United States Economy

[herme3]

I'm not an expert on the economy, but I've heard from many sources that the United States economy could be heading in the wrong direction. In the US, we import a much greater value of goods and services than we can export. The latest statistics from the US Census Bureau show that the US economy had a total international trade deficit of $68 billion in the month of July 2006, and that number is increasing each month.

 

You can visit http://www.census.gov/foreign-trade/balance/ to see the value of goods that the United States is trading with each country. The US used to have profitable trade with other developed nations, such as the UK. However, now it seems that the US is losing money when trading with both developed and developing countries.

 

Just a few years ago, it was not too harmful to have a trade deficit of goods in the United States. While they lost money in trading goods, the US profited from trading services and technology. For example, China manufactured goods such as clothing and toys, but they bought machines and computers from the United States or other developed nations. Now, that has started to change and China is starting to manufacture more advanced technology items.

 

This is a major change that I have noticed myself. At the place I work at, they have a large variety of computers made by different companies. Most of the computers that are over three years old say "Made in USA". Most of the newer computers say "Made in China". Even most of the chips inside the computers are now manufactured in China. Recent statistics on several web sites prove the observations I have made. A major category of trade that was once profitable to the US is now a category where the US is losing money.

 

At the moment, this international trade deficit appears to be helping US citizens. As more goods are manufactured in developing nations, the prices of products continue to decrease. However, the economy as a whole is constantly losing money at an increasing rate. If my calculations are correct, the US economy lost over $25,000 a second in the month of June 2006. I'm sure that number is even higher today. How long can the US continue to lose money before the economy begins to have problems? Already, high-paying technology jobs are being lost to outsourcing. Do you believe this could eventually cause the US economy to crash?

[bascule]

Analyzing the trade deficit from a layman's perspective isn't generally a wise thing to do, because chances are it doesn't mean what you think it means. A negative trade balance can be a good thing (the US has had a negative trade balance for years and years)

 

If you want a more pressing issue in the US economy, it's the housing bubble and Adjustable Rate Mortgages. We're going to see record foreclosures followed by massive property devaluation as the market is swamped with foreclosed homes.

 

This will decimate bankers, who will be forced to sell all the homes they foreclosed on well beneath the original purchase price. Banks are going to lose a lot of money on this. Homeowners will be without homes.

 

Fortunately, I live in a town which instituted a moratorium on new construction/subdivisions/building permits (with lots of exceptions), but in general we have artifically inflated property values thanks to this measure. The result is a greenbelt of open space around the city, and some of the highest density and property valuations in the state (only Aspen is higher)

 

Oh, and I sure as hell didn't get an adjustable rate mortgage.

[herme3]

Analyzing the trade deficit from a layman's perspective isn't generally a wise thing to do, because chances are it doesn't mean what you think it means. A negative trade balance can be a good thing (the US has had a negative trade balance for years and years)

 

Actually, a teacher at my college was talking about this subject. He explained that a negative trade balance for goods was not harming the US before because it had a positive trade balance for services and technology. Recently, the US has had a negative trade balance for both goods and services. Therefore, the US is spending more money than it is making. In each second, the US is losing over $25,000 more than it is making. That's about $1.5 million every minute. Won't the money eventually be depleted?

[ecoli]

In other words, Herme3, we don't necesarily have to export goods, but we still have export knowledge. (ie, sci-tech) Which, we are doing less and less successfully.

[In My Memory]

Herme3,

 

Keep in mind, a trade deficit doesnt mean we've lost money per se. It just means we import more than we export. We make a profit because we mark up the retail price on imported goods. Think about it like this:if we import 1000 miniskirts at 10 cents a skirt without ever trading anything in return, but resell all of the skirts for an average of 20 dollars a piece, our trade deficit is -100 but our gross profit is 20000 (net profit = 19900), so we havent actually lost money.

 

It would be nice if we exported more goods, but pesky human rights groups are always shutting down our sweatshops, so our goods are just to expensive for anyone to buy.

[herme3]

Keep in mind, a trade deficit doesnt mean we've lost money per se. It just means we import more than we export. We make a profit because we mark up the retail price on imported goods. Think about it like this:if we import 1000 miniskirts at 10 cents a skirt without ever trading anything in return, but resell all of the skirts for an average of 20 dollars a piece, our trade deficit is -100 but our gross profit is 20000 (net profit = 19900), so we havent actually lost money.

