Hi Guys
Read this interesting commentary on where the world or in particular where the West maybe going to.
Regards
Read this interesting commentary on where the world or in particular where the West maybe going to.
On the cover of one of this week's newsmagazines is a story about China. It is the world's second super-power, the piece tells us. We don't doubt it. But now our little system of connected thoughts has turned into a galaxy. We look all the way back to the 18th century...when Britain and America stole a march on the entire world. While the Chinese were still tilling their fields with wooden hoes, the Anglo-Saxons were building mechanized looms...and steam engines...and then railroads...and skyscrapers...and airlines. They worked like mad...saved their money...and built up a base of capital that sent them racing far ahead their potential rivals. The Chinese...the Indians...there were vast groups of the world's population that had plenty of manpower. What they lacked was capital, know-how and a market culture that rewarded risk taking and innovation.
The British pushed their advantage around the world. By the end of the 19th century, a quarter of the map was pink - indicating the British Empire. But then came a "fat tail" event - WWI. And Wilson began talking about democracy and independence. And then the colonies wanted their independence...and the empire was soon too expensive...and too difficult to hold onto. And so America stepped in...with a new kind of empire...a soft empire of good intentions and bad economics. Now it is America that bears the costs and comedy of empire.
Under cover of the new Pax Dollarum, the whole world began to industrialize. The Chinese found they could build factories, too...better ones. Newer ones. Cheaper ones. They could save too. And work hard. And soon the whole world economy was globalized. In the new division of labor, the Anglo-Saxons borrowed and spent, fixing up their houses and selling them back and forth to each other...and the Asians saved their money and invested it in factories. And now, Alan Greenspan can no longer control his own economy. He can lower interest rates in the United States...and the Bank of England can cut them in the United Kingdom...but the results are no longer what they hoped for. Cheaper money consumers to spend money, but the stimulus ends up benefiting producers in China, not consumers at home. The more Americans consume, the poorer they become...and the more the factories of Asia reduce their unit costs and expand still encourages their market share.
With less money to spend, the consumer economy can no longer keep up pretenses. Greenspan is trapped. He needs to "normalize" rates to encourage saving and investing, otherwise the economy cannot really grow in the future. But he needs to lower them too; otherwise the economy might collapse now.
Eventually, the jig will be up. Old empires of the Anglo-Saxon world - England and America - will pass away, like empires always do. They will realize that they cannot continue living in the past...or at the standard to which they have become accustomed. This should not bother you, dear reader. Americans will still find jobs...perhaps as tour guides to groups of Chinese taking in the sights in North America.
But it's the fat tails you have to watch out for. Empires do not always die gracefully.
"You have two choices," Genghis Khan said at the gates of Samarkand. "You can submit to me...[I will only take your wealth and sleep with your wives and daughters]...or I will kill you all."
The British pushed their advantage around the world. By the end of the 19th century, a quarter of the map was pink - indicating the British Empire. But then came a "fat tail" event - WWI. And Wilson began talking about democracy and independence. And then the colonies wanted their independence...and the empire was soon too expensive...and too difficult to hold onto. And so America stepped in...with a new kind of empire...a soft empire of good intentions and bad economics. Now it is America that bears the costs and comedy of empire.
Under cover of the new Pax Dollarum, the whole world began to industrialize. The Chinese found they could build factories, too...better ones. Newer ones. Cheaper ones. They could save too. And work hard. And soon the whole world economy was globalized. In the new division of labor, the Anglo-Saxons borrowed and spent, fixing up their houses and selling them back and forth to each other...and the Asians saved their money and invested it in factories. And now, Alan Greenspan can no longer control his own economy. He can lower interest rates in the United States...and the Bank of England can cut them in the United Kingdom...but the results are no longer what they hoped for. Cheaper money consumers to spend money, but the stimulus ends up benefiting producers in China, not consumers at home. The more Americans consume, the poorer they become...and the more the factories of Asia reduce their unit costs and expand still encourages their market share.
With less money to spend, the consumer economy can no longer keep up pretenses. Greenspan is trapped. He needs to "normalize" rates to encourage saving and investing, otherwise the economy cannot really grow in the future. But he needs to lower them too; otherwise the economy might collapse now.
Eventually, the jig will be up. Old empires of the Anglo-Saxon world - England and America - will pass away, like empires always do. They will realize that they cannot continue living in the past...or at the standard to which they have become accustomed. This should not bother you, dear reader. Americans will still find jobs...perhaps as tour guides to groups of Chinese taking in the sights in North America.
But it's the fat tails you have to watch out for. Empires do not always die gracefully.
"You have two choices," Genghis Khan said at the gates of Samarkand. "You can submit to me...[I will only take your wealth and sleep with your wives and daughters]...or I will kill you all."
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