American Economics Thread

[plawolf]

I think the core of American and western economic and social chaos and general national decline can be attributed to one main source - the stock market.

The stock market works great as a funding vehicle to help aggregate large numbers of people with a little bit of money to invest and allow a company to be formed to use that capital to make a valuable contribution to the economy and country and make a profit. They can then pay an interest (dividends) to the investors (shareholders) and so everyone benefits.

The problem with the modern stock market is twofold.

The first is that it is no longer a means to raise capital for specific products/investments, and instead has become a great deal like a giant ponzy scheme where stock pricing is increasingly devorced from the real life performance of the company in question. Almost all recent major listings have valued companies at ludicrously high values that could not possibly be backed up by anything resembling real life assets, profits or any thing tangible and measurable.

When you have that kind of fundamental disconnect, bubbles form. The happy times keep flowing so long as new suckers get sucked in to buy the stocks at ever more inflated prices. But the problem is that stock price is backed up only by greed and wishful thinking.

As soon as market confidence in the continued rise of the stock price wanes, as it always inevitably does, the stock price crash and vast amounts of wealth is wiped out.

Only that wealth isn't really wiped out, it's redistributed, usually to the richest few who has the scale and reputation to impact general market perceptions.

They are the ones who buy into a stock first, when the prices are at rock bottom, and then hike up the price, sucking in small fry investors. Then, once the share price hits a certain predetermined point, the big whales sell off (probably also taking a short position on the stock) rapidly. By the time the rest of the market catch on to what's going on, the big boys have already cashed out, and panic starts to seep in, and before long the share price is in free fall.

When they do that, it's not the 'house' who looses, it's generally real people who loose lifetime savings or retirement funds, so don't anyone give me that 'victimless crime BS line'.

The other problem is linked to the devorced of share value to the real world performance of a company in that the vast overvalued stock price gives companies way more cash than they need or could effectively put to use.

As a result, executative compensation goes to silly town, and you have vast amounts of money raised from stock listings going almost directly into the personal bank accounts of a few select people.

That money isn't being used to create more wealth. Instead it massively distorts the market by giving a few individuals a massively disproportionate share of the available wealth in the economy.

In a free market economy, spending power is also a form of voting power. So long as there is enough money on offer, someone will want to carve out a niche to tempt people to part with their money and tap that wealth.

With wealth being badly concentrated in the hands of a few, the spending power of those ultra wealthy few can distort the cost-benefit calculations of the entire national, and international economic equation, where significant and disproportionate amounts of an economy's and potentially, the world's resources are increasing being devoted to meet the needs of the fewer and fewer.

A third, less direct, but potentially more damaging impact of the stock market ponzy scheme is that the entire rewards system of the economy is fundamentally screwed up.

The stock market, and their ancillary support professions like legal, accounting and advertising, are pretty much hoovering up the best and brightest people a country creates.

People who could have been Nobel winning scientists or revolutionary engineers are instead pulled from the scientific and engineering world's by 5,6 or 7 figure salaries and bonuses.

When much if not most of the nation's finest minds are devoted to wealth redistribution instead of creation, not only is the aggregate national economic pie not growing as fast as it could or should, the average person is going to end up with an ever shrinking share of that pie.

The western stock market needs a comprehensive and fundamental restructuring to return it to its original core mission or helping advance general economic growth rather than being focused mainly with concentrating wealth for the sole purpose of getting as much wealth in the pockets of a few as possible.

So long as the stock market is allowed to continue operating as it has been and still is, the current woes the west is facing, stagnant economic growth and ever gaping wealth inequality, will continue to grow until a tipping point is reach. Every single time in history where that has happened, it ended badly for everyone involved.

 

[Equation]

I think the core of American and western economic and social chaos and general national decline can be attributed to one main source - the stock market..

I say it's more to do with the 1%ers elitist still trying to dictate the world that's changing too fast for them to keep up with maintaining that status quo that benefitted them for over 7 decades.

