Economic Crisis and WWIII

[coberst]

Economic Crisis and WWIII

 

I have often read statements that indicate that the Great Depression was ended as a result of WWII. By going to war, it is said, we managed to cure the greatest economic crisis in American history.

 

It is said that today’s economic crisis might to be as bad as the Great Depression. If such is the case perhaps we should take a lesson from the past.

 

Instead of turning our factories into vast production lines building planes, ships, tanks, and guns and declaring WWIII we might declare a make-believe WWIII and instead of sending these planes, ships, tanks, and guns to far off places where we can kill people and destroy property we could achieve the same effect by building our factories on ships and sending those ships to sea.

 

War is only our second best consumer of goods, our very best consumer of goods would be a factory mounted on a ship with the assembly line terminating at the ramp on the stern of the ship whereby the product can be easily dumped into the sea.

 

Such economic prosperity can only be imagined.

[Buffy]

No, the Depression was ended by the massive Government spending projects promoted by Roosevelt in the mid-30's. WWII actually *delayed* the economic recovery and worsened the recession of 1946-48.

 

Is there some reason that you wish to promote death and destruction while simultaneously delaying our economic recovery?

 

War materiel is a *bad* investment of tax dollars because it adds nothing to the economic infrastructure: it is pure dead weight that worsens economic productivity. In economic terms it has a negative multiplier effect.

 

People who promote such ideas have no understanding of economics.

 

Is sloppiness in speech caused by ignorance or apathy? I don't know and I don't care, ;)

Buffy

[pgrmdave]

We just committed to roughly $700 billion dollars in relief for the financial markets. Imagine what kind of economic stimulus we would get if we spent that money in other ways:

 

Transportation - A strong national rail system, both for freight and passengers, would benefit industry, commerce, tourism in the long run, and construction and engineering in the short term.

 

Education - Investments in teacher education, basic supplies, and improvements to existing buildings would boost construction and education, once again providing both short and long term relief.

 

Tax benefits for reduced gas consumption - provide tax incentives to drive a vehicle that gets X mpg or better, reduce current mass transportation prices massively and improve quality, provide incentives to car companies to manufacture and sell cars with better gas mileage. Not only would we help the environment, we would be reducing our dependence on foreign oil and improving our trade deficit (potentially).

 

Technology infrastructure - The same way the US forced the phone companies to provide service to everybody, we should force them to provide broadband internet access to everybody. Perhaps also provide free wireless service in designated urban areas (though at a basic level, so as not to directly compete with the private sector too much). This would provide IT jobs and reduce the information divide, especially helping rural poor. Improved access to information would help educate our workforce.

 

 

These are just some basic ideas off the top of my head, and I suspect that most of them are better than the financial bailout, and all of them are better than starting a war, fictitious or not.

[Zythryn]

Wasn't there a report out of Britain last summer that pegged the cost of addressing global warming at 1 Trillion dollars? Hmmm, seems that amount of money isn't as insurmountable as many skeptics were saying it was;)

[CakeProcessingUnit]

Wait, what about this WAR in iraq? doesn't that count as a war? why aren't we prospering? lol I agree with pgrmdave.

[coberst]

We just committed to roughly $700 billion dollars in relief for the financial markets. Imagine what kind of economic stimulus we would get if we spent that money in other ways:

 

Transportation - A strong national rail system, both for freight and passengers, would benefit industry, commerce, tourism in the long run, and construction and engineering in the short term.

 

Education - Investments in teacher education, basic supplies, and improvements to existing buildings would boost construction and education, once again providing both short and long term relief.

 

Tax benefits for reduced gas consumption - provide tax incentives to drive a vehicle that gets X mpg or better, reduce current mass transportation prices massively and improve quality, provide incentives to car companies to manufacture and sell cars with better gas mileage. Not only would we help the environment, we would be reducing our dependence on foreign oil and improving our trade deficit (potentially).

 

Technology infrastructure - The same way the US forced the phone companies to provide service to everybody, we should force them to provide broadband internet access to everybody. Perhaps also provide free wireless service in designated urban areas (though at a basic level, so as not to directly compete with the private sector too much). This would provide IT jobs and reduce the information divide, especially helping rural poor. Improved access to information would help educate our workforce.

 

 

These are just some basic ideas off the top of my head, and I suspect that most of them are better than the financial bailout, and all of them are better than starting a war, fictitious or not.

 

 

I agree. The question then is 'why are we not only willing but eagar to spend money and lives on war and unwilling to spend money on the "good"?

 

Therein lay the rub. The Critical Thinker might ask Why do humans do the things they do and can we do better?

[Buffy]

I agree. The question then is 'why are we not only willing but eagar to spend money and lives on war and unwilling to spend money on the "good"?

 

Therein lay the rub. The Critical Thinker might ask Why do humans do the things they do and can we do better?

Well, it's because even critical thinkers do not bother to study history and promote outright falsehoods about our past merely to get people to pay attention to them.

 

So therein lay the rub: why do critical thinkers misrepresent history and prevent others from learning from the important lessons they teach us?

 

So we said, "Let's give him a promotion," :)

Buffy

[coberst]

Well, it's because even critical thinkers do not bother to study history and promote outright falsehoods about our past merely to get people to pay attention to them.

 

 

You are correct. Very few American citizens study history; nor do they study anything much beyond their TV Guide. Part of that is because our educational system has left most of us with severe learning handicaps.

[jackson33]

No, the Depression was ended by the massive Government spending projects promoted by Roosevelt in the mid-30's. WWII actually *delayed* the economic recovery and worsened the recession of 1946-48.

