Fears of dollar collapse as Saudis take fright

[Fish]

http://www.telegraph.co.uk/money/main.jhtml;jsessionid=BYRFMD0QYRQTVQFIQMFSFF4AVCBQ 0IV0?xml=/money/2007/09/19/bcnsaudi119.xml

Fears of dollar collapse as Saudis take fright
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 8:39am BST 20/09/2007

Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.
China threatens 'nuclear option' of dollar sales

Ben Bernanke has placed the dollar in a dangerous situation, say analysts

"This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas.
"Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States," he said.
The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg.
As a close ally of the US, Riyadh has so far tried to stick to the peg, but the link is now destabilising its own economy.
The Fed's dramatic half point cut to 4.75pc yesterday has already caused a plunge in the world dollar index to a fifteen year low, touching with weakest level ever against the mighty euro at just under $1.40.
There is now a growing danger that global investors will start to shun the US bond markets. The latest US government data on foreign holdings released this week show a collapse in purchases of US bonds from $97bn to just $19bn in July, with outright net sales of US Treasuries.
The danger is that this could now accelerate as the yield gap between the United States and the rest of the world narrows rapidly, leaving America starved of foreign capital flows needed to cover its current account deficit - expected to reach $850bn this year, or 6.5pc of GDP.
Mr Redeker said foreign investors have been gradually pulling out of the long-term US debt markets, leaving the dollar dependent on short-term funding. Foreigners have funded 25pc to 30pc of America's credit and short-term paper markets over the last two years.
"They were willing to provide the money when rates were paying nicely, but why bear the risk in these dramatically changed circumstances? We think that a fall in dollar to $1.50 against the euro is not out of the question at all by the first quarter of 2008," he said.
"This is nothing like the situation in 1998 when the crisis was in Asia, but the US was booming. This time the US itself is the problem," he said.
Mr Redeker said the biggest danger for the dollar is that falling US rates will at some point trigger a reversal yen "carry trade", causing massive flows from the US back to Japan.
Jim Rogers, the commodity king and former partner of George Soros, said the Federal Reserve was playing with fire by cutting rates so aggressively at a time when the dollar was already under pressure.
The risk is that flight from US bonds could push up the long-term yields that form the base price of credit for most mortgages, the driving the property market into even deeper crisis.
"If Ben Bernanke starts running those printing presses even faster than he's already doing, we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems," he said.
The Federal Reserve, however, clearly calculates the risk of a sudden downturn is now so great that the it outweighs dangers of a dollar slide.

[Skybird]

Oh, no longer a "magic cheque-book"? :lol: (see: R. Newman: A history of oil)

[bradclark1]

China threatens 'nuclear option' of dollar sales

Isn't this like a serious threat? (showing my economic ignorance)

[SUBMAN1]

I'd like to call this a 'dollar correction' that is long overdue.

-S

[Rockin Robbins]

The strength of the American economy is much more than the strength of the American government. Also the interdependence of world economies makes such offensive economic warfare more dangerous and costly to the attacker than the defender. America can afford losses on a scale unimagined by the world. That was the lesson of WWII. Pity it has been forgotten.

Wishing for the weakening of the US is understandable. Actually working to produce it is working against one's own best interest.

[Skybird]

China threatens 'nuclear option' of dollar sales

Isn't this like a serious threat? (showing my economic ignorance)
Last time this Chinese option was mentioned in a thread, some months ago, some people were even laughing. I wondered why, and still do so.

every bubble travels upwards to the surface, and when reaching it, it bursts.

[Skybird]

The strength of the American economy is much more than the strength of the American government. Also the interdependence of world economies makes such offensive economic warfare more dangerous and costly to the attacker than the defender. America can afford losses on a scale unimagined by the world. That was the lesson of WWII. Pity it has been forgotten.

Wishing for the weakening of the US is understandable. Actually working to produce it is working against one's own best interest.
Not often I disagree with a posting so totally and completely! :)

In a short while, China will be almost unattackable by economical means, and not few analysts would claim that it already is right now. It is autark concerning all goods that are needed by the population to survive, especially food production, agriculture. and if it ever starts to get rid of it epical, monumental, biblical dollars reserves, that will a.) deliver a direct blow to the US economy and finance markets that the US has nothing to defend against and cannot compensate, and b.) it will cause a global avalanche of dollar sales that will increase the American catastrophe even further. since some years, I consider the American willingness to allow this massive vulnerability to grow over so long time to such ridiculous peaks as maybe the greatest strategical mistake in all it's history. I say that without any malicious joy, since that desaster for the US will cause massive disturbance for the european and especially the export-heavy German economy as well. but instead of adressing this lethal weakness, america ignores it and carries on with business as usual, obviously assuming that all nations worldwide will continue to invest into the american capital market for the rest of all time - no effort to seriously consider a strategy to counter this monumental thread. Instead a yelling "Weiter so!".

The Chinese play it silent, and politely. but their determination is as adamant as that of any Western power - maybe even tougher.

What can America do if the Chinese decide to get rid of their dollars (why do you think they have accumulated them so patiently if not as a possible weapon and threat against the US...???). In short: it can do nothing. there is no military option that could be in any way "won", and there is no economical response to counter that move, or to retaliate. That simple. China is unattackable, due to its vital autarky, and its geographical size, the ongoing modernization of it's huge forces, the alreayd great poential of it's navy (that I consider to be constantly underestimated), and the simple fact that it has nuclear bombs and missiles. Sorry to have hurt your egos. :) The only thing that seriously works against them is demographics. Sounds queer, but the one-child-policy is producing the unwelcomed late effect of an over-aging population.

[SUBMAN1]

The strength of the American economy is much more than the strength of the American government. Also the interdependence of world economies makes such offensive economic warfare more dangerous and costly to the attacker than the defender. America can afford losses on a scale unimagined by the world. That was the lesson of WWII. Pity it has been forgotten.

Wishing for the weakening of the US is understandable. Actually working to produce it is working against one's own best interest. Not often I disagree with a posting so totally and completely! :)

In a short while, China will be almost unattackable by economical means, and not few analysts would claim that it already is right now. It is autark concerning all goods that are needed by the population to survive, especially food production, agriculture. and if it ever starts to get rid of it epical, monumental, biblical dollars reserves, that will a.) deliver a direct blow to the US economy and finance markets that the US has nothing to defend against and cannot compensate, and b.) it will cause a global avalanche of dollar sales that will increase the American catastrophe even further. since some years, I consider the American willingness to allow this massive vulnerability to grow over so long time to such ridiculous peaks as maybe the greatest strategical mistake in all it's history. I say that without any malicious joy, since that desaster for the US will cause massive disturbance for the european and especially the export-heavy German economy as well. but instead of adressing this lethal weakness, america ignores it and carries on with business as usual, obviously assuming that all nations worldwide will continue to invest into the american capital market for the rest of all time - no effort to seriously consider a strategy to counter this monumental thread. Instead a yelling "Weiter so!".

The Chinese play it silent, and politely. but their determination is as adamant as that of any Western power - maybe even tougher.

What can America do if the Chinese decide to get rid of their dollars (why do you think they have accumulated them so patiently if not as a possible weapon and threat against the US...???). In short: it can do nothing. there is no military option that could be in any way "won", and there is no economical response to counter that move, or to retaliate. That simple. China is unattackable, due to its vital autarky, and its geographical size, the ongoing modernization of it's huge forces, the alreayd great poential of it's navy (that I consider to be constantly underestimated), and the simple fact that it has nuclear bombs and missiles. Sorry to have hurt your egos. :) The only thing that seriously works against them is demographics. Sounds queer, but the one-child-policy is producing the unwelcomed late effect of an over-aging population.

Thats about the biggest underestimation I have read yet. AMerica can rebound, especially since it doesn't have the Chinese problems. China knows this and knows that we are married at the hip at the moment. Chinese cannot sustain their economy either, especially due to its overaging population. THere is a whole thread on that in this very forum. China's got big problems so any economic fight will end up with them as the ultimate loser, and America will go about its business and regain strength eventually.

-S

[SUBMAN1]

Some light reading:

Easy to confuse the commitment of one nation to another for an act of friendship. As mid-19th century British Prime Minister Lord Palmerston once commented, nations don’t have friends; nations have interests. The mutual interests of China and the U.S. are the kind that kept the U.S. and the Soviet Union from going at each other with nukes during the Cold War.

China and the U.S. are running inter-dependent bubble economies, relying on the economic equivalent of Mutually Assured Destruction (M.A.D.) to keep one from blowing up the other’s economy. Whether by intent or accident, sooner or later market forces will assert themselves and both economies will go through tough transitions. How will the world look after that?

