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EJ
07-16-06, 03:14 PM
Britain and world set for ‘hard landing’ (http://www.timesonline.co.uk/article/0,,2095-2271824,00.html)
July 16, 2006 (The Sunday Times)

FEARS are growing of a sharp slowdown in the global economy, triggered by big increases in energy prices and rising interest rates. Economists at HSBC say there is a greater risk of a “hard landing” for both the world economy and Britain.

Fears over the economic consequences of high oil prices will form the backdrop to today’s talks by G8 leaders in St Petersburg. Peter Dixon, an economist with Commerzbank, said dearer oil added to the risks. “If it’s just a temporary spike, then we’ll carry on as before,” he said. “But if this goes on for any length of time and oil continues to rise, we have a problem.”

Muhammad-Ali Zainy, a senior energy economist at the Centre for Global Energy Studies, said: “Oil could hit $80 or higher this week if the situation worsens. If a shortage of oil develops, the price will go up tremendously. It will skyrocket. We might see it hit $100 if, say, a hurricane in the US causes some destruction to facilities.”

... leading indicators of the global economy, monitored by economists at Dresdner Kleinwort, point to a US-led slowdown already in train. Figures on Friday showed weak American retail sales.

“We’re looking for the US economy to slow to 2.5% but the risks are very much on the downside,” said Ian Harwood, chief economist. “Higher oil prices can only intensify the pressure.”

AntiSpin: We're not big fans of the whole "soft-landing" and "hard landing" metaphor. From the standpoint of the impact of monetary policy on a single nation's economy, the airplane analogy is fair: pulling up and down on the throttle. But the global economy is a far more complex system, more akin to a living organism, like the body of each human that comprises it.

When very healthy, the economy can run a triathlon. When ill, such as from high oil prices, it slows to a crawl or may even go backwards. Once every few decades it is poisoned by toxins so severe that parts of it die, such as the Asian currency crisis in 1997. But the doctors -- the world's central banks and the IMF -- were closely politically aligned; the patient was quickly repaired. But sometimes, as in the 1930s, geopolitical, fiscal, military, cultural and other imbalances are so severe that the right medicine is not applied due to lack of collective will; the doctors aren't getting along. They have conflicting political agendas. The nations they represent are fighting. Weak unilateral medicine is applied separately in various countries that either makes the patient worse or does little to help him. Further, the patient was very weak to start with, suffering from a diet of household debt and fiscal mismanagement.

In the 1930s, the patient died. After wrenching global military and political re-alignments he was resurrected years later in a new form completely different from the previous one. Under severe political and economic duress, the State adopted ideas that under other circumstances would never have been considered viable. The patient stayed dead long enough that he was resurrected in hideous forms in various places, including socialism in Stalin's Soviet Union and racist nationalism of Hitler's Germany. The suffering of millions went on for decades.

This is why iTulip.com constantly warns of the risks of dependence on foreign borrowing to maintain fiscal deficits and the US economy as a whole, of reliance on credit versus savings to fund consumption, of concentration of wealth, of unfair distribution of military sacrifice and duty among economic and social classes, and of dependence by the West on dictatorships for oil. These are all antecedents for a very bad outcome for the US and the world if another period of global economic and political turmoil occurs akin to the 1930s period. Without peerless moral, economic and political leadership from the US, who knows what form a new, post crisis global economy will take?

Addendum:

"...it's a big deal when Robert Rubin changes the subject and begins to talk about income inequality as "a deeply troubling fact of American economic life" that threatens the trading system, even the stability of "capitalist, democratic society." More startling, Rubin now freely acknowledges what the American establishment for many years denied or dismissed as inconsequential--globalization's role in generating the thirty-year stagnation of US wages, squeezing middle-class families and below, while directing income growth mainly to the upper brackets. A lot of Americans already knew this. Critics of "free trade" have been saying as much for years. But when Bob Rubin says it, his words can move politicians, if not financial markets.

Rubin has launched the Hamilton Project, a policy group of like-minded economists and financiers who are developing ameliorative measures to aid the threatened workforce and, he hopes, to create a broader political constituency that will defend the trading system against popular backlash. A strategy paper Rubin co-wrote defines the core problem: "Prosperity has neither trickled down nor rippled outward. Between 1973 and 2003, real GDP per capita in the United States increased 73 percent, while real median hourly compensation rose only 13 percent."

A Storm Is Coming (http://www.alternet.org/workplace/38981/)

Pilot Fish
07-16-06, 06:19 PM
EJ,

You have a real gift for looking at complex situations and simplifying them - to the extent that they can be - for readers. Many thanks.

One minor quibble. While Stalinism was indeed hideous, I'm not comfortable calling it "socialism". In a word association exercise, you say socialism and I'm more likely to think Sweden than the Soviet Union under Stalin. At the same time, while Hitler's followers were racist and nationalist to be sure, they were also quite "corporatist". So why not just call it Facism? Too close to what's happening here at home?

