Originally Posted by Marx & Lennon

Originally Posted by takascar2

Originally Posted by Sabinus Invictus

Originally Posted by Mike Alexander '59

The opposite of love isn't hate, its indifference. The US has been either loved or hated because what we did mattered to other nations, whereas what they did mattered not at all to us. Once we stop mattering, the world will view us with indifference.

So you honestly think that once we're down, a world that hates us with every fiber of their being would not seek vengeance for all of our collective offenses, real and imagined - including the worst one of all - our very existence?

STFU - I am tired of listening to your crap!

Offenses? Like saving the Chineese's ass from Japan during WWII

Like saving the world from the likes of Hitler?

Like spending buckets of cash to rebuild the nations of said enemies after the war is over?

Your right to speak trash like you do, hoping for our destruction was won by US service persons who died for PEACE and FREEDOM in this WORLD.

If you don't like it here, get the f*** out before someone throws you out by force, or worse.

H-m-m-m. I see you also have a problem giving your opinion.

The nerve. :wink:

Originally Posted by Mike Alexander '59

Originally Posted by Peter Gibbons

Good point. But since the Chinese-bought T-Bills don't go directly to our military, but rather to the whole shebang, I don't see it as that simple in the short-run; we could still win, but it would be a pyrrhic victory (assuming no one gets careless and unleashed nukes -- then it will be beyond even pyrrhic).

Yes they do. Salaries must be paid. Vendors must be paid. If they are not fed or paid, soldiers won't fight for you. And if you don't get munitions there is nothing to fight with.

The effect of a withdrawal is faster than you'd think. Currently the US pays 320 billion in interest at about 4.5% or so. Were foreign central banks to stop buying our debt and start selling our debt the market rate would go up a lot. Since our government has rotated to shorter term financing in recent years (to lower interest payments) the effective rate would rise pretty pretty fast. Were it to reach 1980 levels of 11%+, interest payments would reach $780 billion on the already existing debt now, with no new net borrowing. The entire receipts from US individual income tax is in this ball park so all the income tax would go to pay interest on existing debt.

Payroll taxes go to pension and Medicare expenses. Eliminate these programs and you eliminate the payroll tax, unless you want a revolution.

All that is left is about $300 billion in corporate and excise taxes and this would have to fund the entire government. Even if we cut everything out, this still leaves us with only 60% of our current military expenditures.

Realitically you know that aren't going to close down Congress or the White House (Presidiential support and protection alone run to over $1 billion) Congress cost even more. We need the Internal Revenue service because we need the revenue it brings in. That's $10 billion. Are we going to close all our embassays? Shut down the NSA, CIA, FBI, Dept of Homeland Security? These would take at least half of the $300 million leaving a pretty bare bones defense establishment.

To have more we would have to raise taxes, run a deficit, or simply print currency and pay the troops with that. Borrowing more would simply increase interest payments on the existing debt requiring that the newly-raised fund be used to pay interest (it's called being in the bucket). The last would give hyperinflaiton in short order.

Raising income taxes would require hitting up the rich, since they are the only ones with surplus funds. That is off the table.

Within a couple of years our fleet would be mothballed, our armies withdrawn from around the world and most of the soldiers discharged. We cannot afford a big military and have low taxes on the rich. We had a big military in the 1950's and top tax rates were 90%. The military was smaller, but still big in the 1960's and top tax rates were 70%.

The miltary was smaller still, but still fairly big in the 1980's and we borrowed like crazy to pay for it.

The miltary became smaller still in the 1990's and top tax rate was 40%

Today the top rate in in the 30's and we are again borrowing like crazy, trying to grow the military a bit.

Falling interest rates helpd keep the 1980's deficits smaller and so we got away with it long enough to win the Cold War. Even then fiscal balance required, both tax increases and post-victory cuts in military.

Does anyone think interest rates are going fall from the 4.5% level we are paying now, if the Chinese pulled the plug?

Your point is well taken, but it is still not *direct*, per se. There is no doubt that A) in order to keep our troops in Iraq we would have to make great sacrifices at home and that B) there would very, very likely be a structural force reduction in the not-too-distant future from there, unless something came up, like a tax increase on the rich.

And taxing the rich is definitely off the table, currently. But would Bush be forced to change that? His father did (at least to some degree) under a lot less pressure. Then again, MonkeyBoy ain't his father.

I guess it would boil down to which of his values gets more priority, easing the tax burden on the wealthy or force projection in the name of democracy (and perhaps oil :wink: )??

Your post amply points out how dependent we are on the Chinese (and don't forget the Japanese!) to finance our irresponsibility. Paul Volker and Stephen Roach have made it clear we're courting catastrophe on our current course.

Originally Posted by Peter Gibbons

I guess it would boil down to which of his values gets more priority, easing the tax burden on the wealthy or force projection in the name of democracy (and perhaps oil :wink: )??

It's not a question of priority. Raising taxes means the Democrats take over. The choice would be between force projection and losing power. Between expanding the empire and utter defeat. Expansion is nice, but it isn't vital.

Better to rule a second rate nation than play second banana in a great one.

Originally Posted by Mike Alexander '59

Originally Posted by Peter Gibbons

Good point. But since the Chinese-bought T-Bills don't go directly to our military, but rather to the whole shebang, I don't see it as that simple in the short-run; we could still win, but it would be a pyrrhic victory (assuming no one gets careless and unleashed nukes -- then it will be beyond even pyrrhic).

