House of Paine

seeing it all at a glance

 eve:

 back in the late
70's
  when i was 
   contract teaching
        at columbia  
bob mundell joined 
        the faculty 

bob was soft as a soaking peach
  by then 

but ..... 


==========================


  
once 
when i'd said 

'but u're
 assuming something unreal bob 
u're assuming 
    a closed system  "

he reminded  me  
through a  murbly grin

  " but eve ....
   there is a  real closed system...
                                the world "

too bad 
  not enough of uz
 spend 16/7 pondering that tid bit 

take old krug....the other day

mired in a trifeca of points 
over china's re-val :

he claims a rising yuan 

" could be the start of a process 
that will turn the world economy
 upside down
 - or, more accurately,
 right side up" 

------- what ?
  we bin flyin with our crack up...

he explains .... -----------

"That is, the free ride 
China has been giving America
 in which the world's richest economy 
has been getting cheap loans 
from a country that is dynamic
 but still quite poor
 may be coming to an end"


-------  so thats  wrong side up?

             oh really ?

answer me this of jb clarkheimer 

then who oughta be 
the global  buyer 
            of last resort
       in a right side up system?


who should fill
 the  global effective  demand gap ?

the euro's ?

a bundle of low credit third raters ? 

or have you forgotten
the whole system may be better off 
if it lends to uncle and he spends what they lend 
or better he buys first 
   "put it on my 
imperial credit card  "

and as to a surplus trader lending 
back to the deficit traders 
well thats how you keep running a surplus
rich or poor ask the nips 
worked pretty good for them 
over the years  ......

he goes on ---------------

" It's 

  ---(the rightness or wrongness
     of the global system )----
   
 all about which way the capital is flowing"
 
 -----   he pontificates  ....
with out splitting the capital into

 private nvestments in real
foreign  things 
like production plants or 
oil drillings 
  and portfolio purchases
  of paper entitlements 

and up to here
 he does even mention 
public vs private paper buying ----------

"Capital usually flows 
   from mature
 developed economies 
to less-developed economies
 on their way up"

  only a few years ago .....
 

"  before the world financial crisis
 of 1997-1998
 capital movements 
seemed to fit 
the historic pattern
 as funds flowed 
from Japan and Western nations 
to "emerging markets"
in Asia and Latin America" 

---------and it still does 
if one is talking aboutthe right capital
  real private productive nvestment capital -------


"But these days 
things are running in reverse:
 capital is flowing 
out of emerging markets
 especially China
 and into the United States"

------which if that flow is larger only means

the value of
  the present 
  global systems macro effective demand 
imperial deficit 
 exceed the systems directtransnational  investments 

does it seem
intuitively  surprising 
that these two  capital flows 
 would run in opposing directions
one up while the other is down

not if you're at least a  keynesian ....------------


 
"This uphill flow
 isn't the result 
of private-sector decisions; 
it's the result of official policy"

------ ahhh one  distinction is 
 now mentioned
the other is implied 

   private sector flows 
  of direct investment 
remain"right "

 its the gub flubbers
trans oceanic paper asset 
    shuffles 
that make the aggregate 
 have a wrong  net flow direction
   to 
our st pauli girl --------

---- but now he s
jumps to a why ? -------------


------and  ho ho ho

he knows why ...------

 "To keep China's currency 
from rising 
the Chinese government
 has been buying up 
huge quantities 
of dollars
 and investing 
the proceeds in U.S. bonds" 

------- to maintain their competitive
trading  edge globally
  to increase their foreign market 
    penetration 


is this....irrational ? ------------

"One way to grasp 
how weird this policy is 
would be to think about
 what a comparable policy 
would look like 
in the United States
 scaled up to match
 the size of our economy"

------- no no no no 
 of course that 
 makes  the  han -ers 
  policy seem crazy 
by showing what
 it would look like 
if we did it

problem:
 
 china's global market position
 is the  exact opposite 
of UNCLE'S   
 IMPERIAL THRONE position ----------

 SO SAYING 

 "It's as if last year 
the U.S. government
 invested $1 trillion of taxpayers' money
 in low-interest Japanese bonds
 and this year looks set
 to invest an additional $1.5 trillion 
the same way "

IS PURE  miss leading mind fucking
                           BALDERDASH...-------




"Some economists think 
there is a deep rationale 
for this seemingly perverse policy"

---yes and you  just gave it
a low yuan means sharp foreign 
market penetration
and sharp domestic investment penetration

first world surplus capital
  flows in to han ville 
to build  
       domestic plants harbors etc etc etc
 low yuan means nice 
 opportunities
for foreign private  capitalist  investors   --------

" I think it's something 
the Chinese government 
stumbled into 
as it tried to protect itself 
from the 1997-1998 crisis
 and it is reluctant to change
 because the Chinese economy
 has been doing well
 That is, China's leaders
 don't want to mess with success"

----- point blank
krug 
are u saying they are wrong ?

