I don’t know if we will have an exact repeat of the nineties, but, yes, you’re right that after the recession in 1991, the U.S. did have a very weak, so-called jobless recovery that picked up steam as the decade continued. That was very different from the usual pattern of economic recoveries where jobs appear as soon as growth does. In 1991, however, growth first starting taking place before the jobs showed up. That appears to be the case now.
I showed this chart (requires PDF to view) earlier, but it’s worth reposting now. Note how after the 1991 and 2001 recessions, unemployment continued to go up long after the recovery began. In 1991, for example, it was more than a year after the end of the recession before jobs started to appear. But with the typical recession (signified by the black line), unemployment goes down almost immediately as soon as growth begins.
Recessions happen every 8 to 10 years like clockwork as to crises in Argentina as do investment bubbles. Remember the Latin American debt crisis of the early 1980s or the savings and loan crisis in America in the late 1980s and the Asian financial crisis of 1997-98 and now the bursting of the dot com bubble in 2002-3. Okay. Each of these was a crisis but each did not result in the end of the world or the next Great Depression. Jobs will come back and people will forget to save up during the good times or will pay too much for stocks or houses or whatever. Short memories. This will end as well just in time for Bush to crush the Democratic candidate in a landslide not seen since the Nixon-McGovern election. That said, let’s hope Bush does not end up resigning after a similar debacle, but oh that’s right. If Clinton could brazen it out, what is left to shock and offend the American people? They are becoming cynical, craven, disillusioned, apathetic, nihilistic, materialistic, moral relativists. Christ Almighty! The Americans are becoming French!!!
Yes, short memories or – in the case of the young – no knowledge of history.
In another thread you make the observation that “if you worry and fret about each uptick and downtick in the stock market, you will grow old fast. If you are long-term, you look at 20 year trends and this are mere bumps in a long trend line. It is going up.” This observation is only too accurate in describing the chief problem of most declinists. Downticks are studied – almost savored – for what they might reveal about a possibly alarming future. Upticks are taken for granted.
Over the last two years, many commentators have accepted the premise that Al Qaeda attacked the United States because it believed the country was weak. Where they disagree is over the accuracy of the terrorists’ presumed perception. Was the United States, as the president implied, merely a sleeping giant which, once roused, would demonstrate a fearsome power? Or was the United States in fact tired, decadent, adrift – its military might only a hollow shell, inside of which its vaunted economy, culture, and political system were rotting?
Even during the booming `90s, doubts about America’s future were widespread. Cultural critics as far flung as right-wing presidential candidate Pat Buchanan, neo-Victorian moralist Gertrude Himmelfarb, Cold War strategist Edward Luttwak, and Nixon aide turned populist author Kevin Phillips argued that the United States had entered a decadent phase. Whether it was multiculturalism, consumerism, or economic inequality, some kind of centrifugal force was weakening American power and American values from within. After Sept. 11, 2001, talk of decline turned definitively to the arena of foreign affairs. The United States might look like an overweening superpower with an expanding empire, the declinists admonish, but actually its star is fading even now.
The declinists, we might say, will always be with us. Wherever anyone believes in progress, someone, possibly the same one, believes in decline. Declinism emerges today from the triumphalism of the right: In our greatness, conservatives say, there is much to lose, and many who threaten us. So, too, does it emerge from the pessimism of the left: Power corrupts, and the corrupt will get their comeuppance. At present, both impulses – triumphalist and pessimistic, chest-beating and self-lacerating – are on the upsurge. So too, then, declinism…
The belief that nations and belief systems inevitably decay has as many sources as it does uses. Conservative historian Arthur Herman begins his 1997 book, “The Idea of Decline in Western History,” with a tale from “The Iliad”: Homer relates that Ajax needed only one hand to lift a stone “which the sturdiest youngster of our generation would have found difficult to lift with both hands.”
