The IMF Admits It Was Wrong About Keynesianism

[SeminoleDoug]

I live in Shanghai and have read several books on the Chinese economy (my main area of interest), so I happen to know a thing or two about this topic. You really think the main thing that has helped grow the Chinese middle class is the devaluation of the RMB? That's a very American government type argument. It certainly helped a little, but what grew the Chinese middle class was predominantly extremely low wages, which encouraged private companies to move jobs here in droves. Any idea what the Chinese "middle class" salary is here? If you'll take Chinese wages any day, then you can have the jobs you think you want. But, you won't accept Chinese wages, I promise you.

With regards to your second point about the affordability of living on zero income versus having a job: 3 things. Firstly, how many million Americans have been on unemployment for 99 weeks? Those people still currently had income coming in. Granted, unemployment isn't a lot, but how much do you think these jobs that will SUPPOSEDLY be coming back from China will be paying, anyway? To hammer the point home again, I would really like for you to tell me what you think the average Chinese manufacturing wage is (in dollars or RMB is fine) and how much they'd have to devalue the dollar to make it worth it for manufacturers to bring the jobs back to America. And then think about the kind of inflation you'd have on imported goods if the dollar was devalued by that much.

I'd also support higher gas prices and would love it if the government stopped subsidizing oil companies. The American government starts wars and gives tax credits to energy companies because they know cheaper energy is good for economic activity. Unfortunately, there are also negative consequences to the environment and to the country, in general. It will get better, I think, as the US is forced to allow more drilling domestically and becomes more energy independent (also by using more natural gas). But, when folks are taking your advice, printing more money, and devaluing the dollar, they are destroying the poor and middle classes on some kind of pipe dream that's not based on real numbers.

China did this. Do you know what happened to their middle class when they did this? I'll take that kind of hurt any day.


Thereby creating more jobs...


You mean the ones who didn't have jobs before, but do now?


Please explain the difference between trying to buy a cheap iPad on zero income versus a more expensive one on an actual income, and how this leads to more pain for the formerly jobless and now employed. I'm taking from your argument that you're implying millions of formerly unemployed Americans will be saying, "Damn those expensive imports, I wish I was unemployed again."

I suspect you are underestimating the amount of jobs that will be created because of cheap American exports, the damage this will do to unemployment, and most importantly, the resulting pressure that this will put on wages. You're assuming that wages will stagnate, and they won't. The problem we have right now, because of cheap imports, is that wages are stagnating. That is actually much worse.

You do have one point, though: the primary cause of suffering in America will be the rise in the cost of gasoline. But I for one welcome higher gasoline prices. We're seeing record temperatures, brutal droughts and flooding because of anthropogenic global warming. Cheap gasoline means, by proximate cause, fundamental food shortages. Not the kind of food shortages that come from hyperinflated gasoline/transportation costs, but rather, shortages because actual food production is cut. The former is bad, but the latter is what you want least, and the latter is what cheap gasoline is threatening to cause. Gasoline shortages and high prices forced innovations in gas mileage in the 70s and 80s, and will force America to pursue alternative clean fuels today. We need that kick in the butt. America is addicted to cheap oil and it's killing us much more surely than any national debt ever will.

 

[Fisher]

I think I heard somewhere the average Chinese manufacturing wage is around $200/month US. Regardless, I think China is doing well because China is investing in itself and building the businesses that employ people even when the businesses might not be self-sustaining in the private sector.

 

[SeminoleDoug]

That last part might be China's biggest threat (and there are a few really big ones). Currently, the government here controls the biggest four banks: the Bank of China, ICBC, China Construction Bank, and the Agricultural Bank of China. The government is able to direct the banks to give loans to state-owned enterprises, provincial governments, and other politically favored companies. Like you mentioned, some of these entities are not "self-sustaining." And in fact, NPL's (non-performing loans) are on the rise here in China. That prohibits the banks from lending the money to companies that WOULD be self-sustaining. There are tons of small and medium sized companies here that can not gain access to the capital they need to start and operate their potentially job creating businesses because the banks instead loan it to the previously mentioned entities. Then, not only do the banks fill their balance sheets with underperforming loans and are unable to loan it to companies who need it, those companies often turn to loan sharks, basically, who charge exorbitant rates that sometimes crush these private businesses who would be economically viable with loans at decent rates.

It is very concerning to me the people who believe in the "if you build it, it is good...even if it isn't profitable" philosophy. Ask Spain (and the US for that matter) how that works.

I think I heard somewhere the average Chinese manufacturing wage is around $200/month US. Regardless, I think China is doing well because China is investing in itself and building the businesses that employ people even when the businesses might not be self-sustaining in the private sector.

 

[Zalatix]

I live in Shanghai and have read several books on the Chinese economy (my main area of interest), so I happen to know a thing or two about this topic. You really think the main thing that has helped grow the Chinese middle class is the devaluation of the RMB? That's a very American government type argument. It certainly helped a little, but what grew the Chinese middle class was predominantly extremely low wages, which encouraged private companies to move jobs here in droves. Any idea what the Chinese "middle class" salary is here? If you'll take Chinese wages any day, then you can have the jobs you think you want. But, you won't accept Chinese wages, I promise you.

