Gloom, Doom, or Boom? Finance and Economics

Now, what news on the Rialto?

Gloom, Doom, or Boom? Finance and Economics

Postby admin » Fri Dec 16, 2011 6:37 am

Hutchinson | A credit-crunch stuffing

Two successive articles in the Financial Times last week gave warning of a new problem approaching: they spoke of expected 25% declines in financing volume for both commodities finance and aircraft purchases. In addition, the tottering euro-zone provides another route by which a credit crunch may be unleashed on the world. In today's distorted world financial system, a combination of over-loose monetary policy, intractable budget deficits and tightening regulation has made a crunch more or less inevitable. It's worth looking at who the winners and losers might be.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Typhoon » Mon Dec 26, 2011 5:34 pm

China Daily | Provincial borrowers defer loan payments

BEIJING - China's biggest provincial borrowers are deferring payment on their loans just two months after the country's regulator said some local government companies would be allowed to do so.

Hunan Provincial Expressway Construction Group is delaying payment on 3.11 billion yuan ($490.5 million) in interest, documents governing the securities show this month. Guangdong Provincial Communications Group Co, the second-largest debtor, is following suit. So are two others among the biggest 11 debtors, for a total of 30.16 billion yuan, according to bond prospectuses from 55 local authorities that have raised money in capital markets since the beginning of November.

As local governments delay payments for projects commissioned as part of the stimulus to ward off recession in 2009, less money is available for bank lending even as China is taking steps to inject more into the economy. The central bank has held interest rates at 6.56 percent since July to boost the economy, while the US Federal Reserve and the Bank of Japan have kept benchmark rates near zero since 2008.

"When companies start to roll over debt they're not retiring debt, and banks aren't retrieving their capital, so you're crowding out new lending," Patrick Chovanec, a professor at Tsinghua University in Beijing, said in a Dec 13 interview. "This is a problem that's going to start to bite next year."

Local governments had 10.7 trillion yuan in debt at the end of last year, 79 percent due to banks, according to the country's first audit released in June. So-called local financing vehicles that meet collateral requirements can have a one-time extension on their loans, Zhou Mubing, vice-chairman of the China Banking Regulatory Commission, said at a conference on Oct 24 organized by the Internet portal Sina.com.cn, according to a transcript of his comments on the website.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Zack Morris » Mon Dec 26, 2011 8:23 pm

Where's Ethan Jin when we need him?
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Typhoon » Mon Dec 26, 2011 8:34 pm

Zack Morris wrote:Where's Ethan Jin when we need him?


Indeed. Or Alph.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Jnalum Persicum » Tue Dec 27, 2011 5:24 am

.

one more nail in Dollar's coffin


Currency Agreement for Japan and China


.

Currency Agreement for Japan and China

By EDWARD WONG and NATASHA SINGER

BEIJING — China and Japan have agreed to start direct trading of their currencies, officials announced during a visit here on Monday by Japan’s prime minister, Yoshihiko Noda.

Japan will also apply to buy Chinese bonds next year, allowing it to accumulate more renminbi in its foreign-exchange reserves. The moves were among several that emerged from Mr. Noda’s meetings with President Hu Jintao, which focused on how the two nations could work together to maintain peace on the Korean peninsula.

China is the world’s second-largest economy while Japan is the third largest, and the currency agreement is part of a move away from using dollars. Chinese officials have said recently they would like to broaden the global use of the renminbi, also known as the yuan, and want to see more countries move away from relying on dollars as the worldwide currency.

They hold the world’s largest foreign-currency reserves — China has about $3.2 trillion, while Japan holds $1.3 trillion — and any moves to reconstitute the makeup of those holdings could change the global currency map.

“Chinese officials have made it clear that they believe the international economy is too heavily dominated by the dollar,” said Charles A. Kupchan, a professor of international affairs at Georgetown University and a senior fellow at the Council on Foreign Relations. “They believe, as part of China’s rise, that the international system should move to a more balanced structure.”

