Goodbye Middle Class

[JHZR2]

Originally Posted By: CivicFan
The WTO rules set caps on tariffs. In global trade, tariffs can have unintended, destructive consequences because trade is multilateral.
September 12, 2009, US wants to impose tariffs on Chinese tires

September 13, 2009, China moves to retaliate against US tariffs on tires




I love the second link...

It shows:

And then...

Quote:
the United States buys $4.46 worth of Chinese goods for every $1 worth of American goods sold to China


Quote:
“Why did our government purchase so much U.S. government debt?” said one posting signed by a “Group of Angry Youths.” It continued, “We should get rid of all such U.S. investments.”



Quote:
weekend of nationalistic vitriol against the United States on Chinese Web sites in response to the tire tariff. “The U.S. is shameless!” said one posting, while another called on the Chinese government to sell all of its huge holdings of Treasury bonds.


Id much rather be holding chickens than tires. They can keep their tires, but given water pollution and arable land issues... well...

I find the argument on part of China to be irrelevant, given the magnitude of difference...

 

[dwendt44]

China slaps a 25% tariff on imported autos and parts.

We impose a 2.5% tariff on Chinese autos and parts.

 

[Spyder7]

Originally Posted By: JHZR2

Quote:
weekend of nationalistic vitriol against the United States on Chinese Web sites in response to the tire tariff. “The U.S. is shameless!” said one posting, while another called on the Chinese government to sell all of its huge holdings of Treasury bonds.



That statement you posted contains within it another reality that those who are in favor of keeping the status quo ignore: the present system encourages us to buy their trinkets to save a couple bucks, which they in turn take the proceeds from and use to buy up huge blocks of assets, as well as financing our debt, in both our countries.

Those assets include everything from major stakes in publicly traded corporations, to utilities, to land holdings. And they eagerly finance our borrowing, which we pay pretty significant sums to service. As so much of China's economy is essentially state owned or run, its runs very much counter to the public interest to allow a foreign nation - particularly one with an ideology so at odds with our own - to be in a position to hold our countries hostage any time they chose to by - for instance - demanding repayment of the loans in full.

The unpleasant reality many have elected to ignore, or are simply unaware of, is that the trade imbalance under global free trade has given them the markers on our economies that they can threaten to cash in, crashing the economy as a result, any time they choose to.

China has the fastest growing GDP in the world. They currently hold 3rd position, behind the US and EU. By 2020 China will be in the number one position, meaning they will have the most powerful economy in the world, and one still expanding at a rapid pace.

What took the US - our largest trading partner and the nation our interests are most aligned with - hundreds of years to achieve, China has accomplished almost overnight through global free trade. And they're still only in the developmental stage, while - in my opinion - we've eclipsed our own and have begun the slide downward. So far, except for the surging oil prices, sudden devaluation of the US dollar, collapse and bailout of several major corporations (GM, those involved in the S&L crisis, etc), rising inflation and unemployment figures nobody really wants to admit to, its been a pretty slow and soft slide. I can't imagine what the steep one is going to be like when it comes, but I'm pretty certain we're going to find out firsthand within the next 2 or 3 decades.

And I agree: wind and solar are not going to save us.

-Spyder

 

[crinkles]

Originally Posted By: Spyder7

And I agree: wind and solar are not going to save us.

-Spyder


when the world has gone to pieces we won't need electricity or money. I can't wait.

 

[javacontour]

That's odd, you say you disagree with my conclusion, but then came to the same one, the system is broken.

I grew up in that working poor family. Sometimes mom had health insurance, sometimes we were the $14.5K family getting many of the goodies.

One thing about the comparison is it doesn't take into consideration family taking care of the childcare. If you have an aunt or grandmother who can watch the kids, then your available income goes up.

 

[Shannow]

That's where the modern system fails us all versus the "traditional family values"

We are told to follow the work, that "benefits" will be stopped if we don't follow the work...

Then are left outside the extended family in which childcare is handled by retirees, and retirees are handled by the family.

Children are left with stranger, at a cost well above what a marginal job will cover, and grandparents left in homes, soaking up family wealth.

Funnily, at both ends, there's a company willing to provide the service, while encouraging the "move to work" rhetoric, while collectively moving the work further away from the people.

 

[Spyder7]

Originally Posted By: javacontour


One thing about the comparison is it doesn't take into consideration family taking care of the childcare. If you have an aunt or grandmother who can watch the kids, then your available income goes up.



