January 30, 2014

In his State of the Union message, President Obama suggested apprenticeships, tax reductions on new investments, and building new infrastructure as ways to increase jobs and reduce inequality in America.

But he said virtually nothing about what is probably the single biggest cause of lost jobs and stagnating earnings for all but the richest of America's citizens: the U.S. current account deficit, which includes the trade deficit.

Although the Federal Reserve Bank says we're in the midst of a recovery, and the official unemployment rate has fallen below 7%, the economy is far from being out of the woods. That official rate — technically known as U-3 — doesn't begin to tell the real story. It is only one of six unemployment measures kept by the U.S. government and counts all those who say they are unemployed and looking for work. But it does not include those discouraged unemployed workers who have given up looking for a job or those who would like to work full time but are only able to find part-time work. The rate that includes all those people — U-6 — is about 13%. Granted, that is below the 17% of 2010, but it is still far above the 8% of 2007, as we navigate what is being called a recovery — albeit an abnormally slow one.

Perhaps even more disturbing is the dramatic increase in the gap between the incomes of the wealthiest 5% of Americans and the rest. Virtually all of the benefit of the present "recovery" is going to those in the top income brackets. As far as the rest are concerned, it's still the Great Recession.

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American Review April 29, 2013 - Conventional wisdom says that America is in decline, that the American century is over, and that the future belongs to the rest, especially the rest in Asia. Dates vary, but predictions that China?s gross domestic product will soon surpass that of the US to become the world?s largest economy are legion. In 2011, the International Monetary Fund predicted it will happen in 2016.

More recently, The Economist put the date at 2019. Regardless of the exact time, prominent authors such as CNN commentator Fareed Zakaria (The Post American World) and Lee Kuan Yew School dean Kishore Mahbubani (The Great Convergence: see review page 66) have rushed to publish books predicting an historic shift in the global balance of power as a result of this change in relative share of global GDP. Indeed, the Australian government recently indicated its agreement with this thinking by moving to redeploy its resources and reorient its policies in response to a white paper on Australia in the Asian Century.

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1 November 2013

Emerging markets from Latin America to Southeast Asia breathed an audible sigh of relief when the US Federal Reserve – contrary to most market expectations – refrained from initiating its much anticipated policy of "tapering" at its last FOMC meeting in September. Tapering would have in essence signaled the beginning of the end for the Fed's extraordinary and unprecedented stimulative effort known as Quantitative Easing. Through its monthly purchases of $85 billion in securities, the Fed has been pumping massive amounts of capital into the economy and keeping interest rates near zero – all in effort to spur economic activity in the sluggish post-global financial crisis environment.

The implications of QE, however, have been felt far beyond the shores of the US. Much of the capital pumped out by the Federal Reserve has ended up in emerging markets, in search of higher rates of return. Equity markets and various asset classes – real estate, in particular – have surged, especially in key growth markets in Southeast Asia. "Easy money" from the US has funded everything from condo developments and shopping malls, to generous government programs paid for with a credit card.

Anchorage Daily News April 29, 2013  - The Alaska World Affairs Council presents Clyde Prestowitz, founder and President of the Economic Strategy Institute, speaking on "The Betrayal of American Prosperity: Free Market Delusions, America's Decline, and How We Must Compete in the Post-Dollar Era". Lunch Program. RSVP to 276-8038 or This email address is being protected from spambots. You need JavaScript enabled to view it. . Online registration available at a discount. At the door $26 for Members, $30 for Non-Members, $15 for Coffee and Dessert. Students and UAA staff receive lunch for free.

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By Zachary A. Goldfarb - The Washington Post July 13, 2012
As he campaigns for reelection, President Obama has embraced soaring political rhetoric, pledging to harness the ingenuity of America "to bring manufacturing back." In beat-up factory towns across the land, he has promoted a vision to rebuild manufacturing after decades of shuttered plants and vanishing middle class jobs. But he wasn't always so sure. Three years ago, confronting the issue in an Oval Office debate, Obama was less of the chest-thumping politician he is today. Vice President Biden led a group of advisers who were making the case for an ambitious plan to reverse the industry's long decline. Obama had witnessed the devastation of lost factory jobs from his earliest days as a community activist in Chicago and felt in his gut that there must be some way to help, but the president, a policy wonk and onetime professor, also wanted to know what the research showed. "There's a narrative that countries have to make things to be successful," Obama said to his economic advisers. "What's the evidence?"

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EXECUTIVE SUMMARY

As talks to conclude a Trans-Pacific Free Trade Agreement (TPP) have recently progressed , the question of whether Japan should be added to the present list of eleven (United States, Canada, Mexico, Peru, Chile, New Zealand, Australia, Singapore, Malaysia, Brunei, Vietnam) participants and thus of whether it can meet reasonable criteria for open markets has come to the fore. A major obstacle is the structure, practices, and industrial policies associated with the Japanese auto industry. It is perhaps the foremost example of what has become known as the "Closed Open Market" phenomenon. In technical terms the market is completely open with no tariffs or quotas. In reality, the Japanese market, with 6.6 percent, has the lowest penetration of imports and foreign brand autos of all the major auto markets, and this is almost exclusively in the very high price luxury segment. Indeed, Hyundai, the Korean auto maker that is currently perhaps the world?s most competitive producer, has abandoned the Japanese market on the grounds that its non-tariff barriers are so great as to make investment nothing but a waste of money and time. In terms of trade negotiations, this Closed Open Market phenomenon means that Japan can negotiate secure in the knowledge that no matter what formal concessions it makes, imports will not rise. In the particular instance of the TPP, this is all the more the case because the negotiating agenda does not cover the intervention in international currency markets, various investment subsidies, and anti-competitive market structures and practices that cause the major distortions of free market trade flows.

Mexico's performance over the past decade has been good, but Korea, China, Ireland, Taiwan, and Turkey are Mexico?s new peers. They have grown more rapidly and delivered greater gains to their citizens. Mexico is like a global corporation in danger of over-confidence while actually losing market share and becoming more vulnerable to unexpected competition and shocks. Making the Mexican miracle illustrates the threats that the Mexican economy faces, and the steps that it must take to remain competitive.

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