Because the renminbi is not fully convertible, however, it will not compete soon as a global reserve currency, he said. Still, the agreement “could be a baby step in that direction,” Professor Kupchan said. Experts in global trade said China and Japan had both practical and political motives for the pact. Neither side has announced a timetable, agreeing only that officials will discuss possible measures.

Given the proximity of China and Japan, along with the likelihood that the two countries will serve as each other’s biggest trading partners over the next century, it makes sense for them to trade directly without using dollars, said Jeffrey H. Bergstrand, a professor of finance at Mendoza College of Business at the University of Notre Dame.

And the more China loosens its grip on the renminbi, helping to correct what by some measures is a currency undervalued by almost 40 percent against the dollar and 45 percent against the yen, the greater its purchasing power will become, allowing it to import more. This is especially important for Japan, which has been reeling as the dollar has weakened, making American consumers unable to spend as much on Japanese electronics and cars as they used to.

From a practical standpoint, both China and Japan want to reduce the transaction costs of direct bilateral trade and the risks of volatility in exchange rates, said Professor Kupchan.

“With markets looking askance at both the euro and the U.S. dollar, investors in both China and Japan would find it attractive to trade directly,” Professor Kupchan said. On a more political level, he said, the pact also represents an important step in improving bilateral ties between Beijing and Tokyo.

As for the long-term ramifications for the United States, analysts said it was difficult to predict before the pact took effect.

In the shorter term, the agreement is likely to lead to continued weakening of the dollar against the renminbi, Professor Bergstrand said. That should help the United States trade deficit with China, he said, increasing American imports while weakening imports from China. On the other hand, he said, the Sino-Japanese currency agreement is likely to diminish the dominance of the dollar in global trade.

“The Chinese yuan will increasingly play an important role in Asia,” he said. “It does mean that the U.S. dollar will be less important as a currency for transactions in Pacific rim trade.”

Professor Bergstrand compared the role of the dollar on the world stage now to the waning of the British pound 100 years ago as the most prominent currency for international transactions.

For more than a decade, critics have said the government has kept the value of its currency artificially low, giving Chinese exporters an unfair advantage over American counterparts by making Chinese goods cheaper overseas. Washington has pushed for a revaluation. Beginning in June 2010, facing increased inflation, China began to let its currency float gradually up.

Professor Kupchan of Georgetown said the currency pact is more symbolic than significant right now for the United States. “This pact hardly unseats the dollar as the world’s dominant currency,” he said. “But it is a clear sign that China is headed in the direction of internationalizing the renminbi.”

.



no need of Alph or Ethan Jin to tell us this ain't good

hallo Rhubarb (Goldman Sachs), you still short America (U$) ? ?


.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Ammianus » Tue Dec 27, 2011 1:48 pm

Zack Morris wrote:Where's Ethan Jin when we need him?



Hopefully stuffing his face with lavender sauced crow sandwiches

I'll be willing to pay the topmost $$$$$$ on seeing the reaction of his ass as China further unravels and the CCP further implodes
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Zack Morris » Wed Dec 28, 2011 12:01 am

Jnalum Persicum wrote:.
hallo Rhubarb (Goldman Sachs), you still short America (U$) ? ?
.


Maybe you don't realize this but "Rhubarb" is betting big on Asia. He's had fancy offices in luxury high-rises in Roppongi and Central for a long, long time now.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Zack Morris » Wed Dec 28, 2011 12:05 am

Ammianus wrote:I'll be willing to pay the topmost $$$$$$ on seeing the reaction of his ass as China further unravels and the CCP further implodes


Would the spine of his antique 19th century thesaurus be able to endure those angry little fingers?
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby AzariLoveIran » Wed Dec 28, 2011 5:21 am

.


This not about Iran .. this about Oil prices and world economy


20% of global Oil supply


.