Herman traces the earliest declinism to the Greco-Roman cyclical vision of time. All things pass through the revolving stages of birth, flourishing, decline, death, and rebirth. That wheel would reappear in the Medieval era as a figure for fortune: Part of the wheel is up, part down, and their positions reverse as the wheel rotates. In modern times, Herman sees declinism in the racial pessimism of proto-Nazi thinkers such as the 19th-century French writer Arthur de Gobineau, not to mention French existentialists, contemporary multiculturalists, and “eco-pessimists,” among whom he includes Al Gore and the Unabomber.
Largely absent from Herman’s rogues’ gallery are contemporary conservative declinists such as Buchanan, Himmelfarb, or Allan Bloom. Like many of the thinkers Herman sketches, such critics believe that Western civilization attained a pinnacle of greatness in a recently bygone era and that its achievements must be protected against a decay in values that others (multiculturalists, say) might laud as progress. By contrast, declinists of the left – from Kirkpatrick Sale to Noam Chomsky-- tend to insist that Western culture must be transformed, not protected. Otherwise, the West’s rapacious drive for profit and expansion threatens to bring about its own demise, and the demise of others as well.
Western decline may or may not come but at least the banks work. I cannot tell you how fucking sick I am of having to open a special new bank account each and every time that a company wants to make a payment even if a one off deal. Try transfering money to Middle Eastern bank accounts (cannot be done even to Dubai the financial hub of the entire fucking Middle East AND you must use Taiwan Bank or another govt approved bank to do so even if it is $100 or even $10 or even $1)
Today, it was Chinatrust. The staff at this particular branch were idiots. I had brought a copy of my passport along with my ARC. Nope need the real passport. Why? to prevent counterfeit passports from being used. Has this ever happened? No. What would be the point? To open savings accounts where money is going in? What am I going to cheat myself? Second, what is the number of my ARC? Does it match the passport? does the name match? is the ARC fake? no, yes, yes, yes, no. So then… cannot do it. Must have original passport.
Okay. Nevermind. Must leave. Deal with them tomorrow with the real passport which they would not know if it was fake or not anyway.
The Chinese will never be the next great power simply because people here for the most part (like everywhere in the world) cannot think. That said, I think that it goes beyond that here and perhaps we need to link up to an American Chamber of Commerce article in Topics on education reform titled “Why can’t Janni think?” Why? In this new age where creativity and lateral thinking are key, I really cannot see anyone in Taiwan scoring any major successes. Am I in a bad mood today or is this kind of a problem? Sorry but post to new thread…
[quote=“fred smith”]Western decline may or may not come but at least the banks work. I cannot tell you how fucking sick I am of having to open a special new bank account each and every time that a company wants to make a payment even if a one off deal. Try transfering money to Middle Eastern bank accounts (cannot be done even to Dubai the financial hub of the entire fucking Middle East AND you must use Taiwan Bank or another govt approved bank to do so even if it is $100 or even $10 or even $1)
Today, it was Chinatrust. The staff at this particular branch were idiots. I had brought a copy of my passport along with my ARC. Nope need the real passport. Why? to prevent counterfeit passports from being used. Has this ever happened? No. What would be the point? To open savings accounts where money is going in? What am I going to cheat myself? Second, what is the number of my ARC? Does it match the passport? does the name match? is the ARC fake? no, yes, yes, yes, no. So then… cannot do it. Must have original passport.[/quote]
ChinaTrust is awful. I had the same problem a couple of years ago. I couldn’t put money (several thousand U.S. dollars) into a new account there. I thought it must be some kind of joke when the bank teller told me this. I called the manager over to discuss it with him. At first he said it was against the law, but after I pointed out that I had put money into other Taiwan’s banks in similar circumstances, he changed his tune by saying it was against company policy. I then asked him to explain how it could possibly be a bank’s policy to turn down money. His explanation made no sense and I left the branch in a huff. I was so incensed, later that day I made them fax over the company policy and give me another explanation over the phone, but I soon realized there was no point in wasting any more time on the matter and went to another bank to make the deposit.
