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Two diverging economic worlds

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Interesting essay by F.W. Engdahl contrasting the diverging economic fortunes of the US and Europe on the one hand and BRIC and the East Asian economies on the other.
 
I read the article and it makes some interesting points. Then, I wander around that site a little bit more and found a lot of articles praising the situation in Cuba... at that point, I stopped reading since their credibility went down the toilette.
 
I read the article and it makes some interesting points. Then, I wander around that site a little bit more and found a lot of articles praising the situation in Cuba... at that point, I stopped reading since their credibility went down the toilette.

You're confusing Engdahl (the writer) with the site. The site just collects articles from different places. Engdahl has his own site (which you may like even less than globalresearch; I have no idea).
 
Despite the flaming rhetoric, his opinions are mostly fact-based, but missing the biggest factor of all. America's wealth in the 20th century depended on the wonderfully cheap and powerful source of energy that is oil. Whether or not you believe that peak oil is upon us already, there is no denying that to get the second half of the earth's oil out of the ground will cost a lot more than getting the first half out. Without cheap energy, will it still make sense to manufacture everything in China and ship it across the seas to the world's greatest consumer market? Steel production in the US increased 10% after oil prices topped $100/barrel, for example. As oil gets more expensive, things will be made closer to where they're sold because the energy costs will offset the labor savings. China's domestic market will need to provide the growth, but for how long will the government subsidize gas prices?

The developing world will have a harder time booming like the US without a suitable oil replacement. Oil producing countries will have it easier. Energy-independent Brazil should do well (plus they're closer to the US).

I am certain that the economics of the world will change a lot over the next 20-50 years, and I'm particularly concerned about inflation and the gov's debt, but I'd never be as doomsday as this essay.
 
America's wealth in the 20th century depended on the wonderfully cheap and powerful source of energy that is oil. Whether or not you believe that peak oil is upon us already, there is no denying that to get the second half of the earth's oil out of the ground will cost a lot more than getting the first half out.

Engdahl has a readable essay on the topic here. I'm not competent to judge whether what he's saying is credible or not. He also has a book out, titled "A Century of War," which looks at the oil politics of the 20th century. It's pricey but I found it informative.
 
Yea, his whole deal is that he believes in abiotic oil, that the earth creates oil deep within rather than oil being a fossil fuel. These views are not credible and somewhat moot (regardless of how popular the idea was in the USSR in 1950).

Here's a few posts from TOD with abiotic oil discussions.

http://www.theoildrum.com/tag/abiotic_oil

People can believe what they wish I guess. It seems all those evil hedge funds are driving up the cost of oil again!
 
More along these lines in an article at Asia Times:

... the ever-clearer global picture that is emerging from this crisis is that of a meaningful and historically rapid transition from the US as the traditional driver of growth and demand to the emerging markets, led by the BRIC countries (Brazil, Russia, India and China), as the new global driver.

As the US economy, the consumer and the financial sectors flounder, and as much of Europe follows suit, the emerging economies and markets are getting on with global trade, business and finance. This transition is occurring in spite of the predictions of many in the West to the contrary, and it is advancing much faster than most observers would have thought possible.

With US financing and the dollar in deepening trouble past the short term, and even at present, and with little or no viable and genuine signs of an economic rebound in the US, and with the bulk of the under-developed economies beginning to emerge from this crisis early, then we have the prospect of a world where the developed economies will likely continue to stagnate for years, where their currencies become ever-more prone to crisis, but where most of the emerging market economies return to healthy growth rates and where global investment wealth flows out of the developed economies and in their direction.
 
BRIC is thriving because it is A) in copycat mode, or B) because it has "position luck". Russia just has a zillion different commodities. As for BIC, they're all in copycat mode.

"What has America done in the past thirty years? Let's do now what they did back then!"

In the 80s, there was the scare that Japan was going to take over the world because its people had a much better culture, they were all smarter, yadda yadda yadda. Lost decade put the kibosh on that one.

The same exact thing will happen to the Chinese, and the same thing will happen to the Indians. They are not smarter than Americans, and nor are they better. To quote Simons:

"So what is it about these folks? Are they smarter? No, I don't think so. Sometimes I'll think so, but then I'll calm down and realize that isn't the case. But they are better trained. They're certainly better trained."

The reason China and India thrive is that they aren't good--they're cheap. China is the world's factory not because it produces quality widgets, but because of the China price. Similarly, software is much cheaper to write in India than here.

So therefore, China and India are absolutely *constrained* from doing anything crazy economically by the very virtue of the fact that if their people's standards of living want to improve, they will have to give up their competitive advantage of being cheaper than the US! If it was as expensive to buy something from China or India as it is in the US, they'd be nowhere fast.

So no, our standards of living here in the states aren't going down the toilet. Getting over this crisis isn't a question of if but when.

That said, the question of when isn't trivial.
 
This NYT article touches on how the US and Europe handled the financial crisis differently and how their fortunes may diverge as a result.
http://www.nytimes.com/2009/06/12/business/economy/12euro.html?hp

“The shock originated in the U.S., but Europe is paying a higher price,” said Jean Pisani-Ferry, a former top financial adviser to the French government who is now director of Bruegel, a research center in Brussels.

Almost from the beginning of the crisis, the United States and Europe chose largely different paths to aiding their economies. The most stark was Washington’s willingness to commit hundreds of billions of dollars to stimulus spending — in addition to moving aggressively to shore up banks and keep credit flowing — versus Europe’s worry that similar spending would increase inflation in the future.
Just as the policies pursued during the Great Depression have been dissected ever since by economists, the fate of the United States and Europe as the two regions emerge from the global crisis will be analyzed for decades to come.
 
This NYT article touches on how the US and Europe handled the financial crisis differently and how their fortunes may diverge as a result.
http://www.nytimes.com/2009/06/12/business/economy/12euro.html?hp

In my opinion it is not an informed article. The reporter hedges his bets by describing the problems of the US "stimulus" package towards the end of his article. The analysis -- such as it is -- is not incisive. Europe is in deep trouble, no question about it. But to talk of the US "recovering" shows ignorance. Recover to what? To the position of a few years ago? It's precisely the structural imbalances of a few years ago -- unwarranted rising property prices, huge current account deficits (which are lower now), steady outsourcing of manufacturing -- that have led to the crisis of today. Somehow the model in this ignorant reporter's mind is still that of a US economy that has temporarily fallen off the track but will soon be restored to its previous "growth." Both the Engdahl and Asia Times essays indicate this present situation is one of transition from a US-dominated global system to one where US hegemony is a thing of the past. I find them more credible.
 
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