Sunday, November 25, 2007

Junk Economics and the Time Machine

Pondering this whole question further, it does look as if this entire contretemps was predictable for the last few years.

In fact, there's a very interesting article by George Selgin entitled "World Monetary Policy After the Euro" dated 2000 that seems to indicate that the central bankers of europe had the choice to make as to whether the euro would become a true international currency or whether they would take the temptation to inflate the value of the currency.

It seems that that policy shift may at least be partially to blame for the overvaluation of the euro. http://www.cato...1/cj20n1-12.pdf

Unsustainable trade deficits and current accounts deficits, deficit spending gone mad, a war budget scarfing up every available dollar on the market, and a housing market built on quicksand are all driving the decline of the value of the dollar.

All of these have been predictable, in fact, inevitable outcomes.

But sitting home in Europe, and not looking at what Honda, Toyota, Nissan, Subaru, and Kawasaki have been happily doing the last twenty years in the states beggars the imagination. It's an oversight that is, in retrospect, astounding.

In classic terms, Airbus has been caught with their pants down and is busy trying to shift the focus away from its management, who, if the european taxpayer had any sense at all, should have all been sent to St. Helena to commune with Napoleon's ghost, there to receive a lecture about hubris and its consequences.

What seems funny to me is that back when I was working for Douglas and they were trying to sell the place to Taiwan, there was a brief flirtation with Airbus, nothing really, a glance across a crowded room, two ships passing in the came to nothing.

Had Airbus invested in the dollar zone at that time and picked up Douglas commercial operations, they would have had a fully equipped and staffed turnkey plant in the center of the greatest collection of aerospace production and engineering expertise the world has ever seen.

They would also be the proud owners of the largest horizontal spar milling machines west of the Mississippi River which would now be busily churning out spars for every conceivable Airbus product.

There would now be no question as to what the future air force tanker would look like either and no need for a Potemkin Village fig leaf of a plant in Alabama to inartfully conceal their nakedness. In all likelihood American Airlines, Delta, United, Northwest, and the others large and small would be lining up and signing up.

And their high cost structure in the euro zone?

They'd be immune from that whole problem.

Incentives, you say? They'd have so many incentives being handed to them from places like counties in Kansas and Nebraska that they'd be busy for years adding them up and figuring out all the free acreage and industrial buildings that were thrown at them.

The entire WTO case would evaporate in the twinkling of an eye. Instead of an audience, people'd be telling Boeing to STFU.

Mr. Enders and Mr. Gallois would have to rent a tank truck to haul home all the free drinks that people would buy them, and they'd be lionized from one end of this country to the other by appreciative county supervisors, workers and engineers.

And I'd still have a job.


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