But everytime I hear ChinaTrust’s “We are Family” jingle, I want to shot the tv.
As I declinist, I would point out that the whole system is premised upon economic expansion. But this cannot continue forever–eventually we can expect to reach the natural limits of the planet’s resources. Just where that limit might be is something ecological types argue about very technically, but as reality looms ever larger, all this artificial weath will come to look like fool’s gold, fancy numbers notwithstanding.
Economic expansion is not predicated upon using up natural resources since technology often makes better use of natural resources or switches to another natural resource quite easily.
I would not count on job growth any time soon. Let me try to rephrase my argument a bit:
CF, I do see the U.S. as having a very flexible business environment, and one that will take advantage of new directions and technologies. I see the predominant trend of the Noughties as being “offshoring” of labor to reduce costs. Any job which doesn’t have a hands-on component is susceptible to this trend: computer programming, accounting, call centers, telemarketers, most engineering, data entry, most radiology and some cardiology, stock analysis. . . .
Corporations in the U.S. will take advantage of offshoring to reduce their costs. Failure to do so will result in competitive disadvantage against rivals – it is a nearly classic “problem of the Commons” situation.
This will result in perennial layoffs, hiring freezes, and staff reductions. Labor will be squeezed at all levels. As household incomes fall – and they did, overall, last year, according to a news article I saw yesterday in USA Today which mentioned government statistics from 2002 – companies will be forced to reduce costs further in order to maintain margins; their ability to raise prices will be hampered by the simple inability of American consumers to continue to consume.
I fully comprehend that the recent slide of the American dollar against most other currencies – down 20% against the Canadian dollar this year! – will make American exports more competitive against international products, and likewise raises the cost of imports, which will also boost the non-export manufacturing sector. But as (IIRC) you’ve pointed out, much manufacturing has moved to China and Mexico. Even with the slide of the USD, it is still very economically sound to set up factories in Mexico for durable goods, and in China for consumer crap. So I don’t see the currency slide doing much in even the medium term to save American jobs.
As for new waves, I simply don’t see one coming. I see the next ten to fifteen years as being a period of consolidation, in which the U.S. absorbs the efficiencies created by new technologies.
Fair enough, MaPoDoFu. You’ve given a straight answer that responds to most of my main points. We shall soon see whether it’s correct or not. Growth in the U.S. is predicted to be about 4 to 5% over the next two quarters. If the job situation doesn’t improve by March of next year, then your arguments could have some validity.
. . . and today, OPEC surprised the market with an output cut, driving stocks down.
Looks like I’m going to lose money for the third time in two years on an options trade. Or maybe it’s the fourth, I forget.
IMHO the cut is meant as punishment for the ouster of Saddam, and perhaps also for the speech Bush gave at the UN yesterday (which Hamas founder whatzisname called “anti-Islamic”).
It shows that while manufacturing employment has dropped, the total value of manufacturing output has doubled in rich countries since 1970.
Freddy
RICH-COUNTRY manufacturing has supposedly been in decline for so long that it is surprising that the politicians, unions and journalists who leap so nobly to its defence find much left to save. But they do: after years of silence on this hoariest of economic fallacies
For discussions about America and its endless federal programs and the true costs involved.
Large cost overruns are commonplace in government construction projects, procurement and entitlement programs. Officials routinely low-ball costs of proposals to win initial spending approval. When programs go over budget and do not work as promised, politicians place the blame on blunders by the bureaucracy or private contractors. In reality, cost overruns and program failure are not isolated problems but are systematic and widespread across the federal government.
If the US goes down it will not be cause of imperial overstrech. It can simply print the money it needs to setup the puppet governments in Afganistan/Iraq and force them at gunpoint to accept it.
