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Tuesday, February 26, 2008

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Lord

economic integration with low-wage economies reduces the relative demand for less-skilled workers and their relative compensation

The less skilled work in non-import competing industries and if anything benefit from lower goods prices. The highest skilled or most privileged benefit from larger markets for their efforts. It is the middle class that suffer most.

The last thought is most apropos. Broadly shared and forcefully driven are antipodes.

Arthur Eckart

It would be difficult for the E.U. to have greater globalization without more flexible labor markets. However, Europeans may not tolerate massive job destruction and massive job creation, for a net increase in jobs, to lower their unemployment rates. Rapid and massive change cannot take place with their equality philosophy. Greater globalization means greater inequality.

The Europeans can benefit from a surplus of global labor. A large supply of Third World people are willing to work hard for relatively low wages, which can raise European living standards on both the production and consumption sides (e.g. greater profits and lower prices). Moreover, resources can shift into emerging industries more efficiently, adding to upward mobility, etc.

Arthur Eckart

In the 1970s, oil prices often spiked higher from supply shocks. However, in the 2000s, oil prices rose from increased demand (e.g. global production and U.S. consumption) and diminishing returns (since oil is being depleted). However, market forces are reaching more extreme levels to reduce imbalances.

In the U.S. production function, raw materials and energy are relatively small proportions of production costs, while export-led economies, e.g. China, use relatively large proportions of raw materials and energy in their production. The weaker dollar may cause a U.S. shift, e.g. from buying European autos to American autos, etc.

Below is a (partial) list of advantages and disadvantages of a weaker dollar and the latest Beige Book by the Fed.

http://www.dailyfx.com/story/topheadline/A_Weak_US_Dollar__How_1190910183231.html

http://www.federalreserve.gov/FOMC/BeigeBook/2008/20080305/default.htm

John Konop

American Economy: R.I.P. ?

CP-FROM Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review.

The US economy continues its slow death before our eyes, but economists, policymakers, and most of the public are blind to the tottering fabled land of opportunity.

In August jobs in goods-producing industries declined by 64,000. The US economy lost 4,000 jobs overall. The private sector created a mere 24,000 jobs, all of which could be attributed to the 24,100 new jobs for waitresses and bartenders. The government sector lost 28,000 jobs.

In the 21st century the US economy has ceased to create jobs in export industries and in industries that compete with imports. US job growth has been confined to domestic services, principally to food services and drinking places (waitresses and bartenders), private education and health services (ambulatory health care and hospital orderlies), and construction (which now has tanked). The lack of job growth in higher productivity, higher paid occupations associated with the American middle and upper middle classes will eventually kill the US consumer market.

READ MORE

http://controlcongress.com/uncategorized/american-economy-rip

John Konop

UNHOLLY ALLINANCE DESTROYING AMERICA

We have an unholy alliance between many leaders of the Republican and Democratic Party who have sold out our Country to finance their campaigns to maintain power. This policy may help the stock market yet has hurt the average American family. They have pitted Small business and Middle Class America against overseas workers and illegal immigrants with limited rights.

Adam Smith the one of the fathers of the free market system in his Book Wealth of Nations (which is used most universities economics programs) talks about the right of workers to negotiate wages as a key principal in a free market economy.

Yet both Parties with the help of many bought and paid for economist never mention this principal when they talk about trade or immigration policy. Economist and Politicians act baffled as to why real wages are going backwards around the world as we do trade deals ( NAFTA, CAFTA WTO CHINA…) with Countries that have workers who are treated like slaves competing with Americans. They are even more surprised as to why wages would be hurt by an unlimited supply of workers (visa) legal and (Illegal immigrants) illegal with very few rights also pitted against Americans.

The only solution is real trade and immigration reform that does not over supply our Country with workers and pit Americans against overseas child and slave labor.

Arthur Eckart

John Konop, U.S. real compensation has increased over 70%, since the early 1960s, while the disparity between overpaid union workers and underpaid non-union workers narrowed substantially. Also, U.S. living standards rose even higher on the consumption side, because of low interest rates, low prices, and capturing a disproportionate global share of real assets and real goods through free trade.

