... the Chicago Boyz blame that legislation and poor ol' George Harrison's (yes, that George Harrison) raising of interest rates (1931) for the Great Depression. I pray Stirling that our foriegn creditors contunue to excercise forbearance; and that Tim & Ben won't be faced with the Hobson's choice that confronted the Central Banker with the Rockstar name. I've always found Goldbugs strange creatures, but I'm not so certain anymore.

Stirling, how much longer will the World put up with our crap? Gold dinars, anyone??

as long as the alternative is world collapse. That's why this is strategy money: people are buying dollars because the alternative is much worse. As soon as they can decouple they will.

As Chalmers Johnson writes in his excellent book review of South Korean economist Ha-Joon Chang's book Bad Samaritans : The Myth of Free Trade and the Secret History of Capitalism

Alexander Hamilton, the first American secretary of the treasury and the man who coined the term "infant industry." Although he did not live to see it, by 1820 Hamilton’s 40 percent tariff on manufactured imports into the United States was an established fact. Hamilton provided the blueprint for U.S. economic policy until the end of the Second World War. The 19th and early 20th century U.S. tariffs of 40 to 50 percent were then the highest of any country in the world. Throughout this same period, it was also the world’s fastest growing economy. Much like contemporary China, whose average tariff was over 30 percent right up to the 1990s, neither American nor Chinese protectionism inhibited foreign direct investment but rather seemed to stimulate it.

In the early 1990s, I used the Bicentennial Statistical Abstract - Colonial and Historical Statistics, to plot out steel production, railroad mileage built, and coal production, against the various tariff regimes in the 1800s to 1920s. The results were very stark: low tariffs are strongly correlated with downturns in real production, and high tariffs are strongly correlated with increased in real production. Exactly like the leading American economist, Henry Carey, wrote in the mid-1800s.

Carey explained that the ability to import is based on the ability to pay. The ability to pay, in turn, is based on the earning power of the nation’s workforce. If the workforce has to compete against cheaper labor in other countries, then its earning power will be diminished.

Carey even anticipated the situation we find ourselves in today, noting in his time that as the nation's earning power diminished, the U.S. began buying imports on credit, creating a bubble of indebtedness that must sooner or later burst.

The world is still in the grip of nationalism, which replaced tribalism, as "civilization" developed. "Civilization" as a technical historical term means essentially the rise of cities — urbanization. Urbanization was made possible through agriculture, while tribalism is based on hunting and gathering. Through specialization of labor, urbanization became possible and then took off based on the efficiencies of competitive advantage (specialization). Through these efficiencies, the surplus value was able to finance organizational necessities like a professional military and eventually an artisan class with artistic patronage.

Over time but rather quickly in the scheme of things, trade among diverse states and even different civilizations developed, e.g., along the Silk Road, and the spice routes. This led to cultural contact, then influence, and then interpenetration. This is still where we are now, working out the kinks, before taking the next big step to globalization and a unified world — if we don't destroy ourselves first.

A nation was originally a people (Latin gens, from which we get English "genetic") united by blood and language. With the emergence of empire through conquest, these lines began to be blurred somewhat, but America is probably the only "artificial" nation to arise naturally. At least it is the largest. However, its people still relate to each other in terms of nationality, and this is of major significance for political economy. In fact, it is somewhat surprising how quickly Americans forget about their roots and feel no particularly string ties to them. The special relationship with the UK is not by blood, but based on commonality of language and institutions.

R. Buckminster Fuller was a contemporary exponent of globalism. He held that national borders were invisible lines drawn on the globe by the Great Pirates for their advantage, empire, colonies and exploitation. He proposed a World Game that to graphically portray actual and possible allocation of resources to show how a unified perspective of the world could lead to prosperity for all through design science, which would incorporate economics from a global perspective of distributive justice instead of a nationalistic one of beggar-thy-neighbor, as well as a continuation of the rule of the Great PIrates. In Operating Manual for Spaceship Earth, Bucky encourages humanity to think of humanity as the crew of a gigantic spaceship, cooperating to make the thing work as well as possible for all our sakes. It is an apt metaphor today.

I don't know of anyone who thinks that it is possible to go to a global economy overnight. However, if we don't start thinking in that direction, then the world will remain in the grip of nationalism, the effect of which is conflict, first economic and then military. At at time of crisis, the knee jerk reaction is to look backwards, while what is needed to transcend the crisis is to look forward. What got the US and the world into economic trouble is the continuation of nationalistic and imperialistic thinking and feeling that a time that globalization is underway. As a result, Greenspan could blame the crisis on a "global savings glut" instead of elite greed, assertion of privilege, and government not only turning a blind eye but also complicity.

Be it as it may, we are now at the stage were it's "everyone for himself" (the libertarian mantra). Naturally, the elite are in a far better position that others to weather the storm they created by drawing directly on the system that they commandeered for their own benefit, got drunk, and drove over a cliff. The rationale is that the elite are necessary because they are the ones who know how to execute, so they must be saved at all costs because if they go under, they will take the world with them.

On the other hand, workers are reverting to their own interests instead of supporting the companies that either no longer employ them or may not for very long. Demands are rising for labor legislation and protectionism in order to prevent further job loss.

Words like "free trade" are loaded. The connotation of "free" is "good." However, so-called "free" may be anything but free when it is analyzed. Generally the use of "free" in economics actually means to the advantage of today's Great Pirates, who organize the world favorably to themselves from behind the curtain. (Wall Street is now mounting the cry that to be deprived of their bonuses is "socialism.")

A better concept would be "open trade." Everyone benefits from open trade owing to competitive advantage and market allocation. However, for trade to be open, the game cannot be rigged to the advantage of elites, and regulations must be in place and adjustments made to deal with inevitable dislocations. It is unacceptable to allow people to starve in one place to "save jobs" somewhere else, or to support a disproportionate living standard. Moreoer, it is unnecessary. (See Paul Krugman: Protectionism and Stimulus-wonkish.)

The point is that economics is global because people and resources are global. American is founded on the ideal that all persons are created equal and have an equal right to life, liberty and the pursuit of happiness. The implication of this for political economy is that economics is indeed global and that that the rights of all must predominate, rather than the privilege of a favored few. (Is ethical capitalism possible?)

The US is a favored nation. Many interpret this as "favored by God," therefore "exceptional," and even "deserving" to dominate the world and monopolize its resources. This is simply the assertion of privilege.

Others would interpret the favored position of the US as a consequence of a variety of factors, including circumstance, the melting pot, a vast frontier, geographical isolation, and ruthless exploitation of other peoples, in addition to ingenuity and hard work.

Whatever. The fact is that the US is founded on ideals that are presumed universal. If America follows these ideals instead of pursuing advantage, then the transition to a prosperous world will be possible with minimum hindrance. If not, so much the worse for both American and the world.

The world now stands on the brink of the next step, beyond nationalism, empire and localized civilization. Human kind is stepping onto the level of conscious universality and "one people, one planet."

'Sometimes it becomes obvious that people pay for stupidity, assuming that intelligence will then provide the reply for free.'

I am so going to steal that quote....

:-)