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i just saw wholesale inflation's up over 6% for last year, the highest jump in 26 years! so basically, e.g., just about EVERYBODY is now losing value in their homes relative to inflation, and most are losing BIG. and who is getting more than 6% return on their investments otherwise? i would guess most of the population gets well below that (considering that americans have been earning less than they spend - due in part to gluttony, and in part to the fall of the dollar, i suppose - for a year or two, now: U.S. savings rate hits lowest level since 1933 - Stocks & economy - MSNBC.com). but with hoarding there can be deflationary pressure and layoffs, but with inflation and negative savings the limit to credit can loom, and so defaults, and so pressure on banks' measures of risk, ...
very, very "interesting".
how do we avoid what this seems to allude to? what might some of the economic safety nets be for the overall economy? globalization impacts...or technology impacts...etc..
Last edited by hello-world; 01-15-2008 at 09:45 AM..
Let me tell a quick story about how our dependence on foreign manufacturing is going to haunt us. I have a business acquaintance who works for a major Midwestern utility company. Utility companies use large high-voltage switches all across the "power grid" on major trunk lines to control electricity flows. The switches are big, expensive, and generally long-lived and quite reliable--but they can fail under the right conditions. When a switch fails, the area it controls will have a power outage--usually until the switch is replaced.
When a major ice storm hit the Midwest about a year ago, voltage surges on a number of the major transmission lines caused a number of these switches to fail. Because of the high cost of these switches, the utility companies keep very few of them in inventory. Now, the fun part. There is no longer a US manufacturer of these switches. Nearly all of them are manufactured in four countries--Germany, Japan, China, and (oddly) Argentina. In this particular incident, my acquaintance told me that they were able to find just enough switches in the US (by scavenging the entire national inventory) to get the "grid" back up. Had they not been able to do that, it could have taken weeks, maybe months, to restore power to many thousands of customers.
This was a relatively localized incident only affecting a small part of the power grid. Had it been more widespread, he shuddered at the thought of what might have happened. Now, suppose a couple of those countries decided that they really didn't want to sell us those switches. When it comes to critical items necessary for the normal functioning of US society, I'm sure there are many more examples of our total reliance on foreign sources. China particularly scares me--if anyone thinks that China is our best buddy, they are ignoring a half-century plus of reality. We are locked in a vicious world competition for diminishing natural resources and are fighting a protracted battle for economic, financial, and political supremacy. Most Americans, living in their self-indulged stupor in their McMansions in suburbia with the SUV parked in front, have not yet figured out that this country is getting its *** kicked on all fronts right now. At this rate, when we do, it may be too late . . .
Let me tell a quick story about how our dependence on foreign manufacturing is going to haunt us. I have a business acquaintance who works for a major Midwestern utility company. Utility companies use large high-voltage switches all across the "power grid" on major trunk lines to control electricity flows. The switches are big, expensive, and generally long-lived and quite reliable--but they can fail under the right conditions. When a switch fails, the area it controls will have a power outage--usually until the switch is replaced.
When a major ice storm hit the Midwest about a year ago, voltage surges on a number of the major transmission lines caused a number of these switches to fail. Because of the high cost of these switches, the utility companies keep very few of them in inventory. Now, the fun part. There is no longer a US manufacturer of these switches. Nearly all of them are manufactured in four countries--Germany, Japan, China, and (oddly) Argentina. In this particular incident, my acquaintance told me that they were able to find just enough switches in the US (by scavenging the entire national inventory) to get the "grid" back up. Had they not been able to do that, it could have taken weeks, maybe months, to restore power to many thousands of customers.
This was a relatively localized incident only affecting a small part of the power grid. Had it been more widespread, he shuddered at the thought of what might have happened. Now, suppose a couple of those countries decided that they really didn't want to sell us those switches. When it comes to critical items necessary for the normal functioning of US society, I'm sure there are many more examples of our total reliance on foreign sources. China particularly scares me--if anyone thinks that China is our best buddy, they are ignoring a half-century plus of reality. We are locked in a vicious world competition for diminishing natural resources and are fighting a protracted battle for economic, financial, and political supremacy. Most Americans, living in their self-indulged stupor in their McMansions in suburbia with the SUV parked in front, have not yet figured out that this country is getting its *** kicked on all fronts right now. At this rate, when we do, it may be too late . . .
