Any attempt to be economically competitive carries the risk of not being economically competitive. Can the most productive US worker compete with the most productive worker in the World? Can 80% of the US population compete with 80% of the World? When some people in the service industry charge a fortune for what they do and get a big wad of cash off old people loaded with cash, that money will run out. You can't get ahead playing only zero-sum games.
Jobs are being created that do nothing except make the jobless figures look better. How many people comment they can do their job in just one hour per week? Look at the jobs and they mostly achieve nothing anyway. Administrators who divide up medical costs into categories which are accepted or denied by other administrators in the health insurance industry, then appealed, and so on getting nothing overall done, and bringing in zero foreign exchange. And other administrators put the charges together, and some get paid one way and some another. Make a bundle hitting your target selling cars or widgets and half of the money you get from customers goes out of the country, and we get further in debt.
And yes, I got depressed, I see no way to repay that debt or to balance the outgo against the income without totally restructuring the economy. We can't expect and American worker on 30,000 a year to either compete with a Chinese worker on a quarter as much or to pay a medical bill for a liver transplant. The liver was donated free of charge, but labor was over one million dollars. Rich Americans charge too much, poor ones can't survive, and neither can the ones in the middle. SOO form an economic wall around North America and Europe. Some trade can be allowed through the wall and maybe a better way can be found to organize it, but something has to be done. We have all the fundamentals, we just can't compete on labor prices. If the US was totally cut off from the rest of the world we would do pretty well. We just can't keep hemorrhaging money. Same for Europe, or the US and Europe together. But I have never studied economics so would like some comments, preferably not as long as my moan.
I totally agree with you. Ross Perot predicted this long ago. (You can find a video of his 1992 presidential debate with Bill Clinton and Bush, Senior ) I think maybe you are brushing over important categories of what exactly is being referred to by the word "productive". We could point to lower wages, lower standards of living and expectations, lower cost of living and cheaper costs due to international currency exchange rates. Or maybe just a vastly larger pool of labor in other countries like China and India, and so there will be more available talent simply because the pool of available people is so large. A question getting to the heart of the issue is why are things so much more expensive in the U.S. than in other countries? Is it simply all just wages? Or does government regulations, and perhaps the excessive legal liability in American courtrooms, play some role in it? The 1999 WTO protests in Seattle now seem like a distant memory on the Left.
I'm sorry to turn this particular item, just this one, into a therapy session because that's what has given me stress for years. I recall Ronald Reagan saying the dollar is king and that we should spend our dollars on anything from any part of the world we wanted if it is a good price and good quality.
I immediately said 'this is going to end in tears' because imports would mean money going out of the country and we would eventually run out of money. IIRC that was 1982, and it has taken a very long time to run out of money, but as the graph above shows the biggest ever Current Account Deficit started soon after that and it has been a big feature of the US economy ever since. I've been dreading the present day for years, thought we might avoid it, but with the crazy government we have right now, we appear to be getting a 'perfect storm'. Huge war spending, kicking countries off the dollar, very inept diplomacy, making enemies, countries going over to BRICS, no good plans for the future, no rule of law, no morality, no hope.
The first bit - the rich in the US shopping around for the cheapest manufacturing in the world to increase their profit margins, if I'm not mistaken is Neoliberalism. The second bit - Biden Administration and other politicians starting wars and hate with lots of other nations, are often referred to as Neocons though technically they are democratizers, trying to fit other countries into an ideal where they all talk American and vote and believe their votes matter. That by use of military force we can destroy other countries and rebuild them as copies of America.
Not the case. Google or Read up on "comparative advantage". It basically shows the benefits of trade and to what extent trade increases the wealth of trading nations. Once understood, you will understand why even nations which produce NOTHING more efficiently than another both benefit from trade (provided the trade is free and fair). The answer is they can compete (and they do). I'm not sure this is a valid characterization. In a capitalist free market system, any deviation from the "market price" (i.e. price set by the intersection of the supply/demand curves) will result in less than maximum revenues. The rich and elderly seek out the most favorable pricing just like everyone else. My guess is you have noticed the recent onset in inflation. This is due to government monetary policy in large part. Also the realities of the FOREX, which is basically a market for world currencies. You seem to be sensing something isn't quite right and this is causing you angst. You should listen to these gut feelings. If you would like I can explain further so you are prepared for what is to come.