 

When we mark up the retail prices, it only circulates the money already in the economy. The products are usually sold to other Americans, not people in other countries. Money is still being lost from our own economy, and going to the economies of other countries. It would seem healthy if the amount of money going out equals the money coming in. However, the economy itself is losing more money than it is making.

[bascule]

When we mark up the retail prices, it only circulates the money already in the economy. The products are usually sold to other Americans, not people in other countries. Money is still being lost from our own economy, and going to the economies of other countries. It would seem healthy if the amount of money going out equals the money coming in. However, the economy itself is losing more money than it is making.

 

herme3, the US has long been something of a hub of the world's economy. We create so much wealth using such a small amount of material we have (until this century) managed to maintain a growing economy despite a negative trade balance. The dollar continued to grow in value as we used it to purchase goods worldwide.

 

Another way to look at IMM's example is the importation of raw material which is used to produce finished goods which are resold domestically. This results in a net increase of wealth for the country, despite a negative trade balance.

 

The negative trade balance has been amplified by the Bush's administration's massive foreign borrowing and rampant T-bills. This has diluted the value of the dollar, meaning it takes more dollars to import the same amount of goods. Where 1 Euro used to be worth $0.80, now $1 is worth 0.80 Euro. While this is reflected in a growing trade deficit in terms of a dollar valuation, the real culprit is a weak dollar.

[john5746]

http://www.ngmti.org/

 

 

IMO, I think the loss of manufacturing will result in the erosion of the middle class. We are exporting raw goods to China, and they add value to these resources to sell back to us. Since some of this is done through American corporations, stock holders gain wealth, but everyone else loses. Eventually, the middle class will not be able to afford the goods and services and there goes the ballgame.

[herme3]

IMO, I think the loss of manufacturing will result in the erosion of the middle class. We are exporting raw goods to China, and they add value to these resources to sell back to us. Since some of this is done through American corporations, stock holders gain wealth, but everyone else loses. Eventually, the middle class will not be able to afford the goods and services and there goes the ballgame.

 

Will the loss of manufacturing really destroy the middle class? The middle class is no longer made of almost all blue-collar workers. Most of the younger people I know who are "middle class" have received or are in the process of receiving a college education. Therefore, they will be able to work in technical jobs above simple manufacturing.

 

The problem is that China is also becoming more technical. As their economy grows, their own citizens will start taking technical jobs. Lenovo, a Chinese company, has already taken over IBM's PCs. China isn't simply manufacturing computers for US companies anymore. They are starting to design, manufacture, and sell the computers themselves. Eventually, won't technical jobs in the US also be lost to China?

 

If China becomes as technical as the US, I can see problems forming with the global economy. In the US, we seem to be unable to support our current lifestyle. We need the cheap labor in developing countries to manufacture the products we design. When China starts designing the products, where will they find enough cheap labor? If their billions of citizens take white-collar jobs, where could they find the labor to support all of them?

 

In other words, if the US needs China to manufacture goods, who will manufacture goods for China when they become a developed country?

[Pangloss]

I still think the single biggest threat to the American worker is personal debt. And for that they have absolutely nobody to blame but themselves. The mass media throw straw men out like leaves in the Fall, telling us all about Jane Doe, a single mom with three kids who "has to work in order to keep her family fed" (but who in reality also happens to have a late-model automobile, a recently-purchased computer, digital cable and high speed internet, and an X-Box 360... you know... "for the kids").

[woelen]

I think the entire Western world will have to step back quite a lot in material welfare. Till very recent times, the growth of Western economies and material welfare was at the cost of the rest of the world. We took resources from all over the world and added value in our own countries. The people in the other countries, however, did not gain anything from this. The big winners were the companies taking away the resources and of course also all other people, adding value to these raw resources.

 

Now we see a development that people in other parts of the world also can do the adding of value. There is less work for people in the USA, West-Europe and Canada. In the Netherlands, this effect can be seen already. Also highly educated people loose their jobs and find no similar job. Many people work at a lower level than they used to do, and also earn less money. Also, people from Eastern Europe (Poland, Czech republic, and since a short time also people from Romania) are coming here to do all kinds of jobs and not only the lowest level jobs. They are not paid as well as their Dutch collegues, but do the same work at the same quality. Dutch workers loose jobs due to this, because they are more expensive.

