Austerity vs. Growth

[SanJoaquinSooner]

Austerity is probably a good thing for relatively short periods - to help wring the excesses and inefficiences out of the game. But at some point, you gotta buy into growth as the long-term gameplan.

[KantoSooner]

True. But permanent austerity is probably the best thing for government, as governmental involvement in the economy tends to distort and weaken overall national economic health. Companies, on the other hand are ruled by a constant batlle between greed and fear. One of the reasons huge paychecks and low taxes are beneficial is to reward aggressive investment and counterbalance fear.

[Midtowner]

True. But permanent austerity is probably the best thing for government, as governmental involvement in the economy tends to distort and weaken overall national economic health.

Is Germany, a country with government sponsored healthcare and free higher education for all really a distorted and weakened national economy?


Companies, on the other hand are ruled by a constant batlle between greed and fear. One of the reasons huge paychecks and low taxes are beneficial is to reward aggressive investment and counterbalance fear.

German companies don't have these huge paychecks like their US counterparts. They have a thriving and growing middle class and their companies are in pretty darned good shape.

[KantoSooner]

Germany is an interesting example to choose. It's banking system is a shambles (far worse than ours) and quite likely to collapse utterly in the next two years. Why? The Landesbanks were quasi government controlled and thus were pushed, on the one hand, to support every harebrained scheme that national and regional politicos wanted...and then tried to pump up the bottom line with increasingly insane investments (they were, for one, one of the primary buyers of repacked sub-prime mortage securities....which are now worth, well, nothing. Ooops.)
On the other hand, the Germans at least have some profitable manufacturing. Unlike France or Italy that have very little of anything including a value add that the rest of the world wants. That being said, Germany's macro-economy is not in peachy shape. Merkel has already said as much. Taxes will rise and that is not terribly good news. Germany has enjoyed a big boost from the creation of the eurozone....but they've done so by subsidizing the laggard economies of Europe. That's great for as long as you pump money into the Portugals and Greeces, and it helps out your companies as all those suddenly 'rich' southerners buy Krupps coffee makers and volkwagens. The problem is that it is in effect a subsidy program in which the German government indirectly pays for the consumer purchases of people who can't afford it. Sooner or later, you need 'fresh' money or the whole deal slows down and stops.
Germany is approaching that time now.
Profit is hard to come by, financial discipline more so. I believe that the best keeper of such discipline is terror and that is best maintained by a market in which people can fail. Governments are different entities and will never, willingly, let any voter feel pain. Thus, the more involved they are, the flabbier the economy becomes.

[C&CDean]

You guys think way too much about this ****.

[pphilfran]

http://www.reuters.com/article/2010/03/16/deutschebank-pay-idUSLDE62E2E220100316

This is from March 2010

FRANKFURT, March 16 (Reuters) - Deutsche Bank (DBKGn.DE) Chief Executive Josef Ackermann got 70 percent of his 9.55 million euro ($13 million) pay for 2009 as performance-related compensation, reflecting a change in the way banks reward executives likely to be mirrored elsewhere.

Germany's largest lender raised the proportion of deferred and performance-related compensation in response to new rules and released bonus details ahead of peers Barclays (BARC.L) Credit Suisse (CSGN.VX) and Royal Bank of Scotland (RBS.L).

Politicians from the Group of 20 countries drafted new bonus rules in the wake of the global financial crisis in an attempt to discourage short-term risk taking mainly by deferring payouts and by introducing claw-back options. [ID:nL722182]

Although Ackermann's paycheck marks the biggest 2009 award for a German executive disclosed at a blue-chip company so far, his base salary was 1.15 million euros, or only 12 percent of the total.

Amid an uncertain outlook for investment banking in 2010, Deutsche said a larger proportion of management pay would be fixed rather than variable from 2010 onward.

Ackermann saw his pay vault from 1.4 million euros in 2008, showing that bankers' pay can be more volatile than in other sectors such as the auto industry where loss-making Daimler (DAIGn.DE) paid its CEO Dieter Zetsche 4.2 million euros in 2009, down from 4.8 million in 2008.

Ackermann's remuneration tops the 9.2 million euros received by Germany's previous top earner so far, RWE (RWEG.DE) chief Juergen Grossmann as well as that of Anshu Jain, currently head of Deutsche Bank's global markets division, the company's biggest profit generator in 2009.

