fredag, juni 10, 2005

Är det goda större än det rätta?

Bör man uppge friheten för att öka lyckan? Eller väger frihet mer än guld? Frihet är inte enbart ett medel för lyckan utan ett egenvärde. Kanske friheten är en kollektiv nyttighet.

Är frihet, rättvisa och jämlikhet enbart medel för att maximera det goda? Eller kan dessa värden vara önskvärda i sig oavsett vilka konsekvenserna blir för det goda? Det behövs av debatten att döma en ytterligare analys av frågan om friheten är ett medel för lyckan.

Frihet inte ens ett instrumentellt väde

Utilitaristiska filosofer har vanligtvis inte betraktat frihet, rättvisa eller jämlikhet som relevanta begrepp för ett handlande i syfte att uppnå lycka, lust eller nytta (det goda). Därför representerar dessa begrepp egentligen inte ens instrumentella värden för uppnåendet av det goda.

Men man behöver inte betrakta detta från ett utilitaristiskt perspektiv. Låt oss analysera utilitaristernas paradexempel med tandläkaren. U föreskriver att det är bra för ens lycka att gå till tandläkaren och utsätta sig för ett visst lidande för att uppväga ett större lidande. Om man av staten tvingas att göra det "rätta" har det inget minusvärde i en utilitaristisk lyckokalkyl.

Tvång ett minusvärde i reviderad utilitarism

Här kan vi som icke-utilitarister invända att man själv som myndig person borde få bestämma när man vill gå till tandläkaren. Tvingas man av staten blir det ett minusvärde i lyckokalkylen och friheten blir då ett instrument för ens egen "egentliga" lycka. Så vill utilitaristerna inte se problemet.

Man kan ana orsaken till U:s ovilja att betrakta frihetsinskränkningar som minusposter i kalkylen. Det innebär ju för den politiska utilitarismen att det som betraktas som det moraliskt riktiga kommer att belastas med en minuspost som kullkastar hela kalkylen när 'det goda' måste genomdrivas med tvång. Av detta följer att många som inte betraktar sig som utilitarister ser frihet, rättvisa, jämlikhet etc som fristående värden som faktiskt kan åsamka en själv visst lidande. Om detta lidande sedan uppvägs av mera lycka i det långa loppet är en fråga som är främmande för icke-utilitarister.

Vilket "etiskt paradigm"?

I slutändan faller frågan tillbaka på vilket etiskt paradigm man håller sig inom. Med det menar jag de större system inom moralfilosofin som idag förekommer inom den filosofiska diskursen. Tidigare brukade dessa delas upp i två kategorier kallade teleologisk resp deontologisk etik. Denna indelning i ändamål och "bör göra" är numera inte så vanlig eftersom det finns fler kategorier.

Jag finner det fruktbart att urskilja följande fyra "paradigm": Konsekvensetik, pliktetik, rättighetsetik och dygdetik. Utilitarismen är en konsekventialistisk etik som vanligtvis är monistisk (den bygger på en enda grundprincip: att maximera "det goda"). Om frihet inte är "det goda" blir friheten automatiskt underordnad. Frågan är hur mycket.

Inom rättighetsetiken betraktas friheten som en av de grundläggande rättigheterna (dessa kan inses intuitivt eller härledas). Frihet har därför ett egenvärde för individen oberoende av konsekvenserna för "det goda".

Det rätta övertrumfar det goda?

Frågan är därför om "det rätta" övertrumfar "det goda". En antydan till detta är U:s svårigheter att hantera värden som frihet, rättvisa och jämlikhet. Den centrala diskussionen gäller oftast den vanliga rättvisan och formuleras i termer som: "får man straffa en oskyldig?"För att komma ifrån detta problem har 'regelutilitarismen' lanserats (genom att följa vissa regler maximeras lyckan). Den anses inte ha löst problemet. Dessutom har det under senare år uppstått en diskussion om 'externa preferenser' som synes kräva ännu större avsteg från den ursprungliga U. Samuel Brittan erkänner att U måste ta hänsyn till friheten och inte kan vara monistisk och Ronald Dworkin lanserar "rättigheter som trumf".

Jag drar den preliminära slutsatsen att värden från andra etiska paradigm svårligen kan inkorporeras i U - inte ens som instrumentella värden. U är handlingsinriktad. En nyttig handling som minskar friheten kan inte evalueras med avseende på friheten. Att gå till tandläkaren före tandvärken är moraliskt lika riktigt även om staten tvingar fram detta. Tvånget minskar inte 'det goda'. U:s argument i just denna fråga är dock frihetligt men av ett helt annat skäl. Det effektivaste sättet att uppnå det goda är att låta individen själv avgöra när hon bör gå till tandläkaren - inte att tvånget minskar det goda.

