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Economics - Sept 14

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China Moves to Retaliate Against U.S. Tire Tariff

Keith Bradsher, New York Times
China unexpectedly increased pressure Sunday on the United States in a widening trade dispute, taking the first steps toward imposing tariffs on American exports of automotive products and chicken meat in retaliation for President Obama’s decision late Friday to levy tariffs on tires from China.

The Chinese government’s strong countermove followed a weekend of nationalistic vitriol against the United States on Chinese Web sites in response to the tire tariff. “The U.S. is shameless!” said one posting, while another called on the Chinese government to sell all of its huge holdings of Treasury bonds.

The impact of the dispute extends well beyond tires, chickens and cars. Both governments are facing domestic pressure to take a tougher stand against the other on economic issues. But the trade battle increases political tensions between the two nations even as they try to work together to revive the global economy and combat mutual security threats, like the nuclear ambitions of Iran and North Korea...
(13 September 2009)


Priceless: How The Federal Reserve Bought The Economics Profession

Ryan Grim, Huffington Post
The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.

This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too.

"The Fed has a lock on the economics world," says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. "There is no room for other views, which I guess is why economists got it so wrong."...
(07 September 2009)


Revealed: The ghost fleet of the recession

Simon Parry, The Daily Mail (UK)
The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination - and is why your Christmas stocking may be on the light side this year...

Here, on a sleepy stretch of shoreline at the far end of Asia, is surely the biggest and most secretive gathering of ships in maritime history. Their numbers

are equivalent to the entire British and American navies combined; their tonnage is far greater. Container ships, bulk carriers, oil tankers - all should be steaming fully laden between China, Britain, Europe and the US, stocking camera shops, PC Worlds and Argos depots ahead of the retail pandemonium of 2009.

But their water has been stolen.

They are a powerful and tangible representation of the hurricanes that have been wrought by the global economic crisis; an iron curtain drawn along the coastline of the southern edge of Malaysia's rural Johor state, 50 miles east of Singapore harbour.

It is so far off the beaten track that nobody ever really comes close, which is why these ships are here. The world's ship owners and government economists would prefer you not to see this symbol of the depths of the plague still crippling the world's economies.

So they have been quietly retired to this equatorial backwater, to be maintained only by a handful of bored sailors. The skeleton crews are left alone to fend off the ever-present threats of piracy and collisions in the congested waters as the hulls gather rust and seaweed at what should be their busiest time of year...
(13 September 2009)
EB contributor Rick Lakin commented on this article:
"This is evidence of the decline of globalization that will accelerate as oil becomes more scarce and economic decline becomes more steep.">


Keynes: the return of the Master
(book review)
Andrew Gamble, The New Statesman
The crash of 2008 shattered intellectual assumptions as well as financial institutions. Rational expectations theory and some of its spin-offs - such as the efficient markets hypothesis, which suggests that markets are able to calculate and price all risks - did not fare well. The financial meltdown did not belong to its universe. The crash brought a reminder of the volatility and fragility of capitalist economies, and an end to hopes that booms no longer culminated in busts. For a few days in September 2008, the financial authorities faced the possibility of a complete breakdown of the banking system and the onset of a new Great Depression. This was averted, but only narrowly, and with consequences whose full effects will unfold over the next few years. The economic situation has been stabilised and growth has begun to revive, but the economic outlook remains uncertain, and full recovery is likely to be long and painful.

This sudden eruption of economic and political uncertainty has made Keynes popular once more. We are all Keynesians again, it seems. He may no longer be taught on economics courses, and many economics students may not even know who he is, but in the wider political culture he is still a potent memory. He has been credited with rescuing capitalism once before, so it is not surprising that he should be back on the front page of Time, and spoken of approvingly even in the Wall Street Journal and the Economist. Keynes developed his economic theories in response to the 1930s slump and was not short of ideas about what governments should do. A barbed comment at the time was that if there were five economists in a room, there would be six conflicting opinions, and two of them would be held by Keynes. But at least he had opinions. There has been much unfavourable comment on how little the contemporary economics profession has had to say about this new crisis. The events of the real economy have long since ceased to interest most economists. There are some exceptions, such as Paul Krugman and Joseph Stiglitz, but most of the perceptive writing on the crisis has come from financial journalists and historians...
(8 September 2009)

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