“For the first time in nearly half a century, trade between nations has grown slower than the global economy. Some economists believe trade may be at a peak, at least for a while. “Peak Trade” suggests the world could hit a long-term ceiling in terms of the effects of trade growth as an economic driver.”
— Has the Global Trade Engine Stalled? By Eric Justian, December 19, 2014, TriplePundit, U.S.A.
Commentary: Ron Robins
Buy local, make locally, is a major trend in all countries. The huge U.S. economic stimulus package of five years ago mandated domestic sourcing and production, wherever possible. In the U.S., as in many countries, there are large constituencies who see global trade as contributing to massive losses of high paying domestic jobs. Hence, like the U.S., countries around the world are emphasizing buy local, make locally.
Furthermore, renowned trends forecaster Gerald Celente of the Trends Research Institute predicts these trends growing globally together with an anti ‘made in China’ mindset among developed countries’ consumers.
Most of these trends likely apply mostly to the goods trade. But it remains to be seen if the services side of global trade is similarly constrained. My suspicion is that with the growth of the web and recently introduced simultaneous multi-lingual VOIP services such as Skype has inaugurated, services might yet see much further globalization. Services also constitute about 70% of global GDP.
For a more detailed understanding on the growth of the global services trade, read my post, Huge Migration of Service Jobs to Developing World Looming. That essay implies that over the long-term global trade in services — and due to lower cost structures particularly benefits the developing economies — could grow appreciably faster than world GDP.
From an Enlightened Economics perspective, the freer the trade, the better. There’s no better means to economic growth than for the ‘invisible hand’ of the market to function seamlessly and optimally.
Enlightened Economics 
• Should we print money to fund green investments?
Posted by Ron Robins on January 13, 2015
“GQE [Green Quantitative Easing] builds on the logic of QE, but fundamentally changes its objectives. In a GQE programme, new money is created – literally out of thin air – and used to buy bonds, but in this case they would be bonds issued by [UK] government-owned Green Investment Bank, local authorities, housing associations and other similar organisations, such as drainage boards.”
— Why we should print money to fund green investments, by Richard Murphy, January 12, 2015, Finance, Guardian Sustainable Business, U.K.
Commentary: Ron Robins
What a provocative idea! It sounds wonderful in theory. But would it work in practice? So far, the effects of QE in the U.K. and the U.S.A. have been to save the financial system from an immediate collapse (though probably putting it off for a while) while spurring modest growth–if you can believe the weird changes in their statistical methodologies and seasonal adjustments. Furthermore, it’s probably only because of the massive debt in the system that has stopped it from galloping into an inflationary frenzy.
No numbers are mentioned in this article but I believe adding this GQE to the already existent QE could create a real danger of galloping inflation. For starters, most of the services and products required for such a massive increase in green development would be strained and could very easily develop significant inflationary pressures, impacting many other sectors of the economy.
Also, if GQE were to happen there would be many other groups (the National Health Service for one) demanding the same QE programme. So where would it stop? I can understand the feelings behind this move. We would all like to see a greener and sustainable world. But I believe the risks of the process getting out-of-control are too great. It could lead to another Weimar (German hyperinflation of the 1920s) experience. The German leaders of that period also believed they could control the inflationary process!
Additionally, also not considered in this article are the knock-on effects on exchange rates and interest rates. Effects, many known and unknown would rampage through the economy. In short, it’s a fascinating idea worthy of discussion. But, I for one, believe the risks are too great to adopt such a scheme on a large-scale.
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Posted in Economics, Ethical Investing, Finance & Investing, Monetary Policy | Tagged: central banks, consumer price index, debt, environmental sustainability, hyperinflation, interest rates, Monetary Policy, QE, quantitative easing | Leave a Comment »