Yes, I agree with Rob Schaap's illustrative description of the tragedy of
our non-competitive free market at both international and domestic levels. I
would not be able to express it better. And I find it very appropriate to
look at the IT sector, because it is usually shown as a factor of
equalization rather than polarization.
Indicators of the implosion? In the context of our model in particular we
look at the trends of the main (current) balances: private sector, public
sector and the external sector. Within the private sector we look at the
households (or sometimes the "personal" sector, which includes
unincorporated enterprises) and companies. We also look at the stock
positions (accumulation of financial wealth, for example, and, what M.
Forstater said: credit). Through the structure of the model we trace the
impact of these balances and their components on aggregate demand and
economic growth.
If (one of ) the components of the main balances that generate an expansion
reverts or slows down, AND there is no other force that would alternatively
generate an expansion, then an implosion unleashes. In particular, according
to the NIPA accounts, the balance of the private sector started to revert in
the first quarter. And, in the first quarter there was no compensation from
a fiscal or external side. Thus, the previous pattern of growth is altered,
and could turn into an opposite sign. There is going to be a sort of
termporay compensation with the tax rebate (third quarter) but this would
be, in our estimation, only sufficient to avoid a 'technical recession'
(technical recession is four successive quarters of negative growth). But it
will not be sufficient to reinstate economic growth.
A side remark, we do not intend to make a short term forecast of the
economy. It would not be possible, in our opinion. But what can be said is
that the necessary reversion of the (unsustainable) current trends will
lead, sooner or later, to a painful recession. And, the implications for the
rest of the world will be perhaps even more dramatic. Recently European
leaders "complained" that US is loosing its role of locomotive, affecting
Europe. And, in Latin America the effect of the slow down in the US is
starting to impinge on Brazil, Argentina, Chile, and from there others will
follow suit... (I think you were discussing this in the list, I will give it
a look).
well, good night,
Alex