Comparative Advantage is best understood with a simplified mathematical example. Don't worry, the math is not complicated. I will use the most simplified case imaginable. It would help to put the numbers into a tiny spreadsheet. We start with two neighboring countries which have no trading partners. At the outset they don't even trade with each other. Each country produces only 2 products (to make the math simple). Lets assume this is Canada and the US. I will assume the 2 products produced are oil and corn. I will postulate the US produces 400 barrels of oil utilizing 100 man-years of labor. Canada produces 480 barrels of oil utilizing 160 man-years to produce. Perhaps due to frozen soil, harder to locate reserves or longer winters. This level of oil production results in a market price of $10 per barrel. I will further postulate the US produces 100 bushels of corn utilizing 20 man-years of labor. Canada produces 180 bushels of corn utilizing 90 man-years of labor. Corn is more difficult to grow in Canada. This level of corn production results in a market price of $10 per bushel. So at the outset the US appears to produce each of these two products more efficiently. It would seem Canada cannot compete and should (according to your statement above) not engage in trade. Lets look at the wealth generated by each nation at the outset, then repeat after alterations due to trade. Without trade 120 Americans produce 400 barrels of oil and 100 bushels of corn. The total market value of both are $4000 in oil and $1000 in corn for a sum total of $5000. Without trade 250 Canadians produce 480 barrels of oil and 180 bushels of corn. The total market value of both are $4800 in oil and $1800 in corn. The average wage in the US is therefore $5000/120 people which equals $41.67 per year. In Canada the average wage is $6600/250 people which equals $26.40 per year. Now we will examine what results for each country when trade ensues. Canada decides to shift those producing corn to concentrate on oil production. Assuming all efficiencies remain equal, Canada now produces 750 barrels of oil utilizing 250 men. The total value of the oil produced is $7500. This results in an average wage of $30/year. A substantial increase in Canada's wealth. The US now receives 270 barrels of oil from Canada leaving a shortfall of about 130 barrels. The US shifts 67 men from oil production to corn production. The US now utilizes 33 men to produce 132 barrels of oil, leaving 87 men growing 435 bushels of corn. The total market value of US production is now $5670 resulting in an average wage of $5670/120 people which equals $47.25/year. This too is a substantial increase from the wealth obtained without trade. At first glance this may seem like magic. How can BOTH benefit from trade when one of them is not as efficient at producing ANYTHING their trading partner produces. It may take a minute to figure out what is going on here? The difference is what is called comparative advantage. Canadian oil production is nearly as efficient as US oil production. But due to their climate they are nowhere NEAR as efficient at growing corn. So Canada is much better served producing oil and leaving the corn production to the US. Vice-versa for the US. Even though the US is more efficient at producing both, their COMPARATIVE ADVANTAGE at producing corn is extremely pronounced. So the US also benefits from the trade by allowing them to shift some of their labor towards what they do far-and-away better than Canada. This is why few go into the agriculture business in Saudi Arabia. They leave that to us and they do what they do comparatively better which is produce oil. The US actually has larger reserves than Saudi Arabia and with the advent of Fracking is nearly as efficient. Together with the CONOCO-PHILLIPS strike in the Atlantic known reserves are sufficient for years to come. Do the deep Atlantic reserves (which amount to more than double the known reserves in the entire Middle East) belong to the US or Great Britain. Or perhaps some other Atlantic bordering nation. It is highly likely unknown reserves in the deep Pacific are even larger. Who owns the rights to these reserves? Let me go ahead and head-off what I see coming. The oil production in my little example has remained relatively the same at around 880 barrels. So the price remains about the same. After trade however the amount of corn production has ballooned. What would likely result is the US would sell this extra corn to another nation (perhaps Mexico) or shift some of their farmers to other endeavors like making automobiles or computers. The point of the example is to show WHY trade can benefit both nations even when one is more advanced or efficient. Even if the US shifts farmers away due to lack of demand for so much corn it is a net benefit as they can shift their endeavors to SOMETHING the markets would consider of value. In every case it is the value of the total production economies should seek to increase. In the end this is what benefits their citizens most. The prices set by all the various markets are like signals to the economies, incentivizing them towards production of what they do "COMPARATIVELY" best. This results in increased profits and less wasted scarce resources producing something which isn't of greater value than something else you produce comparatively better.