What if you don't? Your assumption takes into factors things that no longer exist, as the extended family has become replaced with the nuclear family (just parents and children), and about half of those kids grow up in divorced families where one parent is pretty much absent the picture.

A lot of this is owing to people no longer remaining in their place of birth as they move elsewhere for schooling or work, and lay down roots wherever they land. There is no other family present.

My family is spread from coast to coast. Some are American, having married US citizens and moved later to the US where they - and some of my cousins - remain today. My parents moved to the Arctic when I was about 4. When they divorced, we left and moved where we could be closer to mom's family. When she decided she wanted to study nursing, we moved again because there was no school nearby that offered it. Similarly, after growing up in other parts of Canada I moved back here to go to school as well. My parents and the rest of my family are in other parts of Canada. My sister lives in BC with my brother-in-law and newphew.

My own history in that regard in terms of so much moving is probably more extreme than the typical example. But far from unique.

I suppose mom could have contented herself with the secretarial schooling she did which was the norm when she finished high school, and thereby avoided moving away from the extended family nearby after the divorce. She opted instead to study and turn into a well paying career what she was more interested in. My sister and I made the same choice. Not content with our educational options where we were, we both left (me to study here at Memorial, her to Mt. Alison in NB), and never looked back.

Though my brother-in-law is from BC, his family lives on the mainland portion while they live and work in Victoria. No extended family there from either side.

This is the norm today. You speak of an age that for many of us is a distant memory, and for which others have no familiarity with at all.

-Spyder

 

[javacontour]

I'm not making any assumption. I presented a conditional. IF means condition. It doesn't assume that it's a normal circumstance. Nor does it assume that it's an extraordinary circumstance. It merely presents the scenario that IF one has extended family willing to care for children that the child care costs largely go away.

I'm not asserting any case as the norm, just presenting possibilities.

Originally Posted By: Spyder7
Originally Posted By: javacontour


One thing about the comparison is it doesn't take into consideration family taking care of the childcare. If you have an aunt or grandmother who can watch the kids, then your available income goes up.



What if you don't? Your assumption takes into factors things that no longer exist, as the extended family has become replaced with the nuclear family (just parents and children), and about half of those kids grow up in divorced families where one parent is pretty much absent the picture.

A lot of this is owing to people no longer remaining in their place of birth as they move elsewhere for schooling or work, and lay down roots wherever they land. There is no other family present.

My family is spread from coast to coast. Some are American, having married US citizens and moved later to the US where they - and some of my cousins - remain today. My parents moved to the Arctic when I was about 4. When they divorced, we left and moved where we could be closer to mom's family. When she decided she wanted to study nursing, we moved again because there was no school nearby that offered it. Similarly, after growing up in other parts of Canada I moved back here to go to school as well. My parents and the rest of my family are in other parts of Canada. My sister lives in BC with my brother-in-law and newphew.

My own history in that regard in terms of so much moving is probably more extreme than the typical example. But far from unique.

I suppose mom could have contented herself with the secretarial schooling she did which was the norm when she finished high school, and thereby avoided moving away from the extended family nearby after the divorce. She opted instead to study and turn into a well paying career what she was more interested in. My sister and I made the same choice. Not content with our educational options where we were, we both left (me to study here at Memorial, her to Mt. Alison in NB), and never looked back.

Though my brother-in-law is from BC, his family lives on the mainland portion while they live and work in Victoria. No extended family there from either side.

This is the norm today. You speak of an age that for many of us is a distant memory, and for which others have no familiarity with at all.

-Spyder

 

[PandaBear]

One has to factor in why China is growing so fast. Geographically it has always been the super power in the East Asia and it was only the last 150-200 years that it went through some difficult times due to corruptions, wars, and political struggles.

When it is suddenly getting into stability and become how the equilibrium of its resource and population should look like, it make sense how they would be where they are. The same goes for India and Eastern Europe. Especially when the largely agricultural population decided it is a better life to work in the factory than in the field, even at below typical wages, the suddenly increasing productivity would make an impact to the entire world regardless of how much it charges. Until this saturated and everyone involve becomes similar, someone would outsource or get out competed. Hopefully the increase in standard of life will keep the same standard of living in the developed world when this happen.