The Set-Up

The U.S. and China are have distinctly different bubble economies. The Chinese bubble economy runs mostly on credit and corruption, like the Japanese bubble economy of the late 1990s except more extreme.

Although the PRC has made some progress toward achieving other characteristics of successful market economies, the PRC retains many of the detrimental characteristics of command economies. In particular, the PRC’s four major state owned banks and other depository institutions have extended too many questionable loans to the state-owned enterprises and the state-influenced enterprises based on industrial policy, guanxi (i.e., connections) with government officials, or outright corruption. Along with below-market interest rates and distorted prices, non-market lending has sustained the PRC’s unusually high rate of investment in capital assets (i.e., equipment, software, and structures) of 43.6 percent of GDP in 2004. In turn, this high investment rate has boosted the PRC’s real GDP growth rate to 9.5 percent in 2004. However, many state-owned enterprises and state-influenced enterprises are unprofitable. Protected through guanxi from bankruptcy and foreclosure, many state-owned enterprises and state-influenced enterprises are either unable or unwilling to service their debts. Consequently, non-market lending has saddled the PRC’s four major state-owned banks and other depository institutions with enormous portfolios of non-performing loans. Private economists estimate that the cost of resolving the PRC’s bad loan problem would be about 40 percent of the PRC’s GDP. Non-market lending encouraged the state-owned enterprises and the state-influenced enterprises to invest in too many capital assets and the wrong types of capital assets to produce goods and services to satisfy market demand. The eventual liquidation of the resulting overinvestment or malinvestment poses a significant long-term risk to the continuation of the PRC’s economic growth. Given the PRC’s integration with the global economy, a significant slowdown or recession in the PRC could diminish the prospects for economic growth in the United States and other countries around the world.

Chairman Jim Saxton (R-NJ)
Overview of the Chinese Economy
Joint Economic Committee, United States Congress, July 2005


The U.S. bubble economy, as explained in The Big Bet is heavily dependent on speculation in financial assets.
The U.S.-centric global speculative financial system continues to operate as a kind of perpetual motion machine, propped up by the "moral hazard" of central bank policies and the willingness of foreign lenders to support U.S. consumption on credit, in order to fund their own economic expansion at home via export income and domestic savings.

As long as the global system works this way, profit incentives, asset markets, and resource allocation will remain distorted. The system will continue to reward speculators with great wealth while it offers scraps to the inventors. The U.S. educational system will cater to speculators, who pay the endowments, and ignore the inventors, who can’t give them as much money.

After more than 25 years of this, is it any wonder that the entire U.S. economy has organized itself to conform to this financial model: a gigantic, risky, one-way bet that uses trillions of dollars of credit and massive leverage, relying on the savings of foreign workers to fund the bet and foreign central banks to cover the risks?

To keep its credit-corruption economy going, China’s ruling party, the CCP, needs the U.S. to buy Chinese exports at a rate that keeps its economy growing fast enough to keep its new entrepreneur class growing and supporting the regime. If they fail, the CCP loses their core political support base.

Meanwhile, the U.S. needs cheap imports from China to balance out the inflation created by its asset-speculation based economy. Lacking cash savings, U.S. consumers cannot buy Chinese exports except with credit. To get access to credit, U.S. consumers need low interest rates. Thanks primarily to China now, and Japan and the UK in the recent past, purchases of U.S. treasury debt keeps U.S. interest rates low, allowing North Americans to re-finance their homes to free up cash to pay for hammers and nails at Made in PRC.

Low cost labor is one reason why Chinese exports are cheap. The wage rate for the average GM factory worker is about $74 per hour versus $3.50 for a factory worker in China, where they are are more than 100 auto companies in operation. When Chinese cars start to hit the U.S. market in volume in a couple of years, they will be comparable to Korean cars today but at two thirds to half the price if the current exchange rate between the Chinese currency, the Renminbi (RMB), and the U.S dollar hold. This is the most important factor keeping Chinese exports cheap for North Americans; an exchange rate that favors Chinese exports. U.S. officials say the RMB is too cheap. The Chinese say the problem is not enough saving in the U.S. Both assertions are true. Fact is, that in addition to indirectly supplying U.S. consumers with the cash and credit needed to buy Chinese stuff, the CCP’s purchases of U.S. treasury debt also strengthens the dollar because every time the CCP buys U.S. treasuries they need to convert RMB into dollars. This help keeps demand for dollars high and the dollar strong. That helps keep Chinese goods inexpensive priced in dollars.

The Stand Off

As the political heat over jobs due to Chinese imports rises in Congress, the U.S. threatens China with trade sanctions and tariffs if the CCP does not let the RMB increase in value to make U.S. exports more competitive. It’s generally believed by members of Congress that the RMB is undervalued by about 40%. But if China actually does as the U.S. asks, U.S. interest rates will increase, the U.S. housing market will decline in earnest and the asset-speculation based U.S. economy may go into a tailspin. China counters by threatening to stop buying U.S. treasuries at the same torrid pace if the U.S. slaps tariffs on Chinese goods. But if the CCP actually carries out this counter-threat then exports to the U.S. decrease and China’s credit-corruption bubble economy may go the way of the Japanese bubble economy in 1991.

An economic version of M.A.D. keeps the two co-dependent bubble economies “in balance.” Will economic M.A.D. work as well as the nuclear version?

The Chinese government is a totalitarian capitalist regime that has over the past several decades evolved from a communist into a capitalist totalitarian state. With the notable exception of perennial hawk Michael A. Ledeen, writing for the Wall Street Journal in 2002, few have stated this in public, and you will never hear it out of a member of the U.S. Congress for two reasons.

The first is obvious: the U.S. counts heavily on China for purchases of U.S. treasury debt to fund outrages fiscal deficits (PDF File) and for cheap imports to balance out strong inflationary forces within the U.S. asset-speculation economy that show up dramatically in commodities like oil that must be imported and in non traded goods and services, such as health care and education. To enable politically popular “Something for everyone!” government spending and support the “Every ticket is a winner!” asset-speculation economy, the U.S. relies on a country that increasingly puts political dissenters in concentration camps, shoots villagers who dare stand up to corrupt local politicians who confiscate their land, and jails anyone who offers even mild criticism of the government. This dependency eliminates the incentive for the U.S to get its fiscal house in order, put an end to reliance on asset-speculation for economic growth, and make a principled choice to not finance a totalitarian regime that continues to move away from the principles of liberty and freedom on which the U.S. was founded.

The second reason given for engaging versus shunning the CCP is that a policy of engagement is expected to lead to greater democratization of China. By doing business with the CCP, the U.S. is encouraging capitalism and trade. This will eventually lead to greater democracy in China. If the CCP does not increase personal freedoms to meet the demands of the nation’s burgeoning entrepreneur class, growing political instability will force the change. All these newly minted capitalists will press for personal liberties to match their economic liberties. The old – literally -- leadership will die off to be replaced by younger, more democratic minded leaders who grew up immersed in Western ideas of democracy and freedom. This line of reasoning is justified with research that shows that the more a country is involved in trade, the more likely that country is to address human rights and other social issues.

This is a politically convenient confusion of correlation with causation. Capitalism and trade may correlate to greater political freedom but does not necessarily cause it. The institutions of democracy do not grow naturally from the mechanisms of trade. A strong political class has to build them with outside help. How about China's new middle class and wealthy capitalists? Not likely. The credit-corruption system is making them rich. They are not motivated to rock the boat, especially when doing so can land you in prison.

As Ledeen pointed out in his WSJ piece, “It is… wrong to think of contemporary China as an intensely unstable system, riven by the democratic impulses of capitalism on the one hand, and the repressive instincts of communism on the other. Fascism may well have been a potentially stable system, despite the frenzied energies of Hitler's Germany and Mussolini's Italy. After all, fascism did not fall as the result of internal crisis; it was destroyed by superior force of arms. Fascism was alarmingly popular; Hitler and Mussolini swept to power atop genuine mass movements, and neither Italians nor Germans produced more than token resistance until the war began to be lost.”

How does it end?

Dangerous as it was, M.A.D. nuclear policy worked. There were a couple of close calls, but no nuclear war between the U.S. and the Soviet Union. The U.S. and the Soviet Union developed communications methods and checks and balances to help prevent accidents. Luck played a big part. The U.S. applied the economic screws on the U.S.S.R., raising the costs of military confrontation until the Soviet economic system failed, which was inevitable in any case.