wow. that's a pretty interesting story.
what i wonder is whether the connectivity of the global economy might bolster any major economy from truly tanking 1929-US-et-al-style. those countries that sell us things (that we depend on) probably don't want to see us sink in such a fashion (maybe in other, slower fashions they themselves can better adjust to).
also, i'm not sure our ***es are getting kicked. i agree we have issues to deal with, and that somebody, somewhere, does something a little better than we do on any single front, perhaps (maybe across many as measured by HDI "standard of living", e.g - while we're still in the top 10 or 15 there...and slipping), though it does seem that we still do relatively well across many fronts. i would agree we are slipping on many fronts, and many are resting on some laurels (or ignorant as to what's really going on a good part of the time), but still, i wonder how imminent an implosion (as you and bob seem to see it) is? i'm not saying it isn't imminent, but it seems there might be some mechanisms in place today that might buffer things to some extent. but then, those very mechanisms may very well result in more immediate and global issues. hence, i ask...
I also failed to mention in my "switch" story that there is a huge international demand for them stemming from electrical development in the developing countries like China. The price of the switches has tripled in the last few years.
Let's read some headlines, and see if we aren't getting our *** kicked. Several of the big mortgage lenders are getting bailed out by sovereign investment funds from foreign countries. Think they're doing that because they are nice guys? No, they are doing it because, with the collapsing dollar in world markets, they can buy those assets for 50 cents on the dollar just with the exchange rate. Then, in addition, because of the mortgage meltdown, they are buying those assets often for pennies on the dollar of what is on the books. They, theoretically, could be buying mortgages with, say, a face value of $200,000 for $20,000 or so. So, even if half those mortgages don't pay off, they still make money. Meanwhile, you might not feel real comfortable effectively making your home mortgage payment to the Communist Chinese government or some oil sheik in the Mideast. I wouldn't.
Many, many wealthy American investors are now making most of their investments overseas. Why? Because, to them, the US is no longer a very profitable place to invest. Even Warren Buffett, a longtime supporter of "US only" investment, has now taken a big stake in an Israeli company building a huge plant in China. More and more American companies are placing most of their emphasis on selling abroad. Apparently, they don't think Americans are going to have the capacity to buy much over the long term.
Check and see how many "American" banks are now foreign-owned. Check out how many oil companies are now foreign-owned or controlled. Hell, even Halliburton is moving its corporate headquarters to Dubai. Go look at your "American" car and see how many of its parts are foreign made. Did you know that most Toyotas have more American-built parts than the cars made by the Big Three? Don't even think about electronics and appliances.
Think we are a "service economy?" Try to get "service" on something in this country. Stay at a hotel, and likely most of the staff are aliens, legal or otherwise. Call a toll-free "service" number and see how often you get somebody from the United States. More and more, "service" means vendors making you do it for yourself.
So what DO Americans do? It seems like most of what we do is build more suburban crap that we really can't afford, using increasingly immigrant labor, built with lumber from Canada, filled with appliances and fancy electronics made in China and Korea, with Japanese cars in the garage filled with gas made with foreign oil. We sit on our Chinese-made couches in front of our Chinese-made TV, getting fat on food that is increasingly imported from other countries, taking increasingly foreign-made pharmaceuticals to try to stay "healthy," and listen to legions of commentators and politicians telling us not to worry, that everything is "OK." Most ominously, we are paying for most of this with dollars we don't have to people who are beginning to figure out that those dollars may just be pretty much worthless.
About the only thing the US is going to have left to assert its place in the world is a huge nuclear arsenal. And, you have to wonder, with our reliance on all nature of foreign-made electronics and components, if we could fire one of the things if we had to--because China probably makes "the button."
I also failed to mention in my "switch" story that there is a huge international demand for them stemming from electrical development in the developing countries like China. The price of the switches has tripled in the last few years.
Let's read some headlines, and see if we aren't getting our *** kicked. Several of the big mortgage lenders are getting bailed out by sovereign investment funds from foreign countries. Think they're doing that because they are nice guys? No, they are doing it because, with the collapsing dollar in world markets, they can buy those assets for 50 cents on the dollar just with the exchange rate. Then, in addition, because of the mortgage meltdown, they are buying those assets often for pennies on the dollar of what is on the books. They, theoretically, could be buying mortgages with, say, a face value of $200,000 for $20,000 or so. So, even if half those mortgages don't pay off, they still make money. Meanwhile, you might not feel real comfortable effectively making your home mortgage payment to the Communist Chinese government or some oil sheik in the Mideast. I wouldn't.
