I firmly believe that my evaluation of the American Economy is still correct. Yes the economy is improving, and the stock market is still going gangbusters. But my premise still stands.
The world is a pyramid scheme. Only things that are made and sold to other countries truly lifts the economy. If you import as much as you export then the rest of the money just moves from place to place within the country; there is no growth. If you export more than you import then the economy can grow in a healthy way. If you import more than you export your economy is crashing, it just takes a long time with the largest economy in the world. But our trade imbalance has been negative for decades.
If you have money that just moves around the country, and you have inflation, it costs more for other's to import our products which reduces our exports over time. The only thing that helps is if other countries have an equal amount of inflation.
There are a few things that support my position.
1) Unemployment is way down, to levels most would consider very good. But many, if not most, of the jobs are much lower paying jobs than before the economic downturn. I believe this is because we have dropped lower into a Service Economy than prior to the downturn. We manufacture less and less each decade.
2) Finally we are exporting oil, and importing less. That has created a world-wide glut in oil which has caused a drop in gas prices at the pump. This is perhaps the best combination of things to happen to our country in a very long time. Consumers benefit, oil companies lose, the economy benefits. This puts more money in consumer's pockets which means they can spend more, which means that they can eat out more, drive more, and all sorts of businesses in America will benefit. Unfortunately there are downsides. If citizens use the extra money to buy "things" and some percentage of those things are manufactured out of the United States it will add to the trade defect. Furthermore income from exported oil, which will help the trade defect, will only benefit a small percentage of people in the USA directly. It's good but it's not as good as it would seem on the surface.
3) The stock market is running at new highs. There have been more days of the stock market being hitting new highs in 2014 than ever before. The stock market generally represents large corporations than small companies. The reason many of those large corporations are more profitable than ever before is because they are manufacturing overseas. It's not the average citizen that is benefiting but rather the corporations. I do not believe this is the plan or some subversive tactic of the large corporations, it is simply the only way they can do business. They can't manufacture in the USA and compete with overseas manufacturers. They either manufacture overseas, or go out of business.
4) The country is shelling out more and more money to support citizens. A lot of people don't like the term "entitlements" applies to Medicare or Social Security. But these same people feel "entitled" to have that money support them exactly because they paid into the system. We all know both Medicare and Social Security are systems doomed to fail unless something is done. Unfortunately the only real fix is to reduce benefits one way or another. The simply isn't enough federal tax money coming in now or anytime in the future to save the system any other way. Now to top those two failing systems we have Obamacare which is another system that simply will not pay for itself. The plan relies once again on the federal and state governments collecting more tax revenue to pay for health care for millions of people who "didn't already have coverage." The projections already suggest this will add another $6T to the federal debt over the next 10 years. Obamacare is a very bad system economically.
Wednesday, December 24, 2014
Tuesday, January 28, 2014
Global Warming (2)
The earth's ice is melting at a very fast rate, surprising those who study and predict these events. Is it possible that the earth is taking care of itself by countering the warming trend. Perhaps all of that ice dumping into the ocean will cool the water which in turn will cool the atmosphere and reverse any warming.
I watch all of this in wonder. If the earth is warming there is really nothing we can do about it. We can cut all of our carbon producing products and practices and won't effect whatever trend the earth is going through. Oh it can't hurt to be smart about our products and practices, as long as is done in an intelligent way that is economically beneficial. Developing better products is good but taxing and fining companies is unproductive and economically detrimental.
If we are entering an ice age, or a warming age, we will have to adapt. Perhaps the human population will be reduced in either case. Again we must adapt as much as possible. Our efforts should be aimed at how to adapt rather than any feeble effort to stop the earths natural cycle. It is a waste of energy.
If the federal government wants to do something proactive then perhaps they can do some studies to determine how high the water might go if all the ice melts and which peoples need to move away from low lying areas. They can develop maps showing which communities will be underwater and establish some means of moving people out of those areas through public service announcements and targeted presentations to the citizens.
Complaining and restricting people in various ways isn't going to help. Informing people is much more productive. Perhaps there are products we need to develop for a warming or cooling earth that will help us adapt. If the earth is warming then we need better and cheaper means to stay cool. If the earth is cooling then we may need new designs for homes that will retain heat better.
Let's get smart about this and shift our focus to adaptation rather than spending energy money and effort to tame an earth cycle that we have no control over.
I watch all of this in wonder. If the earth is warming there is really nothing we can do about it. We can cut all of our carbon producing products and practices and won't effect whatever trend the earth is going through. Oh it can't hurt to be smart about our products and practices, as long as is done in an intelligent way that is economically beneficial. Developing better products is good but taxing and fining companies is unproductive and economically detrimental.
If we are entering an ice age, or a warming age, we will have to adapt. Perhaps the human population will be reduced in either case. Again we must adapt as much as possible. Our efforts should be aimed at how to adapt rather than any feeble effort to stop the earths natural cycle. It is a waste of energy.
If the federal government wants to do something proactive then perhaps they can do some studies to determine how high the water might go if all the ice melts and which peoples need to move away from low lying areas. They can develop maps showing which communities will be underwater and establish some means of moving people out of those areas through public service announcements and targeted presentations to the citizens.
