U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Economics
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 03-09-2015, 09:45 AM
 
Location: Ruidoso, NM
5,170 posts, read 4,731,643 times
Reputation: 4206

Advertisements

Quote:
Originally Posted by shaker281 View Post
They will have to raise CapEx eventually, which will further assist GDP. It is inevitable.
It is inevitable, but the investment will be overseas unless something changes.

[/quote]This suggests those people are voluntarily not returning to the workforce, not that they cannot find jobs. They simply do not want jobs, i.e. retirement.[/quote]

No, it means that kids aren't working because they can't get jobs anymore, and some are graduating college and living in the basement. Or couples have gone bankrupt and only one is able to get a decent job. If you can't get a job in your specialty, there is fierce competition low skill jobs. Another big factor is the expansion of foodstamps and healthcare and disability. Many are simply choosing to live well below the poverty line and do odd jobs under the table so they can still collect benefits rather than "fight" for $8/hr jobs.

Regarding early retirement, the opposite is true:

Reply With Quote Quick reply to this message

 
Old 03-09-2015, 10:02 AM
 
3,792 posts, read 1,769,164 times
Reputation: 765
Quote:
Originally Posted by rruff View Post
How would that have solved the problem? How would it now? There were other factors in play with much bigger effects.

I think we need a weaker dollar to close our trade gap and spur domestic investment. Don't see any other sensible way to do it.
Domestic savings in banks tends to push exports. A weaker dollar isn't necessary. Raising the wages of foreign export workers to at least US minimum wage would help. Just look at the Japanize model. Part of it is a high domestic savings rate. And that is required to be invested domestically.
Reply With Quote Quick reply to this message
 
Old 03-09-2015, 12:08 PM
 
Location: Ruidoso, NM
5,170 posts, read 4,731,643 times
Reputation: 4206
Quote:
Originally Posted by ContrarianEcon View Post
Domestic savings in banks tends to push exports. A weaker dollar isn't necessary. Raising the wages of foreign export workers to at least US minimum wage would help. Just look at the Japanize model. Part of it is a high domestic savings rate. And that is required to be invested domestically.
The US was lacking investment, but it wasn't because of a lack of savings, rather the rich were developing overseas production. They were taking profits they made in this country and removing them, rather than cycling them back in as they'd always done before. Why develop overseas? So long as you have a secure market for your product (the US) you can lower costs and make higher profits. Long term you will also get richer when the country being developed increases consumption. The plan has worked beautifully. And propaganda has been very successful at keeping the US public divided and confused. Hardly anyone understands what happened.

There were many policy changes that supported this. Going off the gold standard gave more monetary freedom. Next, trade agreements, lowered barriers, along with lower taxes on the rich. Isn't it odd that "trickle down" propaganda was in vogue at precisely the time it was made ineffective! Still, opening trade with cheap labor countries need not cause a trade deficit. If there had been any desire to close the trade gap (which would have clearly been the best thing for the US consumer), it could have been easily done with monetary policy, but the opposite was wanted. They wanted US consumer to suck up as much foreign production as possible. Keeping the US$ value high made outsourcing a no-brainer.

You don't need a crystal ball to predict the effects. Labor unions were gutted and wages and benefits declined. To keep consumer demand high, credit was loosened and fiscal debt rose. See the chart below. There was also the fortuitous event of a rising workforce participation rate, mostly from women entering the workforce. This all made the poor wages less noticeable, and kept demand boosted. Plus the press kept touting how good our economy was, and oddly people tended to believe that even though it was all on credit.

Most of the fiscal debt was necessary to support the trade imbalance... ie foreign product consumption. Most of the consumer debt was simple consumption as well. As you surely know, debt escalation is only sustainable when it is invested in infrastructure, research, education, etc that results in higher future production. Collapse was inevitable, but they wished to forestall it as long as possible.

Frankly I don't think they expected to string it out this long. The dotcom boom in the 90s actually *did* give us a decent economy for awhile, but when that was waning it was time to float the last debt bubble. RE, that was the big one, and it kept the economy goosed for nearly a decade. By 2008 we'd maxed out private debt and fiscal debt was getting to uncomfortable levels as well. So that was the end. We are left with crap. High debt, poor employment, poor wages.