We will not see an increase in standard of living until they becomes similar to us in standard of living, like how Japanese labor becomes more expensive than US labor and the jobs started moving back to the US.

 

[Spyder7]

Originally Posted By: PandaBear

When it is suddenly getting into stability and become how the equilibrium of its resource and population should look like, it make sense how they would be where they are. The same goes for India and Eastern Europe. Especially when the largely agricultural population decided it is a better life to work in the factory than in the field, even at below typical wages, the suddenly increasing productivity would make an impact to the entire world regardless of how much it charges. Until this saturated and everyone involve becomes similar, someone would outsource or get out competed. Hopefully the increase in standard of life will keep the same standard of living in the developed world when this happen.

We will not see an increase in standard of living until they becomes similar to us in standard of living, like how Japanese labor becomes more expensive than US labor and the jobs started moving back to the US.


Their rapid explosion in economic output is a relatively new phenomenon. In and of itself, I have no problem with it. There is a problem with it though because their economic surge is coming at the cost of our domestic assets (on both sides of the border) that they are buying up wholesale, and their growth in employment comes at the cost of ours.

Its worse south of the border in that you guys are pretty deep in the red, and China is one of the larger countries who holds the markers on that debt. You pay enormous sums of money every year to service that debt, they turn around and use that money to buy up your country one piece at a time. See where this is going and the inevitable conclusion?

If you don't, you may yet get to see it in your lifetime, when theirs is - by far - the strongest economy in the world, still growing rapidly, and are in a position to dictate the rules of the game while we're powerless to do anything but follow their lead. Lest they call in those markers and crash what's left of both our economies (if yours tanks, ours goes right down with it).

The proof of this trend is all around you. And its not Asian hegemony they owe their growth to. Traditionally the Japanese maintained the balance there, and in most recent times, were the region's economic powerhouse. China's gains have not been coming at the expense of Japan or any other Asian country. Logic dictates they must be coming at someone's expense, so who is left? Look for yourself at the proof behind the assertions I made above and then follow the trend to its inevitable conclusion, and the picture it creates is not a pretty one for us. Not in the slightest.

-Spyder

 

[javacontour]

I keep advocating for a really balanced budget. Not the one we had in the late 90's where it was balanced by borrowing from the SSI "trust fund" and filling Al Gore's "lock box" full of federal IOUs.

But when calls are made to trim spending, expect folks (at all levels) to be more self-sufficient, those who call for such things are called unrealistic, or fed sob stories about how unfair it is, etc.

How unfair will it be when China holds title to everything? I don't expect them to be benevolent property owners, do you?

I don't think all of their gains come at the expense of somebody. That would imply their people are not consuming more of what they produce. However, I would agree that many of the gains are. How much? I don't know. But I also know that's not a long term winning strategy for them. Given they have about 20% of the world population, their biggest growth just might come from internal economic activity, not external.

External will prime the pump, but eventually it has to start growing internally or it will not be sustainable.



Originally Posted By: Spyder7
Originally Posted By: PandaBear

When it is suddenly getting into stability and become how the equilibrium of its resource and population should look like, it make sense how they would be where they are. The same goes for India and Eastern Europe. Especially when the largely agricultural population decided it is a better life to work in the factory than in the field, even at below typical wages, the suddenly increasing productivity would make an impact to the entire world regardless of how much it charges. Until this saturated and everyone involve becomes similar, someone would outsource or get out competed. Hopefully the increase in standard of life will keep the same standard of living in the developed world when this happen.

We will not see an increase in standard of living until they becomes similar to us in standard of living, like how Japanese labor becomes more expensive than US labor and the jobs started moving back to the US.


Their rapid explosion in economic output is a relatively new phenomenon. In and of itself, I have no problem with it. There is a problem with it though because their economic surge is coming at the cost of our domestic assets (on both sides of the border) that they are buying up wholesale, and their growth in employment comes at the cost of ours.

Its worse south of the border in that you guys are pretty deep in the red, and China is one of the larger countries who holds the markers on that debt. You pay enormous sums of money every year to service that debt, they turn around and use that money to buy up your country one piece at a time. See where this is going and the inevitable conclusion?

If you don't, you may yet get to see it in your lifetime, when theirs is - by far - the strongest economy in the world, still growing rapidly, and are in a position to dictate the rules of the game while we're powerless to do anything but follow their lead. Lest they call in those markers and crash what's left of both our economies (if yours tanks, ours goes right down with it).

