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Old 07-04-2013, 09:03 AM  
Direckshun Direckshun is online now
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Happy 4th: no country has recovered from the Great Recession better than the US.

It's pretty clear that in virtually every economic indicator, the United States recovery from the recession is stronger than every other country on earth. The major difference between us and Europe is that Europe exercised austerity, while the American government exercised stimulus.

Other powerhouse countries, like Brazil and (to a much greater extent) Russia have suffered from inept leadership, and India and China are dealing with extremely difficult problems threatening to hold up or, in China's cast, partially collapse their economies.

This piece is a criticism of the Federal Reserve threatening to pare back its support for the American (and thus) global economy. But it greatly rebuts the idea that America's standing has even remotely diminished as the leading economic powerhouse on the planet. All that's happened is that standing has become more resolute, with a pretty effective recovery still on the horizon.

http://drezner.foreignpolicy.com/pos...ic_hegemon_now

Who's your economic hegemon now?
Posted By Daniel W. Drezner
Friday, June 21, 2013 - 1:29 PM

Hey, remember how, after the 2008 financial crisis, a lot of Really Smart People said that the United States had reached the end of influence or a post-American world? How the accumulated ills of the U.S. economy were leading to a decline in American hegemony, or even the end of power itself? How the BRICS were the new new thing?

I bring this up because, five years after the financial crisis rally heated up, we confront this New York Times front-pager by Nathaniel Popper:

Quote:
Despite a partial recovery in the markets on Friday, tumbling stock, bond and commodity prices around the world over the past month are demonstrating just how reliant the global economy has become on the monetary policies of the Federal Reserve.

In the weeks since the Fed’s chairman, Ben S. Bernanke, first indicated that the central bank might start to pare back its support for the economy, markets in Asia, Europe and Latin America have fallen even more sharply than those in the United States, threatening economic growth in many countries.

While leading market measures in the United States have declined 4 percent over the last month, an index of the world’s stock markets has slumped more than 6 percent.

“The Fed isn’t just the U.S.'s central bank. It’s the world’s central bank,” said Mark Frey, the chief strategist at the Cambridge Mercantile Group....

The selling picked up in markets around the world on Thursday, a day after Mr. Bernanke’s latest comments on the Fed’s plan to wind down the stimulus. While the reason for the shift by the Fed is good — a strengthening of the recovery in the United States — investors are nervous that the global economy may not be ready.

The heavy selling was a sharp reversal after years when low interest rates in the United States encouraged investors to put their money into foreign countries. For investors in once-attractive foreign markets, the fear was that those markets may be on even less firm economic footing than the United States’, and consequently less able to absorb the decline in lending that comes along with rising interest rates.

“When the U.S. embarks upon policies that are appropriate for its own domestic circumstances, it can impose policies on the rest of the world that aren’t necessarily appropriate to them,” said Darren Williams, the senior European economist at AllianceBernstein in London.
Surely, however, that rising economic superpower called "China" is ready to save the day, right? Wait, what's this?

Quote:
Thursday was a very bad day for China’s economy, the world’s second-largest and a crucial pillar of the global economy, with credit markets freezing up in an unnerving parallel to the first days of the U.S. financial collapse. The question of how bad depends on whom you talk to, how much faith you have in Chinese leaders and, unfortunately, several factors that are largely unknowable. But we do know two things. First, Chinese leaders appear to be causing this problem deliberately, likely to try to avert a much worse problem. And, second, if this continues and even it works, it could see China’s economy finally cool after years of breakneck growth, with serious repercussions for the rest of us.
Read the whole thing - as well as this Bloomberg story -- to understand why China is acting the way it is.

[But what about the rest of the BRIC economies?!--ed. Let's see, Brazil is a bit preoccupied at the moment, Russia is starved of capital, and India has its own problems. Oh, OK--ed.]

So who's your hegemon now, huh?

If Americans reading this are beginning to feel jingoistic, however, let me point out that if you think this is all good news, you're nuts. From an economic perspective, it's much better to see all these economies growing robustly. Since they're not, Ben Bernanke's decision to start talking about tapering off quantitative easing seems rather blinkered. This is for a few simple reasons:

1) As noted above, all of the other potential growth engines in the global economy are either contracting or screeching to a halt;

2) The fiscal headwind of U.S. fiscal policy hasn't been devastating, but it is likely a net drag on the economy. Oh, and inflation? That's nowhere to be seen. The U.S. economy is doing well in comparison to the other developed nations, but it's still not doing all that well. Now is not the time to engage in restrictive monetary policy (or terribly restrictive fiscal policy either).

3) This week Bernanke has been spelling out what the Fed will be doing in 2014 and beyond. Which would be peachy if Bernanke was going to be chairing the Fed then -- except that every indication is that he won't be. So why his word should carry such impact on post-2013 actions is a bit mystifying.

So the good news is that reports of declining U.S. influence have been greatly exaggerated. The bad news is that it's not obvious to me that the U.S. economic leadership is exercising that power responsibly.

Am I missing anything?
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Old 07-04-2013, 09:24 AM   #2
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Originally Posted by Direckshun View Post
Am I missing anything?
The actual recovery?
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Old 07-04-2013, 09:51 AM   #3
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Fiscal policy typically takes longer to show an effect, but yeah. Things are generally looking better.

