A sign of just how shakey this "recovery" is ...

[IGBT]

there is no recovery. your obama knows nothing about economics and job/wealth creation. his willing accomplices in the media fail to report the facts and cover his lies.

 

[MJinZ]

People can't afford to buy gas to go to Walmart and buy cheap stuff, but they can afford to go to Target and buy more expensive discretionary items: http://online.wsj.com/article/BT-CO-20100519-708889.html

Makes total sense. We need to feed our minds and enrich ourselves with shit like iPads. Ignore the poor giant companies like Macromedia.

 

[dawks]

No one's denying that protectionism works for us, but what about the poor people on the other side of the planet? They're all so sad and hungry!

I might 'work' in the short run (1-3 years), but it only slows economic growth in the long run. Look at Russia, North Korea, etc. Protectionism is BAD overall.

Then again, ignorance is bliss.

 

[yllus]

Protectionism works.

Proof? Data?

 

[HendrixFan]

Protectionism works.

Not historically speaking, not long term. There may be some short term benefit to it, but time will erode those benefits and make it a loser.

 

[theeedude]

Need more stimulus.

 

[WhipperSnapper]

No one's denying that protectionism works for us, but what about the poor people on the other side of the planet? They're all so sad and hungry!

They need to figure out how to organize their governments and society so that they can have economic prosperity independently of other nations. They need to figure out a way to produce wealth so that they can consume it themselves, not send it off to other countries or at least to be able to trade what they produce in exchange for an equivalent value from other countries.

 

[MJinZ]

Not historically speaking, not long term. There may be some short term benefit to it, but time will erode those benefits and make it a loser.

IT depends on what you mean by short term. Japan has been doing OK for itself.

 

[WhipperSnapper]

Plus we're trying to set up a health system like the one that bankrupted Greece. Nothing like taking on a massive expense when you're hurting financially.

Our nation's health care is definitely not helping. Just about every other first world nation is able to provide health care to its people for a far smaller percentage of its GDP while having zero medical bankruptcies and without businesses being burdened by insurance concerns. Instead we're spending about 17% of our nation's GDP on health insurance and that number will only continue to rise all because we're afraid to adopt real socialized medicine.

I really don't think there's much hope for this country. Our nation's thrid world character seems to be increasing every week. The middle class is being eroded and wealth is concentrating in the hands of the upper classes.

 

[thegimp03]

Well the market is down 200 in the first 15 min and the goverment thinks we out of this recession and happy days are here ppffftttt.

I'm not defending the government here but the stock market was due for a "correction" after nearly 14 months without one. I think the correction has been roughly 10% in the last 3 weeks. With ~9.5% unemployment there's no reason for the government to be thinking happy days are here.

 

[WhipperSnapper]

there is no recovery. your obama knows nothing about economics and job/wealth creation. his willing accomplices in the media fail to report the facts and cover his lies.

Is his lack of knowledge about job and wealth creation all that much different from that of the Republicans--those nice folks who support foreign outsourcing, H-1B and L-1 visas, and mass immigration?

 

[yllus]

IT depends on what you mean by short term. Japan has been doing OK for itself.

Lost Decade (Japan)

 

[sandorski]

The thing that people do not understand about analysts is that you can make your numbers project whatever you want as long as you have the info to back it up. You can omit the info that goes against your analysis and make it look right. With something as big as the economy, you can pretty much just pick and choose info to support your argument.

Some Analysts are going to be wrong, but why should I choose your Opinion over that of an Analyst?

 

[WhipperSnapper]

I might 'work' in the short run (1-3 years), but it only slows economic growth in the long run. Look at Russia, North Korea, etc. Protectionism is BAD overall.

Then again, ignorance is bliss.

Russia and North Korea had a huge amount of other problems, like <cough> being communist.

Why don't you make an economic argument to explain how free trade and global labor arbitrage is good for us. You might want to keep in mind Paul Craig Roberts' explanation of how comparative advantage no longer applies to international trade because the precondition of capital immobility is no longer met. See:

http://www.vdare.com/roberts/050520_hearing.htm

Comparative advantage has two necessary conditions, neither of which is met today. One condition is that capital is immobile internationally relative to traded goods. The other is that the trading countries have different opportunity costs of producing the traded goods. (The economic concept of opportunity cost is an in-kind measure; for example, the quantity of wine that is not produced in order to make a yard of cloth.)
The condition of capital immobility is required to insure that a country's capital seeks comparative advantage at home instead of absolute advantage abroad.

If you can explain how merging our labor market and our economy with the billions of impoverished people in the world is good for us--how it will actually result in a higher standard of living for Americans--you might win a Nobel Prize and the media and our politicians will shout your explanation from the rooftops.

