Economic Mutually Assured Destruction Revisited

[dcarrigg]

Re: Economic Mutually Assured Destruction Revisited

Possible, as you mentioned, but takes decades, but how the world economic situation would be by then will be up for guessing.

Germany and Japan are manufacturing oriented. With costs, rent, and wages higher than America, if they can have an industrial base, why can't America?

Differing linguistic and cultural definitions have much to do with why this is. See German Sozialmarktwirtschaft:

http://www.jstor.org/view/00076805/s...3&config=jstor
http://en.wikipedia.org/wiki/Social_market_economy

Or perhaps MITI in the case of Japan:

http://en.wikipedia.org/wiki/Ministr...e_and_Industry

Part of all of this comes from the McCarthyist stigma attached to managing the economy (which anyone who watches the Fed knows happens anyways). The other part is a nationalistic sense of obligation to ones country/people that does not seem as strong in the US. (At least in the economic realm).

So exporting manufacturing does not cause rows in the same manner in the USA.

[marsien59]

Re: Economic Mutually Assured Destruction Revisited

Frank Holmes of U.S. Global Investor's expects copper – which has gained 400% in the past five years and now sells for $3.75 per pound – to hit $8 to $10 in the coming five years.

What does Mr. Holmes see that we are potentially missing?

I am a newbee !
Is this a answer for the price of cooper from J. Sinclair site
http://www.jsmineset.com/cwsimages/M...7_CuPrices.pdf

[BlackVoid]

Re: Economic Mutually Assured Destruction Revisited

Frank Holmes of U.S. Global Investor's expects copper – which has gained 400% in the past five years and now sells for $3.75 per pound – to hit $8 to $10 in the coming five years.

What does Mr. Holmes see that we are potentially missing?

Peak Copper. But I sincerely doubt that the price of copper will rise that much. And the reason is Peak Oil.

[Guest]

Re: Economic Mutually Assured Destruction Revisited

Blackvoid -

You live up to your Avatar name perfectly. You come and you go - like a "silent shadow"...

I appreciate all of your viewpoints. In fact, to be precise, most of the time I think your bets are 100% "on the money".

[GRG55]

Re: Economic Mutually Assured Destruction Revisited

Maybe we were not clear: Economic M.A.D. = no decoupling.

You have company. These IMF folks don't seem to think there will be much decoupling either. Apparently Hank doesn't agree with them however...

IMF Cuts Global Forecast on Worst Crisis Since 1930s

By Shamim Adam
April 2 (Bloomberg) -- The International Monetary Fund cut its forecast for global growth this year and said there's a 25 percent chance of a world recession, citing the worst financial crisis in the U.S. since the Great Depression...

...The reduction is the third by the Washington-based lender since last July, when it predicted the world economy would cope with the U.S. credit squeeze and grow 5.2 percent this year. Central banks will need to conduct policy ``as flexibly'' as the circumstances warrant, the statement said, adding that the European Central Bank has room to lower borrowing costs.

``The financial shock that originated in the U.S. subprime mortgage market in August 2007 has spread quickly, and in unanticipated ways, to inflict extensive damage on markets and institutions at the core of the financial system,'' the statement said. ``The global expansion is losing momentum in the face of what has become the largest financial crisis in the United States since the Great Depression.''

Asked in a Bloomberg Television interview about the IMF's analysis, U.S. Treasury Secretary Henry Paulson said today ``that sounds overblown to me.''...
http://www.bloomberg.com/apps/news?p...9.Y&refer=home

[c1ue]

Re: Economic Mutually Assured Destruction Revisited

Frank Holmes of U.S. Global Investor's expects copper – which has gained 400% in the past five years and now sells for $3.75 per pound – to hit $8 to $10 in the coming five years.

Besides Mr. Holmes being a part of an investment machine geared toward getting you to buy something, dollar depreciation itself could lead to a situation where everyone is right: copper prices achieve $8 to $10, but that $8 to $10 wouldn't buy a hamburger at McDonald's.

Germany and Japan are manufacturing oriented. With costs, rent, and wages higher than America, if they can have an industrial base, why can't America?

Because they were selling to America.

Waterfall effect: as Americans buy less cars and what not, either this excess inventory is dumped at a lower price or the manufacturer must scale back production (and likely fire some people).

[Slimprofits]

Re: Economic Mutually Assured Destruction Revisited

Maybe we were not clear: Economic M.A.D. = no decoupling.

Fred, it is not clear. Is this not E.J.'s comment (bolded)? What am I missing here?

Seems to me that if US demand for China’s exports falls by 10% that a corresponding decline in US demand from China from 20% to 18% can be easily absorbed by other trade partners that are not also heavily dependent on the US for export demand. Even if US import demand from China declined by half and China had to absorb the entire resulting 10% decline in total global exports that will not necessarily cause severe economic problems for China.

Comment: China's exposure is in its financial system, not in its strong 'real' economy.

[Supercilious]

Re: Economic Mutually Assured Destruction Revisited

Maybe we were not clear: Economic M.A.D. = no decoupling.

I happen to believe too that the "decoupling" theory is a myth, but so far I can't imagine any MAD. To me it looks more like a controlled demolition of the globalization (the WTO style globalization). Here is an interesting piece:
http://http://blogs.cfr.org/setser/2008/12/29/the-collapse-of-financial-globalization/

The big question for me is how exactly the next globalization will look?

[phirang]

Re: Economic Mutually Assured Destruction Revisited

Fred, it is not clear. Is this not E.J.'s comment (bolded)? What am I missing here?

China has a "strong real" economy??? :confused: