Kappa, if you've graduated with a mainstream economics degree, you could certainly use a remedial course in real (Austrian school) economics. Just make sure you can compartmentalise and play along with your employers' usual Keynesian crap while professing the free markets in private - just like Alan Greenspan does.
Start at
http://www.mises.org and go from there. A single book as introduction to Austrian economics is "Economics for real people" by Gene Callahan. The classic "Economics in one lesson" by Hazlitt is even simpler but you must already be versed in main concepts of economics, so you could skip it.
means only one thing - the dollar must fall further.
Could you expand on this topic? Very basically, the growth if indstry happens when capital increases and that happnes when people abstain forom consumption and invested savved resources.
The abstaining from consumption does not mean abstaining from buying - it only means that people buy less stuff to be consumed and buy more production factors - capital. So the government's policy of encouraging consumption and discouraging savings are patently wrong.
The US consumets were not saving but instead borrowing money for current consumption - a big no-no! The economy was growing nevertheless. So who the heck was providing the resources for both consumption and capital creation? Right - the foreign savers.
They sent us $500 billion a year worth of goods and materials getting dollars in exchange - current account deficit.
Those dollars they stored in the form of cach, US treasuries or invested back into US directly. So the capital account surplus compensated the current account defdicit and the dollar did not fall.
It would have been great if US used all those subcidies (I was rebuked fro using the word "tribute") for investment into capital, but instead we used most of it for consumption. As a result we lost major chunks of our production where there was foreign competition (cannot compete with free goods). What remains is very inefficient (that includes illiterale school grads, few technical grads, affirmative action, litigation, environazism and regulation) but can exist due to being subcidised and lack of competition - and would fall as soon as subcidies are removed.
The problem is that as of late few years, the majority of dollar buying was done not by private investors expecting to earn profit from US but by foreitn central banks colluding with their export lobbies and their export sectors. Those inflows are much less assured than normal market-driven investments can stop any time they decide they have enough of foreign reserves or that inflation imported from US is hurting them - like it does in China or did to Asia in 97.
The foreign investment numbers indicate that may already be taking place. If we keep shoving dollars at them and they are less willing to buy them and thake them out of circulation as they did - the dollar will fall.
Where would you think this money is going? There are two parts to the mechanism of fiat money creation in US. The Federal Reserve just prints money (by monetising government's debt). Then the fractional-reserve bank system multiplies that primary stock (within the fed-specified reserve requirements). So the fed and the banks both create money and that money would cause inflation if they were not taken away by foreigners in exchgane for real goods.
Now, if the fed prints more money and eases reserve requirements, that means the banks may create money (not backed by goods) and loan them out - thus driving another boom-bust cycle.
But if the businesses are not willing to borrow that money even at low interest - because they see no way to make profit in current anti-business envoronment - the money will just lay there in the bank. The banks will have deposits above minimum reserves but no takers - just like it happened in 1930s in US or like it is happening in Japan. Japanese are buying dollars - over $100 billion a year by printing yen but they still have deflation going because the money is not being loaned - and that is a good thing for them, whatever keynesians claim.
So with americans consuming more and forigners investing less, we may expect reduction in our stock of capital - and eventual drop in productivity and production and consumption. Also, not being able to export inflation we would have... inflation, unless the Fed clamps up and we get a mother of all recessions - which would be a good thing for an economy (as it would correct the past misallocations of capital) but not for administration in power.
Can Greenspan ensure inflation or receccion do not hapen untill after 2004 elections? Would the foreign central banks cooperate? Who knows.
Unlike Bush, Reagan did try to clamp down on spending and slowed it's growth considerably - especially non-military spending. Bush just increased spending - taking more resources out of the private economy, while reducing taxes. He basically printed money to buy stuff for the government and to give taxpayers to buy stuff too but there is no actuall srtuff to buy with that money - unless foreigners oblige and send us more imports.
Curiously, Bush is going out of his way (or at least pretends to, judjing by the latest Snow report) to dissuade foreigners "unfairily" giving us more cheap imports to back newly printed money - thus making sure that the tax refund money he is giving us can buy less stuff.
Bush has even less clue about the economics than even Rude here.
Which is not ment as a slander on Bush - none of the presidents over the past 100 years ever had a clue. Even Reagan was just reading aloud what Jack Kemp learned from Jude Wannisky who in turn got it from real economists - Arthur Laffer and Robert Mundell.
Kennedy was praised as the first implementer of "reaganomics" but he got his economic wits after visiting Ludwig Erhard in Germany and inquiring what made the "german miracle" work.
miko
