The Big Picture

[mansoor_h_khan]

There is a fork in the road for America and world. Here is what is going on:

Economy will eventually deflate. Distribution of income is too narrowly concentrated because of the use of information technology in the production process. Today the production process requires much fewer workers to execute due to productivity gains from use of information technology implementation. And even the income of the information technology workers in the United States is decreasing due to outsourcing.

The number of jobs will continue to decrease (including information technology jobs due to outsourcing) as deflation spreads and companies attempt to maintain their margins. Debt burdens will increase (due to declining incomes) and debt defaults will increase. The Federal Government will have to borrow/print more and more money to help the unemployed and bankrupt states. The U.S. will also most likely embark on massive public works or other projects to increase employment financed by printed money.

Eventually, the Chinese will realize that they are keeping America's malls stocked and America is paying for it with printed money. The only reason America is able to do this is because USD is a globally accepted currency:

a) China will want to become the world leader and will want the world to switch the global currency from USD to Yuan.

America will want to remain the world leader and will want the USD to remain as the reserve currency.

The above noted tension is coming in the future and sooner rather than later.

Some ways this tension can be resolved:

1) America's economy deflates, markets crash and mass unemployment results. The Chinese buy much of America's private assets because they have the cash. Essentially, the Chinese become our bosses at workplaces. America accepts this outcome and life goes on. The Chinese Yuan eventually becomes the world's reserve currency.

2) America's economy deflates, markets crash and mass unemployment results. America responds by raising trade barriers (which increases employment in the United States) but raises tensions worldwide. These raised tensions can get very ugly (leading to wars and conflicts as they did during the great depression).

3) There is another possibility which less likely but possible. America negotiates with China and the Europeans and essentially creates a new world currency by combining the dollar, the Yuan and the Euro and Pound. This will be a start of a world government. A single currency makes exchange rate manipulation impossible and the power to print the reserve currency (new currency) is shared. New currency can then be printed to finance massive public works and other projects worldwide to increase employment and combat deflation.

Edited March 21, 2010 by mansoor_h_khan

[pyracantha]

There is a fork in the road for America and world. Here is what is going on:

Economy will eventually deflate. Distribution of income is too narrowly concentrated because of the use of information technology in the production process. Today the production process requires much fewer workers to execute due to productivity gains from use of information technology implementation. And even the income of the information technology workers in the United States is decreasing due to outsourcing.

The number of jobs will continue to decrease (including information technology jobs due to outsourcing) as deflation spreads and companies attempt to maintain their margins. Debt burdens will increase (due to declining incomes) and debt defaults will increase. The Federal Government will have to borrow/print more and more money to help the unemployed and bankrupt states. The U.S. will also most likely embark on massive public works or other projects to increase employment financed by printed money.

Eventually, the Chinese will realize that they are keeping America's malls stocked and America is paying for it with printed money. The only reason America is able to do this is because USD is a globally accepted currency:

a) China will want to become the world leader and will want the world to switch the global currency from USD to Yuan.

America will want to remain the world leader and will want the USD to remain as the reserve currency.

The above noted tension is coming in the future and sooner rather than later.

Some ways this tension can be resolved:

1) America's economy deflates, markets crash and mass unemployment results. The Chinese buy much of America's private assets because they have the cash. Essentially, the Chinese become our bosses at workplaces. America accepts this outcome and life goes on. The Chinese Yuan eventually becomes the world's reserve currency.

2) America's economy deflates, markets crash and mass unemployment results. America responds by raising trade barriers (which increases employment in the United States) but raises tensions worldwide. These raised tensions can get very ugly (leading to wars and conflicts as they did during the great depression).

3) There is another possibility which less likely but possible. America negotiates with China and the Europeans and essentially creates a new world currency by combining the dollar, the Yuan and the Euro and Pound. This will be a start of a world government. A single currency makes exchange rate manipulation impossible and the power to print the reserve currency (new currency) is shared. New currency can then be printed to finance massive public works and other projects worldwide to increase employment and combat deflation.

Lots of NWO conspiracy opinion. Care to share some facts to back all this up?

