First Test for Globalization

Discussion in 'Economics' started by achilles28, Feb 22, 2009.

  1. This is the first real test for Globalization.

    Western Countries haven't endured a deep recession since manufacturing was shipped overseas (pre-1995).

    Its well-known that heavily industrialized countries peak money velocity. And money velocity = local jobs.

    More productive capacity = more goods produced locally = more local jobs recruited to build those goods.

    Import/Service-based economies are inherently unstable, due to low money velocity.

    For example, America looks like this:

    Retailer > Wholesaler/Importer > China

    It used to look like this:

    Retailer > Wholesaler > Manufacturer > Raw Material Supplier Network > 2nd Tier Suppliers Refiners/Miners/Farmers ect.

    Clearly, the 2nd example maximizes local jobs, as each dollar spent in the value chain recruits many more domestic hands than the first.

    Because America's de-industrialization simultaneously enjoyed a massive explosion in consumer credit (read: DEBT), the effects on middle-class incomes, and income distribution overall, was glossed over and not readily apparent.

    Now, we'll get to witness the full "resiliency" of this moronically-hyped "New Economy". Ushered in thanks to Corporate America and its Bleeding Heart Shills.

    Even with a restoration in banking and credit, the drop in middle class incomes and jobs (read: money velocity) will likely be pronounced and weigh heavy on street-level demand, for years.

    Structurally, our economy is much weaker than its ever been.

    The benefits of employing 50 Americans from a TV purchase instead of 10, should be obvious to everyone.

    This climate will only amplify globalization's underlying problems that until now, lay hidden and masked from a sea of cheap credit and unsustainable American consumption.

    In my opinion, we're not going to revert back to 2000-level GDP. Perhaps more like 1992-1995 level GDP.
  2. And the downside of making TVs 5 times more expensive should be obvious to everyone, too.

    "Buy American" is equivalent to America erecting trade sanctions against America.
  3. "Buy American" is equivalent to employing America.

    The economy was much stronger and more robust from the 40's through 70's when we actually built things, and had a trade surplus.

    Your example about goods costing 5 times more is nonsense.

    Top of the line TV in 1970 cost ~350$. Inflation adjusted to 2009, is 2K.

    Top of the line TV today, is around 2K.

    The difference is America keeps jobs in country, retains a deep manufacturing base, and high money velocity to thwart against recessions and depressions.

    Much better than exporting jobs and wealth overseas!!

    Or is it only advantageous to make and export things when your China? Or Mexico?

    Why is good for them and not for us?
  4. I agree with what Achilles has said. Ultimately, you can only grow if you have increased technology & productivity. A retailer economy has about the same productivity no matter what. The argument that by buying chinese you reduce costs for everything and thus have more to invest ONLY makes sense if americans are exporting the same amount to China, which they are not.

    Under normal trade, I export to you my most efficient products, you export to me your most efficient products, we both win.

    Right now "globalization" is barely one half of the piece. It goes more like this : "I use my overvalued currency to purchase your subsidized goods that aren't really that much better anyway but I don't care because they fly off the shelves. I also cannot export anything to you because you are a commie bastard that still uses import tariffs."

    So there you go. Yes, this will be a test, but it's hard to say if anything will be done. The US needs to be smarter about this. If you're chinese and rolling in dough, why give any concessions? The Americans need to demand tougher trade and then we'll all have fair trade that benefits more people.

    I was also reading a piece about chinese innovation in high technology. What was interesting was the sub context of how the industry should shape out. The chinese only want to develop industries in which they have a marked advantage and that they can become a leader in. They develop their industries at the national level, not at the individual company level. Companies profit and fall together, and they all cooperate. They also all receive help from state institutions, if they're not outright owned by government. Their capitalism really reeks more of mercantilism.
  5. Good posts.....

    Globalization is not complete without a valid worldwide, seamless securities exchange....

    Globalization is a form of overall equilibrium....supposedly exposing and utilizing efficiencies the world marketplace has to offer....

    This cannot be accomplished unless there is a seamless worldwide securities exchange....

    What is lost from one country to the next could be offset by the right stakes found via the worldwide exchange....

    What this means is that one could change to any currency, stock, bond, bank cd, commodity of choice....What a country loses could be offset to some degree through the exchange....

    This would be accomplished in coordination with wiki-type intelligence to the buyer....

    And commissions should be basically nonexistant....maybe 20 cents per 100 units....

    BATS would be the core exchange/direct access model as it has clearly demonstrated it is the most coordination with vendor models such as Genesis....
  6. I'll run this up the flagpole-

    Trade negotiation is simple. You target a trade deficit of $x. If it goes above that then you impose incrementally higher tariffs on imports across the board to bring it back in line.

    The idea is everyone can see the numbers, no surprises, no trade wars. You adjust the target to keep things humming (and affordable) at home- a political decision keeping in mind that a trade deficit exports our wealth.
  7. An American-built TV would be significantly more expensive. You suggested that American-built TVs would employ 50 Americans instead of 10. Highly-skilled American workers are about 5X more expensive than highly-skilled Chinese workers. At the upper end of the manufacture base (e.g. electronics), the Chinese workers are just as productive as the American ones because the Chinese have purchased state-of-the-art factory equipment. Technically, if you run these labor content and labor rate numbers, the American TV would be 2.777 times the price of the Chinese TV.

    We can quibble about the numbers, but the real issue is that if Americans could build TVs for less, then they would. In fact, if Americans could build TVs for the same price, they'd have 100% marketshare given the costs and delays of shipping TVs across the Pacific ocean.

    And if you force American consumers to pay more for TVs to subsidize American TV-making jobs, then those same consumers must forgo other purchases or find even cheaper substitutes for other purchases. Maybe you've created some TV-making jobs in America, but you've lost other jobs in retail, snowmobile manufacturing, restaurants, tourism, etc.

    Again, "Buy American" is no different than imposing trade sanctions on America. In both scenarios the afflicted economy is forced to turn inward to less efficient, less satisfying, and more expensive domestic sources of goods.
  8. OBAMA to meet with BROWN on "Global Stabilization Bill".....

    Wouldn't be surprise to see the INDU crash this week if any "positive info comes from this meeteing.

    The very effert to push "Socialism" on a World Scale, leaving America's interest at home, as second will spook any remaing investors left.

    This meeting could be nothing, or it could be something.

    welcome to OBAMA NATION, sit back and enjoy the show.