Disconnect

The content contained in Armageddon Online comprises just one part of this short post as the news about the US and the world's economic condition requires a multifaceted view on a situation that's bleak at best.

The world economy is slowing sharply, and the euro region is headed for recession this year, the International Monetary Fund predicted Tuesday in a bleak update of global conditions.

Overall, the world economy is expected to expand 3.25 percent in 2012 — down from the 4 percent projected by the IMF in the fall. That figure includes 8.2 percent growth in China, still the world’s most quickly expanding economy, and 7 percent in India. U.S. growth is forecast at 1.8 percent, the same as the fund projected in the fall.

Reasons as to why range from, in the US case, malfeasance perpetrated by government, the Fed and the WS banks to, in Joseph Stiglitz's nuanced take, a structural meltdown caused by tech, financial malfeasance and government's lack of vision in terms of how to intelligently deal with it. 

The private sector by itself won’t, and can’t, undertake structural transformation of the magnitude needed—even if the Fed were to keep interest rates at zero for years to come. The only way it will happen is through a government stimulus designed not to preserve the old economy but to focus instead on creating a new one. We have to transition out of manufacturing and into services that people want—into productive activities that increase living standards, not those that increase risk and inequality. To that end, there are many high-return investments we can make. Education is a crucial one—a highly educated population is a fundamental driver of economic growth. Support is needed for basic research. Government investment in earlier decades—for instance, to develop the Internet and biotechnology—helped fuel economic growth. Without investment in basic research, what will fuel the next spurt of innovation? Meanwhile, the states could certainly use federal help in closing budget shortfalls. Long-term economic growth at our current rates of resource consumption is impossible, so funding research, skilled technicians, and initiatives for cleaner and more efficient energy production will not only help us out of the recession but also build a robust economy for decades. Finally, our decaying infrastructure, from roads and railroads to levees and power plants, is a prime target for profitable investment.

The second conclusion is this: If we expect to maintain any semblance of “normality,” we must fix the financial system.

When factoring in climate change and peak oil into the equation, the news for mankind in 2012 is dire but forced change has a way of generating innovation and problem solving, particularly when survival becomes an issue we all have to deal with. As often stated in BRT, the disconnect of tech and science from government and finance is growing ever larger, where, on the one side, we have incompetence and corruption, while on the other, we have breathtaking advancement able to transform how we do business on this planet. Sooner or later, the divide must be eliminated through wrenching change to the former if we are to remain a viable species in these uncertain times.