“The services of our service economy are not really exportable like manufactured goods.”
But they do harm our economy when we send these jobs overseas, for these reasons:
1. Higher unemployment (anyone who still believes that those who lose these jobs in America will simply find another, BETTER job needs to put the crack pipe down).
2. It’s US dollars that are sent out to be converted into other currencies, where that money is sent to generate activities in those countries (anyone who believes that this is good for America because that money comes back to America by the purchase of our goods and services needs to go and study the TRADE DEFICIT. That money is NOT coming back to America because we do not have the manufacturing capacity combined with exports that we once had. It will, of course, if we are all willing to adopt the standard-of-living of third-world countries. Then and only then will manufacturing come back to America.)
“So how did we get to this point? A bit of history tells us. Keynes had a plan for what became the Bretton Woods system of institutions and trading rules after WW II. Both the IMF and the WTO were founded based upon Keynes’ advice, but not all of Keynes’ recommendations were adopted. One omission was crucial. The institutions and rules Keynes sought would have disallowed serious trade imbalances. There would have been very different requirements for trade surplus and trade deficit countries, not the one size fits all policies now applied by the IMF and WTO. Specifically, Keynes proposed institutions and trading rules that would have required trade surplus countries to take down their trade barriers, while it would let trade deficit countries use export subsidies and tariff barriers for a while to bring trade into balance.”
And this is why Keynes is one of the biggest Intellectual Morons of the 20th century. This would require the central control of production, its costs and its prices, as well, eventually, of wage controls. All of these, as the Austrian school has pointed out so very well for decades, leads to dismal economic failure.
On a related subject, where in the heck can you find 9mm or .380 ammo? Even Cabela’s is consistently out of it.
While I agree with the author’s thesis, I question his reference to the “thinkers” whose overall theories led to this problem. He makes it sound like this crisis happened IN SPITE of their theories. That is incorrect. This crisis happened BECAUSE of their theories.
This is a credit-based recession. All other recessions between now and the Great Depressions were inventory-based recessions. Trade deficits can be caused by either type. But that is of less concern to the effect of the trade deficit. In this crisis, the trade deficit is causing an inventory recession in those nations that rely on exporting to us, and they are causing (insanely) a credit-recession in America, since we have become 70% a consumer-based economy. I say “insanely” because a large portion of the purchasing power that America and Americans have has come from BORROWING (credit) funds from those manufacturing nations that are exporting us (China). We have a snake-eating-itself scenario with massive interest rates accumulating.
And all of this is only a small portion of the overall problem of this credit-based recession, which is the suicidally high percentage of deficit-spending to GDP. A little deficit spending is not a bad thing, in and by itself. When Reagan did it, it worked well, DESPITE the massive spending of the Democrat-controlled congress. And in that regard, it’s like you and me spending more than we earn for a couple of months on a credit card because we know we are going to pay it off when our bonus comes (risky, yes). By doing so, we acquire assets that we wouldn’t ordinarily be able to. When we pay them off, we have that much more real wealth.
The problem with this credit-based recession is that we never paid it off. We kept pushing the debt forward until we are where we are. So, in short, the reason that we are at the brink of economic collapse and pitching forward (not pulling back, as Obammie the Commie praises Himself for having caused) is that the government can not afford to pay for its liabilities, it does not have the manufacturing and export base to “produce” its way out of this recession, and it has destroyed its credit rating so that we can no longer “borrow” our way out of this recession. Oh, that last phrase may come as a shock. But essentially our “AAA” rating is gone and our economic credibility is living on vapors already. We’re just waiting for the formal “vote” from other nations that the tank is empty.
Our banking institutions BECAUSE THEY ARE A PART OF THE CENTRAL-BANKING MACHINE that Keynes and his ilk thought was the best way to manage an economy, is about to collapse. The Alt-A’s and Option-ARMs about to reset. Either of these will dwarf the Sub-Prime “crisis,” but they are both due to hit later this year and throughout 2010. Commercial real estate is also imploding as we speak. The signs are most visible in vacant office space and empty retail shops in strip malls, etc. This will soon work its way in to the major malls around you, which are going to become ghost towns for the most part. If you work in a cube-farm, get used to the idea of doubling or tripling up as landlords who own multiple buildings will seek to recoup these losses and will have no choice but to raise the rent on your employer.
In short, there is only way this recession/depression is going to end, since it is a credit-based economy. We must let all the banking and financial institutions that are essentially insolvent but who are currently hiding that fact FAIL. They must fail completely, their debt must be absorbed and their healthy assets taken over by stronger, better-managed institutions (less greedy institutions that do not over-leverage). We must bring manufacturing back to this country. We must pay off our personal, corporate, and national debt. And we must end the SOCIALIST programs that are destroying us.
Any idiot who says we need healthcare reform to HELP our economy needs to put the crack pipe down and sit down with a student of the Austrian school of economics.
If the self-proclaimed financial pundits and guru’s are bearish, then now is the time to buy equities.
CAN THERE BE ANY DOUBT THAT THESE IDIOTS IN CHARGE ARE TRYING TO COLLAPSE THE US GOVT???
TREASON
But don’t forget we are a “service economy” now.
All will be well....
Ahem...(sarc) if necessary.
Bttt
Sorry, folks, but our manufacturing output is at an all-time high. We just do it with less labor.
Should we make more? Yes!
What holds us back? Gov’t, regulations, etc
But one whopping portion of our trade deficit is imported energy...mostly oil. It accounts for up to 65% of our trade deficit.
We have the domestic supply, we can access it cheaply and efficiently (and safely for the enviro-weenies) but are restricted by gov’t control.
Just start tapping domestic energy and you have solved a big chunk of the trade deficit.