A simplistic answer…

Becker and Posner discusses the financial crisis, and for once I feel a little disappointed, for they somehow miss the international side of things. The financial crisis has been possible because the American people have been on an enormous consuming binge, thanks to cheap stuff from China financed by credit from, yes, China, channeled through mortgages based on ever escalating house prices.

Anyway, I was at an HBS alumni conference last week, and the topic, of all things, was technology trends and financial crises, with speakers such as Martin Wolf, Carlotta Perez and Erik Reinert. One interesting point which was brought up was the US curious insistence on always having cheap energy: Not only is there no tax on gasoline (which would have brought down consumption and emissions, given the national coffers some badly needed cash without having to sell Treasury bonds, and reduced dependence on foreign oil), but the US, according to another speaker, subsidizes coal production to the tune of $50b per year. Stop doing that, and you would help the environment and could buy yourself an investment bank every year….

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2 thoughts on “A simplistic answer…

  1. Steve Frambes

    I apologize for ever discussing the possibility that we (the U.S.) had a somewhat democratic – free market capitalist system in place. I retract all cracks about Euro-Socialism and the Welfare State which has infected what is left of Western Civilization in Europe. We too, have now fallen (or perhaps were already there and couldn’t see it through my red, white and blue glasses) into corporate bailouts – or Socialism for the Rich.
    Without even discussing our inability to win wars in third world nations, we have become the United States of France.

  2. Daniel M. Harrison

    “the US, according to another speaker, subsidizes coal production to the tune of $50b per year. Stop doing that, and you would help the environment and could buy yourself an investment bank every year….”
    Sort of. However, one of the U.S.’s key strategic advantages in the world is arguably the fact that energy prices ARE so cheap comparatively. It’s also a necessity to have cheap fuel: the sheer surface area of North America demands that trucks, planes, and trains can travel at a relatively lower cost across its own continent than say, for those in Europe. Investment banks are merely barometers for the greater economy; in that way, without (subsidized) cheaper energy prices, there probably wouldn’t be that extra cash or extra investment banks to be bought in the first place.
    Recently, there has been much debate in the U.S. re: subsidies, as the “socialization” of the country, as the above commenter points out, too. This type of commentary misses the point as well. Call them bailouts, subsidies, or straight buy-outs of private assets: government intervention is a fact of American economic life, which since Alexander Hamilton nationalized state-by-state debt, has kept the country so competitive at an international level.

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