The rising influence of so-called rogue economies, criminal markets and unregulated gray areas threatens countries around the world.
By Monica Davis (muckracker)
In a Newsweek interview, economist Loretta Napoleoni defined “rogue economics” as a broad description of the black markets, criminal markets and unregulated gray areas in the world economic system. These economies move faster than political sentiment—and international regulatory oversight, giving rise to predatory economic tactics which compromise the entire system.
Loretta Napoleoni: It's an umbrella term for black markets and criminal markets but also gray areas that aren't regulated. It occurs in periods of political upheaval when the economy moves faster than political sentiment and [at a rate which makes] politicians and governments lose control. The credit crisis is an example. Carlyle Capital borrowed $33 for every dollar it held in assets. Bear Stearns, its largest lender, went down when Carlyle Capital became insolvent. Nobody broke any laws because there was no legislation to limit debt exposure. (my emphasis) But the consequences of their behavior negatively affected thousands of employees and depositors. Regulation would have prevented that … Right now, Chinacan sell counterfeit products in the United States; they just alter the logo a little bit. You can buy anything on the Internet. It's a vehicle for prostitution, pornography, child pornography. Those are all examples of rogue economics. (www.newsweek.com/2008/04/22/globalization-s-aftershocks.html)
The international market is such a wild west environment, that we often do not know where our food comes from, nor whether it was processed under safe/sanitary conditions. We don’t even know if the fish was caught under conditions which did no harm to the environment, protected species, or whether the workers in the industry worked in safe conditions, or slave labor environments.
With globalization opening up markets and diluting oversight, rogue economics continues to strengthen and consume the international business environment.
Globalization has helped rogue economics spread. In the 1970s, you knew where products came from; it was a smaller world. For example, now when you order fish in a restaurant, you don't know where it came from. Seventy percent of the fish we eat is black market, fished in violation of international laws. Our ignorance makes us unwilling partners in crime. Rogue economics is turning the global market into our worst nightmare. (Newsweek)http://www.newsweek.com/2008/04/22/globalization-s-aftershocks.html
With unemployment raging around the world, roguish elements in commerce are expanding their influence—and increasing revenues globally. Napoleoni notes that the fall of communism flooded Europewith desperate labor from the East. The rapid influx of desperate workers generated a deflation engine, which drove labor and interest rates down. This, in turn, set the stage for unregulated banks and investment houses seek higher investment returns.
Also, the supply of labor in the West doubled as people came from the East. That led to a deflationary situation around the world in which interest rates fell and banks became more aggressive, looking for more and higher returns. Investment banks were hardly regulated; nearly everything was allowed. (Newsweek)
And now we are paying the price. Rogue economies are out of control. Heck, we’re doing business with a lot of them because they can produce goods so cheaply.
China has become the world’s factory. While westerners whine about alleged Chinese human rights abuses, companies from around the world depend on cheap Chinese made products to fuel their retail stores. The Chinese “dollar”, the renminbi, has gone global, with a variety of consequences:
The ongoing financial turmoil has increased demands for the renminbi going global more pressing than ever. China became the "world's factory" with its export-driven development model, which made the country's real economy vulnerable to global economic fluctuations. The asymmetry between China's status as a trade giant and its obscure currency is increasingly glaring amid the recession sweeping the world. However, it is not realistic to count on an overhaul on the international monetary landscape in the short run to push the renminbi (yuan) into the limelight. (article.wn.com/view/2009/06/29/Asymmetry_Obscure_currency_big_economic_clout/)
The ultimate problem is that these rogue elements are things we can not control. We can’t control how China values/devalues their own currency. We can not control the rampant theft of intellectual property, counterfeiting and dumping that has become part of the Chinese trade manifesto.
Bottom line: rogue economics threatens every economy around the world. The economic chaos, crime and civil unrest which rogue economics causes continues to be a driving force in the international commerce sector, although pundits and forecasters keep predicting the same old, same old, without acknowledging the effect of the rogue elements within the international economic system.
As piece on cnnmoney.com notes, economic forecasters continue to trot out extrapolations, based on past behavior, and pass them off as “predictions.”
Now, we're in the heart of the predictions season. The forecasts for the New Year from the pundits on Fox Business Network, CNBC, Bloomberg TV and dozens of websites vary a bit, but the overall message is overwhelmingly the same for most assets: stocks will remain on a roll, generating double-digit gains for 2011. The prices of gold, oil and other commodities will continue their upward march. As for bonds, rates will keep rising, but slowly. And almost no one has a good word to say about the housing sector, where prices have fallen for months, and according to the prediction mill, are destined to follow the same downward trend.
The problem with these predictions isn't that they rely on complex economic assumptions. It's just the opposite––they're really not forecasts at all, but extrapolations. The pundits are telling us that recent trends will simply keep rolling. CNNMONEY.com
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