Yes they do. Salaries must be paid. Vendors must be paid. If they are not fed or paid, soldiers won't fight for you. And if you don't get munitions there is nothing to fight with.

The effect of a withdrawal is faster than you'd think. Currently the US pays 320 billion in interest at about 4.5% or so. Were foreign central banks to stop buying our debt and start selling our debt the market rate would go up a lot. Since our government has rotated to shorter term financing in recent years (to lower interest payments) the effective rate would rise pretty pretty fast. Were it to reach 1980 levels of 11%+, interest payments would reach $780 billion on the already existing debt now, with no new net borrowing. The entire receipts from US individual income tax is in this ball park so all the income tax would go to pay interest on existing debt.

Payroll taxes go to pension and Medicare expenses. Eliminate these programs and you eliminate the payroll tax, unless you want a revolution.

All that is left is about $300 billion in corporate and excise taxes and this would have to fund the entire government. Even if we cut everything out, this still leaves us with only 60% of our current military expenditures.

Realitically you know that aren't going to close down Congress or the White House (Presidiential support and protection alone run to over $1 billion) Congress cost even more. We need the Internal Revenue service because we need the revenue it brings in. That's $10 billion. Are we going to close all our embassays? Shut down the NSA, CIA, FBI, Dept of Homeland Security? These would take at least half of the $300 million leaving a pretty bare bones defense establishment.

To have more we would have to raise taxes, run a deficit, or simply print currency and pay the troops with that. Borrowing more would simply increase interest payments on the existing debt requiring that the newly-raised fund be used to pay interest (it's called being in the bucket). The last would give hyperinflaiton in short order.

Raising income taxes would require hitting up the rich, since they are the only ones with surplus funds. That is off the table.

Within a couple of years our fleet would be mothballed, our armies withdrawn from around the world and most of the soldiers discharged. We cannot afford a big military and have low taxes on the rich. We had a big military in the 1950's and top tax rates were 90%. The military was smaller, but still big in the 1960's and top tax rates were 70%.

The miltary was smaller still, but still fairly big in the 1980's and we borrowed like crazy to pay for it.

The miltary became smaller still in the 1990's and top tax rate was 40%

Today the top rate in in the 30's and we are again borrowing like crazy, trying to grow the military a bit.

Falling interest rates helpd keep the 1980's deficits smaller and so we got away with it long enough to win the Cold War. Even then fiscal balance required, both tax increases and post-victory cuts in military.

Does anyone think interest rates are going fall from the 4.5% level we are paying now, if the Chinese pulled the plug?

Good analysis. To which I would only add:

1) Raising taxes isn't that much better since even doubling the current top tax rates would barely make up the difference. And how good is the economy going to be doing when the government jacks taxes during a period of double-digit interest rates? Pretty damn lousy I'd guess.

2) The borrowing option would eventually become indistinguishable from the print money option.

This is exactly the hyperinflation scenario that I alluded to on the Social Security thread, BTW. Since you indicated that you thought it wasn't going to happen in this turning I can only presume you predict either:

a) The US will manage to maintain its privileged currency position, or

b) The US will very soon implement the high taxes solution.

I assume you're predicting the latter, correct?

Originally Posted by Peter Gibbons

And taxing the rich is definitely off the table, currently. But would Bush be forced to change that? His father did (at least to some degree) under a lot less pressure. Then again, MonkeyBoy ain't his father.

I guess it would boil down to which of his values gets more priority, easing the tax burden on the wealthy or force projection in the name of democracy (and perhaps oil :wink: )??

Your post amply points out how dependent we are on the Chinese (and don't forget the Japanese!) to finance our irresponsibility. Paul Volker and Stephen Roach have made it clear we're courting catastrophe on our current course.

Perhaps an even more cynical analysis is in order. Mike's borrowing solution will only work if coupled with a strong enough economy to keep the tax revenues high and keep the debt under control. Clearly, the SS Reform plan is designed to bolster the market and do just that. However, despite clearly having the votes to implement it, the Republicans are now backing away and guys like Volcker are talking like the sky is about to fall.

Well, what if somebody ran the numbers and decided: fuck it, we're too late.

That would leave two options, high taxes or hyperinflation -- and either one would occur very soon. The tax option is clearly out, so what would be the plan?

Either the right wing of the American establishment is completely asleep at the wheel (a possiblity not to be discounted), or they plan to allow a hyperinflation and pick up the pieces afterward. I've heard a number of lefties posit the wild theory that the Republicans want to trigger a crisis that will necessitate radical economic reforms. Maybe they're right.

Originally Posted by Kurt Horner

a) The US will manage to maintain its privileged currency position, or

b) The US will very soon implement the high taxes solution.

I assume you're predicting the latter, correct?

I believe both will happen to some extent. My comments talked about the impact of a decision by China to stop all buying of US Treasuries and to start dumping them. I don't think they are going to do that because it means recession for them with certain, possibly destablizing, domestic unrest. It was in response to the silly idea that China would attack Taiwan in the near future, which I also don't think is going to happen.

But if you assume a China stupidly belligerent enough to take on the US at the height of its hegemonic power, I was pointing out that the financial route would play into the Chinese hands much more than a military confrontation. Why fight the US militarily when you can win without firing a shot?