 

[plawolf]

I say it's more to do with the 1%ers elitist still trying to dictate the world that's changing too fast for them to keep up with maintaining that status quo that benefitted them for over 7 decades.

The wealth of the top 1% has increased massively both in absolute terms, and also as a percentage of total national wealth.

As such, I doubt the 1%ers are fretting too much about the pace of change or trying to slow or stop it, since much of that change appears to benefit them disproportionally, while at the same time the lot of the average middle class has worsened markedly.

Instead, I think its far more likely the 1%ers are actively driving and steering a lot of the changes in recent times to best benefit themselves.

The massive and relentless drive to deregulate the stock markets, absolute hostility towards government corrective action in the market place and the rise of the religion of the infallible 'market forces' are just some notable examples where change has helped to make it far easier for the 1%ers to effectively rig the game in their favour and make sure there isn't anyone who can stop them.

The massive concentration of media power is also a very dangerous and worrying recent development, where 6 major corporations controlled 90% of media in America way back in 2012, that share may well have increased in the years since.

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[Yvrch]

I was looking at the chart below this morning showing income growth in US. It's a long way down since Reagan years.



Below is a bit old but you got the idea.

 

[PanAsian]

The TPP is purely a product of corporate and large investor special interest groups which will dramatically increase the wealth and inequality gap in the US, further decimate American workers' livelihoods, and goes against everything that the US supposedly values in its purportedly democratic political system.

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Trans-Pacific Partnership under fire from both right and left in America
BY DAVID DEVOSS on APRIL 18, 2016 in ASIA TIMES NEWS & FEATURES, CHINA, INDONESIA, JAPAN, KOREAS, SOUTHEAST ASIA

LOS ANGELES–Foreign ministers spend most of their time persuading other countries to do their bidding. But last week US Secretary of State John Kerry flew to Los Angeles to convince a decidedly American audience to support the Trans Pacific Partnership, the newly controversial trade pact that would link the US, Mexico, Chile, Peru and Canada with Japan, Malaysia, Singapore, Vietnam, Brunei, Australia and New Zealand in a tariff-free zone accounting for nearly 40% of global trade.

The agreement “establishes strong, balanced rules to protect intellectual property and the 40 million Americans working in creative and digital industries — which I don’t have to tell you is a huge issue for California film studios and Silicon Valley,” Kerry proclaimed to the pro-business Pacific Council on International Policy. “In the 21st century you cannot only sell to yourself and expect to grow and survive, let along compete and thrive.”

There’s no question TPP will help certain US industries. No longer will cotton exports face a 10% tariff in Vietnam. Japan will drop its 40% tariff on American frozen beef and 75% tariff on US -made automobiles. Markets for almonds, walnuts, and pistachios should grow dramatically once 30% tariffs are eliminated in Southeast Asia.

TPP certainly is good for Asia. Japan is an enthusiastic proponent as is Vietnam, which stands to gain tariff-free access to North America for apparel, footwear and textiles. According to recent polls, 89% of Vietnamese support TPP, if only because they believe increased US trade will counter China’s economic leverage. “TPP negotiations are done; Vietnam enters a new playground,” read a recent front page headline in Tuoi Tre, one of Vietnam’s largest selling newspapers.

NAFTA on steroids?

The benefits of globalization may seem obvious to a corporate CEO and a price-conscious shopper seeking to buy cheap blue jeans or summer fruit in the middle of winter. But 2016 is an election year and the 5,544-page TPP agreement, negotiated in secret from 2010 to 2015, has landed with a thud. All five candidates for President – Democrats and Republicans alike – have denounced the proposed trade agreement. Democrat Bernie Sanders says the TPP will cost America’s middle class 448,000 jobs. Republicans Donald Trump and Ted Cruz are equally outspoken in their criticism, as is Hillary Clinton, who was a big fan when she was Secretary of State and the pact was first proposed.

Politicians’ beliefs “evolve,” of course, and there’s a chance the new president will embrace the agreement following the inauguration next January. But for the moment TPP in the US is being denounced as “NAFTA on steroids.”