(Even uber-capitalist philosopher George Reisman was unable to convincingly explain it to Paul Craig Roberts during a debate that occurred years ago on the Ludwin von Mises forum.)

 

[HendrixFan]

IT depends on what you mean by short term. Japan has been doing OK for itself.

They export like crazy, which we don't/won't do. Not sure where exporting jives with protectionism, but I think that comes down to semantics. Japan is the whipping boy on this forum for a struggling economy and low debt load as an excuse for the US to deficit spend, so I'm not sure they are seen widely as something we want to emulate.

There is also plenty of room to debate that will a low debt load (and little money needed to service that debt) in conjunction with a trade surplus that Japan should be doing better than "OK".

The notion that walling yourself up and ignoring the outside world would be beneficial long term for any aspect of life is pretty silly, much less economics. If we are struggling to compete in a global marketplace it is because we need to improve our worth, not limit our competitors to make ourselves artificially better.

 

[WhipperSnapper]

Proof? Data?

It's not so much that protectionism works as much as it is that Global Labor Arbitrage can be an economic disaster. You might say that, "Protectionism isn't good, but merging your nation's labor market and economy with that of billions of poor people is far worse."

Ideally all nations would have healthy economies and similar environmental protections and labor laws and wouldn't have huge amounts of poor people willing to work for $1/day in which case protectionism might be detrimental. However, by merging our labor market and our economy with the billions of impoverished people who live in India, China, and Mexico, the result will be an averaging out of the standard of living and quality of life amongst those nations. The amount of poor people in the world more than drowns out the amount of middle class people, so you can do the math on what an averaging out of the standard of living would look like.

How is that for a "proof"--using the simple logic of the supply of labor and the demand for labor (capital, factories)? When the supply of labor increases almost infinitely over night relative to the capital that can use that labor, the price point--wages, purchasing power, standard of living--must decrease.

This averaging out of the wages, purchasing power, and the standard of living is what is called Global Labor Arbitrage.

 

[MJinZ]

Lost Decade (Japan)

We're in it right now. 2008 - 2018.

 

[dmcowen674]

So who are you supposed to believe? In this case, Bentonville. When Wal-Mart (WMT, Fortune 500), an economic bellwether, notes that customers can't afford the gas to get to the stores and that they're increasingly using food stamps when they get there, things are bad."

At least we don't have Bush and McCain telling us "The Economy is strong"

 

[dmcowen674]

What confuses me about the analysis of the economy is the unemployment numbers. They state that unemployment claims are going down, but most of the people I know that are unemployed have been so for a year or two, so they can't claim unemployment anymore since they are beyond their extensions..

Do they count in them in the unemployment numbers?

There are not as many NEW unemployed people, but there aren't many new jobs either.

I've never known so many people on unemployment at one time, and just this year school districts have started laying off tons of people due to lack of state funding, so that's a whole new set of people without income. I've been laid off 2 times in the past 3 years, and this year I just barely kept my job, but my boss has notified me that next years school budget is projected to be far worse, so I may want to keep that in mind. Only problem is that if I move, I'm still just as likely being cut being the most recent hire. Given my track record, I'm a little hesitant.

IMO, we are in for a bad next 5-10 years.

When they run out of Unemployment they are counted as working.

Many are now admitting the unemployment rate is well over 20% and climbing fast.

 

[WhipperSnapper]

They export like crazy, which we don't/won't do.

My understanding is that the Japanese have an industrial policy that protected high-end, high-value-added, high-tech manufacturing.

Not sure where exporting jives with protectionism, but I think that comes down to semantics. Japan is the whipping boy on this forum for a struggling economy and low debt load as an excuse for the US to deficit spend, so I'm not sure they are seen widely as something we want to emulate.

There is also plenty of room to debate that will a low debt load (and little money needed to service that debt) in conjunction with a trade surplus that Japan should be doing better than "OK".

Nations that engage in trade protectionism would be happy to export goods. They don't want to import them.

When looking at Japan, it's necessary to take bad economic reports with a grain of salt. As financial writer Eamonn Fingleton (who lived in Japan for decades) points out, the Japanese are like pessimists who downplay good news. That is to say, they are liable to claim that their economic situation is much worse than it is because they are a reserved, humble people--a state of mind and an attitude that is completely different from that of optimistic Americans who are more likely to brag and puff up a situation. Also, the Japanese don't want other nations to ask them to remove their own trade protections. By claiming that the economy is bad they can be left alone.

See: Japan's Phoney Slump -- very interesting read.

JAPAN'S PHONEY SLUMP By Margaret Legum

As everyone knows Japan has been in a 'slump' for the past decade or more. Which goes to show that the cosy mercantilist version of capitalism practised there produces worse results than the American-led free market model. Really? It seems neither of these is true - rather the reverse.