And no issuing debt is NOT the same as printing money directly. The latter will get you hyperinflation accross the board. The former will not. When you print money and spend it on goods and services the money supply must necessarily grow. This is not necessarily true if you borrow. If the central bank prints money to buy bonds the net result would be trillions of dollars in cash that would eventually go into other US assets. The value of the dollar would fall and imports would become very expensive. Dollar-demominated asset prices would rise rapidly, forming a bubble and then crash, destroying trillions of dollars. That is all that printed money would get sucked into assets and then annihilated in a crash. Most of it would never work its way into the real economy and so the effective money supply would not grow. The result would be import inflation and deflation in US-produced goods and services. Money supply would likely fall.

Only by direct spending of printed dollars on goods and services can the government ensure that the printed money actually gets into the real economy and so increases money supply. This is what Weimar did. Attempting to do the same through the financial system does not have to work. When it does not, economists call it pushing on a string.

When the government monetizes the debt what they are doing isn't promoting hyperinflation, they are confiscating wealth (with a delay). It is an indirect tax on the rich. It is subtle and can have a very long delay (decades). If done modestly the mode of confiscation is through moderate inflation and negative real returns on assets. Wealth holders gradually lose their wealth, expressed in real terms. This can take decades, as after WW II.

In a modern liberal democracy the only way to fund large government is to soak the rich. You can soak them lightly and evenly through taxation like Clinton did, or you you can really take some of them to the cleaners, while others (e.g. Bush's oil buddies) escape unscathed through debt monetization. as Bush is doing. This is one of the reasons today is a liberal era and a 4T. We have a monetary/fiscal FDR clone in office who seeks to appropriate a great deal of (non-oil) American wealth. I would prefer Democratic-style than Republicans style asset confiscation since high taxes are easier to game than collapsing asset bubbles. But we have the world that we do.

With my luck, I'll probably lose most of what I've saved up all my life

Originally Posted by Mike Alexander '59

Originally Posted by Peter Gibbons

I guess it would boil down to which of his values gets more priority, easing the tax burden on the wealthy or force projection in the name of democracy (and perhaps oil :wink: )??

It's not a question of priority. Raising taxes means the Democrats take over. The choice would be between force projection and losing power. Between expanding the empire and utter defeat. Expansion is nice, but it isn't vital.

Better to rule a second rate nation than play second banana in a great one.

Upon reflection I must agree your point has great merit. At first glance I would not agree (myself), but then again, I would put country before party. The scoundrels now running what was my party don't do that, apparently. Therefore your logic is disturbingly sound.

Originally Posted by Mike Alexander '59

I believe both will happen to some extent. My comments talked about the impact of a decision by China to stop all buying of US Treasuries and to start dumping them. I don't think they are going to do that because it means recession for them with certain, possibly destablizing, domestic unrest. It was in response to the silly idea that China would attack Taiwan in the near future, which I also don't think is going to happen.

I don't think they're going to dump all at once, either, just slowly back off. I just think that once the process of dumping the dollar begins, that process will accelerate.

Originally Posted by Mike Alexander '59

And no issuing debt is NOT the same as printing money directly. The latter will get you hyperinflation accross the board. The former will not. When you print money and spend it on goods and services the money supply must necessarily grow. This is not necessarily true if you borrow.

I know that. That, after all, is why the government borrows instead of printing money to meet its obligations. That's why I specified that eventually the two are the same.

Originally Posted by Mike Alexander '59

If the central bank prints money to buy bonds the net result would be trillions of dollars in cash that would eventually go into other US assets. The value of the dollar would fall and imports would become very expensive. Dollar-demominated asset prices would rise rapidly, forming a bubble and then crash, destroying trillions of dollars. That is all that printed money would get sucked into assets and then annihilated in a crash. Most of it would never work its way into the real economy and so the effective money supply would not grow. The result would be import inflation and deflation in US-produced goods and services. Money supply would likely fall.

But since the goods we buy are increasingly imported rather than US-produced, this will be generally inflationary. If domestic produced goods provide a consistent discount then people will substitute for them, causing those prices to be bid up as well (unless domestic production increases -- a scenario unlikely in the face of rising interest rates). Domestic services are dependent on those same higher-priced goods and the labor of people who have to buy those higher priced goods who will, in turn, demand higher wages. So you'll still get general price increases and the eventual result is an economy that just can't borrow anymore. So, eventually your three options condense to two.

Originally Posted by Mike Alexander '59

When the government monetizes the debt what they are doing isn't promoting hyperinflation, they are confiscating wealth (with a delay). It is an indirect tax on the rich. It is subtle and can have a very long delay (decades). If done modestly the mode of confiscation is through moderate inflation and negative real returns on assets. Wealth holders gradually lose their wealth, expressed in real terms. This can take decades, as after WW II.

To explain, I'm suggesting that we can become so far over-leveraged that the financial system can no longer keep up and the government is akin to the person who is juggling multiple credit card balances. Except that, while the person trying juggle a bunch of debts eventually defaults -- the government can, if necessary, just print money to cover a debt. Fed officials have made it clear that, if necessary, they will do just that.

Originally Posted by Mike Alexander '59

With my luck, I'll probably lose most of what I've saved up all my life

You'll probably just have to switch your investments to the Far East -- which, if present trends continue, is where all the wealth will be in 10 to 15 years.

Originally Posted by Kurt Horner

Well, what if somebody ran the numbers and decided: fuck it, we're too late.

Do you think they have?