Iran Threatens to Block Oil Shipments, as U.S. Prepares Sanctions

By DAVID E. SANGER and ANNIE LOWREY

WASHINGTON — A senior Iranian official on Tuesday delivered a sharp threat in response to economic sanctions being readied by the United States, saying his country would retaliate against any crackdown by blocking all oil shipments through the Strait of Hormuz, a vital artery for transporting about one-fifth of the world’s oil supply.

The declaration by Iran’s first vice president, Mohammad-Reza Rahimi, came as President Obama prepares to sign legislation that, if fully implemented, could substantially reduce Iran’s oil revenue in a bid to deter it from pursuing a nuclear weapons program.

Prior to the latest move, the administration had been laying the groundwork to attempt to cut off Iran from global energy markets without raising the price of gasoline or alienating some of Washington’s closest allies.

Apparently fearful of the expanded sanctions’ possible impact on the already-stressed economy of Iran, the world’s third-largest energy exporter, Mr. Rahimi said, “If they impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz,” according to Iran’s official news agency. Iran just began a 10-day naval exercise in the area.

In recent interviews, Obama administration officials have said that the United States has developed a plan to keep the strait open in the event of a crisis. In Hawaii, where President Obama is vacationing, a White House spokesman said there would be no comment on the Iranian threat to close the strait. That seemed in keeping with what administration officials say has been an effort to lower the level of angry exchanges, partly to avoid giving the Iranian government the satisfaction of a response and partly to avoid spooking financial markets.

But the energy sanctions carry the risk of confrontation, as well as economic disruption, given the unpredictability of the Iranian response. Some administration officials believe that a plot to assassinate the Saudi ambassador to the United States — which Washington alleges received funding from the Quds Force, part of the Iranian Revolutionary Guards Corps — was in response to American and other international sanctions.

Merely uttering the threat appeared to be part of an Iranian effort to demonstrate its ability to cause a spike in oil prices, thus slowing the United States economy, and to warn American trading partners that joining the new sanctions, which the Senate passed by a rare 100-0 vote, would come at a high cost.

Oil prices rose above $100 a barrel in trading after the threat was issued, though it was unclear how much that could be attributed to investors’ concern that confrontation in the Persian Gulf could disrupt oil flows.

The new punitive measures, part of a bill financing the military, would significantly escalate American sanctions against Iran. They come just a month and a half after the International Atomic Energy Agency published a report that for the first time laid out its evidence that Iran may be secretly working to design a nuclear warhead, despite the country’s repeated denials.

In the wake of the I.A.E.A. report and a November attack on the British Embassy in Tehran, the European Union is also contemplating strict new sanctions, such as an embargo on Iranian oil.

For five years, the United States has implemented increasingly severe sanctions in an attempt to force Iran’s leaders to reconsider the suspected nuclear weapons program, and answer a growing list of questions from the I.A.E.A. But it has deliberately stopped short of targeting oil exports, which finance as much as half of Iran’s budget.

Now, with its hand forced by Congress, the administration is preparing to take that final step, penalizing foreign corporations that do business with Iran’s central bank, which collects payment for most of the country’s energy exports.

The sanction would effectively make it difficult for those who do business with Iran’s central bank to also conduct financial transactions with the United States. The step was so severe that one of President Obama’s top national security aides said two months ago that it was “a last resort.” The administration raced to put some loopholes in the final legislation so that it could reduce the impact on close allies who have signed on to pressuring Iran.

The legislation allows President Obama to waive sanctions if they cause the price of oil to rise or threaten national security.

Still, the new sanctions raise crucial economic, diplomatic, and security questions. Mr. Obama, his aides acknowledge, has no interest in seeing energy prices rise significantly at a moment of national economic weakness or as he intensifies his bid for re-election — a vulnerability the Iranians fully understand. So the administration has to defy, or at least carefully calibrate, the laws of supply and demand, bringing to market new sources of oil to ensure that global prices do not rise sharply.

