Re: Future of US and global economy

["Gary Santos" <evs@xxxxxxxxxxx>]

What is in the way of the US from becoming a Japan?

First, the attempt of Bush's fiscal stimulus package which in its present
form will be used to pare down credit card debt and not spending. The tax
savings on dividend taxes will be put in bonds and not spent since the
receipients are already rich. Second, Greenspan and Bernanke will attempt to
stave off deflation by buying, directly or indirectly, all sorts of assets.
Unfortunately, this won't work. I momentarily thought it would until I read
Fekete's article
(http://www.gold-eagle.com/gold_digest_03/fekete010903.html) which
essentially says that the opposite will happen. Now, I'm not sure. Very
interesting thesis, Fekete's.

Ultimately, I think all depends on the actions of all of those holders of US
bonds and treasuries given the current account deficit and the net
investments position. While it would be hard for them psychologically to
start a selling program, i.e. they will tend to hold just like anyone who
has his 401k in a paper loss or a trader who freezes as the price goes
beyond his mental stop, they just might call the bluff(?) of Greenspan and
Bernanke who said they will take on any sellers. But then again what will
that do to the dollar exchange rate as capital flows into other currencies
and to depressed real assets elsewhere? So much uncertainty! Was it in this
forum that someone said remove all uncertainty first? My personal tendency
is to go into real, tangible assets since most of the uncertainty and
dangers lie in any fiat currency and in financial assets with the exception
of the Swiss Franc. Unfortunately for those in the US, real assets are
pricey unlike the real assets of Southeast Asia.

If the US can not sustain its spending, jobs will be lost in those countries
heavily dependent on US imports. Singapore will suffer especially since it
has no domestic demand (a domestic economy, rather) to speak of. I wouldn't
be surprised if the liberalization of markets will be suspended for a while
and some sort of protectionism sets in. I remember a certain Eliot Janeway
write years ago that the only country in the world that can close its doors
and still grow is the US. Bush did it for steel and agriculture, didn't he,
despite free trade rhetoric.

Now you fellows know why I joined this forum. I'm very pessimistic and
wondered if I was fooling myself -- having seen what a flight of capital can
do to an Asian economy and sensing that it was about to happen in the US. If
it was the stock market and real estate market in Asia, the thing to watch
is what the bond holders in the US will do -- whatever economic bent you
favor. In a sense, I want you fellows to attack my position, tear it down
and prove me wrong. (Be kind, though, as my excuse is that I'm not an
economist. I just read a lot and have an appetite to learn.)

If it is of any use to you fellows, the most credible things (so far) in my
mind are: (a) Gold will rise to at least $500-$600 as this will justify
putting back into production many closed mining companies. Even the Fed and
JP Morgan and Citibank would want this. This way all short positions can be
unwound with the least collateral damage. (b) Iraqi oil will end up under
the control of the US. Throw in Saudi Arabia's as Henry pointed out. Just
wait until they get Venezuela under control or when OPEC raises production
to fill in the gap and there is absolutely no reason to believe Saddam will
have a change of heart. (c) The US dollar will depreciate a further 20% over
the next year or so. Even rightist policy writers are saying so and (d) we
can expect alternative currencies/stores of value to present themselves to
the world's central banks especially the Euro. (e) Another thing: even if
Saddam or Bin Laden are neutralized, there are too many extermists out there
to take over. Kill the two? Make martyrs out of them? Incarcerate them for
life? So what if oil goes back down to $15, the uncertainty will remain and
retailiations will be likely. North Korea is another thing. The fellow is
desperate. North Korea has no food and he can produce plutonium in mere
months and sell it to you know who or blackmail the US to give him aid
forever. From what I've seen so far, Bush won't be blackmailed but Kim has
nothing to lose. More uncertainty.

We are coming full circle back to the 1930's. Same issues only now the whole
world has too much debt. The prospects of a monetization of this debt might
be the means of last resort. Goodbye Central Bank inflation targetting and
their stable prices dogma.

So, fellows, should I continue to be pessimistic or is another revolutionary
economic thinker going to rise from the ranks of the economists? Uniquely,
perhaps, Henry's proposal for a restructuring of trade is a starting point.
The rich just get richer and the present structure of trade (based on
lowering wages and commodities if I may add) is unsustainable in my mind
unless together with the liberalization of trade comes the liberalization of
international borders.

Last thing, let's be grateful that the internet exists. This is probably the
only real free press around.


----- Original Message -----
From: <sachavidler@xxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Wednesday, January 08, 2003 9:16 AM
Subject: Future of US and global economy


> What is to stop the US heading into a medium/long term economic downturn
> similar to that experienced by Japan over the last decade?  And what are
the
> prospects for the global economy if that happens?
>
>