Originally Posted by Mike Alexander '59

But if you assume a China stupidly belligerent enough to take on the US at the height of its hegemonic power, I was pointing out that the financial route would play into the Chinese hands much more than a military confrontation. Why fight the US militarily when you can win without firing a shot?

I am not convinced that the connection is as direct as you assert, but you've made a compelling argument for there being a strong connection (i.e., Chinese stop funding=Bye Bye extensive US military capability). If the Japanese keep on funding for example and/or if we temporarily alter domestic priorities, we could still possibly fund a defense of Taiwan --but still be pressed for military reductions shortly thereafter. But your definitely right that a Chinese dump of T-Bills is ominious and constricting.

Originally Posted by Mike Alexander '59

And no issuing debt is NOT the same as printing money directly. The latter will get you hyperinflation accross the board. The former will not. When you print money and spend it on goods and services the money supply must necessarily grow. This is not necessarily true if you borrow. If the central bank prints money to buy bonds the net result would be trillions of dollars in cash that would eventually go into other US assets. The value of the dollar would fall and imports would become very expensive. Dollar-demominated asset prices would rise rapidly, forming a bubble and then crash, destroying trillions of dollars. That is all that printed money would get sucked into assets and then annihilated in a crash. Most of it would never work its way into the real economy and so the effective money supply would not grow. The result would be import inflation and deflation in US-produced goods and services. Money supply would likely fall.

Only by direct spending of printed dollars on goods and services can the government ensure that the printed money actually gets into the real economy and so increases money supply. This is what Weimar did. Attempting to do the same through the financial system does not have to work. When it does not, economists call it pushing on a string.

That is a great explanation of the difference between the causes of monetarily-induced general inflation and likewise-induced asset inflation. [/quote]

Originally Posted by Peter Gibbons

Originally Posted by Kurt Horner

Well, what if somebody ran the numbers and decided: fuck it, we're too late.

Do you think they have?

I'm not certain, of course. But with the second term domestic agenda floundering like it is (despite the votes to pass it) I think it's likely. If a crash is inevitable, better to blame the Democrats for stalling than to risk having the newest legislation get blamed for the crisis. If my theory is correct, we won't see any real action on the tax cut front either. At best, they'll maintain the reductions from the first term.

The test of this theory would be to watch the rhetoric from the Right. If correct, the message of "obstructionist Democrats" will become a very frequent complaint. A sudden, acute crisis could see some FDR-style "emergency measures" implemented directly by the President -- with Congress relenting (all the legislation they want with none of the acountability of actually voting for it).

And, if this theory is correct, we should see a financial crisis within the year.

Originally Posted by Peter Gibbons

Originally Posted by Mike Alexander '59

Originally Posted by Peter Gibbons

I guess it would boil down to which of his values gets more priority, easing the tax burden on the wealthy or force projection in the name of democracy (and perhaps oil :wink: )??

It's not a question of priority. Raising taxes means the Democrats take over. The choice would be between force projection and losing power. Between expanding the empire and utter defeat. Expansion is nice, but it isn't vital.

Better to rule a second rate nation than play second banana in a great one.

Upon reflection I must agree your point has great merit. At first glance I would not agree (myself), but then again, I would put country before party. The scoundrels now running what was my party don't do that, apparently. Therefore your logic is disturbingly sound.

I think discounting the use of the prinitng press is unwarranted optimism. The current establishment has far too many Crusader types to just allow a decline, and I do agree that raising taxes is political suicide.

If they really believe they are on a righteous mission, why let logic intrude on the decision making process. It certainly hasn't been much of a restraint up to this point. They may opt to roll the dice - regardless of risk. :shock:

Originally Posted by Marx & Lennon

Originally Posted by Peter Gibbons

Originally Posted by Mike Alexander '59

Originally Posted by Peter Gibbons

I guess it would boil down to which of his values gets more priority, easing the tax burden on the wealthy or force projection in the name of democracy (and perhaps oil :wink: )??

It's not a question of priority. Raising taxes means the Democrats take over. The choice would be between force projection and losing power. Between expanding the empire and utter defeat. Expansion is nice, but it isn't vital.

Better to rule a second rate nation than play second banana in a great one.

Upon reflection I must agree your point has great merit. At first glance I would not agree (myself), but then again, I would put country before party. The scoundrels now running what was my party don't do that, apparently. Therefore your logic is disturbingly sound.

I think discounting the use of the prinitng press is unwarranted optimism. The current establishment has far too many Crusader types to just allow a decline, and I do agree that raising taxes is political suicide.

If they really believe they are on a righteous mission, why let logic intrude on the decision making process. It certainly hasn't been much of a restraint up to this point. They may opt to roll the dice - regardless of risk. :shock:

Originally Posted by Mr. Justin Raimondo

Don't worry, say the hegemonists,
be happy. Forget that we're spending far too much on maintaining the biggest
military machine the world has ever seen, and throwing multi-billions more
into manipulating and managing "spontaneous" movements for
"regime
change" around the world. Foreign Affairs magazine tells us, in an
article with the hubris-laden title of
"How
We Learned to Stop Worrying and Love the Current Account Deficit,"
that "overstretch" is "a myth." It's the foreign policy equivalent of Franklin Delano Roosevelt's
declaration that "we
owe it to ourselves." There is such a thing as a free lunch, after
all. We can spend, spend, and spend again ? and the bill will never come. Or, if
it does, only the little people will be hurt, as Foreign Affairs reassures its elite readers:

"Although the period of global rebalancing would be painful for U.S.
consumers and workers, it would be even harder on the European and Japanese economies, with their propensity for deflation and stagnation. Such a transitory adjustment would be unpleasant, but it would not undermine the economic foundations of U.S. hegemony."

