Tuesday, April 22, 2008

What You Would Expect to See in a Developing Country

Life span shorter in parts of U.S.

For the first time since the 1918 Spanish flu pandemic, life expectancy for a significant proportion of the United States is on the decline largely because of an increase in chronic diseases related to obesity, smoking and high blood pressure.

That doesn't sound good. I'm going to add stress to the list. It isn't easy to watch a prosperity bubble deflate.

"It is what you would expect to see in a developing country, not here," said Dr. Majid Ezzati, a Harvard professor and lead author of a study published in the open-access journal Public Library of Science Medicine.

Emphasis added.

Nothing like this trend has been observed in this country since the massive deaths caused by the 1918 flu pandemic, Murray said, and nothing like it appears to be happening in any of the other industrialized nations around the world.

I guess that means we are a developing country now. If nothing else, we've got a banana republic trade deficit.

America, the Next Great Banana Republic

After 30 years trying to defy economic gravity, the US is well on the way to becoming the world's largest banana republic. If the current level of government mismanagement continues, within 20 years the US economy will be comparable to that of Mexico. With a more modest level of mismanagement, this will occur in less than 10 years but under much better economic circumstances.

Perhaps the Great Wall of Mexico isn't really needed long-term then.

There are basically only three ways to remedy a current account deficit. One is to impose trade barriers in order to force a balance between exports and imports. This is what the IMF and US government have discouraged Mexico from doing. The IMF and US government are committed to "free trade" and are advising all countries to do likewise. In many cases this is not in the best interest of these less-developed countries because they will continue to need protection for their infant industries if they are to survive.

The second way to remedy a current account deficit is to allow a devaluation of the currency making it more costly for its citizens to buy foreign products and making its exports more competitive overseas. The third way is adopt economic policies designed to create recession, which undermines the public's ability to buy foreign-made goods. Unfortunately, if this is done when a country in already in recession, it simply creates a depression with widespread unemployment instead of simply less purchasing power.


The first way is 1970s thinking. I can't even begin to imagine how broken the global economy would become if we turned protectionist. The good news is that we wouldn't have to choose between deflation and inflation though. Inflation would win big time! Hurray! *cough* *gag* *sputter*

The second way is being tried now. Unfortunately, there are at least three problems. First, as our currency declines the price of oil rises. Paying more for oil makes the trade deficit worse. Second, we're addicted to oil. Our consumption of oil isn't falling nearly as fast as the value of the dollar is. Third, one of our major exports is food. Don't we kind of want to eat it ourselves or is that just me?

I'm seeing a major problem with the third way. Perhaps it is that "if this is done when a country is already in a recession" part? Or perhaps it is the "depression with widespread unemployment" part? Who knows?

There's also a fourth way I believe. It is called war. This might have worked (if you can call massive bloodshed working) in the past, but the following quote comes to mind.

I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones. - Albert Einstein

4 comments:

MAB said...

Stag,

http://en.wikipedia.org/wiki/Permanent_income_hypothesis

Perhaps there is a 5th way - Americans start living within their means and consume less and save more.

Eventually economic reality will either dawn on or be forced upon American consumers. At some point, global credit markets will just shut down the excess spending.

Just assume the Permanent Income Hypothesis (PIH) is valid:

Will real wages rise for the majority of Americans against a global pool of billions of cheap workers?

Will the living expenses of the American family decrease?

Will houses permanently increase in value allowing income extraction?

Is a stock market with a 2% yield going to provide permanent reliable income?

Will aging baby boomers recognize that their future incomes will shrink, perhaps dramatically?

I won't even mention negative real yields on safe fixed income instruments. Ok, maybe I just did.

Perhaps it was all just an Illusion of Permanent Income

Stagflationary Mark said...

MAB,

If you don't mention negative real yields on safe fixed income instruments then I won't mention rice rationing at Costco and Sam's Club. Fair enough? Oh wait, you DID mention it. Now look what you started.

UPDATE 1-Wal-Mart's Sam's Club limiting sales of rice

http://www.reuters.com/article/marketsNews/idUSN2323679120080423

Anonymous said...

The fence is to keep Americans out of Mexico.

Stagflationary Mark said...

Anonymous,

One really has to wonder at some point.