I hear a lot of folks talking about the need to up interest rates to free up money for the housing market, but it sure doesn't seem like that's needed. Getting a mortgage is pretty easy right now if you've got income and reasonable debt levels.
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Old 07-04-2013, 09:54 AM   #4
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I guess this puts an end to the whole "socialism vs capitalism" debate no?
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Old 07-04-2013, 10:15 AM   #5
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Old 07-04-2013, 10:17 AM   #6
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There's a nice mini energy boom happening in tornado alley from Texas up to North Dakota, but not much else is going on in te economy. Without that, which the Dems have tried to destroy anyway, we'd be at Euro growth.
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Old 07-04-2013, 10:24 AM   #7
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If this is so, it's a lousy standard.
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Old 07-04-2013, 11:13 AM   #8
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Have to disagree with inflation "nowhere to be seen". Look at the price of gas, milk, meat, and bread. Most Americans spend a good portion of their income on food and fuel, and those prices continue to rise. Insurance and health care costs continue to rise as well.

Ask the common American whether inflation is up or down, and the general condition of prices of things today, and I think the answer would vary greatly from that fancy report.
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Old 07-04-2013, 11:19 AM   #9
Direckshun Direckshun is online now
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Quote:
Originally Posted by Prison Bitch View Post
There's a nice mini energy boom happening in tornado alley from Texas up to North Dakota, but not much else is going on in te economy. Without that, which the Dems have tried to destroy anyway, we'd be at Euro growth.
Euro growth (or lack thereof) has been due to austerity, mostly.

Tell me, which party's been pushing for austerity?
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Old 07-04-2013, 12:56 PM   #10
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the dollar is still losing value D -- whatever you believe is recovery isn't helping
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Old 07-04-2013, 01:26 PM   #11
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Quote:
Originally Posted by mnchiefsguy View Post
Have to disagree with inflation "nowhere to be seen". Look at the price of gas, milk, meat, and bread. Most Americans spend a good portion of their income on food and fuel, and those prices continue to rise. Insurance and health care costs continue to rise as well.

Ask the common American whether inflation is up or down, and the general condition of prices of things today, and I think the answer would vary greatly from that fancy report.
I do the shopping for my family; seeing inflation everywhere in groceries.
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Old 07-04-2013, 01:37 PM   #12
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Originally Posted by mnchiefsguy View Post
Have to disagree with inflation "nowhere to be seen". Look at the price of gas, milk, meat, and bread. Most Americans spend a good portion of their income on food and fuel, and those prices continue to rise. Insurance and health care costs continue to rise as well.

Ask the common American whether inflation is up or down, and the general condition of prices of things today, and I think the answer would vary greatly from that fancy report.
They can say that because the government removed energy and food from its inflation calculation back in the 1970s.

To see how much money is being printed, just think of how low the interest rate is on a savings account. The banks don't need your money, since they are getting so much from the Fed.
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Old 07-04-2013, 01:40 PM   #13
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Old 07-04-2013, 01:46 PM   #14
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To say there is no inflation right now would be incredibly silly. The cost of everything is going up, except wages. Record corporate profits, and no wage increases for the average worker. At some point, and it will be sooner than later at this point, something will absolutely have to give.
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Old 07-04-2013, 01:49 PM   #15
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With tremendous volatility continuing in global markets this summer, John Williams, of Shadowstats, released an incredibly important report which contained an ominous warning. Below is a key portion of this tremendous report:

Here is the statement from John Williams of Shadowstats:

Beginning to Approach the End Game. “Nothing is normal: not the economy, not the financial system, not the financial markets and not the political system (recently the delay of Obamacare). The financial system still remains in the throes and aftershocks of the 2008 panic and near-systemic collapse, and from the ongoing responses to same by the Federal Reserve and federal government. Further panic is probable and hyperinflation remains inevitable.

Typical of an approaching, major turning point in the domestic- and global-market perceptions, bouts of extreme volatility and instability have been seen with increasing frequency in the financial markets, including equities, currencies and the monetary precious metals. Consensus market expectations on the economy and Federal Reserve policy also have been in increasing flux. The FOMC and Federal Reserve Chairman Ben Bernanke have put forth a plan for reducing and eventually ending quantitative easing in the form of QE3. The tapering or cessation of QE3 is contingent upon the U.S. economy performing in line with overly-optimistic economic projections provided by the Fed. Initially, market reaction pummeled stocks and bonds.

Underlying economic reality remains much weaker than Fed projections. As actual economic conditions gain broader recognition, market sentiment should shift quickly towards no imminent end to QE3, and then to expansion of QE3. The markets and the Fed are stuck with underlying economic reality, and, eventually, they will have to recognize the same. Business activity remains in continued and deepening trouble, and the Federal Reserve—despite currency-market platitudes to the contrary—is locked into quantitative easing by persistent problems now well beyond its control.
Specifically, banking-system solvency and liquidity remain the primary concerns for the Fed, driving the quantitative easing. Economic issues are secondary concerns for the Fed; they are used as political cover for QE3. That cover will continue for as long as the Fed needs it.
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