 

Is there some reason that you wish to promote death and destruction while simultaneously delaying our economic recovery?

 

War material is a *bad* investment of tax dollars because it adds nothing to the economic infrastructure: it is pure dead weight that worsens economic productivity. In economic terms it has a negative multiplier effect.

 

People who promote such ideas have no understanding of economics.

Buffy

 

Actually, FDR's worker programs and WWII had the same overall effects on the economy. Some (very minor) infrastructure was added in the 30's, but by enlarge it simply pumped money back into the buying power of a few. It did NOT create wealth which is and always has been the foundation for National Growth. The end result; Income Taxes, rose from 30% in 1929 to 70% in 1937

yet unemployment and many traditional key factors to judge the economy remained the same. GNP (todays dollars) 1929...103.8 Billion, 1933 55.8 Billion and not until June 1940 did it return to pre depression levels.

 

I agree War should not be a means to improve economic standards, I would disagree that the war for some reason should not have been entered. However Government spending went from Social to Industry, which did create much of the Industry that exist today, bring back some former industry and most important bring the investor back into the equation. I have argued, if the War had not occurred, the results would have only stalled the already increasing economy by ten years, but never that is was in NO way instrumental in the economy. Suppose, I know nothing about economics, but is my view..

 

Dave; I am one that has opposed the 'Bailout', feeling Government cannot artificially support the values of anything, especially where apparently no demand exist. The market value of homes involved are based on what people WILL pay, not what previous buyers HAD payed.

 

As for Government programs to supply what should be from Industry is pure socialism. If a need exist, or that the public would support, there would be some one or some current industry to provide. Rail was the major form of transportation for decades, still is in many urban areas and not all supplied by Amtrak. Nationally, industry supplies a very well maintained 'rail system'. In recent years publicly owned industry has increased movements of virtually all 'non-timed deliveries' by hauling commercial truck trailers or the use of containers. As for those vacations, people have chose to fly, drive or take the bus. If you lived out here in the mid-west, you can see daily Amtrak Passenger cars with very few on them to NOBODY.

 

Education; We spend on average 10k plus, per student per year and in the worst systems they spend up to 16K per (Washington DC). This is coming in large part by the people that live in the area of the school district. How much more can you bleed from those people, where more and more are retiring or just moving to avoid the taxes. You can't ever reward the many fine teachers that practice, since its all based on tenure. Private schools or anything just not based on Government/Union controls are doing quite well, with very high percentages going on to college and comparatively non existent drop out rates. Beyond K-12, there remains no reason why any person can't attend or learn from any numbers of means, IF THEY WANT TO...

 

Tax benefits; Social engineering is what your asking for and I would bet to save the planet from mankind's evil ways. As a smoker and a beer drinker, I have about had it with taxes, said to pay for my medical cost. While those taxes go to pay for obesity and all the problems those folks bring on themselves. Said another way, what each individual considers to be the correct lifestyle or any group of them, should not be used to punished others...

 

Technology is itself a product. Why not go to Cable Access, where industry finally has gone most everywhere or you can receive TV via satellites. Government still uses typewriters, hardly a source for gaining technology...

[Buffy]

Actually, FDR's worker programs and WWII had the same overall effects on the economy. Some (very minor) infrastructure was added in the 30's, but by enlarge it simply pumped money back into the buying power of a few.

:evil: To be charitable, this is a joke.

 

The TVA alone electrified the entire Mid-Atlantic Range and produced power necessary for a huge increase in production capacity that would have never happened had the Coolidge-Hoover strategy of "letting business be business" been continued, and would have severely limited our capacity to ramp up production that did indeed win WWII. This network of water and power infrastructure is mostly still there today, and to dismiss it so blithely is in direct contradiction to reality.

 

While this and many other infrastructure projects (go anywhere in America and check out how many roads were built in the 1930's that are only slightly modified today), were essential to winning WWII, production in WWII did indeed overheat the economy, and when the war ended the huge over capacity caused a very painful recession.

 

You're of course right that by 1940 the economy had recovered, and therefore it didn't need the WWII stimulus!

It did NOT create wealth which is and always has been the foundation for National Growth.

I know that it is a popular conservative truism that "government spending never creates wealth," but it's so easy to disprove, that I'm amazed that anyone can say it with a straight face. Where would we be without railroads funded by government in the 1800's? Without the Interstate Highway System? Without dams and aquaducts?

 

I know that Greenpeace and the Sierra Club would love it, but not anyone who wants growth!

...Income Taxes, rose from 30% in 1929 to 70% in 1937...

...at a time when only the very rich made any money at all--or paid the 70% rate--because, well, there was a Depression! Your own figures--although misinterpreted--bear this out:

yet unemployment and many traditional key factors to judge the economy remained the same. GNP (todays dollars) 1929...103.8 Billion, 1933 55.8 Billion...

GNP was nearly cut in half! As a result, unemployment hardly "remained the same," it jumped to 25% and underemployment affected 60% of the remaining workforce.

 

Did this take time to correct? Absolutely! Were there mistakes along the way, like over-regulation? Sure! And Roosevelt himself recognized them and changed policy rather than mindlessly running the country off a cliff by insisting on irrational "consistency to principles of free markets" that caused the depression in the first place, and has arguably caused our current mess as well.

 

Consistency requires you to be as ignorant today as you were a year ago, :phones:

Buffy

[jackson33]

:evil: To be charitable, this is a joke.

