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So much for rising prosperity as seen in the eyes of fresh whole milk. That party ended several decades ago.
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Et tu, manufacturing? Then fall, Caesar! Some to the common pulpits and cry out “Liberty, freedom, and enfranchisement!”
Al Gore on Free Trade
With one third of America’s growth due to exports in the past six years, and export-related jobs paying 12-18% more than other jobs, Gore has fought for free and fair trade to improve the lives and livelihoods of American families.
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In the fall of 1993 the White House faced heavy opposition to NAFTA from labor and House Democrats. The opposition said the accord would accelerate the exodus of high-paying manufacturing jobs across the border. That point was made most vividly by Ross Perot, who predicted that it would produce a “giant sucking sound” made by the companies headed for Mexico.
NAFTA's effect on United States employment
According to the Economic Policy Institute’s study, 61% of the net job losses due to trade with Mexico under NAFTA, or 415,000 jobs, were relatively high paying manufacturing jobs. Certain states with heavy emphasis on manufacturing industries like Michigan, Ohio, Pennsylvania, Indiana, and California were significantly affected by these job losses.
As I mentioned in the previous thread, I don't have a problem with $300 xboxes -- I have a problem with the $30B/month trade deficit that is coming with it.
ReplyDeleteOn a wealth basis, we all benefit from a falling cost of production -- that's what the Jetsons Economy was all about -- less labor collectively spent on life's necessities means more hours of the day available for self-development and screwing around.
However, trade that comes with asymmetrical deficit is not completed until the money lost from the debtor's economy returns. It's kinda like that quantum-level stuff how two virtual particles appear, run around, and meet again to collapse to nothingness again.
Last year we paid ~$300B more for China-made stuff than we gave them in return. Just in sovereign debt alone we owe over $5T, $600B more than a year ago. (!) $2000 per capita of can-kicking.
I'm no economic Einstein, but I think this is not a George Jetson economy but rather a J. Wellington Wimpy economy.
The point of an economy is not actually that we all have to labor all the time. Labor is just the means, wealth is the end.
And wealth is where you find it, somewhat : )
Troy,
ReplyDeleteI like matter anti-matter analogy for the trade deficit. Our arrogant leaders and 1%ers think we can borrow an infinite amount of money with no consequences. I'm afraid the reckoning, when it comes, will be swift and painful for everyone. A lot of temporary wealth will be annihilated when the money and anti-money particles meet.
Our dollar is weird because it is, as far as we humans are concerned, the universal unit of money.
ReplyDeletehttp://en.wikipedia.org/wiki/Triffin_dilemma
That gave Greenspan room (if not duty) to dramatically expand the money supply as world GDP bloomed, 1995-2005.
Everything is predicated on global production growing inexorably. If so, then when the money we've sent out 1995-now finally comes back to our economy looking for things to buy it won't be a burden.
CBO is projecting a $24T economy by 2030, a per-worker production gain of $70,000/yr, assuming we keep 130M workers employed from here on out.
A lot of temporary wealth will be annihilated
My hard-wealth thesis tells me that wealth is only really lost to rot, war damage and natural disasters.
Japan holds $1.1T of our sovereign debt now. If & when they start cashing that in there won't be any wealth destroyed, just transferred, from us, to them, finally completing the trades we started in the 1980s.
We consumed, they saved, now the time is coming to change places.
This is why I'm a deflationist in the big scheme. So much valuation in our current system is predicated on past realities that may no longer obtain. $1 gasoline, massive government deficits & trade deficits, 2-4% mortgage interest rates, 130M working people . . .
Valuation Is Not Wealth !
This is why I'm a deflationist in the big scheme.
ReplyDeletehmm. I just thought of something.
Our $n-trillion cumulative trade deficit coming back to us as goods sales is going to take real wealth out of our economy and give us more cash in a single transaction.
I mentioned earlier today that this will be inflationary for food prices, assuming we start exporting much more to China (hence the BNSF system map).
Food prices will probably continue going up. Food is a major expense, but ground rent is still the long pole in the tent here, and I'm still hoping the combination of rising necessities (and taxes) + fixed wages will result in lower housing costs eventually.
But this is a lonesome thesis to hold ~~ people seem to want home prices to go up, not down . . .
Mr Slippery,
ReplyDeleteI'm afraid the reckoning, when it comes, will be swift and painful for everyone.
I'm more of a slow painful death kind of guy. But then again, I'm not known for my economic optimism, lol. Sigh.
Troy,
ReplyDeleteOur $n-trillion cumulative trade deficit coming back to [haunt] us as goods sales is going to take real wealth out of our economy and give us more cash in a single transaction.
I really think you need the word "haunt" in there to do it justice. Gives it a supernatural feel, lol.
As for matter vs. antimatter, I hope we never lose our superpower status.
Lame Superhero of the Week: Matter Eater Lad
In fact, he even saved the universe with his lame super power. When the Miracle Machine threatened to destroy the world, Matter Eater Lad gulped down the offending machine…but then went insane.
I bet it was a productivity miracle machine. One can only imagine what unemployment would have done.
I find it an intellectually stunning revelation that exporting our wealth is basically twice as inflationary as just doing money drops to get that same amount of money back into the economy.
ReplyDeleteAt least with the printing, we didn't have to do any wasteful labor or capital consumption to earn that money, plus we of course we get to keep the stuff we didn't ship for our own future use : )
The google search "exports are inflationary" produces just page of hits.
I am sitting here stunned. Either I am an ignoramus of the first water or the world is insane.
Troy,
ReplyDeleteThe google search "exports are inflationary" produces just page of hits.
I am sitting here stunned. Either I am an ignoramus of the first water or the world is insane.
I'm having deja vu. I've lived through this before.
June 3, 2010
Cumulative Trade Deficit Nightmares
I'm being serious here. There's a deficit in cumulative trade deficit discussions and I can prove it. I went looking for more information on it today and it took me right to my own blog! Do I look like some sort of expert on the topic?