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Thread: Dr. James K. Galbraith Interview - Janszen

  1. #21
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    Default Re: Dr. James K. Galbraith Interview - Janszen

    Quote Originally Posted by Pilot Fish
    I can't see infrastructure building as the next "bubble". While it might make sense for China, it doesn't seem to for the US unless there is also a "Manhattan Project" to reconstitute the US as a manufacturing nation again. It doesn't take much in the way of roads, bridges, railways and energy to create and distribute Treasuries, MBS and credit derivatives. And the current infrastructure doesn't seem to have been much of an impediment to getting all those Chinese goods distributed from West coast ports to every part of the country. So where is the ROI?
    California passed over 50 billion dollars in bonds for infrastructure in the most recent election. I wouldn't be surprised if another 50b was passed in the next 5-10 years, especially if we get an inflation or hyperinflation scenario.

    just adding a little hard factoid to back up the infrastructure spending thesis.

    cheers

  2. #22

    Default Re: Dr. James K. Galbraith Interview - Janszen

    Quote Originally Posted by Pilot Fish
    I can't see infrastructure building as the next "bubble". While it might make sense for China, it doesn't seem to for the US unless there is also a "Manhattan Project" to reconstitute the US as a manufacturing nation again. It doesn't take much in the way of roads, bridges, railways and energy to create and distribute Treasuries, MBS and credit derivatives. And the current infrastructure doesn't seem to have been much of an impediment to getting all those Chinese goods distributed from West coast ports to every part of the country. So where is the ROI?

    PF, the FEDS aren't looking for ROI... they are trying to hide the helicopter drop.

    The NAFTA Mexico, US, Canada superhighway is a type of Manhattan Project.. at least in terms of cost and wide distribution of the helicopter money over a wide swath. An energy crisis leading to a panicky Manhattan Project scale of building nuclear energy plants would be another one.
    Last edited by Charles Mackay; 11-29-06 at 01:42 PM.

  3. #23
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    Default Re: Dr. James K. Galbraith Interview - Janszen

    iirc new york city maintains its water mains at a frequency that adds up to a full refurbishment every 300 years. a decade or two ago we had a bridge on i-95 fall down into the water below, killing several people in cars and trucks who fell with it. there's plenty of infrastructure work to do.

    also, one of the nice things about infrastructure - highways, bridges, tunnels, water and sewer services - is that there is some in every state and every congressional district. if we can spend $250million on a "bridge to nowhere" - an island with abou 50 residents - imagine what we can spend when some is going to every district!
    Last edited by jk; 11-29-06 at 11:50 AM.

  4. #24
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    Default Re: Dr. James K. Galbraith Interview - Janszen

    Same thing in Arkansas in 2002
    Death toll from bridge collapse rises to 13. 05/28/2002

    http://www.usatoday.com/news/nation/...e-collapse.htm

    Scary.
    Jim 69 y/o

    "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

    Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

    Good judgement comes from experience; experience comes from bad judgement. Unknown.

  5. #25

    Default Re: Dr. James K. Galbraith Interview - Janszen

    This is where JG starts to get a little crazy:

    I think some of these guys are still living in the era of the gold standard when there was a mechanism that drove trade balances back to zero. Those do not exist anymore. Those kinds of views are tainted by a Bretton Woods view of the world. That discipline disappeared in the early 1980s. Perhaps the most delayed realization in the history of economics is that inflation disappeared in 1983. The Fed still operates like inflation is on some kind of hair-trigger mechanism, that if the Fed doesn't remain vigilant—always with a tightening bias—that the economy will fall into an inflationary cycle that will be very expensive to transition back out of. They behave as if the economy is dangerously unstable with respect to inflation, that the economy is ready to enter into a 1970s-style inflationary spiral at any time. But even during extended periods of loose monetary policy, inflation has remained tame. It hasn't happened and won't. The risk went away with the rise of the U.S. trade deficits.

    Of course, anyone who has looked beyond the BLS's dubious data knows that inflation has been quite present since 1983, to the tune of at least 5% a year (http://www.itulip.com/forums/showthread.php?t=482). 1983 also marks the year home prices were replaced with OER in the synthesized CPI statistics: a convenient maneuver if one wants to make inflation appear to be deep-sixed, in favor of asset bubbles which are traditionally but arbitrarily not counted as "inflation".

    He also says:

    That gets us back to the question of what event will cause a new U.S., European, and Japanese multilateral reserve system to form. Reforming the dollar reserve system into a collective reserve system with the smallest disruption of trade requires, for example, that the European Union (EU) create a euro bond market that is as liquid and transparent as the U.S. bond market. Today, there is no euro bond market at all, only national bonds issued in euros. Creating such a market is no mean feat. Further, the EU will need to run a current account deficit. Given the retrograde and reactionary crew in charge in Europe today, that seems highly unlikely. Transition to a new system usually requires a crisis, but a crisis is not in the interest of any of the players, and the source of the spark of a real fire is not obvious.

    That there is no Euro bond market, and that it would be difficult to introduce one, is a keen observation. But there's an alternative to replicating the US global-reserve-currency-and-deficits system: one could simply return to the old system of settling trade accounts using something with universal value (like gold).

    This may yet emerge, especially if JG is right in that a global reserve system on the scale of the dollar system will likely not exist for a while after that system collapses (or otherwise wanes). I think it is possible we may never see such a system again.

    Ultimately, there is no way to get around not producing enough real value for world trade. All the dollar debt system has done is time-shift the US's lack of value into future payback and other forms of calamity.

  6. #26
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    Default Re: Dr. James K. Galbraith Interview - Janszen

    I always try to remember that there have been 57 occurances of the US actually issuing real money into the economy and at any time the US cares to they can do so again. None of this having anything to do with gold, one of the more recent times of issuing real money was I believe 1971 when Nixon has the Treasury issue the $2 bill, using it as payroll direct to the military.

    Inflation is a wage issue to the Fed and Dr. Galbraith is correct this has not been a problem since 1980, I think there's a income growth chart on this forum that shows that pretty clearly. The bottom 80% of the income earners in this country have experienced no inflation in their pay since 1979.

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