Meanwhile how are the people who perpetrated this doing? Great! They managed to escalate their wealth at rate unprecedented in history, and they are well positioned globally. The banks were bailed out. All the upside and none of the downside. Even since 2008 they are getting rich from the US stock bubble. There aren't many good investment opportunities in the world right now, but they can wait for things to shake out. No blame, no shame. And the US consumers are busy squabbling among themselves, and don't have a clue about what is happening.


Last edited by rruff; 03-09-2015 at 12:21 PM..
Reply With Quote Quick reply to this message
 
Old 03-09-2015, 12:40 PM
 
3,792 posts, read 1,769,164 times
Reputation: 765
Quote:
Originally Posted by rruff View Post
The US was lacking investment, but it wasn't because of a lack of savings, rather the rich were developing overseas production. They were taking profits they made in this country and removing them, rather than cycling them back in as they'd always done before. Why develop overseas? So long as you have a secure market for your product (the US) you can lower costs and make higher profits. Long term you will also get richer when the country being developed increases consumption. The plan has worked beautifully. And propaganda has been very successful at keeping the US public divided and confused. Hardly anyone understands what happened.

There were many policy changes that supported this. Going off the gold standard gave more monetary freedom. Next, trade agreements, lowered barriers, along with lower taxes on the rich. Isn't it odd that "trickle down" propaganda was in vogue at precisely the time it was made ineffective! Still, opening trade with cheap labor countries need not cause a trade deficit. If there had been any desire to close the trade gap (which would have clearly been the best thing for the US consumer), it could have been easily done with monetary policy, but the opposite was wanted. They wanted US consumer to suck up as much foreign production as possible. Keeping the US$ value high made outsourcing a no-brainer.

You don't need a crystal ball to predict the effects. Labor unions were gutted and wages and benefits declined. To keep consumer demand high, credit was loosened and fiscal debt rose. See the chart below. There was also the fortuitous event of a rising workforce participation rate, mostly from women entering the workforce. This all made the poor wages less noticeable, and kept demand boosted. Plus the press kept touting how good our economy was, and oddly people tended to believe that even though it was all on credit.

Most of the fiscal debt was necessary to support the trade imbalance... ie foreign product consumption. Most of the consumer debt was simple consumption as well. As you surely know, debt escalation is only sustainable when it is invested in infrastructure, research, education, etc that results in higher future production. Collapse was inevitable, but they wished to forestall it as long as possible.

Frankly I don't think they expected to string it out this long. The dotcom boom in the 90s actually *did* give us a decent economy for awhile, but when that was waning it was time to float the last debt bubble. RE, that was the big one, and it kept the economy goosed for nearly a decade. By 2008 we'd maxed out private debt and fiscal debt was getting to uncomfortable levels as well. So that was the end. We are left with crap. High debt, poor employment, poor wages.

Meanwhile how are the people who perpetrated this doing? Great! They managed to escalate their wealth at rate unprecedented in history, and they are well positioned globally. The banks were bailed out. All the upside and none of the downside. Even since 2008 they are getting rich from the US stock bubble. There aren't many good investment opportunities in the world right now, but they can wait for things to shake out. No blame, no shame. And the US consumers are busy squabbling among themselves, and don't have a clue about what is happening.
The starting point to unwind this mess is to insist that everyone that makes something to be used in the US gets paid US minimum wage or higher. Then we up the minimum wage to replace the lost wages do to outsourcing. And we keep the minimum wage going up 5% a year. That is a good start to unwind this mess.

Oh ya I figured out what you just wrote for myself starting in 2009.
Reply With Quote Quick reply to this message
 
Old 03-09-2015, 05:34 PM
 
Location: Ruidoso, NM
5,170 posts, read 4,731,643 times
Reputation: 4206
Quote:
Originally Posted by ContrarianEcon View Post
The starting point to unwind this mess is to insist that everyone that makes something to be used in the US gets paid US minimum wage or higher.
Besides being impossible that is unnecessary. Just use monetary policy to reduce the value of the US$ and this will close the trade gap. We would then still outsource low skill production to some degree, but we'd replace it with higher skilled and higher wage production. Investing in the US would make sense again. This is the best scenario for the US public. We can raise minimum wages easily as well, but that is a side issue that doesn't address the fundamental issues.

