George Sarant

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Archive for August 2011

OF NATURE AND THE PAST

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As I write this a hurricane is approaching New York. There was an earthquake on Tuesday that radiated from Virginia all the way to Canada and shook New York City, although it wasn’t felt where I’m currently located, on sandy Long Island. The hurricane likely will be felt, and all of this is a reminder of the precariousness of life on earth, given the forces of nature. In the comfortable cocoon that civilization provides us we tend to forget how insulated we have become. Only when natural disaster strikes does it register how savage the natural world is, because most of the time the storms, floods, earthquakes, and tsunamis happen somewhere else. People who live closest to nature, such as farmers, have few illusions about it. Those with a more romantic view are urbanites, largely clueless as to reality and perils of the natural world.

Some similarly romanticize the past, and think it would be nice to live in a different era, when things were perhaps simpler. It is true one could go back a few decades and still be comfortable, but further beyond that, not much more than a century, and the inconveniences would be overwhelming. The smells alone would be intolerable to a modern person. Think of life without electricity, indoor plumbing, toilet paper, refrigeration; never mind the Internet. Think of life with exposure to diseases now vanquished, when more than half of children born would not survive to adulthood, along with the ever present threat of war, famine, and pestilence.

There is a window beyond which we would find ourselves very uncomfortable, and it is likely our descendants would find our present equally unpalatable. For we are of our place and time whether we like it or not, just as our ancestors were of their place and time. We are part of the world we live in, and but one stop on a procession of generations that stretches backward and forward in time.

Written by georgesarant

August 25, 2011 at 9:38 PM

Posted in Uncategorized

ECONOMY AND SOCIETY IN 2011

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These are the gloomiest times we have seen since the Carter years. This is confirmed by survey after survey showing a lack of faith in institutions, a lack of confidence in the future, and dismal economic statistics. The stock market dropped 450 points last week, or 1300 so far this month and 2000 for the year, wiping out $3 trillion in wealth. The previous week the market finished its wildest week in history, with four 400 point or more daily swings in a row. Though a lot of this was pure silliness, and an overreaction to the slightest scrap of news, mostly from overseas, it is clear the economic fundamentals are not good. Unemployment is over 9% and underemployment is 18% plus. One in five males are out of work, with profound social consequences.

Gold is up 30% for the year. What does it say when gold is a better investment than productive assets that would actually provide growth? There is fear and uncertainty across the land. 47% believe the future is only going to get worse, 73% say the U.S. is on the wrong track, while the number of people satisfied with the way things are going has hit a new low at 11%. Deficits are running at 10% of GDP, with debt over 100%. In short the economic outlook is bleak.

There is an even chance the economy is tanking again as anemic growth sputters towards a double dip recession. We are constantly bombarded with a frenzy of bargains deals to try and increase sales without much effect. Yet despite so much slack in the economy prices are rising and may get worse thanks to all the money the Federal Reserve has pumped into the economy. So far the government response has been, if anything, counterproductive. The last time I used the title Economy and Society was in 2009, ending with the question what if it (the then proposed trillion dollar stimulus) doesn’t work? Clearly it didn’t work and government policies have brought us to our current circumstances.

The news from Europe is even worse, souring markets around the world, as countries struggle with debt problems and their banks appear shaky. But in the big picture what is really going on is a wave across the western world, as the realization begins to set in that unsustainable spending, borrowing, and entitlements cannot continue without sufficient population growth. This is not really news as it has been predicted for years, but unfortunately governments ignored the problem and failed to deal with long-term arrangements, instead reacting to short-term, day to day headlines. Now they are running out of options.

Given chronic government mismanagement there is nothing a change in policies would not correct by, i.e. returning to balanced budgets and sound money. Everything will not go down the tubes unless we let that happen. It is still within our power to correct these conditions, if the vision and will can be found. For the question is whether we still believe in the future, or whether we will bury our heads like the Europeans and slowly fade away. Americans are usually the most optimistic of peoples, and that dormant positive outlook needs to be rekindled. Unless we think the world is going to end, things will turn around sooner or later, depending on when we take the right actions. Economic forecasting is about as reliable weather forecasting so dire predictions need not trouble us. There are always gloom predictors and boom predictors, but most of the time we manage to muddle through somewhere in the middle, as neither the very worst or the very best often happens.

Written by georgesarant

August 20, 2011 at 9:08 PM

Posted in economy, government, society

US ECONOMY AND THE WORLD

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Vladimir Putin described the United States as a “parasite” on the world economy due to the pre-eminence of the dollar, which presumably provides certain advantages. This comes from someone late to the world economic party, considering that Russia still can’t even qualify for the World Trade Organization and remains an economic backwater. But then Putin is nostalgic for the Soviet Union, the Cold War, and great power status. He thinks by being antagonistic to the US he elevates Russia, but no one wants to play his game on this end. The long-suffering Russian people deserve better than the gangster government they have, and attempting to deflect blame for life’s miseries via ultra-nationalism will not rescue a grossly mismanaged state. Given that he’s not exactly buff he should also keep his shirt on.

It is easy to understand resentment of American dominance, although this comes at the expense of no other country. Indeed in all of history there has never been a more benevolent world power. Since World War II the American military has kept the world at relative peace not only for the US but for everyone else, thus providing stability and prosperity. This has come at huge cost to the American people, and the US has the burden of carrying a load for the world in other areas as well. The American economy is still the engine driving the world economy, and if it sputters so does everyone else. Americans are also subsidizing the rest of the world in terms of innovation across the board, but particularly in health via new cures and drugs. For example, the Nobel Prizes in medicine has been awarded to more Americans than to researchers in all other countries combined. Eight of the 10 top-selling drugs in the world were developed by U.S. companies. With this, however, come all the development costs, which are largely born by the US market. So the US is hardly “leeching” on the world economy but rather is carrying a heavy burden.

But the extent to which American problems are displaced across the world can be overstated. The stock market dropped over 700 points this week not due to anything domestic but rather because of fear of defaults and economic collapse in Europe. So while markets crashed and even gold went down, where did money from around the world flow? To US Treasuries, for safety and security, actually driving down the yield. In this context the S&P downgrade of US debt from AAA makes no sense. True the government has to rein in borrowing and cut back on debt, but that process will work itself out. The momentum is all in the direction of cutting spending and debt reduction over time. The economy may be doing poorly at the moment, in no small measure due to the federal government, but this will be set right. After all change is coming; change you can believe in.

Written by georgesarant

August 6, 2011 at 6:04 PM