Monday, March 2, 2009

Trade Death

The Great Depression saw US/European industrial output drop by something like five percent in 1931 and four percent in 1932. In this last year US industrial output has dropped more than ten percent while Taiwan has dropped 43 percent, Russia 16 percent, Germany 12 percent, France 11 percent and Great Britain nine percent. Across the world industrial output has plummeted, share prices are garbage and trade is in the toilet. US house prices across the nation have dropped by a third and California's official unemployment rate is over ten percent, and that doesn't count workers who have given up or taken part-time work to fill in. If this isn't the Great Depression Two I don't know what is.
Some commentators think this doesn't look like a depression because we don't have the "visual cues" of GD1- soup kitchens, people begging and people jumping off window ledges. It's clear that no one in charge has a clue what to do and the brigade of Internet advisers has a ton of suggestions, none of them all encompassing, and many suggestions aren't even palatable in the world of political possibility. Inflate the economy with massive amounts of new money, pay down mortgages, let the house of cards tumble, start a war. Who knows what will straighten this mess out, but the bloggers have an opinion. The US Secretary of State has told Asian leaders that declining to buy US bonds will be viewed in a very dim light; yet China has no money to spare, it says, as it's citizens are counting unemployment close to twenty million as laid off factory workers return to the countryside to try to feed themselves. They aren't doing a very good job and the Central Government is spending nearly $600 billion to keep them alive and quiescent.
On the one hand politicians are promising not to institute protectionism and erect trade barriers, on the other hand the simple act of not buying foreign products is enough to bring an industrial economy to it's knees...From my perspective the US efforts at stimulus may have bought us some time. Time enough for Europe to implode over Eastern European defaults, and perhaps it has bought enough time for Asian social structures to implode as trade dies and unemployment skyrockets across the Far East. Perhaps then we in the US will have time to acknowledge the reality of the Great Depression Two and start to rebuild on the wreckage left by the rest of the world. Or not.

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