The ‘Root Cause’ of the USA’s declining economic status~

The ONLY government activities that have an effect on the private economy is when the government hires more government workers or the government spends taxpayer money to consume products and services produced by the private sector.

Since we can believe that government will generally create tax policy that will not negatively effect the economy, we should not worry about tax policy.

Profits and growth and wealth are a few reasons why the private sector has an incentive to create jobs...but the private sector cannot increase jobs until there are growing and sustained demands on it's products and services...

 

We have a floating exchange rate system now, the fixed exchange rate died in the 70s. The manipulation we do here would devalue our currency abroad relatively if they didn't play the same game. Your point is accurate, but the cause is debt monetization. Backing money with gold can still be as easily manipulated. What they should do is allow people to exempt income from the sale of gold assets (people who hold gold as retail or modified inventory get no exemption etc.,), so it is a true hedge against inflation. But you can argue that for any commodity really. Stocks too. They should also tie deductions to inflation etc.., only when everyone can get a credit equal to inflation will governments stop printing money to invisibly tax people.

 

What? This is America we fly the b2 bomber we can build anything we want. The truth is we have moved past assembly line labor. No point in training a workforce to make china money. Do you see what that labor is worth? That is why we don't bother creating those jobs.

 

I was thinking about a manufacturing company of the 50/60's in the USA in which most of what they were producing was done inside of their facility(s). And what didn't make sense to produce inside their facility(s) they probably sourced from other US companies. So these companies had machine shops, sheet metal shops, injection molding, electrical shops, paint shops, etc. But in parallel there were these same shops set up as separate businesses serving the smaller business needs...like a machine shop. I'm guessing costs and quality at a large company for a machine shop part was challenged by an outside machine shop vender promising better quality and lower costs so the larger company begins 'outsourcing' their machine shop needs in which they get quality parts, on time, at a fixed cost. Over time, this same process happened to nearly all of the manufacturing processes, between government regulations, company inefficiency, rising costs, management and union issues, etc. simply made it easier to depend on outside services. Well...who would have guessed that off shore someplace they also opened machine shops, with state-of-the-art equipment, and they proved they could produce the same parts for much lower costs...outsourcing! So now the larger companies started using off-shore companies and stopped using US companies...hence today there are few machine shops in the USA. But, while originally to go off-shore it required high volume purchases, quickly the off-shore companies figured out how to also provide very low quantity parts...so then larger and smaller US companies now had an easy time outsourcing. We can imagine as long as there are cheaper labor and material markets in the world, most of this work will not come back to the USA. Multiply this scenario across most every large and medium and small business across the USA and this surely had a huge impact on American jobs. For the engineers in this forum I'd also like to make note that in the 40's to the 60's our products and processes were mostly analog meaning this required some skills and art but along came the digital world which means a machine shop in Taiwan with the right equipment can produce the identical part that is made in a US machine shop and the data can be transmitted to Taiwan in minutes! The digital age simplified everything in terms of materials and manufacturing for example the difference between an analog clock and a digital clock. So today we are feeling the effects of this manufacturing and technology transition from our local systems of the 50/60/s to the global systems of today...and...there really is no turning back!

BTW; nothing mentioned above was initiated by evil democrats, or evil republicans, or evil profiteering corporations, or evil Reagan, or evil Clinton, or evil Wall Street; it's the natural business evolution to remain competitive in the global marketplace...

 

I think that is competitive advantage and progress though in addition to government inefficiency. However many of those professions are skilled and the unions blocked new entry to the workforce around that time with a nice min wage bump. Hard to train machinists now. My neighbor runs a machine shop as it turns out. He makes parts and they get sent overseas for mass production. Steam boilers valves and what not. They get paid big bucks but he is 80 and his employees are nearly his age too. They haven't found younger trained workers so they will just close when they retire no one has the experience to buy in. He makes six figures as an owner operator.

 

So if you were a kid getting started today, would you set your sights on working in a cutting-oil soaked machine shop or in a Google facility with a computer? I'm a farmer and it's almost impossible to find day labor...Americans don't want the migrant workers doing it but Americans won't do it either; who wants to be a farmer when they can work at Google or do nothing? Every single day when more stuff is outsourced somewhere outside of the USA, these are jobs leaving that will never come back. It's not clear what industry or technology can take over for this 4-decade old loss of US jobs? Google and Microsoft and Apple and others now outsource employees; they can't find them in the USA so they open facilities around the world where they can find what they need, or bring them into the US on green card visas. And is the USA producing smart kids out of public education, or giving all kids an opportunity to attend college or a trade school...absolutely not. Again, none of this stuff is political; it's all about global competition and survival...