 

The TVA alone electrified the entire Mid-Atlantic Range and produced power necessary for a huge increase in production capacity that would have never happened had the Coolidge-Hoover strategy of "letting business be business" been continued, and would have severely limited our capacity to ramp up production that did indeed win WWII. This network of water and power infrastructure is mostly still there today, and to dismiss it so blithely is in direct contradiction to reality.

 

While this and many other infrastructure projects (go anywhere in America and check out how many roads were built in the 1930's that are only slightly modified today), were essential to winning WWII, production in WWII did indeed overheat the economy, and when the war ended the huge over capacity caused a very painful recession.

 

You're of course right that by 1940 the economy had recovered, and therefore it didn't need the WWII stimulus!

I know that it is a popular conservative truism that "government spending never creates wealth," but it's so easy to disprove, that I'm amazed that anyone can say it with a straight face. Where would we be without railroads funded by government in the 1800's? Without the Interstate Highway System? Without dams and aquaducts?

 

I know that Greenpeace and the Sierra Club would love it, but not anyone who wants growth!

...at a time when only the very rich made any money at all--or paid the 70% rate--because, well, there was a Depression! Your own figures--although misinterpreted--bear this out:

GNP was nearly cut in half! As a result, unemployment hardly "remained the same," it jumped to 25% and underemployment affected 60% of the remaining workforce.

 

Did this take time to correct? Absolutely! Were there mistakes along the way, like over-regulation? Sure! And Roosevelt himself recognized them and changed policy rather than mindlessly running the country off a cliff by insisting on irrational "consistency to principles of free markets" that caused the depression in the first place, and has arguably caused our current mess as well.

 

Consistency requires you to be as ignorant today as you were a year ago, :phones:

Buffy

 

Long story short; Our government structure cannot exist with out wealth, like it or not. This wealth, the capital to invest and/or pay taxes are essential to future potential and a growth in the overall economy. Call it trickle down or basic econ 101. Any person ever having started a business (know you have) either had to develop some wealth, had some investor help (bank loan) or a combination. As your workers achieve, save and some go forward to create their own business, they to will tap the investor for funding. Take this out of the equation, which happened in the 30's, few could. For government to make a payroll, to build or do anything, it requires a source for payment to those that do the building. This can only be done until the source (wealth) has diminished to the point where no one has wealth. Under the technical term of recession, we were not in one after 1933, but those that had money lost the incentive to invest. WWII brought that incentive back, as the Corporate structure became active, for whatever purpose.

 

By 1950 the GNP had rose to 284.2, nearly what was in 1940 or 1930 and has increased since, as has wealth. In 1970 had hit 1 Trillion and today around 15 Trillion, three times 2nd place Japan, who by the way has used good old fashion Capitalism and obviously Free Market access.

 

Todays problems are strangely similar/familiar to those of 1929 and one fear I have is the shut down of investments by those wealthy investors. Its said those folks are holding 12 Trillion in money market accounts and little guys like me have placed everything in saving accounts, no telling how many more trillions already out of the markets and from all around the world. Who do you think the government's are trying to compensate for...and it won't work.

[pgrmdave]

Nationally, industry supplies a very well maintained 'rail system'. In recent years publicly owned industry has increased movements of virtually all 'non-timed deliveries' by hauling commercial truck trailers or the use of containers. As for those vacations, people have chose to fly, drive or take the bus. If you lived out here in the mid-west, you can see daily Amtrak Passenger cars with very few on them to NOBODY.

 

It is possible, though I doubt there can be any good study done on it, that improvements to our train system, including lowering costs (it costs more to take a train than to fly in many places) and improving quality would make people more likely to use trains. Perhaps we need more trains, but smaller, to reduce the number of empty seats. Perhaps we need cheaper train tickets, or more stations. I don't use public transportation because there is no easy way for me to do so, even though I live in New Jersey, which has some of the best public transportation, but I can see where it could be improved.

 

Education; We spend on average 10k plus, per student per year and in the worst systems they spend up to 16K per (Washington DC). This is coming in large part by the people that live in the area of the school district. How much more can you bleed from those people, where more and more are retiring or just moving to avoid the taxes. You can't ever reward the many fine teachers that practice, since its all based on tenure. Private schools or anything just not based on Government/Union controls are doing quite well, with very high percentages going on to college and comparatively non existent drop out rates. Beyond K-12, there remains no reason why any person can't attend or learn from any numbers of means, IF THEY WANT TO...

 

I agree with most of this, and I've railed against the incredible amount of money that NJ spends on the public schools, which is why I think that more money needs to be spent training teachers and on supplies (I've experienced shortages of both trained teachers and adequate supplies). I also think that we shouldn't expect people to attend education beyond high school just to get a basic education.

 

Tax benefits; Social engineering is what your asking for and I would bet to save the planet from mankind's evil ways. As a smoker and a beer drinker, I have about had it with taxes, said to pay for my medical cost. While those taxes go to pay for obesity and all the problems those folks bring on themselves. Said another way, what each individual considers to be the correct lifestyle or any group of them, should not be used to punished others...

 

I recommended lowering taxes, providing tax incentives, not increasing taxes. And yes, I think that taxes can be a very effective way of social engineering, far better than simply passing laws, and usually cheaper. If the government is going to spend that much money, would it not be better spent helping our environment through fewer pollutants? Better gas mileage doesn't just mean less global warming - it means less air pollution, less asthma, and lower gasoline prices all around.

 

Technology is itself a product. Why not go to Cable Access, where industry finally has gone most everywhere or you can receive TV via satellites. Government still uses typewriters, hardly a source for gaining technology...

