"In recent days several analysts have warned that the global economy could suffer a repeat of the 2008 crash if the knock-on effects of a contraction in Chinese output pushes down commodity prices further and sparks panic selling on stock and bond markets."
The very possibility that this could happen demonstrates how things have gotten even worse since 2008. Commodities are basic inputs in lager production processes and the fact that "investment" in them is a more significant source of income than the output generated further down in production (which would benefit from lower prices of basic inputs) tells you that capitalism is not working at all the way it is supposed to. Commodities are supposed to be raw materials, not an asset class. The financial sector has become dependent on extracting a form of rent from the producers of finished goods (who might then pass it on in other ways).
China can't sustain the rate of growth it has been producing indefinitely and as it slows down, there are going to be consequences. I can't say if this is going to happen now or a little further down the road, but business cycles and crises are a fact of life under capitalism and the current upswing, to the degree that it has taken place, has been going on for a while now.
laika posted:Commodities are supposed to be raw materials, not an asset class. The financial sector has become dependent on extracting a form of rent from the producers of finished goods (who might then pass it on in other ways).
Its mind boggling that this is so endemic that these hoarders' loses are hitting the economy at large.
I've been following this toby jones guy recently, he's saying that the saudis are simutaneously dropping out the price floor and manufacturing scarcity. Interesting idea https://vimeo.com/95782753
Urbandale posted:that chinese bubble everyones been looking for since 09
No, it's just the observation that a really high rate of compound growth can't continue indefinitely for a huge number of reasons and it has in fact been slowing
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season 10 is so good
Edited by Spatial_Reasoning ()
Spatial_Reasoning posted:laika posted:
Commodities are supposed to be raw materials, not an asset class. The financial sector has become dependent on extracting a form of rent from the producers of finished goods (who might then pass it on in other ways).
Its mind boggling that this is so endemic that these hoarders' loses are hitting the economy at large.
I've been following this toby jones guy recently, he's saying that the saudis are simutaneously dropping out the price floor and manufacturing scarcity. Interesting idea https://vimeo.com/95782753
Is this what communism looks like?
Urbandale posted:growth slowing is a reasonable argument, sure, but thats not the same as bubblechat.
I didn't say it was, but it kind of is if the bubble is to a significant degree dependent on what happens with real economic activity in China
Petrol posted:HenryKrinkle posted:http://llco.org/stop-the-extradition-of-el-chapo-to-the-imperialists/
lol
yeah, seriously
"...We have, in other words, a repeat of the situation of the late 1930s, prior to the U.S. rearmament drive, when capacity utilization improved in the consumption goods sector without much recovery in the capital goods sector."
"Though the fall in commodity prices in itself constitutes an additional cause of the worsening crisis, it poses a still greater threat through another channel, namely the prospect of what the early twentieth-century economist Irving Fisher called “debt deflation.” Fisher argued that if primary commodity prices, and consequently manufactured goods prices, fall, then the real burden of debt goes up for those for whom such goods appear on the asset side, against money-denominated debt obligations on the liability side. To improve their balance sheets, therefore, they try selling these assets, which only makes things worse, leading to huge falls in asset prices and hence to bankruptcies that deepen the recession. The advanced capitalist countries have been on the brink of deflation for a long time; current developments may push them over the edge and compound the crisis greatly."
by Ha-Joon Chang
The US stock market has just had the worst start to a year in its history. At the same time, European and Japanese stock markets have lost around 10% and 15% of their values respectively; the Chinese stock market has resumed its headlong dash downward; and the oil price has fallen to the lowest level in 12 years, reflecting (and anticipating) worldwide economic slowdown.
According to the dominant economic narrative of recent times, 2016 was the year when the world economy would recover fully from the 2008 crash. The US would lead this recovery by generating growth and jobs via fiscal conservatism and pro-business policies. Reflecting the economy’s robust growth, the US stock market reached new heights in 2015, although disrupted by the mess in the Chinese stock market over the summer. By last October, US unemployment had fallen from the post-crisis peak of 10% to 5%, bringing it back close to the pre-crisis low. In a show of confidence, last month the US Federal Reserve finally raised its interest rate for the first time in nine years.