Even if U.S. real growth is zero over the next year, the sharp rise in U.S. living standards over the 2000s will at least be maintained, while household debt is paid-down and saving built-up (along with high income and employment), for the inevitable reacceleration of U.S. economic growth.

U.S. GDP was $14 trillion last year, including $5 trillion of manufactured goods, while U.S. exports were about $1.5 trillion (in 2000 dollars). Only 13 million U.S. workers were needed to produce $5 trillion of manufactured goods (see bottom table in link below). The U.S. is both the largest manufacturer and exporter in the world. Yet, the U.S. also leads the rest of the world combined in the Information and Biotech Revolutions (in both revenues and profits).

Currently, 20% of U.S. households earn over $100,000 a year, while millions of Third World immigrants raised their living standards substantially moving to the U.S. Consequently, there has been substantial upward mobility in the U.S. Perhaps, you can cite Adam Smith's belief of workers rights.

http://www.census.gov/mcd/exports/arp05.pdf

John Konop

Arthur Eckart

Nice Spin

Free Trade and Poverty

MSNBC-Newsweek-Many economists argue that free trade is a magic bullet—the quickest way to fuel growth and alleviate poverty. Yet free trade hasn’t much helped the 47 least developed countries in the world, the poorest of the poor. According to United Nations data, their share of world trade has declined sharply since 1950, and now accounts for a meager 1 percent of global trade volume. Collectively, the number of people living in abject poverty in those nations is expected to rise to 471 million by 2015—up from 334 million in 2000. Even East Asia, long the poster child for export-driven growth, owes much of its rise to government-led and -financed industrial strategies, as well as outright protectionism. Japan still impedes imports of foreign rice, for example, while South Korea blocks a variety of agricultural products.

This is not old-fashioned populism. Serious thinkers have concluded that neoliberal economic policies are little help to the world’s poorest nations. Columbia University economist and Nobel laureate Joseph Stiglitz argues that the WTO’s agenda as currently constituted should be scrapped.

Under the rubric “aid for trade,” the WTO has in fact endorsed initiatives that, ironically, resemble the protectionism and government-driven development the organization originally set out to dismantle.

READ MORE

http://controlcongress.com/uncategorized/free-trade-and-poverty

whit3hawk

Arthur Eckart, I'm not so much concerned with the distorted representation that your statistics give about real life, but whether your motivations are personal, to defend your position in a system within which you are amongst the privileged, or philosophical, which you assumed without in-depth inspection to avoid the pain of taking a real look, or whether you're merely parroting Greenspan, to whom we are dearly indebted for knowingly failing to avert the current international financial crisis... or some other more obscure motivation.

While 20% make in excess of 100,000 a year. in fact millions, the other 80% average less than 28,000 a year. Big gap. 70% since the 60's? You forgot to forgot to mention that inflation was much greater than the supposed gains. Also, you started at 100,000. Had you started at 500,000 you would have had to say less than 10%. Also a large number of these folks work in the financial sector, where money is created and bundles and bubbled beyond belief. Bigger numbers doesn't mean more units... a 12 inch pie, is 12 inch for a dollar of for $500.

$14 trillion GDP, with only $5 trillion of manufactured goods? How do you see that as a positive statistic? Ignore the fact that neither suggest increases in units of anything produced, just bigger numbers with no greater substance, a big portion of which 9 trillion left are financial sector transactions where the only REAL production is shuffling theoretical values, and imagined values.

Standard of living? I used to live in a nice rental with 8 rooms back in the sixties and through the early 70's, today I'm lucky if I can get a 2 bedroom hovel in a town sufficiently away from a large metropolis, where can afford it.

Getting down to motivations, I'm significantly concerned at how people can be faced day after day with a decaying nation, a decaying economic life, and dare boast of how well we are doing as a nation.