The 1994 North American Free Trade Agreement adopted during President Bill Clinton’s first term was supposed to bring the US all the benefits of a globalized economy. Thousands of manufacturing jobs would go to Mexico, the government admitted, but in return US workers would receive training for many more higher wage, higher skilled positions. The Peterson Institute for International Economics in Washington, DC, named after Richard Nixon’s Secretary of Commerce, predicted NAFTA would create 200,000 American jobs. Instead it destroyed 845,000 manufacturing jobs that were replaced – if at all – by minimum wage positions in service industries.

NAFTA may have weakened the US economy, but China’s entry into the WTO devastated US manufacturing eliminating the blue collar jobs that were vital to many parts of the country. Economist Gordon Hanson of the University of California, San Diego, estimates the US has lost two million to 2.4 million jobs since 2000 because of more affordable imports from Beijing. Although US manufacturing has recovered somewhat, polling suggest that America’s faith in globalization has been declining over the past seven years.

Americans are not the only ones unhappy with globalization. Economists Gary Hufbauer and Eujin Jung of the Peterson Institute cite more than 3,500 protectionist regulations — “microprotections” — which have been introduced quietly around the world since 2008.

Globalization blues

China’s rise has confounded classical economic models that assume workers who lose employment in one industry eventually will find work in another. “China’s advance has toppled much of the empirical wisdom about the impact of trade on labor markets,” economists David Autor, David Dorn and Gordon Hanson noted in a paper published by the National Bureau of Economic Research. They believe China is responsible for the loss of 20% of America’s manufacturing jobs since 2000. Globalization they and many other economists conclude mainly produces a huge transfer of wealth from labor to corporate investors and the rich.

Barack Obama and John Kerry both insist that TPP will increase jobs while continuing to keep prices low. “TPP will be a clear win for American workers, American businesses and communities,” says Kerry. “These trade agreements are at the center of defending our strategic interests, deepening our diplomatic relationships, strengthening our national security and reinforcing our leadership across the globe.”

Washington’s ratification of TPP will underscore America’s strategic commitment to trading partners concerned about growing Chinese hegemony. But there is little evidence TPP will boost economies. According to the World Bank, the average tariff in developing and industrialized countries alike fell from 24% in 1990 to 8% in 2010. Tariffs can’t fall much more since most those remaining protect agriculture. In truth, 90% of US exports to TPP countries already are duty free.

The Obama administration is attempting to burnish globalization’s tarnished reputation with a wave of publicity. Recently, it announced that TPP would eliminate 18,000 tariffs currently levied by the 11 other countries in the deal. But research by Public Citizen found that most of the tariffs, like Brunei’s tariff on ski boots, are inconsequential. Yes, American exporters no longer would have to worry about Malaysia’s shark fin tariffs, Vietnam’s whale meat tariffs and Japan’s ivory tariffs. But the US does not trade in these products. Says Dean Baker, co-director of the Center for Economic and Policy Research: “So when the proponents of the TPP tout the 18,000 tariffs is this because they have no clue what they are talking about, or are they deliberately trying to deceive the public?”

TPP enriches a few multinationals

US Congressmen who wish to read the TPP agreements must do so alone in a locked room and are not permitted to take notes. Those who have done so say only two of the 26 chapters cover traditional trade matters. The bulk of the document, which must be accepted or rejected without any modification, consists of new rights and privileges for multinational corporations (especially international banks and pharmaceutical companies) and irrevocable constraints on government regulation. The document makes it easier for companies to move jobs offshore, take control of natural resources and prevent the regulation of financial services.

Government contracts that give preference to Buy America or Buy Local procurement would be banned. TPP, which has no expiration date, only could be changed if all 12 nations agree. Conventional courts cannot adjudicate individual trade disputes in the countries where they occur. All disagreements must be decided by “Investor State Dispute Resolution” conducted by TPP Tribunals staffed by lawyers from the private sector who are empowered to force governments to pay unlimited fines to corporations that believe their profits are in jeopardy.