The current economic version of M.A.D. between the CCP and the U.S. may turn out to be as lasting and positive for the U.S. as nuclear M.A.D. was between the U.S. and the U.S.S.R. but for three major differences. Capitalism has made the CCP wealthy and powerful, supported by a large and growing capitalist class, whereas socialism brought the Soviet Union’s leadership to ruin, a lesson not lost on the CCP. Maybe free trade makes democracy more likely in China but shoveling U.S. capital assets and productive capacity into China and increasing dependency on China’s capital and labor to fund America’s fiscal profligacy and economic dysfunction takes away U.S. leverage to press the CCP for social reforms. Either bubble economy may go through a crisis for reasons neither country either expects or desires, but that doesn’t mean such a crisis might not be instigated by one that foresees an end-game advantage.

If the brewing confrontation between Iran and the U.S. breaks out into open hostilities the result will be a spike in oil prices and interest rates in the U.S. The asset-speculation economy will take a major hit. How will China’s credit-corruption economy fare? China has oil and gas deals with Iran and it has been credibly asserted that the CCP played a role in the election of Iran’s current anti-U.S. leadership. The CCP also has oil deals with an increasingly dictatorial Russia and overtly anti-American Venezuela. When the dust settles after a possible a U.S./Iran crisis, China winds up with oil, enormous productive capacity and trade partners across Asia, South America and Europe. And what does the U.S. have?

[Letum]

If you really want to piss off the American economy, just start trading Oil in Euros.

Since OPEC announced that all oil trading would be done in US$ in the 1970s(?) the
American economy has been laughing.
Everyone needs to convert to US$ to trade oil and this means that oil prices are
never bad against the US$ and it means America has a easy time selling UD$s.

Then Iraq decided to trade oil in euros. Everyone thought Iraq was shooting it's self
in the foot because this meant no trading with OPEC and less profit per barrel selling
to almost all other currencies, but then the Euro went up 15%+ against the US$ and
suddenly Iraq was making big money.

Iran, Venezuela and Korea see the big profits Iraq is making and also switch to Euros
for oil trading.

OPEC starts to get worried that other countries will switch to Euros for oil trading.
OPEC prepares to switch to Euros as well so that it does not lose out on the profits.
This worries America a lot. If OPEC switches to Euros it will mean a end to the happy
times and a big devaluing of the US$.

BUT

Just as things are looking grim for the American economy Iraq (the first country to
trade in Euros) is invaded by America. The message is loud and clear; trade in Euros
and feel America's wrath.
Countries cancel plans to switch to Euros and the heat is taken off OPEC who
continue to trade in US$. The American economy is saved.
Too bad about the death and destruction etc.


:shifty:

[Rockin Robbins]

Europe is no place to look for economic widsdom. What they mistake as a M.A.D. strategy is in reality co-dependency, which operates for the good of all. The presence of defects does not invalidate a process. There were plenty of defects in the German WWII submarine plan. The process was brilliant. The execution was admirable. It's defects were fatal.

A capitalist economy, because it relies on the interdependence of people operating in their own self-interst is resilient, simply because it has so many independent contributers to the system. It is loss-tolerant, operates above logic (what works, works, almost randomly tried), optimizes allocation of resources and allows universal opportunity to leave class boundaries because it is a meritocracy. In the US, we are learning how much stronger and more beneficial is the private economy than government manipulation. So long as government confines its actions to eliminating fraud, ensuring that opportunity is not denied for reasons of race, creed, or religious belief, runs the police force and the military, it is doing its job. Competing or eliminating business is just tyranny. Economic rights are as important as personal rights. Individual rights to life, liberty and property are the center of public good.

[Skybird]

Exactly, Leturm. And not just since Robert Newman included it in his show :D

Subman, I have given up to tell Americans that their economy is very fragile and depending on eternal pumping foreign finances into it'S system, which simply will stop one day, one way or the other, and probably earlier than later. Practically all of the major Arab oil producers in the past two years have thought loud in public about turning from dollars to Euros concenring their oil deals, and only intimidation and lucrative weapon deals - deals with some of your and our most unforgiving and determined enemies: figure where this stupidity will lead us - have kept them from getting serious about it. China you cannot dictate anything anyhow, their reserves hang like a damocles sword over your country - that's why they collected them in all silence, and with patience while you were sleeping and asked for another luxury good. You overestimate their economical vulnerability tremendously.

This is not the WWII era anymore, American economy is not strong by itself, but heavily depending on nobody ever touching the status quo of infinite foreign money transfer into your system, which is, if you only look honstely at it, a very stupid and wasting way of economical business. But trust is fading, and revenues for foreign investors become more and more a question mark, due to your fantastic deficits and debts with all the consequences coming from that, substantially as well as psychologically.

Or to put it all short: you are extremely vulnerable, and do not want to realize it.

So I just sit and hold my mouth and watch you crazy people racing against the concrete wall with your eyes wide shut, sicne you will not listen to others anyway (like always, it seems). but don't dare to complain afterwards that nobody warned you. Outside the US, there are not really just few voices predicting exactly this scenario,and warnings of investing into greater and greater parts of the American market since quite some time now have found entrance into the customer briefings of bansk and investement institutions in Europe - your repuation is noi lponge rbeyond dohbt, the trust your finacial power once enjoyed, is decreasing. If you think the light (!) symptom of the recent mortgage problems are the heart of the expected storm,and the better part of it already is over, then I tell you different - it is just a soft and gentle pre-vibration to the earthquake your unhealthy finances are heading for. Think of it as the deep breath before the storm, and it will come in one year, or two, or five, but it is constantly gathering. You can't eternally live on tick and expect that everybody gets fooled and joins you for his - imagined - own interest forever. Currently you try to talk everybody to join you in the trap you are in, hoping that if he sits with you inside of the trap, he will not turn against you for self-interest. But there are more and more signs that this cheat has worked for the longest time. From Southamerican rebellious spirit over the strong Euro to the growing doubts about the currency for oil deals in the Arab sphere, and finally the rise of China: the signs are there that you may need to excpect to get massively hit sooner than you may fear. It is only a question of time until someone not meaning well with you anymore, or not trusting in the bubble anymore, calls your cards - and then you see that bluffing alone does not really beat a good hand. And the Chinese hold the strongest cards, followed by Europe.

interestingly, all economies of the major powers and empires of the past 2500 hundred years, from Athens over Rome to the european powers, suffered from this very same mistake and arrogance: to allow to centralize all flow of goods and finances and steer this stream of luxury into the heartland of the empire, by that enjoying the luxury from that - but at the same time becoming more and more dependant from the outside and the perimeter of the empire, from that becoming financially and often economically weak and weaker, and from that loosing more and more degrees of freedom to act - in case of several European powers in the past 500 years needing to reboot their finance systems from zero (Spain, Holland, France). You repeat the very same mistake that several times have been demonstrated by other powers before!

[Letum]

Exactly, Leturm. And not just since Robert Newman included it in his show :D

Apocalypso Now
You have good taste! ;)
Im suprised Rob never mentioned that OPEC considerd switching to Euros.

First time I've shown the slightest intrest in global economics.
I really should look at it more, but it is such a steep learning curve.

Got this (http://en.wikipedia.org/wiki/The_Party%27s_Over:_Oil%2C_War%2C_and_the_Fate_of_ Industrial_Societies) on my reading list for now in the hope that it won't be too heavy.

[Skybird]

Europe is no place to look for economic widsdom. What they mistake as a M.A.D. strategy is in reality co-dependency, which operates for the good of all. The presence of defects does not invalidate a process. There were plenty of defects in the German WWII submarine plan. The process was brilliant. The execution was admirable. It's defects were fatal.

A capitalist economy, because it relies on the interdependence of people operating in their own self-interst is resilient, simply because it has so many independent contributers to the system. It is loss-tolerant, operates above logic (what works, works, almost randomly tried), optimizes allocation of resources and allows universal opportunity to leave class boundaries because it is a meritocracy. In the US, we are learning how much stronger and more beneficial is the private economy than government manipulation. So long as government confines its actions to eliminating fraud, ensuring that opportunity is not denied for reasons of race, creed, or religious belief, runs the police force and the military, it is doing its job. Competing or eliminating business is just tyranny. Economic rights are as important as personal rights. Individual rights to life, liberty and property are the center of public good.
From the idealistic textbook for capitalists. the realitylooks far more brutal and inhuman, and sees qwidening gaps and sharpening contrasts between the benefitting rich, and the exploited poor. Truith ios that capitalism is not for the people. It only is for the strongest, and enslaves the weak. Socialdarwinism at its best. for civilised, self-aware being like us hmans, it should not be good enough. And the abuse is the rule, and is massive - if only you open your eyes. In the end, how could a purely materialistic ideology not accepting other, non-material qualities as well, be of benefit for mankind, ever? It is not by random chance that the social rifts and widening gaps between the haves and have-nots are so rapidily increasing. In Germany we have reached a state now where a critical number of people work full time - but can't make a living from working for that company. they can't accumulate reserves for when getting old anymore. It is a social bomb building. At the same time, whilke always comlaing how bad and expensive it all is, Key corprorations since over 15 years claim one record profit after the other, with manager wages being beyond good and evil and claiming rises of 50% when at the same time firing workers and demanding others to work more for less wages. It is a brutal everybody-eats-everybody, and the strongest exploiter wins it all. Europe since years has stepped onto the American trail in this negative example, and we must not be proud of doing so.