Jain head of the investment banking division earned 7.79 million euros while co-head Michael Cohrs earned 3.22 million euros in 2009.

RAISING EYEBROWS

The scale of payouts for bankers has been raising eyebrows on the high street, which is still reeling from the credit crisis.

The ire directed at Deutsche -- which did not need a bailout -- is likely to be less severe than at loss-making Swiss rival UBS (UBSN.VX), which paid big bonuses despite needing a government rescue during the crisis.

Carsten Kengeter, who heads up the Investment bank at UBS, was paid just over 13 million Swiss francs, even though the unit booked a pretax loss of 6 billion francs in 2009. [ID:nLDE62E056]

Investment banks boosted earnings in 2009 in part thanks to government measures including short selling bans on financial stocks, looser collateral rules, and fiscal stimulus measures.

Deutsche's corporate and investment bank generated 4.3 billion euros, or 83 percent of Deutsche Bank's 5.2 billion euros pretax income in 2009.

In 2008 the corporate and investment bank made a 7.4 billion euro pretax loss and the group made a 5.7 billion euro loss.

Deutsche Bank paid out a total 11.3 billion euros to its employees in compensation and benefits in 2009. Of that, almost 2.6 billion euros in cash and deferred pay went to bankers who can create "high risk positions" that could result in high losses or profits, it said.

Deutsche Bank on Tuesday reiterated ambitious targets to reach pretax income in its core businesses for 2011 of 10 billion euros at group level.

Elsewhere, profitable banks such as Goldman Sachs (GS.N) and Barclays decided to limit or forego bonus payments in an attempt to mute public criticism of the banking industry, which is being blamed for causing the economic crisis. [ID:nN01240228]

By contrast John Stumpf, CEO at Wells Fargo & Co, received compensation worth $21.3 million for 2009, prompting President Obama's pay czar Kenneth Feinberg to question the bank's remuneration practice. [ID:nN04184813]

A battle with regulators over a $100 billion pay package prompted Citigroup Inc (C.N) to sell its Phibro energy trading business to Occidental Petroleum Corp (OXY.N). [ID:nN0983947]

Top bosses at Barclays (BARC.L) also turned down multimillion-pound bonuses despite posting bumper profits, while the chief executives of Royal Bank of Scotland (RBS.L) and Lloyds Banking Group (LLOY.L) -- which required bailouts -- waived their bonuses in response to public pressure. [ID:nLDE61K0FC] [ID:nLDE61L25X] ($1=.7318 euros) (Reporting by Edward Taylor; Editing by Hans Peters, Mike Nesbit)

[Position Limit]

germany was one of the largest buyers over overpriced MBS, CDS garbage from ours truly. alot of europe (PIIGS) got rooked by this trade. it's amazing how far americas quest to have the tackiest house on the cul-de-sac reaches. it's amazing also that this gets glossed over in the socialist propagada in this country. european central bankers are now using the expanding balance sheet model that ben and the boys love so much. but with the sum of all current and future financial decisions at 1400 (spx) who can argue?

[pphilfran]

If they bought a bunch of worthless chit then they got what they deserved...

They were just as greedy buying the stuff as the people that put them up for sale...

If you don't know what you are buying you shouldn't be buying it and you damn sure shouldn't bitch when you get your azz handed to you...

[Position Limit]

If they bought a bunch of worthless chit then they got what they deserved...

They were just as greedy buying the stuff as the people that put them up for sale...

If you don't know what you are buying you shouldn't be buying it and you damn sure shouldn't bitch when you get your azz handed to you...

"everything looks worse in black and white". who's bitchin by the way? or perhaps there could have been more powers granted to the CFTC in the late 90's when it was trying to be acquired. but yes your right, it's their fault for buying AAA rated derivatives that were stuffed with americans junk debt. caveat emptor sounds great if this were 1910, but unfortunately there's quite a bit at risk in the global market place of 2008. i suppose clearing clients and customers should just take thier lumps from getting in bed with john corizine's mf global... because there's never any unintended consequences of banking tom foolery. buyer beware!!!!

[Sooner5030]

I'm beginning to believe that austerity will not work either. Growth? Forget it. $1.6 trillion annual deficit, 15 trillion debt, 15 trillion GDP and 2% gowth? There's no way to grow out of this problem. The GAO has stated this fact for like 5 straight years now.