Wait, you don't think that cheap Chinese wages weren't made dramatically cheaper by the devaluation of the CNY?

As for what I said I'd take, I said I'd take their middle class growth... not their wages. America had a similar growth in their middle class population without Chinese-level living conditions. Our workers actually could support a family on one income, and that means a house and a car. Then globalization came and blocked the American worker out of the equation. Totally excluded Americans from the game.

With regards to your second point about the affordability of living on zero income versus having a job: 3 things. Firstly, how many million Americans have been on unemployment for 99 weeks? Those people still currently had income coming in.

There are a substantial number of Americans who've been unemployed past 99 weeks. The BLS doesn't even know how many there are because they're not counted.

In any case, supporting these unemployed people is unsustainable.

By the way, if you're a young adult and unemployed, you usually don't get unemployment because you usually haven't worked long enough yet.

Granted, unemployment isn't a lot, but how much do you think these jobs that will SUPPOSEDLY be coming back from China will be paying, anyway?

At least the Federal minimum wage of over $7/hour. Which, to answer your question about Chinese wages, is far higher than Chinese wages. So, yes, when those jobs come back, it will be of great benefit to us.

To hammer the point home again, I would really like for you to tell me what you think the average Chinese manufacturing wage is (in dollars or RMB is fine) and how much they'd have to devalue the dollar to make it worth it for manufacturers to bring the jobs back to America. And then think about the kind of inflation you'd have on imported goods if the dollar was devalued by that much.

Urban Chinese households are now at $3,000 a year. $12,000 in Shanghai or Beijing. Which is far more than what you're going to get when your 99 weeks of benefits run out.

I do believe the Yuan is better than 1/10th the US dollar. Last I saw it was 6 Yuan to 1 dollar, and rising. This is important because the news is now abuzz with the fact that companies like Foxconn are moving production to the United States. Why? Because the Yuan and Chinese wages are both rising, independently. My scenario calls for the US dollar to be 10% of its current value. CNY = 1/6 USD, 0.1 * USD means CNY = 10/6 USD. Chinese incomes shoot up to $30,000 USD, or even $120,000 USD. See how that works? Imagine how many manufacturing, service and knowledge industry (think: Biotech outsourcing to India) will come racing back here when everything outside goes up 10 fold.

We ALREADY have Jeffrey Immelt of GE saying that foreign outsourcing is “quickly becoming mostly outdated as a business model for GE Appliances”. If this doesn't make you do a triple take, then you aren't paying attention to the state of economic affairs. Either that, or you're not surprised and you knew this was coming.

Again, imagine how this would be if the US Dollar was 10% of its current value...

And I welcome sky-high import prices. That would literally FORCE import substitution - the production of said goods domestically. This is, in fact, already happening, to a small degree.

I'd also support higher gas prices and would love it if the government stopped subsidizing oil companies. The American government starts wars and gives tax credits to energy companies because they know cheaper energy is good for economic activity. Unfortunately, there are also negative consequences to the environment and to the country, in general. It will get better, I think, as the US is forced to allow more drilling domestically and becomes more energy independent (also by using more natural gas). But, when folks are taking your advice, printing more money, and devaluing the dollar, they are destroying the poor and middle classes on some kind of pipe dream that's not based on real numbers.

As I showed you above, the numbers are quite real. The poor and middle class won't be destroyed because there'll be more jobs and, most importantly, an upward pressure on wages.

Competitive devaluation hasn't destroyed anyone. Hyperinflation can destroy a country, but that is not the same thing as competitive devaluation for the same reason that a race car is not a rocket.

 

[Zalatix]

I think I heard somewhere the average Chinese manufacturing wage is around $200/month US. Regardless, I think China is doing well because China is investing in itself and building the businesses that employ people even when the businesses might not be self-sustaining in the private sector.

China does more than that. They steal foreign companies' intellectual property and have even codified that theft into their trade agreements: "share your IP with our subsidized companies if you want to build anything here". Their tariffs are also not to be ignored.

As for their subsidies, that is REALLY not to be ignored. Their subsidies on their solar companies killed Solyndra in America, AND I know people don't believe China killed Solyndra - but they are also killing Germany's solar industry, too.

 

[Fisher]

China does more than that. They steal foreign companies' intellectual property and have even codified that theft into their trade agreements: "share your IP with our subsidized companies if you want to build anything here". Their tariffs are also not to be ignored.

As for their subsidies, that is REALLY not to be ignored. Their subsidies on their solar companies killed Solyndra in America, AND I know people don't believe China killed Solyndra - but they are also killing Germany's solar industry, too.

Sure, those protectionist tariffs hurt us. It is a shame that the US is too spineless to counter tax their goods. Their IP thefts do not bother me so much really since that is more for their own domestic purposes. I know China has a lot of interest in developing alternative energy products for the US market. Quite frankly, if they do it well and cheap, it may be to our individual benefit since the government seems to only be focused on big business and not end-users thereby insuring that our energy costs continue to skyrocket regardless of what type of energy it is. IP is getting ridiculous anyway with the endless fights between iCrap and everybody else.