Leave it to the market forces alone, and you get brutal egoism in its purest form. control everything by law, and regulate all via the state, and you suffocate most economical creativity. Truth is: you need a bit of both if you want an economy serving the interest of all people in a fair manner, and not just the rich predators on top, at the cost of the slaves at the bottom. this is what in europe originally was understood as "social market economy". But liike capitlöaists exaggerate the non-regulation, all poltical parties also exaggerate the regulation, for their own power interest. Corruption and monopole-building has been the consequences. And in the end a total distortion of the socalled free market. If you look at the protection schemes of both the US and the EU against south america and Africa, you know that the free market alway has been nothing more than an illusion, hiding the exploitation of the weaker nations. And this goes on until today.

[Skybird]

Exactly, Leturm. And not just since Robert Newman included it in his show :D

Apocalypso Now
You have good taste! ;)
Im suprised Rob never mentioned that OPEC considerd switching to Euros.

Didn't he? Not remembering it all word by word - at least he indicated it, it seems to me. but I could be wrong. I have it on CD, sooner or later I will watch it again. It's brilliant - and so damn true.

First time I've shown the slightest intrest in global economics.
I really should look at it more, but it is such a steep learning curve
I recommended it in the years before, and recommend it once again: Paul Kennedy - The Rise and Fall of the Great Powers. Economical change and military power 1500-2000.

A brilliant, thick (1000 pages in German) and very readable study on the interaction between finance system, economy, and military history in Europe and America. I have finsihed reading it a second time this Spring- and again found it most rewarding and enlightening.

[Fish]

Paul Kennedy
Sunday March 3, 2002
Observer
'By what right,' an angry environmentalist demanded at a recent conference I attended, 'do Americans place such a heavy footprint upon God's Earth?' Ouch. That was a tough one because, alas, it's largely true.
We comprise slightly less than 5 per cent of the world's population; but we imbibe 27 per cent of the world's annual oil production, create and consume nearly 30 per cent of its Gross World Product and - get this - spend a full 40 per cent of all the world's defence expenditures. By my calculation, the Pentagon's budget is nowadays roughly equal to the defence expenditures of the next nine or 10 highest defence-spending nations - which has never before happened in history. That is indeed a heavy footprint. How do we explain it to others - and to ourselves? And what, if anything, should we be doing about this?
I pose these questions because recent travel experiences of mine - to the Arabian Gulf, Europe, Korea, Mexico - plus a shoal of letters and emails from across the globe all suggest that this American democracy of ours is not as admired and appreciated as we often suppose. The sympathy of non-Americans for the horrors of 11 September was genuine enough, but that was sympathy for innocent victims and for those who had lost loved ones - workers at the World Trade Centre, the policemen, the firemen.
There was also that feeling of pity that comes out of a fear that something similar could happen, in Sydney, or Oslo, or New Delhi. But this did not imply unconditional love and support of Uncle Sam.
On the contrary, those who listen can detect a groundswell of international criticisms, sarcastic references about US government policies, and complaints about our heavy 'footprint' upon God's Earth. Even as I write, a new email has arrived from a former student of mine now in Cambridge (and a devoted Anglophile), who talks of the difficulty of grappling with widespread anti-American sentiments. And this in the land of Tony Blair! It's lucky he's not studying in Athens, or Beirut, or Calcutta.
Many American readers of this column may not really care about the growing criticisms and worries expressed by outside voices. To them, the reality is that the United States is unchallenged Number One, and all the rest - Europe, Russia, China, the Arab world - just have to accept that plain fact. To act as if it were not so is a futile gesture, like whistling in the wind.
But other Americans I listen to - former Peace Corps workers, parents with children studying abroad (as they themselves once did), businessmen with strong contacts overseas, religious men and women, environmentalists - really do worry about the murmurs from afar. They worry that we are isolating ourselves from most of the serious challenges to global society, and that, increasingly, our foreign policy consists merely of sallying forth with massive military heft to destroy demons like the Taliban, only to retreat again into our air bases and boot camps.
They understand, better than some of their neighbours, that America itself has been largely responsible for creating an ever more integrated world - through our financial investments, our overseas acquisitions, our communications revolution, our MTV and CNN culture, our tourism and student exchanges, our pressure upon foreign societies to conform to agreements regarding trade, capital flows, intellectual property, environment and labour laws. They therefore recognise that we cannot escape back to some Norman Rockwell-like age of innocence and isolationism, and fear we are alienating too much of a world to which we are now tightly and inexorably bound. After my recent travels, this viewpoint makes more and more sense to me.
So what is to be done? One way to clearer thinking might be to divide outside opinion into three categories: those who love America, those who hate America and those who are concerned about America. The first group is easily recognisable. It includes political figures such as Lady Margaret Thatcher and Mikhail Gorbachev; businessmen admirers of US laissez-faire economics; foreign teenagers devoted to Hollywood stars, pop music and blue jeans, and societies liberated from oppression by American policies against nasty regimes. The second group also stands out. Anti-Americanism is not just the hallmark of Muslim fundamentalists, most non-democratic regimes, radical activists in Latin America, Japanese nationalists and critics of capitalism everywhere. It also can be found in the intellectual salons of Europe, perhaps especially in France, where US culture is regarded as being crass, simplistic, tasteless - and all too successful.
Since there is little that can be done to alter the convictions of either of those camps, our focus ought to be upon the third and most important group, those who are inherently friendly to America and admire its role in advancing democratic freedoms, but who now worry about the direction in which the US is headed. This is ironic, but also comforting. Their criticisms are directed not at who we are, but at America's failure to live up to the ideals we ourselves have always articulated: democracy, fairness, openness, respect for human rights, a commitment to advancing Roosevelt's 'four freedoms'.
Three times in the past century most of the world looked with hope and yearning toward an American leader who advocated transcendent human values: for Woodrow Wilson, Franklin D. Roosevelt and John Kennedy made hearts rise abroad when they rejected narrow 'America First' sentiments and spoke of the needs of all humankind.
It is a return to this tolerant and purposeful America that so many worried and disappointed foreign friends want to see. Unilateralist US policies on land mines, an international criminal court and Kyoto environmental protocols fall well below those expectations. Underfunding the United Nations seems both unwise and contrary to solemn pledges. Committing an extra $48 billion to defence, but not committing to amounts or percentages for next month's Monterrey conference on financing development looks hypocritical. In fact, a few of these US policies (for example, on the early Kyoto proposals) can probably be well defended. But the overall impression that America has given of late is that we simply don't care what the rest of the world thinks. When we require assistance - in rounding up terrorists, freezing financial assets and making air bases available for US troops - we will play with the team; when we don't like international schemes, we'll walk away. My guess is that every American ambassador and envoy abroad these days spends most of his time handling such worries - worries expressed, as I said above, not by America's foes but by her friends.
Finally, individual policy changes matter much less than the larger issue. There is a deep yearning abroad these days for America to show real leadership. Not what Senator William J. Fulbright once termed 'the arrogance of power', but leadership of the sort perhaps best exemplified by Roosevelt. This seems to be what EU external affairs commissioner Chris Patten wants when he voices his worries about America shifting into 'unilateral overdrive'.
It would be a leadership marked by a breadth of vision, an appreciation of our common humanity, a knowledge that we have as much to learn from others as we have to impart to them. It would be a leadership that spoke to the disadvantaged and weak everywhere, and that committed America to join other advantaged and strong nations in a common endeavour to help those who can scarce help themselves. Above all, it would be a leadership that turned openly to the American people and explained, time and time again, why our deepest national interest lies in taking the fate of our planet seriously and in investing heavily in its future. Were that to happen, we would fulfill America's promise - and probably get a surprise at just how popular we really are.