 

Nowadays, still Western companies do the adding of value, but it is done more and more in other parts of the world. We all see the outsourcing effect in IT-business, but also in chemistry in the manufacture of refined specialty products. The next step will be that 3th-world companies will take over this business and that countries do not sell their resources anymore to Western companies for a bargain, but they can use their resources on their own in their own adding of value process. They then will export the refined/added value products.

 

So, I think that the average welfare will not change over the world, but that it will be divided more evenly. I personally think it is not a bad development. Of course it hurts if you cannot afford a big MPV anymore and have to take a smaller car, or have to go out less frequently, but in the long run we will all benefit. We still can afford a car and still can go out, but we have to work a little harder for it and we have to step back a bit.

[ParanoiA]

http://www.ngmti.org/

 

 

IMO, I think the loss of manufacturing will result in the erosion of the middle class. We are exporting raw goods to China, and they add value to these resources to sell back to us. Since some of this is done through American corporations, stock holders gain wealth, but everyone else loses. Eventually, the middle class will not be able to afford the goods and services and there goes the ballgame.

 

So, my question is: Will the stock holders, corporations - the wealthy - stop this outsourcing methodology before it's too late? Or, will something else happen to balance it out?

 

This has long been a concern of mine. Being in the CWA union, we are seeing more and more of our jobs getting outsourced. Some are coming back, due to the language barrier, but most are never to be returned.

[ParanoiA]

I still think the single biggest threat to the American worker is personal debt. And for that they have absolutely nobody to blame but themselves. The mass media throw straw men out like leaves in the Fall, telling us all about Jane Doe, a single mom with three kids who "has to work in order to keep her family fed" (but who in reality also happens to have a late-model automobile, a recently-purchased computer, digital cable and high speed internet, and an X-Box 360... you know... "for the kids").

 

Yes, a "late-model" automobile since dependability becomes exponentially more important when you have no other help or resources but yourself. I don't know many single moms who have the time or knowledge to crawl under an early-model chevy and replace something every couple of weeks.

 

A recently purchased computer and digital cable because it would be nice to wind down 14 hour days with a couple of hours of TV before going to bed to start all over again the next day. When you don't have a spouse to help, your job doubles. Or are you expecting an already over-worked mother to do without probably the only "escape" she has? Or should she go get a crack habit and drink her miserable life away like so many others do?

 

I'm a middle class parent, happily married with a pretty good job. And I still can't hardly make ends meet. I still have to tell my kids "no" ten times to every one "yes". I can only imagine how much harder it is for a single mom to do all of this. Even less money and less resources and less sympathy from a self-righteous judgmental society. Meanwhile, she's the one who has to look at her children and tell them "no" over and over again.

 

Eventually, you have to put the future ahead of the present if you're going to live a decent life. You go into debt and do your best to make your kids happy, and try not to let it get out of control.

 

I have a lot of sympathy for single moms, and a lot of resentment for jerk off dead beat punk men that run out on their responsibilities. As a man, I'm disgusted by this reputation. Any man that pawns off his reponsibilities to a woman, isn't a man in my book.

 

Sorry, pangloss. I guess I got off on a rant there.

[CPL.Luke]

Part of the prolem with american det is the cost of education in the US. I know that personally 4-5 years from now I'm likely to hae anywhere from 50-100 thousand dollars in debt, just from the tuition.

 

In the end the debt is worth it IMO because a good school thats well connected to your desired field can do wonders for getting you in the door, but the cost of that schooling is still going to make it very hard for me to go and get a car, a house, or anything else that would require a loan. And you can't blame someone for personal debt if it went into their education, there just isn't anyway around that.

[Pangloss]

No apology necessary, and I can't imagine anyone wouldn't be sympathetic to the circumstances of parents these days. But in a harsh and unfortunate way, this is exactly what I was talking about.

 

In my view these are all these excuses for keeping up with the Joneses:

 

Yes, a "late-model" automobile since dependability becomes exponentially more important when you have no other help or resources but yourself. I don't know many single moms who have the time or knowledge to crawl under an early-model chevy and replace something every couple of weeks.