Translation: screw the workers and consumers.
U.S. "hegemony" is more important than their selfish desire to work for a living.
So what if the dollar collapses,
capital flight ensues, and we experience an economic crash in the U.S. ? it will
be far worse for the foreign suckers who spent all those years financing
our debt, and, besides that, the
Empire
is
forever.

The real threat, says this Foreign Affairs piece co-authored by David
H. Levy and Stuart S. Brown, isn't economic reality ? the latest "wave" of the "technological
revolution" will save us
from that. No, the real threat is "isolationism," i.e., the unwillingness of all
those "little people" to endure the pain of "global rebalancing" set in motion
by our rulers' foreign policy of perpetual
war
and global intimidation.

Americans are paying for Bush's 'global democratic revolution' through the nose
? but a chosen few are reaping huge profits

Foreign Affairs fantasy:

How
We Learned to Stop Worrying and Love the Current Account Deficit

All things relative -

If US economy catches a cold, the rest of the world gets the flu. If US has an economic depression or hyper-inflation, much of rest of the world (including China) ceases to exists as modern economies.

Under such circumstances, if the US can only afford to launch a couple hundred ICBMs, float a single Ohio sub or a lone carrier group and field only a couple of Marine/Army divisions, it still maintains its relative military dominance if the rest of the economically-decimated world can only afford a tugboat or two and a couple Somalian technicals. [At Ft. McNair War College - "Now gentlemen/women, time to polish-up your essays on T.R.'s gun boat strategies."]

That world dependency on the US economy (for better or for worst) will not likely change during our current Kondratyev-winter (4th turning?). And after the K-winter ending in 2016 +/- 4 yrs, the US economy takes off again for a couple of decades during a K-Spring.

One should not expect an economically-induced RELATIVE U.S. military weakness. The military basis for US hegemony will remain well into this century.

But, perhaps relative military might, alone, may prove insufficent to maintain the hegemony. As history has often shown, political will is the critical factor. Gentlemen/women, what say ye?

Originally Posted by salsabob

All things relative -

If US economy catches a cold, the rest of the world gets the flu. If US has an economic depression or hyper-inflation, much of rest of the world (including China) ceases to exists as modern economies.

Under such circumstances, if the US can only afford to launch a couple hundred ICBMs, float a single Ohio sub or a lone carrier group and field only a couple of Marine/Army divisions, it still maintains its relative military dominance if the rest of the economically-decimated world can only afford a tugboat or two and a couple Somalian technicals. [At Ft. McNair War College - "Now gentlemen/women, time to polish-up your essays on T.R.'s gun boat strategies."]

That world dependency on the US economy (for better or for worst) will not likely change during our current Kondratyev-winter (4th turning?). And after the K-winter ending in 2016 +/- 4 yrs, the US economy takes off again for a couple of decades during a K-Spring.

One should not expect an economically-induced RELATIVE U.S. military weakness. The military basis for US hegemony will remain well into this century.

But, perhaps relative military might, alone, may prove insufficent to maintain the hegemony. As history has often shown, political will is the critical factor. Gentlemen/women, what say ye?

This sounds a lot like wishful thinking to me. When India and China decide to be prime trading partners, they are creating the largest trading block in world history. Both economies can grow for decades, and use our accumulated money to help them finance their growth. While oil is still priced in $$$, they can assure their energy future. What else do they need?

We are very hubristic if we believe the world cannot get by without us.

The Chinese will have the USA to thank if they become a hyperpower
By James Cumes - posted Wednesday, December 10, 2003 Sign Up for free e-mail updates!



What is these days often referred to as China's "miracle" can fairly be classified as such on the basis of the scale and speed of its economic development in the past 30 years. The Wirtschaftswunder in (West) Germany, in the 1950s and 1960s, was perhaps comparable in some respects and had some of the same or similar causes.

However, the German experience had some important differences, relating especially to differences in size and to the stage the West German economy had already reached at the starting point of its economic re-development.

In both cases, an important element in the two "miracles" was the policy of the United States. However, in the case of the FRG, the objective was well defined, especially under the Marshall Plan, and that objective was achieved.

We can argue whether, in the case of China's miracle, United States policies were more or less important than in the case of West Germany but what is clear is that, in both cases, American policies were a crucial element.

On a rather different aspect, that of the slide in the value of the US dollar, I have recently written:

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To understand what the US dollar problem is - and what therefore the solution is - we have to understand how the present dollar indebtedness came about. Inflation is the problem of supply being inadequate in relation to effective demand.

In that sense, the United States never solved the problem of inflation which emerged in and after 1969. On the contrary, United States policies, especially of using hikes in interest rates to "fight inflation," only made things worse and gave us stagflation.

The solution - the only genuine solution - of expanding supply through fixed-capital investment - was never achieved or indeed seriously attempted.

Instead, the continuing excess of effective demand over supply provided incentives for other countries to bridge the United States supply gap. First, these included even such countries as Britain which then applied the same American policies to "fight inflation," with the same result - an increase rather than a decrease in inflationary pressures. Germany and Japan did better. Then gradually the Asian Tigers and, of course, more recently and most significantly, China came in to meet the shortage of supply.

