Anti-Globalization Will "Eat Our Lunch"

I realize it's a little bizarre to quote yourself, but I wanted to highlight this link showing just how well Brazil's central bank has run things lately:

http://seekingalpha.com/article/80921-a-global-game-of-economic-chicken

Here's a thought: Are too many countries playing a kind of economic chicken? Their refusal to control stimulative policies, despite increasing inflation and runaway oil prices, has them in a highly risky position.

Many countries are already experiencing double-digit inflation -- Russia, Turkey, South Africa, India, Indonesia, and the Philippines -- despite recent interest rate increases.


These guys are falling behind the curve," says Edwin Gutierrez, an emerging-market bond portfolio manager at Aberdeen Asset Management in London, in the hopes that the surge in food and energy prices will prove short-lived. "It's a very dangerous game," says Mr. Gutierrez.


One of the few exceptions? Brazil:


...There, the central bank moved quickly to raise interest rates despite comparatively mild price pressures. The country suffered enormous inflation in the late 1980s and early 1990s before getting the problem under control. "Brazil knows better than anyone what happens with hyperinflation," says Terrence Gray, who manages $3 billion in emerging-market stocks at DWS Scudder, an arm of Deutsche Bank.

 

As an fyi, they are finally coming up with documentation that globalization is saving our butts:

http://www.ft.com/cms/s/0/d87f2158-46a4-11dd-876a-0000779fd2ac.html?nclick_check=1

Trade has saved America from recession
By Fred Bergsten

Published: June 30 2008 17:51 | Last updated: June 30 2008 17:51

The global economy has clearly decoupled from the US and world growth remains close to 4 per cent in spite of the absence of any increases in domestic US demand. Continued expansion abroad, especially in the emerging market economies, has in fact cushioned the slowdown and so far prevented recession in the US. Hence we are also experiencing the first episode in history of reverse coupling, in which the rest of the world pulls the US forward rather than the opposite.

The most striking feature of the current global economic situation is that the US is the only major country that is seriously contemplating recession and that has adopted aggressive expansionary policies to combat that risk. Most other countries are more worried about inflation than slower growth. Many are experiencing reduced growth, to be sure, but part of their slowing is a natural cyclical reaction to four years of near-record global expansion, at more than 4½ per cent from 2004 to 2007, and the need to focus on price stability. The additional losses because of the housing and credit crises in the US amount only to a couple of 10ths of 1 per cent in most areas, including Europe and Japan. It will reach a full percentage point or more only in the fastest growers such as China, where expansion will remain near 10 per cent. Many of these cuts are in fact welcome as their central banks are tightening monetary policy rather than easing it.

Global growth is thus still likely to approach 4 per cent in both 2008 and 2009 in spite of the sharp slowdown in its largest single economy. The emerging market economies, which now account for half of world output calculated at purchasing power parity exchange rates by the International Monetary Fund, are still expanding at 6-7 per cent. Even the nearest neighbours of the US – Canada and Mexico – are nowhere near recession and have altered their policies much less forcefully. In spite of the international transmission of substantial financial as well as real economic shocks from the US, the traditional relationship where “the world catches cold when the US sneezes” no longer holds.

The second striking feature is the reverse coupling of the global economy. Over the past two quarters, the US has recorded positive growth at an annual rate of 0.8 per cent (in spite of the pronouncements of many observers that recession had already set in). Its “net exports of goods and services”, the gross domestic product equivalent of the current account balance, have strengthened at an annual rate of almost 1 per cent of GDP during that period. Hence the totality of recent US expansion has been provided by the strengthening of its trade balance. Domestic demand has been falling but the US has been saved from recession by the rest of the world.

