Sturm und Angst Politischen Ökonomie
Thought German might fit the Wagnerian mood of the markets today in a brief post discussing the economy. A few links on related tangents that I found intriguing, and then a brief comment:
John Robb – A Real Nuclear Option in Finance
John relishes being not only out front but the edge thinker. He’s right that derivatives have to be addressed though I’m not qualified to comment as to “how”. I haven’t the faintest idea and the sums that derivative markets leverage vastly exceed our planetary GDP ( that’s right, not the economy of United States, the GDP of planet Earth) In particular, I wonder how you monkey with one class of derivatives without spooking the traders in other derivative instruments into stampeding us over a cliff in ten minutes. OTOH, Robert Paterson, who unlike me really does understand derivatives and the nuances of trading, agreed with Robb, who offered:
One solution: Nuke entire parts of the system. In short, destroy the system’s network connectivity. For example, credit default swaps ensure that failure will spread through internetworked contracts. Nuke CDS derivatives ($60 trillion or so) by making them illegal. Destroy parts of the network in order to save the remainder — firewalls and firebreaks.
Fabius Maximus – No coins, no COIN
FM sees the economic crisis forcing huge changes in American foreign policy, defense structure, military doctrine and acquisitions:
In most of these money is no object in the pursuit of security (or other goals, often quite chimerical). That is an exceptional way of thinking. More so when one considers how our current account deficit has steadily increased since 1971 (when we went off the gold standard) – and the even more rapid increase in the foreign debts that finances the annual deficit.
That era will close soon, and the United States will return to earth. Like everyone else, we will have to consider what foreign adventures we can afford before starting them – weighing their costs and benefits – and stop wars whose costs spiral out of control. This will force a military revolution more profound than any since WWII, when we entered the “money is no object” era for weapons and foreign wars.
….Not that the annual budget wars were not fought fiercely, but they will be conducted differently once budgets start their rapid and long-term decline. Like any organization thrust into radically changed environment, restructuring – drastic changes in structure and doctrine – will be needed.
Maritime, air, and land – our approach to all will change. Maintaining full-scale forces against purely theoretical future threats will become impossible. Seeking dominance in every theater will become unrealistic. Prioritization will become imperative.
FM also offers up A solution to our financial crisis . Right now, China, the leader in global dollar reserves is in a position where our crash is their crash and their crash may be the end of the PRC as we know it. Good time to strike a deal.
Tom at HG’s World cites Niall Ferguson in Ferguson’s greatest area of expertise, as an economic historian:
The End of Prosperity, or A Better Future?
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