"A telecom revolution wants to happen. It should have happened already. But its not happening."

I live 70 miles west of DC, capital of the free world, in a rural location. I have complained to the Virginia State Corporation Commission about Verizon twice this year. Six weeks of no dial tone so far this year. The repair people say DSL will never happen at this location. The only recently arrived At&T cell tower will give me slightly faster service than dial up for $60. a month. The satellite services are just as expensive.
Republicans are in charge. Screw the margin, take the most from the center. And the mess they are making will destroy our imperial delusions. We are running thru that trip mercifully fast.
Hopefully a telecom revolution will be resumed in Jan 09 and a green tech one too.
From a 42.5Kbps connection due to Verizon's crap copper wire.
But there is a nice view out the window.

How does this model work?

Henry C. K. Liu explains:

During the Clinton administration, Robert Rubin, widely regarded as the father of the strong-dollar policy, declared his aim of a strong dollar soon after his appointment to the Treasury in January 1995. Rubin understood that a capital account surplus is the answer for a current account deficit, based on economics worked out by Martin Fieldstein in the Ronald Reagan administration. A strong dollar is key to this capital account surplus/current account deficit strategy, which has come to be known as dollar hegemony.

The policy exploits the instinctive penchant of other countries to make export gains from an undervalued currency. The United States would open its huge market to the exporting economies of the world and force them to finance the resultant US trade deficit with capital inflows from the exporting economies. A strong dollar ensures the appeal of US companies to overseas investors and thus aligning global support for a strong dollar. Dollar hegemony forces the central banks of US trading partners to hold their dollar trade surplus in US bonds and assets, if they want protection from speculative attacks on their currencies. A fall in domestic currency will cause domestic interest rates to rise, and make dollar loans more expensive to service and amortize.

As US domestic demand skyrocketed in the late 1990s, the 30 percent rise in the trade-weighted dollar between 1996 and 2001 helped keep a lid on domestic inflation and kept dollar interest rates low, even as the Fed began to hike the Fed Funds rate target to preempt wage-pushed inflation caused by structural full employment (at 4 percent unemployment). While US companies managed to attract overseas investors with low yields that translated into high yields in their own home currencies by a strong dollar, the inflow also financed the merger/acquisition mania of US companies that made the resultant entities fiercely competitive global giants.

The budget surplus of the Clinton years did not slow down inflow of funds, which readily went to finance mergers and acquisition and initial public offerings (IPOs). The easy money and credit milked from the backs of underpaid workers in the exporting economies enabled the US economy to venture into new technological fields, such as digitized telecommunication that spurred the dot-com fever, structured finance that gave birth to the hedge funds industry, and all manners of financial and accounting acrobatics. Wealth was being created as fast as the United States could print money, with little penalty of inflation. The rest of the world was shipping products they themselves could not afford to consume to US consumers in exchange for papers of the US financial system that in turn feeds US consumer power with debt.

A new economic sector called financial services came into existence. This was the true meaning of the slogan "a strong dollar is in the national interest". Dollar hegemony allowed the United States to levy a tax on the rest of the world for using the dollar, a fiat currency, as the reserve currency for world trade. The livelihood of the world's workers came to depend on US consumers' appetite for debt sustained by loans from the underpaid workers' own governments. Neo-imperialism works by making the world's poor finance the high living of the world's rich. It transcends the Marxist notion of class struggle and surplus value. In neo-liberal globalization, not just labor but even capital comes from the exploited.

What the Wall Street Journal calls mass capitalism would not have been half-bad if it were not for the fact that the hard-earned capital was squandered through fraud and Ponzi schemes. These new ventures financed by fund inflows did strengthened the US economy at first. But as the real economy in the United States did not grow as fast as the inflow of funds, because fewer and few things were being produced in the US, the excess funds soon channeled toward manipulation and fraud on a massive scale, resulting in financial scandals such as LTCM, Enron, WorldCom, Global Crossing, and thousands of less-known bankruptcies.

Much of the disaster came from the smoke and mirrors of so-called financial services, based on minute technical quantitative advantages that seem benign by themselves, but can accumulate into huge profit or loss in hundreds of billions of dollars on the turn of a penny. Hundreds of billions of dollars of investment and credit went up in smoke from fraudulent schemes perpetrated not only by management under the coaching of ever-enterprising investment banks, but also with the active, knowing participation of the banks, robbing workers and retirees the world over of their pensions and life savings.

