America's Superpower Status Coming to an End

Newsmax.com ^ | 3/1/05 | Paul Craig Roberts

[beyond the sea]

The U.S. economy is headed toward crisis, and the political leadership of the country – if it can be called leadership – is preoccupied with nonexistent weapons of mass destruction in the Middle East.

The U.S. economy is failing. The afflictions are serious. They could be fatal even if diagnosed and treated. America is losing the purchasing power of its currency and its ability to create middle-class jobs. Story Continues Below

The dollar's sharp decline and projections of continuing trade and budgetary red ink are undermining the dollar's role as reserve currency. A number of central banks have announced that they will be diversifying their currency holdings and will not be buying dollars at the same rate as in the past. This will put more pressure on the dollar. At some point, the flight will begin. Instead of buying fewer dollars, central banks will sell dollars, hoping to get out before the dollar hits bottom.

Suddenly, the advantage of being the reserve currency becomes a nightmare, as the world's accumulations of dollars are brought to market. An enormous supply and weak demand mean a very low exchange rate for the once almighty U.S. dollar.

Overnight, those cheap goods in Wal-Mart, which are the no-think economist's facile justification for Wal-Mart's decimation of communities, small businesses and employment, shoot up in price.

[Toddsterpatriot]

For instance: If in 1940 it would take ten typewriters and ten clerks one week to reproduce what you can do for yourself with a PC over the same period of time. They then compare the cost of the ten people and ten typewriters with the actual 2003 cost of a week of your time and your PC and come up with an adjustment. Something like, "the average office worker today is 8 times as productive as the office worker of 1940", and use that reasoning to either multiply 2003 amount spent on office workers by a factor of 8, or to divide the 1940 number by the same.

That's certainly a possibility, but maybe you want to use a different example. Your example involves a service. The chart involved goods.

From the chart link:
It is critical to adjust the figures for inflation in order to make a valid comparison. The price of many goods such as computers has fallen sharply. Since GDP data are calculated in money rather than volume terms, failure to account for price changes gives a distorted picture. For example, suppose the output of a product rose by 10 percent in terms of units while falling 10 percent in price due to higher productivity. Using nominal dollar figures makes it appear there was no increase in output. Using real data captures the increase.

See, units produced, not services provided which is how I read your office example.

You agree that there is a need to adjust when units increase while price drops, don't you?

Here's an example, how many beer cans were produced in 1940 vs in 2000? Do you think we produced more? No doubt. Do you think they were less expensive per unit? Again, no doubt. How would you adjust for that?

[1rudeboy]

Incidentally, I want to thank you for your repeated responses allowing me to flesh out the fallacies of the global free trade system.

My pleasure. I wish I could say the same, but all I see is an argument based on emotion, not fact.

[superiorslots]

Quote: Cheap labor isn't a threat. No, it is "cheap labor" that is being threatened. Who needs it?! ANSWER: fewer and fewer business processes.


Then why are american companies jumping over each other to move their production lines to mexico and china?

[ARCADIA]

You agree that there is a need to adjust when units increase while price drops, don't you?

No, I disagree. These adjustments are very subjective and tend to bias the infomation. What you consider a productivity gain, another may consider a productivity loss. Products are priced relative to the other products available on the market; it is a distortion to manipulate the data based on choices that were not available to the marketplace.

[Toddsterpatriot]

No, I disagree. These adjustments are very subjective and tend to bias the infomation.

No doubt they're subjective, but they still need to be considered.

What you consider a productivity gain, another may consider a productivity loss.

How is a productivity gain ever a loss?

Another example, oil is currently $53 a barrel. If my oil well currently produces 1,000,000 barrels a year, I'm adding $53,000,000 to GDP.

I add some new injection equipment to my well and raise productivity to 2,000,000 barrels a year. Oil drops to $25 a barrel. I'm now adding $50,000,000 to GDP. Can you truly say that GDP dropped $3,000,000? Even though I doubled oil production?

[ARCADIA]

Can you truly say that GDP dropped $3,000,000? Even though I doubled oil production?

Can I say it? No. But, that is what a well regulated free market is supposed to do. It is the market that has determined your impact on GDP; and, who are we to change that? You might think that your oil is worth $53 million + your capital investment, however the market has deemed otherwise. Should we ever decide to invest in domestic oil production to wean ourselves off of Middle Eastern oil, we may have to protect our domestic suppliers to ensure that the market does not collapse on their capital investments.

[Toddsterpatriot]

Can I say it? No. But, that is what a well regulated free market is supposed to do. It is the market that has determined your impact on GDP; and, who are we to change that?

Please, the market doesn't measure GDP.

[cubreporter]

:)that was humorous.

[Southack]

"Then why are american companies jumping over each other to move their production lines to mexico and china?"

First of all, China and Mexico have *lost* 22 million of their own manufacturing jobs over the past 5 years or so... China and Mexico Lost 22 Million Jobs

Second, U.S. businesses have a history of first outsourcing what they later automate away entirely.