The problem with austerity is that it can create a feedback loop and cause consecutive GDP contractions in multiple years. People see the calculated GDP fall and they hold onto their money.

I think default and reset is an option that needs to be considered. The money can never be paid back.

[pphilfran]

"everything looks worse in black and white". who's bitchin by the way? or perhaps there could have been more powers granted to the CFTC in the late 90's when it was trying to be acquired. but yes your right, it's their fault for buying AAA rated derivatives that were stuffed with americans junk debt. caveat emptor sounds great if this were 1910, but unfortunately there's quite a bit at risk in the global market place of 2008. i suppose clearing clients and customers should just take thier lumps from getting in bed with john corizine's mf global... because there's never any unintended consequences of banking tom foolery. buyer beware!!!!

I was not saying you were bitching...I was just generalizing... :)

Only saying that you must do your homework or get burned...and if you are buying very complicated securities you damn sure better know your stuff and do a lot of digging...

They wanted the yield so they took the risk...

[diverdog]

True. But permanent austerity is probably the best thing for government, as governmental involvement in the economy tends to distort and weaken overall national economic health. Companies, on the other hand are ruled by a constant batlle between greed and fear. One of the reasons huge paychecks and low taxes are beneficial is to reward aggressive investment and counterbalance fear.

Can you provide any proof for your statement on huge pay checks?

[Position Limit]

I was not saying you were bitching...I was just generalizing... :)

Only saying that you must do your homework or get burned...and if you are buying very complicated securities you damn sure better know your stuff and do a lot of digging...

They wanted the yield so they took the risk...

true they wanted yield. but these guys were not fogging up a mirror to pass the trading test. makes you wonder how so much was missed. i'm sure lust for yield played a large part. hell the domino that started the meltdown was a hedge fund that bear sterns set up to trade the stuff with a couple of their own guys!!! in what turned out to be one of the dumbest trades in history. but i digress. alot of european banks/financial woes are a result of the cul-de-sac quest.

[jkjsooner]

Germany is an interesting example to choose. It's banking system is a shambles (far worse than ours) and quite likely to collapse utterly in the next two years. Why? The Landesbanks were quasi government controlled and thus were pushed, on the one hand, to support every harebrained scheme that national and regional politicos wanted...and then tried to pump up the bottom line with increasingly insane investments (they were, for one, one of the primary buyers of repacked sub-prime mortage securities....which are now worth, well, nothing. Ooops.)

That last sentence is true but these were external mortgages. I doubt the government was pushing them to buy US subprime mortgages.

In fact, Germany had almost no real estate bubble whatsoever so tying their banks' health to internal mandates seems iffy to me.

[pphilfran]

true they wanted yield. but these guys were not fogging up a mirror to pass the trading test. makes you wonder how so much was missed. i'm sure lust for yield played a large part. hell the domino that started the meltdown was a hedge fund that bear sterns set up to trade the stuff with a couple of their own guys!!! in what turned out to be one of the dumbest trades in history. but i digress. alot of european banks/financial woes are a result of the cul-de-sac quest.

It is easy to see how it was missed...they were extremely complicated securities...like you said they had a bunch of crap buried within...

[pphilfran]

Back on track...

Like everything else you need balance...too far to either extreme and you are asking for trouble...

[jkjsooner]

Politicians from the Group of 20 countries drafted new bonus rules in the wake of the global financial crisis in an attempt to discourage short-term risk taking mainly by deferring payouts and by introducing claw-back options.

I've been saying for the last 10 years that this is a problem. Our entire system made gambling very profitable for the executives while the companies (and bond holders) paid the price.

I'd guess most people wouldn't feel that our own country has the right to institute such rules. I suppose the stock holders should be the ones who force the issue but unless a single entity (person/mutual fund/private equity firm) holds a large percentage of the stock it's just not going to happen.

I suppose we can vote with our wallets but that doesn't remove the hazard that these behaviors pose to the economy.

[pphilfran]

I've been saying for the last 10 years that this is a problem. Our entire system made gambling very profitable for the executives while the companies (and bond holders) paid the price.

I'd guess most people wouldn't feel that our own country has the right to institute such rules. I suppose the stock holders should be the ones who force the issue but unless a single entity (person/mutual fund/private equity firm) holds a large percentage of the stock it's just not going to happen.