Many, many wealthy American investors are now making most of their investments overseas. Why? Because, to them, the US is no longer a very profitable place to invest. Even Warren Buffett, a longtime supporter of "US only" investment, has now taken a big stake in an Israeli company building a huge plant in China. More and more American companies are placing most of their emphasis on selling abroad. Apparently, they don't think Americans are going to have the capacity to buy much over the long term.
Check and see how many "American" banks are now foreign-owned. Check out how many oil companies are now foreign-owned or controlled. Hell, even Halliburton is moving its corporate headquarters to Dubai. Go look at your "American" car and see how many of its parts are foreign made. Did you know that most Toyotas have more American-built parts than the cars made by the Big Three? Don't even think about electronics and appliances.
Think we are a "service economy?" Try to get "service" on something in this country. Stay at a hotel, and likely most of the staff are aliens, legal or otherwise. Call a toll-free "service" number and see how often you get somebody from the United States. More and more, "service" means vendors making you do it for yourself.
So what DO Americans do? It seems like most of what we do is build more suburban crap that we really can't afford, using increasingly immigrant labor, built with lumber from Canada, filled with appliances and fancy electronics made in China and Korea, with Japanese cars in the garage filled with gas made with foreign oil. We sit on our Chinese-made couches in front of our Chinese-made TV, getting fat on food that is increasingly imported from other countries, taking increasingly foreign-made pharmaceuticals to try to stay "healthy," and listen to legions of commentators and politicians telling us not to worry, that everything is "OK." Most ominously, we are paying for most of this with dollars we don't have to people who are beginning to figure out that those dollars may just be pretty much worthless.
About the only thing the US is going to have left to assert its place in the world is a huge nuclear arsenal. And, you have to wonder, with our reliance on all nature of foreign-made electronics and components, if we could fire one of the things if we had to--because China probably makes "the button."
as for ***es kicked, i think we can read and cite examples on either side of the argument. a few years ago it looked like our aerospace industry was getting it's *** kicked by the likes of airbus, e.g.. look at airbus, e.g., now. they may very well be back. but the point is that i am not sure that we are getting our ***es kicked completely. and of course, one person's ***kicking can be another person's "call to change for the better" or "hey - so we lose some industry - there could be some good that can come of that". i am not necessarily of those opinions, but, i can see valid reasons to hold them.
don't get me wrong, i agree that we may be slipping in a number of ways. academically, perhaps (from childhood through some of our science and "academia"). public health, perhaps. financially, perhaps. and these are not small things. i agree that many people do not see or think about this, and so we may very well continue to slip if people don't open their eyes and do something constructuve.
and i am totally with ya on the service in this country. it's WAY more about "me" and "my entitlements" than "service" much of the time, when we're even actually getting service from within our own borders.
as for china "making all the buttons", very worthwhile thing to contemplate, i agree, (considering what they spew into the global environment as a result, their "Quality control" and safety or "human rights" questions, their possible manipulation of things via price controls, etc.) though it is also arguable that some of this results in a mutual need (for a while, anyhow) that can mitigate any otherwise sudden economic apocalypse. (price controls, e.g., can work either way if, for instance, the market begins to disappear due to it's own financial issues.) i can almost assure you that china does not make "the button", or any parts in the supercomputer to design the "button"...a china would, however, likely "watch" it and make their own from what they learn. not that i think these "relationships" are necessarily good, but i wonder whether they might at least ameliorate a true collapse 1929-style.
Last edited by hello-world; 01-15-2008 at 12:28 PM..
Very interesting thread. As someone who already has a job in the Denver area but who has not yet moved there, makes me re-think my strategy. Maybe I should sell my house here in TX and move there, but park my gains in Gold for awhile and rent an apt whilst hoping my job does not go to India. Or maybe I should continue to work from here and take a wait and see attitude. Or maybe I should move there and throw caution to the wind and buy a depreciating asset and hope for the best.