                              -----


"But pressures against
 China's dollar purchases 
are building
 By keeping the yuan down
 China is feeding 
a trade surplus"

----- oh so u agree 
it has
 a good  effect 
only is not susainable

well
 selective export taxes 
could curb those  trade problems 
while  still allowing the low yuan
bargain basement  sale 
  of  han labor 
       to build domestic
 plant and infra structure -----------

" that is creating 
a growing political backlash 
in America and Europe"

-------- like
  high oil prices 
and  kool jap cars ....
        with  finesse 
      it can be
         sailed thru 
     and will .... -----------

----now he really throws a stink ball ----------

 " China
 which is still a poor country
 is devoting a lot of resources 
to the accumulation
 of a basically useless pile 
of dollars 
instead of 
to higher living standards"

------- oh so a policy
which fuels
china's
 first world 
  trade surplus 
and its domestic investment boom
 is a loser strategy???


isn't 
it the proven
 dynamic means 
 to a higher  growth path ?????

  letting the yuan blow up will
help the han people  ????

 okay show me where thats proven ????----------

-------------------------------

now he 
jumps  to his real subject 

bush bashing scary story telling 

so u can stop here
 but only 
 if you got my  main early point

about nations serving
as global  buyers of last resort


they  pay for themselves 
when there's slack in the world production system

by stimulating  global production 

in a world slump like 2001 
they induce more output 
by far  
 then they drain off

ala any gubs fiscal deficit spending
     in a slack system will
the critique

only the  credit worthy 
 can play the lead role 

fantasy deals where a world bank loans
say 300 billion to low end nations 
to boost world out put
which would work as well

     okay check the national analogue

 what happens

do we up  domestic make work 
and hand outs

no we cut ricjh guys taxes
and 
 up tick 
  military spending ------------                            
--------------

ps more kruggles duncery:


"The question is 
what happens to us 
if the Chinese finally decide
 to stop acting so strangely"

------ scared kids ??????-----------

"An end to China's 
dollar-buying spree 
would lead to a sharp rise 
in the value of the yuan
 it would probably also lead 
to a sharp fall
 in the value of the dollar
 relative to other major currencies
 like the yen and the euro"

---------okay some turbulence  but -----------
 
 "This would help
      U.S. manufacturers
 by raising their competitors' costs"

------------- great!!!!!!!

                but ----------------

" if the Chinese
 stopped buying 
all those U.S. bonds
 interest rates would rise
 This would be bad news 
for housing 
 maybe very bad news
 if the interest rate rise
 burst the bubble"

---------oooooohh scary scary -----------


"In the long run
 the economic effects 
of an end 
to China's dollar buying
 would even out
 America would have 
more industrial workers 
and fewer real estate agents
 more jobs in Michigan
and fewer in Florida
 leaving the overall level 
of employment
 pretty much unaffected"

----- breezy set up fans for .....-------
 a double but -------------------

 "   But 

    as John Maynard Keynes 
pointed out
 in the long run we are all dead "

-------------- my lord 
can we  at last
  move on to another keynes line 
       one that doesn't expose 
his  fruits vivid sense 
  that  now is the only 
    for ever we  queers got ----

"In the short run
 some people would win
 but others would lose
 And I suspect 
that the losers 
would greatly outnumber 
the winners"

-------- what tells u
       even 
 in the long run  
the won loss score 
 will reverse ??

wagery u lose today
but you'll make it up

aaaahh in the long run

 an earthly  heaven 
is  where your grand kids 
  will have their jobs 
 ----------------


"And what about
 the strategic effects? 
Right now 
America is a superpower
 living on credit"


-----  hhhmmmm --------- 


 "something I don't think 
has happened 
since Philip II ruled Spain"

---------- my my my 
what u don't really get 
about the "zyztem"
  is a wonder to me 
             pauli wog --------------


 " What will happen 
to our stature 
if and when China 
takes away our credit card?"

------- if it were possible 

that  no one else came up

 with a new card offer

i'd say....
1929 all over again 

    but hey
   uncle's not there yet

cards will show in the mail aplenty ----------------

"one of these days 
Chinese dollar purchases 
will trail off
 and we'll find ourselves
 living in interesting times" 

-------oh paul paul.....
          would that 
             that were so ------------