Lastly, your point about the need for "peerless moral, economic and political leadership from the US" is well taken - and when considered against what we actually have instead, quite discouraging.

WDCRob
07-16-06, 09:28 PM
One wonders just what sort of altitude gain or loss we may experience tomorrow.

fogger
07-17-06, 02:47 AM
socialism, facism, whatever... who cares... it all describes larger government, more intrusive government, and basically the word "government".

We started out with very little and did very well. We now have a lot and look where we are.


the post-crisis world frightens me because it is set up for us to demand more government.


i also don't think it's an accident that we are in this crisis.

ChessMan
07-17-06, 11:50 AM
I too believe intrusive government is a bigger problem than most realize.

I believe prosperity is created by individual actions, and that the freer an individual is to act, the better off we all are. Only violent acts should be outlawed.

Jim Nickerson
07-17-06, 11:57 PM
socialism, facism, whatever... who cares... it all describes larger government, more intrusive government, and basically the word "government".

We started out with very little and did very well. We now have a lot and look where we are.

the post-crisis world frightens me because it is set up for us to demand more government.

i also don't think it's an accident that we are in this crisis.

Fogger, when I was born in 1941, the US population was 133M, when I got out of dental school in 1966 it was 196.5M, and now about 299M. The more people in society, the more complicated the society, the more there are that are undereducated, perverted, dishonest, drug-using, alcohol abusing--you name it, the more people, the more complicated are the problems with which to deal.

I contemplated what would I have done had I been the "king of China" in 1989 during the Tiananemen Square demonstration which was non-violent, but which was quashed by the communist party violently? With well over a billion people under the control of the communist party, I think I would have done as the communist leaders did--I would have stopped it all perhaps even sooner, not because the people demonstrating deserved in any way to be punished or much less killed, but because one could not let anarchy develop in a population of 1 billion.

The more people we have on this planet, then more complicated all of life becomes, and despite comparisons between how things are now and how they were in simpler times, government is not going to disappear if any sort or orderliness is to be maintained, like it or not.

Chessman you wrote

I too believe intrusive government is a bigger problem than most realize.

I believe prosperity is created by individual actions, and that the freer an individual is to act, the better off we all are. Only violent acts should be outlawed.

Yes, it is a mistake for the government to prosecute people like Ken Lay, Fastow, Ebbers, Bosky, Milkin, and all the others that have been getting nailed--so many I cannot recall, and those are just the ones caught--none of them acted violently, so why waste tax-payers' money prosecuting them and warehousing them in prisons?

I think I read where in China, about 0.5% of the population control 30% of the wealth--anyone correct with better figures. That to me is not good, nor is whatever the analogous ratio that exists in this country. The greater the weath disparities in population the greater the problems more people experience--mainly those not at the top of the wealth ladder. As long as there are people and money, there will be greed, and greed leads to a lot of what we have in America now.

Whatever conclusion one can draw, it is not that we need less government, what we need are fewer people that provoke a need for more government.

http://www.itulip.com/forums/images/buttons/quote.gif (http://www.itulip.com/forums/newreply.php?do=newreply&p=1395)

jk
07-18-06, 07:17 AM
great post, jim. these theoretical rants benefit from occasional injections of reality.

Island Girl 7
07-22-06, 09:30 AM
After giving my husband a quick synopsis of this great thread, we started thinking about what happens when the masses are feeling desperate and without hope. We felt that's when socialism, communism start to look good. As my mother in law once explained to her children when they were growing up about how Hitler was able to come to power in Germany, people started to listen to whoever they thought would put food on the table.

I'm wondering how many years away we are from the "hungry masses" scenario.

jk
07-22-06, 12:22 PM
in the 90's i used to worry about what i called "weimar russia." russia was choatic, decadent and crime ridden, increasingly impoverished and apparently ripe for a strongman leader on horseback. i guess it did kind of get one in putin, although he is no hitler. i'm sure the recovery of oil prices helped ameliorate the process.

in the u.s. the "hungry masses" scenario brought in fdr, social security and various governent make-work programs - public works at least some of which still provide benefits, others pure boondoggle. still, not the end of the world.

i've started to think of the lebanon war as the spanish civil war - the trail run for ww ii - for our generation. here we have a u.s. client state fighting against china's client's client. [china-iran-hezbollah].

i see bad, increasingly chaotic and conflict-filled times ahead. the 30's depression bracketed by world wars i and ii was the setting for the passing of leadership from the uk to the u.s. i think we are entering a dark time during which global leadership will likely pass from the u.s., most likely to china or some asian consortium. i would like to think that this country [i'm in the u.s.] could regain its bearings and its values, but on current evidence.... i just hope that somehow there isn't as much suffering as last time around.