I'm a professional. Yet the economic badlands in our nation have forced me to change professions 5 times... the last one, I almost reached 90,000 a year... until our wise old men thought that sending my job overseas, where equally or lesser qualified young people would jump at trying to do my job for 1/10 the money paid to US folks. I'm not an isolated victim of strange circumstances. I've seen savings and retirement accounts of peers, in excess of millions, being eaten up and literally confiscated by trickle down economics theorists. How about doing the same with taxes... trickle them down as well? I can tell you taxes wouldn't trickle down; they'd downpour to soak the folks at the bottom. A trickle never reaches the roots that need it, so the American tree is on its way to becoming mighty dry.

Finally, 28,000 of the 50's and 60's could support 2 adults and 2.1 children, and afford a house. Today, one can barely do that with 100,000.

Do you still believe what they told us in school when they first saw the benefits of mechanization? The said, "Wow, when machines can do the work of many people, they'll be able to divide the jobs amongst the same people, who would only have to put in a fraction of the time for the same wages... We'd gain so much leisure time... which reminds me that to earn more, we've had to put in more hours, and take additional jobs, and sends our wives and children to work, and now we're putting in more hours than the Chinese are... and they put in about 12 hours a day 29 days a month.

Arthur Eckart

Whit, it's unfortunate people are duped by misinformation or project their personal misfortunes on the entire economy. Meaningless jobs are not in the fundamental long-run interest of an economy. Otherwise, most people would still be farmers. U.S. median household income was over $45,000 in 2005 (median is half earn more and half earn less). You may want to see the link below about U.S. living standards, over the past 100 years, to correct other false assumptions. Obviously, the increases in quantity and quality of output exceeded the rises of inflation.

http://www.bls.gov/opub/uscs/report991.pdf

John Konop

From EPI-that the economy isn’t working for working people. Does anybody really care?

* Unemployment rose in 20 of the Super Tuesday states between June and December, 2007.

* Median hourly real (i.e., inflation-adjusted) wages fell in 15 states from 2005 to 2006 and rose 0.2% or less in two others. Over the same period median household income declined or rose less than the national overall rate (1.5%) in 14 states.

* Employer-provided health insurance coverage declined in 18 states, leaving a growing share of the population uninsured in 19 states.

* In 22 of the 24 states, private-sector employer-provided pension coverage declined.

* While poverty declined by 0.3% in the nation as a whole from 2005 to 2006, the share of residents in poverty rose in 8 of the Super Tuesday states, with the largest rises in Arkansas (3.9%), New Jersey (2.0%) and Massachusetts (1.8%).

http://controlcongress.com/uncategorized/economy-not-super-in-super-tuesday-states

Arthur Eckart

Also, I may add, there are many misperceptions about the U.S. economy. For example, many believe the $2 trillion a year U.S. health care system is inferior or inefficient compared to the E.U. or Canada. In reality, the U.S. has a higher quality system. So, it costs more (e.g. higher skilled medical workers are paid more, more advanced equipment cost more, new treatments require more investment, etc.). I've stated before, the U.S. is a fragmented and diverse society. Poorer Americans typically see MDs, who graduated from less prestigious or foreign schools, while richer Americans often see MDs from top schools, although the U.S. has high minimum standards in medicine. Also, the U.S. education system is fragmented and diverse (U.S. per student investment in education is almost double compared to Britain and 50% more than Canada). Generally, it depends where people live in the U.S. (e.g. neighborhoods). A recent study showed those in the U.S. with some college have a life expectancy of 82, while those without college have a life expectancy of 75 (see link below). Moreover, the U.S. financial and retail (delivery) systems are most efficient, which many countries attempt to copy. U.S. tech firms are most advanced, while U.S. small business start-ups are promoted (most jobs are created by smaller firms). Of course, without productivity and flexibility in older industries, limited resources cannot be freed to shift into newer industries. So, the 13 million U.S. workers who produce $5 trillion a year of manufacturing output is positive, i.e. more output (in both quantity and quality) with fewer inputs is a positive economic goal.

http://health.msn.com/health-topics/articlepage.aspx?cp-documentid=100197958>1=31036

Arthur Eckart

http://health.msn.com/health-topics/articlepage.aspx?cp-documentid=100197958>1=31036

John Konop

Krugman comes clean on trade

Liberal NYT columnist/economist finally admits that soaring trade with low wage countries is driving down wages for most Americans. He still refuses to actually DO anything about it, but this sounds like step one on his 12 step trade reform detox. It’s worth a complete read.