 

I don't agree, it's about value, society and employers don't put much value(wages) on physically difficult dirty jobs but are more than willing to reward people with less demanding office jobs, who the hell wants to slave away in a farm field in the heat/cold/wind/rain for minimum wages when they can be sipping cappuccinos in their cubicle at Google? what's wrong with rewarding people adequately for difficult jobs no else will do...

it's not that google, apple and microsoft can't find employees here to work for them they prefer outsourcing, why pay an american or canadian top dollar when someone in India will do it for the same pay we give farm labour, there's no need to have them on site and there are no benefits to pay...what it all comes down to is the 1% and protecting corporate profits through globalization...the only safe jobs will be those that can't be outsourced, those that require hands on site ability, farm labour, technical trades, medical profession etc...

 

I am a fisherman I hate the office environment. I would rather be a machinist. I know what you mean though. The first time in the swamp sorts out my field and office crew.

 

Except that your "facts" about the Fed are totally wrong (the Fed is not privately "owned"), you wrongly attribute control of the economy to the Fed, and your solutions are silly (you want Congress to control the money supply?), good post.

 

Non-Logarithmic scale always distort growth to make recent growth look stronger because the proportion change is magnified.

For example, in the chart above, when you look at it, it looks like the money supply has just exploded over the past 20 years, right?

But that is because the larger scale of numbers in recent years diminish the apparent effect of earlier.

But when you look at the percentage changes, you get a completely different story. In 1991 the money supply was at about 1.8 trillion, and increased to $7.3 trillion in 2011. about a 300% increase.

When we go back 20 years earlier, although the graph makes it appear much less volatile, we see the money supply growing from about 0.4 trillion in 1971 to $1.8 in 1991. That is about a 350% increase.

So while the chart makes it appear as though the money supply has growth so much faster in recent years, in through it has not grown any faster than the previous 20 years.

You always have to be wary of charts of unadjusted data over long periods of time because of this kind of distortion.

 

The premise of this thread, and of the many posts that accepted it, is that there has been some great "declining economic status" in the US. Unless you just focus on the recent recession, that is, IMO, a faulty premise.

Of course we have just been though the terrible consequences of a horrible housing price bubble and collapse. One that certainly wreaked havoc on the economy.

But aside from that, there has been no great economic decline in the US. For the 30 years ending 2007, real economic growth average about 3% per year, in line with historical averages.

It just feels like there's been a decline to most of us, because over the past 30 years, almost all of that growth has gone to 10% of us, and mostly to only 1% of us.



Trickle down worked great at making the rich richer. It just didn't "trickle down" on the middle classes.

 

The idea that people are not willing to work is a false meme. There is indeed some people who shirk all work but there are some who try to conflate this into a perception that all people who are not working are shirkers and so deserve no sympathy or help.

It takes some time for people to find a working environment they are comfortable with but the circumstances of existence and pressures of everyday survival often curtail the ability of most people to do that. As a result there are huge numbers of dissatisfied people feeling that they are trapped into doing jobs that they hate. The ones who can escape this trap are those who are willing to risk everything on a blind leap into adventure and these are few and far between, as can be expected in a developed society.

The world has changed drastically in the last few decades but the US is manufacturing far more goods with one tenth of the labour it used fifty years ago. These days many entry level manufacturing jobs require degrees in mechanical or electrical engineering or at least journeyman level training in the trades because almost all of the manual work has been automated and working in a factory is far more about maintaining the assembly line than standing on it.

My advice to kids these days would be to become and engineer but if college is not possible, an electrician or plumber if they want to work in a job that will pay well for their entire life. The last of the union trained workers are retiring and the decades long right wing jihad against the trade unions caused them to abandon their training programs over a generation ago as they were pushed out of work and saw no future for their children and sent them to college instead. Those concerned with decimating the unions gave no consideration to the long term consequences of their actions but the loss of an entire generation in these trades is becoming increasingly apparent, and expensive. There is such a massive shortage of trained electricians and plumbers and welders and other skilled trades that their non-union wages are now higher than the old union wages would be while union wages have skyrocketed as more firms sign up with them just to insure a guaranteed workforce. It was estimated in 1998 that there was an immediate need for over 500,000 electricians and 400,000 plumbers and the lack of them is holding up $50Billion in construction projects a year. This has more than doubled. Private and public training institutions have stepped in to fill the gap but they are expensive to attend and graduates expect wages that will allow them to repay the cost. Even so there is no way to replace practice and it will take them some years to attain the practical skills of a journeyman and even more to become a master. The old timers are retiring and many new skills are required, we can only hope that the youngsters show up in time for the oldsters pass on their knowledge.

