Last year we worried about homes below water; now it is the economy itself that is sinking. Warren Buffett says the US economy has "fallen off a cliff." And, as bad as the US is, the rest of the world is worse. Germany's exports have collapsed; Japan is in free fall; much of Eastern Europe may join Iceland in bankruptcy. The Asian Development Bank estimates the loss to financial assets worldwide at $50 trillion dollars - the equivalent of a full year of annual global output. It's not for nothing that National Intelligence Director Dennis Blair announced that the economic collapse trumps terrorism and catastrophic climate change as the greatest threat to US security.
After slogging through the stimulus, the banking mess and the foreclosure crisis, our besieged president now must turn his attention to organizing global cooperation to lift the world economy. Finance ministers of the group of 20 countries (G-20) meet near London this week; the heads of state gather on April 2. The agenda: whether to expand national stimulus plans, how to forestall a banking collapse, and help for the weaker countries that can't help themselves. Rhetoric won't cut it; real commitments have to be made. As the anti-Bush, Obama has been celebrated by much of the world as if he walks on water. Now, we'll see if they will follow the savior rather than crucify him.
We need every major economy - particularly those like Germany, Japan and China in the best position to do so - to help boost the global economy with bold national, deficit financed, recovery plans. We can't do this alone. Our own stimulus - about 2% of GDP in 2009 - is too small even to lift this economy. Everyone has to grab a bucket and start bailing.
Moreover, gaining this consensus will help put the world on notice that the old ways are gone. We're not going back to an economy in which the US borrows $2 billion a day from abroad, while serving as the world's consumer of last resort. The Chinese, Japanese, Germans and other nations have to move away from export-led growth. The unsustainable trade imbalances - with the US absorbing 70% of the world's savings - provided the flood of cheap capital that eventually capsized the global economy.
That world is over. US consumers are already tightening their belts. Exports have collapsed. If we ever begin a recovery, the US should seek more balanced trade. That means we will have to sell stuff beyond toxic financial paper to the rest of the world. Obama anticipates this with his drive for new energy, an industrial policy that may allow the US to gain an edge in the green markets of the future.
At the same time, China, Germany, Japan and the mercantilist nations will have to stop relying on exports for their growth. For Germany, the world's largest exporter, exports made up an estimated 41% of GDP last year. That can't go on. The first step is for the countries to stimulate internal demand to help get the global economy going once more, and thereby begin the wrenching journey they will have to make to more balanced growth.
Here as elsewhere in this economic debacle, the leaders remain behind the curve. On Monday, the European finance ministers announced that they had no plans to add to recent stimulus plans, dismissing US pleas for expansion as, in the words of the European Chair, "not to our liking."
The Chinese initially trumpeted a large internal public works stimulus, much of which turned out to already be in the five year plan. Now Chen Deming, the commerce minister, declares China plans to subsidize exporters and lower export taxes, saying that we "should increase our share of the global market. We must transform ourselves from a big export nation to a strong export nation." Nightmare.
G-20 conferences have generally been for show. The stakes are real this time - and the odds going in are against the president in gaining the bold action needed. And once more he'll be out there virtually on his own, taking on the real deal in stark contrast with his opposition here at home. The conservative claque is ranting about socialism. Blue dog Democrats like Sen. Kent Conrad are mobilizing to defend agribusiness subsidies, while the Republican leaders simply don't get it. Rep. John Boehner, the perpetually tanned House minority leader, last week called for a freeze on all spending over the next year, something like putting a pillow over the mouth of someone suffocating to death. And Sen. John McCain, the party's nominee, woke to deliver one of his dyspeptic lectures against earmarks; the patient is hemorrhaging blood, but the Senator is worried about the pimples on his face.
The Europeans want to wait and see. The Chinese are subsidizing exporters. The Republicans are railing about earmarks and socialism. Obama's call for a new responsibility hasn't exactly taken hold.
Is this guy for real the only way an economy can grow is by export. We learned that from Soviet, their market got stagnant and died and was part of the crash.
For an economy to grow you need resources and income of money from the outside. Countries that grow need a higher export then import. If not they either loose wealth or become stagnant in growth. USA has cut its own throat and part of its problem is that they more or less has outsourced most manufacturing jobs. Import a hell alot more then they export.
Yes some countries will allways be loosers in a healthy economic system. Of course we can all create self sufficient countries with zero market, but it sound as a communistic utopian dream, wich prob will fall because the human flaw of greed.
The wizards of Wall Street are economic terr-orists.
get over it.
we've drifted away from solid-tangibles a long, long, long time ago; precisely for the reasoning that failures do indeed occur - even massive systemic ones - just like that which has occurred. again.
Now get over it, please.
life always has its gambles. Its never been entirely rational.
some just lose.
Luckily, thinking people devise other chances for them selves when it really is just a game.
Bankruptcy is an Honorable and Sociable way to keep the game going and going much, much longer for all of us.
Its a fair opportunity restart for those of us who have learned lessons about the game along the way - it's nothing more than merely Time. Time for the opportunity to think and re-structure lively-hoods; something smart people (homo sapiens) can and routinely do.
Collectively, the United States of America, many of her companies, several million of her citizens, as well as many numerous other countries and denizens around the globe have just gone bankrupt. Few were at "fault"; most were simply rational actors operating within an irrationally flawed system.
Time to fix those irrational flaws. we can do that. we're smart.
This article is about as well written as any. This whole mess is so convoluted that even attempting to understand it all makes your head spin.
Genetic Material. Only Four molecules. And Billions of complicated life forms.
Economics. Unchecked Greed. And Very, very complicated economic disaster.
All start out simple - all end up complicated. But the last one could of been avoided just by checking the greed and regulating the excesses.
Link to commentary: http://barrysacks5.com/usautoindustry.htm
A figment of our imaginations.
It doesn't really exist!
Then we could all get on with our lives.
My question is - if capitilism ever fails who does everyone turn to then?
Be that as it may, Capitism does work, and if regulated properly, it can bring much good and prosperity in the world. It most certainly is BETTER than any of the leading contenders. But like all good things, it can be abused and it can be very destructive.
Aristotle was right and still is right - moderation in all things is the best of all possiblities.
If Chinese shoes are really superior shoes, they will sell even with a tariff-added premium. If we could produce the same stuff here, then they won't. Things like style and quality will be more important than utter cheapness. Although they're pretty good at fakes and knock-offs, too.
It's pretty clear that laws and enforcement will have to figure in the new equations, too. We can either ease our way out of this quicksand together, or all drown trying to climb over the other guy.