 

[SeminoleDoug]

I didn't say that Chinese wages weren't made cheaper at all by the devaluation of the RMB, but even at a more realistic evaluation, Chinese wages are still FAR cheaper than American wages. It's not even close. And so what I am saying is that the majority of the jobs that moved to China would still be there despite past devaluations. In fact, I'm curious what you think the Chinese RMB should be valued at currently. The government widened the band that the RMB trades at several months ago (hence the appreciation you talked about). A few companies have talked about moving a few jobs back to the US, but it's as much for PR reasons as economic ones. Do you have any idea how many jobs that Apple has said it's going to create in the US? How many products? We're talking about a miniscule number of jobs. Most of the manufacturing will move into China's interior, Vietnam, or Myanmar, depending on how the government chooses to deal with ethnic tensions. Very few jobs will return to the US. Trust me, I'm in a position where I can know.

The bottom line is you want Chinese jobs without Chinese wages and that is impossible. Chinese jobs exist because of Chinese wages. Your suggestion is to make USD worth 10% of what it is today? And this will cause the prices of all imported good to rise by 10 times? You think that kind of inflation is going to increase total economic activity? You think when manufacturers import all of the raw materials they need to produce goods and pay 10 times more for it, that is going to benefit the country? You think people making $7 an hour are going to be able to afford the price increases companies have to pass on when the cost of wages increases and raw materials cost as much as ten times more? I can assure you that's not correct. Believe me or not, but your plan would be catastrophic. It's not even worth discussion.

Wait, you don't think that cheap Chinese wages weren't made dramatically cheaper by the devaluation of the CNY?

As for what I said I'd take, I said I'd take their middle class growth... not their wages. America had a similar growth in their middle class population without Chinese-level living conditions. Our workers actually could support a family on one income, and that means a house and a car. Then globalization came and blocked the American worker out of the equation. Totally excluded Americans from the game.


There are a substantial number of Americans who've been unemployed past 99 weeks. The BLS doesn't even know how many there are because they're not counted.

In any case, supporting these unemployed people is unsustainable.

By the way, if you're a young adult and unemployed, you usually don't get unemployment because you usually haven't worked long enough yet.


At least the Federal minimum wage of over $7/hour. Which, to answer your question about Chinese wages, is far higher than Chinese wages. So, yes, when those jobs come back, it will be of great benefit to us.


Urban Chinese households are now at $3,000 a year. $12,000 in Shanghai or Beijing. Which is far more than what you're going to get when your 99 weeks of benefits run out.

I do believe the Yuan is better than 1/10th the US dollar. Last I saw it was 6 Yuan to 1 dollar, and rising. This is important because the news is now abuzz with the fact that companies like Foxconn are moving production to the United States. Why? Because the Yuan and Chinese wages are both rising, independently. My scenario calls for the US dollar to be 10% of its current value. CNY = 1/6 USD, 0.1 * USD means CNY = 10/6 USD. Chinese incomes shoot up to $30,000 USD, or even $120,000 USD. See how that works? Imagine how many manufacturing, service and knowledge industry (think: Biotech outsourcing to India) will come racing back here when everything outside goes up 10 fold.

We ALREADY have Jeffrey Immelt of GE saying that foreign outsourcing is “quickly becoming mostly outdated as a business model for GE Appliances”. If this doesn't make you do a triple take, then you aren't paying attention to the state of economic affairs. Either that, or you're not surprised and you knew this was coming.

Again, imagine how this would be if the US Dollar was 10% of its current value...

And I welcome sky-high import prices. That would literally FORCE import substitution - the production of said goods domestically. This is, in fact, already happening, to a small degree.


As I showed you above, the numbers are quite real. The poor and middle class won't be destroyed because there'll be more jobs and, most importantly, an upward pressure on wages.

Competitive devaluation hasn't destroyed anyone. Hyperinflation can destroy a country, but that is not the same thing as competitive devaluation for the same reason that a race car is not a rocket.

 

[SeminoleDoug]

I agreed with everything you said except about the US being spineless. China somewhat has the US by the balls since they are still the largest foreign holder of US debt. Certainly, any action the Chinese could take (selling massive amounts of Treasuries and forcing yields to spike) would also hurt China, but it would probably hurt the US much more. The two countries have a very weird relationship. Both can hurt each other significantly and both are forced to try and accept the other's transgressions.

Sure, those protectionist tariffs hurt us. It is a shame that the US is too spineless to counter tax their goods. Their IP thefts do not bother me so much really since that is more for their own domestic purposes. I know China has a lot of interest in developing alternative energy products for the US market. Quite frankly, if they do it well and cheap, it may be to our individual benefit since the government seems to only be focused on big business and not end-users thereby insuring that our energy costs continue to skyrocket regardless of what type of energy it is. IP is getting ridiculous anyway with the endless fights between iCrap and everybody else.