Frågan är om det är fruktbart att diskutera tvång och frihet på utilitaristernas villkor med en minuspost för lyckan när tvång måste tillgripas. Det måste i praktiken vara utomordentligt svårt att mäta hur mycket frihetsinskränkningar i olika fall minskar lyckan.

Man säljer friheten i praktiken = moral?

Är då inte det empiriska faktum att folk är villiga att uppge delar av sin frihet för att få litet mer lycka ett bevis för att det goda är större än det rätta? -Nej, det är det inte om det inte finns ett moraliskt rättfärdigande av principen (annars gör man sig skyldig till det 'naturalistiska misstaget' - man förväxlar är och bör).

Men kan inte transaktionen mindre frihet-mera lycka rättfärdigas? -Den teori som kan göra detta är utilitarismen. Eftersom U har kommit till korta hänger frågan i luften. Därför kan man fråga sig om det är fruktbart att utveckla fihetsaspekten i lyckotermer. Är det inte bättre att utgå från en rättighetsteori som istället kompletteras med nyttoresonemang än tvärtom?

Det rätta kanske är en kollektiv nyttighet

Men man behöver inte ens utveckla rättighetsteorier för att hitta invändningar mot att det goda skulle vara större än det rätta. Det finns rader av sentenser och ordspråk som anser att frihet skall sättas före lycka, ett exempel från Danmark:

"Bättre vara en fri luffare
än en fångad kung."
(Danskt ordspråk)

Varför förekommer så många uppmaningar i denna stil? Jo, naturligtvis för att det ligger en närmast oemotståndlig lockelse att uppge (till att börja med) en del av sin frihet för att få litet mer lycka. Man kan då fråga sig: Är det så att frihet är en 'kollektiv nyttighet' som man försöker upprätthålla med moraliska incitament? Det kan förklara varför det till synes ofta framstår som "rationellt" att uppge litet frihet för mera lycka. Men om många gör så hamnar vi i ett ofritt samhälle som är sämre för de flesta. (Kan analyseras inom ramen för 'Fångarnas dilemma'.)

Analysen förutsätter att vi kan hantera 'det goda' i åtminstone ordinalt mätbara termer. Att detta skulle betyda att vi måste bli utilitarister tror jag dock är en förhastad slutsats.

45 Comments:

At 10 juni, 2005 17:28, Blogger Per-Olof Persson said...

Sweden, Capitalism, and the Welfare State

by Nima Sanandaji



Supporters of the welfare state around the world have for many decades pointed out the Scandinavian countries, particularly Sweden, as proofs of how this system can generate both wealth and social equality. Sweden is in fact one of the best examples of how economic freedom fosters development and individual responsibility, whereas big government destroys the foundation for economic growth and personal accountability.

"From the 1950s until the early 1970s, the Swedish social democratic model managed to successfully deliver on its promises of low unemployment, low inflation, and a relatively egalitarian distribution of wealth. But during the course of the past 25 years, the Swedish model has seemed to be headed along a path of slow disintegration, culminating in the disastrous economic recession of the early 1990s."

~ Jason Coronel. "Foundations, Decline and Future Prospects of the Swedish Welfare Model: From the 1950s to the 1990s and Beyond." DePaul University Spring 2002

During the 1870s Sweden was an impoverished nation, occasionally plagued by starvation. All this changed as capitalism was introduced in the country. Free markets, property rights and the rule of law created an environment where the Swedish people could achieve a long period of rapid economic development. Between 1870 and 1970 Sweden had the second highest economic growth in the world, second only to Japan.

Socialism had played an important role in Swedish politics, where the social democrats and the labour unions had become the most important political force. But Swedish social democrats were pragmatic and had during the first half of the twentieth century maintained an economy that was one of the freest in the world. The fact that Sweden did not take part in the world wars meant that our economy had a better chance to develop than those of many other western nations. The Swedish people also had a very strong work ethic. Also, Sweden’s Lutheran religion encouraged industriousness and good work ethics.

During the 1960s the social democrats radicalised. They abandoned their traditional pragmatic policies and started a large-scale expansion of the welfare state. Between 1970 and 1990 taxes increased by almost one percent point each year. Income taxes doubled between 1960 and 1990, rising from approximately 30 to 60 percent. During the 1970's the political left viewed Swedish policies as a success. The massive expansion of the public sector reduced unemployment in the short run. Few questioned if this expansion was a sustainable policy.

