Now the "free" traders are discovering that the opposition to their "wonderful" idea is as dug in as it was when folks like us tried to derail NAFTA (see my response back when).
And Greider is spot on (again). He hasn't gotten much wrong since I first started reading his stuff in the early 1980s (The Education of David Stockman).
The End of Free-Trade Globalization
November 4, 2010 | This article appeared in the November 22, 2010 edition of The Nation.
The world economy is on the brink again, facing a crisis of epic dimensions for reasons largely obscured by the inflamed politics of 2010. Against their wishes, the United States and China have been drawn into an increasingly nasty and dangerous fight over currencies and trade. American politicians, especially desperate Democrats, have framed the conflict in familiar moral terms—a melodrama of America wronged—and demand retaliation. Other nations, sensing the risk of a larger breakdown, have begun to take protective measures. Every man for himself. The center is not holding.
The political fray obscures the fact that the basic economic problem is larger than any single nation and stalks the global trading system itself. There is a huge hole in the world—a massive loss of demand. Think of the trade wars as the largest producers fighting over an abrupt shortage of buyers. Financial collapse and recession, with falling income, defaulting debt and rising unemployment, made the hole. In other times, Washington would have stepped in to impose policy solutions and create market demand as the global system's buyer of last resort. This time, Goliath is gravely weakened, both in economic strength and political authority.
The political push-pull zeroes in on China. Beijing is accused of playing dirty, stealing jobs, production and wealth. Washington imposes a penalty tariff on Chinese tires and tubular steel. Beijing pushes back with a tariff on US poultry. President Obama once again urges China to stop manipulating its currency to underprice Chinese exports and stymie US goods going the other way. China once again blows off his request. United Steelworkers ups the ante by filing a 5,800-page complaint detailing how China is scheming to corner the global market in green technologies. Obama promptly orders an investigation. "What do the Americans want?" asks the vice chair of Beijing's National Development and Reform Commission. "Do they want fair trade? Or an earnest dialogue?... I don't think they want any of this. I think more likely, the Americans just want votes." He has a point. But so do American politicians, who think China's hardball industrial strategy has had something to do with America's anemic recovery. The House, divided on everything else, voted 348-79 in September to authorize tariffs on nearly all Chinese imports if Beijing does not relent in its currency game.
Chinese officials understand, even if many Americans do not, that they are essentially doing what the trading system has allowed or at least tolerated from many others. Washington grumbled when Japan and then South Korea, Taiwan and Singapore pursued similar development strategies. Arrogant US policy-makers assumed that these rivals would eventually adopt the American model and become more like us. They never really have.
The problem is that when a nation of 1.3 billion successfully advances along this road, it blows out the lights. Decades ago, when Washington scolded Japanese officials for violating free-trade orthodoxy, they bowed humbly and made agreeable noises. The Chinese don't bother. more
Doing It Again
By PAUL KRUGMAN Published: November 7, 2010
Eight years ago Ben Bernanke, already a governor at the Federal Reserve although not yet chairman, spoke at a conference honoring Milton Friedman. He closed his talk by addressing Friedman’s famous claim that the Fed was responsible for the Great Depression, because it failed to do what was necessary to save the economy.
“You’re right,” said Mr. Bernanke, “we did it. We’re very sorry. But thanks to you, we won’t do it again.”
Famous last words. For we are, in fact, doing it again.
It’s true that things aren’t as bad as they were during the worst of the Depression. But that’s not saying much. And as in the 1930s, every proposal to do something to improve the situation is met with a firestorm of opposition and criticism. As a result, by the time the actual policy emerges, it’s watered down to such an extent that it’s almost guaranteed to fail.
We’ve already seen this happen with fiscal policy: fearing opposition in Congress, the Obama administration offered an inadequate plan, only to see the plan weakened further in the Senate. In the end, the small rise in federal spending was effectively offset by cuts at the state and local level, so that there was no real stimulus to the economy.
Now the same thing is happening to monetary policy.
The case for a more expansionary policy by the Fed is overwhelming. Unemployment is disastrously high, while U.S. inflation data over the past few years almost perfectly match the early stages of Japan’s relentless slide into corrosive deflation.
Unfortunately, conventional monetary policy is no longer available: the short-term interest rates the Fed normally targets are already close to zero. So the Fed is shifting from its usual policy of buying only short-term debt, and is now buying long-term debt — a policy generally referred to as “quantitative easing.” (Why? Don’t ask.)
There’s nothing outlandish about this action. As Mr. Bernanke tried to explain Saturday, “This is just monetary policy,” adding, “It will work or not work in much the same way that ordinary, more conventional, familiar monetary policy works.”
Yet the Pain Caucus — my term for those who have opposed every effort to break out of our economic trap — is going wild. more
Brad DeLong: Robert Zoellick May Be The "Stupidest Man Alive"
Joe Weisenthal | Nov. 7, 2010, 8:30 PM
You could say that economist Brad DeLong is less than impressed by World Bank Chief Robert Zoellick's call for a new global gold standard.
He notes, for one thing, that any arbitrary anchoring of global currencies would be deflationary -- exactly what DeLong sees as the problem right now.
And he takes umbrage with Zoellick's characterization of gold is a new form of money:
Markets are using gold as a speculative asset and a hedge. They are not using it is a medium of exchange, a unit of account, or a safe store of nominal value.
He really may be the Stupidest Man Alive. more
And in case you think Krugman is exaggerating when he describes the Pain Caucus, note this blast from the Germans who have MANY Pain Caucus members in their monetary establishment. You would think the Germans would know better!
Germany Blasts Bernanke
Results of Fed Stimulus Could Be 'Horrendous'
The US Federal Reserve announced this week that it was pumping an additional $600 billion into the US banking system.
German Finance Minister Wolfgang Schäuble has sharply criticized the US Federal Reserve's decision to pump a further $600 billion into the country's ailing economy. He says the move could create problems for the global economy. Others have joined in the condemnation.
Germany is not impressed. One day after the United States Federal Reserve announced that it would pump $600 billion (€423 billion) into America's banking system over the next eight months, German Finance Minister Wolfgang Schäuble sharply criticized the decision.
"I don't think they are going to solve their problems that way," Schäuble told German public broadcaster ZDF in a Thursday evening interview. "They have already pumped an endless amount of money into the economy via taking on extremely high public debt and through a Fed policy that has already pumped a lot of money into the economy. The results are horrendous."
In a separate interview on public broadcaster ARD, Schäuble said that the move by Fed Chair Ben Bernanke would "create additional problems for the world." He promised to bring up the issue in talks with the US and said that, by following such a monetary path, the US was violating a pledge that all industrialized countries agreed to at the last G-20 summit in Toronto in June.
The Fed's plan envisions the purchase of US government bonds in an effort to lower long-term interest rates as a way to stimulate borrowing and investment. In a contribution to the Washington Post, Bernanke emphasized that the move was designed to help strengthen the US job market and reduce an unemployment level that has stagnated at 10 percent. "This approach eased financial conditions in the past and, so far, looks to be effective again," Bernanke wrote, referring to rising stocks and dropping interest rates this week. more