 

I can only get broadband access from one company (incidentally, the oldest cable company in the US). I have no choice for fiber optics. Cell phone reception is very, very spotty where I live. The government effectively mandated that every household be given the opportunity to have a telephone, would it be a bad use of the government's money to allow every household access to fiber optics? Or would that be more likely to help spur economic growth, especially once more households accepted, and internet entrepreneurship increased, and telecommunications companies profits rose from the increased customers?

[jackson33]

dave; Am familiar a little with the Chicago system, where people drive into areas 50 miles from the City Loop, park and avoid a two commute into town in minutes. An obvious cost effective means to time spent.

 

As for vacationing or commuting between cities on business or pleasure. There have been hundreds of studies, most ending up with lack of convenience to the traveler (or family) or getting to a final destination, usually no where near your train/bus travel ends.

 

For some reason I hear a lot about lack of supplies in school systems. Seems like every years I donate at the local department store to give supplies to the local schools or donate to some school begging for new books. Teachers, buying books or supplies for their students and so on. What I don't seem to understand is where that 300k to teach those 30 students per year is going. If its administrative, most often heard excuse or followed by maintenance cost (which are usually outsourced) then simply cut back. Good teachers, by nature are not expecting to become wealthy, usually paying for up date education themselves. Granted they do receive a rather good wage of 9 months labor and most capable of earning on an extensive lecture tour, with any expertise. I do question what further education could make any non effective teacher of anything, more effective.

 

I object to Federal Government involvement in social engineering for the same reason I opposed the topic.."bailout". What concerns you is IMO primarily the problem of NJ and you fellow citizens. My concerns are nothing like yours down here in NM and you should not be paying for my problems. I could bring California, Florida where they have problems making both ours seem like minor inconveniences and again suggest you nor I should be responsible TO them. Actually the Bailout or 700 Billion, will be spent to aid those two States, probably indirectly 80% going to solve, which again won't solve anything.

 

Anything to me is astonishing. I remember my folks first 7 inch TV in the 40's and everyone visiting just to watch some program and a magnifying piece (cost as much as the TV), making it look like a 10 inch. Talking to an operator to make the simplest of calls and yes walking two miles in the snow to school. I also remember paying 75.00 on one short phone call ordering some tropical fish from Asia for a shop in 1962. Today I play Texas Hold em, with hundreds of people from all over the world on a phone line for literally nothing, could if I wanted watch a movie on a 72 inch HD screen, sent to me by a site in seconds or delivered in 18-24 hours. All you or so many complain about seems so trivial to what I went through and what I went through WAS so trivial to what my parents and grandparents went through. I recall my granddad telling me, going to the store was a weekend trip to town from his Virginia home, feeding his horse and all it took to get what takes me 5 minutes. Think you get the point...and by the way government has supplied zero of those improvments...IMO.

[Moontanman]

By permission of Stratford

 

The United States, Europe and Bretton Woods II

October 20, 2008

 

 

 

 

By George Friedman and Peter Zeihan

 

French President Nicolas Sarkozy and U.S. President George W. Bush met Oct. 18 to discuss the possibility of a global financial summit. The meeting ended with an American offer to host a global summit in December modeled on the 1944 Bretton Woods system that founded the modern economic system.

 

Related Special Topic Page

Political Economy and the Financial Crisis

The Bretton Woods framework is one of the more misunderstood developments in human history. The conventional wisdom is that Bretton Woods crafted the modern international economic architecture, lashing the trading and currency systems to the gold standard to achieve global stability. To a certain degree, that is true. But the form that Bretton Woods took in the public mind is only a veneer. The real implications and meaning of Bretton Woods are a different story altogether.

 

Conventional Wisdom: The Depression and Bretton Woods

The origin of Bretton Woods lies in the Great Depression. As economic output dropped in the 1930s, governments worldwide adopted a swathe of protectionist, populist policies — import tariffs were particularly in vogue — that enervated international trade. In order to maintain employment, governments and firms alike encouraged ongoing production of goods even though mutual tariff walls prevented the sale of those goods abroad. As a result, prices for these goods dropped and deflation set in. Soon firms found that the prices they could reasonably charge for their goods had dropped below the costs of producing them.

 

The reduction in profitability led to layoffs, which reduced demand for products in general, further reducing prices. Firms went out of business en masse, workers in the millions lost their jobs, demand withered, and prices followed suit. An effort designed originally to protect jobs (the tariffs) resulted in a deep, self-reinforcing deflationary spiral, and the variety of measures adopted to combat it — the New Deal included — could not seem to right the system.

 

Economically, World War II was a godsend. The military effort generated demand for goods and labor. The goods part is pretty straightforward, but the labor issue is what really allowed the global economy to turn the corner. Obviously, the war effort required more workers to craft goods, whether bars of soap or aircraft carriers, but “workers” were also called upon to serve as soldiers. The war removed tens of millions of men from the labor force, shipping them off to — economically speaking — nonproductive endeavors. Sustained demand for goods combined with labor shortages raised prices, and as expectations for inflation rather than deflation set in, consumers became more willing to spend their money for fear it would be worth less in the future. The deflationary spiral was broken; supply and demand came back into balance.

 

Policymakers of the time realized that the prosecution of the war had suspended the depression, but few were confident that the war had actually ended the conditions that made the depression possible. So in July 1944, 730 representatives from 44 different countries converged on a small ski village in New Hampshire to cobble together a system that would prevent additional depressions and — were one to occur — come up with a means of ending it shy of depending upon a world war.

