Because I said I’d look into it, I’m about to start reading about the Solow-Swan Neoclassical Growth Model. Be warned of my ignorance on economic matters (there’s a reason I only lasted one semester as a Finance major 
). If people like me were intended to understand that stuff, it wouldn’t be so damned complicated (thus the root of my disgruntlement). But I do try to understand that stuff, reading up on it from time to time.
Having a dad and brother involved in those sorts of fields means it’s discussed in emails, and I actually received one earlier this week where he had written about Savings & Loans, the financial bailouts, and mark-to-market. Much of it went completely over my head. Matt Taibbi’s article in Rolling Stone helped break it down some, but the financial sector’s jargon and practices largely remain a mystery to me. Hell, I can’t even figure out how interest is compounded on my credit cards and am willing to bet plenty of others share this financial ignorance. It’s too damned difficult to be sensible, with veiled fictions and academic theories woven into our reality, distorting important truths (like the value of our money) while encouraging usury-gone-wild. It’s easy to see how corruption seeped in through the many loopholes shielded by the complexities of its systems and markets. It sure blows my mind.
This may make me sound very anti-global and unhip, but I believe that in order for a citizenry to control its government and economy, they must first be able to understand them. Where have our fundamental principles gone, and why aren’t they being applied to and within our government, businesses, and economic practices? Why are we trying to save a corrupted system? Why do these big businesses deserve our tax dollars when they already charge us for their services and products? We are still talking about resuscitating that which, on one hand, gave our nation prosperity and tremendous advancements, but on the other is now robbing us and siphoning money to foreign nations’ markets, shrugging it off as just business-as-usual in a global environment.
But I don’t think we get that these companies don’t belong to us. In fact, they don’t even belong to the U.S. They are global now. They simply belong to earth. That’s a huge advantage in that if we Americans don’t want to play ball their way, they can always threaten to leave (and have). That’s why we’re paying them, because we think we need their jobs and to accept their rules of engagement to play ball. Because they can move to China, India, Mexico, Great Britain, etc. But they barely contribute tax-wise to our economy, especially when there are tax incentives to moving their headquarters elsewhere in the world; yet they still impose their will on elected politicians to drain the public wealth. Do you see the power differential here? That’s what I mean when I say this system is unsustainable – because it will screw us in the end. It has no incentive not to, thinking only of profits for their executives and major shareholders, unencumbered by ethical considerations unless required by regulators. But how do we regulate multinational businesses?
I may not understand economics very well, but I do see that ethics seriously need to be factored in. And now it appears we’re running out of time. But what can one person do? What would it take?
Then my mind wanders over to China. Have you heard that China has surpassed Japan in holding the highest number of U.S. Treasury securities? Yeah, I only found out this week, though it doesn’t surprise me. The U.S. Treasury’s website on March 16th posted the January 2009 numbers on foreign-held bonds:
China – $739.6 BILLION
Japan – $634.8 billion
Oil Exporters (moved up from the 4 spot to 3rd since I last checked) – $186.3 billion
(Oil exporters, according to their site, include Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria.)
Okay, now notice the major jump in numbers. The United Kingdom, which used to be in the 3 spot last I knew, now 5th, holds $124.2 billion. That’s 16% of China’s holdings.
Some other notable nations:
Caribbean Banking Centers (include Bahamas, Bermuda, Cayman Islands, Netherlands Antilles and Panama; in 4th spot) – $176.6 billion
Brazil – $133.5 billion
Russia – $119.6 billion
Israel – (only) $16.9 billion
Of the grand total of over $3 Trillion, China and Japan comprise 45%, with China holding 24% alone. Shouldn’t this concern us Americans? Is this really just “business-as-usual”? What stops China or Japan or any other nation from dumping these securities, and what impact might this realistically have on our economic way of life? We tax payers don’t have the money to pony up thanks to freely handing over so much to major corporations, so what other collateral is used for this sort of collection? And if one of the “big dog” nations sells off a substantial chunk, won’t that likely trigger a cascade in dumping security holdings, with no country wishing to wind up holding worthless securities? At least this is what I assume since isn’t that how it works with our stock market? If Warren Buffet breathes in a stock’s direction, the numbers change because so many people put faith in his recommendations. Will China’s market wield that sort of power in this new global system?
And, I wonder, what is China’s relationship with Japan? Is it adversarial or cooperative?
With these sorts of things in mind, I’ll get on to looking up info on the Solow Growth Model now.
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