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Ch. 1: Introduction: The Panic of August 
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Brilliant

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No, I don't see that as a misreading. Phillips says that "the Gulf sheikdoms would require that their oil be paid for with dollars, thereby keeping the greenback on a de facto oil standard." He mentions that this is coming undone.

Here is a related situation. China produces masses of goods for Americans which is bought from the source in yuan at a fraction of the US dollar. Since America is the big consumer and has the largest demands it benefits the Chinese to keep the dollar strong to maximize yuan profits. The more money the Americans put into the Chinese the more valued the yuan becomes in relation to the dollar. One strategy China is pursuing to help keep the dollar high is to reconvert the yuan into dollars and put the money into savings. Effectively removing the money from circulation and supporting the dollar. Last I read China had holdings of American dollars in the neighborhood of $600 billion dollars which is like 3.3 trillion yuan. So it really has nothing to do with American interests and everything to do with supporting an industrial boom within China. Canadian natural resource exporters are little different, as the Canadian dollar goes up the return from oil and natural fiber (forest products) falls significantly and it puts us in an uncomfortable situation to say the least. Create new markets or continue feeding the elephant at a loss in our pockets? Normally when the dollar is low Canadians can profit from exploitation of natural resources unfettered by economical philandering.

A simple arrangement that is mutually beneficial is usually adopted.

I think that the same is true of the oil standard, the American dollar is used because it is strong, in surplus and of good value, it is like a stock in a way. The Saudis believe that America will have a strong future so it makes sense to hold onto its dollars. Or it could also just be that American's domination of almost all trade markets and political organizations gave them an exceptional advantage over other nations. For America the benefit is that dollars are in demand as they are being traded daily for huge amounts of oil creating a similar shortage in Saudi sovereign wealth funds that China is able to produce by currency exchange and savings.

:book:



Wed Jan 21, 2009 10:52 pm
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Book Slut

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I've just started reading Bad Money and have a few comments.

Kevin Phillips' idea of the finance sector 'metastasising' or infecting the real economy by the distorted malignancy of believing fantasy about wealth, treating the US economy like a pyramid scheme, is one that I find powerful and worrying. http://en.wiktionary.org/wiki/metastasize says '(medicine, of a disease or tumour) To spread to other sites in the body; to undergo metastasis'. This is a worrying diagnosis of recent American history, invoking the difficulty of surgery for a cancerous tumour that is killing the patient. I like America, and I do hope that President Obama will learn from President Roosevelt's Hundred Days and engage in far reaching change.

An area of Phillips' analysis that I find fascinating and brilliant is his comparison of America to the previous world empires of Britain, Holland, Spain and Rome. He notes that financial dominance emerged in each as a sclerotic prelude to collapse. My own view is that this comparison is not the whole story, and America needs to bounce back to stabilise its economy. However, I do think the imperial comparisons give major strategic insight. My own approach, which I appreciate is not easy to explain, starts from science and astronomy as a way to orient the study of world politics. Long term climate is a basic context. My approach is to interpret history against the mythic astronomical rhythm of the precession of the equinox - the Ages of Pisces and Aquarius. Against this framework, I interpret history on a 2148 year cycle, so we are now at the same point within the Age of Pisces as the world was in the Age of Aries 2148 years ago in 139BC. At this time, Tiberius Gracchus was the Tribune of Rome, confronting the Senate to reform land as Rome confronted its republican institutions with the realities of imperial power, shown in the sack of Carthage and Corinth a few years earlier. As the Punic War against Hannibal is a model for understanding the Second World War, and as Alexander is a model for Napoleon, Barrack Obama finds himself playing a similar historic role to Tiberius Gracchus. What this makes me wonder for the future is whether America will fracture like Rome, with new Marius, Sulla and Caesar preparing for a future imperial military state over the next century. The scale of American military power is orders of magnitude greater than that of Ancient Rome but they bear comparison as world dominating historical powers. China also bears comparison to its history over a 2148 year cycle. Over this time frame, the Communist Revolution corresponds to the rise of the Han Dynasty which ruled in two periods for four hundred years.

Against these comparisons, Phillips' suggestion of American decline in power and the rise of China looks more like America facing turmoil between its republican and imperial sides, while China maintains stability.



Last edited by Robert Tulip on Fri Feb 20, 2009 7:26 am, edited 1 time in total.



Fri Jan 30, 2009 5:51 pm
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pets endangered by possible book avalanche

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I've read most of Phillips' book, and I'll be interested to hear what you have to say about it. Phillips' journey has been unusual, from advisor to Nixon to independent commentator who sometimes sounds radical. He loses me sometimes in the book, easy to do as I have a very poor grasp of finance.

Both the last non-fiction, The Limits of Power, and this book describe imposing barriers for the new president, barriers that may well be insurmountable. This may seem unnecessarily gloomy, but if you think of history as movement of forces, as you seem to, it makes sense that one person is not going to be able to wrench history onto a different track. We are certainly putting an absurd amount of faith in the ability of a single person to rescue us. It's not fair to him, though also to be fair, he encouraged us to view him in this way.