Domestic jobs in the United States were eliminated by the millions and shipped overseas, while overseas workers were told to be thankful for inhuman wages and sweatshop conditions that at least warded off starvation. Instead of confessing their regulatory failings, US officials such as Alan Greenspan of the Federal Reserve took comfort in the role derivatives played in allegedly smoothing over massive financial shocks in the system, making the damage longer-lasting. Falling wages and worker benefits were cushioned by the wealth effect from speculation by people who could not afford the risk. Now that the US economy is trapped in a prospect of decade-long slow growth with a pending onslaught of deflation, and the hollowing-out of blue-collar manufacturing and white-collar high-tech sectors, Greenspan has told Congress that the threat of deflation remains "remote" and that thinking jobs are better that doing jobs.

What Greenspan told Congress makes perfect sense in the context of a new strategy for an American empire. The hollowing out of America's manufacturing and digital sectors becomes a compelling rationale for US control of the world to protect its offshore sourcing. After all, wars have been fought to protect the supply of oil in places where nature has placed it; why should the United States not fight to protect where the "free" market puts its manufacturing and data processing? In this strategy, the US needs only two things: a powerful military with instant power-projection capability everywhere around the globe, and dollar hegemony to print dollars that can buy all the things that the world makes for export to the US. The British Empire was rationalized by the need of Britain to import food as domestic agriculture became crowded out by industry. Similarly, the US Empire will be rationalized by the need of the United States to import manufactured goods as domestic production is crowded out by financial services.

There are only two difficulties with this grand strategy: 1) to build the ideal empire, US workers will have to be retrained for the service sector and large numbers of both blue- and white-collar workers will fall through the cracks - and that creates problems in a democracy; and 2) the rest of the world is not stupid and may not take it lying down. So freedom and democracy at home will have to be modified in the name of homeland security and foreign resistance will have to be crushed in the name of freedom and democracy. The "war on terrorism" is tailor-made for this grand strategy.

full article
Henry C. K. Liu
America's Selective Strong Dollar Policy
Asia Times Online-August 14, 2003

The United States would open its huge market to the exporting economies of the world and force them to finance the resultant US trade deficit with capital inflows from the exporting economies.

The exporting countries would be forced to repatriate the dollars to avoid increasing their money supply and importing inflation. Their buying US debt would have the neutralizing the creation of gobs of fiat money. The Bush Administration picked up on this game of expanding debt financed from abroad and canned the underpinning of the strong dollar, apparently on the idea that military power was sufficient to guarantee the system, so that debt expansion was essentially infinite in potential. "Deficits don't matter" and apparently neither did the national debt. Interestingly, if it hadn't been for the financial fiasco resulting from the Fed's bailouts that led to asset bubbles, they might have pulled it off. And it is still possible that the oil barons and Asian SWF's may bailout the US, at the price, of course, of turning many of America's choice assets into rent-producers for them.

If it had worked, the US could have also increased its exports, taking a larger share of the global pie, while putting enormous pressure on Europe to reduce its social spending. After the Soviet Union fell and China compromised its socialistic principles, only Europe remained as a stark and successful contrast to the growing dominance of the US corporate sector economically and politically. BTW, this battle is still being waged as we speak. The strong euro is a blessing and also a curse. As the riots taking place in France go to show (which are turning into armed rebellion), imposing Reaganism and Thatcherism there isn't going to be as easy as it was in the US and Britain.

If this is Ian's position, he should attribute it to Liu, who sees evil in the simple banalities of business. All I see is the confluence of factors, inflated into a policy by a gasbag.

http://mauberly.blogspot.com/

The flip-flop itself is a tale of two Bernanke’s: On the afternoon of August 7, the Federal Reserve chair was an inflation hawk -- according to the unchanged FOMC policy statement -- fearful of adding liquidity to the markets. By day’s end on August 9, however, he was leading the liquidity charge, initiating a process that would help unlock the credit seize-up that started in late-July.

Why the 180?

Using the Freedom of Information Act, Ken Thomas, researcher and lecturer at the University of Pennsylvania’s Wharton school, was able to get Bernanke’s calendar of phone calls and meetings at the time the flip-flop occurred. He found that a day after the Fed’s August 7 decision to keep rates steady and maintain a focus on inflation worries, Bernanke received a phone call from Citigroup’s Robert Rubin, the Wall Street powerhouse and former Clinton Treasury secretary. Thomas does not know the content of the Rubin call, but subsequent calls and events suggest that Bernanke rapidly changed his mind on August 8 and 9, after which he began steering the Fed towards a series of massive money additions to the banking system.

According to the Bernanke logs, a 5 p.m. Rubin call on August 8 was followed by a 7:30 a.m. next-day breakfast with Bush Treasury man Henry Paulson and an 11 a.m. meeting with legendary mortgage expert Lou Ranieri. (It was Ranieri who pioneered mortgage-backed securitizations, the very bonds that were collapsing as a result of the subprime mortgage virus that had already begun infecting the financial system.) At 2 p.m. that day the Fed chair met with Ray Dalio, head of Bridgewater, the fourth-largest U.S. hedge fund, along with other hedge-fund magnates. At 4:30 p.m., Bernanke was on a conference call with his fellow FOMC members, undoubtedly to discuss a Fed change of heart.

