What do we make of this? Reuters: The Institute for Supply Management said on Monday its index of national factory activity rose to 51.6 last month from 50.6 in August. September marked the 26th straight month of expansion in a sector that has shouldered the broader economic recovery. Economists polled by Reuters had expected the index to edge down to 50.5. A reading above 50 indicates expansion manufacturing. A measure of factory employment rose to 53.8 last month from 51.8 in August, while production climbed to 51.2 from 48.6. Part of the long term rise in factory activity is a result of a weaker dollar, which makes American exports more attractive overseas. And there is no guarantee that what the factories are making will not simply end up as unsold inventory. But for the moment, the industrial sector appears to be one of the only bright spots in a gloomy economy. I mean obviously, with so many jobs shipped overseas or replaced by robotics, we'll never have the same percentage as we did in the 70's but this caught me by surprise.
It's good news, and it shows how resilient the US economy is (despite conservative defeatism). The way out of Great Recession and public debt is growth, not austerity.
I actually predicted this well before it appeared in the papers. The reason manufacturing is up is because of a weakened US dollar. Americans are less able to afford to import things from other countries, while other countries want to start buying more from the USA, before their US dollars that they hold become less valuable due to inflation. Because of the out of control spending and debt, people in other parts of the world are concerned about inflation of the US dollars they hold. Another factor is that real wages in the USA are falling. All the unemployed people are desperate for a job, and are now willing to work harder for less. This makes it less expensive to manufacture in the USA. While the increase in manufacturing in the USA is a good thing, it is actually more of a reflection of the severe economic problems. There is a sort of equilibrium. When a country suffers a severe trade deficit, the people get poorer. The poor people buy less, reducing the trade deficit. Eventually the poor are willing to work harder for less, and it becomes more favorable for that country to export to the rest of the world.
when you print hundreds of billions of dollars you are bound to have a slight increase in production temporarily!
No huge shock to me (when you think about it). Productivity is (to my knowledge) way up in America. Employees will do far more for far less then they did a few years ago. That lowers costs. Plus, the dollar (until recently) was much lower then it was about 10 months ago. That also lowers costs. http://www.bloomberg.com/apps/quote?ticker=DXY:IND U.S. exports are at record monthly highs. Unfortunately, imports are very near record highs as well. And since American workers are now making AND saving less (on average)...that means they are going further into debt to buy things. http://www.census.gov/foreign-trade/balance/c0004.html http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm
If a country maintains a trade defecit, the citizens of that country are slowly going to lose ownership over their land and businesses which they own. All the rents and profits from that land and businesses will no longer go to the people within that country. The "theory of comparative advantage" does not take into account that often a country's main comparative advantage is its capital or its limited natural resources, rather than a renewable product or service. Once a country begins to lose ownership of its capital, or deplete its non-renewable natural resources, its standard of living will decrease. The USA has been running a huge trade deficit with China. What is, and what will, China be getting in return? Americans will have to be taxed to pay back all their debt with interest. China is busy buying up international companies formerly owned by corporations in the USA. China is also buying up land in the USA, both directly, and through bank mortgages. All the interest payments on those mortgages, and the land rent, will go to the Chinese instead of Americans. All the profits Americans once got from all their foreign-based companies will now go to China. Many of these companies are natural resource-based companies, that own forests, ore mines, and oil fields. These are limited resources that Americans will not have access to in the future.
If the dollar gets weak enough, not only will exports improve but some manufacturing may begin to return from outsourced countries. I've been a fan of the weak dollar ever since government spending got out of hand right after the internet bubble. It shows how the market place adjusts no matter what the government does to try to control it. Of course we pay a high price for all of this since inflation caused by the government fooling with the money supply is about the same thing as taxation. At least the government doesn't get to spend it.
a weak dollar may help jobs come back to america, but it also means everybody's standard of living declines!
Yes, initially. But bringing manufacturing and jobs back to America increases the standard of living over the long haul. We've screwed it up. We need to pay a price to make it right again, I'm afraid.
so long as you realize there will be a minimum of 10 years of severe pain and many pension funds will be wiped out. Many people will lose everything.......but yes, long term if enough jobs come home then a new period of prosperity can come....assuming the government don't screw things up again!
The strength of a currency typically reflects the living standards within that country. Purposely trying to weaken a currency only increases exports through taking away the people's wealth, making them more desperate to work harder for less. This is exactly what China has been doing. China can get away with it because the government owns most of the land, and many large corporations. By "artificially" keeping the yuan undervalued, the Chinese government has actually been forcing the people to work harder to be able to use (or buy) the land. Lets try to look closely at what actually goes on. The Chinese government prints plenty of yuan notes to by dollars and euros, which it hoards in its treasury. If the Chinese people want to buy or rent land, they have to somehow obtain yuan notes. In any case, the people are taxed. The taxes are relatively "low", but most of the people are poor despite that. The only way to live a decent life is to somewhow get enough yuan notes, which necessitates finding ways to export products to obtain the yuan notes that the Chinese government has sold to foreigners. If the Chinese government stoped artificially undervalueing the yuan, it would be much easier for the Chinese people to afford to pay their taxes and to buy land. The whole currency control is just a reflection of the government "forcing" its citizens to work harder so that the country can have a trade surplus.
If you can do that and not have any appreciable inflation, then do it. It's a success story. But of course your meme is false, as usual. The US government would have no debt if we just printed money to pay expenditures. We don't.
and thats exactly what zimbabwe did and also Poland and a host of other goverments throughout the world.......sure you can print away the debt.....if you dont mind paying 2,000 dollars for your weekly groceries and 1,000 dollars to fill up your car
