The Americans are good (or used to be good) in the creative destruction.
So, destruct big part of the economy, without touching the political system.
Trade War with China
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The Americans are good (or used to be good) in the creative destruction.
So, destruct big part of the economy, without touching the political system.
The Chinese challenge is a political one, not an economical.
They have to redistribute the wealth from the wealthy (connected & influential ) to the average person ( no connection and no one hear his voice).
Usually every country failed there, Brazil, CCCP, Argentina, Japan, USA in 2008.
Hendrik_2000
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I guess you are too young to even know the stagflation of 80's when both inflation and unemployment jump sky high, It is not until Voelker become the fed chief that he beat the stagflation by restricting money supply
Until the 1970s, many economists believed that there was a stable inverse relationship between inflation and unemployment. They believed that was tolerable because it meant the economy was growing and would be low. Their general belief was that an increase in the demand for goods would drive up prices, which in turn would encourage firms to expand and hire additional employees. This would then create additional demand throughout the economy.
According to this theory, if the economy slowed, unemployment would rise, but inflation would fall. Therefore, to promote , a country's could increase the to drive up demand and prices without being terribly concerned about inflation. According to this theory, the growth in money supply would increase employment and promote economic growth. These beliefs were based on the school of economic thought, named after twentieth-century British economist .
In the 1970s, Keynesian economists had to reconsider their beliefs as the U.S. and other industrialized countries entered a period of . Stagflation is defined as slow economic growth occurring simultaneously with high rates of inflation. In this article, we'll examine 1970s stagflation in the U.S., analyze the Federal Reserve's (which exacerbated the problem) and discuss the in monetary policy as prescribed by that eventually brought the U.S. out of the stagflation cycle.
1970s Economy
When people think of the U.S. economy in the 1970s the following things come to mind:
- High
- Inflation
- Unemployment
Inflation was high by U.S. historical standards: inflation – that is, excluding food and fuel – reached an annual average of 12.4% in 1980. Unemployment was also high, and growth uneven; the economy was in recession in 1970 and again from 1974 to 1975.
The prevailing belief as promulgated by the media has been that high levels of inflation were the result of an oil and the resulting increase in the price of gasoline, which drove the prices of everything else higher. This is known as . According to the Keynesian economic theories prevalent at the time, inflation should have had an inverse relationship with unemployment, and a positive relationship with economic growth. Rising oil prices should have contributed to economic growth. In reality, the 1970s was an era of rising prices and rising unemployment; the periods of poor economic growth could all be explained as the result of the cost push inflation of high oil prices, but it was unexplainable according to . (See also, .)
You pay more interest if your bonds are not as attractive to buyers, not because only if there is inflation. Bonds have to compete with other things as investment including other bonds and equities. If there is supply of bonds are too large for the demand or the pool of buyers, your bonds also won't be as attractive. Russia reduced US bond holdings because they put their money into something else, which is most likely to be gold buying. In this case, gold competes with bonds as an investment. Japan reduced their US Treasury assets because they wanted to put their money in some other assets. In this case, those other assets compete with bonds. Even if China does not liquidate its US Treasuries, it can stop buying and let existing ones mature, which reduces its amount of US Treasuries (most of it are short term). By stopping buying, it reduces the demand for US Treasuries, and to make Treasuries more attractive to other buyers, you have to raise the interest rates.
Your second statement is true. But in the current case you have reduced taxes, which not only could have reduced the money supply, but reduce the ability to pay for government expenses, pay back older bonds and their interest, which would necessitate creating more bonds, which increases the supply of bonds in the face of the preceding paragraph, a situation of less buyers and less demand. That creates pressure to increase interest rates. Higher deficits lead to a higher supply of bonds to finance those deficits, which again has to be matched to the demand of the buyers and the number of buyers, and if that is not met, results in higher interests to get enough buyers for them.
Again, it showing quite well that the whole economics science is closer to the English poetry or voodoo than the the quantum mechanism.
Nixon opened up the world economy in 1971, and that created the shock. The reason why Nixon nixed the gold standard was way lower unemployment and
inflation than the result of the cancellation of gold backing.
By attaching the world economy to the US they lengthen the life of the US empire, but they created an unstable, extremely interconnected word order.
Basic system analysis.
The Keynesian theory still true, but now the economy is not only one country with one central bank, but the world with a lot of interconnected decision making.
Trump administration lead by Mike Pompeo's team is now starting a new front, a vile, distorted and deceiving narrative - propaganda war.
Speaking to reporters before Pompeo’s speech on new initiative for Asia, Brian Hook, senior policy adviser to Pompeo said this.
"I would not say that this (new economic engagement) is a strategy to counter the one belt, one road. The belt and road (initiative) is for the moment China's way of doing things. It is a made in China, made for China initiative,"
BRI a made in China, made for China initiative: US official
The Belt and Road Initiative is a multi-billion-dollar initiative launched by Chinese President Xi Jinping when he came to power in 2013. It aims to link Southeast Asia, Central Asia, the Gulf region, Africa and Europe with a network of land and sea route.
PTI
The BRI "is a made in China, made for China" initiative, a senior Trump administration official has said as he asked Beijing to uphold internationally accepted best practices and adopt an open and inclusive approach to its overseas infrastructure projects.
The Belt and Road Initiative is a multi-billion-dollar initiative launched by Chinese President Xi Jinping when he came to power in 2013. It aims to link Southeast Asia, Central Asia, the Gulf region, Africa and Europe with a network of land and sea route.