"The Swedish system is in serious trouble. The Swedish economy is no longer creating jobs – private sector employment has been shrinking for decades, and the public sector can no longer absorb more workers… Many Swedes are pessimistic about the future, in large measure because they cannot imagine how their system can survive, yet cannot overcome the political obstacles to changing it."

~ Virginia Postrel, Reason Magazine November 1999

As the cost of regulations and big government grew, entrepreneurship dropped. In the 2002 Global Entrepreneurship Monitor survey Sweden ranked in the 31st place among 37 countries when it came to start-up of new companies. None of the large Swedish companies were established later than 1970. It is not a coincidence that Sweden has gone from being the fourth richest country in the world in 1970 to being the fourteenth richest in 2002. Today the average American has 37 percent higher purchasing power and almost twice as high private consumption as the average Swede. More than 30 percent of the Swedish population falls below the American poverty line.

P.J. O’Rourke once wrote that no American would work if they lived in a system such as the Swedish welfare state, where government is "generous" with benefits to the unemployed, those on sick leave and those that have retired. What makes Sweden interesting is that for a long time people were very reluctant to take advantage of the system. The Swedish population had a strong tradition of entrepreneurship and hard work and continued to work hard even though they now had the option to live off government. But people do adapt their morality to maximize their benefits in the economic system in which they live, although this might take a generation or so.

During the last few years the number of Swedish citizens that are being supported by unemployment, sick leave or early retirement has increased dramatically. Is there a major epidemic that is keeping people from going to work and causing young unemployed people to retire? The social democrats certainly seem to think so, maintaining that Sweden is still a country where most people are willing to accept any full time job if offered.

This denial goes deep in Swedish mentality. Recently Jan Edling, an economist from Sweden’s largest labour union, LO, wrote a report where he explained that it was the welfare system that caused people to go on sick leave or early retirement. According to Edling, Sweden had a de facto unemployment rate of 20–25 percent. As LO refused to print the report Edling resigned after 18 years of service.

Telling the truth might not be popular, but I wish that Edling's report would be translated and sent to all fans of the welfare state around the world. It shows that the Swedish welfare state has systematically destroyed personal responsibility and work ethics. There is a point where so many people start taking advantage of the system that each individual understands that they will be on the losing side if they don’t maximize their own utility. A system that pays people not to work eventually creates a mentality where many people choose not to work. In the coming years the citizens of the European welfare systems will probably wake up to this reality.

June 8, 2005

Nima Sanandaji is 23 years old and will soon start graduate studies in biochemistry at the University of Cambridge. He is the president of the Swedish pro-market organisation Captus and the editor of the Captus Journal.

 
At 11 juni, 2005 01:55, Blogger magnus said...

Noterar i slutet av Nimas kommentar, att den skrevs 8 juni, dvs två dagar innan blogposten! Ska nog inte läsa Nimas text, då den troligen inte är en till blogposten helt adekvat kommentar.

Ämnet för blogposten intresserar mig oerhört, och läser och kommetera nog under helgen... (nu är det ju natt).

 
At 11 juni, 2005 19:23, Blogger Per-Olof Persson said...

EN DEPRESSION SKAPAS AV KREDITEXPANSION


Länk med figurer:

http://www.safehaven.com/article-3242.htm



June 12, 2005

From Misallocations of Resources to Further Misallocation!

by Marc Faber


"....to combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about ; because we are suffering from a misdirection of production, we want to create further misdirection - a procedure which can only a lead to a much more severe crisis as soon as the credit expansion comes to an end."
- Friedrich Hayek, "Monetary Theory and the Trade Cycle", London 1933

Because of a strong US dollar, a recovery in the stock market, further strength in the US housing industry, disappointing news from Europe, and rallying US government bonds to new 2005 highs, the super-bulls on the American wonder-economy are again out in force telling the world with great conviction "we told you so"! In fact, the more the audience that watches CNBC in the US declines (down 60% from the peak in 2000) the louder the voice of the bullish camp seems to become.

But, let us look at some facts. From figure 1, courtesy of Ed Yardeni, we can see that following a slump post year 2000, global semiconductor sales have rebounded strongly and are at about the level they were in year 2000.

