Uh-oh

Japan is apparently getting set to turn down the lights and send the partiers home:

[A] decision by Japan's central bank on Thursday, by a vote of 7-1, to scrap its unprecedented super-loose monetary policy has raised concerns about the possible fallout on the global economy.

Ok, but changes in the monetary policy of a major nation is hardly unprecedented - we've done that here in the USA several times. So what's the problem?

[B]ecause no major central bank has ever had such a loose policy, no one knows for sure how to end it smoothly. "These are uncharted waters for a central bank," R. Glenn Hubbard, dean of Columbia University Business School and a central banking expert, said. "Exiting with minimal disruptions will be a difficult exercise."

But that's Japan's problem, not ours - our economy is the envy of the world! Right?

One reason for all the anxiety about the behavior of Japanese investors is the size of their holdings overseas...A reversal of these huge flows of cash could have even broader ripple effects in the global economy, some economists say. If money grows scarcer in the United States, interest rates could rise there, too. Economists say this could lead to a situation - far-fetched but not entirely implausible - in which the Bank of Japan deflates the American real estate market, as homebuyers face more expensive mortgages.

Our huge deficits make huge foreign investment in our economy mandatory. Should investors find other markets more attractive - as would happen with positive real interest rates in Japan - this would have to lead to some combination of higher interest rates, reduced imports, or increased exports in the U.S. The impact from each of them will be a reduced standard of living - but increasing our exports would at least position us better for the future by increasing our investment in domestic manufacturing. Letting our manufacturing base dwindle away poses two obvious (to me, anyway) risks we should not want to face: The most obvious would be a major crisis requiring a rapid industrial response like we faced at the outset of WWII. The other would be finding vast numbers of men without any - well, manly jobs to do.

The prospect of transforming millions of coarse, hard-living, male blue collar workers into gentle, accommodating service workers perfectly interchangeable with women may be a feminist's dream, but the reality would be quite different. Most likely men will begin to drop out of the work force and just let the women do these jobs. Right now our real-estate boom has kept men busy building things, but once that cools off (as seems even more inevitable now) the growing crisis will soon become apparent. The notion that education - acquiring new skills for the new economy - will relieve this crisis are just plain silly. Computer programming jobs are already being outsourced in
droves - exactly what skills are these guys supposed to acquire in order to remain competetive in the global marketplace? Bioengineering? Nuclear physics? Afraid not - about the only skill our legions of workers will need in the new economy is the ability to say "May I help you, ma'am?" and then avoid smacking her when she gives him crap - the latter may well be too much of a challenge for most. Of course there will be other options readily available - white supremacist militias could stand in for workplace camaraderie, the drug business can always use some tough men, and off-the-books financial service businesses could always use debt
collectors.

We need to re-industrialize, we need to do so as a matter of national policy, and we need to do so now. Will this cause a net reduction in our standard of living? Most certainly, if measured purely in financial terms. But it will make all the difference in fending off a more disastrous decline in the quality of life over the coming decades. And a decline in our standard of living seems inevitable - do we pay now or surrender later?