[mansoor_h_khan]

Lots of NWO conspiracy opinion. Care to share some facts to back all this up?

Fact: Increasing mass unemployment in the United States and world over. This has to lead to deflation due to collapsing demand. Unemployed people don't spend much money. Today's production process is very rigid. For example, it take much time (years) for layed off software engineers to become nurses.

Edited March 21, 2010 by mansoor_h_khan

[pyracantha]

Fact: Increasing mass unemployment in the United States and world over. This has to lead to deflation due to collapsing demand. Unemployed people don't spend much money. Today's production process is very rigid. For example, it take much time (years) for layed off software engineers to become nurses.

Deflation? Where would that be? From the data, we currently have a fair amount of inflation.

No deflation in the UK currently:

http://www.statistics.gov.uk/cci/nugget.asp?ID=19

And not in the States this year either.

http://www.usinflationcalculator.com/inflation/current-inflation-rates/

Perhaps you are thinking of Japan?

http://www.tradingeconomics.com/World-Economy/Inflation-Rates.aspx

So let me see if I understand you correctly: unemployment leads to deflation. (You are familiar with Zimbabwe aren't you?). That depends on whether you look at the long or short term and whether you follow classical or Keynesian economics:

http://library.thinkquest.org/C004323/low/macro4.html.

So concentrating on the UK, where I live, we have rising levels of economically inactive people and yet price inflation. What's your explanation for this?

Updated - checked your profile, I see you live in the States. I thought you guys had falling unemployment:

http://www.tradingeconomics.com/Economics/Unemployment-Rate.aspx?Symbol=USD

Or are your figures massaged like ours?

Edited March 21, 2010 by pyracantha

[mansoor_h_khan]

Deflation? Where would that be? From the data, we currently have a fair amount of inflation.

No deflation in the UK currently:

http://www.statistics.gov.uk/cci/nugget.asp?ID=19

And not in the States this year either.

http://www.usinflationcalculator.com/inflation/current-inflation-rates/

Perhaps you are thinking of Japan?

http://www.tradingeconomics.com/World-Economy/Inflation-Rates.aspx

So let me see if I understand you correctly: unemployment leads to deflation. (You are familiar with Zimbabwe aren't you?). That depends on whether you look at the long or short term and whether you follow classical or Keynesian economics:

http://library.thinkquest.org/C004323/low/macro4.html.

So concentrating on the UK, where I presume you live (no?), we have rising levels of economically inactive people and yet price inflation. What's your explanation for this?

I live in the United States. True, there is no serious deflation here yet. But unemployment is still increasing and like I explained classical economics has a very tough time dealing with unemployment in a technologically complex highly specialized society because aquiring new skills takes much, much time by definition (i.e., given very high level of specialization much, much time is required to get to an acceptable level productivity for a worker switching careers or learning a new trade).

Also, one way America and the U.K. have NOT deflated yet is by selling debt to external creditors. This can go on only so long until some kind of an adjustment in the architecture of global power in the world. The creditor nations are getting economically stronger and it is natural for them to want more say in world affairs.

Edited March 21, 2010 by mansoor_h_khan

[mansoor_h_khan]

Deflation? Where would that be? From the data, we currently have a fair amount of inflation.

No deflation in the UK currently:

http://www.statistics.gov.uk/cci/nugget.asp?ID=19

And not in the States this year either.

http://www.usinflationcalculator.com/inflation/current-inflation-rates/

Perhaps you are thinking of Japan?

http://www.tradingeconomics.com/World-Economy/Inflation-Rates.aspx

So let me see if I understand you correctly: unemployment leads to deflation. (You are familiar with Zimbabwe aren't you?). That depends on whether you look at the long or short term and whether you follow classical or Keynesian economics:

http://library.thinkquest.org/C004323/low/macro4.html.

So concentrating on the UK, where I live, we have rising levels of economically inactive people and yet price inflation. What's your explanation for this?

Updated - checked your profile, I see you live in the States. I thought you guys had falling unemployment:

http://www.tradingeconomics.com/Economics/Unemployment-Rate.aspx?Symbol=USD

Or are your figures massaged like ours?