In other words, United States inflation was never "solved"; it was simply shifted from domestic price increases to deficits in the balance of trade and payments.

The United States was not alone in this. Australia followed much the same unhappy path, with much the same unhappy results, qualified of course - but not essentially transformed - by the massive stature of the United States in the world economy and world finance.

I know that I am unique in my interpretation of the origins of the dollar problem - and consequently, of course, of the problems of manufacturing, labour, and the downward drift in the living levels of the working and much of the middle class in the United States, especially in the last 20 years.

However, any other interpretation is difficult to justify.

It follows that the solution to the underlying problems of the United States economy - and of course, for example, the Australian economy - is to "fight inflation" by expanding domestic supply, rather than persist with dependence on overseas suppliers, which can lead only to even more massive distortion of world trade and payments and, almost certainly, major collapse, sooner or later, in the world economic and financial "system".

The only way to achieve this "expanded domestic supply" is to promote fixed-capital investment which will bring real growth to the domestic production of goods and services.

(We must remember that real, stable and persistent growth ultimately depends, not on consumer spending and consumer debt but, in the end, on fixed-capital investment which is the economy's real driving force.)

That promotion of fixed-capital investment is not easy. It's much easier to export your industries overseas - as the United States and Australia have done for the past 20 years - than it is to get them back.

So it'll be a tough struggle. It'll need all the support and encouragement it can get. The only way to get this effective support and encouragement on the scale that will be necessary is to expand fixed-capital public investment on what will probably have to be an unprecedented scale.

Unprecedented but not impossible. On the contrary, it is now an absolute imperative if we are to save the world from economic catastrophe ? and political and strategic catastrophe as well.

You see this acceptance of public investment in the European Union's plans and - vital if the easy exports of the past 20 years are now to be scaled down - in the infrastructure plans of the Chinese.

That's where VOW (Victory Over Want) comes in and where it is crucial, both to the advanced economies like the United States and Australia, and to the poorer, developing countries in all the continents - and that includes Europe which of course has problems of its own making through, inter alia, the restraints - most of them foolish - of the single currency.

So the causes of China's "miracle" are neither exotic nor abstruse. At the same time, of course, the mists and miscalculations embodied within America's own policies have caused the Americans inadvertently to provide thrust to a China "miracle" which many may consider to be contrary to the United States own economic, political and strategic interests. The Americans themselves may indeed have given that vital thrust necessary to create a powerful rival claimant for their own hyperpower status.

At the same time, of course, the United States has destroyed much of the capacity on which its own strength was based. In some ways, it has travelled much the same road as the defunct Soviet Union. American policies of the past 30, and especially the past 20 years, have gravely weakened the economic and social base on which the American military/strategic preponderance has been raised.

Unless American policies are fundamentally changed, the United States "century" will come to an end and what is largely America's creation ? the modern China - will begin its own Chinese "century."

Of course, it would be foolish to claim that it was enough for the United States to offer China an opportunity for extraordinary and extraordinarily rapid economic development - and, ultimately, for growth towards hyperpower status.

It was for the Chinese government to grasp this opportunity - as, indeed, several other Asian countries have done.

We then come to the question whether China is undergoing "evolution to an unknown world" or whether it is simply applying sensible and practical policies which are, with clear thinking, available to us all.

That China is not applying the "mainstream" economic policies which the Americans have spread around the world is obvious. Only to that extent may the Chinese policies be said to be "exotic" or to be an "evolution to an unknown world."

What they have done and are doing is to encourage fixed-capital investment and to join public and private fixed-capital investment on the road to rapid and domestically sustainable development.

The ambitious infrastructure plans of the Beijing government contrast with the way in which vital infrastructure in the United States has been allowed to run down. Even if a robust start were made right now to restore United States infrastructure, it would take several to many years - according to their own official calculations - to restore it to the levels of a decade or so ago.

Here we have the clues to the grasping of the opportunity that the United States presented.

China has not buried itself in the past and stultified its own economic, social, political and strategic development. Nor has it made a mad dash into the future, with the chaos that we have seen, for example, in Russia and some other components of the late Soviet Union. Above all, it has been astute enough not to swallow whole the theories, concepts and policies of mainstream economics, especially as expressed in the United States.

At the moment at least, it appears that China has formulated a melange of policies - a "mixed economy" with ingredients mingled in a particularly skilful way - that will carry it forward, even if the world economy falters and perhaps even if it undergoes a substantial collapse in the next few years.

Such a collapse, involving the United States, might provide another opportunity, inadvertently offered by the United States, for China to stride towards unprecedented greatness and to become the new, single hyperpower of the 21st century

I'd just found this out folks. This is the
name of the present Chinese leader:

Hu Jintao

But, wait there's more. After a short
search, I'd found his birth year:

1942

Take that what ever way you want.

Oh, he became the head of the
government - in 2003!

In the words of the Hitchhiker's Guide...

DON'T PANIC!

Stanley '61

Black Ghost

Originally Posted by Mr. Martin Jacques in the [i

Guardian[/i] (UK)]One way of taking the temperature in China is the internet, a very important indicator of public opinion in a country where more traditional media are tightly controlled. The importance of - and recent upsurge in - nationalism, for example, has found powerful expression on Chinese websites. The internet response to Rice's visit has been revealing. The racist character of much of it has moved liberals to protest, most significantly Liu Xiaobo, a veteran critic of mass movements in China since Tiananmen, who has written a response on the New Century Net website.