 

[Fisher]

I agreed with everything you said except about the US being spineless. China somewhat has the US by the balls since they are still the largest foreign holder of US debt. Certainly, any action the Chinese could take (selling massive amounts of Treasuries and forcing yields to spike) would also hurt China, but it would probably hurt the US much more. The two countries have a very weird relationship. Both can hurt each other significantly and both are forced to try and accept the other's transgressions.

It is complicated. We let them have favorable rates to appease corporate America that thinks we are going to get into that marketplace (primarily cars) or get cheap labor out of it. It is a mirage that is killing american business. Likewise, I believe the zero interest is a trap to keep us in the position we are in. We need to start raising interest rates slowly while we can so we do not have to do it abruptly when it is forced upon us, and it will be forced upon us eventually either way.

 

[SeminoleDoug]

Which makes me really curious what some people think is going to happen when interest rates do rise. You've got a $16.4 trillion debt that is growing by over $1 trillion a year. You generate about $2.3 trillion in total revenues. When interest rates rise and much of the US debt has short term maturities, what do people think is going to happen? To tie it all together, very strange to hear people calling for even more government spending. I don't even think Keynes would have argued for such a thing with 110% debt to GDP ratio and the future cost of social benefits. It's shocking to me.

It is complicated. We let them have favorable rates to appease corporate America that thinks we are going to get into that marketplace (primarily cars) or get cheap labor out of it. It is a mirage that is killing american business. Likewise, I believe the zero interest is a trap to keep us in the position we are in. We need to start raising interest rates slowly while we can so we do not have to do it abruptly when it is forced upon us, and it will be forced upon us eventually either way.

 

[Zalatix]

I didn't say that Chinese wages weren't made cheaper at all by the devaluation of the RMB, but even at a more realistic evaluation, Chinese wages are still FAR cheaper than American wages. It's not even close. And so what I am saying is that the majority of the jobs that moved to China would still be there despite past devaluations. In fact, I'm curious what you think the Chinese RMB should be valued at currently. The government widened the band that the RMB trades at several months ago (hence the appreciation you talked about). A few companies have talked about moving a few jobs back to the US, but it's as much for PR reasons as economic ones. Do you have any idea how many jobs that Apple has said it's going to create in the US? How many products? We're talking about a miniscule number of jobs. Most of the manufacturing will move into China's interior, Vietnam, or Myanmar, depending on how the government chooses to deal with ethnic tensions. Very few jobs will return to the US. Trust me, I'm in a position where I can know.

I just answered you upthread: China's CNY is valued at 1/6 the US dollar. If the US dollar dropped by 90% the CNY would be 10/6 the US dollar. Chinese wages are $3000 a year according to my cite. That means their wages would rise to $30,000. In short, a 90% drop would eliminate China entirely.

The bottom line is you want Chinese jobs without Chinese wages and that is impossible.

Not true at all. We had tons of manufacturing jobs during the 1950s to 1970s without Chinese wages. What you say is impossible has already happened.

Chinese jobs exist because of Chinese wages.

Then explain why there were so many manufacturing jobs in America during the 1950s to 1970s despite our wages being much higher than Chinese wages. We had Americans supporting middle class lifestyles on a single income. Tell us how that compares with China.

Your suggestion is to make USD worth 10% of what it is today? And this will cause the prices of all imported good to rise by 10 times? You think that kind of inflation is going to increase total economic activity? You think when manufacturers import all of the raw materials they need to produce goods and pay 10 times more for it, that is going to benefit the country?

Wait, you think we RAN OUT of raw materials here? What makes you think that?

You think people making $7 an hour are going to be able to afford the price increases companies have to pass on when the cost of wages increases and raw materials cost as much as ten times more? I can assure you that's not correct. Believe me or not, but your plan would be catastrophic. It's not even worth discussion.

First you need to explain how you think we've run out of raw materials in the USA. Second your argument assumes that there won't be upward pressures on wages. Third, you completely ignore the fact that a 10 fold devaluation of the dollar will make American products TEN TIMES cheaper on the global market - creating an explosion in American exports. Do you realize what this will do for job creation?

Most importantly, what you don't realize is that the trade deficits America runs, is naturally devaluing the currency anyway. What you keep saying I shouldn't be wanting, is already happening, slowly. There is no scenario that has the dollar maintaining its value in the face of massive trade deficits. This is not only worthy of discussion, it's something that will happen. Stop offshoring jobs to China or watch the dollar die. There is no option #3.

But wait, there's more. Cheap labor in China is becoming expensive right now. This will also eventually happen to Vietnam, Mexico, Myanmar, and everywhere else that corporations go to search for cheap labor. What will happen when they run out of sources of cheap labor? Wait for it... prices will go up! What then?

And outsourcing American jobs is already catastrophic.

 

[Fisher]

Which makes me really curious what some people think is going to happen when interest rates do rise. You've got a $16.4 trillion debt that is growing by over $1 trillion a year. You generate about $2.3 trillion in total revenues. When interest rates rise and much of the US debt has short term maturities, what do people think is going to happen? To tie it all together, very strange to hear people calling for even more government spending. I don't even think Keynes would have argued for such a thing with 110% debt to GDP ratio and the future cost of social benefits. It's shocking to me.