In an article for the British magazine Prospect, Tokyo-based writer Eamonn Fingleton questions both of them. He also suggests that the Japanese have encouraged these myths, and the Western establishment and financial press have generally swallowed them. His work is supported by that of Doug Stuck of the Washington Post.


First, the facts. The Japanese economy is the most income-equal of the developed countries. This is important. It has in fact thrived over the past ten years. Japanese consumers are probably the richest in the world. About 2.2 million more households now own a car than a decade ago. Domestic sales of sophisticated electronic equipment rose by 17.6% in 2002 alone. Household ownership of video cameras grew 136% in the 11 years to 2001; while mobile phone subscribers increased from nearly zero in 1993 to 67 million in 2000. Every household has a colour television, 90% has a microwave oven, 40% a computer and 39% a set of golf clubs.


Unemployment has ranged from 4.5% to 4.9% - roughly similar to that in the States. The number of Japanese holidaying abroad rose from just over 8 million in 1989 to 14.6 million in 2000 - a rise of 79.9%. In terms of life expectancy Japan surpassed Sweden and Switzerland in the 1990s to lead the world, having added 1.5 years to average life expectancy.


The Japanese work less hard than the Americans to achieve higher incomes, more savings and better health than the Americans. The average working week is five hours shorter than Americans'. They also pay less tax - less than 20% compared to 26%. Yet health care is virtually free; and nearly every ward in the cities has a public swimming pool and playgrounds. The rate of heart attacks is a third of that in the US, the divorce rate half, the crime rate one-third and murders are one sixth of the American. Homelessness is rare in Japan where they also read twice as many books per capita as do Americans.


Why is this? Why is an economy that is supposed to be in a recession producing the goods for its people? Doug Stuck thinks that 'Japan's public and corporate officials have largely resisted the route so often urged by the US to cut their losses, cut their workforces, and let companies go bankrupt. Japan balks at the US model wherein highly paid CEOs rescue a struggling company by throwing thousands of its employees out of work. Instead, workers keep their jobs while the companies limp along. It may be inefficient capitalism, they say, but workers have jobs.'


The result is that the financial sector of the economy - the owners of capital - do less well in Japan than under the US model; and it is strains in that sector that are of interest to the conventional economic establishment and the financial media. But Japanese financiers take a longer, and less speculative, view of their investment. They have continued to invest heavily in capital-intensive industry and in infrastructure. A record 2.2 million square meters of new office space will be completed in 2003 in Tokyo - more than was contained in the Twin Towers. Tokyo's sewerage system has been transformed in the past decade.


This means that, during this period of 'recession', Japan has overtaken the US in terms of high technology, including components for the supercomputer industry, and optical fibre networks, which demand large reservoirs of highly sophisticated proprietary know-how. Japan makes the purest silicone in the world - a vital component for supercomputers.


Why has Japan managed to defy the conventional wisdom that an economy must put the financial sector's interest above all others? Essentially it is because Japan manages her economy - both trade and investment - to suit her own long-term interests. Notoriously she defies the rules about opening her trade in sectors where she is not competitive. She does not rely on foreign investment; indeed for decades Japan fiercely resisted American attempts to open Japan's financial markets to foreigners. The result is a benign circle of expansion in which Japan has become an exporter of capital. Its net foreign assets have nearly quadrupled in the past twelve years.


The current account trade surplus totalled $987 billion in the 1990s - 2.4 times the total for the 1980s, when Japan was regarded as the 'unstoppable juggernaut' of trade. The yen, you may be surprised to hear, far from declining against the dollar, has risen by 19% since the Tokyo financial crash. The savings rate was 14.9% of GDP in 2001, which means Japan accounts for nearly 30% of all new savings in the OSDC group of rich countries. Government debt, widely described as 'out of control', fell from 6.0 to 1.6% of GDP between 1993 to 1998. Only 6% of government debt is owed to foreigners; while the US borrows abroad $4 billion a day to finance its debt.


Why, then, do the Japanese collude with the 'slump' idea, constantly bemoaning its own failures. Fingleton suggests a number of reasons. Chief among them is that 'the myth has brought Tokyo's trade bureaucrats a full decade of undeserved peace': they have been able to resist demands for reduction of trade barriers. 'For Japanese economic planners the benefit of the basket case story has been its effect in cooling the West's once dangerous anger over Japanese trade policies'.


Fingleton also suggests that 'bad-news propaganda' is something of a traditional Japanese weapon. 'In the 1930s the Japanese military let it be known that Japanese soldiers couldn't shoot straight and that Japanese tanks were made of paper…' Whatever the reasons - including poverty-pleading when asked for aid, and for second world war victim compensation - it is time we looked behind the smokescreen for some tips about how to grow an economy.