I suppose we can vote with our wallets but that doesn't remove the hazard that these behaviors pose to the economy.

I with I knew he answer

[KantoSooner]

Can you provide any proof for your statement on huge pay checks?

As a matter of fact, I am not in favor of them, because I think that too often they are not tied to performance. I do think, however, that the prospect of an enormous payday does serve to focus the minds of any manager and encourage risk taking/expansionist behaviour.

[KantoSooner]

That last sentence is true but these were external mortgages. I doubt the government was pushing them to buy US subprime mortgages.

In fact, Germany had almost no real estate bubble whatsoever so tying their banks' health to internal mandates seems iffy to me.

Their politicians were pushing them to provide funds to dumbass local projects (such as chip plants in Dresden). The failure of these investments to produce a reasonable return put the landesbankers ever further in the hole and forced them to look for higher and higher rates of return on the investments over which they DID have control. Thus US mortgage debt, an array of crap investments in Indonesia ('Thanks for your Euros, now **** off') and government bonds from countries forced to pay high interest rates because they are bad credit risks. (One reason the German gov is so eager to bail out the PIGS is that the fallout of a default would be the end of an entire tier of the German banking industry.)

[Bourbon St Sooner]

germany was one of the largest buyers over overpriced MBS, CDS garbage from ours truly. alot of europe (PIIGS) got rooked by this trade. it's amazing how far americas quest to have the tackiest house on the cul-de-sac reaches. it's amazing also that this gets glossed over in the socialist propagada in this country. european central bankers are now using the expanding balance sheet model that ben and the boys love so much. but with the sum of all current and future financial decisions at 1400 (spx) who can argue?

$4 gas? $5 milk?

But only the poor pay that tax. That's what's so paradoxical about the borrow and spend model. Inflation is a very regressive tax. The only reason inflation isn't worse is that the problems in Europe are forcing people to stay in the dollar as a safety net.

[Sooner5030]

This guy is always anti-fed but I like hearing from skeptics.


http://video.cnbc.com/gallery/?video=3000087187

[Sooner5030]

http://www.cnbc.com/id/47263088/


For the fiscal cliff, there are four main items at issue: Expiration of the Bush tax cuts; the end of the 2 percent payroll tax holiday; extended unemployment compensation coming to a close; and the automatic spending and budget cuts mandated by the Budget Control Act if Congress fails to reach its Supercommittee's deficit reduction goals.

All told, the damage would amount to $500 billion, or some 3.8 percent of gross domestic product [cnbc explains] , at a time when GDP is struggling to grow by 2 percent.

We're really in a bad position.....average economic growth even with $1 trillion deficit spending...ZIRP...if the $ falls will the fed have to raise rates.....which will result in higher mandatory spending to service the debt.

[Chuck Bao]

I got into this debate several times with senior economists with Thailand's chief policy think tank, the National Economic and Social Development Board, and the senior economists with the Thai central bank, the Bank of Thailand, following the disastrous Asian economic crisis. They all defended their actions or lack of action in curtailing excessive growth in the hope of developing their country and the average lives of the Thai people. I can't fault them on that. It was very dangerous however that Thailand became a US dollar market and everyone was borrowing in dollars just after China devalued its currency and hedge funds took this as a sign to attack.

That's not fair. Life is not fair. The Asian economic crisis did wipe out the wealth of some 300-400 million people as the currency crisis spread throughout Southeast Asia. It is funny that the exchange rates are finally adjusting back to near it once was before the '97 crisis.

The Bank of Thailand would still like to see GDP growth of 5-6% per annum. But, they are wisely much more aware and responsive to the threat of external shocks. For some reason, Americans don't seem to have learned that lesson.

[KantoSooner]

It's not that strange, Chuck, 'We are the world'. Americans have been trained by a 50 year anomaly in which the US economy affected the rest of the world but was immune to whatever happened overseas.
The periodic wake up calls (ex: the 'oil shock' of the 1970's) were short term and we could, in essence, hold our breath until they went away.
Now we enter a much more 'normal' world in which Chinese exchange rate policy, OPEC price jiggering, EU unemployment, Mexican ag policy and Russian gas export decisions, for example, will impact the average American in very concrete ways. And we don't vote for any of their politicians.
Yippee, hello globalization.
Ultimately its a lot stabler than a single pole world economy, but it'll take some getting used to. And probably MORE rather than less involvement in international talk shops like the IMF, UN, etc.

