How the Crash Will Reshape America

[monsoon]

the fact that you believe the whole reason for this current economic condition is because of the transition of manufacturing jobs to service/creative jobs proves your ignorance in economics. ...

[AlexPKeaton]

The Lump of Labor fallacy is only about 100 years old and has nothing to do with the issue at hand. It says nothing about the elimination of industry in the United States to increase profits for the corporate owners. And when these companies are begging the government for bailouts due to their bad corporate decisions, it doesn't cover that either. Different subject entirely.

I want you to go to Kannapolis, NC and explain to the 6000 people there that got laid off when Cannon Mills was bought out and the work moved to Brazil on how it is OK.... we have an intellectual theory that says there is plenty of work to do. Explain that to the 4 million+ that have been laid off since October. Let us know how that turns out for you.

[gvsusean]

Please explain to me how the USA adds value to the economy by going completely to services. How exactly do we produce any "value" assuming you understand what that means, for us to purchase what we need for day to day living? You call me ignorant, but you can't answer the question in detail. If you can't then please do so and we can discuss it. Otherwise, I stand by what I said that you add value to the economy by just 3 things. You grow it, you dig it up or you manufacture it. And BTW, we are still a farming nation.

I am waiting for your details.

[crinzema]

I'm sure our president can relate to this. A heroin addict has to go through withdrawals if he wants to get over his addiction. Much like an addict, our economy, including individuals, businesses, government, are hooked on debt financed spending. Right now, our economy is trying to get over it's addiction by saving, eliminating toxic assets, and spending less. This is called a recession. It hurts much like drug withdrawals. Obama doesn't like the pain of withdrawals. What he is doing is giving our economy another high with more debt financed spending. The very thing that started this recession. Now, we are indebted to the drug dealer (China).

[tamias6]

the fact that you believe the whole reason for this current economic condition is because of the transition of manufacturing jobs to service/creative jobs proves your ignorance in economics. You are a broken record that has played since the transition from farming to manufacturing... Yes people get hurt in transitions, there are no arguments with that; but to regress into a protectionist and physical (as opposed to intellectual) based economy would only digress us into the 1950's economy. The truth of the situation is that we live in exponential times. Technology doubles every few years. To fund our exponential lifestyles we have had to work more hours. When there were not enough hours in the day to work we had to make our purchases on credit (because someday we will catch up!). When we had difficulty getting credit, financial institutions lowered their standards. When those could not get any lower the people who originally could not receive credit but did because of the lower standards began defaulting on their loans. When thousands/millions of people default on thousands of dollars of debt the financial institutions will fail. When the financial institutions fail, the other banks are afraid to loan money so businesses cannot make payments and they in turn fail. Now this is pretty much a TV guide version of what has happened. However, to blame this economy on the advancement of personal careers is down right wrong!

[monsoon]

....

The software designer manufacturers nothing yet adds value to the economy

The engineer manufactures nothing yet can reduce/eliminates the amount of labor required to manufacture something

The Lawyer does not grow anything but they are very important to people who want to sell goods internationally

The Biochemist does not manufacture anything but can find a cure for disease (valueless)

The teacher grows nothing (except hopefully the desire to learn)

Fire people and Police people create nothing but add no value?

Judges, interpretor, marketers, human resources, architects, doctors, athletes, surgeons, add no value?....

[crinzema]

Cut down version

[AlexPKeaton]

P.S. I know you're going to fight back with "It's not Belgium or German countries I'm talking about; it's China. They don't outsource anything to us." Thats because they have nothing to give us but cheap labor which we readily take advantage of.

[monsoon]

And as their currency rises in value relative to the dollar, Chinese labor won't be so cheap anymore. The free market will eventually reach equilibrium. For a long time China was keeping its currency artificially low, and they're still not allowing it to float freely on the world market. In that sense they have an unfair advantage, ....

[arcturus]

China's success is greatly exaggerated.

[Yankee Fan]

?

China already owns 700 billion is US debt, will be purchasing considerably more, and has a 40 billion dollar monthly surplus.

You don't send your secretary of state there to get down on her knees imploring them to buy more if they weren't successful. If anything their success has been understated.

http://www.telegraph.co.uk/finance/finance...n-looks-on.html

[arcturus]

If the Chinese and other off-shore places were forced to compete on even terms, then our jobs would not be going to these places. When we let the corporations value the american worker in terms of 3rd world labor concepts then we convert our economy to 3rd world status. Anyone who would believe otherwise just doesn't get it. The collapse that we are seeing now is the result of that an one that has been obscured by the false economy of paper wealth generated by ever appreciating real estate made possible by the irresponsible and cheap lending of money.

[monsoon]

I don't buy this concept that goods produced overseas are less expensive for Americans. Go to an appliance store and look at the clothes dryers that are on display. You basically can choose between either Electrolux or Whirlpool as they took over almost all the other brands. Now look at the tags to see where they are manufactured. It's Mexico or Korea and maybe Canada. Yet prices for these machines are higher than I've ever seen them.

Now, go look at Bosch. This is an independent brand which is a German company but they decided to build a plant here in the USA to manufacture models for the NA market. (most Americans would not purchase a real european style dryer) Feature for feature the Bosch dryer is less expensive despite being of higher quality and having the "proudly made in the USA from USA parts" stuck on the plate.