The notion that walling yourself up and ignoring the outside world would be beneficial long term for any aspect of life is pretty silly, much less economics. If we are struggling to compete in a global marketplace it is because we need to improve our worth, not limit our competitors to make ourselves artificially better.

We're struggling to compete in the global marketplace because it's almost impossible to compete against hard-working impoverished and often college educated people who are willing to work for 1/20th of what Americans are willing to work for (in terms of income, environmental protections, labor protections, workplace environment, standard of living, etc.)

It's not that Americans have suddenly become lazy and incompetent as many Conservatives like to believe. Rather, it's simply that it's hard to compete against fifty cents an hour with no environmental or labor regulations.

 

[WhipperSnapper]

What happens to new college graduates who can't find jobs. Do they get counted as "unemployed"?

 

[HendrixFan]

If you can explain how merging our labor market and our economy with the billions of impoverished people in the world is good for us--how it will actually result in a higher standard of living for Americans--you might win a Nobel Prize and the media and our politicians will shout your explanation from the rooftops.

I'll give it a shot, but it isn't anything that others haven't talked about before like you claim.

Historically, as markets for trade have opened up a boom followed for those involved. Allocation of resources was brought closer to optimal. The same reason that farmer Ted growing corn and farmer Joe growing wheat allows for more productivity and more food for the both of them, is the reason why opening up trade with billions of others is good. Allocation of resources. You have the raw materials that earth creates, you have the labor that turns raw materials into goods. Expanding markets allows access to more raw materials and more labor. Raw materials are being "wasted" when they sit there doing nothing, same with labor. The notion that we are just dumping labor to other countries and receiving nothing in return isn't accurate.

There are many things wrong with what the US is doing economically, and I think some of those things are being ignored while people blame free trade. The middle class has been weakening despite increases in productivity. There is a concentration of wealth going on. There has been considerable GDP growth and the US is by far the leader in the world in GDP over the last 20 years that free trade has been booming. Despite that, the money is flowing to less and less people. The problem isn't that the US isn't getting enough of a piece of the world's pie, it is that too few in the US are getting a piece of the US's pie.

The same argument for free trade is the same argument for technology, and we are all here on computers right now aren't we? Technology makes jobs obsolete. Doesn't that mean job loss and lower standards of living? Not at all. In fact it is the exact opposite. Technology makes things more efficient and improves standards of living. New jobs replace older jobs, but efficiency is the key, as that is where you see the gains. Free trade allows greater efficiency, which is why things will get better overall.

 

[WhipperSnapper]

Here's another good read:

America's Postindustrial Nightmare? A Conversation with Eamonn Fingleton

 

[sandorski]

My understanding is that the Japanese have an industrial policy that protected high-end, high-value-added, high-tech manufacturing.



Nations that engage in trade protectionism would be happy to export goods. They don't want to import them.

When looking at Japan, it's necessary to take bad economic reports with a grain of salt. As financial writer Eamonn Fingleton (who lived in Japan for decades) points out, the Japanese are like pessimists who downplay good news. That is to say, they are liable to claim that their economic situation is much worse than it is because they are a reserved, humble people--a state of mind and an attitude that is completely different from that of optimistic Americans who are more likely to brag and puff up a situation. Also, the Japanese don't want other nations to ask them to remove their own trade protections. By claiming that the economy is bad they can be left alone.

See: Japan's Phoney Slump -- very interesting read.





We're struggling to compete in the global marketplace because it's almost impossible to compete against hard-working impoverished and often college educated people who are willing to work for 1/20th of what Americans are willing to work for (in terms of income, environmental protections, labor protections, workplace environment, standard of living, etc.)

It's not that Americans have suddenly become lazy and incompetent as many Conservatives like to believe. Rather, it's simply that it's hard to compete against fifty cents an hour with no environmental or labor regulations.

Ya. It seems odd how much the Japan's Lost Decade gets thrown about. Once you look at the People of Japan the idea of Hard Times seems to vanish. The average Japanese person is living a hell of a lot better than the average American, even before the recent Recession began.

 

[HendrixFan]

Here's another good read:

America's Postindustrial Nightmare? A Conversation with Eamonn Fingleton

I like what he is saying. Two key points (IMO) are short term versus long term and productivity. When a company offshores labor and keeps the difference in profit that is a failure in which free trade is a scapegoat. This is why a concentration of wealth is happening, and long term the companies who engage in such activity won't survive. Companies should be producing something. Anything. Many of the giants in today's economy don't produce anything but just leech off of others. They make money off of valuations, but aren't actually producing anything for consumption. They take the work of others, skim off the top (and in large portions) then put it back out there.

For the US to be competitive in a world wide marketplace we have to actually make something that has value, and keep the long term stability and strength of a company in high regard.