[pphilfran]

It's not that strange, Chuck, 'We are the world'. Americans have been trained by a 50 year anomaly in which the US economy affected the rest of the world but was immune to whatever happened overseas.
The periodic wake up calls (ex: the 'oil shock' of the 1970's) were short term and we could, in essence, hold our breath until they went away.
Now we enter a much more 'normal' world in which Chinese exchange rate policy, OPEC price jiggering, EU unemployment, Mexican ag policy and Russian gas export decisions, for example, will impact the average American in very concrete ways. And we don't vote for any of their politicians.
Yippee, hello globalization.
Ultimately its a lot stabler than a single pole world economy, but it'll take some getting used to. And probably MORE rather than less involvement in international talk shops like the IMF, UN, etc.

This is a terrific post!

[Chuck Bao]

It's not that strange, Chuck, 'We are the world'. Americans have been trained by a 50 year anomaly in which the US economy affected the rest of the world but was immune to whatever happened overseas.
The periodic wake up calls (ex: the 'oil shock' of the 1970's) were short term and we could, in essence, hold our breath until they went away.
Now we enter a much more 'normal' world in which Chinese exchange rate policy, OPEC price jiggering, EU unemployment, Mexican ag policy and Russian gas export decisions, for example, will impact the average American in very concrete ways. And we don't vote for any of their politicians.
Yippee, hello globalization.
Ultimately its a lot stabler than a single pole world economy, but it'll take some getting used to. And probably MORE rather than less involvement in international talk shops like the IMF, UN, etc.

I agree with pphilfran. This is indeed a terrific post. Wall Street does respond to international news but it is more like a couple of knee-jerk reactions and then moves on to something else. Meanwhile, our politicians try to treat the symptoms without addressing the root causes, which may or may not be within their control.

Like it or not, we have lost some control of our economic future. The US Fed can't so effectively manage our economy when our manufacturing production chain is global and other countries are fighting us for resources and markets and in many cases fighting unfairly. US debt spending and foreign held debt are just complications from that root cause, in my opinion.

Maybe the US will get more involved with the IMF, World Bank, UN, etc. I'm not so optimistic that anything much can be achieved with that lot of bureaucrats. I've interviewed a few of their senior economists and I really don't have the impression that they are "stick your head up above the crowd" critical thinkers.

On the other hand, Wall Street and the global commodity exchanges are forcing policy by the sheer weight of money and it turns on a dime.

The lack of control of our economic future brings us back to the point of austerity vs. growth. Although it may not be politically popular, I would err on the side of austerity so that we can manage a future global financial shock. Okay, I've stolen that from my good friends at the Bank of Thailand.

[KantoSooner]

Another thing I'd like to see: a $0.01 per transaction fee on stock purchases and sales. For the average muni fund or 401(K) type investor, it's a meaningless 'burden'. Even for most stock brokers, it doesn't affect them one way or the other. For the super-computer wizards who are leveraging micro-fluctuations in the market and then magnifying each judder and stumble of the herd by trading millions of times per minute, it is death incarnate. And they lie at the root of much of the distortion of today's stock markets. (which, in turn dirve capital markets to some degree, and affect public confidence, etc. etc. It's one loci of rot in today's economy.)

[diverdog]

Another thing I'd like to see: a $0.01 per transaction fee on stock purchases and sales. For the average muni fund or 401(K) type investor, it's a meaningless 'burden'. Even for most stock brokers, it doesn't affect them one way or the other. For the super-computer wizards who are leveraging micro-fluctuations in the market and then magnifying each judder and stumble of the herd by trading millions of times per minute, it is death incarnate. And they lie at the root of much of the distortion of today's stock markets. (which, in turn dirve capital markets to some degree, and affect public confidence, etc. etc. It's one loci of rot in today's economy.)

Spot on. I have advocated the same thing in a lot of post. We use to have this tax.

Back to your other post I think another issue in the global economy is that we do not do a good job of negotiating trade treaties. If we do not have equal access to another nations markets then we need a quid pro quo policy until the markets open up. And don't get me started on subsidies on exported provducts...especially farm goods.

