Of Guido Salerno Aletta

Source: Here
Dall’ Italy to China passing from Germany to the USA: not exactly mainstream conversation with l’ economist Guido Salerno Aletta (edited by Giacomo Gabellini)
For several days, general attention has been focused on the Economic and Financial Document (Def) launched by the Conte government, but the Italian case certainly does not represent the only factor destined to heavily influence the performance of the world economy, which is weighed down by numerous unknowns, starting from the explosive rise of China and the political line adopted by the Trump administration. We talked about all this with the economist Guido Salerno Aletta, former general director of the Ugo Bordoni Foundation and former deputy general secretary of Palazzo Chigi.
In his recent article, you expressed the opinion that the current confrontation between financial operators and the Italian government represents a battle of the great clash between States and markets. What led you to reach such a conclusion? How do you think this clash will evolve??
Merchants take advantage of any opportunity to get rich. A country that tries to bring financial resources back to the real economy must be destroyed. Everything must flow back to Insurance, Funds, Purses, Derivatives and so on, to inflate the Turbofinance bubble. It all depends on the Central Banks and Governments, who so far have preferred to reflate financial wealth rather than income.
While the European spotlight remains rigorously focused on the Italian situation, the document on the State of Unification recently published by the German authorities certifies that Germany - especially its eastern part - is encountering major economic difficulties which had already begun to emerge several years ago, with the multiplication of so-called mini-jobs and a very strong centralization of wealth. What are they due to?, in his opinion, Germany's economic problems?
It is a model in deep crisis, as demonstrated by the growth of opposition even in the richest state, like Bavaria. Uncontrolled immigration, as well as the mini-job system, it has undermined social cohesion. The Germans have accumulated fictitious wealth, fruit of the structural surplus of trade relations with foreign countries, which is based on the willingness of debtors to pay interest and the capital lent. It is unsustainable financial colonialism.
Some observers have called attention to how Germany, the largest exporter in the world, is persevering in dedicating itself to the production of the same goods without focusing decisively on the development of new technologies. This continuous specialization in 'mature' sectors (like the car), is not at risk of leaving the country – e, a ricasco, the whole of Europe – dangerously behind in the race to develop new technologies? He believes that austerity has played a role in this 'plastering' of Germany?
Germany is old. Continue to focus on cars and chemistry, the drivers of the twentieth century. It has already lost the challenge of modernization, having focused on satellite countries that supply low-priced semi-finished products in manufacturing production.
Always remaining on the front of new technologies, experts do not fail to point out how China has established itself as a protagonist in this very delicate sector. This may seem astonishing, if we consider that almost everywhere in Europe there is a widespread belief that the Chinese continue to base their strength on low-quality production, relying on the competitive advantage given by low wages. How do you rate China's economic strategy?? What are the main strengths of the former Celestial Empire?
China has done nothing but capture technological innovation at zero cost, imposing the sharing of know-how by foreign companies that wanted to take advantage of the low cost of Chinese labor. Now the strength of the Chinese economy is not based on low wages, but on the ability to integrate the value chain through a technological supply chain controlled in every aspect. Western protectionism, with respect to the removal of all barriers to trade, will lead to the division of the globe into two areas of influence
Especially with Donald Trump's rise to power, the United States has adopted a particularly aggressive posture towards China, accused of manipulating the currency, to build asymmetric economic relationships with its partners and to 'rob' the US of many sensitive technologies - although the US itself did exactly the same thing when it had yet to establish itself as a great power. First with the TPP and now with the tariff policy, associated with strong diplomatic and military activism in the South China Sea, the United States seems inclined to 'encircle' China with a view to containment. What are your thoughts on the United States-China confrontation?? How do you evaluate the Chinese countermoves??
China's advantage now lies exclusively in its economic growth potential and centralized direction of investments. Once Obama's strategy of encircling China and Russia with the TPP and TTIP failed, there will be an asymmetric conflict between China which tries to project itself into the world through the Silk Road and the USA which will try to block this expansion using military instruments, financial and conditioning.
Trump's 'neoprotectionist' line is seen by many - especially in Germany - as a deadly danger for freedom of trade and economic growth itself. Some academics have even hypothesized a parallel between the current tariff policy and the protectionist measures adopted in the USA between 1922 and the 1930, held jointly responsible for the outbreak of the crisis 1929 and the Great Depression – as well as the related effects produced in Europe and the rest of the world. He thinks this parallel is appropriate? What are the objectives that Trump intends to achieve through this type of policy?
The US is plagued by the duplicity of its economy: I am an agricultural country, and now potentially an energy exporter, competing with others who are much poorer, like Argentina or Russia, and on the other hand they are the main producer of advanced technologies. But above all they have to face the abandonment of manufacturing. In the international division of labor they find themselves in the same situation as after the First World War, with an intractable conflict between producers who ask for a low dollar to be competitive and Wall Street who wants a high dollar to attract capital to manage. The high interest rates on the dollar serve this purpose, as well as ensuring coverage of the twin deficit, much more than controlling inflation.
For years the mainstream press has continued to celebrate US economic growth, based on GDP and unemployment data. Nevertheless, on a population of 325 millions of people and a workforce that numbers almost 258 million units, beyond 96 millions of adults are unemployed and 6 millions underemployed. The rate of labor force participation in economic growth (a percentage that has fluctuated for years between 62 and the 63%) it is at its lowest levels since the late 1970s, when the impact of the decoupling of the dollar from gold and the oil shocks was still being heavily felt. How can we explain this 'disconnection' between official statistics and 'raw' data? What are the main problems affecting the US economy?
The abandonment of manufacturing and the consequent lesser role of wages in the distribution of gross national income, given the fragmentation of employment in the tertiary sector, it led to the disappearance of the middle class and the precarization of work. Trump is just a megaphone for this increasingly difficult situation. Without internal household savings, everything is now dependent on credit and the ability of debtors to repay it.
Thanks to the development of technologies capable of extracting shale oil and gas, the United States has established itself as a true energy superpower. How will the conquest of this new status impact international energy balances?? He believes that the availability of enormous hydrocarbon reserves by the United States will loosen the symbiotic relationship that historically binds Washington to Saudi Arabia?
The crucial issue is the fueling of American foreign debt, of which petrodollars have been a fundamental pillar. The potential to directly export gas, provides the US with an unexpected strategic asset. It reduces the progressive erosion of oil trade in dollars, which undermines the fundamental value of the dollar as an indispensable tool for trade.
In recent years, a series of nations starting with Russia, China and Iran have laid the groundwork to eliminate dollar intermediation in their bilateral trade, and the European Union itself has raised the possibility of equipping itself with its own payment channel to carry out its trade with the Islamic Republic. For several years, meanwhile, there is extraordinary activism around gold. China, Russia, Germany, Venezuela and many other countries around the world have increased their reserves or requested repatriation from the countries that held their gold reserves. An astute observer like Ambrose Evans-Pritchard has hypothesized that this could herald a sort of restoration of the old gold standard to replace the dollar, clearly in a declining phase. How do you evaluate the Russian-Chinese maneuvers aimed at abandoning the dollar? He believes the return to some form of anchoring to gold is likely and desirable?
The crucial issue of today's strategic conflict concerns the role of the dollar and its substitutability. The new paradigm of dividing the globe into areas is based on this, no longer ideological but political-financial. The new blocks are these. Gold plays a substitute role, limited, compared to mineral resources, which can be used as an underlying. The rebalancing of trade and payments balances represents the best antidote to the drift towards currencies that must bear the risk of unbalanced growth and the resulting debts.