“I don’t think anybody thinks we can contravene the laws of supply and demand any more than we can contravene the laws of gravity,” said David S. Cohen, who, as treasury under secretary for terrorism and financial intelligence, oversees the administration of the sanctions. But, he said, “We have flexibility here, and I think we have a pretty good opportunity to dial this in just the right way that it does end up putting significant pressure on Iran.”

The American effort, as described by Mr. Cohen and others, is more subtle than simply cutting off Iran’s ability to export oil, a step that would immediately send the price of gasoline, heating fuel, and other petroleum products skyward. That would “mean that Iran would, in fact, have more money to fuel its nuclear ambitions, not less,” Wendy R. Sherman, the newly installed under secretary of state for political affairs, warned the Senate Foreign Relations Committee earlier this month.

Instead, the administration’s aim is to reduce Iran’s oil revenue by diminishing the volume of sales and forcing Iran to give its customers a discount on the price of crude.

Some economists question whether reducing Iran’s oil exports without moving the price of oil is feasible, even if the market is given signals about alternative supplies. Already, analysts at investment banks are warning of the possibility of rising gasoline prices in 2012, due to the new sanctions by the United States as well as complementary sanctions under consideration by the European Union.

Since President Obama’s first months in office, his aides have been talking to Saudi Arabia and other oil suppliers about increasing their production, and about guaranteeing sales to countries like China, which is among Iran’s biggest customers. But it is unclear that the Saudis can fill in the gap left by Iran, even with the help of Libyan oil that is coming back on the market. The United States is also looking to countries like Iraq and Angola to increase production.

Daniel Yergin, whose new book, “The Quest,” describes the oil politics of dealing with states like Iran, noted in an interview that “given the relative tightness of the market, it will require careful construction of the sanctions combined with vigorous efforts to bring alternative supplies into the market.” He said that it would “add a whole new dimension to the debate over the Keystone XL pipeline,” the oil pipeline from Canada to the United States that the administration has sought to delay.

“The only strategy that is going to work here is one where you get the cooperation of oil buyers,” said Michael Singh, managing director of the Washington Institute for Near East Policy. “You could imagine the Europeans, the Japanese, and the South Koreans cooperating, and then China would suck up all of the oil that was initially going to everyone else.”

A broader question is whether the sanctions — even if successful at lowering Iran’s oil revenue — would force the government to give up its nuclear ambitions.

One measure of the effects, however, is that the Iranian leadership is clearly concerned. Already the Iranian currency is plummeting in value against the dollar, and there are rumors of bank runs.

“Iran’s economic problems seem to be mounting and the whole economy is in a state of suspended expectation,” said Abbas Milani, director of Iranian studies at Stanford University. “The regime keeps repeating that they’re not going to be impacted by the sanctions. That they have more money than they know what to do with. The lady doth protest too much.

.



As Ron Paul correctly said, all sanctions end up with war

well , folks .. whatever you do, keep your tanks full .. if Hormuz is mined, oil will hit 350+ and climbing

.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby admin » Thu Dec 29, 2011 3:57 am

This distinct important topic should have it's own forum, I think.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Marcus » Thu Dec 29, 2011 5:47 am

Why would Iran [try to] close Hormuz when its own oil to China has to use that route?
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby cincinnatus » Fri Dec 30, 2011 1:14 am

Marcus wrote:Why would Iran [try to] close Hormuz when its own oil to China has to use that route?


And over 60% of their government revenues...

http://en.wikipedia.org/wiki/Petroleum_industry_in_Iran

it would be the equivalent of Iran enforcing U.S. sanctions on itself...did they transplant W's brain to A-jad?
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Typhoon » Fri Dec 30, 2011 1:41 am

cincinnatus wrote:
Marcus wrote:Why would Iran [try to] close Hormuz when its own oil to China has to use that route?


And over 60% of their government revenues...

http://en.wikipedia.org/wiki/Petroleum_industry_in_Iran

it would be the equivalent of Iran enforcing U.S. sanctions on itself...did they transplant W's brain to A-jad?


