The Great Divergence

[kandrathe]

In 2000, I remember when I was pulling all my money out of the stock market that Google at $200/share is ludicrous.

Re: Google. Google is at $525. If you'd bought in 2000, at $200/share, you'd have made 10% a year - and that's buying at the top of the bubble, and selling after the worst crash since 1929. Not bad for "ludicrous."

It fell right after that, and didn't return to that price for 5 years, where at any time I might have bought it at a fraction of the year 2000 value.

Re: "Make work" worsening unemployment. This is nonsense because you're not at full employment. U3 is at 10%, and U6 is at 16%. The relatively small number of people who have been given "make work" jobs, as you characterize them, are irrelevant. If there were jobs available in the private sector, one of the 10 million or so unemployed would have filled them by now.

Ok, in your opinion then, companies using stimulus money to hire people they couldn't afford is better than having them eventually hired by companies that can afford them?

Re: Too good to be true. You seem very sure of your ability to pick out "too good to be true" from "economic growth". Google is a great example - is that too good to be true? Or just a company that did very well in a very hot market?

It was. The price crashed within months, as did Microsoft, IBM, and every other tech stock whether they deserved it or not.

Re: The Iraq and Afghanistan wars... I think we can look to those who supported these crazy boondoggles on flimsy evidence as being responsible for that spending. If you're wondering what possible logic could convince the US to invade some hellhole halfway around the world, your old posts should all be archived somewhere.

You mean like back in 2003 when I replied;

In light of current events, I have had some time to reflect on some thoughts related to yours.

1) Who has more to fear? Would it be the US, from infiltration of radical hate filled terrorists, or the rest of the world from the only remaining super power with the demonstrated force of 10's to 1000's of times larger than any other army on the planet. We like to think of ourselves as the good guys, but is that how the rest of the world views us? By acting and unleashing our dogs of war, will we reinforce folks fear of us? Fear, anger, hatred, somehow I feel they are connected.

2) The objectives of regime change by the Bush administration were always at odds with most of the rest of the world. Last summer it was clear that the only acceptable solution in Iraq for the Bush administration was one without the current regime in power. The last six months UN side show only delayed the innevitable ground war to depose Saddam. Anyone who is familiar with him or his regime would know that the Ba'aths would not walk away from power. In light of point #1 above, when the worlds only super power says your are done, period, I think it acted as a wake up call to most smaller nations (including France, Russia, et. al.). Generally, through this action, we are demonstrating to the world that we are calling the shots, and willing to back it up with force. The whole topic of WMD proliferation is a smoke screen, and I don't think we should not have played that card. Should we address the WMD capabilities of Pakistan, India, Iran, North Korea, or Israel? And, then why not the Russia, China, Britain, France, or ourselves?

3) The Bush administration's National Security Policy of pre-emptive action further sows fear, in light of #1 and #2. Again, we are viewing ourselves as the good guys, and after 9/11 we feel justified in going after the SOB's that did it to us. Why should we wait for an "event" which could take out hundreds of thousands of American lives. Afghanistan, yeah ok, the Taliban and the remnants of a war torn bombed out culture, sure. So, then are we justified in deposing Saddam, and eliminating the threat of this known enemy pre-emptively? Now who's next? What are the limits of assymetric warfare?

4) I think we were at the UN for the wrong reasons. Putting the shoe on the other foot, could it not be argued that it is the US that is failing the UN by trying to subvert the process, and cajole the international community into supporting a war that was ultimately unjustified (at least in what has been argued before the Security Council) . I agree with Pete's assessment that the only justification that was needed was to prove that Iraq has violated the 1991 armistice agreement. The reality, IMHO, is that the Bush administration did not feel the need to get the UN blessing, but it was done to make it easier for Blair, and other allies, and other Arab states to side with us. Now, without it, our allies in this conflict have been hung out to dry politically.

5) Lastly, the demonstrations we are seeing around the globe against the war are not in support of the Iraqi regime, or Saddam Hussein. I think they are a statement against an arrogant US administration, and unchecked US power.

So while the precedent of regime change to depose an evil despot in the Balkans exists, I think it is unique to the Balkans situation. Acting under NATO, I think it was done more (on our part) to help stabilize Europe. I don't think we really were looking to do anything in the Balkans, and Milosevic could hardly be viewed as a threat to the US. I believe we did it because our NATO allies asked us, and more likely cajoled, and shamed us into doing it.

Re: The Austrian business cycle. Austrian theory predicts a *sectoral* redistribution due to malinvestment (companies made too much investment in the wrong stuff, not enough in the right stuff). What we see instead is a *systemic* crisis - everyone loses, nobody wins. What people want is not different goods or services, but safe assets. Savings are flooding away from, not towards, capital goods, simultaneous with a *decrease* in consumer spending. What does that say? Well, it says that the Austrian story is wrong, and that what we need is something more like Minsky - herding causes bubbles, panic causes crisis, fear prevents recovery. And no, that is *not* what the Austrians said.

I'll have to look them up to quote it directly.