 

Many older cars have outstanding servicability. People used to know this, but more and more people seem to have forgotten it, especially with all those shiney new cars coming out all the time. You don't have to "crawl under an early-model chevy and replace something every couple of weeks". And even if you go with a newer car, you don't need a Lexus when a Toyota will do. That in-dash CD changer is a luxury, not a necessity. You don't need a navigation system, just plan your route ahead of time on Mapquest and print out those directions. 30 cents beat $3,000 any day.

 

That's the kind of thing I'm talking about. People buy stuff they don't need because they don't have to pay for it up front -- it's set up for them in nice, easy, monthly installments. And if the payment they're saddled with as they walk out the door is much higher than they anticipated (and budgeted for) walking in, well, that must be because cars are "just too expensive these days", right?

 

 

A recently purchased computer and digital cable because it would be nice to wind down 14 hour days with a couple of hours of TV before going to bed to start all over again the next day.

 

Books are great for that. Cheap too.

 

 

When you don't have a spouse to help, your job doubles. Or are you expecting an already over-worked mother to do without probably the only "escape" she has? Or should she go get a crack habit and drink her miserable life away like so many others do?

 

Life sucks sometimes. You know what doesn't fix it, but instead only makes it worse? Spending more money than you make.

 

 

I'm a middle class parent, happily married with a pretty good job. And I still can't hardly make ends meet. I still have to tell my kids "no" ten times to every one "yes". I can only imagine how much harder it is for a single mom to do all of this. Even less money and less resources and less sympathy from a self-righteous judgmental society. Meanwhile, she's the one who has to look at her children and tell them "no" over and over again.

 

I'm not sure I get your point here. Are you saying that it's better to say "yes" to them?

 

If this is about getting society to change, we'd perhaps agree somewhat there. It has gotten crazy materialistic, as incomes and spending continue to rise. But society always has uncontrollable elements that make parenting difficult. You have to stay on top of it. The parent decides, not society. If they don't like it, tough noogies.

 

I would very much like to see society become more supportive of parents on many levels. It's outrageous the way people are ostracized for not spending ridiculous amounts of money on their children. If I were a parent I would be a "no" parent", and laughing in the face of any parent who disagreed with me. But I guess not everyone can do that sort of thing. Oh well, I digress.

 

 

Eventually, you have to put the future ahead of the present if you're going to live a decent life. You go into debt and do your best to make your kids happy, and try not to let it get out of control.

 

I don't really agree with that second premise, but I'm sure the idea of putting your children first is a common theme amongst parents. I just think they need to put more thought into whether going into debt is actually an example of "putting your child first", or if it is instead an example of "teaching him or her the wrong lesson" and "rewarding their bad behavior". Or to take an example from above, "getting them out of your hair" (because you just got home from a 14-hour day).

 

 

I have a lot of sympathy for single moms, and a lot of resentment for jerk off dead beat punk men that run out on their responsibilities. As a man, I'm disgusted by this reputation. Any man that pawns off his reponsibilities to a woman, isn't a man in my book.

 

Yeah I think we're on the same page there.

 

 

Sorry, pangloss. I guess I got off on a rant there.

 

Again no problem at all, but I don't think you've established here that going into debt is necessary. You're welcome to take another shot at it. I don't pretend to understand the trevails of parenting, so I'm endeavoring to keep an open mind about it.

[Heretic]

I can't comment on you economy persay... but I can say that the strength of the US dollar is beginning to affect things here in Canada. The weaker your dollar gets or the stronger ours becomes the worse it is for our economy.

 

We need tourisim from the states and more importantly we need you to outsource your labor to us and not India. The stronger your economy the stronger ours becomes. However if we overtake your dollar our situation up here will become progressively worse.

[ParanoiA]

Well, I agree that virtually none of this is necessary debt. You are right. But it's shortsighted to judge someone so harshly when they have mouths to feed and no help with it.

 

Everyone needs downtime. It isn't healthy not to. I can't blame a mom for splurging the first chance she gets to get digital cable. A small bit of trivial pleasure compared to long, drawn out - not to mention thankless - workdays.