NYT: …it’s hard to avoid the conclusion that growing U.S. trade with third world countries reduces the real wages of many and perhaps most workers in this country. And that reality makes the politics of trade very difficult…The highly educated workers who clearly benefit from growing trade with third-world economies are a minority, greatly outnumbered by those who probably lose… And lower prices at Wal-Mart aren’t sufficient compensation.

As I said, I’m not a protectionist. For the sake of the world as a whole, I hope that we respond to the trouble with trade not by shutting trade down, but by doing things like strengthening the social safety net. But those who are worried about trade have a point, and deserve some respect.

READ MORE

http://controlcongress.com/uncategorized/krugman-comes-clean-on-trade

Arthur Eckart

John Konop, how do you help households and firms, who really need help, without creating and promoting "moral hazards?" Some European countries use big government to give generous welfare benefits that promote immorality and have high "sin taxes" to reduce immorality. Giving on one hand and taking on the other is inefficient.

In the U.S., free trade makes the U.S. economy more dynamic. It destroys obsolete jobs and creates new jobs. However, free trade also creates job displacement. The U.S. has the highest ratio of high skilled/high paying employment in the world. Yet, there remains a shortage of high skilled U.S. workers, because it takes more time and effort to learn new needed skills. Perhaps, one way to help displaced workers is to give greater educational scholorships, grants, and loans based on fields of study (e.g. microbiologist or biochemist) rather than by income, race, sex, etc. Free trade drives down wages in some jobs. However, it also drives down prices and interest rates. The real economy is what's important. Free trade has been a huge net benefit to society, that even a politically-biased NeoKeynesian like Paul Krugman realizes.

John Konop

Free Trade or Fascism?

MSN-China, host of the summer Olympics, is an authoritarian nation that denies its people basic human rights and freedoms, harasses journalists and foreign aid workers and tortures prisoners, the United States charged Tuesday.

China is still among the world’s human rights abusers despite rapid economic growth that has transformed large parts of Chinese society, the State Department said in an annual accounting of human rights practices around the world.

Portions of the report were obtained by The Associated Press ahead of its release Tuesday. The report gives a chilling account of alleged torture in China, including the use of electric shocks, beatings, shackles, and other forms of abuse. It includes an account of a prisoner strapped to a “tiger bench,” as device that forces the legs to bend sometimes until they break.

Torture of Gao RongRong in the Longshan forced Labor Camp

WATCH VIDEO

http://controlcongress.com/uncategorized/free-trade-or-fascism

Arthur Eckart

It's a paradox that an overabundance of newer, bigger, and better houses, after an overextended homebuilding boom, is "distressing." I suppose if no houses were built, since 1995, Americans would be less distressed, e.g. living in a cardboard box on the sidewalk.

Houses, like autos, will get better and better. Most people don't understand the U.S. homebuilding boom was financed by massive foreign capital inflows and the U.S. profit boom, while overbuilding took place to raise U.S. actual output towards potential output. Consequently, Americans could keep buying massive quantities of cheap imports to keep export-led economies busy. U.S. banks, not U.S. households, are paying for the oversupply of houses, and the Fed is funding U.S. banks with cheap capital. So, ultimately, export-led economies pay, in part, because they're holding too many worth less dollars.

kraloyun

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It's a paradox that an overabundance of newer, bigger, and better houses, after an overextended homebuilding boom, is "distressing." I suppose if no houses were built, since 1995, Americans would be less distressed, e.g. living in a cardboard box on the sidewalk.

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It's a paradox that an overabundance of newer, bigger, and better houses, after an overextended homebuilding boom, is "distressing." I suppose if no houses were built, since 1995, Americans would be less distressed, e.g. living in a cardboard box on the sidewalk.

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It's a paradox that an overabundance of newer, bigger, and better houses, after an overextended homebuilding boom, is "distressing." I suppose if no houses were built, since 1995, Americans would be less distressed, e.g. living in a cardboard box on the sidewalk.

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