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Zoltan Pozsar Saves The Western World
Those calling for a quick return to 2% inflation in advanced economies are "naively optimistic."
That was one, among many, messages from the incomparable Zoltan Pozsar, whose latest missive was another case study in ambitious holism, misplaced or not.
Pax Americana was the great enabler of globalization, and globalization the great enabler of lowflation, Pozsar said, reiterating the increasingly consensus view that central banks were given far too much credit for decades of subdued price growt
I was thinking along these same lines last night in trying to formulate a response to Prof. Stiglitz’s thought that killing demand might reduce investment and lead to more inflation. I mean, who cares if we suppress demand for cheap crap from China (sorry, Walmart, Target). Fortunately, a bipartisan majority in Congress has approved $50 billion to begin the process of onshoring chip fabrication. It’s a start. Congress also authorized $1 trillion for infrastructure and another significant tranche, ib the scaled-down Build Back Better bill, for renewable energy projects; hopefully, Biden’s infrastructure czar Mitch Landrieu (President Landrieu?) will figure out a way to direct some of that money to large-scale projects (rail, freight and passenger; ports — hello, Long Beach; wind farms and mega solar) that increase productivity, strengthen national security, and begin to address climate change impacts. Again, it’s a start. Of course, the phrase “industrial policy” is unutterable in GOP circles and has been for forty years, which is a major reason why we find ourselves in this difficult situation. To Pozsar’s point, less consumption, less Wall street short-termism, more investment, more onshoring, more renewables, more conservation, more sacrifice for the greater good is what this country needs at this juncture.
When did the Republicans decide that Posar type investment was bad. I used to think they stood for growth and progress. Who tore that plank out of their platform. They’ve wandered so far afield now that their last presidential candidate didn’t have a platform. Their slogan should just be “trust me”.
Their slogan is “You hate the other guy too, right?”
H-Man, I guess he thinks he has the blueprint but the devil is in the details. Right now the world is a densely populated planet with limited resources. It would seem our destiny will be based on how we hoard or share those resources. If you have limited resources, you beg or try to borrow those resources. If that doesn’t work, you simply steal the resources by resorting to war. If you have the resources, you share to the extent your constituents do not suffer but always prepare for war. At the end of the day, the big dog will always eat.
I like Pozar’s brain but there are a couple of holes in this piece. First, “reshoring” or whatever we call it, only works if we have the required resources. We don’t. Many of the important resources we need are only found in countries that don’t want to do business with us or that we don’t like. Also, reshoring will take major amounts of labor we don’t have, either in the required numbers or with the necessary skills. Third, we have used external suppliers for so long many major firms no longer have the in-house expertise to design, direct, and control input supplies they used to do in-house. Many large firms do what universities now do to manage scarce resources, they rely on temps. US universities now utilize temporary faculty for more than half their requirements. Such people are cheaper than regular faculty, can be laid off on virtually no notice, and now have learned to teach on-line so that can have huge classes. If we think that kind of stuff will Make America Great, forget it. Moreover, temp faculty do no research, write no modern texts and don’t provide essential services to help keep our schools up-to-date with the rest of the world. Companies do the same for the same reasons. One S&P 100 company I consulted with was being supplied with temp engineers from three different agencies in just one of its locations. These engineers were working on some of the firm’s most mission critical products. They could leave at anytime and take their brains with them. Finally if Pozar thinks China only sells us junk he hasn’t looked at the labels in his own clothes for a while. Air Jordans? Made in Vietnam. If we made them here they would go for $1500 a pair. My custom shirts come from Malaysia. I can’t afford the same quality if made here. One final tidbit. Foxconn was going to build a huge plant in Wisconsin. No mre, couldn’t make it work. The big chip plant in Ohio. On hold. The new “chip bill” will only facilitate plants that will have ample access to resources and labor in economical quantities. If Pozar wants to see what the new world order will look like he needs to (re)read Snow Crash.