EROSION OF WEALTH August 9, 2011Posted by wmmbb in Humankind/Planet Earth.
The decline in the share market on Friday and again yesterday in response to the Global downturn, if not recession, affects most of us through our superannuation.Do we join the panic or stand transfixed in the spotlight?
Presumably companies will have less money to invest with consequent effect on employment and economic activity. And it seems to me that perhaps governments will be less inclined or capable of taking up the shortfall. There are sovereign debt issues in Europe and the United States.
In the latter case the dropping of the tax rates for the richest people has not had the effect of increasing overall economic activity, which I suppose was predictable. Chalmers Johnson’s prediction that the enormous military spending in the US, including the outflow to support the overseas bases and the attendant wars would eventually drag the economy down may be happening, although it has not gotten into the public consciousness. Equally, Kenneth Galbraith’s description of consumers seduced by the imagery of television to shop and consume is unlikely to work if the dominant emotion is fear combined with loss of discretionary income.
Come the circumstance, come the irony. South American countries, with new found independence, have it seems more room to move. They are, we are told, critical of the irresponsible economic policies in the North. Take the case of Argentina, according to Mario Osava published in Truthout:
In Argentina, the impact of the U.S. fiscal tightening will likely be a result of slower global economic growth and the subsequent drop in demand, according to Enrique Aschieri with the International Society for Development.
Argentina is much less vulnerable today after running up a trade surplus in the last eight years, he told IPS. The United States is now the fourth biggest importer of goods from Argentina, after Brazil, China and Chile, in that order.
“If the crisis affects us because we can export less, like what happened in 2009, we still have a large margin for inward growth,” he said, stressing the importance of the domestic market as an alternative for warding off the effects of the crisis in the industrialised world.
But in his assessment, the U.S. debt ceiling dispute, which thrust the world into unprecedented uncertainty, “is not a real economic problem, but a political issue,” because “the United States has no problem putting a ceiling on its debt, since it becomes indebted in the same currency with which it pays,” said Aschieri.
“The underlying issue,” he said, “is a coalition that has no problem exacerbating the inequality that has been growing in the United States over the last 30 years,” he said.
For the first time, the South American’s have both broken free of their oppressors, internal and external, and seem to become the economic teachers for the rest of us. Perhaps we could develop more trade links and reintroduce the teaching of Spanish.
Speculative flows in and out of the market, due to apparently trading on futures, do create the climate for selling with the result that bargain stocks can be picked up. So much for touted rationality of the market.
I could not remember at the time, but David Kaiser made the reference to Kenneth Galbraith.