No. The number of new unemployed added to the unemployment rolls every month has fallen somewhat in recent months. Employment level is NOT increasing. Also, the BLS numbers are massaged per very controversial birth/death model.

For example (a news story from this weekend), a new supermarket opened in one of the mid-western states and held a job fair. About 1200 people showed up to apply for 75 jobs! Most applicants did not have retail experience and were previously employed in other higher skilled fields.

Also, underemployment is rampant.

[pyracantha]

No. The number of new unemployed added to the unemployment rolls every month has fallen somewhat in recent months. Employment level is NOT increasing. Also, the BLS numbers are massaged per very controversial birth/death model.

For example (a news story from this weekend), a new supermarket opened in one of the mid-western states and held a job fair. About 1200 people showed up to apply for 75 jobs! Most applicants did not have retail experience and were previously employed in other higher skilled fields.

Also, underemployment is rampant.

OK, so you have a similar employment picture in the States whereby (however our governments massage the figures) we have more people earning less and less. We agree.

However, getting back to your post (time-stamped 08:30) about how you say rising employment leads to deflation, why the inflation in both our countries?

This article from almost a year ago might help explain:

http://www.reuters.com/article/idUSTRE5323UM20090403

[mansoor_h_khan]

OK, so you have a similar employment picture in the States whereby (however our governments massage the figures) we have more people earning less and less. We agree.

However, getting back to your post (time-stamped 08:30) about how you say rising employment leads to deflation, why the inflation in both our countries?

This article from almost a year ago might help explain:

http://www.reuters.com/article/idUSTRE5323UM20090403

One way America and the U.K. have NOT deflated yet is by selling debt to external creditors. This can go on only so long until some kind of an adjustment in the architecture of global power in the world. The creditor nations are getting economically stronger and it is natural for them to want more say in world affairs.

[pyracantha]

One way America and the U.K. have NOT deflated yet is by selling debt to external creditors. This can go on only so long until some kind of an adjustment in the architecture of global power in the world. The creditor nations are getting economically stronger and it is natural for them to want more say in world affairs.

Could you explain what you mean by your first sentence? Governments sell debt in the form of treasury securities, bonds, bill and gilts etc. You seem to be saying the UK/USA haven't specifically sold the debt back to those who we got the credit from. Clearly this isn't my speciality, but this sounds an awful lot like the repackaging of debt that was contributory to getting us in this mess in the first place.

(Increasing debt leads to poorer credit ratings and more expensive interest rates on loans, leading to a greater debt burden.)

I agree with your comments about creditor (developing world) nations and how they will play a greater part in the future world economy. I have pretty bleak thoughts about the future of the UK economy. We have destroyed our manufacturing base, our levels of investment in R&D are appaling, we outsource to the cheapest offshore supplier and expect that our supposed role as a world financial centre is going to be enough to support the country. We have become complacent and as a nation expect things rather than earn them.

The majority of UK subjects (we aren't strictly "citizens") haven't got a clue as to how tough it's going to get. Our government refuses to "step up to the plate" (as I believe you Americans say) and make the difficult decisions, looking only to cheap expensive distractions to buy another term in power.

Edited March 21, 2010 by pyracantha

[mansoor_h_khan]

Could you explain what you mean by your first sentence? Governments sell debt in the form of treasury securities, bonds, bill and gilts etc. You seem to be saying the UK/USA haven't specifically sold the debt back to those who we got the credit from. Clearly this isn't my speciality, but this sounds an awful lot like the repackaging of debt that was contributory to getting us in this mess in the first place.

(Increasing debt leads to poorer credit ratings and more expensive interest rates on loans, leading to a greater debt burden.)

I agree with your comments about creditor (developing world) nations and how they will play a greater part in the future world economy. I have pretty bleak thoughts about the future of the UK economy. We have destroyed our manufacturing base, our levels of investment in R&D are appaling, we outsource to the cheapest offshore supplier and expect that our supposed role as a world financial centre is going to be enough to support the country. We have become complacent and as a nation expect things rather than earn them.