While Phillips is saying that the devolution of empires and greed account for the U.S.-led financial meltdown, along comes Sebastian Mallaby in Sunday's Washington Post, claiming that the culprit is China, in particular its manipulation of its currency. "China's cheap currency led it to run a massive trade surplus.The earnings from that surplus poured into the United States. The result was the mortgage bubble." See the full article at
http://www.washingtonpost.com/wp-dyn/co ... 03291.html
No wonder I'm confused.


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Fri Jan 30, 2009 6:30 pm
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This is a great book by the way that really lays thing out the real and "messy" way. The global meltdown of last year was a long -time coming for AMerica. The high wages paid to workers and the voracious appetite of accepting loans by bankers and mortgage companies, along with the globalization of a "free market" system that is set out to exploit cheap labor in Mexico, China, etc. all led to the "reality-check" of america that sooner or later, peoples wages are going to be cut if they want to keep their jobs .



Fri Feb 20, 2009 1:52 am
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Holy Smokes I'm Great

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Bobby, what book are you reading? Lay off the Fox news - it's destroying your brain.



Fri Feb 20, 2009 8:52 am
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Post Fox News??
Hi

I am a staunch opponent of fox news by the way lol. But my thread that you replied to might not have been clear. Sometimes I am quick to ramble things due to my zealous personality. Honestly, I did not read the entire book "Bad Money" yet for I have just joined this group a couple of days ago. Also, I am young so even though I read alot and am intelligent my views might not have crystallized yet. Basically I know alot of things but I have not really put all that knowledge together to get a good view of reality. That is why I joined this book club. I have no friends who talk books or politics or history. I have been DESPERATE to find people who are interested in the same things I am. Because by speaking my views to other people AND by listening to other points of view I learn about the fallacies of my own views, as well as the right stuff, and vice versa. So I hope you keep an open mind like I do when posting threads for my aim is to learn more and I hope that this is also your aim.



Fri Feb 20, 2009 1:54 pm
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Bob, I'm sorry I came off like that.

I think globalization is a nightmare only because there are too many people in the world, not because it "exploits" workers in poorer countries. In fact, it does just the opposite in most every case.

American workers aren't overpaid. CEO's are.

Asia is going to continue to gain wealth in the future. While we're in a depression, China's economy will grow by roughly 8%. Getting these 1.3 billion people close to first world standards and consumption rates is crazy. Every developing nation is using China as a model to grow - like India.

Imagine how much goods would cost if there were 2.4 billion people - who made the same amount you do, all bidding for the same goods you want to purchase. There's no way to fulfill the needs of all those people plus those of the rest of the globe. It's insanity. These countries need to be kept poor and backwards. They need to be exploited by not introducing globalization. We need to depress their wages and get them used to earning a living by mining their raw materials and selling to us for beads and trinkets.

Also, imagine the security risk of pumping up all these economies. It's like feeding someone that has never really liked you steroids - while you go on a diet. To me, it's stupid. That's what globalization does. It moves wealth.

I just think with so many people out there - and the fact that my station in life puts me in direct competition with nearly every other individual on earth - it would be smart of me to make sure that I can reap the rewards of globalization (cheap goods) and die before I have a chance to realize the nasty side effects.

This is what the generation before me is doing. I'm too late.



Fri Feb 20, 2009 7:46 pm
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Post As you said...
President Camacho wrote:

Imagine how much goods would cost if there were 2.4 billion people - who made the same amount you do, all bidding for the same goods you want to purchase. There's no way to fulfill the needs of all those people plus those of the rest of the globe. It's insanity. These countries need to be kept poor and backwards. They need to be exploited by not introducing globalization. We need to depress their wages and get them used to earning a living by mining their raw materials and selling to us for beads and trinkets.

This is what the generation before me is doing. I'm too late.


Thanks for your frank reply. I appreciate your insight and knowledge. You are right that "true" globalization is good for the world. I am with you on that one and I even mentioned that in a previous post somewhere. But the real globalization that our nation is spreading, under the cover of "good globalization," is badly oppressing many others for EXACTLY the reasons you stated, for maintaining global hegemony. A potential powerhouse like China must not grow and reap the benefits of globalization because that would mean their dangerous competition with us and, therefore, a new rival. For the same reason of "rival containment," they did this to Nicaragua, Mexico, Guatemala, Panama, etc. Whats relevant here is that IF one, or all these countries, grew and became prosperous, OTHER countries would want to emulate these nations. This flux of increasing power of other nations is TOTALLY unacceptable. Basically for exactly the same reasons you have in your quote. There are certain exceptions where the U.S. has increased the power of other nations, but this is always the exception, not the rule. They did this with South Korea but ONLY to discredit North Korea and, therefore, communism. What better way to discredit it then by economically strangling North Korea, and making S. Korea more economically powerful. This will show the world that communism brings poverty and capitalism brings prosperity. In conclusion, I do agree that globalization should bring prosperity to the world, but as you even said, this is not the case.



Sat Feb 21, 2009 1:58 pm
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btw, I totally disagree with their not being enough resources for everyone on this earth. Talk to ANY economist, they will tell you otherwise. Its just that resources are sooo centralized nowadays that its hard to see any evidence of their being enough resources for everyone.



Sat Feb 21, 2009 2:00 pm
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