· Paul Kennedy CBE, Professor of History and Director of International Security Studies at Yale University, is the author of The Rise and Fall of the Great Powers

http://observer.guardian.co.uk/print/0,,4366637-110490,00.html

[Skybird]

Paul Kennedy


They understand, better than some of their neighbours, that America itself has been largely responsible for creating an ever more integrated world - through our financial investments, our overseas acquisitions, our communications revolution, our MTV and CNN culture, our tourism and student exchanges, our pressure upon foreign societies to conform to agreements regarding trade, capital flows, intellectual property, environment and labour laws. They therefore recognise that we cannot escape back to some Norman Rockwell-like age of innocence and isolationism, and fear we are alienating too much of a world to which we are now tightly and inexorably bound.
(...)
Since there is little that can be done to alter the convictions of either of those camps, our focus ought to be upon the third and most important group, those who are inherently friendly to America and admire its role in advancing democratic freedoms, but who now worry about the direction in which the US is headed. This is ironic, but also comforting. Their criticisms are directed not at who we are, but at America's failure to live up to the ideals we ourselves have always articulated: democracy, fairness, openness, respect for human rights, a commitment to advancing Roosevelt's 'four freedoms'.
(...)
But the overall impression that America has given of late is that we simply don't care what the rest of the world thinks. When we require assistance - in rounding up terrorists, freezing financial assets and making air bases available for US troops - we will play with the team; when we don't like international schemes, we'll walk away.
(...)
There is a deep yearning abroad these days for America to show real leadership. Not what Senator William J. Fulbright once termed 'the arrogance of power', but leadership of the sort perhaps best exemplified by Roosevelt. This seems to be what EU external affairs commissioner Chris Patten wants when he voices his worries about America shifting into 'unilateral overdrive'. It would be a leadership marked by a breadth of vision, an appreciation of our common humanity, a knowledge that we have as much to learn from others as we have to impart to them. It would be a leadership that spoke to the disadvantaged and weak everywhere, and that committed America to join other advantaged and strong nations in a common endeavour to help those who can scarce help themselves. Above all, it would be a leadership that turned openly to the American people and explained, time and time again, why our deepest national interest lies in taking the fate of our planet seriously and in investing heavily in its future. Were that to happen, we would fulfill America's promise - and probably get a surprise at just how popular we really are.

:yep:

Haven't I said that guy is clever!? :D

[mookiemookie]

I once worked for a money manager who had been in the business for 50-some-odd years and the best piece of advice he gave me was that "it's never as bad as they make it out to be, and it's never as good as they make it out to be." I think a lot of the financial media gets wrapped up in these doom and gloom predictions in order to sell papers. But that's just me.

Here's a viewpoint I read the other day that I put some faith into. It makes the case that sure, the dollar is weakening versus other currencies, but who's there to replace it? No one, yet.

http://blogs.telegraph.co.uk/business/ambrosevanspritchard/july07/willtheusdollarcollapse.htm

There's another one that tempers some of the "Chicken Little" feelings here, as well. It makes the case that economic health and currency strength aren't as correlated as you'd think: http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article2062059.ece

[SUBMAN1]

Skybird - you are living in fantasy land. Smart people write smart documents that describe the state of things in exact detail to a fine hair, yet you have this other worldly ideas that don't originate on planet Earth that have no bearing on what is real! How can you discount what is reality with all that fantasy about how you see things? It doesn't work. Come down to Earth for once and give some fact, not opinion. We all have our opinions.

Thanks,

-S

[Letum]

Skybird - you are living in fantasy land. Smart people write smart documents that describe the state of things in exact detail to a fine hair, yet you have this other worldly ideas that don't originate on planet Earth that have no bearing on what is real! How can you discount what is reality with all that fantasy about how you see things? It doesn't work. Come down to Earth for once and give some fact, not opinion. We all have our opinions.

Thanks,

-S

It might be more constructive to point out where you think some one is wrong rather than just saying you think they are.

[SUBMAN1]

Skybird - you are living in fantasy land. Smart people write smart documents that describe the state of things in exact detail to a fine hair, yet you have this other worldly ideas that don't originate on planet Earth that have no bearing on what is real! How can you discount what is reality with all that fantasy about how you see things? It doesn't work. Come down to Earth for once and give some fact, not opinion. We all have our opinions.

Thanks,

-S
It might be more constructive to point out where you think some one is wrong rather than just saying you think they are.

I did - its pure opinion and I stated that above - maybe I wasn't clear on that point? Give me some facts instead of stating this is true because I said so. Give me some alternate sources. We all have our opinions here and I don't need to see opinions. That is the point.

-S

[Letum]

Skybird - you are living in fantasy land. Smart people write smart documents that describe the state of things in exact detail to a fine hair, yet you have this other worldly ideas that don't originate on planet Earth that have no bearing on what is real! How can you discount what is reality with all that fantasy about how you see things? It doesn't work. Come down to Earth for once and give some fact, not opinion. We all have our opinions.

Thanks,

-S
It might be more constructive to point out where you think some one is wrong rather than just saying you think they are.
I did - its pure opinion and I stated that above - maybe I wasn't clear on that point? Give me some facts instead of stating this is true because I said so. Give me some alternate sources. We all have our opinions here and I don't need to see opinions. That is the point.

-S

But you haven't backed your self up with any reasoning. You have just presented a......errr....opinion!
It's hipocracy in the extreme!

[SUBMAN1]

Skybird - you are living in fantasy land. Smart people write smart documents that describe the state of things in exact detail to a fine hair, yet you have this other worldly ideas that don't originate on planet Earth that have no bearing on what is real! How can you discount what is reality with all that fantasy about how you see things? It doesn't work. Come down to Earth for once and give some fact, not opinion. We all have our opinions.

Thanks,

-S
It might be more constructive to point out where you think some one is wrong rather than just saying you think they are.
I did - its pure opinion and I stated that above - maybe I wasn't clear on that point? Give me some facts instead of stating this is true because I said so. Give me some alternate sources. We all have our opinions here and I don't need to see opinions. That is the point.

-S
But you haven't backed your self up with any reasoning. You have just presented a......errr....opinion!
It's hipocracy in the extreme!

Seems you have failed to read the whole thread. Go back and re-read.

-S

[Etienne]

And suddenly, working for a foreign company (They generally pay in USD) is a LOT less attractive.

The canadian dollar is probably going to reach the USD soon anyway... Scary.

[SUBMAN1]

The canadian dollar is probably going to reach the USD soon anyway... Scary.

It has - it is 1:1 right now.

-S

[Heibges]

They said the same thing when the Europeans stopped buying our debt 20 years ago.

[Skybird]

Whatever, Subman. When the euro was introduced you also said (I think it was you), it would never make it to the 1,40 mark and would always remain to be weak and unattractive. Currently it is pulverising your mark, is predictet to reach 1,60 within one year, and in Asia, Arab nations, and southern America the yearning is strong to jump from dollars to Euros.

All as I predicted by using my often mocked crystal orb, if I may add that in all modesty.

The US capitla market is living on tick. And now that even the major leading european banks like the Detusche Bank admitted to have spöeculated in high risk operations connected to the mortgage crisis, banks and investment funds from Asia and Europe will be far more hesitent and careful to inject their money into you again so uncritically. Consequences: for your deficits, national investements, jobs. It unfolds slowly, but constantly.

But don'T worry, I am just off reality and living on another planet, so what do I know. ;) Two international top investement advisors from Switzerland, and America, in past weeks had said the same like I did and even admitted to have sold their portfolios for that reason. Random chance only, so party on.

[flyingdane]

Europe is no place to look for economic widsdom. What they mistake as a M.A.D. strategy is in reality co-dependency, which operates for the good of all. The presence of defects does not invalidate a process. There were plenty of defects in the German WWII submarine plan. The process was brilliant. The execution was admirable. It's defects were fatal.

A capitalist economy, because it relies on the interdependence of people operating in their own self-interst is resilient, simply because it has so many independent contributers to the system. It is loss-tolerant, operates above logic (what works, works, almost randomly tried), optimizes allocation of resources and allows universal opportunity to leave class boundaries because it is a meritocracy. In the US, we are learning how much stronger and more beneficial is the private economy than government manipulation. So long as government confines its actions to eliminating fraud, ensuring that opportunity is not denied for reasons of race, creed, or religious belief, runs the police force and the military, it is doing its job. Competing or eliminating business is just tyranny. Economic rights are as important as personal rights. Individual rights to life, liberty and property are the center of public good.

Well said!!..:rock: :rock: :rock:

[flyingdane]

The strength of the American economy is much more than the strength of the American government. Also the interdependence of world economies makes such offensive economic warfare more dangerous and costly to the attacker than the defender. America can afford losses on a scale unimagined by the world. That was the lesson of WWII. Pity it has been forgotten.