Need your advice guys. Living in Dallas. Have several opportunitues in Denver. Married with only one child. We are both accountants (both mid forties) and make a combined salary of 145K. Completely debt free and live a very frugal, monk like existence. No car loans, no CC debt, plenty of savings. Did I mention we were accountants? He, he, he........Anyways, in your opinion - would a family like ours do o.k. if the economy tanked. I feel that in our career field we might be more immune to a recession. What do you think? Oh, we both work for the nations largest natural gas distributor. Thanks for the intelligent and honest comments so far.
Need your advice guys. Living in Dallas. Have several opportunitues in Denver. Married with only one child. We are both accountants (both mid forties) and make a combined salary of 145K. Completely debt free and live a very frugal, monk like existence. No car loans, no CC debt, plenty of savings. Did I mention we were accountants? He, he, he........Anyways, in your opinion - would a family like ours do o.k. if the economy tanked. I feel that in our career field we might be more immune to a recession. What do you think? Oh, we both work for the nations largest natural gas distributor. Thanks for the intelligent and honest comments so far.
hey, are you "subtly" trying to tell US the way it ought to go?
to me, you sound like an anomaly that does everything right, at least as far as buffering for financial hard times! counter to "the american way" by and large. so, my guess is, YOU could tell us whether you might fare better than many of the rest of us if things were to go the way jazzlover and bob anticipate. of course, i suppose that might depend on where your savings are invested. could be tough to have them all tied up in your house, stocks, and mutual funds, e.g., if all those were to decline in value (as they probably are at the moment), right?
what's the cautious accountant's point of view? and, what do you think about the future of natural gas as an energy source? are you with a distributor that distributes foreign fuel? do you suspect that other sources might bite into the demand for natural gas? though, my naive guess would be that kind of thing, if were ever to pan that way, might pan that way after the next few years that some out there think might be a little "bumpy", economically. again, YOU tell US!
to wait a few more years but the pull of the mountains and family are also present. My fear is that we buy a house this year and then find out that if we had waited another year or so we could have saved even more. I guess I'm not so much worried about my future employment as I am about losing money in a downward market. I guess trying to time this type of market might be foolish and maybe we just need to go ahead and buy. Oh, and as far as natural gas and it's future - I feel pretty confident that it will remain strong, especially in Colorado. Thanks!
To be truthful, there may be many things that are happening in our economy that make good short-term business sense. For example, if I could cut my labor expenses by 50% by moving my manufacturing plant off-shore, from a business perspective, it probably would be foolish for me not to do it.
The rub comes from the fact that individually sensible decisions may have serious collective consequences--especially over the long-term. In theory, that is what we elect leaders to worry about, and hope that they make good policy decisions to assure our long-term economic and social survival. Today's leaders, though, are so busy looking at this week's poll results that long-term thinking has gone out the window.
The other problem is that we tend to think of things only in economic terms, not strategic terms. For example, buying two-thirds of our oil from overseas in order to keep our wasteful lifestyle built around endless oil consumption going may make some good short-term economic sense in some respects, but it is moronic from a strategic perspective. I alway liked an old saying, "If you are putting all of your eggs in one basket, you'd better be watching the damned basket." Well, 2/3's, going on 3/4's, of our "oil basket" is now in the hands of a bunch of two-bit dictators, oil sheiks, nuclear wannabes, and communists--and the basket is shrinking, at that. If that isn't poison to our strategic interests and security, I don't what is. Of course, our feckless politicians' answer is to drill more in the US and DEPLETE OUR DOMESTIC ENERGY RESOURCES EVEN FASTER. I don't think anyone has to be a Harvard-graduated genius to figure out what makes strategic sense. Anyone with an objective mind and some common horse sense should be able to figure it out. Relatively few of them exist within the Washington Beltway, apparently, and equally as few anywhere out on the political "stump" these days. No one wants to tell Americans that they are going to have to "hunker down" some, and that things aren't going to be near as cushy for awhile--probably a long while. All of this means that things will probably get a whole lot worse than they would otherwise have to for we Americans. As I posted earlier, reality usually wins in the end.
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Great points........
and, what do you think about the future of natural gas as an energy source? are you with a distributor that distributes foreign fuel? do you suspect that other sources might bite into the demand for natural gas? though, my naive guess would be that kind of thing, if were ever to pan that way, might pan that way after the next few years that some out there think might be a little "bumpy", economically. again, YOU tell US!