Now that you see what benefits trade generates and how to calculate the amount of wealth creation based on a set of efficiencies, lets delve into trade with China. At first glance it appeared China, with their archaic inefficiencies, was a gold-mine of potential trade benefits. This hasn't turned out to be the case. Despite the seemingly endless low-wage labor pool, the reality of doing business with China involves more than just short-term labor. Corporations who entered into the Chinese labor market went in and set up production, trained their labor force in modern production methods, set up the machinery to produce their products. These trade secrets largely amounted to the representative wealth of the companies. Time and again the Chinese would essentially record every piece of equipment (hardware and software) used to manufacture every product produced in China. They systematically set up identical production sites without compensation. Basically intellectual property theft. These short-sighted companies found themselves having to compete against their own products and processes. Often times products labeled with their own branding (counterfeit). Many complained, many went out of business, many like Apple and Google just capitulated and joined forces with the CCP. Giving up all morals and principles, agreeing to do the bidding of the CCP in regards to spying on the US, etc. They now collect all manner of data on every citizen. They no longer need to steal intellectual property in China. They use cyber crime, Google, Tik-Tok, etc. to steal IP remotely. Trump wasn't the first to realize this, but he was the first to stand on behalf of American Workers against unfair Chinese trade practices. Perhaps too late. Many of our elected officials have already been bought off and sold out America through foreign graft and corruption.
The costs of trade with China have far outweighed any benefits resulting from Comparative Advantage. In an effort to increase the level of trade the CCP also conducted currency manipulation. In my example in post #10 above I recorded everything in dollar value. What actually occurs is US and Canadian currency are exchanged on the FOREX. The exchange rate will fluctuate until the trade is balanced. If the US starts buying more goods from Canada than it sells, the value of the dollar will drop in relation to the Canadian dollar. This makes Canadian goods more expensive for Americans and they stop buying as much from Canada until trade is once again balanced. China would instead buy up dollars (and treasuries) and hoard them or send consumer products - hoarding the proceeds). This made the dollar appear to be more scarce than it really was. By keeping the value of the dollar artificially high Americans continued to buy Chinese goods and a large trade gap persisted. The purpose of the markets is to balance trade. Using this strategy they were able to maintain trade imbalances. What results is cheap Chinese goods in US markets (good for US consumers). But this had a devastating impact on US labor markets. Essentially you had a situation where Chinese cargo ships were arriving on the Pacific coast loaded with all manner of US designed goods, manufactured with Chinese labor and returned loaded with Federal Reserve currency and US Treasuries. Of course they didn't actually contain currency, this was done electronically, but the visual is valid. Our elected officials were all too happy with this arrangement as it provided a source of funding for excessive government spending. No matter how ridiculous the deficits China was there to scoop up the Treasuries, staving off any inflation which would otherwise ensue if the Federal Reserve had to monetize the debt by printing dollars. Americans too had dollars printed as interest rates remained low. The catch is, China was essentially buying dollars at a price which is well above their real market value. The price is artificially inflated. As time passes the difference between the artificial value and the true market value widens. They are selling us goods with real value, produced by Chinese with great effort. What they receive in kind is paper with far less real market value than the products produced. But of course the average Chinese aren't aware of this until the house of cards comes crashing in. At some point you cannot continue to finance the entire deficit of the US government (spending like drunken sailors) in conjunction with the borrowing of US citizens at low rates when you are having to hoard that debt at 10X the actual value of the currency. Once down this path it is difficult to get off. Understand, their entire economy and all their reserves were based on the artificial value of the dollar. If they attempt to utilize those dollars the value plummets and they can no longer maintain the facade they hold such highly valued reserves. The house of cards comes crashing in at some point and they need to be the first one to the exit or face even more dire