Wishing for the weakening of the US is understandable. Actually working to produce it is working against one's own best interest.

Amazing insight :know: :rock: Fantastic stuff. :up:

[Von Tonner]

Skybird, economics is not a forte of mine but I have a question. Would not the reintroduction of the gold standard help to bring some sanity and what would this do for SA if this happened?

[P_Funk]

Europe is no place to look for economic widsdom. What they mistake as a M.A.D. strategy is in reality co-dependency, which operates for the good of all. The presence of defects does not invalidate a process. There were plenty of defects in the German WWII submarine plan. The process was brilliant. The execution was admirable. It's defects were fatal.

A capitalist economy, because it relies on the interdependence of people operating in their own self-interst is resilient, simply because it has so many independent contributers to the system. It is loss-tolerant, operates above logic (what works, works, almost randomly tried), optimizes allocation of resources and allows universal opportunity to leave class boundaries because it is a meritocracy. In the US, we are learning how much stronger and more beneficial is the private economy than government manipulation. So long as government confines its actions to eliminating fraud, ensuring that opportunity is not denied for reasons of race, creed, or religious belief, runs the police force and the military, it is doing its job. Competing or eliminating business is just tyranny. Economic rights are as important as personal rights. Individual rights to life, liberty and property are the center of public good.
Well said!!..:rock: :rock: :rock:
Refer to Skybird on that. I never stop being amazed at how hypocritical many 'capitalists' are. Oh boy socialism is just fantasy and utoipianism. BUT THE MARKET ECONOMY NEVER DOES ANYTHING SINISTER! As Skybird said, straight from the Capitalist text book.

You wanna talk about tyranny... sheesh every empire before democratic society was built on small groups of people with all the money. And whats changed...

People that revere Milton Freidman's ideological religion are either ignorant of what it really means, or aren't being honest about what it really means. The standard economic practises of American Foreign Policy, as directed by the business interests that control it, have basically intervened in favour of American economic interests. The US orchestrates Allende being assasinated in the coup that brought Pinochet to the throne and interstingly enough Milton Freidman was the economic advisor the Pinochet after that... funny how that all lines up.

[August]

socialism is just fantasy and utoipianism.

Socialism is no utopia. It is the death of self improvement. A hell of nanny state mandated politicaly correct thinking that destroys individualism and leaves life bland and boring. Sinister things do happen in market economies just as they happen in socialist paradises. However in capitalist systems the greedy and evil do not control everything and everybody whereas in socialist systems that is the ultimate goal.

[Skybird]

Skybird, economics is not a forte of mine but I have a question. Would not the reintroduction of the gold standard help to bring some sanity and what would this do for SA if this happened?
Ou, never thought on that, but in principle it makes sense not to print money freely, but to link it on real values and economical posseions in any way. The hidden inflation started to explode in the years after Bretton Woods was abandoned. This system allowed the US almost unlimited autonomy concerning its financial policies, but the Fed hat to base every dollar on gold reserves. All other nations had to adapt and run around to keep up with the system, so it was of great comfort for America, but did not treat others as equals. For corrections eventually needed if the system lost too much balance, there was the ICF founded (so one may ask why the ICF is still there when Bretton Woods has no meaning anymore, and judging by its questionable acts and influence this is a very valid question indeed, to me it was kept alive since it prooved to be a valuable tool for manipulation of the finance markets, and especially foreign economies of perceoved weaker nations, to bring them in line with the needs and demands of the first world industry, and keep them weak). Bretton Woods was abandoned when Vietnam became simply too expensive as that the US could afford it anymore without changing the way it raised it's funds. The price was costly, even more so since the dollar also is linked to oil sales, whioch gives America a constant revenue from every drop of oil being sold anywhere i the world (at least when it is OPEC oil). The ammount of money circulating increased dramatical in the following years and decades. Most people think of inflation in terms of price raises concerning every day goods and food and such things, and think the inflation is around 1-2%. That is wrong, the so-called "hidden" inflation which is measured by the increase of money and values that are circulating, compared to the time period before, is clearly in the tw-digit range, and you will get very different values from different sources: it varies between 10-20% (per year!), depending on what source and what method to count you choose.

When people tell me we have a stable currency, I can only laugh out loud. What we have instead is a gallopping inflation. This u nhealthy trend has seen a sharp increase in the past 10-15 years, when stockmarket deals suddenly became en vogue in Europe, too, and every little john smith and Hans Schmidt suddenly thinks he must own shares. an immense ammount of money (and value) was created that way - that has no solid "grounding" by real values in terms of goods, properties, material items. These fictional values were used to create new and other fictional values, via the stockmarket. see, this is how the immense bubbles and overratings were created.

Without need, I may add.

So, yes, at first glance I tend to think that linking currencies back to gold reserves may be a reasonable thing. but the opposition to such a move would be overwheliming. It is all those private people and companies and bankers that have a lot to loose once the bubble becomes apparent, or bursts. Currently I see no chance that going back to that system has even a slight chance. Also, the Chinese with their monumental reserves would not participate, and global economy design without china is a useless effort in the future. they would loose immense values, and the strategic option to threaten America (and the West, btw.) by releasing their dollars to the market. Why should they wish for that? It is not in their interest, and would slow their growth.

[mookiemookie]

Not to mention that the key to making the gold standard actually work is the faith the people place in the government actually sticking to it. After the Great Depression (caused in no small way by the gold standard and there's a strong correlation to the length of time that a country stayed on the gold standard to how greatly the Great Depression affected said country) it's clear that the gold standard can be dropped at any time.

Uncertainty in the markets is generally a bad thing and people will take a "flight to safety" into the one asset that's safe under the gold standard - gold. If the price of gold goes up, and your currency is pegged to it, then your currency is devalued....essentially paying more for gold since the supply of it is drying up because people are hoarding it. Deflation occurs and then you're in a deflationary spiral....from Wikipedia: "decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to decreases in price."

I don't think it's an idea that can work in today's deregulated currency markets.

[P_Funk]

socialism is just fantasy and utoipianism.
Socialism is no utopia. It is the death of self improvement. A hell of nanny state mandated politicaly correct thinking that destroys individualism and leaves life bland and boring. Sinister things do happen in market economies just as they happen in socialist paradises. However in capitalist systems the greedy and evil do not control everything and everybody whereas in socialist systems that is the ultimate goal. And what is your basis for this argument? Have you examined every possible concept for socialist development? Have you personally investivgated all the many socialist microcosms which have functioned in individual contexts all around the world in random little places? Or do you just accept the mainstream's limited vision of it?

This idea that somehow capitalism has won is fallacious and frankly annoying. Many different socialist concepts for social existance have been put forward and shot down before they were even tried. The only examples you then have are 20 and 30 year old stories of failed states or terribly misleading examples of 'communist' dictatorships that never were socialist.

You say that socialism is about eliminating the individual and homogenizing the process of exitance. That is far fromt he truth. If this was the result in some cases, then that was a failed attempt. The real idea behind socialism and its many different rethinkings (some people refuse to be considered a socialist simply because of the connotation and misleading ideas associated with it) is that you eliminate the unfair obstacles that make one man succeed where an identical man fails. The basic idea is to make class advantages as unimportant as possible. You might worship the mantle of capitalism but every decade rich are richer and poor are poorer. It is still true today that if you have money and wealth you need not even bother trying since you're already won the rat race.

The much lauded American Dream is a dead idea. It thrived in the 50s in the post-war boom where basically every allied nation threw cash at New York to pay off their war debts and the military industrial complex that was born in the war continued to thrive. And even if America is pretty well off all around the world minor countries that try to achieve some independance, be it economically, or democratically, are all muscled into line by some form of economic oppression handed out by the many moneyed powers. The world bank, or just America's own questionable foreign policy.

[JALU3]

Socialism (http://en.wikipedia.org/wiki/Socialism) . . . to go off topic . . . is a wonderful theory. However, I don't think it will work due to the greedy, self-serving, nature of mankind. In an ideal world, socialism would work, because everyone would strive for the common good, making products and services that others need, and getting back an equal share of products and services in return. Yet, that would assume that all people are putting an equal amount of effort, and all things were valued equally.
This doesn't work due to the nature of mankind. max consumption with minimal amount of effort, self advancement over the advancement of the group/community, the needs of the self out waying the needs of the whole or the many, the not in my backyard mentality, etc. Now, if someone would like to argue that the nature of mankind is predisposed towards socialism . . . I would like to see it . . . but I think that the nature of mankind can be seen in the kindergardens and high school open areas, when people are allowed to be themselves. Sorry for the bleak outlook, but there it is, my opinion.

