperfections as what they are; they personify EJ as an individual and the minor imperfections should be accepted for what they are, simply what he is. No different than whatever his facial features. He has created a World Standard venue for debate about economics and should be recognised for that, as an individual of great personality and standing..... warts and all.

[Jay]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

good read here "
The US Can't Unilaterally Inflate"

http://ndknotepad.blogspot.com/2009/...y-inflate.html

Oh, goodness, another deflationista article. Here's the punch line of the article:

The US must either:

1) Persuade China, Japan, and others to allow their currencies to appreciate dramatically so the US can abruptly default on some of its debt to them, and reduce their exports considerably;
2) Persuade China, Japan, and others to allow high domestic inflation. If the US wanted 12% inflation domestically, it might ask for 16% or 17% inflation in China, if not a bit more;
3) Do something crazy, like enact Smoot-Hawley Mark II and beat each other up at the WTO;

4) Suffer through deflation.


How about

5) They print a lot of money and don't persuade anyone of anything but let the world come to them until they puke and then everyone loses, but the debts are wiped clean and we get a new multipolar currency regime that favors all of the big players, including China likely, and yet still sucks the blood out of third world countries. In the meantime all of the little people pray to god that no one does anything too stupid.

[necron99]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

My fear is that pressurising him in this way might push EJ into trying to work with someone that inadvertently imposes THEIR interpretation of events upon the text... He has created a World Standard venue for debate about economics and should be recognised for that, as an individual of great personality and standing..... warts and all.

Agreed! I wouldn't want someone else to impose a different viewpoint onto EJ's work, although I'm perfectly happy to read separate pieces from different viewpoint. But I realize that this imposition can happen inadvertently. So, hey, Mooncliff and Fred had some good tips.

[ST]

Re: Mission Accomplished – Part I: Wrecking the Economy - Eric Janszen

Take the commodity bull market in 2008, and especially oil. The weak dollar trend took oil from $16 to around $60. Wall Street then took it from $60 to $147. That game got cut off when capital inflows reversed. The liquidity drain crashed the securitized mortgage debt market in Q1 2007. The rest is history.

Surely, you must concede that soaring Asian demand between 2000 to present fueled by their own bubble economy, and as witnessed by low inventory levels across the board, did also account for some significant rise in energy, agriculture and base metals prices, also.