Figure 1: Global Semiconductor Sales and Earnings, 1991 - 2005

Source: Ed Yardeni, www.yardeni.com

So far so good! But let us now look at the details of these worldwide sales. For one, while sales have recovered - well understood after 5 years - to the previous highs, the earnings of semiconductor companies have not and hover around the level they were at in 1997 - 8 years earlier. In addition, while global semiconductor sales have recovered, we can see from figure 2, that in the US they have hardly moved up following the 2000/2001 slump.

Figure 2: US and European Semiconductor Sales, 1991 - 2005

Source: Ed Yardeni, www.yardeni.com

Maybe the US super-bulls should take a closer look at figure 2, and if their senses have not been too blurred by their most recent euphoria, also notice that US semiconductor sales are no higher than they were in 1994!

But nor to worry, we know by now that the US economy is a service economy and does not need to produce anything to prosper except printing machines to keep increasing the supply of money (most printing machines are probably imported too). Needless to say that the quality of US services is "the envy of the world", as Mr. Bush, Rumsfeld, Cheney & Co. might articulate and - according to the Census Bureau's Economic Census - with the fastest growth being registered not in "mundane" businesses such as biotechnology, nanotechnology and high tech industries but in high value added and intellectually highly demanding sectors such as lawn care, childcare providers, janitorial services and nail and hair salons!

If global semiconductor sales are up worldwide but down in the US and flat in Europe, where did they rise? Obviously in Asia ex Japan! From figure 3, we can see that Asian Pacific semiconductor sales have doubled to annually almost $ 100 billion since 2001.

Figure 3: Asian Pacific and Japanese Semiconductor Sales, 1991 - 2005

Source: Ed Yardeni, www.yardeni.com

And while we are at it, for the proponents of the "Great American Empire and Economic Supremacy of the US" we should point out that Asian semiconductor sales, well understood ex Japan, are not only twice as large as US sales but also larger than US and European semiconductor sales combined.

Now, I am not suggesting that semiconductor sales are a perfect economic indicator - although I would rather rely on them than on some forecasts by confused economists. Still, the composition of global semiconductor sales tells us something about the state of the current global economic recovery.

Following the economic contraction and stock market slump in year 2000, the Fed pursued an extremely accommodative monetary policy. Money supply rose rapidly and credit market debt exploded (see figure 4). As can be seen from figure 4, in late 2001 and in early 2002, money supply was growing at annual rates of more than 20%.

Easy money policies and artificially low interest rates led to a credit bubble with the result that since year 2000, total credit market debt has been growing at more than 4-time GDP growth and financed a gigantic boom in home prices, which in turn allowed households to extract equity from their homes through refinancing activity and spend it on excessive and conspicuous consumption.

Figure 4: MZM annual growth, 1984 - 2005

Source: Ed Yardeni, www.yardeni.com

I am well aware that some observers dispute the fact that there is a housing bubble in the US. These observers contend that for the nation as, a whole, home prices did not rise all that much and that the excesses only exist in selected markets. This is to some extend true but then these observers should also recognize the fact that one of the principal common features of every investment mania or bubble is that the object of speculation is very concentrated. Take the 2000 stock market bubble. The excesses occurred in telecom, media and high tech whereas the rest of the market and in particular the old economy stocks such as home builders, basic and resource shares were inexpensive (as was the entire Asian region with exception of the TMT sector). So, because in a bubble some or - as I would argue - most sectors of the market do remain depressed, this does by no means alter the fact that in some narrow sector a gigantic bubble can exist.

Looking at figure 5, courtesy of Goldman Sachs, the uneven distribution of housing price gains in the US is visible. The biggest price gains occurred on the east and west coast and in particular in California, Florida and New England.

Figure 5: Home price Changes since Year 2000

Source: Goldman Sachs and Freddie Mac

The US housing bulls also take comfort from the fact that since 1952, the value of household real estate holdings has never declined. Again, this may be true, although we must take into account that every year the stock of homes is increasing. Consequently it is only natural that the value of household real estate has a rising tendency (see figure 6).

Figure 6: Market Value of Household Real Estate

Source: www.thechartstore.com

Still, whereas the value of household real estate has never declined in nominal terms, it has declined in teal terms and for selected markets on numerous occasions. Figure 7, shows that following strong real price gains in 1971/72, 1979/80, 1986/87, inflation adjusted prices declined in 1971, 1974, 1981/82 and in 1990/91. Therefore, following the extended period of real price gains we had since 1997, it is more than likely that prices will decline at least in real terms at some point in the future.