The proof of this trend is all around you. And its not Asian hegemony they owe their growth to. Traditionally the Japanese maintained the balance there, and in most recent times, were the region's economic powerhouse. China's gains have not been coming at the expense of Japan or any other Asian country. Logic dictates they must be coming at someone's expense, so who is left? Look for yourself at the proof behind the assertions I made above and then follow the trend to its inevitable conclusion, and the picture it creates is not a pretty one for us. Not in the slightest.

-Spyder

 

[Tempest]

Quote:
Let's analyze this. Out compete them, eh? So you have nearly 3 BILLION laborers in India and China, not to mention the rest of the third world that are willing to produce stuff for essentially slave wages. How do people who are qualified to produce things in this country able to compete?

So you are saying that every single person and facility is exactly equal in capability and output? The answer to that is NO. The reason people in this country make more money is because they are more productive. They put out more goods and services per person than anyone else on the planet. This is due to advancement in technology (paid for by the evil corporations "exploiting" workers) so people have to do less and machines do more.
The more and better machines we produce to work, the more productive people become.
Quote:
Consider the incredible, increasing productivity of America's manufacturing workers: The average U.S. factory worker is responsible today for more than $180,000 of annual manufacturing output, triple the $60,000 in 1972.

These increases are a direct result of capital investments in productivity-enhancing technology, which last year helped boost output to record levels in industries like computers and semiconductors, medical equipment and supplies, pharmaceuticals and medicine, and oil and natural-gas equipment.

http://online.wsj.com/article/SB10001424052748703652104576122353274221570.html

Quote:
Then you say that their decision to open their markets brought up their standard of living. You realize that this is impractical, right???

Why? China and India are MUCH better off now that they have opened their markets to foreign trade.

You are correct that there is a fixed amount of resources. This is exactly why trying to create an island of artificially high prices won't insulate you from the reality of limited resources, and making our work force as productive as possible is key.

 

[Tempest]

Originally Posted By: JHZR2

Lots of real goods coming our way for us shipping them increasingly worthless electrons. I'd say we are getting the better of the deal by a long way.

 

[Tempest]

Quote:
Even after that, trade protection remained in place until the globalized model took hold in the 80s, and rapidly became the predominant model that it is today. The US and the West in general was rich well before the 1980s.


Quote:
In the 1950s, multinational corporations based in the U.S. and Europe grew tremendously. International trade mushroomed during the second half of the 20th century. The past two decades, especially, have seen more and more countries moving toward free-market economies and lowering barriers to trade.

You don't see any conflict with those statements? The later, from your link, is exactly what I was saying. The last two decades have seen an increase in free trade because of all of the trade success after WWII.

 

[PandaBear]

Like any loan, sovereign debts have the possibility of default.

What China did by buying up their trade partner's debt is like giving out a loan that they think the can collect down the road. What if the US default, whether by inflation or by not paying interest / principle? This reduce the market value of the debt today, much like how the bad real estate loans cause the banks to collapse.

As the other nations also hold our debt, they too could suffer and demand higher interest for us to borrow the money today. This indirectly balance out (in the macro scale, excluding sudden surges and collapses in the short term). The currency also drop to reflect this.

What we experience as inflation and the rise in our trade partners currency is how things get balanced in history. Or, like you guys said, they'll buy up assets from us, or other nations using our debt/currency, to pay for it.

 

[Tempest]

Quote:
their growth in employment comes at the cost of ours.

Obviously not.

Quote:
Their rapid explosion in economic output is a relatively new phenomenon.

http://investing.curiouscatblog.net/2010...output-in-2008/
Yes, but can you answer why? All of these cheap sources of labor have been around for many decades.

 

[PandaBear]

Originally Posted By: Tempest
Quote:
their growth in employment comes at the cost of ours.

Obviously not.


This doesn't address employment of population but rather value in output by dollar amount.

Quote:

Quote:
Their rapid explosion in economic output is a relatively new phenomenon.

http://investing.curiouscatblog.net/2010...output-in-2008/
Yes, but can you answer why? All of these cheap sources of labor have been around for many decades.


The cheap labor was locked up in agricultural until they are open to employment in other sectors (i.e. manufacturing).

 

[Spyder7]

Originally Posted By: Tempest

You don't see any conflict with those statements? The later, from your link, is exactly what I was saying. The last two decades have seen an increase in free trade because of all of the trade success after WWII.