Well, it's rumoured to have worked at least on one occassion:

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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Enki » Fri Dec 30, 2011 6:28 pm

If the US blockades Iranian shipments then closing the Strait of Hormuz makes sense because it will hurt its enemies also. Things that don't make sense in peacetime often make sense in wartime.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby cincinnatus » Fri Dec 30, 2011 10:21 pm

Enki wrote:If the US blockades Iranian shipments then closing the Strait of Hormuz makes sense because it will hurt its enemies also. Things that don't make sense in peacetime often make sense in wartime.


No. You really shouldn't talk about things in which you are ignorant ;) . I kid, I kid....

If the UNSC were to pass sanctions calling on the international community to enact new sanctions on Iran after the latest IAEA report, or the next, then it wouldn't be "the U.S." blockading Iran. It would include of course, the USN, in enforcing the UNSC resolution, but it would be the international community enforcing sanctions, not some unilateral U.S. "blockade." If Iran chose to escalate via mining the straits, then they would be choosing war...a NEOCON wet dream that combines the U.S. Democratic way of war (ALLIED FORCE, OOD in Libya) and the 1980s Tanker War as the UN coalition navies would then clear the straits. I don't like it...I don't like the hypocrisy of the Nuclear Powers telling other's they can't join the club, but I also don't like Iran's BS position on their program. If they want the damn things, cowboy-up and admit it...publicly say something like "after OIF, any country would be nuts to NOT want nuclear weapons as a defensive measure against regime change interventions." Drop out of the NNPT, accept the economic sanctions that follow such a move, and stop playing the victim. Accept that if they're serious about "wiping Israel off the map" via some nuclear strike, that Iran will cease to exist. Problem solved...deterrence reinstated.

Now I sure as hell wouldn't hold my breath waiting for the UNSC to approve such sanctions, and the U.S. won't do it alone. Unless China wants to rush in behind the UN military coalition after another silly war and clean up with post-war contracts, they'll veto. Russia is another story...they really love higher energy prices, so they at worst might abstain (or even more at worst, abstain and then send SA-20s to fulfill the cancelled contract to make it harder for the UN coalition, make a few billion more from the current Iranian regime, and then like China, roll in after the fact and outbid Western interests for contracts).
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Hoosiernorm » Sat Dec 31, 2011 5:48 pm

http://video.cnbc.com/gallery/?video=3000063711

Some Guy Named Dave on the CRISIS!
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Parodite » Mon Jan 02, 2012 9:53 pm

Hoosiernorm wrote:http://video.cnbc.com/gallery/?video=3000063711

Some Guy Named Dave on the CRISIS!


Kind of funny he says Germany is and will be doing fine.... but me guess that the German's low birthrate has nothing to do with it because according to Dave, going extinct they surely will...
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Enki » Mon Jan 02, 2012 10:50 pm

cincinnatus wrote:
Enki wrote:If the US blockades Iranian shipments then closing the Strait of Hormuz makes sense because it will hurt its enemies also. Things that don't make sense in peacetime often make sense in wartime.


No. You really shouldn't talk about things in which you are ignorant ;) . I kid, I kid....

If the UNSC were to pass sanctions calling on the international community to enact new sanctions on Iran after the latest IAEA report, or the next, then it wouldn't be "the U.S." blockading Iran. It would include of course, the USN, in enforcing the UNSC resolution, but it would be the international community enforcing sanctions, not some unilateral U.S. "blockade." If Iran chose to escalate via mining the straits, then they would be choosing war...a NEOCON wet dream that combines the U.S. Democratic way of war (ALLIED FORCE, OOD in Libya) and the 1980s Tanker War as the UN coalition navies would then clear the straits. I don't like it...I don't like the hypocrisy of the Nuclear Powers telling other's they can't join the club, but I also don't like Iran's BS position on their program. If they want the damn things, cowboy-up and admit it...publicly say something like "after OIF, any country would be nuts to NOT want nuclear weapons as a defensive measure against regime change interventions." Drop out of the NNPT, accept the economic sanctions that follow such a move, and stop playing the victim. Accept that if they're serious about "wiping Israel off the map" via some nuclear strike, that Iran will cease to exist. Problem solved...deterrence reinstated.