Plotted in secret, the TPP is a corporate coup d’état benefitting the drug, energy, banking and agribusiness industries. It was supposed to take effect this year but the process was delayed when Australia refused to submit to the corporate court system and New Zealand objected to pharmaceutical companies determining the price of drugs sold in New Zealand. All countries denounced America’s demand that regulations on financial speculation be eliminated and drug patent monopolies be extended so that the introduction of generic equivalents could be postponed for years.

Asia Times contributor David DeVoss lives in Los Angeles where he manages the East-West News Service (

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)

(Copyright 2016 Asia Times Holdings Limited, a duly registered Hong Kong company. All rights reserved. Please contact us about sales, syndication and republishing.)

 

[Equation]

Washington’s ratification of TPP will underscore America’s strategic commitment to trading partners concerned about growing Chinese hegemony. But there is little evidence TPP will boost economies. According to the World Bank, the average tariff in developing and industrialized countries alike fell from 24% in 1990 to 8% in 2010. Tariffs can’t fall much more since most those remaining protect agriculture. In truth, 90% of US exports to TPP countries already are duty free.

If this is true than how come President Obama's administration did not think this through?

 

[Yvrch]

TPP is a stepping stone to a much bigger FTA encompassing all APEC countries, which has another alphabet soup acronym. If they can do it , that'd be a really impressive feat. Even this smaller TPP is scary enough to spook pundits from both left and right equally, one has to wonder what a monster their end game FTA would be.

 

[AssassinsMace]

Anybody hear about Trump's plan if he's President to intentionally default on US debt and then renegotiate paying a lower price. Trump has said all he learns about the world is from the news media. I guess because the news always reports how foreign countries own the US through buying America debt, Trump thinks this will go great among Americans that he's doing this to other countries. Yeah but the majority of US debt is actually owned by average Americans. So Trump would actually rob Americans of a lot of their money.

Regarding TPP...

TPP is all about China. Obama wants to take away a power the US has enjoyed exercising in the world being the number one consumer market in the world. China will be in the future the number one consumer market far more than the US will ever have been. That translates to power. Americans like to believe countries and people around the world are naturally attracted to the US. No it's as simple as if they can make money off of Americans. Google's didn't like how China can tell what it can or cannot do in China. China prevents Hollywood from taking over the Chinese box office like Hollywood has done in other foreign box offices. TPP will nullify this power because a secret non-democratic committee gets to judge and rewrite laws of member countries overriding member countries' own sovereignty. It's believed that this committee is made up of representatives of private corporations... that all want unlimited access to China. If this secret committee is filled with corporate representatives, they get to shape emerging economies in their favor. Conflict of interest doesn't matter. How many global corporations does an emerging economy have? Baidu and other Chinese internet companies weren't as big when Google started being a trouble maker in China. Google wanted unrestricted access because the belief was they were bigger and naturally would snuff out any Chinese upstarts and they would dominate China. Same logic with Hollywood. Hollywood wanted to push their movies and actors so that Chinese audiences would only have a taste for them and no one else. That's why you heard Hollywood complaining why they had to include Chinese actors to appease Chinese audiences. One can argue the reverse can happen but Hollywood has successfully already turned American audiences from liking foreign movies. If China was a member of TPP and tried to do now what Hollywood was successful at doing, under the rules of TPP the US can sue for unexpected losses due to outside interference. So if Hollywood expected one of their movies to make $300 million in the Chinese box office and made only $20 million, Hollywood will be able to sue for the difference. Yeah of course right now TPP will do nothing to raise it's members' economies as reported because it has always been about getting unlimited access to China. I bet that's how they sold it to countries on accepting a non-democratic committee ruling over a countries' own sovereignty and laws.

