Not as Easy as It Seems

I don’t comment much on Nouriel Roubini for two important Reasons; one, he is a trifle too radical in his approach for my own taste, and two, he is more firmly grounded in economic thought than I, and possibly more intelligent as well. His analysis of the type of Recession that the United States is entering requires some Cosideration. I don’t know as the American Recession is as important to the rest of the World, as it was in Times past. Most of the World have left Technological Poverty, having acquired educated Elites to run the complex technologies now available for Sale elsewhere; America could potentially drop out of the World economy for an extended Period, without notice by the rest of the World. The worst aspect of an American Recession may be getting their invested Capital away from American shores.

Studying Roubini’s Post leaves me with a shiver, I feeling that Someone has walked over America’s grave. American Copyrights and Patents are finding lessening compliance, as American holders insist on ever-increasing Return from them; within a Scenario where the World can now devise their own technology. The leading American Products provide very little financial Return to American Households, where the Profits are not split up by high Wages, and much Corporate share is owned by Foreigners. Actual Wages have been stagnant, if curio limited Labor is subtracted from the Wage mix. The greater amount of World Investment still expects the American Consumer to pay for the Production and Start-Up Costs. The Weaning of the World from the American nipple may inflict the greatest impact of an American Recession. The entire Above discussion, though, fails to impact American Wage stagnation at all.

I am afraid I disagree with Roubini, thinking that the Recession will be L-shaped, after the Japanese model. The causation is the Same: Excessively large Capital Investment in dated Technologies, which are still unpaid. Does this seem like a Re-Do of the Tech Bubble? This is the direct result of a earlier Fed policy which trained both Business and Consumer to accumulate as much Debt as allowed. It meant that adequate Capital repayment was delayed; remember the old ‘Guns and Butter’ mythology where so many Economists and Politicians claimed We could have both? I believe in the L-shaped Recession because We still have to pay for that Capitalization, with Aged Capital, Aged Technology, and Aged Labor Force. Most Economists will claim there is an Escape Capsule, but I do not see it; new Investors will not be found, until old Investors have been paid. lgl