Complaining and restricting people in various ways isn't going to help. Informing people is much more productive. Perhaps there are products we need to develop for a warming or cooling earth that will help us adapt. If the earth is warming then we need better and cheaper means to stay cool. If the earth is cooling then we may need new designs for homes that will retain heat better.
Let's get smart about this and shift our focus to adaptation rather than spending energy money and effort to tame an earth cycle that we have no control over.
Increasing the minimum wage - huge mistake
Certainly those making minimum wage would certainly benefit and enjoy a raise from $7.25 to $10/hour. However over the next few years that change will reverberate to further push our country into financial disaster.
The fundamental factor that drives the long term economy is the import/export of products. If we export more than we import, in terms of dollars, our economy strengthens. If we import more than we export, in terms of dollars, our economy weakens. We have had a negative import/export balance in goods sold or bought every year since 1999 totaling nearly Nine Trillion Dollars. It like having huge leak of dollars which is draining value out of our economy. Yet we are living as if nothing has changed. My own house is a perfect example.
We have a ski boat, spa, two jet skis, two motorcycles, and three cars, along with an 1,800 sq ft. house - for just 4 people. We live quite comfortably. Check the standard of living in India, China, or any of the other countries that are making products and selling them to the U.S. You'll find they are lucky to have 2% of the standards we have. Anybody that handles money well will tell you that you must live within your means. Generally speaking that means don't spend more than you make. We are a nation in debt, both in individual citizens, and in the $17T federal debt. This can not continue.
Many people are angry that companies have been moving manufacturing operations overseas. The reason they do that is labor is cheaper in many places outside of the United States. Products made in other countries are equal, in come cases better, quality than those made in the United States. If the U.S. companies try to compete, paying U.S. salaries, they will eventually go out of business. For their own survival they must shift their manufacturing overseas.
Increasing the minimum wage exacerbates the imbalance between salaries in the U.S. vs many other countries. It will only result in even more companies either failing, or shifting operations overseas.
If we build unique products that can't be built overseas by competing companies or countries we can pay these high salaries. Few products meet this criteria. On average we are losing our competitive edge because other countries, like China, are graduating far more college students than we are.
The only way to save the United States from economic collapse is to go through a period of balancing our salaries with other countries. That means other countries will have increasing salaries, which is happening but the gap is quite large and the time required to close the gap is likely to be measured in many years. Our overall salary base is falling, but again not fast enough.
The lack of jobs in the United States, reflected in the unemployment figures is one factor in lowering the average salary. Companies also have been squeezed by the economic conditions and are struggling to fund retirement accounts and other costs so they are offering lower salaries. These are beneficial to the long term economic recovery of the country. This is a healthy natural process that will help close the salary gap between the United States and developing countries. Along with this is a lowering of the standard of living in the U.S. but that is the price we have to pay for living beyond out means.
Increasing the minimum wage is completely contrary to what we should be doing. If anything lowering the minimum wage would be a huge step to increased employment and the long term economic stability of our country.
The fundamental factor that drives the long term economy is the import/export of products. If we export more than we import, in terms of dollars, our economy strengthens. If we import more than we export, in terms of dollars, our economy weakens. We have had a negative import/export balance in goods sold or bought every year since 1999 totaling nearly Nine Trillion Dollars. It like having huge leak of dollars which is draining value out of our economy. Yet we are living as if nothing has changed. My own house is a perfect example.
We have a ski boat, spa, two jet skis, two motorcycles, and three cars, along with an 1,800 sq ft. house - for just 4 people. We live quite comfortably. Check the standard of living in India, China, or any of the other countries that are making products and selling them to the U.S. You'll find they are lucky to have 2% of the standards we have. Anybody that handles money well will tell you that you must live within your means. Generally speaking that means don't spend more than you make. We are a nation in debt, both in individual citizens, and in the $17T federal debt. This can not continue.
Many people are angry that companies have been moving manufacturing operations overseas. The reason they do that is labor is cheaper in many places outside of the United States. Products made in other countries are equal, in come cases better, quality than those made in the United States. If the U.S. companies try to compete, paying U.S. salaries, they will eventually go out of business. For their own survival they must shift their manufacturing overseas.
Increasing the minimum wage exacerbates the imbalance between salaries in the U.S. vs many other countries. It will only result in even more companies either failing, or shifting operations overseas.
If we build unique products that can't be built overseas by competing companies or countries we can pay these high salaries. Few products meet this criteria. On average we are losing our competitive edge because other countries, like China, are graduating far more college students than we are.
The only way to save the United States from economic collapse is to go through a period of balancing our salaries with other countries. That means other countries will have increasing salaries, which is happening but the gap is quite large and the time required to close the gap is likely to be measured in many years. Our overall salary base is falling, but again not fast enough.
The lack of jobs in the United States, reflected in the unemployment figures is one factor in lowering the average salary. Companies also have been squeezed by the economic conditions and are struggling to fund retirement accounts and other costs so they are offering lower salaries. These are beneficial to the long term economic recovery of the country. This is a healthy natural process that will help close the salary gap between the United States and developing countries. Along with this is a lowering of the standard of living in the U.S. but that is the price we have to pay for living beyond out means.
Increasing the minimum wage is completely contrary to what we should be doing. If anything lowering the minimum wage would be a huge step to increased employment and the long term economic stability of our country.
Subscribe to:
Comments (Atom)