THe main problem of the world economy is wages remaining too low.
One reason of these low wages is excesive capital mobility and excessive labor market deregulation.
These will reverse in the next 20 years, you can bet on it.

“The Europe has implemented a number of trade barriers to restrict US competition or move production to Europe … Electronic standards that differ from the US to import requirements that raise supply chain costs ”

I don’t get your point…

Seen from here, I was always thinking that US had implemented trade barriers to restrict european competition ,with those slighty different requirements for car or electronic ?
And by the way, trading only in that different money instead of Euro, the US-Dollar, they are also raising european costs to export in America
America

The challenge for non-industrial investment is in booking an asset on the balance sheet. If you bought a factory that makes widgets, then it’s easy. If you bought a factory that makes memory chips, and that manufacturing technology suddenly becomes obsolete, that’s a different story (example: Hynix). If your business is contracting with the memory maker and a computer maker, that is a far different story – you can book the contract, but is there any reason at all to expect that you will be able to roll the contract and remain in your high-margin business? (example: HK-based textile intermediaries, now under incredible pressure – I believe this was discussed recently in The Economist). It is hard to invest in the service economy and hi-tech because there is much less staying power in the assets. Compare what computer programmers are getting paid today vs. 5 years ago – truly night vs. day.

We all know that you can’t have greater expected return without greater risk. Why should our economy appear more stable than China’s, when we are in businesses which could go the way of the NASDAQ, and theirs will go nowhere, neither up nor down?

Now I will pose a very simple question: If you are a debt investor, would you prefer that the business take more or less risks? Standard theory says you tell them to take LESS risks, because your debt is safer. If you are a large central bank in Asia, and you are already sitting on a mountain of US gov’t debt, wouldn’t you rather that Americans just keep building reliable homes, instead of investing in a new wave of tech startups which could crater?

I know this is a total ramble and admit I don’t have things sorted out at all; really I just want to suggest that the qualitative differences between the US economy and its main creditors could be an important angle to examine.

India’s Choice

For an AIDS patient in a poor country lucky enough to get antiretroviral treatment, chances are that the pills that stave off death come from India. Generic knockoffs of AIDS drugs made by Indian manufacturers – now treating patients in 200 countries – have brought the price of antiretroviral therapy down to $140 a year from $12,000.

That luck may soon run out. India has become the world’s supplier of cheap AIDS drugs because it has the necessary raw materials and a thriving and sophisticated copycat drug industry made possible by laws that grant patents to the process of making medicines, rather than to the drugs themselves. But when India signed the World Trade Organization’s agreement on intellectual property in 1994, it was required to institute patents on products by Jan. 1, 2005. These rules have little to do with free trade and more to do with the lobbying power of the American and European pharmaceutical industries.

It’s Just Business, Nothing Geopolitical
By KEITH BRADSHER

HONG KONG — Shut up and keep buying.

Few countries are benefiting as much as China these days from the international status quo – and Beijing knows it. So, as American criticisms of China have shifted from human rights to the value of its currency and the aggressiveness of its trade practices, Chinese leaders have tried hard to keep the peace while exporting ever more.

China’s economy is doubling in size every 10 years, and personal incomes have been climbing steeply, especially in the cities. Trade with the United States plays a huge role in that growth, as investors around the world pour money into Chinese factories that make goods destined mainly for the American market….

It’s possible to have falling financial asset prices without debt deflation. It’s even possible to have falling financial asset prices and a relatively high rate of consumer price inflation – the mid-’70s being a case in point. Falling stock and bond prices may hurt the asset side of the balance sheet, but inflation helps clean up the liability side. Hard assets – commodities, real estate – can do well in an inflationary environment, especially if real, as opposed to nominal, interest rates remain relatively low. And while home equity isn’t the 400-pound gorilla of U.S. household net worth that it used to be, it’s still pretty big. So consumer spending and investment doesn’t necessarily have to crater just because the stock market does.

That’s not to say it would play out that way now if the Fed decided to put full employment ahead of price stability. A lot has changed since the 70s – vastly more debt, vastly larger international capital flows, vastly more complex and “flexible” (to use Greenspan’s favorite word) financial markets. Whether that last would prove a blessing or a curse in a full-blown dollar crisis remains to be seen. Maybe the end result would be something that looks like ’70s stagflation, or maybe the whole house of cards would come tumbling down, I don’t know.

But it seems worthwhile to consider that as the owner of the world’s primary reserve currency, the USA is in the rare position of being able to inflate away its own debts, external as well as internal. If there is a way to squeeze some short-term benefits out of an inflationary monetary policy, you can bet the ruling party would be for it, no matter what the long-term cost. Would the Fed have enough backbone to resist?

China’s Latest Capitalist Beachhead
By DAVID BARBOZA

SANYA, China – China’s leaders once tapped Hainan, this small sunny island off the southern coast of China, to be one of five experimental laboratories for capitalism. Hainan was supposed to compete to become a new Hong Kong, even a future Singapore.

But more than a decade later, even as China’s hot economy bubbles over with success in places like Shanghai and Shenzhen, Hainan is, well, still an experiment, like a lone laggard.

It seems as though this place, despite its postcard-perfect views and year-round summer sheen, might be called one of China’s earliest glitches on the road to capitalism, an isolated patch of somewhat undeveloped land that had once captured leadership attention, wads of cash and many talented Chinese wanting to strike it rich.