Figure 7: Inflation-adjusted Annualized Home Price Gains

Source: Bridgewater Associates

In addition, whereas it is possible that for the entire nation, household real estate assets never declined in nominal terms, in selected markets we had numerous vicious real estate slumps. In the early 1980s Texas properties totally collapsed. In the early 1990s New England properties went through an unpleasant slump. And even the Golden State of California, with all the pluses that the bulls are now advancing in its favor, had three years of declining prices between 1991 and 1994. In fact it took until 1998 for prices to recover to the 1990s highs (see figure 8). In Asia, we know all too well that property prices can decline violently something that seems to escape the perma housing bulls in the US!

Figure 8: Annual Home Price Changes, California vs US, 1976 -2004

Source: Goldman Sachs and Freddie Mac

The point, however, is this. Ultra easy monetary policies after 2001 fueled in the US an asset boom, which was particularly noticeable in the housing industry. This housing boom created wealth, illusionary wealth I might add, which allowed American households to boost their consumption at a faster rate than their personal income gains. What ultra easy monetary policies failed to boost was capital spending in terms of net capital formation (capital spending that exceed depreciation) and "real" industrial production, as I have demonstrated in the case of the semiconductor industry (see figure 2). To what extend the US economy can continue to expand based on inflating home prices remain to be seen, but as Hayek would say, faced with a misdirection of production in the late 1990s, the Fed created further misdirection in the housing industry between 2000 and today, which will eventually lead to a much more severe crisis as soon as the credit expansion comes to an end.

Turning our attention to figure to figure 4, once again, we can actually see that following the burst in money supply growth in 2001 and 2002, MZM growth has recently almost come to a standstill. In fact, MZM is expanding at the slowest rate in ten years, which would suggest to me that money has already become much tighter. Certainly, dollar strength and some weakness in commodities as well as slower growth in foreign official dollar reserves do all support the notion that money has become tighter. Therefore, unless the Fed starts to print money once again, the housing market may shortly begin to weaken somewhat, as has already happened in Australia, and in the United Kingdom, where following some unease in the property market retail sales disappointed.

But would printing money by the Fed help this time around? Hardly! Long term US government bonds have rallied while the Fed pushed short term interest rates up, because the bond market loves nothing more than tight money which would deflate the economy and asset prices. Conversely, another round of ultra easy monetary policies would lead to renewed dollar weakness, some inflationary pressures for consumer prices and weaker bond prices. So, it is likely that nationwide home price increases will shortly moderate and that in some areas (California and Florida - see figure 4) prices will even come down regardless of the Fed's monetary policies.

The stock market rally I expected for April unfolded in May but now the oversold position we had in late April has been replaced by an overbought condition. In addition, the market faces significant resistance between 1200 and 1230. Therefore, the upside potential seems rather limited at this point.

Bonds are now also grossly overbought and are likely to weaken in the period directly ahead. In the meantime, the Euro has broken down, whereby bearish sentiment on the Euro is now almost as high as bearish sentiment was for the US dollar in late 2004. Therefore, I would expect at least some stabilization of the Euro around current levels. Moreover, if investors begin to discount that the Fed may refrain from further increasing rates, a strong rebound in the Euro and renewed dollar weakness should not be ruled out.



Regards,

Marc Faber
GloomBoomDoom.com

 
At 11 juni, 2005 20:17, Blogger Per-Olof Persson said...

HANDELSKRIG MELLAN USA OCH KINA?

June 11, 2005

China Trade Wars
by David Chapman


Will starting trade wars with China be what tips the world's financial system over? China has certainly grabbed its share of ink lately even amongst the hype over the rejection of the Euro constitution by France and the Netherlands. The focus on China started last month when the Bush Administration acceded to cries from Congress and US manufacturers that the US was losing ten's of thousands of jobs to China and being flooded with cheap Chinese imports with the expiry of global quotas in January under WTO rules.

Following on the heels of slapping quotas on a host of Chinese goods the US was also crying that China's currency policies were distorting world trade and were a serious threat to China's economy and the rest of the world. The US also warned that China was in danger of being accused of being a "currency manipulator". The US wisely stopped short of such an accusation because if they had then Congress would have been free to take the next step of imposing trade sanctions on China. In the next breath Treasury Secretary Snow tried to soften the accusation by saying that he certainly hoped Congress would not impose trade sanctions as the world's financial markets would shudder.

