Dustin

unclaimed money

カジノ

Put on this level Markku I’m sure you are right. And as you say to each his (or her) own. What I’m not sure is whether post 09/11 the US itself has not become more risk averse. I certainly read the Bush administration as a move against the whole ‘new economy’ ethos you were developing in the late 90′s, an ethos which I certainly found lacking here in Europe. Far too many here were trying to copy Time Warner rather than Yahoo – ie to buy in from the top rather than facilitate development from below. The role of Texas and the interior in general seems to have grown, while your innovative coastal regions seem to be losing influence. This is probably the greatest threat to the future of living standards in the US.

‘Old US’ monopolies like Microsoft and the RIAA seem to have gained in influence – so we are seeing ‘internal’ and ‘external’ protectionism. Venture capital seems to be much more difficult to come by, there are few really exciting IPO’s etc. I don’t think you have an innovation friendly administration, but I don’t doubt this will change.

As far as we Europeans go, we are obviously not so materialist, but where’s the harm? We can still live well without being ‘super rich’. We trade a bit of quantity for a bit of quality.

I guess we aren’t so bothered about not being a major military force either, but one day our negotiating skills may come in handy, even for those who value militray prowess more.

I don’t think our growth problem is so much to do with valuing safety. I think it is demographic, we are ‘old Europe’ in the sense that we are ageing, and this is affecting our rate of consumption increase and hence internal aggregate demand, this is really the German growth slowdown. Also this situation is aggravated because we do not accept immigrants as readily as you do, and here I am a clear admirer of the US model, which seems to me much more in harmony with a globalised interconnected-world.

So here I think we have things to learn from each other. Life isn’t a football match, you don’t have to be so partisan. Pragmatism is the great American strength, unfortunately of late you have allowed yourselves to be unduly attracted by the charms of ideology.

Competition is so much a fabric of American life, culture and society, more so than in Europe, which prizes safety at the expense of growth. Well, to each his own…

By the way, earlier I had written about the steel tariffs. There is much discussion even within solid Republican ranks about that. Most seem to agree that it was a mistake; however, I’ve seen some commentary as to it being a “shot across the bow”, – a warning to the rest of the world that the US can at any time turn protectionist, should others continue trade protectionism. If that is so, however, I think the message was lost… and it remains a blunder.

But I do know that there will be some moves against China, which has been seen as benefitting from US largesse on a unilateral basis (thousands of jobs have been lost to cheap Chinese imports). It’ll be interesting to see in what shape these moves come, especially during an election year….

Don’t forget the US steel industry. Things are not that simple. This is not a dichotomised world, most things are simply……….grey (when they are not extremely mirky, that is).

Markku: This isn’t clear yet. Bernanke still is saying the US economy on its present course is going to have a run-in with deflation sometime around the spring of 2005. Some people are betting in the equity markets that the US economy is about to take off, they could well be wrong. Also the US economy is driven by private consumption not cap-ex right now. There is plenty of liquidity, but the environment is more risk averse than it was in the late ninetees. So there isn’t the investment. Of course, as in the Japan case, the pension funds could use the excess liquidity to buy-up the increasing government debt. But then I fail to see what is so special about having private pensions.

But this isn’t the point. The point is there is no guarantee. Capitalism is about risk and entrepreneurship, it doesn’t claim to be socialism. If you have good entrepreneurs you get to do well. In the 80′s it was all Germany and Japan, the 90′s were good for the US model, but who is to say that the next decade won’t be for the Chinese or the Indians. Maybe the Indian entrepreneurs will be better than the US ones. Recent judgements over things like Iraq don’t bode too well. This issue is not decideable in advance, it is empirical, you have to run the programme to get to see what happens, but meantime you have to take decisions. This is called the ‘pensioners problem’.

So you can get very badly hurt, that’s part of the game. The funny thing is when you ask people questions like ‘would you fancy being a foreign investor in Argentina and taking a 75% haircut on your savings?’, people seem to be risk averse.

They seem especially risk averse when it comes to their pensions. And this is my concern about the second pillar. I have nothing against people having private pensions, and nothing against people making and losing money. It’s a casino, and if you like casinos that’s fine by me. My problem is what to do with those people who arrive in old age having lost a lot. Becuase if you provide for them, you have to provide for the others, and if you’re going to be provided for anyway there’s no point in taking the risk. This is the moral hazard part.

If you think this is unreal, look at Japan. And don’t tell me what has happened in Japan can’t happen in the US, because you don’t know, and neither do I.

Thats why it’s capitalism, because we can’t know in advance. If we knew in advance it would be planable, and making money would be easy, which it can’t be, in principle. And if it was planable, it wouldn’t be capitalism it would be socialism, which is impossible because things aren’t planable in advance etc etc etc.

So we’re in a circle, and we’ll get to see later whether it’s a vicious one or not.