So now the steel industry wants a bailout. It was only a matter of time. Where did I hear this prediction? Hmm, let me think...
Well if newspapers, auto suppliers, general retailers, and an expanding raft of others get a piece of this magically self-perpetuating pie, why not steel?
The one thing I can't figure out is why world governments are so intent on thawing frozen credit markets; getting folks to lend and borrow again. Don't we all have enough debt and distressed collateral? Shouldn't companies and individuals instead be encouraged to save, pay off loans, and rightsize?
That is, unless money really doesn't have any meaning after all. In which case, let's just cut to the chase: have the government guarantee all loans, then default on all of them. So the dollar craters, so what? In comparison to what? The Chinese Yuan? Big deal.
China's economy is built -- like most Asian economies, an official policy pioneered by Japan -- on mercantilist principles of exporting everything you can, cheap, to the U.S. Unlike Japan, China relies on strong economic growth to placate its population.
It's a Faustian bargain where Chinese citizens acquiesce to autocratic control in return for a swift and steady improvement in living conditions. And where the U.S. outsources industries otherwise subject to rigid standards for pollution, occupational safety, consumer protection, and basic product quality in exchange for ever cheaper goods.
The U.S. will likely remain a stable society through all this. But China? Where are they going to send their lead-painted GI Joes and melanin-infused dog food? Their unregulated herbal supplements and vitamins? Their substandard steel, contaminated chemicals, bleached papers, shoddy clothing and wobbly furniture?
China long ago resorted to propping up the American dollar by buying Treasury bills to offset the titanic surplus of dollars in their trade account. If the dollar craters, so does the value of China's holdings. They cut our jugular, we cut off their balls. Somewhere Damocles is smiling.
And with Chinese social strife rising due to accelerating plant closings and no social safety net -- not to mention the existing poisonous tension between urban growth built on the backs of vast numbers of poor, ignored rural farmers and laborers -- China will be too busy quelling civil strife than to punish the West for its flagrancy. [Yes Dave, "V is for Vendetta" applies more to Beijing than London or Chicago. Always has.]
They'll be dropping bails of cash out of helicopters before this is over.
Pass the Soma!
3 comments:
"That is, unless money really doesn't have any meaning after all."
I'll admit that I don't know much about the economy (hello, Sam Cooke!), but I do know that money has not had any real meaning for a long time, ever since US currency was divorced from any correlation with actual value, i.e., the gold standard. We have a virtual economy, in which the Fed controls the amount of money in the system, and in which anyone who tried to "cash in" their currency at a bank for something they could actually touch, or put in a vault, would be arrested.
It's all numbers on a screen "just like pictures in a book," as Danny from The Shining would say. What's happening now is that economic reality--the Jack Torrance of this analogy--has now come calling with its axe, and we are lost in the maze.
Hey Dr. B: For somebody who doesn't know much about the economy, you summed up the currency situation better than I could using twice as many words.
How do you say "Here's Johnny!" in Mandarin? Just fake plastic trees...
You're kinda 'I told you so' kinda guy Philbony. How bout that for grammar Dr B?
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