The majority of UK subjects (we aren't strictly "citizens") haven't got a clue as to how tough it's going to get. Our government refuses to "step up to the plate" (as I believe you Americans say) and make the difficult decisions, looking only to cheap expensive distractions to buy another term in power.

Relax. Your island has produced so much knowledge that has powered the world economy (science, technology, ideas in all kinds of fields like economics, management methods etc.). The developing world has "stolen" this knowledge. Here is how it works:

1. Master has thought the slave how to think, work and produce (Master = West, Slave = East)

2 The slave now wants to be the master. Which is ok. No big deal. Just have to find a way to work out the relationship. What you really want is get paid for giving all that knowledege to the slave. So, Yuan becomes the reserve currency and they print up Yuans and give some to you. Your young get jobs in Yuan land and pay tax to elders in the west. Remember, productivity depends on knowledge, skill, discipline and creativity. The west is still ahead in the creativity part. The east will eventually learn that too. This part takes much more time. So creative westerns should be able to get high paying jobs in Yuan land and pay tax to their elders.

3. Of course, process starts over again and there will have to be transition of power again in the future from Yuan land to the next civilization which becomes over-producers.

4. The question is whether the transition of power will be smooth or messy. I pray not too messy. But then I don't really know.

[pyracantha]

4. The question is whether the transition of power will be smooth or messy. I pray not too messy. But then I don't really know.

What does history tell us about power transfers? I'd wager it will be "messy".

[mansoor_h_khan]

What does history tell us about power transfers? I'd wager it will be "messy".

There is another way to think about all this:

"3) There is another possibility which is less likely but possible. America negotiates with China and the Europeans and essentially creates a new world currency by combining the dollar, the Yuan and the Euro and Pound. This will be a start of a world government. A single currency makes exchange rate manipulation impossible and the power to print the reserve currency (new currency) is shared. New currency can then be printed to finance massive public works and other projects worldwide to increase employment and combat deflation. This way will require major shift in thinking."

Don't know if humans will learn to direct energies to improving their lives and not "messy" power transfers. There is hope:

Weapons of Mass Destruction = Mutually Assurred Destruction

So. There is strong incentive to work out something not too messy. I pray that it happens. But I don't really know!

[scepticus]

all this power transfer stuff is naive. rebalancing will occur but that is hardly the same as a wholesale transfer of power.

and, what do you mean by power exactly? diplomatic, military, economic, or perhaps, the power to be happy and have a workable economy?

what is going on is not a transfer of power from west to east so the east can take up the capitalist torch for another 300 years. The east has always followed the west (or been coerced) in capitalism. WHen the west declines we shan't have a resurgent eastern capitalismn to replace it since the east are not at heart capitalists; we shall rather have a lengthy interregnum characterised by decentralisation and a fall in trade, but over a long period of time.

its interesting to see how unable most people are to forsee a future that does not conform to current cultural bias. To whit, you think there must be a new superpower and that global relations the next couple of centuries are dominated by sparring nations and superpowers as before. When in actuality, the defining factors fopr this next epoch are not borders and races and debt but rather aging, energy shortage and societal adjustment to the incredible technologies wrought the last 30 years.

So chaos, technology and natural issues like population decline and energy will determine winners and losers, not current debt levels, which can be repudiated, and will be to greater or lesser extent all over the world.

[tomwatkins]

Fact: Increasing mass unemployment in the United States and world over. This has to lead to deflation due to collapsing demand. Unemployed people don't spend much money. Today's production process is very rigid. For example, it take much time (years) for layed off software engineers to become nurses.

Headline-"Invention of Spinning Jenny will lead to mass unemployment, world hunger and social unrest".