consequences. Biden is now known to have taken payoffs from Russia, China, Ukraine, Kazakhstan etc. It appears our government may have been subverted. One of his first acts as POTUS was to essentially shut down our oil production. Russia benefited enormously for the return of favor. Russia is an oil company masquerading as a country. I believe, last I checked, over 70% of their government revenue comes from oil sales. At $110/barrel they make a hefty profit indeed. With oil in the 20's their cost of production almost equals the market price leaving little profit. Essentially this means they lose 70% of their government budget. Similar for natural gas sales. This is why Biden shut down US production. Americans seemed perplexed as the reasoning provided by the Biden administration made no logical sense whatsoever (if one was unaware of the corruption, bribery, and subversion). Biden claimed his motivation was to combat "Climate Change". ??? Americans burning oil purchased from the Middle East rather than oil produced domestically can in no way alter the Climate Change equation even if it did exist. As if this wasn't already blatantly obvious, he then actually made a highly publicized trip to the Crowned Prince of Saudi Arabia to request they increase oil production to make up for his purposeful drop in US production (complete with fist-bump). He made the request at a publicly broadcast meeting. I'll never forget the Saudi Prince's public reply, "I'm not sure what you want from me? We are already producing oil at maximum capacity and doing everything possible to further increase capacity. You have driven the price of oil above $110/barrel. If we aren't already at maximum production, trust me, I will be demanding to know why?!!! You needn't have come all this way to make such a request (with a perplexed look on his face)." Biden looked like a complete retard. It is Biden's purposeful actions to shut down US production (a return of favor to Putin) which allows Putin to fund his war in Ukraine. And it continues to this day. If we want to end the war in Ukraine we need only inform him if he doesn't get the hell out of Ukraine we will open the spigots and drive oil down into the 20$/barrel range. If he does get out we will only drop it down to $30/barrel. Case closed, conflict over.
What should you take from this as you prepare for what is to come? As we speak the cards are already in the process of falling to the table. The Chinese economy is in free fall. They are lashing out like a petulant child. Buyers willing and able to purchase US Treasuries have dropped off dramatically. China has begun to divest themselves of US Treasuries. As if this wasn't enough, Biden has actually accelerated his spending spree (mainly to combat Climate Change?) to the tune of almost $5T in monetized Treasuries each year in office. This will most assuredly be repeated his 4th (and final?) year in office. Biden will likely double an already astounding debt of $20T in just 4 years in office. In other words, these Treasuries are resulting in the immediate printing of dollars. This is being further exacerbated by the debt incurred during previous administrations which is no longer concealed by Chinese hoarding. So both the old and new debt is fully impacting the immediate inflation rate, not over the normal term of Treasury bonds paid back over many years to come. Of course the resulting monetization (printing of dollars) will result in a total of more than 100% inflation. But remember from above China's monetary policy helped US consumers and hurt our labor markets. What is unfolding now is the opposite. Unemployment is low as dollars flood the world economies making US products relatively cheap for foreigners to purchase. Prices for goods in our markets rise. Many available jobs are going unfilled as many have grown accustomed to socialist entitlements. They just live off the government handouts of the wealth earned by their fellow Americans. There are two possible outcomes depending on how the US government chooses to respond. The only method available to the Secretary of the Treasury to combat inflation is to raise the interest rates above the rate of inflation. This would likely mean interest rates well in excess of 20%. The impact to the economy would be quite painful as borrowing would be severely curtailed. Businesses would avoid borrowing for new projects at all costs. Unemployment would be a real likelihood. Or the government might choose to continue spending and print ever increasing sums of money to finance the government with the printer. If this is how they respond you can expect HYPERINFLATION. Exponential rises in the inflation rate to insane levels. In some cases currency valuations can fall 90% in 24 hours. In other words a #1 combo meal at McDonald's which cost $100,000 in the morning will cost $1,000,000 tomorrow morning so you better fill the backseat with cash and eat this morning rather than the pickup bed tomorrow morning.