[Letum]

Norway is about the most socialist country in the world. It is doing quite well!

[JALU3]

Now back on topic . . . and talking of trying to keep ones currency devalued to support increased exports. The EU is now trying to urge the market to keep the EU at a lower value. (http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=ab3e9dc1-0c21-492b-8b8b-0950f6fb58d1)

[August]

socialism is just fantasy and utoipianism.
Socialism is no utopia. It is the death of self improvement. A hell of nanny state mandated politicaly correct thinking that destroys individualism and leaves life bland and boring. Sinister things do happen in market economies just as they happen in socialist paradises. However in capitalist systems the greedy and evil do not control everything and everybody whereas in socialist systems that is the ultimate goal. And what is your basis for this argument? Have you examined every possible concept for socialist development? Have you personally investivgated all the many socialist microcosms which have functioned in individual contexts all around the world in random little places? Or do you just accept the mainstream's limited vision of it?

This idea that somehow capitalism has won is fallacious and frankly annoying. Many different socialist concepts for social existance have been put forward and shot down before they were even tried. The only examples you then have are 20 and 30 year old stories of failed states or terribly misleading examples of 'communist' dictatorships that never were socialist.

You say that socialism is about eliminating the individual and homogenizing the process of exitance. That is far fromt he truth. If this was the result in some cases, then that was a failed attempt. The real idea behind socialism and its many different rethinkings (some people refuse to be considered a socialist simply because of the connotation and misleading ideas associated with it) is that you eliminate the unfair obstacles that make one man succeed where an identical man fails. The basic idea is to make class advantages as unimportant as possible. You might worship the mantle of capitalism but every decade rich are richer and poor are poorer. It is still true today that if you have money and wealth you need not even bother trying since you're already won the rat race.

The much lauded American Dream is a dead idea. It thrived in the 50s in the post-war boom where basically every allied nation threw cash at New York to pay off their war debts and the military industrial complex that was born in the war continued to thrive. And even if America is pretty well off all around the world minor countries that try to achieve some independance, be it economically, or democratically, are all muscled into line by some form of economic oppression handed out by the many moneyed powers. The world bank, or just America's own questionable foreign policy.

Yeah right, well foreigners have been predicting my countries imminent demise ever since we became independant. That is over two centuries of market based economy and we've done pretty darn well for ourselves so far.

Socialist governments on the other hand have always either failed or turned despotic rather quickly, except in a few small communities which, imo, are the only places that such a political system can work.

[Letum]

Socialist governments on the other hand have always either failed or turned despotic rather quickly, except in a few small communities which, imo, are the only places that such a political system can work.
That rather depends on how broad your description of sociolism is.
There are many, many social democracys in Europe and a few in other parts of the
world. Most noteably the Scandinavian democracys, but also the UK.

Wiki says: (http://en.wikipedia.org/wiki/Social_democracy#List_of_famous_social_democrats)
[2] (http://en.wikipedia.org/wiki/Scandinavian_welfare_model)
Social democracy is a political ideology (http://en.wikipedia.org/wiki/Political_ideology) that emerged in the late 19th century (http://en.wikipedia.org/wiki/19th_century) out of the socialist movement (http://en.wikipedia.org/wiki/Socialism).[1] (http://en.wikipedia.org/wiki/Social_democracy#_note-Berman) Modern social democracy is unlike socialism in the Marxist (http://en.wikipedia.org/wiki/Marxism) sense, which aims to replace the capitalist (http://en.wikipedia.org/wiki/Capitalism) system entirely; instead, social democrats aim to reform capitalism democratically (http://en.wikipedia.org/wiki/Democracy) through state regulation and the creation of state sponsored programs and organizations which work to ameliorate or remove perceived injustices (http://en.wikipedia.org/wiki/Injustice) inflicted by the capitalist market system.

[Skybird]

Socialism (http://en.wikipedia.org/wiki/Socialism) . . . to go off topic . . . is a wonderful theory. However, I don't think it will work due to the greedy, self-serving, nature of mankind.
For the same reason, capitalism in the meaning of "seeking your own wellbeing will serve the communal wellbeing" cannot work, too. It's just survival of the strongest, the winner takes it all, the looser has to fall (preferred silently, and never critizising the winners).

That's why someone came up with the idea of social market economy. Which actually was hoped to be a mixture: competition yes, but not to a degree that a competitor is allowed to seek his wellbeing at the disproportionate cost of the many, or the almost execution of his rival. Social solidarity, meant to make a certain minimum of help for the the weaker ones and investing into the communal funds not voluntary, but obligatory. State control in so far as it is needed to guarantee a minimum of euqality of chances for those entering the competition.

Unfortunately, this concept - in theory maybe the most reasonable sounding of all these - got destroyed or perverted for the same rasons like capitalism and socialism before.

It seem we are always doomed to return to the law of the jungle, no matter what coverup-story currently is en vogue.

In the end, I see materialism (and the resulting "anti-ethic") at the root of the problems of both capitalism and socialism. I do not really like both.

[P_Funk]

Socialism (http://en.wikipedia.org/wiki/Socialism) . . . to go off topic . . . is a wonderful theory. However, I don't think it will work due to the greedy, self-serving, nature of mankind. In an ideal world, socialism would work, because everyone would strive for the common good, making products and services that others need, and getting back an equal share of products and services in return. Yet, that would assume that all people are putting an equal amount of effort, and all things were valued equally.
This doesn't work due to the nature of mankind. max consumption with minimal amount of effort, self advancement over the advancement of the group/community, the needs of the self out waying the needs of the whole or the many, the not in my backyard mentality, etc. Now, if someone would like to argue that the nature of mankind is predisposed towards socialism . . . I would like to see it . . . but I think that the nature of mankind can be seen in the kindergardens and high school open areas, when people are allowed to be themselves. Sorry for the bleak outlook, but there it is, my opinion.
I'm sure that there was a time when they thought the idea of democracy on the scale which we have as being as ridiculous as your own assertions. People grow, and so do societies. Its all about development. Within the lifetime of every strand of genetic code disseminated through my family from beginning til ultimate disapperance from the gene pool I'm sure we won't see the kind of 'socialist' ideas in practise that I think about. Does that mean it will never happen? I don't think so. I think its rather arrogant to sum up the potential of human nature. And, should you choose to believe it, evolution adds many special advantages over time. The way I see it the ego and self-serviance of people is related to natural instincts of animals mixing with emotional self-awreness born in our own evolution. Whos to say this is the end, aside from the christians, of our growth?

Yeah right, well foreigners have been predicting my countries imminent demise ever since we became independant. That is over two centuries of market based economy and we've done pretty darn well for ourselves so far.

Socialist governments on the other hand have always either failed or turned despotic rather quickly, except in a few small communities which, imo, are the only places that such a political system can work.
So America is the example of success. Does the existance, however long, of America's predominance as an economic power (and to say over 200 years is a bit of a stretch, much the same as calling the Roman empire as going as far back as the moment the Republic was formed prior to its conquests) immediately preclude the success of any other system? This single minded capitalism or naught business is rather pig headed and small minded. History is much bigger than America and the world will out live this brief period of American dominance. Systems have grown dominated and disappered in favour of others. Maybe you could approach the subject with a bit less emotional bias face it as a neutral entity.

What can work? Citing examples of failures is by no means exhaustive. You interpret the broad and very negotiable nature of socialist concepts with very pejorative slants and by imposing very limited imaginings of them on the entire circus. And within the very restrictive environment of a capitalist dominated world the growth of socialist ideas has been severely retarded by countering forces invested in preserving the status quo. Did many ideas fail because they couldn't work? Or were they prevented from succeeding before they had a change to sh1t the bed?

Its never so simple as saying "Capitalism Won".

[Bosk]

I certainly don't think America can keep going around invading whoever it pleases, for whatever reasons it pleases and expect the rest of the world to grin and bear it, and keep happily buying it's dollars. Nor does it's "you're either with us or with the terrorists" style of diplomacy seem to be winning it any friends either.

I've also no idea how anyone in America could think that moving most it's manufacturing sector to China could possibly be healthy for it's long term economic outlook.

[P_Funk]

I certainly don't think America can keep going around invading whoever it pleases, for whatever reasons it pleases and expect the rest of the world to grin and bear it, and keep happily buying it's dollars. Nor does it's "you're either with us or with the terrorists" style of diplomacy seem to be winning it any friends either. The other thing to bear in mind is that it isn't just America generally invading nations. When you characterize it that way it sounds like something thats not very nice but also tolorable inevitably. Its not just about people or nations getting miffed, its a matter of the stability of the world economy. If America somehow ends up invading OR Attacking Iran its likely going to end our era of economic prosperity. Iran has the means to effectively halt the flow of oil from the Middle East, between their own reserves and the military capability to sink any tankers that want to run the waters within Iran's reach, and that reach is ample enough to affect enogh oil routes that comprise enough of a bulk to crash the market.

