The Great Economic State of the World

[domtoni]

Tanya Becket, the BBC interviewer, was talking to George Soros. I think you all know who George is. Billionaire Investor, almost causing the collapse of the British Sterling by selling it short etc.

He made two very interesting comments:
1. The world needs a new Bretten Woods system. You may not remember but Bretten Woods established a global stable monetary system where currency was pegged to within +/- 1% of Gold (at $35/ounce) and weaker currencies like the Italian lira to +/- 3% of the gold price. Well, BW collapsed in 1971 when the USA pulled the dollar off the gold standard. The dollar then became the international currency.
2. The world needs an archetect like John Keynes. Father of Keynsians economics, he calls for greater government spending (sound familiar). Gordon Brown in the UK is a follower of Keynes. The UK is literally broke. Even during the best capital intake, the UK was spending far more than it was receiving in tax (probably accounting for borrowings). While in the states, I saw something on PBS which said the US could safely borrow more money !!!

Lastly, a US friend said that he was advised by another friend that the government may require people to take their private pensions (read 401K or IRA) in the form of an insurance annuity. Well, this is how the UK private pension system is structured. You save your money tax free, and when you want to take it beyond 59.5 years of age, you can take 25% tax free and the rest has to purchase an annuity (by the time you hit 75). As you may not know, annuities carry very big front end loads (re commissions). Annuities work out OK if you take them at 60 and live to 100. Not good if you take it at 65, and kick off the next day. Reason, all of the remaining money stays with the insurance company. Yes, there are alternatives etc but that is beyond my discussion at this point. At this time next week, I may have more on this.

But if you think the money is growing and you are getting the total benefits, Gordon Brown in one of his first moves as Chancellor of the Exchequer, started taxing the private pension funds 3%. So if the fund has 500 million in it, and has a good year where it makes 100, then 3 million goes off to pay the government. I assume each contributor then receives 97% of the total profit, less other costs.

Just a speculative thought, it makes one wonder if this is another way the US government will help to pay for health care?

Overview of the first two points:
- Is Soros saying that the world needs to take the $$ off as the international currency? What will happen to the dollar in international terms if that happens remembering the world is a flood with euro dollars (a collapse and huge inflation?).
- Is Soros saying that only government spending is OK, and should be followed at the expense of private growth?

One of my thoughts with the establishment of the Euro would be that the overall goal of the Euro was to peg the Dollar, Euro at 1/1 and the Yen to the Dollar / Euro at 100 / 1.

Comments anyone?

 

[Garry]

Soros is probably shorting the Dollar like he did the Pound Sterling. It is just another ploy to rape the markets and make himself richer. He wants to buy the votes of Americans to further his own stupid greed. A funny thing about socialists like him is that he uses capital markets to make money and now that he has his, he wants to tell everyone else how to live. Europe is full of people like him...they secretly feel that they are elite and deserve to live well while the peasants grope around for sustinance. I seem to recall a revolution or two that set these guys straight.

We are already adopting Keynesian economic policies when we run up deficits to support the economy when it contracts. His view was that sometimes it is in the national interests for governments to borrow on future GNP to ride out ups and downs in the market. We have been adopting that view since FDR was in office. The problem that he didn't anticipate was that these programs of expenditure would come to be viewed by the body politic (congress in USA) as permenent because it helps to buy votes.The origional theory was to drop those programs as the economy recovers, not become entitlement programs of a permenent nature.

Populist programs have appeal to disenfranchised voters that have been crushed by capitalism's misteps and retractions as economies reboot and new industries are created. The real problem for the US and GB has been the wholesale shipping of good paying manufacturing jobs offshore and the short term speculation in markets which has created turmoil where there should be stability. The governments need to figure out controls to slow this process down and create stability in financial markets. For our elected leaders, that is tricky as they don't understand the rate of change taking place worldwide. The countries that adapt to these new market dynamics will survive and prosper and those rooted in the past so deeply that change is hindered will become second class economies.

Garry

 

[just ernst]

do you think that only some people`s are the problem into this world?,......sometimes i see the little problems, all the people around, want to get more and more money for theyr jobs, so we had nothing against the yellow wave,..... and second, i allways wonder when i read catalogs from around the world,......in usa a crankshaft cost 300$,...the same cost in uk 450 pound, and in germany 700€,......made in ??,....

the yellow wave swaps to usa, and i think with no good response, low quality and the same price like the us-quality-produkts, if they sell cheaper, they loose, but if they sell in europa with the same price,.....all peole will buy, because in europa we paid more than 40% expensiver for the same product like in usa,......
in europa the yello wave get´s rich and ultra rich,......

and we all had problems with our monthly money,....we had not enough, we want more and more,.....is okay,....do you think the yellow wave paied all this money more to theyr worker??,.....

i dont know if the gouverment can change something,......the aspekt with gold and money is clear and logic, i think the only way to do,.....but this alone is not the world-economi, we all are the economi,......and we kill it in moment,..we are in pain,....we wants more and more for our save life,.....and we sell what we do not need in moment,....for save,.....and we dont get what we want, we wait,...what happend in future,.....for our money-save-life,.....and we dont buy parts at the neighbor-shop,......we look around the world to get the cheepest parts,......yea, is okay, we all must look for our money,.....but we kill the old economi,....we !!!,....we killed the shops in our own countries, and the other shops around must sell expensive because the smaller marked,.......i do the same,....for my money-safe,....

sorry for my bad english, i want to write my thinking about, and i think like a people from the street

ernst

 

[Garry]

Ernst,
We have the same problem happening in America with cheaper goods being sold from foreign manufacturers as Europe does. The geni is out of the bottle and it's not going back in. The asian producers can manufacture cheaper than we can for several reasons: no National pension,no National health care, no environmental agencies to regulate pollution, low taxes on manufacturing plants, low...low wages, etc. The cost of materials is the same for every country due to commodity prices, so this is the real reason products cost more in developed countries.

Somewhere along the line, the developed countries' governments adopted programs that add to the cost of business and that is the reason for higher prices at your local shops. Add burdensome taxes (VAT& Income Taxes) on corporations to support these programs. throw in oppressive regulations from EPA and others, and you can see how the costs escalate. For what it's worth, American workers can produce higher volumes at higher quality than these asian producers with less scrap loss and defects. Of course our workers cost more, but they are worth it. If the US government would take the yoke off of US companies and help them get on a level playing field with Asian companies, the American produced products would blow these guys off of the map. That's not US pride talking, but is based upon internationl business studies from around the world that has been published for decades.

I am willing to bet that GB, Italy, Germany, France, Netherlands, ETC. could do the same. There are brilliant engineers in all of these countries and excess manufacturing capacity, ample capital, and a willing work force available.

I may sound like I don't approve of some of the social programs and environmental policies, but that would be wrong. Some of the programs developed out of real needs. However, the root cause that led to these programs creation has not been dealt with in our governments, especially our educational institutions. Think about it...we still educate college students much the same way we did 50 to 75 years ago. Where is the innovation to prepare our young people to work in the 21st century? And where is the leadership for newer thinking in government comming from? The truth is that we need more visionaries in government and policy think tanks to not only address these issues but to look out for future generations, especially our children and grand-children.

Garry