World markets shuddered once before in an earlier period when in 1930 the Smoot-Hawley Act imposed high tariffs on numerous foreign goods in order to protect US industry and farm products. Instead of the high tariffs having their impact other countries soon followed and imposed high tariffs themselves. The result was that world trade slowed and it exacerbated the Great Depression. After WW2 in order to prevent something similar from unfolding it led to the Bretton Woods Agreement (1944) and the General Agreement on Tariffs and Trade (GATT) in the 1950's. Of course later on this led to the World Trade Organization (WTO) the European Union and the North American Free Trade Agreement (NAFTA) between Canada, the USA and Mexico.

That numerous global trade concerns remain is testament to the difficulty in getting agreement in a world where different political agendas cause trade frictions everywhere. Europe and the US have protection for farmers preventing numerous third world countries, where agriculture still dominates, from being able to export their products and therefore dig themselves out of their poverty. The aerospace industry is no stranger to the global trade wars witness the battles of Boeing and Airbus and the protection they are provided. Globalization opponents of course protest (and sometimes riot) over the ills of globalization.

But starting a trade war with China is one that could potentially backfire. The US is currently running a trade deficit that is around 6% of GDP. For almost any other country in the world running a trade deficit totalling 6% of GDP would ensure that the IMF was knocking on the door and instructing the country what it had to do to correct this imbalance. But while the IMF has gently hinted that the US should correct this imbalance there has been no overt action directed against the US. It helps of course that the US effectively runs the IMF.

In order to lower the trade deficit the US$ must fall further. Thus far this year the US$ is instead rising. In April 2005 the US trade deficit with China was $14.7 billion the highest by more than double Japan at number 2. A year ago the number was a $12 billion deficit. That the US is having a problem with China is an understatement. They are hooked on cheap Chinese goods and there is very little on the horizon that is going to change that.

And given the problems of General Motors (GM/NY) and Ford (F/NY) it is only a matter of time before the Chinese get the hang of making good cars and there will be few in the US be able to resist a car selling for under $10,000 even if it is Chinese. China already has a large budding automobile industry and its cars outsell GM in China 6 to 1. China already exports to Malaysia and Iran. North America is not far behind.

On the other side, all those excess US dollars in China finds its way right back to the US by purchasing US bonds. The US savings rate is abysmal not much above zero while savings rates in developing countries like China is quite high. So the excess capital is exported back to the US by purchasing their bonds and thus financing their deficits. Currently China holds in excess of $175 billion of US bonds number 2 behind Japan who holds more than $700 billion of US securities.

Ever since the world was shaken by the Asian Financial Crisis of 1997-1998 the developing countries have been building up their reserves in order to keep control of their currencies and gain control of their economies. So the developing countries, which includes China and even Russia, India etc. have been placing their excess savings back with the US in order to maintain their currencies against the US$ and to keep their factories humming. The US on the other side is becoming hysterical in its demands for China to revalue their currency upward as not only is the US losing jobs to China they are becoming more and more dependent on the largesse of foreign countries to finance their lifestyle. As if a 30% jump in the Yuan putting the average Chinese worker producing goods for America at $1.30 instead of $1 will make a major difference in demand in the US. What better way for the US to default its huge debt then devaluing its currency.

It probably wouldn't and the Chinese will continue to act in their interest by not being pressured by the US do their bidding. China is concerned that the vast majority of its goods production is low end goods destined for foreign markets (yes Europe is making the same noise about goods flowing in from China as well). Worse many of the Chinese firms producing these goods are foreign owned firms including numerous American firms that closed shop in the US only to reopen in China to take advantage of the low wages. China would like to export more goods of its own including the high end goods that the developed world specializes in. Ergo why we believe it is only a matter of time before Chinese cars put the nail in the coffin of GM and Ford for good.

Another problem China has is a very shaky banking system. Some even consider it bankrupt because of unfettered lending and some of the loosest lending practices in the world. Chinese banks have also encouraged lending money for consumer goods (especially cars) to a population that has only recently become accustomed to getting loans of any sort. This is an accident waiting to happen. Couple unfettered lending, inexperience in dealing with loans, loose banking and lending practices and quite likely an investment bubble and the banking system is an accident waiting to happen.

The trade differences could heat up. China believes that the US attempt to put quotas on Chinese goods is in contravention to WTO rules and plan on taking the US to the WTO. They just might win. But as Canada knows only too well when fighting a trade battle with the US even if you win you lose. Canada has taken the softwood lumber issue to NAFTA and even though the rulings go in Canada's favour the levies remain.