[Chuck Bao]

Another thing I'd like to see: a $0.01 per transaction fee on stock purchases and sales. For the average muni fund or 401(K) type investor, it's a meaningless 'burden'. Even for most stock brokers, it doesn't affect them one way or the other. For the super-computer wizards who are leveraging micro-fluctuations in the market and then magnifying each judder and stumble of the herd by trading millions of times per minute, it is death incarnate. And they lie at the root of much of the distortion of today's stock markets. (which, in turn dirve capital markets to some degree, and affect public confidence, etc. etc. It's one loci of rot in today's economy.)

You've lost me here, Kanto. I had assumed that most of the quant arbitrage trading programs are in-house so they don't have to pay any brokerage fee. One of my analysts built a computer program that proved to make money if it didn't have to pay a brokerage fee on a ridiculous amount of trades.

Even brokers with a seat on the exchange have to pay something well above $0.01 per transaction to the exchange and the custodial banks to temporarily house the securities. Much, much more importantly, there are capital requirements for brokers on the amount of outstanding trade settlements. I think that that is one of the reasons why banks with huge capital balances merged with investment banks/brokers following the repeal of the Glass-Steagall Act. It is also why the repeal of that act was quite dangerous.

[KantoSooner]

So far as trade and treaties is concerned, two quickies:

First, we have mixed our trade and diplo/military policy since forever. And it will remain such. One case in point is Japan. Post WWII, we had an overwhelming motivation to see Japan healthy, strong and a huge, unsinkable aircraft carrier just off Russia and China's coasts. So we, in essence, turned a blind eye to patent infringement, predatory trade practices and the like. And the Japanese, bless their hearts, took full advantage and also, importantly, remained rigidly stalwart allies. (Here in the US, we have no idea the fire storm the Prime Minister there had to go through to get Japanese military involvement in Afghanistan - they supplies our fleet with fuel and fueling vessels for years).

Secondly, we don't really do so badly at the trade game. No, we don't have 50% of the world economy any more, but, really, the only reason we did in 1945 was that the rest of the world had conveniently bombed each other or been bombed, quite literally in many cases, flat.

My list of what most retards US businesses in international trade would include:

1. Taxation policies. things like taxation of US citizens living and working and deriving all their pay outside the US. At this time such individuals must pay US taxes as well as the taxes of the country in which they are resident (of course). This is insane, we are the only major economy to do so and it robs our citizens of important career experience. We in essence breed managers who know nothing of the international market; so they come off as morons against their competition. The average mid-career Mexican or Korean business person is light years ahead of his cloistered and naive US counterpart.
Further....ah crap, Sarbanes-Oxley, you could go on all day. Business is global, you aren't going to capture stuff that happens off-shore, but we've got the biggest market on earth. Tax at a point in the food chain where you have control instead of belaboring your companies with burdens that no one else's companies carry.

2. Refusal to conform to international standards. I spend a good portion of my life trying to see whether US produce will work under international standards. Why, oh why can't we just spend time in the international standards committees instead of insisting on reinventing the wheel...and thus putting our products at an automatic disadvantage in world trade?

3. Make our healthcare, and pension benefits portable, individual and not under the management of one's employer. Right now, major US manufacturers bear huge burdens of healthcare costs. Pension funds have been treated as piggy banks since they were invented. And yet many of our competitors long ago set up structures that deducted X% of salary, matched it with Y% of employer contribution and then sequestered it away in special bank accounts....outside the grasp of politicians and CFOs eager to dress the books this quarter.

4. Forget about 'unfair' competition. Dumping does not exist. Either someone can produce at a lower cost than I can; in which case I need to adjust my business model or go find a new business. Or they are, in effect, giving me some portion of that product for free. Lucky me in the latter case.
When we buy Aussie lamb in the US, we are buying a product that is as free of subsidy as any in the world...and is then processed and transported (under refrigeration) halfway around the world...and is then sold at prices less than what American lamb ranchers claim is necessary to exist. And our ag sector is massively subsidized. What is wrong with this picture?
Before we whine about subsidies, we should probably look at the flab and arrogant mismanagement of much of US industry. At the same time we can be proud that, for all our faults, we are still doing pretty well and hold a hugely disproportionate share of the world's business.