 

When all was said and done, the delegates agreed to a system of exchangeable currencies and broadly open rules of trade. The system would be based on the gold standard to prevent currency fluctuations, and a pair of institutions — what would become known as the International Monetary Fund (IMF) and the World Bank — would serve as guardians of the system’s financial and fiduciary particulars.

 

The conventional wisdom is that Bretton Woods worked for a time, but that since the entire system was linked to gold, the limited availability of gold put an upper limit on what the new system could handle. As postwar economic activity expanded — but the supply of gold did not — that problem became so mammoth that the United States abandoned the gold standard in 1971. Most point to that period as the end of the Bretton Woods system. In fact, we are still using Bretton Woods, and while nothing that has been discussed to this point is wrong exactly, it is only part of the story.

 

A Deeper Understanding: World War II and Bretton Woods

Think back to July 1944. The Normandy invasion was in its first month. The United Kingdom served as the staging ground, but with London exhausted, its military commitment to the operation was modest. While the tide of the war had clearly turned, there was much slogging ahead. It had become apparent that launching the invasion of Europe — much less sustaining it — was impossible without large-scale U.S. involvement. Similarly, the balance of forces on the Eastern Front radically favored the Soviets. While the particulars were, of course, open to debate, no one was so idealistic to think that after suffering at Nazi hands, the Soviets were simply going to withdraw from territory captured on their way to Berlin.

 

The shape of the Cold War was already beginning to unfold. Between the United States and the Soviet Union, the rest of the modern world — namely, Europe — was going to either experience Soviet occupation or become a U.S. protectorate.

 

At the core of that realization were twin challenges. For the Europeans, any hope they had of rebuilding was totally dependent upon U.S. willingness to remain engaged. Issues of Soviet attack aside, the war had decimated Europe, and the damage was only becoming worse with each inch of Nazi territory the Americans or Soviets conquered. The Continental states — and even the United Kingdom — were not simply economically spent and indebted but were, to be perfectly blunt, destitute. This was not World War I, where most of the fighting had occurred along a single series of trenches. This was blitzkrieg and saturation bombings, which left the Continent in ruins, and there was almost nothing left from which to rebuild. Simply avoiding mass starvation would be a challenge, and any rebuilding effort would be utterly dependent upon U.S. financing. The Europeans were willing to accept nearly whatever was on offer.

 

For the United States, the issue was one of seizing a historic opportunity. Historically, the United States thought of the United Kingdom and France — with their maritime traditions — as more of a threat to U.S. interests than the largely land-based Soviet Union and Germany. Even World War I did not fully dispel this concern. (Japan, for its part, was always viewed as a hostile power.) The United States entered World War II late and the war did not occur on U.S. soil. So — uniquely among all the world’s major powers of the day — U.S. infrastructure and industrial capacity would emerge from the war larger (far, far larger) than when it entered. With its traditional rivals either already greatly weakened or well on their way to being so, the United States had the opportunity to set itself up as the core of the new order.

 

In this, the United States faced the challenges of defending against the Soviet Union. The United States could not occupy Western Europe as it expected the Soviets to occupy Eastern Europe; it lacked the troops and was on the wrong side of the ocean. The United States had to have not just the participation of the Western Europeans in holding back the Soviet tide, it needed the Europeans to defer to American political and military demands — and to do so willingly. Considering the desperation and destitution of the Europeans, and the unprecedented and unparalleled U.S. economic strength, economic carrots were the obvious way to go.

 

Put another way, Bretton Woods was part of a broader American effort to extend the wartime alliance — sans the Soviets — beyond Germany’s surrender. After all wars, there is the hope that alliances that have defeated a common enemy will continue to function to administer and maintain the peace. This happened at the Congress of Vienna and Versailles as well. Bretton Woods was more than an attempt to shape the global economic system, it was an effort to grow a military alliance into a broader U.S.-led and -dominated bloc to counter the Soviets.

 

At Bretton Woods, the United States made itself the core of the new system, agreeing to become the trading partner of first and last resort. The United States would allow Europe near tariff-free access to its markets, and turn a blind eye to Europe’s own tariffs so long as they did not become too egregious — something that at least in part flew in the face of the Great Depression’s lessons. The sale of European goods in the United States would help Europe develop economically, and, in exchange, the United States would receive deference on political and military matters: NATO — the ultimate hedge against Soviet invasion — was born.

 

The “free world” alliance would not consist of a series of equal states. Instead, it would consist of the United States and everyone else. The “everyone else” included shattered European economies, their impoverished colonies, independent successor states and so on. The truth was that Bretton Woods was less a compact of equals than a framework for economic relations within an unequal alliance against the Soviet Union. The foundation of Bretton Woods was American economic power — and the American interest in strengthening the economies of the rest of the world to immunize them from communism and build the containment of the Soviet Union.

 

Almost immediately after the war, the United States began acting in ways that indicated that Bretton Woods was not — for itself at least — an economic program. When loans to fund Western Europe’s redevelopment failed to stimulate growth, those loans became grants, aka the Marshall Plan. Shortly thereafter, the United States — certainly to its economic loss — almost absentmindedly extended the benefits of Bretton Woods to any state involved on the American side of the Cold War, with Japan, South Korea and Taiwan signing up as its most enthusiastic participants.

 

And fast-forwarding to when the world went off of the gold standard and Bretton Woods supposedly died, gold was actually replaced by the U.S. dollar. Far from dying, the political/military understanding that underpinned Bretton Woods had only become more entrenched. Whereas before, the greatest limiter was on the availability of gold, now it became — and remains — the whim of the U.S. government’s monetary authorities.