In fact, over the next few weeks, Bernanke participated in no fewer than thirty-five separate conference calls with fellow Fed operatives -- a complete departure from his earlier no-conference-call style. And he got the liquidity ball rolling. As we now know, the Fed started pouring liquidity into the system on August 9. Then, on August 17, it slashed its base discount rate for member-bank loans by 50 basis points. Finally, on September 18, it enacted a shock-and-awe liquidity-adding half-point drop in the federal funds rate.

The Bernanke narrative is based on the incidence of calls and meetings, and not the actual content. But it seems clear that Rubin started a chain reaction on August 8 -- only one day after the Fed’s disappointing, hold-the line policy decision that so disappointed financial markets and intensified the credit turmoil. Essentially, the academic Bernanke became a hands-on market participant through his contacts with Rubin, Paulson, the hedgies, and others. He reached out to savvy financial-market players who put him in touch with the real world. He then embarked on a 5-week journey that shook world credit markets out of their financial panic and started the healing process that continues to this day.

http://www.cbsnews.com/stories/2007/10/08/opinion/main3342757.shtml

Essentially, the academic Bernanke became a hands-on market participant through his contacts with Rubin, Paulson, the hedgies, and others. He reached out to savvy financial-market players who put him in touch with the real world. He then embarked on a 5-week journey that shook world credit markets out of their financial panic and started the healing process that continues to this day.

Snap.

you're probably right to be cynical about Bernanke. He's no healer; he's a heeler in that he heels to Wall Street. S'a find hound who wants to please.

http://mauberly.blogspot.com/

Wall Steeet, Like the City of London is a necessity. It's not evil. The Fed had better listen to Wall St. Where else is there such financial expertise?

got confused. They thought financial wealth was real wealth for a country. Keynes had a lot to say about the City, and most of it was uncomplementary. A financial sector makes a great servant, but an awful master and wil now need to be brought to heel.

that noted that economic growth and growth in the financial sector was tied to the energy sector. That so long as the ability to grow energy at 3% to 4% per year, then the economy and the financial sector could likewise grow. He noted that it was an illusion that the finance sector did anything, and that it just so happened that monetary policy and targeted growth rates coincided with the energy sectors ability to extract oil at the requisite rates of growth. He is the same individual who predicted that the United States would reach peak oil in the early 1970's and that the world would reach peak oil in the mid 2000's. At the point of peak world energy, he noted, that the energy sectors and the economy and financial sectors would diverge.

Which leads me to another question for Ian. The Classical Liberal model of which the Left and Right are yet a part, (as there is no true conservative in the United States - only two wings of Classical Liberalism) are wed to the notion of forever growth.

The question I have is, can such a Liberal vision ever possibly be sustainable? Since the rise of all persons in equality, progress, learning, it was all built on this edifice of growth and expansion. If the growth ends, indeed goes into a period of contraction to give the planet some breathing space, is this the death of Liberalism.

And then, with what do we replace it.

to growth are technological--or, if you will, based on the means of production. I don't see that there is any theoretical limit to growth. But there is a practical limit to growth based on carrying capacity (including ability to handle refuse like greenhouse gasses).

Imagine, if you will, if we had real solar power and real hydrogen fuel cells based on water, plus nanotech fabricators.

What's the world's carrying capacity then?

But, as it happens, in such a world, liberal politics and economics wouldn't work either, because they are a solution set for the problem of scarcity.

In the medium term, I want to see energy turned from something we dig up, to something we manufacture. Something that is capital, not a resource. This is necessary, among other things, to allow for even prosperity again and for all boats to rise. Right now growth can't be allowed to exceed oil supply by more than efficiency gains or we get out of control inflation. So money needs to be spent where it doesn't generate too much demand for increased energy.

We need to break that if we want everyone in the world to have a chance at prosperity.

We also need to break the "dump" problem, but fixing the energy problem in the right way will go a long way.

Just doing this won't break the tradition of liberal politics, but it will modify it signifcantly.

He watched Cramer on CNBC ;)

It always looks like it just happened.

The really successful people are always lucky right!

Citi just the other day. A single plane trip and $11 billion.

teachers.

"As if by magic, the teacher in Mumbai or Delhi draws algebra equations on Hall's computer screen, while Hall struggles with the solution over the Internet phone connection.<,i>"I could never afford real tutors in Manhattan," he says."

I guess he can't turn MathCad on.

http://mauberly.blogspot.com/