Welcoming contributions by China to regional development, Brian Hook, senior policy advisor to the Secretary of State and Director of Policy Planning, said the US just wants Beijing to adhere to high standards and to uphold areas such as transparency and rule of law and sustainable financing.
His comments came ahead of Secretary of State Mike Pompeo is set to make major policy initiative announcement for the Indo-Pacific region during the first Indo-Pacific Business Forum hosted by US Chambers of Commerce.
"I would not say that this (new economic engagement) is a strategy to counter the one belt, one road," Hook said.
"The belt and road is for the moment China's way of doing things. It is a made in China, made for China initiative," he said.
Asserting that the US and its economic engagement benefits the Indo-Pacific region, Hook said that the Trump administration believes that America's model of economic engagement is the "healthiest" for the nations in the region.
So the US encourages China to adhere to best practices and infrastructure development financing, he said.
"And this only occurs when, infrastructure in other areas are physically secure, financially viable and socially responsible.
"We encourage China to promote an uphold internationally accepted best practices and infrastructure development and financing and to adopt an open and inclusive approach to its belt and road initiative, especially these overseas infrastructure projects," Hook said.
The US, he said, has a vision of a free and open Indo Pacific, which does not exclude any nation.
The initiatives to be announced at the Forum by the Trump administration is meant to advance America's cooperation with its partners and to encourage new forms of collaboration between the United States and Indo-Pacific nation.
Speaking to reporters before Pompeo’s speech on new initiative for Asia, Brian Hook, senior policy adviser to Pompeo said this.
"I would not say that this (new economic engagement) is a strategy to counter the one belt, one road. The belt and road (initiative) is for the moment China's way of doing things. It is a made in China, made for China initiative,"
BRI a made in China, made for China initiative: US official
The Belt and Road Initiative is a multi-billion-dollar initiative launched by Chinese President Xi Jinping when he came to power in 2013. It aims to link Southeast Asia, Central Asia, the Gulf region, Africa and Europe with a network of land and sea route.
PTI
The BRI "is a made in China, made for China" initiative, a senior Trump administration official has said as he asked Beijing to uphold internationally accepted best practices and adopt an open and inclusive approach to its overseas infrastructure projects.
The Belt and Road Initiative is a multi-billion-dollar initiative launched by Chinese President Xi Jinping when he came to power in 2013. It aims to link Southeast Asia, Central Asia, the Gulf region, Africa and Europe with a network of land and sea route.
Welcoming contributions by China to regional development, Brian Hook, senior policy advisor to the Secretary of State and Director of Policy Planning, said the US just wants Beijing to adhere to high standards and to uphold areas such as transparency and rule of law and sustainable financing.
His comments came ahead of Secretary of State Mike Pompeo is set to make major policy initiative announcement for the Indo-Pacific region during the first Indo-Pacific Business Forum hosted by US Chambers of Commerce.
"I would not say that this (new economic engagement) is a strategy to counter the one belt, one road," Hook said.
"The belt and road is for the moment China's way of doing things. It is a made in China, made for China initiative," he said.
Asserting that the US and its economic engagement benefits the Indo-Pacific region, Hook said that the Trump administration believes that America's model of economic engagement is the "healthiest" for the nations in the region.
So the US encourages China to adhere to best practices and infrastructure development financing, he said.
"And this only occurs when, infrastructure in other areas are physically secure, financially viable and socially responsible.
"We encourage China to promote an uphold internationally accepted best practices and infrastructure development and financing and to adopt an open and inclusive approach to its belt and road initiative, especially these overseas infrastructure projects," Hook said.
The US, he said, has a vision of a free and open Indo Pacific, which does not exclude any nation.
The initiatives to be announced at the Forum by the Trump administration is meant to advance America's cooperation with its partners and to encourage new forms of collaboration between the United States and Indo-Pacific nation.
The dollar still needs to be backed. In this case, they moved from gold to "black gold", and created the petrodollar.
By creating the petrodollar, the dollar could not be affected by the normal laws of economics that happens with trade deficits and surplus. The result of this is that the dollar remains strong and stronger despite budget and trade deficits, which in turn continues to results in more deficits and the outpouring of wealth from the US to the rest of the world. The rest of the world became richer --- the subsequent development of many nations including China --- while the US racks up deficit and debt, while its living standards have not improved. Most US workers, at least 80%, live on paycheck to paycheck and more than 40 million Americans --- a population bigger than many countries --- cannot feed themselves without food stamps. The reason why Trump gets voted in is because living for a vast amount of Americans have not been better, failure of wealth migration, mobility and equal distribution.
The central bank gives infinite money for sound investment.
The treasury is allways a sound investment.
So, the treasury will have infinite demand.
The central bank OR the government can manipulate the interest rate paid for the treasuries by the overnight lending rate OR by the taxes.
The Yuan can be in the same position like the "petro"dollar, all that China needs to do is the next:
1. open up the Chinese bond market for foreigners
2. stop to buy treasuries
3. open up the banking system , and the transactions.
Easy, after that China will show trade deficit, and will behave like the US.
Of course the unemployment will grow, and the debt level of government/economy will increase .
The dollar is an opportunity for everyone, to get dollar by making an arbitrage on the US/foreigner salaries. It gives big power to the USA government above the trade surplus nations. And this paid by the US middle class.
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