I think if we start rates up slightly when we don't have to, businesses who have been on the pot will finally poot out some capital investments that will create new jobs. Zero interest is killing the bond market which forces people into the stocks where they are fish in a barrel. Thirty year 2.99% mortgages are going to cause interest rates to inflate even more because they will not support a bank for the next 30 years of business. It is going to be a nasty credit world in about a decade. We need to get a head start on hedging it, but it would be political suicide, thus my earlier use of "spineless".

 

[Zalatix]

I agreed with everything you said except about the US being spineless. China somewhat has the US by the balls since they are still the largest foreign holder of US debt. Certainly, any action the Chinese could take (selling massive amounts of Treasuries and forcing yields to spike) would also hurt China, but it would probably hurt the US much more. The two countries have a very weird relationship. Both can hurt each other significantly and both are forced to try and accept the other's transgressions.

It would hurt China more. They depend on us for exports. If we go under, their unemployment shoots up by a hundred million. Such a move would blast the US dollar to dust - which would hurt the entire world, because the entire world's economic well-being depends upon exports to the US.

The world depends quite dearly on people like you bullying Americans into accepting the offshoring of American jobs.

Unfortunately for you, a rebellion is underway.

You should take that cite very seriously. It points to a major revolution against globalization and its bigotry against American workers.

 

[SeminoleDoug]

First of all, you don't just get to name the value of your currency. It's not like waving a magic wand and your currency devalues by 90%. By what mechanism do you plan on accomplishing your 90% devaluation of currency?

Now I am really curious how old you are. Were you alive in the 1950's or 1960's? Do you know anything about the 1950's or the 1960's? There was this thing that happened in the 1940's called World War 2. In it, Europe and Japan was basically leveled, leaving America as one of the sole countries with the manufacturing know-how that wasn't in ruins. That does a lot to help your manufacturing competitiveness. Furthermore, since you like to talk about China so much, do you know what happened in the 1950's and 1960's in China. Mao Zedong's revolution was completed in 1949. In 1950, he organized collective farms that failed miserably and led to one of the greatest famines in history. In the 1960's, he inflicted the Chinese people with the Cultural Revolution. However, this is not the 1950's and 1960's. 80% - 90% of Chinese people aren't farming on communes and, God willing, there is no Cultural Revolution to worry about. You can't think that America is going to enjoy the same advantages it did in the 1950's and 1960's. China is moving up the value chain and learning how to manufacture more high end goods. And as long as people stick their heads in the sand and think because America did it in the 1950's and 1960's with high wages they can still do it, in today's competitive economy, than America will continue to suffer as it has been.

I also don't know if you have any idea exactly how much raw materials China uses in order to manufacture the world's goods. Or where you think raw materials come from. Not all raw materials are produced within the United States.

I just answered you upthread: China's CNY is valued at 1/6 the US dollar. If the US dollar dropped by 90% the CNY would be 10/6 the US dollar. Chinese wages are $3000 a year according to my cite. That means their wages would rise to $30,000. In short, a 90% drop would eliminate China entirely.


Not true at all. We had tons of manufacturing jobs during the 1950s to 1970s without Chinese wages. What you say is impossible has already happened.


Then explain why there were so many manufacturing jobs in America during the 1950s to 1970s despite our wages being much higher than Chinese wages. We had Americans supporting middle class lifestyles on a single income. Tell us how that compares with China.


Wait, you think we RAN OUT of raw materials here? What makes you think that?


First you need to explain how you think we've run out of raw materials in the USA. Second your argument assumes that there won't be upward pressures on wages. Third, you completely ignore the fact that a 10 fold devaluation of the dollar will make American products TEN TIMES cheaper on the global market - creating an explosion in American exports. Do you realize what this will do for job creation?

Most importantly, what you don't realize is that the trade deficits America runs, is naturally devaluing the currency anyway. What you keep saying I shouldn't be wanting, is already happening, slowly. There is no scenario that has the dollar maintaining its value in the face of massive trade deficits. This is not only worthy of discussion, it's something that will happen. Stop offshoring jobs to China or watch the dollar die. There is no option #3.

But wait, there's more. Cheap labor in China is becoming expensive right now. This will also eventually happen to Vietnam, Mexico, Myanmar, and everywhere else that corporations go to search for cheap labor. What will happen when they run out of sources of cheap labor? Wait for it... prices will go up! What then?

And outsourcing American jobs is already catastrophic.

 

[SeminoleDoug]

I know. I know. Globalization is evil. Socialism is the way to go.

North Korea has proven all of your economic theories produce utopian outcomes...

It would hurt China more. They depend on us for exports. If we go under, their unemployment shoots up by a hundred million. Such a move would blast the US dollar to dust - which would hurt the entire world, because the entire world's economic well-being depends upon exports to the US.

The world depends quite dearly on people like you bullying Americans into accepting the offshoring of American jobs.

Unfortunately for you, a rebellion is underway.

You should take that cite very seriously. It points to a major revolution against globalization and its bigotry against American workers.