After that you have America truly losing all credibility as a superpower. Being the most powerful nation doesn't mean you can invade everyone, it means that everyone trusts you and is willing to work with you or at least respect you. America's brazen and irrational foreign policy since 2003 and earlier is a serious threat to itself. People say that everyone predicts America's decline incorrectly, but invading a major nation such as Iran would be the ultimate gaff in America's long history of questionable military moves.

Lets just pray Bush is satisfied with keeping the numbers in Iraq high until his term runs out.

[Skybird]

After that you have America truly losing all credibility as a superpower. Being the most powerful nation doesn't mean you can invade everyone, it means that everyone trusts you and is willing to work with you or at least respect you.
Show me a single small or huge empire in the past where it worked like that. the Sassanides? Athens? The Romans? Egypt? The Medieval european kingdoms? the mongoles? China? The geman emperor? The Arabs? The almohades? Napoleon? The dutch traders? The Spanish, Portuguese? Austria? Prussia? The British empire? the third Reich? Russia, before and during Stalin? the US?

An empire cannot escape the necessity to act, and intervene, else it falls apart. It cannot tolerate endless turmoil in it's outer periphery, this becomes the more threatening the more the centre of turmoil is away from the empirial centre. In the network modern world today is, the separation of centre and periphery is not as important anymore as it once has been. This means, the dangers could become threatening everywhere - not just in some far away borderlands.

This is not meant as a comment of morals of politics. It simply describes a self-dynamic no empire can escape.

[Letum]

After that you have America truly losing all credibility as a superpower. Being the most powerful nation doesn't mean you can invade everyone, it means that everyone trusts you and is willing to work with you or at least respect you. Show me a single small or huge empire in the past where it worked like that.


:rotfl::rotfl::rotfl:
So very, very true!

[The Avon Lady]

After that you have America truly losing all credibility as a superpower. Being the most powerful nation doesn't mean you can invade everyone, it means that everyone trusts you and is willing to work with you or at least respect you.
Suggested reading: America Alone: The End of the World as We Know It, by Mark Steyn (http://www.amazon.com/America-Alone-End-World-Know/dp/0895260786/ref=pd_bbs_sr_1/102-2017472-0844116?ie=UTF8&s=books&qid=1190813786&sr=1-1).

[P_Funk]

After that you have America truly losing all credibility as a superpower. Being the most powerful nation doesn't mean you can invade everyone, it means that everyone trusts you and is willing to work with you or at least respect you. Show me a single small or huge empire in the past where it worked like that. the Sassanides? Athens? The Romans? Egypt? The Medieval european kingdoms? the mongoles? China? The geman emperor? The Arabs? The almohades? Napoleon? The dutch traders? The Spanish, Portuguese? Austria? Prussia? The British empire? the third Reich? Russia, before and during Stalin? the US?

An empire cannot escape the necessity to act, and intervene, else it falls apart. It cannot tolerate endless turmoil in it's outer periphery, this becomes the more threatening the more the centre of turmoil is away from the empirial centre. In the network modern world today is, the separation of centre and periphery is not as important anymore as it once has been. This means, the dangers could become threatening everywhere - not just in some far away borderlands.

This is not meant as a comment of morals of politics. It simply describes a self-dynamic no empire can escape.
I think you're misinterpreting what I meant, and reading it the day after it doesn't represent the same meaning I thought it did.

Basically I meant that a superpower or an empire or what have you which runs amok will not survive since it will draw all the world to be an enemy or at least uncooperative. And other than the Roman Empire and perhaps that of Alexander for a very brief time, how many empires were able to effectively invade anywhere and everywhere all at once? The US's foreign policy is erratic and dangerous to so many interests that should they tarnish they're "reputation" with an idiotic invasion of Iran it will only ruin their ability to even represent a noble face to the world. Political influence will be gone. Russia will throws its hand in with China because even China, which I consider to be a frightening state in its political psychology, because it will be obvious that the US is even more dangerous. The middle east will be united against the west TRULY and even the non-extremists will join.

That is my point. Not some morality or insincere idea of empires, but a pragmatic understanding that who is gonna want to deal with the US when its the most hated power in the world? There would be no practical reason to give them heed if their military is stretched through half of the Middle East, when every muslim nation is polarized against them and where their single action would likely topple the oil market.

Powers which invade invade invade make no freinds. The US cannot be at war with everyone, and invading Iran would do just that.

[Iceman]

I think a lot of the financial media gets wrapped up in these doom and gloom predictions in order to sell papers. But that's just me.

It's not just you...and not only the media has a corner on doom and gloom predictions here..lol.

A city divided against itself cannot stand...same as a world.

[P_Funk]

I think a lot of the financial media gets wrapped up in these doom and gloom predictions in order to sell papers. But that's just me.
It's not just you...and not only the media has a corner on doom and gloom predictions here..lol.

A city divided against itself cannot stand...same as a world.
I dunno...

Invading 3 muslim nations in less than 8 years... probably levelling the third with nukes... overextending America's army... alienating its allies and galvenizing its enemies... not only driving the US into unrecoverable debt but also crashing the world oil market...

That sounds pretty bad to me. Now tell me how nuking Iran would make the world happy and wouldn't be dark. Even Skybird thinks it a lesser of 2 apocalypses and he wants it to happen.

[Skybird]

Even Skybird thinks it a lesser of 2 apocalypses and he wants it to happen.

:nope:

Wishing for something - and a.) not seeing an alternative to something, or b.) seeing something taking place and describing it as such, are two very different things.

[P_Funk]

Even Skybird thinks it a lesser of 2 apocalypses and he wants it to happen.
:nope:

Wishing for something - and a.) not seeing an alternative to something, or b.) seeing something taking place and describing it as such, are two very different things.
Really? I thought that you were just being pragmatic and unemotional when you said that you thought it was the only way. You've already given up hope of avoiding it just like I've apparently given up hope of stopping Iran from getting the nuke (without destroying our economic era anyway). But yes, perhaps you don't want it to happen, but that doesn't mean its not the only way it can or will go. History is rarely accurately predicted, even by men as smart as you Skybird.

[Iceman]

History is rarely accurately predicted, even by men as smart as you Skybird.

History repeats itself nonstop...you misunderstand my reply...there is no hope for this world if it relies on flesh and blood...history has taught us that repeatedly and brutally.Flesh is ravenous and loves the darkness.

You can hate on America all you want or blame, if it makes you feel better about things but evil and wickedness is a "Human" thing and knows no borders or languages...right and wrong is a choice.

Isaiah 51
[6] Lift up your eyes to the heavens, and look upon the earth beneath: for the heavens shall vanish away like smoke, and the earth shall wax old like a garment, and they that dwell therein shall die in like manner: but my salvation shall be for ever, and my righteousness shall not be abolished.

[Skybird]

Funk, you said I wish for nuclear strikes on Iran, and in the context it sounded as if I would not have a happy day until the bombs start falling. That is almost malicious a statement.

I also said I assume they will use nukes, and that I think they would be needed indeed to get the job done. but do I know if the decision makers really are tough enough to make such a costly decision? Most people are not such a brutal beast as I can be (when I wish to be), and prefer to be seen as civilised and humane, and turning the other cheek when they got hit. I don't know, but assume that almost all european ones would shy away from that nuclear option. they will even demand many restrictions on a purely conventional attack, making it a doomed-to-fail affair from the beginning. And many American possible leaders will hesitate as well ( http://www.globalresearch.ca/index.php?context=va&aid=6909 - Thanks Fish for having posted this link first!). The too soft Lebanon war, and the example of Rumsfeld's many ingenious ideas, do not raise my optimism.

Hope is a nice word - if you are satisfied with simply believing something. I am a realist, and as a realist I see that chances are that there will be a showdown. else we would have to deal with nuclear terrorism orchestrated by Iran sooner or later, and an Iran multiplying the tensions in the region, and triggering the nuclear armament of other nations in the region, too. - What has hope to do with it? I leave that to the clerics and their "holy" scriptures.

War is for warriors, not politicians, starry-eyed idealists and managers of fate. And as a warrior you do not even allow your god(s) to come between you and your enemy. You kill the god(s) first and then your enemy, at all cost, no matter what.

Even at the cost of your own possible death.

But you are free not to actively wish for that latter outcome. Not caring for wether you live or die, is enough.