 

Toward Bretton Woods II

For many of the states that will be attending what is already being dubbed Bretton Woods II, having this American centrality as such a key pillar of the system is the core of the problem.

 

The fundamental principle of Bretton Woods was national sovereignty within a framework of relationships, ultimately guaranteed not just by American political power but by American economic power. Bretton Woods was not so much a system as a reality. American economic power dwarfed the rest of the noncommunist world, and guaranteed the stability of the international financial system.

 

What the September financial crisis has shown is not that the basic financial system has changed, but what happens when the guarantor of the financial system itself undergoes a crisis. When the economic bubble in Japan — the world’s second-largest economy — burst in 1990-1991, it did not infect the rest of the world. Neither did the East Asian crisis in 1997, nor the ruble crisis of 1998. A crisis in France or the United Kingdom would similarly remain a local one. But a crisis in the U.S. economy becomes global. The fundamental reality of Bretton Woods remains unchanged: The U.S. economy remains the largest, and dysfunctions there affect the world. That is the reality of the international system, and that is ultimately what the French call for a new Bretton Woods is about.

 

There has been talk of a meeting at which the United States gives up its place as the world’s reserve currency and primacy of the economic system. That is not what this meeting will be about, and certainly not what the French are after. The use of the dollar as world reserve currency is not based on an aggrandizing fiat, but the reality that the dollar alone has a global presence and trust. The euro, after all, is only a decade old, and is not backed either by sovereign taxing powers or by a central bank with vast authority. The European Central Bank (ECB) certainly steadies the European financial system, but it is the sovereign countries that define economic policies. As we have seen in the recent crisis, the ECB actually lacks the authority to regulate Europe’s banks. Relying on a currency that is not in the hands of a sovereign taxing power, but dependent on the political will of (so far) 15 countries with very different interests, does not make for a reliable reserve currency.

 

The Europeans are not looking to challenge the reality of American power, they are looking to increase the degree to which the rest of the world can influence the dynamics of the American economy, with an eye toward limiting the ability of the Americans to accidentally destabilize the international financial system again. The French in particular look at the current crisis as the result of a failure in the U.S. regulatory system.

 

And the Europeans certainly have a point. If fault is to be pinned, it is on the United States for letting the problem grow and grow until it triggered a liquidity crisis. The Bretton Woods institutions — specifically the IMF, which is supposed to serve the role of financial lighthouse and crisis manager — proved irrelevant to the problems the world is currently passing through. Indeed, all multinational institutions failed or, more precisely, have little to do with the financial system that was operating in 2008. The 64-year-old Bretton Woods agreement simply didn’t have anything to do with the current reality.

 

Ultimately, the Europeans would like to see a shift in focus in the world of international economic interactions from strengthening the international trading system to controlling the international financial system. In practical terms, they want an oversight body that can guarantee that there won’t be a repeat of the current crisis. This would involve everything from regulations on accounting methods, to restrictions on what can and cannot be traded and by whom (offshore financial havens and hedge funds would definitely find their worlds circumscribed), to frameworks for global interventions. The net effect would be to create an international bureaucracy to oversee global financial markets.

 

Fundamentally, the Europeans are not simply hoping to modernize Bretton Woods, but instead to Europeanize the American financial markets. This is ultimately not a financial question, but a political one. The French are trying to flip Bretton Woods from a system where the United States is the buttress of the international system to a situation where the United States remains the buttress but is more constrained by the broader international system. The European view is that this will help everybody. The American position is not yet framed and won’t be until the new president is in office.

 

But it will be a very tough sell. For one, at its core the American problem is “simply” a liquidity freeze and one that is already thawing. Europe’s and East Asia’s recessions are bound to be deeper and longer lasting. So the United States is sure — no matter who takes over in January — to be less than keen about revamps of international processes in general. Far more important, any international system that oversees aspects of American finance would, by definition, not be under full American control, but under some sort of quasi-Brussels-like organization. And no American president is going to engage gleefully on that sort of topic.

 

Unless something else is on offer.

 

Bretton Woods was ultimately about the United States trading access to its economic might for political and military deference. The reality of American economic might remains. The question, then, is simple: What will the Europeans bring to the table with which to bargain?

 

Tell Stratfor What You Think

 

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[Buffy]

Long story short; Our government structure cannot exist with out wealth, like it or not. This wealth, the capital to invest and/or pay taxes are essential to future potential and a growth in the overall economy.

You'll get absolutely no argument out of me for that, but it sounds suspiciously like you're trying to say that anything short of absolute zero regulation and taxes is tantamount to "eliminating wealth."

 

Let me argue that you are saying exactly that when you say:

Call it trickle down or basic econ 101.

This is a false equivalence of laughable proportions.

 

No, "Econ 101" does not translate into "pure trickle-down" although its clear that you do believe it:

Any person ever having started a business (know you have) either had to develop some wealth, had some investor help (bank loan) or a combination. As your workers achieve, save and some go forward to create their own business, they to will tap the investor for funding.

So, you're saying that until someone has some wealth, he has no right to expect anything, and anything that government might do to give labor a right to negotiate or "redistribution of wealth through unfair taxes" will cause an economy to self-destruct.

 

Such an extremist position would appear to be evidence of either a complete lack of understanding of Econ 101, or perhaps a hidden agenda to make sure that you get the bigger piece of the pie.