Interesting twist. My post, which I can go back and dig up to quote fully if need be, began by stating the US was isolationist prior to WWII, that the shift occurred after, and only really took hold in the 1980s. Pretty much what the link I quoted says, and which your selective quoting leaves out.

That was in response to a post of yours that stated the US was built on an anti-isolationist system and which implied globalization was there from the beginning.

I can go back and dig up both posts, quote them in full, and show which one it was that had the accurate description. Hint: it wasn't yours that mine was in response to.

-Spyder

 

[Tempest]

Quote:
This doesn't address employment of population but rather value in output by dollar amount.

Our share of output has dropped by 5%, while loosing more than 5% of our manufacturing jobs, all the while increasing actual output. China has gained ~17% share. To say that employment has dropped because of China simply doesn't add up as there is no correlation. These graphs show that China simply has ADDED to global output, not taken from the US.
Quote:
The cheap labor was locked up in agricultural until they are open to employment in other sectors (i.e. manufacturing).

How were their markets "opened" to other sectors?

 

[Spyder7]

Originally Posted By: PandaBear
Like any loan, sovereign debts have the possibility of default.

What China did by buying up their trade partner's debt is like giving out a loan that they think the can collect down the road. What if the US default, whether by inflation or by not paying interest / principle?



You can find out yourself what happened to countries who found themselves unable to make the payment on their debt and in default. There are an abundance of examples, but they all illustrate a similar picture: when the nation defaults on its loan the creditor exacts payment by forcing upon them a new deal aimed at collecting the loan, on terms favorable only to the lender, and which keep the defaulting nation held hostage to the creditor and condemned to a cycle of national poverty they are unable to break out of.

Examples in the developing countries in Latin America abound where nations there borrowed beyond their ability to repay and wound up in default. The IMF and World Bank stepped in to bail them out, but the only one who benefited by the bailout was the creditor. Those nations, after the bailout, remained afloat on paper, but at a tremendous cost of assets that were previously national ones and which they had to sell of at clearance prices under the restructured deals that went with the bailouts.

In the US, the consequence is even more dire in terms of a "what-if" scenario were a default ever to occur. Its not the simple picture you paint, however. US prosperity is based largely on confidence in its dollar as an international currency, and domestic markets where trade is done using those dollars.

In a default there, investors lose confidence and a spiral ensues as others, in turn, seek to cash out before the dollar collapses. As an analogue, a good example is a bank. Banks carry only a fraction of liquidity compared to the assets investors have as holdings in the bank. They rely not on liquid assets to remain solvent, but the confidence of their investors. When that confidence is lost, the result is a bank run where everyone demands their savings at once. The banks don't can't meet that demand, and the result is they go out of business with the majority of investors - unless the savings are insured by another institution - left high and dry.

What then happens in an economy such as the US one, in a similar scenario, is that the dollar is reduced to worthless paper overnight. From there comes Soviet style collapse. And the collapse of the USSR and what became of their currency in the aftermath, is probably the best contemporary analogue we have for what happens when a country as large as the US suddenly becomes insolvent.

Similar to a bank, the US is able to carry a large national debt because of investor confidence. If one major investor pulls out, it can create a ripple effect. The US government, again like a bank, does not have the liquidity to pay off all of those investors. Printing currency is not an option because the result is devaluation of the currency and hyper-inflation; though the alternative isn't much better, so it becomes a catch-22 situation.

At any rate, this is purely an abstract and hypothetical "what if." My only point is that I don't see it in a nation's interest to find itself in a situation where this kind of "what if scenario" could even be contemplated, nor to move increasingly in the direction toward these types of scenarios becoming less academic and more and more of a razor thin line that has to be carefully tread to avoid it being played out.

I've given, in other posts, indicators that point to the fact that we are already past the apex and into a decline owing to foreign ownership of so much assets, massive debt and increasing sums coming out of the treasury - and the tax payer who funds it - just to service that debt, the devaluation of the US dollar we have already seen and consequent loss of purchasing power along with its inflationary twin.

These should be serving as wake up signs that something is seriously amiss and that the crises to come will make the more recent ones look like the good old days as it will become increasingly harder to recover from each.

Note I use the term "we" because our nations and our fortunes are so intertwined, and traditionally our economy has followed a course parallel to your own in boom times and bad times.

-Spyder