The difference between the two is that Electrolux and Whirlpool are profiteering and booking the profits and Bosch decided to build driers in the community it serves even though it might cost them a few dollars/machine. It speak volumes as to what is really going on as this sort of thing is only serving the short sighted executives that are closing American plants to make more money for themselves. Don't believe me. Go down to the store and check it out yourself.

[Raildudes dad]

The difference between the two is that Electrolux and Whirlpool are profiteering and booking the profits and Bosch decided to build driers in the community it serves even though it might cost them a few dollars/machine. It speak volumes as to what is really going on as this sort of thing is only serving the short sighted executives that are closing American plants to make more money for themselves. Don't believe me. Go down to the store and check it out yourself.

[AlexPKeaton]

Ultimately the issue is how do you bring that labor back? The answer is easy - produce an item of similar quality that's competitive cost wise. Now If we accept that technology is easily imitated and copied then it boils back to whoever has the cheapest labor, and that will be to countries with lower standard of livings that don't have to worry about health care and retirement benefits.

[AlexPKeaton]

I don't buy this concept that goods produced overseas are less expensive for Americans.

[monsoon]

.... Not in the virtuous sense, of course, but it's greed that make the market work. ...

[arcturus]

I suppose we could go back and forth about this for a while, but you have found the fundamental difference in our thinking. You think greed is a bad thing. Greed is good. Not in the virtuous sense, of course, but it's greed that make the market work. People serve their own best interests, which has the side effect of benefitting the economy as whole. You obviously don't agree.

[AlexPKeaton]

Well.. Why is the market failing, millions being thrown out of work, and the greediest getting richer by the day?

[monsoon]

.... The best way to ensure another great depression is to take decisions about how to allocate capital out of private hands of private citizens and give them to the government. Changing rules to even the playing field and eliminate loopholes are good for everyone except those would would exploit such loopholes. Imposing tariffs for the sake of protecting American jobs sounds good, but it ultimately does more harm than good. Making it near impossible to fire people also sounds good, except it discourages companies from taking risks and hiring people in the first place. There are always unintended consequences to poorly thought-out policies.

[Mark Miller]

This has been a good discussion and it is clear that there is passion on both sides.

Whether it is because of unbridled greed or economic cycles or too much / too little regulation, America is being reshaped.

8 months ago, you heard very few people uttering the recession word. Now we are hearing recession and depression.

More importantly we are hearing contraction. Contraction of the economy is going to be painful. If everything contracts our wealth shrinks. Or better stated, our perceived wealth shrinks. I guess this is similar to the equilibrium that has been discussed, because the truth is that in the world economy everything doesn't come up to our level, instead we go down to their level. The equilibrium will not be a good thing for any of us. Ultimately we have very little to fall back on.

In this contraction, everything shrinks. Outputs of food production on a large scale. The ability to provide essential services at a big scale. The ability to provide health care at a big scale. The ability to provide future wealth generation at the scales we are used to. No more 800 unit housing developments. No more 1000 foot skycrapers. No more cheap transatlantic flights. No more yellow bus fleets carting kids to school over entire townships.

No matter what philosophy you lean toward, preparing ourselves to live and work at a smaller scale is the safest way to proceed. Building all the systems for this smaller scale will be essential. We are not doing that.

Even if this is wrong, this is the prudent way to secure the future. There will be no detriment proceeding in this way. If it is wrong, we end up with a better scale of living and a more sustainable future. If it is right, we might have a chance.

[gvsusean]

You miss something here. The failure to have done this caused the great depression in the 1930s. The period of biggest growth for the American middle class in terms of relative income, access to resources, and sustainability happened in the 1950s and 1960s when the marginal tax rate was 90% and the government had a firm hand on business regulation. When they started dismantling this framework in the 1980s and replace it with the false economy we have now, real income for families stopped keeping up with inflation and in fact household income has been falling, quite dramatically since the last census.

You continue to toute the virtues of supply side economics, yet when faced with examples of why it has failed you simply tap dance around that by explaining it away in nonsensical terms such as calling it a bubble. Sorry, I really don't buy it, and the people put out of work by the "bubble"will disagree too. I think the people are tired of hearing these theories from people.

I don't mind letting private companies make their own decisions. But when they get in trouble they are not willing to face the consequences and now are asking for the federal government, the people, to bail them out. This is the failure in what you describe and I think the government has every right to come in and force change on these companies when they are so irresponsible that public money is needed to fix the problem. Greed is not good, as you put it, unless there are checks and controls on it. We are seeing the consequences of this now. Millions being thrown out of work is no mere bubble as there has been nothing like this since the 1930s.

I fundamentally disagree with this concept that it is OK for corporations, who are getting tax breaks and handouts from the American taxpayer, to place jobs in places such as communist China. If importing so much oil is bad so is importing all of our other goods. If gives these countries control over us and puts us in the position of not facing our problems. We are seeing that now.

[arcturus]

Americans got spoiled. Here's the guy who said it the best ...

http://www.youtube.com/watch?v=LoGYx35ypus

[AlexPKeaton]

wait, are you saing we grew because of the tax rate? What big event happened in the late 30's early to mid 40's?

[monsoon]

...We're not buying "their stuff", we're buying our stuff produced by them. 60% of Chinese exports are by non-Chinese companies. Most of the stuff we import from China is still 'our product'. China is just making them for us. We've hired outside help.