He says that of 800 messages he has read about her visit, no less than 70 involved racist comments about her colour: of these, only two were relatively moderate; the rest were vicious, describing Rice as a "black ghost", "black dog", "black woman" and "black bitch". One stated, "You are not even like a black ghost, a really low form of life," and another, "Her brain is even more black than her skin." One writer said: "I don't support racism, but this black ghost really makes people angry, the appearance of a little black who has made good."

70/1,000,000,000,000ths of racialist bile indict a nation. We cannot let this stand.

Originally Posted by Marx & Lennon

We are very hubristic if we believe the world cannot get by without us.

2004 trade between US and China @ $240B+. An additional equivalent figure in China's non-US trade is related to re-export (components completed in China and assembled in China or vice-versa) to US; total together, represents 45-70% of China trade; estimates are 37-55% China GDP dependent on US trade. Most analysts in Intel community believe China would collapse economically, likely politically, within a year of a substantial perturbation in US trade; while related significant impacts would occur to the US economy, due to its greater diversity and size, scenarios of similar level of disruption to US socioeconomic and political viability should not be expected.

At slightly over $20B total trade with US, India is not in as precarious situation as China. India is not expected to be at levels of trade similar to China for two more decades. For the foreseeable future, most trade growth will be depended on trade with partners (e.g., Japan, China, Europe) that have substantial re-export to US. Most analyst believe India's expected rise in power goes hand-in-glove with further dependency on re-export trade to US.

Originally Posted by salsabob

Originally Posted by Marx & Lennon

... We are very hubristic if we believe the world cannot get by without us.

2004 trade between US and China @ $240B+. An additional equivalent figure in China's non-US trade is related to re-export (components completed in China and assembled in China or vice-versa) to US; total together, represents 45-70% of China trade; estimates are 37-55% China GDP dependent on US trade. Most analysts in Intel community believe China would collapse economically, likely politically, within a year of a substantial perturbation in US trade; while related significant impacts would occur to the US economy, due to its greater diversity and size, scenarios of similar level of disruption to US socioeconomic and political viability should not be expected.

At slightly over $20B total trade with US, India is not in as precarious situation as China. India is not expected to be at levels of trade similar to China for two more decades. For the foreseeable future, most trade growth will be depended on trade with partners (e.g., Japan, China, Europe) that have substantial re-export to US. Most analyst believe India's expected rise in power goes hand-in-glove with further dependency on re-export trade to US.

Necessity could change that fast. How well did our internal trade drive the American economy in the late 19th and early 20th centuries? The Chinese people need everything. They curretnly hold huge amounts of US paper. Why not take issue #2 and use it to finance a fix for problem #1?

I don't disagree that the Chinese will take a beating if we quit buying, but how much so? They only achieved this level recently, and they survived the entire time prior on much less. We, on the other hand, are used to our luxuries, and will not function well in survival mode.

China does not want to do us in

they are all people too

they are in many respects a lot like us, only a bit poorer economically.

the world can survive just fine with a China in the First World as an economic superpower alongside the USA

all we have to do is play our cards right, avoid a stupid war, and construtively engage China in open trade and cultural and intellectual exchange

we will all be all the richer for it

their civilization invented inoculation, eyeglasses, ocean-going shipping, the printing press, gunpowder, rocketry, the compass, and much more. there is not one reason to believe that they have spent all their briliance in the past or that this century is their setting sun.

we don't have to be like China, ourselves, but we must be realistic. there will always be a China. how we come to terms with this reality may well decide our own future.

Media Advisory
April 5, 2005

Contact:
Lynn Erskine, 202-270-1557 or 202-332-5218



Projected Shortfalls from U.S. Defense Policy
Dwarf Social Security Shortfall


Washington, DC -- According to a new study by the Center for Economic and Policy Research (CEPR), the additional spending required to maintain U.S. military pre-eminence in the coming decades is likely to be many times larger than the projected Social Security shortfall.

While the United States is currently the pre-eminent military power, maintaining military dominance will be increasingly difficult as China passes the U.S. as the world largest economic power in approximately ten years, according to CEPR. The paper, The Social Security Shortfall and the National Defense Shortfall, projects the amount of additional military spending that the U.S. will need to keep pace with China.

Using a purchasing power parity measure, which nearly all economists agree is the appropriate measure of economic output, China's economy is already two-thirds the size of the U.S. economy and larger than any other economy in the world. It is projected to exceed the U.S. economy by 2016 and grow to more than three times the size by the end of the century.

"Many analysts have failed to appreciate the true size of China's economy, because they use the wrong measure of the GDP," said Dean Baker, Economist and Co-Director at CEPR and author of the report. "It is possible to debate the importance of the projected shortfall in the Social Security program over its 75-year planning horizon. But in almost any scenario, maintaining the current U.S. defense policy over this period will impose far larger costs."

