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Economics & Economic Gaps
Change is the nature of things, whether economic, political, religious, or even genomic. It can be slow or abrupt, but it is always inexorable.

Our focus here is on how globalization is equalizing international wealth. Inter-nation trading on the world scene is not much different from that on Main Street Memphis, Paris, Shanghai, or Cape Town. We barter, we trade. We exchange. This is the essence of market economies. Beginning with the Industrial Age, the most ready and adaptable societies leaped ahead. It was truly a great leap forward to borrow a famous metaphor. If you were part of it, it was great. But there was a catch.

The real wealth, mineral and human wealth, was mostly beyond the borders of the leapers. The human trait of dominance—writ large—tempted the industrializing nations to organize empires to pursue wealth at the expense of nations less developed. Wars among empires erupted—leading to still greater differentiation. WWII was a turning point of sorts in that the new weaponry was used that could put an end not only to competition, but humanity itself. Polarization was the initial result with the have-nots scrambling to grow and/or become weaponized. The rules of engagement among the superpowers changed dramatically, including those of economics.
Months ago we posted commentary on the how the quick fix and short game vs the long game. Let's see how things stack up and what challenges lie ahead.

Which way is the economy going?
  • Very slowly up, after all pundits everywhere were predicting or fearing a new great depression.
  • The crisis that ensued arose from poorly regulated banking practices that supported a housing boom coupled with uncompetitive manufacturing led by automobiles. Not only has Detroit rebounded, but housing is now a generally an undervalued commodity compared with the rest of the developed world. Each can only get better.
  • Exports are moving up on a broader base. Not only is an emerging China buying more from us, but will consume more American high-tech goods in the future. They have become out third-largest trading partner, up some 50% over five years ago.
  • Oil imports are nearing 1995 levels. Natural gas production and vast new reserves are likewise easing the energy markets. Trade deficits have reduced by a third in five years.
  • Internet connectivity is not only changing the world, it too is boosting the economy by by expanding expanding exports.
If not trial and error, evolution is nothing. Without evolution, we could not be here. So does that make the stock market a matter of trial and error? It follows. And as John Cassidy points out in the 4 Oct. 2009 New Yorker, what can be individually prudent can be collectively disastrous. How can anything be good for each you and me but bad for both of us? And if that is really so, why is it so? These are the psycho-sociological questions of the hour that we turn to here. But first a bit of background.
From Wikipedia 18 Apr 2009 version:

Derivatives are financial contracts, or financial instruments, whose values are derived from the value of something else (known as the underlying). The underlying value on which a derivative is based can be an asset (e.g., commodities, equities {stocks}, residential mortgages, commercial real estate, loans, bonds), an index (e.g., interest rates, exchange rates, stock market indices, consumer price index {CPI} — see inflation derivatives), weather conditions, or other items. Credit derivatives are based on loans, bonds or other forms of credit.
Don't count on it.

On Oct 17 2008, during an employees-only conference call, a JP Morgan Chase fielded a question: “Chase recently received $25 billion in federal funding. What effect will that have on the business side and will it change our strategic lending policy?”
There is so much controversy over Treasury Secretary Henry Paulson's initial bailout proposal, we thought it wise to reproduce it here in its entirety. There is indeed no provision for congressional oversight. Reporting to Congress would be a formality, after the fact. There are no recommendations for how the financial system might be restructured to prevent future repeats. It does have a limitation of effect, but a continuing crisis could lead to time extensions. And perhaps most important, Sec 2b states: "The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation. " Some interpret this section as putting the Secretary beyond the law. In effect he would have legal immunity when carrying out whatever plan or actions he wishes.
Tariffs Weaken us Economically
Nov 2003
Revised Jan 2004
[Bin Laden must be cheering]

Nations apply tariffs (taxes) on goods imported from foreign sources for both economic and political reasons, too often the latter.
As of 22 Jan 2008 the national debt stood at $9.19 trillion.

Given the estimated population of the United States of 304,154,916, each citizen's share of this debt is $30,230.06 or about $121,000 for each family of four.

The National Debt has continued to increase an average of $3.14 billion per day since September 30, 2005! That is about $300 per month for each American. Something will have to give, and soon. The Stock Market's collapse at this updating, is at least a harbinger of things to come, even though sectors of the economy are in great shape.
Microcredit has huge potential to make an economic difference in our times. It already has, but it needs to be brought along. Some interesting links follow:
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Unemployment is not terribly high. NON-employment is. Somehow the Bush Administration has changed the calculations.
Economic gaps generate humiliation in have-not nations and alienation in have-not individuals. Together, these extreme features demean people to the point where terrorism becomes their only possible response. See Terror in the Name of God and Jessica Stern for why this is so.
Wide gaps in military spending exist among the cultures now in conflict. The Axis of Evil hardly appears on the radar screen. With a 57-fold "defense-spending" multiple over "The Axis of Evil", the US has nothing to fear militarily.
This page content has moved to Energy Policy
Historically, free-market economies have proven to be more viable than feudal or socialistic styles.
Economic gaps between people and between nations go with the very concept of free enterprise. Problems arise when gaps become too small to motivate individual achievement or so large that they provide motivation for extremist responses to terrorism on the parts of small groups and individuals. It is true that money is not the only motivator. Unless, that is, there is not enough of it. When gaps among nations become too extreme, trouble in the form of TERROR looms, as it has in our times.
Just as deceit deceives the deceiver, so also economic bullies see paper where tigers await. And it is related to the common human ailment:
Revised 15 July 2011

Each nation needs a national budget to do those things that are in the collective interests of all its citizens. Public safety, health and education are prominent needs. Funds come from the citizens directly and indirectly.
Considering the noise out of the White House, one would think America is on the verge of being overrun by its enemies. That is not even a remote possibility.
As Richard Feynman said in
"Lost Lectures"

Tycho Brahe had his supernova. And Kepler had his. Then there weren't any for four hundred years. Now I have mine! You know there are about a hundred billion stars in a galaxy--ten to the eleventh power. That used to be called a huge number. We used to call them astronomical numbers. Today it's less than the national debt. We ought to call them 'economical numbers.'
July 2005

A final solution to terror will involve many thrusts and changes.