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1 dragonfire1981  Sat, Jan 21, 2012 8:19:51am

You and Posen make good points. I agree there could potentially be conflict over resources. There are good alternatives to fossil fuels out there that we could hopefully choose to implement instead of say, nuking the Middle East.

The problem is that as oil becomes scarcer (and it will) its already inflated price will skyrocket even more, further benefiting those who already benefit from lack of alternative fuels.

Water is more interesting. I would like to think if more effort with building efficient treatment and purification facilities we could deal with the problem without need to pick up arms. But I also realize there's a good change I am wrong.

I agree America will lose its dominance and you can thank politicians who have zero foresight whatsoever. The GOP may bitch about China, but the Chinese are already preparing for what's coming while some in this country are happy to pretend it isn't.

2 researchok  Sat, Jan 21, 2012 8:43:45am

I read this and waited a bit before commenting.

I believe your assessment is on track-

...if Posen is correct - and no doubt there will be some who disagree with him - and globalization continues then more of the social fabric of the old US will be torn, and many Americans won’t like that.

My concern is this. If there is indeed a social upheaval, there would be a sizable number of people (reactionaries) who would fuel an even bigger underground economy and put pressure on gold and other metals.

From where I sit, that would be disastrous for the economy overall. Even worse, it is hard to imagine politicians who won't exploit those uncertainties and fears.

How do you integrate this new economy without instilling fear? Can it be done without cataclysmic upheaval?

3 Charles Johnson  Sat, Jan 21, 2012 9:45:19am

By the way, the reason why the MP3 won't embed is because there's a small bug in the URL linking regex that I haven't had time to fix. It happens if there's another link before the MP3 link in the post. If you move it to the top of the post it will work... I'll do that for you.

4 freetoken  Sat, Jan 21, 2012 6:55:03pm

re: #3 Charles

Thanks.

5 Prideful, Arrogant Marriage Equality Advocate  Sat, Jan 21, 2012 8:42:32pm

This post should win a prize.

6 Bob Levin  Sat, Jan 21, 2012 9:21:18pm

This is nicely done, but I think I'm going to disagree in a few places. The problem, or feature, is that your argument is pretty tight--meaning that an adjustment to a fact or projection or two, could change the entire picture.

First, it's entirely logical that as countries repaired themselves after the devastation of WWII, competition would increase--which is another way of saying that American economic hegemony would decline. By itself, this would not lead to volatility. However, the fluctuating demand and supply of certain raw materials would cause less certainty, less predictability--which is another way of saying volatility. Included in this uncertainty is the invention of new materials, the continued technological innovations, and the real life ability of people and nations to adapt. In other words, prediction past a certain point is just not possible. In fact, it's not even possible to identify the point.

Second, I'm not sure that a good analogy can be made between the present and the world economy of the 1870s. There are key differences--such as a much much better understanding of finance and the growth of the state in various forms, all of which end up as a regulatory mechanism for each national economy. The regulatory function of national governments is not going away, and may increase.

Third, the next election might be a huge disappointment for anyone expecting a rise in Tea Party sentiment, as these guys could easily get clobbered. In fact, I expect this to happen. If the Democrats are able to properly frame the real issues that face us, then the Congressional election of 2014 might result in the entire Republican party becoming marginal. This is also a possibility, equally as compelling as your hypothesis.

And finally, the participation rate in the economy is based on a fixed technological state, and we all know that the technological state of being is far from fixed. Therefore, as it is possible to have another technological revolution (and certain world events and inventions point in this direction), it is also possible that the participation rate will increase in ways that are presently unexpected.

Anyway, so you see how a little tweaking here and there changes the entire picture.

7 Prideful, Arrogant Marriage Equality Advocate  Sun, Jan 22, 2012 1:31:46am

re: #6 Bob Levin

I completely agree with you.

8 freetoken  Sun, Jan 22, 2012 3:39:25am

re: #6 Bob Levin

Third, the next election might be a huge disappointment for anyone expecting a rise in Tea Party sentiment, as these guys could easily get clobbered.

No doubt, the next American election can be seen now, 10 months prior, as turning either way, and the Tea Party-ing GOP may very well fall on its face.

But Posen is addressing how the world economy is changing in the long term, and increased volatility between and inside of nations can play out in many, many ways and the actual path taken may be finely tuned to many parameters. What Posen presents is that such changes, without describing their end state, increase in magnitude and frequency (hence increased "volatility"). Thus the Tea Party folk gaining power one election (2010, sort of in the House) and then losing devastatingly in the next is indeed volatility.

More to Posen's point - it's all about geopolitics, and how the US will be more constrained in the number of options available to us on the world stage. We already see that with the current administration. Indeed the current GOP candidates like to beat their chests (save for the isolationist Paul) as if they could be the next GWB and start wars here and there. But Obama is acting exactly as one would expect of a national leader whose actual options (strategic - we're not talking tactics here) are increasingly limited.

This is particularly true when it comes to monetary matters, which is why our leaders so willingly support bank bailouts, even outside of the US, and don't want to start anything serious with China over the Renminbi valuation.

Of course Posen could be in error. One possibility is that the international order could freeze up (sort of like melted chocolate freezing-up when a cold liquid is poured into it.) Nations could all become too afraid to do anything, and some extra effort is put towards maintaining the status quo. However, I don't see that happening for the very reason I outlined - resource competition will drive certain nations, and certain regions of the world, into hyper-competition.

9 Bob Levin  Sun, Jan 22, 2012 4:47:37am

re: #8 freetoken

I think you might enjoy Researchok's post about China and the bubble's bursting in the West. I think there's an aphorism about market behavior that I'm missing. However, what you've seen is a natural evening out of development, creating more nations capable of being on the same economic standing as the US and Europe--which has been the goal of globalization.

You keep mentioning the Tea Party, and I strenuously try to ignore them.

The PBS Ken Burns special on Prohibition shows the formation of this coalition--beginning in 1836. They fail. No other way to describe it. But if they were so strong in the 1920s, and still incredibly ineffective, eventually voted out with FDR, then disappearing from mainstream public discourse--this group is no different.

And, volatility means that finance guys haven't figured out the new rules--yet. Once they know the rules, then they can predict, end of volatility.

Nations could all become too afraid to do anything, and some extra effort is put towards maintaining the status quo.

Too much work to do. They have to come up with a new paradigm, which very well might coincide with new innovation. The thing to remember is that things are moving forward, and not even a group as loud as the Tea Party can stop it.

Don't worry, be happy.


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