Despite the US desire to have a lower US$ and issuing threats against China there are some who believe that the US Trade Deficits are fine. Just this past week Federal Reserve Bank of Dallas President Richard Fisher told CNBC that "where would the world be if Americans did not live out their proclivity to consume everything that looks good, feels good, sounds good, tastes good? We provide a service to the rest of the world ......So I think we are doing our duty here." There we go without the US consuming everything (and going into debt to do it) the world would collapse into a depression. We have heard this analogy from other analysts as well.

Of course that is pure stupidity. When the end comes the consequences will be even worse because events will overwhelm the Fed and ultimately the US consumer and banking system. Simply the US has no savings and is totally dependent on foreign countries, some of whom like China are not exactly their friend, to finance their huge deficits. Threatening a trade war with China may play well in Peoria but Beijing will just snub their thumbs at them.

And of course trade tensions are not the only area of tension. We outlined earlier the global fight for oil. Since then Chinese companies have made further investments in the Canadian Oil Sands and there are more in the works. Washington is watching nervously. And China is investing in Russia as well including the Russian oil industry. The Chinese need for energy is growing rapidly and there are willing to pay up for the privilege of securing supplies. We note again that the Chinese have made huge investments in Iran a country that the US has threatened over its nuclear program. It almost seems inevitable that at some point in the future that the US and China might clash over resources.

And the conflict between the US and China goes into the political and military arena as well. Recently Donald Rumsfield mused about China's growing investment in the military and what they might be building it up for. While China's record as a one party state and its human rights record remains thoroughly dismal we can't but help note that the US spends more on the military then the next 10 nations combined including China.

The US is the only country that has actually invaded another nation in the past few years (Afghanistan 2001, Iraq 2003). As well it is clear from their actions and words that the US would like to move to the militarization of space. And finally the US's human rights record was slammed by Amnesty International and Human Rights Watch over its holding of prisoners in Guantanamo Bay, the Abu Ghraib scandal and the recent Koran scandal. Are we saying that the US's human rights record is worse than China? No not by a long shot but the number of abuses has been growing from the nation that touts democracy and human rights. Couple this with the Patriot Act (and still near by on the shelf Patriot Act II) and increased search capacity for the FBI and the concerns expressed by the American Civil Liberties Union (ACLU) and the international human rights organizations are a growing concern.

All the foreign funds flowing into the US is having a perverse impact on the US bond market pushing yields to their lowest level since 2003. This in turn has continued to fuel a bubble in the housing market with low interest rates. Even Alan Greenspan has expressed concern about the huge flow of funds and what it might mean in the US as it pushes US interest rates ever lower. Continual low interest rates was not a panacea for Japan and not likely to be for the US either. And Greenspan is also very concerned about an upward revaluation on the Chinese Yuan and the potential impact it might have on domestic prices in the US and on Chinese purchases of US Treasuries.

Economic conflicts over trade and oil, political conflict and the potential for military conflict is the growing legacy between the US and China. One could flow from the other. And that is why the trade spat is of grave concern because if could be the tip of the iceberg that will increase in the coming years.

We leave you with a monthly chart of the US$ and a chart of the sinking auto giants GM and Ford. The monthly chart of the US$ lops off the huge run-up in the early 1980's followed by the collapse after the Paris Accords of 1985. It took several years through to the mid-nineties when the Japanese and the US collaborated to try save the sinking US bond market, the sinking US$ (and the very high Japanese Yen). Under Clinton the Federal Reserve opened up the monetary spigots setting in motion a frenzy of lending creating the bubble tech mania of the late 1990's. This coincided with the huge rise of the US$. This was followed by the US$ collapse under Bush II even as the Federal Reserve kept the monetary spigots on and the bubble shifted into the housing market.

The recent rise in the US$ has been strictly technical. Many believe it is the start of a new rise in the US$. We doubt it as even in the 1990's it took several years before the US$ rose again and even then it took huge intervention. We don't have those conditions today. Instead we have the world's most indebted nation (budget and trade) who also happens to be the world's reserve currency and the US administration openly wanting the currency to fall. Today it is held together by the fear of the foreign developed countries wanting to keep a lid on their own currencies propping the US$ up through huge purchases of US Treasuries. Not a healthy situation.

GM and Ford are the personification of America. Instead these two giants are sitting on the edge of bankruptcy failing to keep up with demands of today as their market share collapses and overburdened with the promises of yesterday in pensions and health care supporting upwards of a million people. The consequences of a Ford and GM bankruptcy would be huge and probably require government intervention. With China pushing on a string and about to enter the international car market their demise is almost sealed. China an economic, political and military threat to US's power in the world. Trade wars are but a part of the bigger conflict.