 

I have no problem with accumulating wealth, but to say that actually increasing the accelerating concentration of wealth that we have in this country now where the top 1% of our population owns 90% of the wealth will actually save our economy is absurd.

 

What drove the growth of the 90s was in fact tremendous investment in new industries here in the US, leading to massive job growth and consumption that drove up corporate income and fed further investment. Much of this was driven by tax breaks or policies that encouraged local investment--and not by the way, simply by lowering taxes, but by creating incentives on exactly how to invest that wealth. The last eight years has been a bizarre combination of creating "false wealth" with a real estate bubble along with shipping massive quantities of jobs off-shore, producing no increases in local investment, while the vast majority of government have been dumped into wasteful military spending that does *not* contribute to infrastructure and encourage local investment because it exists.

 

This is *exactly* the lesson of the Depression and WWII that has been missed by the current administration: direct investment in infrastructure that supports local investment grows the economy dramatically--as evidenced by the data you cite showing a full recovery by 1940, before we entered the war. Conversely, while some of the investment of WWII provided infrastructure, government support disappeared immediately after the war when companies whose infrastructure had been "improved," found themselves without funds to retool those factories into non-wartime uses because the government had to drastically reduce spending because the economy had been bled dry. This led to the recession of 1946-48, driven by massive layoffs while the economy retooled without government assistance.

 

The recovery by 1950 that you cite was indeed because of investment of wealth, but the expenditures during WWII actually set this back because although they got new government paid-for factories, factories that build planes and tanks don't magically switch to refrigerators and cars overnight, and thus a lot of that investment was indeed "wasted."

 

This shows how a balance of government action and private investment can "multiply" the power of wealth. There's no question that the two can work hand-in-hand to the benefit of all, and an investment in government--AKA "taxes"--if judiciously managed can be the best investment for those who wish to increase their wealth.

 

Certainly government unfettered is bad, but arguably no worse than business unfettered. The two are a necessary balance between the interests of the generators of wealth that drive the economy and the people who provide not just the labor but the *demand* for the products and services that drive the economy.

 

Are you seriously arguing that concentration of wealth is a good thing? Or are you equally absurdly claiming that with no government intervention that wealth does not concentrate? Or that once wealth is concentrated that it does not manipulate government into doing things to further concentrate wealth, and force costs to be lowered as much as possible?

 

Was Teddy Roosevelt just as much of a Socialist as his cousin Franklin? Why should the government have engaged in trust busting? Why was it good that FDR's administration, both before and during WWII spread contracts around among vendors instead of catering to some Social Darwinist fantasy of corporate survival of the fittest?

 

Is it perhaps because concentration of wealth is bad?

 

Its not just the concentration of the ownership that's somehow inherently against some moral standard, its that if companies are allowed to create oligopolies, competition is eliminated which results in dysfunctional markets that *stagnate*.

 

More importantly as a refutation of your argument, elimination of competition in markets makes it impossible for those "little guys" to scrape together funds and create their own wealth.

 

The sad thing is that the "small investors" that you claim to be are the ones that get screwed for believing this fantasy that if you just let the barons of industry do what they want, that you'll some day see it "trickle down" to you and you'll get yours.

 

The Andrew Carnegie's and J.D. Rockefeller's of this world--before they were forced by government to break up their wealth--were just like today's robber barons like Donald Trump who would never give a sucker an even break.

 

There are words to describe folks that believe in absurd things.

Todays problems are strangely similar/familiar to those of 1929 and one fear I have is the shut down of investments by those wealthy investors. Its said those folks are holding 12 Trillion in money market accounts and little guys like me have placed everything in saving accounts, no telling how many more trillions already out of the markets and from all around the world. Who do you think the government's are trying to compensate for...and it won't work.

If you're right about not needing any government intervention then neither the big nor small investors would be sitting on that cash!

 

The growth you cite in the economy occurred while the Great Society reigned and we had 40 years of Democratic control of Congress. If you wish to claim that some how the "anti-wealth" policies of these people cause such deleterious affects on generation of wealth, then you have to explain why the data that you yourself cite contradicts that thesis.

 

None of what you have stated supports your contention that the projects of the 30's provided a trivial input to the economy that somehow "sapped" wealth because taxes were so high. To the contrary, its clear from the massive amount of infrastructure that as I stated earlier is still in existence today and is still driving the growth of wealth, was one of the *best* investments that those rich folks of the 30's who had their wealth "confiscated" by 70% tax rates could possibly have made!

 

I know that ever since Reagan, the extreme Right has upheld his belief that "government is always the problem" but if so, our founding fathers and the vast majority of politicians throughout our history have "worked against the people." That's a lot of great leaders to offend in service only to uphold an unbelievably absurd oversimplification of why government exists and its role in society.

 

Without government, there would be no society.

 

And claiming that any restrictions it might impose on "freedom to innovate" will cause the end of the world is fantasy; one of which any small investor such as yourself should be extremely fearful.

 

Wealth is the parent of luxury and indolence, and poverty of meanness and viciousness, and both of discontent,

Buffy

[jackson33]

Buffy; First, I do not oppose taxes and/or regulation. I do oppose either, at the US Federal Level, where the agenda is not consistent with the Constitution or the laws derived over time as society has until recently, SLOWLY evolved. One important factor not often discussed are State Rights and the Taxing policy or laws/regulations they also have. I have no objection with any State, with the consent of its people to practice any level of socialism or some anti capitalism program. People and business can move, if they do not approve, remaining American. As the Federal takes authority from States, outside the 'COMMON INTEREST' of the total (majority or not), choice becomes limited to the people and/or business.