Obviously like in so many other things the international governing bodies are simply toeing the US line. Sanctions were placed after their revolution to oust the US/British puppet dictator.

But I posted that thinking that the basic idea was that war had already started and that blocking the strait of hormuz would not be within Iranian interests even if war had already begun.

Now I sure as hell wouldn't hold my breath waiting for the UNSC to approve such sanctions, and the U.S. won't do it alone. Unless China wants to rush in behind the UN military coalition after another silly war and clean up with post-war contracts, they'll veto. Russia is another story...they really love higher energy prices, so they at worst might abstain (or even more at worst, abstain and then send SA-20s to fulfill the cancelled contract to make it harder for the UN coalition, make a few billion more from the current Iranian regime, and then like China, roll in after the fact and outbid Western interests for contracts).


Right.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Enki » Mon Jan 02, 2012 11:06 pm

http://thinkprogress.org/economy/2011/0 ... -recovery/

A recovery like we just had without a corresponding rise in worker's wages is unprecedented in American history.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Zack Morris » Wed Jan 04, 2012 10:02 pm

Enki wrote:http://thinkprogress.org/economy/2011/06/30/258388/corporate-profits-recovery/

A recovery like we just had without a corresponding rise in worker's wages is unprecedented in American history.


Global wage arbitrage. This tyranny of market-based meritocracy shows that human society may be inherently feudal: a tiny rent-seeking class of lords or 'capitalists', by luck, birthright, or cleverness, and the mass of rent-paying laborers. Specialization of labor ensures dependency on the rent-seeking class and makes it difficult to successfully strike out on new career paths when things get tough.

But I guess there are upsides. We are well fed, have an abundance of reality TV shows to choose from, and can complain about it using our iPads.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Mr. Perfect » Thu Jan 05, 2012 5:19 am

Who in the world told you to think in terms of "global wage arbitrage"?
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Zack Morris » Thu Jan 05, 2012 5:42 am

Mr. Perfect wrote:Who in the world told you to think in terms of "global wage arbitrage"?


It's simple economics, Mr. Perfect. Other countries can do the same work for cheaper. When entire labor markets open up suddenly, it is easier to move abroad than it is to cultivate new skills at home, and so chronic unemployment tends to increase as workers are displaced and local economies destroyed. It's okay, though, people don't have any self-evident rights to have such petty inconveniences taken into account by titans of industry.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Mr. Perfect » Thu Jan 05, 2012 6:30 am

Yes, but we just used go call it "competition". Where did the "global wage arbitrage" thing come from?
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Enki » Thu Jan 05, 2012 6:54 pm

Zack Morris wrote:Global wage arbitrage. This tyranny of market-based meritocracy shows that human society may be inherently feudal: a tiny rent-seeking class of lords or 'capitalists', by luck, birthright, or cleverness, and the mass of rent-paying laborers. Specialization of labor ensures dependency on the rent-seeking class and makes it difficult to successfully strike out on new career paths when things get tough.


Especially when you count the barrier to entry of the markets known as 'certifications'. In order to invest in certain types of things you need to be certified as the class of investors. Can't get in on the Facebook IPO unless you're certified at that level.

But I guess there are upsides. We are well fed, have an abundance of reality TV shows to choose from, and can complain about it using our iPads.


Umm...we are well fed for now. Since a huge proportion of the world's population is NOT well fed, then when global wages equalize it means that the average American will probably be poor too.
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Re: Gloom, Doom, or Boom? Finance and Economics

Postby Enki » Thu Jan 05, 2012 6:56 pm

Mr. Perfect wrote:Yes, but we just used go call it "competition". Where did the "global wage arbitrage" thing come from?


Corporate elites use lobbying power to influence foreign policy in order to keep wages low. Re: Confessions of an Economic Hitman.
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