[mansoor_h_khan]

all this power transfer stuff is naive. rebalancing will occur but that is hardly the same as a wholesale transfer of power.

and, what do you mean by power exactly? diplomatic, military, economic, or perhaps, the power to be happy and have a workable economy?

what is going on is not a transfer of power from west to east so the east can take up the capitalist torch for another 300 years. The east has always followed the west (or been coerced) in capitalism. WHen the west declines we shan't have a resurgent eastern capitalismn to replace it since the east are not at heart capitalists; we shall rather have a lengthy interregnum characterised by decentralisation and a fall in trade, but over a long period of time.

its interesting to see how unable most people are to forsee a future that does not conform to current cultural bias. To whit, you think there must be a new superpower and that global relations the next couple of centuries are dominated by sparring nations and superpowers as before. When in actuality, the defining factors fopr this next epoch are not borders and races and debt but rather aging, energy shortage and societal adjustment to the incredible technologies wrought the last 30 years.

So chaos, technology and natural issues like population decline and energy will determine winners and losers, not current debt levels, which can be repudiated, and will be to greater or lesser extent all over the world.

Ok. Got it. I am cool with all this stuff.

But the practical question remains: Who gets to print money?

[tomwatkins]

There is another way to think about all this:

"3) There is another possibility which is less likely but possible. America negotiates with China and the Europeans and essentially creates a new world currency by combining the dollar, the Yuan and the Euro and Pound. This will be a start of a world government. A single currency makes exchange rate manipulation impossible and the power to print the reserve currency (new currency) is shared. New currency can then be printed to finance massive public works and other projects worldwide to increase employment and combat deflation. This way will require major shift in thinking."

Don't know if humans will learn to direct energies to improving their lives and not "messy" power transfers. There is hope:

Weapons of Mass Destruction = Mutually Assurred Destruction

So. There is strong incentive to work out something not too messy. I pray that it happens. But I don't really know!

The Pound? You're kiddin? Why not the Rupee which will be much more significant? Or a host of others I could think of like the Aussie Buck. I can see a "reserve currency" in the form of a World Central Bank holding some kind of unique currency which individual countries initially contribute to and then can then draw down on in emergency but apart from that no. If you think of all this numbers in a ledger cr@p it really is all nonsense isn't it?

[tomwatkins]

all this power transfer stuff is naive. rebalancing will occur but that is hardly the same as a wholesale transfer of power.

and, what do you mean by power exactly? diplomatic, military, economic, or perhaps, the power to be happy and have a workable economy?

what is going on is not a transfer of power from west to east so the east can take up the capitalist torch for another 300 years. The east has always followed the west (or been coerced) in capitalism. WHen the west declines we shan't have a resurgent eastern capitalismn to replace it since the east are not at heart capitalists; we shall rather have a lengthy interregnum characterised by decentralisation and a fall in trade, but over a long period of time.

its interesting to see how unable most people are to forsee a future that does not conform to current cultural bias. To whit, you think there must be a new superpower and that global relations the next couple of centuries are dominated by sparring nations and superpowers as before. When in actuality, the defining factors fopr this next epoch are not borders and races and debt but rather aging, energy shortage and societal adjustment to the incredible technologies wrought the last 30 years.

So chaos, technology and natural issues like population decline and energy will determine winners and losers, not current debt levels, which can be repudiated, and will be to greater or lesser extent all over the world.

In your world debt is just "repudiated"? So you just default which, by the way, means you default on the holders of government securities (treasuries and gilts for instance) held by your own countrymen, pension funds etc. It aint all held by the Chinese and Japanese you know. Not quite that simple. You can "lose power" very quickly in your own domain by screwing the people. Ask anybody still alive from 20's Germany.

[mansoor_h_khan]

The Pound? You're kiddin? Why not the Rupee which will be much more significant? Or a host of others I could think of like the Aussie Buck. I can see a "reserve currency" in the form of a World Central Bank holding some kind of unique currency which individual countries initially contribute to and then can then draw down on in emergency but apart from that no. If you think of all this numbers in a ledger cr@p it really is all nonsense isn't it?

Ok. If you are going to build a world govenment and a truly world currency then you want someone on the team who has recent knowledge of how to run an empire (that would be Great Britain and U.S.A.). The Chinese can try to fight America (of course, America may not want to fight then Yuan becomes the reserve currency by default) but this path is also very difficult and may lead to chaos.

[scepticus]

In your world debt is just "repudiated"?

happens all the time. what do you think floating currencies are?