DavidChapman.com
Technical Scoop

 
At 12 juni, 2005 01:52, Anonymous Anonym said...

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At 12 juni, 2005 11:17, Blogger Per-Olof Persson said...

NÄR SKA DEN AMERIKANSKA KREDITBUBBLAN SKAPA EN VÄRLDSDEPRESSION?

More Signs of Economic Distress

by Al Doyle


I wanted to write on the coming burst of the real estate bubble, but that topic has been skillfully covered by Dr. Gary North, Bill Bonner, Eric Englund and other LRC contributors. For anyone who doesn't believe that interest-only mortgage loans and soaring property values during a time of stagnant or falling wages are signs of gross excess, allow me toss out a few other indicators of the decline of the U.S. economy.

When I was growing up, those who couldn't qualify for a bank loan might have to borrow from local lending companies or make payments at a used car lot. Such indebtedness was widely scorned as a sign of irresponsibility. After all, what kind of person would pay (horrors!) double-digit interest for a loan? What is happening today evokes nostalgia for the good old days of the early 1970s.

So-called "payday loan" shops are one of America's fastest-growing industries. The business plan is simple, but very expensive for the customer. People write postdated checks and pay 25 percent interest a month for a short-term loan of $100 to $1000. Suckers are encouraged to roll over their debts, continue borrowing, and create a vicious cycle.

What kind of moron would pay a 300 percent annual interest rate, you ask? Stupidity (in generous supply thanks to public schools) and a poor knowledge of basic math are prerequisites, but the problem goes deeper than that.

Desperation is the main motivating factor. In many cases, the payday loan clientele is totally tapped out. The credit cards have been charged to the limit, income is erratic or falling, and the borrower sees no alternative. Others are addicted to consumerism (buying depreciating junk) or casinos, and they would rather spend or play the slots today than live cheap and restore sanity to their finances.

Does this mean payday loan operators are doing booming business in ghettos and low-income areas? The real action is far from the 'hood. Drive through any middle-class district or prosperous-looking suburb, and you'll soon see several of these shops offering instant cash for a very steep price. If you really are in a bind for a few bucks, talk to Knuckles, Rocco, or other old-time loan sharks. Their rates are lower than the payday loan crowd.

The number of pawnshops has also grown considerably in the 21st century, and there is another option for those who don't want to live without their guitar or DVD player.

Got a clean title on your vehicle? You can get a high-interest loan at many pawnbrokers or "car title loan" shops. Most of the borrowers hand over the title to older cars valued at less than $4000. For doing this, they get to borrow 20 to 30 percent of the value of their now-hocked vehicles.

In addition to paying hefty interest rates, there is one other substantial cost to borrowing against a vehicle. Owners of older cars and trucks can often go without expensive collision insurance, as the value of the vehicle isn't worth the cost of coverage. Car title loan shops understandably require collision when a loan is made.

Even though I've seen it up close many times, it is still a shock to watch someone charge their groceries with VISA or MasterCard. Creditholics often swear they use the card just to get airline miles or future rebates, but the truth is somewhat different in many cases.

There seems to be a common denominator among those who borrow (that's what using a credit card is) to buy food. They are brain-dead shoppers who are totally unacquainted with obtaining good value.

It doesn't matter if they are putting $10 or $200 on the plastic, because the pattern is the same. Everything in the shopping cart is a name brand, priced at full retail. Sale items are rarely purchased by the grocery charge-card crowd, but there is no lack of high-priced convenience food and other impulse purchases.

Why do these people pay $2 for a package of hamburger buns when the exact same product is available for 50 cents at a nearby day-old bakery shop? It's flavorless white bread no matter what the cost.

Need more evidence? What does it say when Dairy Queen, Wendy's and other fast-food outlets devote valuable signage space to the phrase "Visa and MasterCard accepted"? Clearly, there are plenty of customers who don't have even a few bucks on hand to pay for a burger or an ice cream cone, but they'll whip out the magic plastic card and add to their indebtedness. It's called living in a fool's paradise.

Disregard all government and mainstream media propaganda about the condition of the U.S. economy. We're in a heap of trouble, and it's fixin' to get worse.

June 11, 2005

 
At 12 juni, 2005 11:22, Blogger Per-Olof Persson said...

KREDITEXPANSIONEN ÄR ETT VIKTIGT ÄMNESOMRÅDE EFTERSOM DEN HAR SKAPAT STÖRRE EKONOMISKA OBALANSER ÄN DEN 1929!!!!

 
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