The fact is that the US$ is a fiat currency in which investors are losing faith in. Faith in the dollar keeps it floating. The dollar by itself has no more value than toilet paper (and it probably isn’t as soft on your anus). Once the dollar loses the last vestiges of that faith then the house of cards will come tumbling down along with the financial systems of those whose central banks keeps all their eggs in the dollar basket.
The US needs foreign investors to invest in their overpriced stocks and bonds and have bank savings in the US as well as buy their green (toilet) paper. Americans have no savings to speak of and have a whole lot of debt. The govt also owes the world and runs the presses 24/7 to pay their own debts. Now at some point the foreigners still investing in the US will simply say no more that is when the US goes downhill and probably w/o any brakes. At present, the US govt is trying to manipulate the gold + currency markets in an attempt to devalue the dollar without the largess actually realising. This is akin to the frog + pot analogy; if you put a live frog in boiling water it will jump out really fast but if you put the frog in normal temp water and turn up the heat slowly the frog will slowly cook to his demise.
What will push the US to the brink?
Taxing foreign savings in the USA on non-resident foreign accounts.
Congress this year was threatening the lack of savings tax on non-resident foreign accounts - that apparently has been shelved but as usual will probably come back as a rider on some obscure bill. Already the money leaving the US for lack of an good interest rate is quite high but if Congress gets it’s way neither yanks nor foreigners will have any savings in the US.
Continuing lack of stock market returns
The US stock market right now sorta sucks so foreign investors aren’t really coming back in.
Dollar continuing it’s slide against other currencies
Investing in any US$ valued asset leaves your bum open to some severe currency risk (as a non-US person) as the dollar is losing value all the time vis a vis the Euro/A$/NZ$,Yen, et al.
US continued role as school yard bully + expansion of the police state
Printing more paper to pay for foreign escapades doesn’t help make friends nor does it do much for balancing your chequebook. The police state and erroding freedoms ala Patriot act 1, 2 - could make some investors skiddish about investing there or they simply can’t get a visa to visit the money anymore.
Gold - the only true currency (and one that can finally work in the digital age)
If the Chinese allow their citizens to buy + save gold as easily as they can save RMB now then that might
be the final straw. The Chinese are already considering this (it would allow the Chinese to reduce the money supply so that the RMB could be revalued/allowed to float within a range as does the HK$ does - this would get the US/Asia/EU monkey off their back - not that the Chinese actually give a damn). The gold price will start to skyrocket once millions of Chinese start buying gold and everybody else will dump the piss-poor dollar for not so green(back) pastures (other fiat currencies) / gold and other precious metals.
You’re filled with quite a few misconceptions. Due to a lack of time, I’ll just point out a couple obvious ones.
First, gold is not the only true currency unless you are still living in the some bygone age. That battle over the gold standard is over with. Wealth is tied up in production, not some metal dug out of the ground.
Second, I guess you either don’t have any money in the stock market or you just haven’t been paying attention to current events. The U.S. stock market has been doing great over the last year.
Do you mean to tell me, Katie Scarlett “Cold Front” O’Hara, that Tara, that land doesn’t mean anything to you? Why, land is the only thing in the world worth workin’ for, worth fightin’ for, worth dyin’ for, because it’s the only thing that lasts.
During the 1990’s I spent much of my time focusing on economic crises around the world ?in particular, on currency crises like those that struck Southeast Asia in 1997 and Argentina in 2001. The timing of such crises is hard to predict. But there are warning signs, like big trade and budget deficits and rising debt burdens.
And there’s one thing I can’t help noticing: a third world country with America’s recent numbers ?its huge budget and trade deficits, its growing reliance on short-term borrowing from the rest of the world ?would definitely be on the watch list.
It’s Krugman’s new favorite theme – America as the Banana Republic. About two months ago, he argued that the Republicans were trying to enforce a one-party rule in the U.S. similar to the PRI’s former rule in Mexico.
Or maybe it’s the fourth, I forget.