The paper shows that:

Using a purchasing power parity (PPP) measure of GDP, China's economy is already two-thirds of the size of the U.S. economy and is projected to exceed it by 2016.
In a low-cost scenario, the gap between the amount of spending needed to keep pace with China's military and the amount of spending projected by the Congressional Budget Office (CBO) will be more than 2.0 percent of GDP ($240 billion at 2005 output levels) by 2030, and nearly 5.0 percent of GDP by 2050 ($600 billion at 2005 output levels).
In a mid-cost scenario, which assumes that China devotes the same share of its output to the military as the U.S. does at present, this military spending gap will be close to 7.0 percent of GDP by 2050 ($720 billion at 2005 output levels).
In a high-cost scenario, in which China matches the share of output that the U.S. spent on its military at the height of the Cold War, the military spending gap will exceed 12 percent of GDP by 2030 ($1.4 trillion at 2005 output levels) and 18 percent of GDP by 2050 ($2.2 trillion at 2005 output levels).
This U.S. military spending shortfall is far larger than the projected Social Security shortfall. In the low-cost scenario, the present value of the military spending shortfall over the next 75 years is $26.7 trillion, more than six times the size of the Social Security trustees projection of the 75-year shortfall in Social Security. The projected 75-year military spending shortfall in the mid-cost scenario is $35.7 trillion, nearly nine times the size of the projected Social Security shortfall. In the high-cost scenario, the projected military shortfall over the next 75 years is $89.2 trillion, more than 22 times the size of the projected Social Security shortfall.


See the paper for the full analysis: http://www.cepr.net/publications/ss_defense_2005_04.pdf

The Center for Economic and Policy Research is an independent, nonpartisan think tank that was established to promote democratic debate on the most important economic and social issues that affect people's lives.

I'd just found this out folks. This is the
name of the present Chinese leader:

Hu Jintao

But, wait there's more. After a short
search, I'd found his birth year:

1942

Take that what ever way you want.

Don't forget that China's Crisis was later than ours! It began with the Japanese invasion of Manchuria, 1931, and ended with the founding of the People's Republic, 1950. This makes Hu Jintao a bona fide Silent.

Combine this with the fact that elders, not midlifers, are the most empowered generation in Chinese culture, and you'll see why China is still midway through its Third Turning -- a Third Turning that began in 1989 with Tiananmen Square (which ended the Cultural Revolution Awakening, 1968). This makes China:

* approximately in line with Europe, Japan, Korea, India, and Israel/Palestine, whose turnings are timed about the same way. Israel and Palestine, of course, start with the Israeli War of Independence / Naqba. Europe's First Turning started with the Berlin Airlift in 1949, which hammered down the Cold War boundaries and guaranteed the time and ability to rebuild. Japan's begins with the end of occupation in 1951; Korea's with the end of the Korean War, 1953; India's, with Indian independence, 1950.
* one quarter turning behind the United States, whose turnings start five years earlier (1963 for the Awakening, 1984 for the Unraveling... Crisis to hit this or next year)
* one full turning behind the Balkan/Ottoman nations, whose Fourth Turning began in the 1989-1991 period. Iraq and Saudi Arabia are at least midway through their Fourth Turnings; I think Iraq is a little closer to First Turning due to the Iraq/Iran War.
* one and one half turnings behind Afghanistan, whose First Turning began with the fall of the Taliban in 2001.

I don't know about Russia -- I'm still not sure about the double whammy of WWI and WWII. Right now I think the effect may have been a double dose of Artists, fungooing their cycle and shifting it violently from the Balkan/Ottoman cycle (which was once the Byzantine cycle) to the European cycle. I just can't agree with Xenakis' contention that the thirty million dead in WWII had the effect as any other mid-cycle war on Russia. The children that grew up during WWII would have to be Prophets under that schema, for instance, and I can't envision that.

Iran is another one I haven't figured out... this is either a high or an unraveling for them, but I don't know which. I don't know enough history of South America or Africa to tell about them, but it is most unlikely that the major disruptions of the world will come from either of those continents.

Originally Posted by catfishncod

Don't forget that China's Crisis was later than ours! It began with the Japanese invasion of Manchuria, 1931, and ended with the founding of the People's Republic, 1950. This makes Hu Jintao a bona fide Silent.

Combine this with the fact that elders, not midlifers, are the most empowered generation in Chinese culture, and you'll see why China is still midway through its Third Turning -- a Third Turning that began in 1989 with Tiananmen Square (which ended the Cultural Revolution Awakening, 1968). This makes China:

You are right, I have conculded China is pretty near North America on the saeculum, being up to 4 years behind is pretty close enough. I am not sure if the Tiananmen Square massacre was a 2T or 3T event, I am trending towards 3T myself.

* approximately in line with Europe, Japan, Korea, India, and Israel/Palestine, whose turnings are timed about the same way. Israel and Palestine, of course, start with the Israeli War of Independence / Naqba. Europe's First Turning started with the Berlin Airlift in 1949, which hammered down the Cold War boundaries and guaranteed the time and ability to rebuild. Japan's begins with the end of occupation in 1951; Korea's with the end of the Korean War, 1953; India's, with Indian independence, 1950.

I am undecided where Japan and Korea are on the saeculum, Europe's (along with Russia) last 4T ended in 1950 and last 2T started in 1968. The Indian Sub-continent is most likely the same. I don?t know about Israel however the rest of the Middle East along with Iran and the Palestinian territories is 15 years behind North America on the saeculum. The last 2T there started with the Iranian revolution.

Originally Posted by Tristan Jones

You are right, I have conculded China is pretty near North America on the saeculum, being up to 4 years behind is pretty close enough. I am not sure if the Tiananmen Square massacre was a 2T or 3T event, I am trending towards 3T myself.

Maybe it was the catalyst for the end of the 2T.