[Chuck Bao]

So far as trade and treaties is concerned, two quickies:

First, we have mixed our trade and diplo/military policy since forever. And it will remain such. One case in point is Japan. Post WWII, we had an overwhelming motivation to see Japan healthy, strong and a huge, unsinkable aircraft carrier just off Russia and China's coasts. So we, in essence, turned a blind eye to patent infringement, predatory trade practices and the like. And the Japanese, bless their hearts, took full advantage and also, importantly, remained rigidly stalwart allies. (Here in the US, we have no idea the fire storm the Prime Minister there had to go through to get Japanese military involvement in Afghanistan - they supplies our fleet with fuel and fueling vessels for years).

Secondly, we don't really do so badly at the trade game. No, we don't have 50% of the world economy any more, but, really, the only reason we did in 1945 was that the rest of the world had conveniently bombed each other or been bombed, quite literally in many cases, flat.

My list of what most retards US businesses in international trade would include:

1. Taxation policies. things like taxation of US citizens living and working and deriving all their pay outside the US. At this time such individuals must pay US taxes as well as the taxes of the country in which they are resident (of course). This is insane, we are the only major economy to do so and it robs our citizens of important career experience. We in essence breed managers who know nothing of the international market; so they come off as morons against their competition. The average mid-career Mexican or Korean business person is light years ahead of his cloistered and naive US counterpart.
Further....ah crap, Sarbanes-Oxley, you could go on all day. Business is global, you aren't going to capture stuff that happens off-shore, but we've got the biggest market on earth. Tax at a point in the food chain where you have control instead of belaboring your companies with burdens that no one else's companies carry.

2. Refusal to conform to international standards. I spend a good portion of my life trying to see whether US produce will work under international standards. Why, oh why can't we just spend time in the international standards committees instead of insisting on reinventing the wheel...and thus putting our products at an automatic disadvantage in world trade?

3. Make our healthcare, and pension benefits portable, individual and not under the management of one's employer. Right now, major US manufacturers bear huge burdens of healthcare costs. Pension funds have been treated as piggy banks since they were invented. And yet many of our competitors long ago set up structures that deducted X% of salary, matched it with Y% of employer contribution and then sequestered it away in special bank accounts....outside the grasp of politicians and CFOs eager to dress the books this quarter.

4. Forget about 'unfair' competition. Dumping does not exist. Either someone can produce at a lower cost than I can; in which case I need to adjust my business model or go find a new business. Or they are, in effect, giving me some portion of that product for free. Lucky me in the latter case.
When we buy Aussie lamb in the US, we are buying a product that is as free of subsidy as any in the world...and is then processed and transported (under refrigeration) halfway around the world...and is then sold at prices less than what American lamb ranchers claim is necessary to exist. And our ag sector is massively subsidized. What is wrong with this picture?
Before we whine about subsidies, we should probably look at the flab and arrogant mismanagement of much of US industry. At the same time we can be proud that, for all our faults, we are still doing pretty well and hold a hugely disproportionate share of the world's business.

That is more than two quickies. As always, I appreciate your view on international trade and that more Americans should consider exactly what they are buying and where it is coming from.

Your point about Japan is well taken. I get particularly incensed about the part of protecting American corporate interests overseas with our military and the lives of our young, brave men and women. There is so much doublespeak there.

American industry invested a hell of lot of money in China over the last 20 years. I am aware of how those joint ventures are going there and the Chinese lobby in Washington here. I am aware of how we will continue to coddle China because nobody in Washington wanted to be blamed for losing China while corporate America was so intent on low labor costs and potential access to a billion people market. The whole scenario is frightening now that China owns our debt.

Okay, Americans are disadvantaged in finding employment overseas because we belong to the only country in the world that requires double taxation. I'm not complaining. And so what if we have to disclose all of our foreign bank accounts on a yearly basis? I don't really care and I can outperform any Australian, British, Japanese, Chinese. Bring it on.

[Killerbees]

As far as austerity vs growth,

The FED has pushed growth all it can. All that has acheived is huge investment banks taking on huge carry trades leveraged to the hilt that require ZIRP to remain profitable. They took the easy path and it has only bought us a little time.

This didnt start in 08 or 00, GDP growth since the 80s has been a mirage.

Austerity is the only viable path but it will not be accepted by masses nor are there enough politicians willing to commit career suicide to force it. So we will blindly forge on, watching the talking heads on tv explain away the latest bank implosion, until the rest of the world forces austerity on us.