Not far behind the US, the story goes, have been Britain and Ireland. Hit harder than the US by the financial crisis, they have, however, recovered handsomely because they kept their nerve and stuck to the right, if unpopular, policies. Spending cuts, focused on wasteful welfare spending, accelerated job creation by making it more difficult for people to live off the taxpayer. They sensibly didn’t give in to the banker-bashers and chose not to over-regulate the financial sector.
Even the continental European economies have been finally picking up, it was said, having accepted the need for fiscal discipline, labour market reform and cutting business regulations. The world – at least the rich world – was finally set for a full recovery. So what has gone wrong?
Those who put forward the narrative are now trying to blame China in advance for the coming economic woes. George Osborne has been at the forefront, warning this month of a “dangerous cocktail of new threats” in which the devaluation of the Chinese currency and the fall in oil prices (both in large part due to China’s economic slowdown) figured most prominently. If our recovery was to be blown off course, he implied, it would be because China had mismanaged its economy.
China is, of course, an important factor in the global economy. Only 2.5% of the world economy in 1978, on the eve of its economic reform, it now accounts for around 13%. However, its importance should not be exaggerated. As of 2014, the US (22.5%) the eurozone (17%) and Japan (7%) together accounted for nearly half of the world economy. The rich world vastly overshadows China. Unless you are a developing economy whose export basket is mainly made up of primary commodities destined for China, you cannot blame your economic ills on its slowdown.
The truth is that there has never been a real recovery from the 2008 crisis in North America and western Europe. According to the IMF, at the end of 2015, inflation-adjusted income per head (in national currency) was lower than the pre-crisis peak in 11 out of 20 of those countries. In five (Austria, Iceland, Ireland, Switzerland and the UK), it was only just higher – by between 0.05% (Austria) and 0.3% (Ireland). Only in four countries – Germany, Canada, the US and Sweden – was per-capita income materially higher than the pre-crisis peak.
Even in Germany, the best performing of those four countries, per capita income growth rate was just 0.8% a year between its last peak (2008) and 2015. The US growth rate, at 0.4% per year, was half that. Compare that with the 1% annual growth rate that Japan notched up during its so-called “lost two decades” between 1990 and 2010.
To make things worse, much of the recovery has been driven by asset market bubbles, blown up by the injection of cash into the financial market through quantitative easing. These asset bubbles have been most dramatic in the US and UK. They were already at an unprecedented level in 2013 and 2014, but scaled new heights in 2015. The US stock market reached the highest ever level in May 2015 and, after the dip over the summer, more or less came back to that level in December. Having come down by nearly a quarter from its April 2015 peak, Britain’s stock market is currently not quite so inflated, but the UK has another bubble to reckon with, in the housing market, where prices are 7% higher than the pre-crisis peak of 2007.
Thus seen, the main causes of the current economic turmoil lie firmly in the rich nations – especially in the finance-driven US and UK. Having refused to fundamentally restructure their economies after 2008, the only way they could generate any sort of recovery was with another set of asset bubbles. Their governments and financial sectors talked up anaemic recovery as an impressive comeback, propagating the myth that huge bubbles are a measure of economic health.
Whether or not the recent market turmoil leads to a protracted slide or a violent crash, it is proof that we have wasted the past seven years propping up a bankrupt economic model. Before things get any worse, we need to replace it with one in which the financial sector is made less complex and more patient, investment in the real economy is encouraged by fiscal and technological incentives, and measures are brought in to reduce inequality so that demand can be maintained without creating more debts.
None of these will be easy to implement, but we know what the alternative is – a permanent state of low growth, instability, and depressed living standards for the vast majority.
drwhat, please make Urbandale and RedMaistre mods.
ilmdge posted:Yah, the old dm economics stuff was one of the best parts of old lf/wddp.
drwhat, please make Urbandale and RedMaistre mods.
aren't there already enough mods? serious question
Urbandale posted:http://www.theguardian.com/commentisfree/2016/jan/21/dont-blame-china-global-west-economic-recovery-asset-bubbles?CMP=twt_guby Ha-Joon Chang
thanks. i agree with ha-joon chang on a lot of things.
as with almost everything that pretends to be some major backstop of capitalism, central banking control is a purely psychological game, and once the psychological impact of quantitative easing dissipated and it became the new normal, there was nothing left to do but undo it, which is what the US is in the process of trying to do, but all the hinges and gaskets are whining and wheezing.
if my job was to preserve capitalism at any cost i think i would have done exactly what they have done. there was no better option for them to preserve the system. i don't know what happens next.
