Ilargi writes: It may seem sort of hard to decide which idea is sillier. But then again, that’s not really fair. The nonsense oozing from Bush and Canadian PM Harper in Peru about how free trade will solve all our problems within the next 18 months goes way beyond silly. We can rest assured we’ll see more protectionism than we hold possible, and the US will lead the pack. Bailing out Detroit is one thing the rest of the world will label protectionist, and we can just take it from there. Think Washington will bail out Toyota and Honda’s US factories as well? Not much choice. But I still have hope they’ll let them all go in freefall.

Yet, the fact that the free trade mumbo trumps Obama’s 2.5 million job rescue plan doesn’t mean the latter makes any sense. I took a look at the financial team, well, all of the team really, and none of my confidence is being boosted. Hillary Clinton is that woman who wanted to bomb all kinds of people, remember? The armored pant-suit? And how can you change anything by keeping your financial staff full of the same kind of folks who are there now? Geithner is an insider with direct responsibility for Bear amd Lehman, Larry Summers is a power-hungry bigot, and Rob Rubin was for Citi was Paulson was at Goldman: the worst gambling addict in the house. These folks won’t make decisions in favor of the American people, they’ll save their own status and investments. And by picking them Obama makes clear that’s what he’ll do too.

Building highways for cars that nobody can afford any longer is nuts. Paying for it with borrowed money also is. Printing money is out of the question: the global bond markets will be relentless and out for blood. The US needs to produce things, not repair them. Most of all, it needs to produce its own basic needs, and after that is done, goods that can be exported. And no, I don’t mean cars. (11/23/08)
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Peter Schiff writes: As the Federal bailout bonanza prepares to spread beyond the mortgage and financial sectors to fill Detroit’s depleted coffers, few economic or policy analysts have spared a thought for the destitution of the U.S. government itself. Put simply, our government doesn’t have enough spare cash to bailout a lemonade stand let alone a bloated and failing industry that is losing tens of billions of dollars per month. Washington can only offer funds that it has borrowed from abroad or printed. Unfortunately, the nation is in the grips of a delusion that money derived from these sources has the power to heal. But history has clearly shown that borrowed or printed money only has the power to destroy. …

With no money of our own, our ability to bailout our own citizens is completely dependent on the world’s willingness to foot the bill. While I am sure that Bush and Paulson are doing their best to convince the world that open ended financing of the United States is in the global interest, my guess is that, unlike Congress, our foreign creditors will see through the self-serving nature of our plea.

Like any bailout, our foreign creditors should consider the moral hazard of rewarding bad behavior, and the old investment adage of not throwing good money after bad. By continuing to “lend” us money, the world is merely delaying the necessary rebalancing of our upside down economy. By continuing to subsidize our reckless and outsized consumption, the world merely delays the inevitable re-balancing and exacerbates the underlying problem at the root of the current global financial crisis.

If Washington bails out General Motors, the funds will never be recovered. GM will simply burn through the bailout money and then be back for more. Talk of designing a new fleet of “green” cars that will pave the way to profitability by spurring a new buying spree is simply delusional. Given the staggering “legacy” costs of health care and pensions for millions of current and former workers, Detroit cannot produce cars profitably. Unless these costs are seriously brought down, and there is very little chance that they will be, Detroit will remain a bottomless money pit.

Similarly any money that the world lends to America to finance more consumption will never be repaid. We will simply blow through it, and be back, hat in hand, begging for more. As we painfully learned in the housing bust, lending people money that they cannot pay back makes no sense. This applies equally to foreign central banks lending to America as it does to commercial banks lending to homeowners.

So for the same reasons that Washington should not bail out General Motors, the world should not bailout America. Like GM, our economy is in desperate need of a restructuring. Spending must be replaced with savings, and consumption with production. The service sector must shrink and manufacturing must expand to fill the void. The dollar must fall, wages in America must be brought down to a competitive level, and hopefully government spending and burdensome regulation can be reduced.

This transformation will not be fun, but it is necessary. Our standard of living must decline to reflect years of reckless consumption and the disintegration of our industrial base. Only by swallowing this tough medicine now will our sick economy ever recover. By accepting a lower standard of living today, we will eventually be rewarded with a higher one tomorrow. (11/24/08)
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National Intelligence Council reports: “Global
Trends 2025: A Transformed World” is the
fourth unclassified report prepared by the National
Intelligence Council (NIC) in recent years that
takes a long-term view of the future. It offers
a fresh look at how key global trends might develop
over the next 15 years to influence world events.
Our report is not meant to be an exercise in prediction
or crystal ball-gazing. Mindful that there are many
possible “futures,” we offer a range of possibilities
and potential discontinuities, as a way of opening
our minds to developments we might otherwise miss.

Some
of our preliminary assessments are highlighted below:

• The whole international system—as constructed
  following WWII—will be revolutionized. Not
  only will new players—Brazil, Russia, India
  and China— have a seat at the international
  high table, they will bring new stakes and rules
  of the game.
• The
  unprecedented transfer of wealth roughly from
  West to East now under way will continue for the
  foreseeable future.
• Unprecedented
  economic growth, coupled with 1.5 billion more
  people, will put pressure on
  resources—particularly energy, food, and water—raising
  the specter of scarcities emerging as demand outstrips
  supply.
• The
  potential for conflict will increase owing partly
  to political turbulence in parts of the greater
  Middle East.

As
with the earlier NIC efforts—such as
Mapping The Global Future 2020—the project’s
primary goal is to provide US policymakers with
a view of how world developments could evolve, identifying
opportunities and potentially negative developments
that might warrant policy action. We also hope this
paper stimulates a broader discussion of value to
educational and policy institutions at home and
abroad. (11/23/08)
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