 

[Zalatix]

First of all, you don't just get to name the value of your currency. It's not like waving a magic wand and your currency devalues by 90%. By what mechanism do you plan on accomplishing your 90% devaluation of currency?

Good point. We were talking hypotheticals, of course.

Of course, the reality is, if we keep running these big trade deficits, all your screaming about how catastrophic my plan is, will become moot: it will happen anyway. You probably know this already.

Now I am really curious how old you are. Were you alive in the 1950's or 1960's? Do you know anything about the 1950's or the 1960's? There was this thing that happened in the 1940's called World War 2. In it, Europe and Japan was basically leveled, leaving America as one of the sole countries with the manufacturing know-how that wasn't in ruins. That does a lot to help your manufacturing competitiveness.

This has absolutely nothing to do with the fact that TVs bought here, were made here. It also has little to do with the fact that, unlike any of those nations, we're running a monstrous trade deficit. Do you know what a trade deficit is? It's something we have a lot of, and which China usually doesn't have. It means that Americans are being excluded from the global labor force. They're being excluded from jobs producing for America, and especially from jobs producing for anywhere else.

Furthermore, since you like to talk about China so much, do you know what happened in the 1950's and 1960's in China. Mao Zedong's revolution was completed in 1949. In 1950, he organized collective farms that failed miserably and led to one of the greatest famines in history. In the 1960's, he inflicted the Chinese people with the Cultural Revolution. However, this is not the 1950's and 1960's. 80% - 90% of Chinese people aren't farming on communes and, God willing, there is no Cultural Revolution to worry about. You can't think that America is going to enjoy the same advantages it did in the 1950's and 1960's.

I don't care about the "advantages" you think we had. I care about whether the TVs and iPads we buy here, are made here. I care about the fact that American workers are being barred from the global market. This is not sustainable. It will end in catastrophe.

You need to explain why you think we are somehow obligated to run a $250 BILLION non-oil trade deficit. Moreover you need to explain why you think it is catastrophic NOT to run a a $250 BILLION non-oil trade deficit. You're going to need a whole lot of pixie dust and abacadabra to handwave that story into the realm of credibility. Fortunately, America is long past being duped into buying whatever handwaving you use to justify that. I'm sure you read my cite, yes?

China is moving up the value chain and learning how to manufacture more high end goods. And as long as people stick their heads in the sand and think because America did it in the 1950's and 1960's with high wages they can still do it, in today's competitive economy, than America will continue to suffer as it has been.

Okay, good for China. They can manufacture high end goods for their market. I am concerned with making it so that American workers produce high end goods for America.

You seem to believe that if American workers produce those goods in America, there will be some sort of catastrophe. Do you even realize what you are saying?

Do you even realize that trade deficits naturally devalue the US dollar?

I also don't know if you have any idea exactly how much raw materials China uses in order to manufacture the world's goods. Or where you think raw materials come from. Not all raw materials are produced within the United States.

Not all, but not none, either. China has already been playing with denying us some of those raw materials. Your scenario is highly exaggerated.

 

[Zalatix]

I know. I know. Globalization is evil. Socialism is the way to go.

North Korea has proven all of your economic theories produce utopian outcomes...

Oh no, let's go with your plan, put all of America out of work and send all the jobs to China or Vietnam.

Question for you... who in America will buy Chinese iPads when they're all out of work? Who'll pay for all that unemployment?

 

[SeminoleDoug]

You act like somebody is holding a gun to the heads of Americans and forcing them to buy goods made overseas. The one thing you simply can not seem to fathom is people buy Chinese goods because Chinese wages are cheaper. If people are willing to accept far smaller wages, than they can win those jobs back from overseas. Otherwise, you can only try to force companies to manufacture here at higher costs and businesses will correspondingly charge a lot more for goods. The free market is obviously something you don't want. As I mentioned, North Korea may be just the place for you. They don't like the free market either.

Good point. We were talking hypotheticals, of course.

Of course, the reality is, if we keep running these big trade deficits, all your screaming about how catastrophic my plan is, will become moot: it will happen anyway. You probably know this already.


This has absolutely nothing to do with the fact that TVs bought here, were made here. It also has little to do with the fact that, unlike any of those nations, we're running a monstrous trade deficit. Do you know what a trade deficit is? It's something we have a lot of, and which China usually doesn't have. It means that Americans are being excluded from the global labor force. They're being excluded from jobs producing for America, and especially from jobs producing for anywhere else.


I don't care about the "advantages" you think we had. I care about whether the TVs and iPads we buy here, are made here. I care about the fact that American workers are being barred from the global market. This is not sustainable. It will end in catastrophe.

You need to explain why you think we are somehow obligated to run a $250 BILLION non-oil trade deficit. Moreover you need to explain why you think it is catastrophic NOT to run a a $250 BILLION non-oil trade deficit. You're going to need a whole lot of pixie dust and abacadabra to handwave that story into the realm of credibility. Fortunately, America is long past being duped into buying whatever handwaving you use to justify that. I'm sure you read my cite, yes?


Okay, good for China. They can manufacture high end goods for their market. I am concerned with making it so that American workers produce high end goods for America.