 

If an economy is based on the investment from those that have capital (opposed to Government financing) then the more wealth available and the desire to place this wealth AT RISK, the better an economy can improve. There is a risk called inflation, where Tax structures/Interest Rates can be legitimately used to control that growth. There is a correlation between, growth, taxes and regulation.

 

Concentration of wealth, seemingly important to you, has and always will occur. In history its was to the governing powers and since has turned in large part toward industrial/business, its owners and WORKERS, with additional wealth to those that invested wisely. Sam Walton, was not born rich, worked for dime store, had a simple idea that has created thousands of millionaires, employs over a million, paying taxes in thousand of local areas and rewarded no telling how many investors (small and large). To me this is trickle down, with benefits reaching all levels of society, now worldwide.

 

Trying to stay consistent with other discussion; The above involves generally prudent people, those interest in personal achievement. Not trying to call anyone anything, there is a very large percentage of people for whatever reason simply blow any income for personal things. This includes the big lotto winners to some in business and a number of folks that have been taught and believed government will provide.

 

Competition eliminated??? Will never happen and you might check with GM, Ford or Chrysler. Many other quite successful small business thrives around the any major business. Outsourcing has become the standard (out of necessity) for most every medium to large business and all business requires material for manufacturing or service. Business models may change or become obsolete, but competition in business is the heart of efficiency or if you prefer 'productivity'.

 

I won't argue, government sponsored welfare over those 40 years of Democratic controlled Congress, has improved the economy. It allowed people to spend money on items they otherwise could not have bought. In the beginning there were many that joined the workforce and became part of the middle class. However it also made a dependent class in the society and wanting ever more assistance. In recent years this "rooster" has come home, with lower interest rates, access to credit and no fear of making obligations good if they go bad. I wish I had an answer, do not, but one thing for sure to continue these policies with out some obligation and on the Federal Level, will destroy whats left of the original concept of those founders.

 

Reagan was not the first to note, government could become or was the problem. Since day one of the US, no more or less then half the people have felt any setting government was wrong on many issues. In a society where choice exist, its an inevitable problem. If you think about it, you and many others that post here are basically saying the same thing, but inserting the 'Bush Administration' where government is meant.

[pgrmdave]

For some reason I hear a lot about lack of supplies in school systems. Seems like every years I donate at the local department store to give supplies to the local schools or donate to some school begging for new books. Teachers, buying books or supplies for their students and so on. What I don't seem to understand is where that 300k to teach those 30 students per year is going. If its administrative, most often heard excuse or followed by maintenance cost (which are usually outsourced) then simply cut back.

 

Well, at my high school, one of the larger costs was replacing books and buying new ones. No, we didn't buy new versions every year, but every year they replaced any books that were in terrible condition (one of my friends had a book with no spine - all the pages were loose, so she just brought the chapter that we were working with that day. That's the kind of book that they'd replace). And every once in a while they needed to buy new books. There were some classes where there weren't enough books for everybody, especially in the science classes.

 

That's not to say that there weren't silly expenses, but increased funding, when applied correctly, makes a huge difference.

 

Good teachers, by nature are not expecting to become wealthy, usually paying for up date education themselves. Granted they do receive a rather good wage of 9 months labor and most capable of earning on an extensive lecture tour, with any expertise. I do question what further education could make any non effective teacher of anything, more effective.

 

I'm not sure if there is any specific education that can help (of course, there are always new teaching techniques to learn, and new information about the some specific fields) but I think that any continued education, in any field, helps teachers be more effective. It does two things - it keeps their mind learning, and it forces them to take on the role of the student, giving them continued perspective.

 

I object to Federal Government involvement in social engineering for the same reason I opposed the topic.."bailout". What concerns you is IMO primarily the problem of NJ and you fellow citizens. My concerns are nothing like yours down here in NM and you should not be paying for my problems. I could bring California, Florida where they have problems making both ours seem like minor inconveniences and again suggest you nor I should be responsible TO them. Actually the Bailout or 700 Billion, will be spent to aid those two States, probably indirectly 80% going to solve, which again won't solve anything.

 

Well, actually, NJ will benefit a lot, due to our close proximity to NYC. However, I think that there are some problems, like global warming, air/water pollution, species extinction, which transcend both geological and political borders. Pennsylvania's factories pollute New Jersey's air, so we have a stake in cleaning them up. And you still haven't addressed the core issue, that providing incentives can create jobs and stimulate the economy, making everybody do better.

 

Anything to me is astonishing. I remember my folks first 7 inch TV in the 40's and everyone visiting just to watch some program and a magnifying piece (cost as much as the TV), making it look like a 10 inch. Talking to an operator to make the simplest of calls and yes walking two miles in the snow to school. I also remember paying 75.00 on one short phone call ordering some tropical fish from Asia for a shop in 1962. Today I play Texas Hold em, with hundreds of people from all over the world on a phone line for literally nothing, could if I wanted watch a movie on a 72 inch HD screen, sent to me by a site in seconds or delivered in 18-24 hours. All you or so many complain about seems so trivial to what I went through and what I went through WAS so trivial to what my parents and grandparents went through. I recall my granddad telling me, going to the store was a weekend trip to town from his Virginia home, feeding his horse and all it took to get what takes me 5 minutes. Think you get the point...and by the way government has supplied zero of those improvments...IMO.

 

Like I said before, the government did mandate phone service. They also provided the school, they funded the ARPANet, they built the roads...Thanks for making my point for me :D