 

[Equation]

When China

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in Hong Kong 10 days ago, it got only modest mention in the news reports. Keeping the nuclear-powered supercarrier and its strike group out of a port where American ships have docked for decades is a calculated signal of worsening relations between Washington and Beijing—passive aggression in very pure form.

Given that Hong Kong is among the busiest commercial ports in Asia, we’re on notice now. Every American with an interest in our dense, multisided trade and investment relationships with China should start paying close attention to the mounting tensions between Beijing and Washington.

The first thing you see is this: America’s economic ties with China have been out of whack with national security policy since Deng Xiaoping’s reforms began opening China in the early 1980s. Business booms, while military and geopolitical competition intensifies.

This isn’t going to do any longer. There is an emerging danger that rivalry for strategic influence in the western Pacific will damage trade and investment relations.

Beijing was characteristically subtle but perfectly clear when asked why it refused theStennisport privileges. The foreign ministry told

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, Hong Kong’s leading English-language daily, that port calls were approved “on a case by case basis in accordance with sovereignty principles and specific circumstances.” A ministry official in Hong Kong then stated the visit was “not convenient.”

The “specific circumstances” were lost on no one. Two weeks earlier Defense Secretary Ashton Carter

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as it passed through the South China Sea and declared, “The United States intends to continue to play a role out here that it has for seven decades.”


A week later the U.S. Pacific Command sent six heavily armed A-10 Thunderbolts on flights near the Scarborough Shoal, which is among the disputed land formations in the South China Sea over which Beijing claims sovereignty.

Allowing or refusing port calls has long featured in Asia’s diplomatic sign language. When ties between Beijing and Tokyo temporarily warmed in 2008, a

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for the first time since World War II.

Keeping theStennisout of Hong Kong harbor was a big, worrisome move, laden with symbolism in the Chinese fashion. There are three implications.

One, choosing Hong Kong as the venue to respond to Carter’s assertion of U.S. primacy in the Pacific signals that China views its relations with the U.S. as unitary. While trade and investment are mutually beneficial, economic ties are not immune to fallout from sharpening political and diplomatic friction.

Two, China will go to the wall as it asserts its influence in the western Pacific. Regardless of what may be at stake, no challenge from the U.S. has a prayer of forcing Beijing to accept the 70-year status quo Carter indelicately referenced aboard theStennis.


Finally, Hong Kong’s status as a special administrative region in the Sino-British treaty that reestablished Chinese sovereignty in 1997 does not make the territory some kind of protected zone. The fact that U.S. warships are common sights along Victoria Harbor only magnifies the sharp edge of Beijing’s gesture.

Good sinologists would understand these things. There’s a lot of history and culture and 175 years of wounded pride in China’s drive to “stand up,” as Mao famously put it. This has to be reckoned with.

But defense secretaries and fleet commanders such as

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, trained in operational expertise but rarely diplomacy, do not generally make good sinologists. This is the root reason Washington’s China policies are so discombobulated.

Beijing hasn’t tagged a single iPhone or fashion accessory as an instrument of retaliation as strategic and geopolitical tensions mount. No one’s suggesting this. But there’s less room every day for complacency on this score in the American business and investment communities. Sooner or later, both sides of the relationship are bound to intersect.

The State Department once boasted an honorable tradition of diplomats trained in Asian languages, cultures, and histories. Some of these people were scapegoats during the “Who lost China?” arguments after the 1949 revolution, and the Pentagon gradually eclipsed State in the policy-planning space during the Cold War. By the Reagan years the process was more or less complete.

It’s time to revive the tradition. We need big-picture diplomats capable of integrating politics, economics and national security questions—men and women trained to understand China’s perspective even if they entertain no sympathy for it.

Whether we like it or not, China has a place in maintaining security in its neighborhood. The sooner Washington accepts that seven decades of unchallenged primacy are over, the easier it will be to continue exercising a very considerable degree of influence, as others in the region clearly welcome.

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Yep, enough said. This is what I mean by "changing of the times".

 

[AssassinsMace]

Intel had to cut 12000 jobs in part because Obama thought he could stop China.

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