You seem to believe that if American workers produce those goods in America, there will be some sort of catastrophe. Do you even realize what you are saying?

Do you even realize that trade deficits naturally devalue the US dollar?


Not all, but not none, either. China has already been playing with denying us some of those raw materials. Your scenario is highly exaggerated.

 

[Zalatix]

You act like somebody is holding a gun to the heads of Americans and forcing them to buy goods made overseas.

It is like a drug addiction. One from which America is sobering up a lot faster than you realize, if you really believe Made in the USA isn't enjoying a big resurgence. Note: remember what you said about PR? A lot of people don't even realize how much is made overseas. You obviously haven't looked at the news and seen how pissed off people are getting. This is not old news. America used to not care, cheap goods used to be king. This. Is. Changing.

You obviously did not read my cite which shows that opposing offshoring is an I WIN!!! button for politicians. Times are changing.

The one thing you simply can not seem to fathom is people buy Chinese goods because Chinese wages are cheaper.

And what you cannot fathom is that this is devaluing the dollar - making it a certainty that no import, anywhere, will remain cheap.

If people are willing to accept far smaller wages, than they can win those jobs back from overseas. Otherwise, you can only try to force companies to manufacture here at higher costs and businesses will correspondingly charge a lot more for goods.

And wages will also go up.

The free market is obviously something you don't want. As I mentioned, North Korea may be just the place for you. They don't like the free market either.

You don't want Americans to have any jobs.

China, considering their tariffs and currency manipulation, doesn't want the free market. Neither does Germany, which has a lot of de facto protectionist measures. Neither does Obama, who has slapped tariffs on China's solar products. Your "oppose offshoring = North Korea" tantrum does not hold water.

And again, $250B non-oil trade deficits devalue the dollar. This is a fact of economics. You need to come to grips with this.

You need to explain why you think we are somehow obligated to run a $250 BILLION non-oil trade deficit. Moreover you need to explain why you think it is catastrophic NOT to run a a $250 BILLION non-oil trade deficit. You're going to need a whole lot of pixie dust and abacadabra to handwave that story into the realm of credibility.

 

[SeminoleDoug]

Time will tell. If people were really pissed off about it, we should see stronger GDP growth and huge jobs growth. But that's not what we see. GDP growth slowed to probably sub one percent in the 4th quarter and job growth has been very slow. Also, if you looks at the jobs being created, they aren't primarily in manufacturing. What you want to see is not what is actually happening. The facts don't support your theory.

I never said we are obligated to run a deficit. That is merely the result of the facts that US labor is expensive and it's cheaper to buy things overseas. Once again, nobody is making them do so. People are choosing to buy overseas and they will continue to do so. Time will prove me correct.

And I don't know what your obsession with the words "pixie dust" "abracadabra" and "hand wave" are. Maybe you are a witch for a living. That would explain a lot of your economic thinking. But you should come up with some new lines.

It is like a drug addiction. One from which America is sobering up a lot faster than you realize, if you really believe Made in the USA isn't enjoying a big resurgence. Note: remember what you said about PR? A lot of people don't even realize how much is made overseas. You obviously haven't looked at the news and seen how pissed off people are getting. This is not old news. America used to not care, cheap goods used to be king. This. Is. Changing.

You obviously did not read my cite which shows that opposing offshoring is an I WIN!!! button for politicians. Times are changing.


And what you cannot fathom is that this is devaluing the dollar - making it a certainty that no import, anywhere, will remain cheap.


And wages will also go up.


You don't want Americans to have any jobs.

China, considering their tariffs and currency manipulation, doesn't want the free market. Neither does Germany, which has a lot of de facto protectionist measures. Neither does Obama, who has slapped tariffs on China's solar products. Your "oppose offshoring = North Korea" tantrum does not hold water.

And again, $250B non-oil trade deficits devalue the dollar. This is a fact of economics. You need to come to grips with this.

You need to explain why you think we are somehow obligated to run a $250 BILLION non-oil trade deficit. Moreover you need to explain why you think it is catastrophic NOT to run a a $250 BILLION non-oil trade deficit. You're going to need a whole lot of pixie dust and abacadabra to handwave that story into the realm of credibility.

 

[Zalatix]

Time will tell. If people were really pissed off about it, we should see stronger GDP growth and huge jobs growth.

That'll happen when the politicians look at the election data and realize how easy it is to win election by taking a reformist stance on globalization.

But that's not what we see. GDP growth slowed to probably sub one percent in the 4th quarter and job growth has been very slow. Also, if you looks at the jobs being created, they aren't primarily in manufacturing. What you want to see is not what is actually happening. The facts don't support your theory.

Nobody said job growth is primarily in manufacturing. What I said is they're coming back, and they are. They aren't coming back fast enough to reduce our trade deficit to zero... hence the slow job growth.

I never said we are obligated to run a deficit. That is merely the result of the facts that US labor is expensive and it's cheaper to buy things overseas. Once again, nobody is making them do so. People are choosing to buy overseas and they will continue to do so. Time will prove me correct.

