Exchange resonance of our world

US corporations, which have moved their production for US markets offshore in order to drive up their share prices and provide their CEOs with multi-million dollar bonuses,can be provided with a different set of incentives that encourage the corporations to bring employment back to the US. For example, the corporate income tax can be restructured to tax corporations according to the value-added in the US. The higher the value-added in the US, the lower the tax rate; the lower the value-added, the higher the tax rate. Cutting the budget deficit by halting pointless wars and unnecessary military spending and reducing the trade deficit by bringing jobs back to America are simple tasks compared to confronting inflationary depression. The world has had enough of American irresponsibility and is taking away the reins. At the November 15 economic summit, the world will begin the process of imposing a new financial order on the US in exchange for continued lending to the bankrupt "superpower." With bailouts eating up the world's supply of capital, continued foreign financing for Washington's wars of aggression is out of the picture.

By most accounts the US economy is in serious trouble. Robert Reich, an adviser to President-elect Obama, calls it a "mini-depression,"and that designation might be optimistic. The Russian economist, Mikhail Khazin says that the "U.S. will soon face a second 'Great Depression'." It is possible that even Khazin is optimistic.

I cannot predict the future. However, I can explain what the problems are, how they differ from past times of troubles, and why traditional remedies, such as the public works programs that Reich proposes, are unlikely 明星经纪公司 to succeed in reviving the U.S. economy.

Khazin points out, as have others, such as University of Maryland economist Herman Daly 环氧地坪 and myself, that consumer debt expansion is the fuel that kept 网球场 the U.S. economy alive. The growth of debt has outstripped the growth of income to such an extent that an increase in consumer credit and bank lending is not possible. Consumers are overburdened with debt. This fact takes monetary policy out of the picture. Americans can no longer afford to borrow more in order to consume more.

This leaves economists with fiscal policy, which, as Reich realizes, also has problems. Reich is correct that neither a reduction in marginal tax rates nor a tax rebate is likely to be very effective. Reich, a Keynesian, has an uncertain grasp of supply-side economics, but as one who has a firm grasp, I can attest that marginal tax rates today are not the stifling influence they 标牌制作 were prior to John F. Kennedy and Ronald Reagan. As Art Laffer said, there are two tax rates, high and low, that will produce the same tax revenues by expanding or contracting economic activity. Marginal tax rates are no longer in the higher ranges. As for a tax rebate, Reich is correct that in the present situation a tax rebate would be dissipated in paying off creditors.


Reich sees the problem as a lack of aggregate demand sufficient to maintain full employment. His solution is for the government to spend "a lot" more on infrastructure projects on top of a trillion dollar budget deficit -- "repairing roads and bridges, levees and ports; investing in light rail, electrical grids, new sources of energy." This spending would boost employment, 矿用通信电缆 wages, and aggregate demand.

I have no opposition to infrastructure projects, but who will finance the baseline trillion dollar US budget deficit plus the additional red ink spending on infrastructure? Not Americans. The US savings rate is zero or negative. Home mortgage foreclosures are in the millions. Officially, US unemployment is 10 million, but if measured by pre-Clinton era standards,通信电缆 unemployment is much higher. Statistician John Williams, who measures the unemployment rate by the pre-Clinton standards concludes that the rate of US unemployment is about 15 percent. President Clinton "reformed" the unemployment statistics by ceasing to count discouraged workers as unemployed.

For years, the US government's budget has been dependent on foreigners financing the red ink. Countries such as Japan and China and OPEC suppliers of oil to the US have huge export surpluses with the US. They 矿用控制电缆 recycle the dollars by buying US Treasury bonds, thus financing the US government's red ink budgets.