 

And as a parent, it is absolutely tough to say no to your kids under some circumstances. For instance...you finally get little johnny to bring his grades up, after some rough disciplinary trials. His behavior and school commitment is finally looking up and he's doing the right thing. Now he's asking for an X-box. You've spent months trying to convince this kid that doing good in school and good behavior will earn him more priveledges. Only he still has to stay home till you get there because of his age, and he already has TV. All of his friends have an X-box and he's been so good...

 

And when you see how easy it is for kids to go from doing great to doing horrible, you begin to fear every moment like this. If I say "no", will he think he did all of this for nothing? If I say "yes" will he think that everytime he does good I should buy him something?

 

Kids aren't like adults, they don't see any wisdom at all in school work. Zero. Notta. Nothing.

 

Anyway, I'm just rambling on and on here. My main point isn't that you're wrong - because you're right. It's just not the blatant immaturity and selfishness that you're implying. It's deeper than that. At least with most people, I think it's deeper than that.

[herme3]

So, I think that the average welfare will not change over the world, but that it will be divided more evenly. I personally think it is not a bad development. Of course it hurts if you cannot afford a big MPV anymore and have to take a smaller car, or have to go out less frequently, but in the long run we will all benefit. We still can afford a car and still can go out, but we have to work a little harder for it and we have to step back a bit.

 

I agree with everything you said. However, I'm not sure if there are enough remaining resources to give people in developing countries a lifestyle even close to what we have lived. I believe a lot of the world's resources have been consumed during the period of luxury in the western world. Most oil experts believe the western world has already consumed over half of the world's oil. Large amounts of other resources have also been consumed. Therefore, there will be fewer resources for everyone to share if the world's economies do balance out.

 

This has long been a concern of mine. Being in the CWA union, we are seeing more and more of our jobs getting outsourced. Some are coming back, due to the language barrier, but most are never to be returned.

 

I know exactly what you are talking about. Around ten years ago, two large office buildings were built near where I live. The buildings were owned by a major credit card company. I remember the newspaper talking about the large number of local jobs the office buildings would create. About five years later, both office buildings closed because the credit card company outsourced all of those jobs to India.

[john5746]

Will the loss of manufacturing really destroy the middle class? The middle class is no longer made of almost all blue-collar workers. Most of the younger people I know who are "middle class" have received or are in the process of receiving a college education. Therefore, they will be able to work in technical jobs above simple manufacturing.

 

We still need manufacturing though. It may be highly automated, with educated people running the machines, etc. I don't think we can just count each other's money or heal each other and expect GDP to increase.

 

In other words, if the US needs China to manufacture goods, who will manufacture goods for China when they become a developed country?

 

Europe and the US?

[CPL.Luke]

also consider that all of the american companies that are outsourcing their labor to china are selling the products made in china to other countries besides the US, so even though the US's product export to import ratio may decrease the actual amount of money coming across our border increases.

 

For example consider the case where an american company uses a factory in china to produce a million cars, and they sell those cars in china. So the company is going to get the profits and the manufacturing costs sent back to them in the US, the US economy got money even though it didnt export any goods.

 

a perfect example of this would be VolksWagon. VW makes most of its cars in mexico now and they ship maybe 3/10 ths of those cars back to Germany, which has the effect of pumping money out of the German economy, but then VW sells the rest of those cars to the US, mexico and other countries aroud the world, so really the German economy GAINED money because their getting both the manufacturing cost and the profits from anouther economy.

 

even further an economy doesn't just squeak by with outsourcing, it benefits. Outsourcing increases profit margins, and allow for more product to be produced, so outsourcing allows a company to to produce more and make more money off what it produces, and then it also allows the company to reach a larger untapped market overseas with fewer transportation costs.

 

Leading those companies to bring more money back into their home economy. which is then going to be respent on gods and services inside of the home economy.

 

The only problem with this is if a company starts moving its executives back overseas as well, then more of the profits get spent overseas and it sucks money out of the economy.

 

but I think at that point the entire thing gets so hopelessly complex that there almost ceases to be a point in trying to describe economic borders, the entire process is increasing the gross GNP of the world, which ultimately benefits everyone even if it disproportionatly benefits some groups first.

[herme3]

Here's a recent news article about this subject:

 

http://money.cnn.com/2006/10/12/news/economy/trade/index.htm?postversion=2006101212