Aug

16

Africa from outer space

Excuse me, but I have to butt in here.

I would like to clarify that "congressional acts" have been restrictive on the money supply. Read the first two sections here on excess reserves .

All the new debt issued by .gov is counter productive to QE, proportionally.

The Fed is far from running out of ammunition. One example is that a change to this act, in the wiki article, could remove the incentive for banks to store excess reserves at the fed. This would likely force this $800 billion into other assets.

More importantly:

On the subject of being optimistic I would like to remind anyone to study the important components of any decent growth model (the importance of the idea that is total factor productivity from the Cobb-Douglas function, the Solow model, the Romer model). For the very long run, the Principle of Transition Dynamics can provide a patient simpleton with riches. Generally speaking the fastest growing nations will be those with the lowest per capita GDP relative to their ability to acquire capital, investment, institutional reforms, and education. That has been true for a very long time, probably all of human history, and I can find no reason that it will not continue.

It is commonly stated that China has been the wealthiest country for 15 of the last 18 centuries. According to the McKinsey Quarterly, Africa (yes Africa), will have the largest labor force in the world by 2030. Vietnam and many South Asians are reforming. Vietnam's average age is under 25 years old, 28% percent of the population is urban, and they are urbanizing at over 3% a year. They are not alone in these very attractive demographics. Indonesia is arguably more promising in the near term. There is an inconceivable amount to be optimistic about. Would anyone here honestly claim that there has been more at any other point in history to look forward to? The World can and will grow without the United States; our humble pie has been baked and now lies in wait for us on the table.

If we must dwell on the what we are doing to ourselves in the U.S., I would like to point out that our unemployment rate at this trough is still better than that of France or Canada at their peaks. Those are two of the premier developed nations of the world.

Ken Drees comments:

If the incentive to park funds is removed, then a flood of available funds will be gushing into the hands of the public at most likely very low rates due to excess supply. And where does hot money go first–especially if business and housing are still on their collective backs? Stocks! So really why worry about deflation at all when it's obvious that a waiting flood behind a dam could at any time be let go.

You also seem to have optimism about large demographic countries and how our high unemployment mark is much better in respect to other countries. In contrast to this last night on Covuto, Donald Trump was most vocal about taxing chinese goods to the moon and taking all that revenue and paying off the deficit. He cited unfair business practices etc. Cavuto said "trade war," Trump said, "we need to get our best business people into positions of authority in regards to china trade policy and effect a hardline approach– after all the USA built them up to what they are now through buying their goods."

Change happens.


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2 Comments so far

  1. Andrew on August 16, 2010 3:33 pm

    With all due respect, the statistic about Canadian unemployment is patently false. A very simply check would reveal this.

    I do agree with the other assertions made in the post.

  2. Dan T. Vol on August 17, 2010 10:26 am

    At this point in mankinds’ history, isn’t “The” growth question be whether growth should be a value at all. Only a parochial tribalists with nose sto the disintegrating grindstone would care.

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