Free trade is actually good. The problem is that it was managed so that only a tiny fraction benefited, and they benefited a lot.
Reply With Quote Quick reply to this message
 
Old 03-09-2015, 06:24 PM
 
3,792 posts, read 1,769,164 times
Reputation: 765
Quote:
Originally Posted by rruff View Post
Besides being impossible that is unnecessary. Just use monetary policy to reduce the value of the US$ and this will close the trade gap.
But what happens when everyone is trying to devalue their currency at the same time? There is no solely monetary solution to this problem.
Quote:
Originally Posted by rruff View Post
We would then still outsource low skill production to some degree, but we'd replace it with higher skilled and higher wage production. Investing in the US would make sense again.
It is hard to reduce the value of US$ farther than it is. Aside from going back to QE.
Quote:
Originally Posted by rruff View Post
This is the best scenario for the US public. We can raise minimum wages easily as well, but that is a side issue that doesn't address the fundamental issues.
Debt % GDP, wage inflation without the creation of new debt. And the problem is global. Just about everyone has too much debt to their available income.
Quote:
Originally Posted by rruff View Post

Free trade is actually good. The problem is that it was managed so that only a tiny fraction benefited, and they benefited a lot.
Free trade is good as long as everyone plays by the same rules. Insisting the our trading partners pay their export workers US minimum wage or higher is to everyone's benefit.
Reply With Quote Quick reply to this message
 
Old 03-09-2015, 10:36 PM
 
Location: Ruidoso, NM
5,170 posts, read 4,731,643 times
Reputation: 4206
Quote:
Originally Posted by ContrarianEcon View Post
But what happens when everyone is trying to devalue their currency at the same time? There is no solely monetary solution to this problem.
The US had balanced trade throughout it's history until ~1980. This was normal for *every* country.

Every country can manipulate it's currency to correct trade imbalances if they want. I'm cool with that.

Quote:
It is hard to reduce the value of US$ farther than it is. Aside from going back to QE.
It's really easy. When China wants sells us a bunch of goods and doesn't want to buy any, we give them $s. We don't sell bonds, we just print the money.

Quote:
And the problem is global. Just about everyone has too much debt to their available income
Nearly every developed country did the same as the US, only less dramatically. In Europe, the Scandinavian countries, along with Germany and Switzerland, are fine because they've been net exporters in the Eurozone. This "get rich via globalization" scheme has been world wide.





Quote:
Free trade is good as long as everyone plays by the same rules. Insisting the our trading partners pay their export workers US minimum wage or higher is to everyone's benefit.
Actually it doesn't matter what anyone else does, so long as you adjust your currency value to balance trade. Insisting that our trading partners pay the same wages is unnecessary, and undesirable. We *want* to outsource inherently low skilled and low productivity work so we can focus on higher productivity. That's what makes us prosperous.
Reply With Quote Quick reply to this message
 
Old 03-10-2015, 12:43 PM
 
3,792 posts, read 1,769,164 times
Reputation: 765
Quote:
Originally Posted by rruff View Post
It's really easy. When China wants sells us a bunch of goods and doesn't want to buy any, we give them $s. We don't sell bonds, we just print the money.
Is that Federal Reserve Notes? IOUs for real money? A dollar is a bond with nothing to back it up but a T-bill.
Reply With Quote Quick reply to this message
 
Old 03-10-2015, 01:36 PM
 
Location: Ruidoso, NM
5,170 posts, read 4,731,643 times
Reputation: 4206
Quote:
Originally Posted by ContrarianEcon View Post
Is that Federal Reserve Notes? IOUs for real money? A dollar is a bond with nothing to back it up but a T-bill.
As real as fiat money gets. The US$s they get are worth just as much as the ones we use.
Reply With Quote Quick reply to this message
 
Old 03-10-2015, 09:46 PM
 
39 posts, read 30,625 times
Reputation: 53
To answer OP's original question, think about this analogy: How heavy a car is does not solely determine how hard it hits a brick wall; how fast its going also determines it.

If hyperinflation is a brick wall, we did not crash and break the wall, even though our car was a dumptruck carrying tons of sand, because we were going half a mile per hour.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top