I'd serve a term as mod if needed but if not then don't worry about it. Seems reasonable to wait on this til the remake of the forums software gets implemented anyway
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drwhat posted:as with almost everything that pretends to be some major backstop of capitalism, central banking control is a purely psychological game, and once the psychological impact of quantitative easing dissipated and it became the new normal, there was nothing left to do but undo it, which is what the US is in the process of trying to do, but all the hinges and gaskets are whining and wheezing.
if my job was to preserve capitalism at any cost i think i would have done exactly what they have done. there was no better option for them to preserve the system. i don't know what happens next.
I dunno either but I'm currently looking back to world-systems theory in general and Giovanni Arrighi in particular. His model is of successive systemic "cycles of accumulation" with the US being the most recent and ending in financial expansions.
I think the formerly "advanced" countries have been headed in the neoliberal direction so long that they don't know how to do anything else. The ECB is hinting at another 1.5 trillion euros in March, which is completely outrageous, not the least because it's at the same time they are cutting social services, pensions, etc. for everyone else. There's not s lot that can be done to the economic system without major social and political changes people with power aren't willing to make.without major pressure or revolution from below
China, Russia, Brazil, et al are building alternative international institutions like clearing unions and development banks. Maybe things continue to fracture, maybe a war, maybe Trumpian fascism, no clue
Edited by laika ()
drwhat posted:i don't know what happens next.
Probably another year or two of fake prosperity, followed by a period of hyperinflation in every country in the world at the same time, and then a resurrection of Hitler
http://mobile.nytimes.com/2016/01/22/opinion/when-will-the-candidates-start-talking-about-the-economy.html
"Thanks to mounting internal contradictions and operational stress, central banks are increasingly unwilling (like the Federal Reserve) or unable (like the People’s Bank of China, the Bank of Japan and, soon, the European Central Bank) to borrow financial returns from the future. As a result, financial volatility is rising."
That part I just quoted because he said internal contradictions.
"The first covers long-overdue structural reforms. Guided by the administration, Congress needs to overhaul a tax system littered with anti-growth provisions, invest more in infrastructure, expand labor-market retraining and modernize our education system. The lack of such reforms, and the insecurity generated, is one main reason the private sector has held back from spending the enormous cash reserves on its balance sheets; encouraging that money to flow into productive activities, rather than share buybacks, would boost the economy.
America also needs a more responsive fiscal policy. This means, above all, redirecting resources that essentially subsidize the better-off segments of society, including the excessively low taxation of carried interest and other budgetary measures to help reduce the economic drag that inequality creates through reduced consumer demand."
Cut taxes and only spend enough through the state to get the private sector to invest. Modernizing education may mean charter schools and shit. Tbe great new plan to fix everything is to add some really mild Keynesian touches to neoliberalism.
"Finally, the United States needs to push for critical reforms in the global finance infrastructure. It took embarrassingly long for the world to agree on modest changes in the governance of the International Monetary Fund, largely because Congress was disengaged. The next steps should include further reallocation of voting power from Europe to developing economies, consistent with today’s global economic realities.
While I.M.F. reform might seem arcane, it could be vital to averting another global crisis — without changes, the fund’s credibility will continue to be questioned, especially in the eyes of emerging economies, undermining global policy cooperation and increasing the risk of currency wars and other damaging coordination failures."
An attempt to curb the changes I mentioned earlier and keep the dollar based international financial system as intact as possible. This reminds me that I forgot to mention that there have been significant capital outflows from "emerging markets" over the past year
laika posted:While I.M.F. reform might seem arcane, it could be vital to averting another global crisis — without changes, the fund’s credibility will continue to be questioned, especially in the eyes of emerging economies, undermining global policy cooperation and increasing the risk of currency wars and other damaging coordination failures.
lol "coordination failures"
laika posted:Giovanni Arrighi
is clarence really gonna leave this untouched
laika posted:the six largest US banks had zero growth in profits from 2014 to 2015
same
Urbandale posted:a permanent state of low growth, instability, and depressed living standards
same