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The Dow was down 530 points today. The unemployment rate is considered good and the economy is so called doing well but does a 530 point drop concern anyone?
It's a reaction to China dropping the value of their money, among other things.
The Dow was down 530 points today. The unemployment rate is considered good and the economy is so called doing well but does a 530 point drop concern anyone?
Not me, I have been out of this casino for a year. I saw this coming a long way off, but the people here I tried to warn could not see the forest for the trees. Well boys, enjoy the ride.
Your conclusion does not follow from your premise. But you already knew that.
Sure it does.
If a corporation wants to move their production to a cheap labor country they need to know they will be able to export those goods. Trade policies that promote a US deficit, and fiscal and monetary policies that keep the US$ strong ensure this. The US has been the world's great sink for excess production for decades.
It's a no-brainer. Dump your high priced US labor and regulations, produce your stuff overseas with $1/hr labor, and import it back to the US with much higher profits.
If the officials had been looking out for the interest of the public, this never would have happened.
If a corporation wants to move their production to a cheap labor country they need to know they will be able to export those goods. Trade policies that promote a US deficit, and fiscal and monetary policies that keep the US$ strong ensure this. The US has been the world's great sink for excess production for decades.
It's a no-brainer. Dump your high priced US labor and regulations, produce your stuff overseas with $1/hr labor, and import it back to the US with much higher profits.
If the officials had been looking out for the interest of the public, this never would have happened.
So you propose to dig a moat around the country and not allow anything in? Look at your history in places like India and Brazil that adopted that kind of policy. It doesn't end well.
The US is still the #2 manufacturing economy in the world and China only passed the US a few years ago. Automation has had more impact on US jobs than offshoring. We've had generations of industrial engineers working to knock the labor cost out of producing things. They have been very successful. The jobs that moved offshore are mostly low skill repetitive task jobs that don't pay well.
Circling back to the stock market, the long-term trend is that the people who hold the capital are going to increasingly reap the benefits of automation. The stock market will continue to go up as the rich get richer. The market may correct but it's the correct long term place to have your money. What we're seeing in China is partly caused by them reaching a degree of wealth where they've seen enough wage inflation that they're not as competitive as they once were. 10 years ago, I was paying experienced engineers in Shanghai $25K to $30K. Last year, it was more like $75K to $80K and it was damned tough to retain them because they could walk across the street for a big raise. We had to open a facility out in the boonies in Wuhan to find the pool of new grad people you could still pay $30K. Employers are also now on the hook to fund retirement pensions. As China becomes less competitive, double-digit growth becomes unattainable. As they become more affluent, the things we take for granted in the United States like clean air, drinkable water, healthy food supply, etc become important.
So you propose to dig a moat around the country and not allow anything in?
Of course not. Trade is great. It's the one-sided trade that is killing us.
Controlling trade for the benefit of your country's economy isn't a new thing. It's what every semi-prosperous country has done throughout history. The thing that changed a few decades ago was many oligarchs embarking on a scheme to get filthy rich by draining wealth from developed countries (the US in particular) under the guise of "free trade".
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The jobs that moved offshore are mostly low skill repetitive task jobs that don't pay well.
Repetitive union jobs paid very well. But it's totally fine to loose production so long as we replace it with production of equal value. But in this case we didn't. Our production loss was replaced with debt.
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The stock market will continue to go up as the rich get richer.
This already exceeded the breaking point in 2008. Just like in 1929. Very different outcome this time though. In 1929 it resulted in a huge correction that saw the rich get poorer and the consumers get richer for ~45 years.
A consumer capitalist system requires that consumer's incomes grow at about the same rate as the capitalist's over the long term. Else it stalls or crashes. In the short term the difference can be made up by escalating public and private debt.
Going global shifts the playing field to the world rather than the country. Developing countries are relatively low hanging fruit compared to developed ones, but consumption lags production. The US makes up the difference by reducing production and keeping consumption boosted via debt. This is what they've been doing the last 40 years, and the reason why the oligarchs have gotten so wealthy, while it has sucked for pretty much everyone in the US.
The problem currently is that we are in fact suffering from a global consumption-debt crisis. The US is pretty well tapped out in their role of sucking up the world's excess production. Our infrastructure is in shambles, wages have been flat for 40 years, and our debt burden is maxed out. There doesn't appear to be any way for the rich to keep getting richer without a major correction and clearing of some debt.
But who knows... maybe they can keep the global economy limping along until robotics makes consumer-capitalism obsolete.
I will tell you wasn't a good sign today. The fact that the futures looked great and the market was up quite a bit this morning, but couldn't hold the gains based on China lowering their interest rates. The normal bull market would have gained 400 points today.
In the 70s equities weren't dead. They were murdered. 20% Treasuries? Why bother with equties when da gubermnet is paying 20% with no risk? When long term rates kept falling capital appreciation in bonds made it a bond bull market of our dreams. No money was going into equities. How does a bond bull market start out at 3% unless we plan on a Depression of our nightmares?
So bond market? If you don't mind being shot in the head on a rate hike with no upside its perfect.
So I guess its gold then eh? Oh yeah that had a big run up too.....hmm. Well then real estate is the ticket.. Its failsafe.
Oil for sure then. Those guys can't lose.....
Not much of a haven and money markets is mattress money.Speaking of which in 10 years I am sure the dollar will buy twice what it can now.
So that's just the thing.....not that I like equities , but where can it flee?
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