Once again you fail to understand that people won't even be able to buy overseas over time because the dollar is being devalued by our trade deficits.

And I don't know what your obsession with the words "pixie dust" "abracadabra" and "hand wave" are. Maybe you are a witch for a living. That would explain a lot of your economic thinking. But you should come up with some new lines.

Hey, it got you to finally address the issue of your belief that huge trade deficits are some kind of ordained natural order of things. Your denial-of-reality based approach to economics continues to blind you to the fact that these trade deficits are devaluing the dollar and will eventually make imports too expensive.

We can erect trade barriers to lower the trade deficit now or we can let it destroy the dollar and destroy offshoring later. There is no option #3 here. America needs to choose.

Monster trade deficits kill currencies.

 

[Zalatix]

Seminoledoug you might not want to consider continuing to make a fool of yourself. Even the World Bank is warning the world to stop relying on outsourcing American jobs. We're running out of jobs to give. You should seriously consider this instead of clinging to your "trade deficits can go on forever" fantasies.

World's big 'wanted' sign: 600 million jobs - CSMonitor.com

The World Bank, too, sees a need for many countries to avoid the model of export-led growth that has long relied heavily on wealthy consumers in Europe and the United States. A slowdown in richer nations means poorer nations must look more to their own markets or neighboring countries.

 

[Deuce]

Yeah, but they're on the hook for it, and that credit can eventually be taken away from them, so that they can't spend more than they have.

Obama the Jerk and his cohorts don't have that roadblock. They can just keep spending and spe..err...buying and buying more votes.

Ohh, so you're suggesting that the US Federal debt is not comparable to a typical household debt? That such comparisons are invalid? Perhaps because a typical household doesn't owe most of its debt to itself, or to its family members? And because a typical household cannot print the currency in which their debt is owed? And because a typical household cannot borrow vast sums of money at rates less than inflation? (effectively a negative interest rate) And maybe because US Government spending is not really comparable to credit card debt spent on frivolous electronics and toys, but rather is closer to investment like student loans? (because we build a highway in order to promote the economic activity that highway allows for)

Is that what you mean?

Despite this supposedly-catastrophic fiscal situation we're in, the US Treasury Bond is still considered the single safest investment on the planet. So safe that people are literally willing to pay us to hold onto their money for a while.

And since when is the US Government not "on the hook" for its debt? It's literally unconstitutional for us to default.

I should also point out that our debt is not something that other nations can suddenly decide to collect on. Treasury bonds are fixed-term.

 

[imagep]

I say this, I promise you, not in some snide way like you angered me with what you said. Not at all. You made a rational argument. But I can honestly say it terrifies me the way your side thinks. Your case for racing to devalue your currency in order to increase exports is exactly what is happening in the world. What you fail to acknowledge, or possibly realize, is that while exports will become cheaper (a good thing), imports will become more expensive. It will increase jobs, but also increase prices. And many people at the bottom will suffer the most. Because I guarantee you the increase in prices (as a result of cheap foreign goods not being cheap anymore due to the devaluation of the dollar that you seem to be promoting) will FAR exceed any corresponding increase in wages. This is stealing from those at the bottom. If prices increase faster than wages, you can effectively buy less.

People at the bottom spend a disproportionate amount of their income on things that are produced in the USA, like housing and food. So inflation of foreign made items doesn't effect them as much as the upper middle class and rich.

Also, while it sucks that imports go up when we have a weak dollar, it's great that consumers tend to purchase more US goods as alternatives, creating more jobs in the US. Without a job, it really doesn't matter how much something cost, you can't afford it.

Also, since a large portion of the cost of foreign made products is the distribution of them (advertising, overhead and profit of retailers), any inflation due to higher cost foreign goods is actually much less than you would expect. Like lets say that a foreign widget cost 50¢ and retails for $1. If the foreign widget goes up 2% in cost, that's a 1¢/widget increase to the retailer and the consumer, representing just 1% inflation to the consumer.

 

[SeminoleDoug]

I would appreciate it if you wouldn't use terms like fool. If you do, I will continue to refrain from calling you what you are acting like, which is a much worse word than fool. I'm sorry that you think the US can wave a magic wand, devalue their currency by 90%, and that everything will be better. Because it's simply ridiculous. It ignores the fact that other countries will consider simply devaluing their currencies as well, like they are doing now. You don't seem understand the methods by which nations debase their currencies or the concepts of being overleveraged.

You act like somebody is forcing Americans to outsource jobs overseas or to buy goods from overseas. You seem to have no understanding of the free market whatsoever, why companies outsource jobs, or why trade deficits exist. You seem to want an authoritarian state where the government determines how much money is worth, where companies are allowed to manufacture products, and which products people are allowed to buy. And that is a world that nobody, including North Koreans, want to live in.

Seminoledoug you might not want to consider continuing to make a fool of yourself. Even the World Bank is warning the world to stop relying on outsourcing American jobs. We're running out of jobs to give. You should seriously consider this instead of clinging to your "trade deficits can go on forever" fantasies.

World's big 'wanted' sign: 600 million jobs - CSMonitor.com