The improved US trade performance of the past two years is due partly to the substantial, if lagged, restoration of the country’s price competitiveness as the dollar declined by a trade-weighted average of 25-30 per cent since early 2002, reversing most of its excessive run-up during the previous seven years that produced unsustainable current account deficits exceeding 6 per cent of GDP. Equally important, however, is the continued robust growth of the world economy. Every percentage point by which the rest of the world expands domestic demand faster than internal growth in the US produces gains of about $50bn (€32bn, £25bn) for the US external balance. Weighted by US exports, foreign growth exceeded US growth by about 2 percentage points in 2007 and will do so by an average of about 1.5 points this year and next as decoupling persists. Taken together, these currency and comparative growth factors have already improved the real US trade balance, and hence GDP, by almost $150bn since 2006, with gains of another $150bn or so likely through 2009. (The nominal US trade and current account deficits will not improve as much because of the sharp rise in the price of oil imports.)

The Organisation for Economic Co-operation and Development’s new Economic Outlook projects that more than 80 per cent of all US growth in 2008-09 will derive from continued strengthening of its external position. Exports have been climbing at an annual rate of about 8 per cent, at least six times as fast as imports. Unless domestic demand takes an unexpected further fall in the quarters ahead, reverse coupling of the global economy will thus have prevented the US recession that was so widely predicted and feared. Presidential candidates and members of Congress who believe that the US is losing from globalisation should take note of this export-led growth and its creation of excellent new jobs, and recognise the folly of backing away from international trade at a time when it is providing critical gains for their country.

These international macroeconomic developments also provide another telling indication of the shifts in global economic power. As noted, the emerging market economies make up about half the world economy, so their growth of 6-7 per cent assures reasonably strong world output increases even if there were no expansion at all in the rich countries. China alone accounts for 10 per cent of the global total, so its annual expansion of 10 per cent generates a full percentage point of world growth all by itself. The steadily rising diversification of global economic leadership is paying huge dividends to all its participants, most dramatically during this episode to the US as export-led growth saves it from at least the worst ravages of its housing bubble and associated policy errors.

 

I see Hank Paulson has a new penname.

 

LOL.
There was a funny piece on MadTV about VCR repairman. At least I thought it was funny but now when you opened my mind I can see clearly what a bunch of selfish assholes are all the people who bought DVD players.

Lets close the border and close all Toyota, Honda, Mercedes, BMW plants on U.S. soil. It will make us all much better off. Genial idea.

 

About those families in Michigan. I care as much about them as they care about me genius.

 

Hank Paulson, or any other government official, has little to do with globalization and I think you know that. And thank God they don't. Fortunately, globalization is an animal much too large for any government official to try to tame and destroy...

 

The inference was the "strong dollar policy" statements made by Hank while the dollar continually crashes. I have about as much faith in that "globalization is good for the US" article as I have in Hank's lies about a strong dollar policy.

 

Screw the idiot who wants to make 65K a year sitting in some job bank with a broom. Its the greed of the uaw that will assure cars never be built here again.

 

Well, in spite of the insult, I'll try to dialogue. My opinion is that the dollar was long overinflated. In fact, I think it still is. The US should be an exporting powerhouse, but it couldn't be because our dollar was being propped up by various factors. Right now we still only export a relatively small fraction of our GDP compared to most other countries with decent sized and run economies.

We have GOT to get our exports up and one of the keys is a reasonable level for the dollar. The rest of the world's economy is expanding rapidly and we MUST sell to the them and one of the keys is a falling dollar. A falling dollar levels, at least in large part, the playing field.

It will be a somewhat bumpy transition but will be good for us in the end...

 

HOGWASH!

The $USD is weak because:

1. We overconsume... on credit... we borrow from everybody with virtually no chance of ever paying back (at least not "in kind").

2. Our labor expects to make $18+ per hour, while workers in Chindia make <$1 per hour. We can't be net exporters to them due to labor cost differential.

It cannot be "everybody's exports are big winners"... somebody has to consume the goods.

There is competition for exports... we are losing the fight.

We did it to ourselves through outsourcing and spendthrift ways. America will NEVER again be the economic powerhouse leader... that has shifted to Asia.. PERMANENTLY. Get used to the idea.