12/15/05 Globalization? How's It Working For You?

...Ran across a thought provoking article today, The Big Bet: Why the U.S. will not solve its economic, educational, health, retirement, energy, and other major structural problems until it suffers a major financial crisis. Opinionated article about some of the things threatening our nation now and in the future. Whether you agree with all his assessments or not, it addresses some very real problems. Mr. Janszen laments that we have built a system that uses credit and leverage and relies on the savings of foreign workers to fund our system and central banks to cover the risks. While we over consume and go further into debt, both individually and as a nation, foreigners are buying up our debt so that they can produce more goods and build their economies and sell us more goods and give us the financing to do it.
...Many people think it is only a matter of time before that is going to stop. Mr. Paul Volcker, Alan Greenspan's predecessor as Chairman of the Federal Reserve, warned back in February 2005 at a speech at an economic summit sponsored by the Stanford Institute for Economic Policy Research that "...there are disturbing trends: huge imbalances, disequilibria, risks -- call them what you will. Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot. What really concerns me is that there seems to be so little willingness or capacity to do much about it." Mr. Volcker later related an anecdote attributed to another economic observer, "...what can be left to later usually is -- and then, alas, it's too late."
...Mr. Volcker further commented, "The difficulty is that this seemingly comfortable pattern can't go on indefinitely. I don't know of any country that has managed to consume and invest 6% more than it produces for long. The United States is absorbing about 80% of the net flow of the international capital. And at some point, both central banks and private institutions will have their fill of dollars."
.