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This was a question from another thread that died. Thought I'd try to resurrect it.
What SHOULD growth in the economy be based on?
I guess I don't understand how people can, in basically the same sentence, denigrate the consumerist society while simultaneously denigrating the non-producer economy. So we need to move away from a service-based economy and back toward a producer/manufacturer-based economy, but we also need to stop buying so much crap and being strong consumers. But how do these concepts work together?
My job/career is service-based to the extent that I don't build or produce tangible things. So I'm hearing that the FIREL-based/service-based economy needs to go away -- I need to produce something tangible. But then I need to sell it to people who shouldn't be buying/consuming things but instead saving...
Healthy economies are commonly driven by the manufacturing industry (people produce things that people then buy, and this cycles money in the system). However, the economy shouldn't function by credit (at least not to a majority). People should buy things they can afford to pay for. A manufacturing industry allows for the export of goods, which localized service jobs cannot do.
In the past, people would buy a product and expect it to last a long time, so they spent a reasonable amount of money on it (enough money to pay for domestic manufacturing). Now, people expect to buy many cheap things that could be replaced in the short term. This cannot support a local manufacturing industry.
It's balance that matters. China is in trouble because they produce too much and don't consume enough. We are opposite. 71% of our GDP is consumption. This is unsustainable. In China's case, the goods they produce require consumers. If all the jobs and wealth go to one place, there is no one left to buy. China's high savings rate is as much to blame for financial problems as our excessive credit. No nation has ever thrived without producing goods. UK and USA are the latest victims.
The US still produces a lot of things, there is a gap between consumption and production but the gap really isn't that large. Around 60~65% of the GDP should be consumption and our trade deficits need to be lower.
There is a easy way to greatly reduce the gap:
Stop importing so much damn oil!!
The US imports around 10 million barrels of just crude oil a day (We import all other sorts of crap too). At current prices thats around 16 billion or so dollars a month. The trade deficit is currently $56 billion a month.
It doesn't necessarily have to be manufacturing that helps a nation derives its wealth. It can be anything that foreigners are willing to pay for. Manufacturing just gets the #1 spot because that is how most nations have done it in the past. We can still have a primarily service sector based economy but we need foreigners to buy it. That is the main thing.
What you need to look at is the trade balances of the nations. The nations that are losing wealth have negative trade balances and the nations that are gaining wealth have trade surpluses. A negative trade balance cannot last forever. We have high unemployment right now because no one wants to buy the services/labor/goods of those unemployed people. China has virtually unlimited amounts of labor so the way I see it. Manufacturing in the US is dead.
What we need is a green economy. A way that we can export, for example, renewable energy. We have some of the best renewable energy resources in the world, yet we let them go untapped while we spend 800$ billion on foreign oil. Our day of reckoning is coming. China will be exporting their goods to the Middle Easterners who can afford to buy their goods And China will be buying oil from the middle east which will balance out the trade for the nations. The US will remain in the dark, left behind. Notice that the soviet union collapsed from the inside, not the outside. We are on the same course.
The middle class in the US is in free fall. The middle class in China is on the rise. You can really see the shift of wealth from one nation to the other. Chinese will be the number 1 consumers in the world, not the USA.
This was a question from another thread that died. Thought I'd try to resurrect it.
What SHOULD growth in the economy be based on?
I guess I don't understand how people can, in basically the same sentence, denigrate the consumerist society while simultaneously denigrating the non-producer economy. So we need to move away from a service-based economy and back toward a producer/manufacturer-based economy, but we also need to stop buying so much crap and being strong consumers. But how do these concepts work together?
My job/career is service-based to the extent that I don't build or produce tangible things. So I'm hearing that the FIREL-based/service-based economy needs to go away -- I need to produce something tangible. But then I need to sell it to people who shouldn't be buying/consuming things but instead saving...
What we should be going in this generation is moiving to a very high technical economy and leave the basic manufacturing to the countries that are at a high school or lower average education and skill level. But the last two generations have about 50% who can take care of themselves and about 50% that are bascially third world workers in the 21st century. They now want to blame the same boomers that have and are raising their children in many instances. I am hoping that in the next generation we will not ahve to import highly educated workers for very technical jobs like we do now.Otherwise we will remain a country of those getting richer and those getting poorer. No government handout can stop that.
In China's case, the goods they produce require consumers. If all the jobs and wealth go to one place, there is no one left to buy.
Wrong. The people of China will buy those goods. China will simply retool their factories to start producing chinese demanded goods. China will just sell to the highest bidder. Right now the highest bidder is the USA, but for how much longer?
Wrong. The people of China will buy those goods. China will simply retool their factories to start producing chinese demanded goods. China will just sell to the highest bidder. Right now the highest bidder is the USA, but for how much longer?
But you miss the point, they are not purchasing the goods. There economy is 60-70% based on export. They are mercantilists accumulating currency. The Chinese people have savings rates of 40% and higher. They don't spend, largely because there is little in the way of a safety net. This over-saving is just as dangerous as over-spending. All that liquidity has to go somewhere and it ended up here as excess credit.
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