I work in construction. There is very few youngsters working in our trade. Our youngest finish carpenter is almost 50, some are in their 70s. The trade starts with labourers who learn their skill over a long time. Some years ago our labourers were replaced by immigrants who will work for less and seem to have no desire to learn. We really wonder what will happen when we all retire because a lot of what we do comes through a very long line of know how passed along from generation to generation. These are things that can only be learned by being shown and explained and demonstrated and practised over and over again across a huge variety of circumstances.

You can't outsource that or learn it on line and it is something that will always get you a good paying job anywhere, more than enough to live a comfortable life.

 

Wages and value have nothing to do with the type of work being done except in a few cases. Unless you can get Americans to pay $30 each for watermelons there is no way possible the farmer can pay higher wages! Even with current wages between $8 and $16/hour for farm workers this labor cost is already a problem so many are turning to more mechanization which means less jobs. And if I go to the labor hall and ask for 5 workers and pay them $12/hour, and some at the labor hall to compete for work will say they'll do the work for $10/hour, then why pay $12/hour when workers are willing to work for $10/hour? It's not about 'rewarding' workers?? It's about the supply and demand of labor and what the marketplace will tolerate.

You are wrong; high tech and other companies CANNOT find enough qualified workers in the USA...they simply are not available. Yes sometimes off-shore wages are lower than in the USA but it's not FREE to do business long-distance.

Again you are wrong about 'the 1% and protecting corporate profits through globalization'...if Company A is your competitor and uses lower cost labor and materials, therefore providing the same products for less cost to the consumer...how are you going to compete with Company A? Your ONLY choices are to use the same lower cost labor and materials, stop producing the product, or close the doors.

Sorry to say you are also wrong about what can be outsourced. Farming is more and more mechanized. Technical trades; don't know what you mean? Medical work can now be done over the Internet, maybe one doctor assisting much lower level medical technicians over the Internet. A business is either viable or it is not...if labor becomes the problem, business will figure out how to function with less labor...

 

that's an ego centric viewpoint, americans want everything cheap at someone's expense, only an american's work is of any value...american's want cheap goods from overseas manufactured by someone making a dollar a day but want to sell american products made by people making $30 per hour...maybe those watermelons are worth $30 each...you think $30 for a watermelon is ridiculous go to the Philippines and see how difficult it is to buy a jar of american made peanut butter on a Philippino's daily wage, that would probably be the Philippine equivalent of a $30 watermelon...

I'm not, the US is no different than Canada, we have tech workers being laid off and their jobs outsourced to India

I'm wrong am I? ...then you proceed and back up exactly the point I was making...

technical trades, plumbers, electricians, lab techs, and hands on jobs that require tertiary training...

 

That's because it's a geometric progression, and is curved that way.

 

Constant sabotage by the minority Republican Party, who will have dominance or slump.

 

It's not 'ego centric'...it is reality.

Don't be surprised to see much of the work done by plumbers and electricians being outsourced in the future. Innovations make this work easier, requiring less labor. Someone will figure out how to design standard components of an electrical system, produced off-shore, shipped to the site and simply installed needing only 10-20% of the labor. Yes there will always be some percentage of labor at the local levels but I suggest never underestimate the future in terms of producing cheaper and better stuff which requires much less labor.

 

And because of that gives an unfair and distorted picture. That is the point.

 

Actually it goes much further than that. There is some people experimenting with using large scale 3D printing to make entire houses one layer at a time. I know about one being built in the Netherlands and another in the US right now.

This is the future of construction. Assemble a massive printer, program it with the Cad drawings, feed it with raw materials and it will make you a house, or a factory, or a skyscraper. I can easily see this becoming a common method for the construction of large simple buildings by 2050, like those needed for manufacturing, warehousing and big box retail where the plumbing and electrical is applied rather than built in, which repetitive rote work can be done by fairly simple mobile robots.

 

"The ‘Root Cause’ of the USA’s declining economic status~"

1.) foreign outsourcing of American Jobs

 

agree, were gonna have to adapt to a society were there is not enough jobs for enough people, it's gonna be interesting how our children answer this problem

 

That had been going on for years and we were doing great up to 2001 and doing OK up to 2007. There was no sudden mass outsourcing of jobs in 2008 that caused the unemployment rate to jump from about 5% to 10%.

- - - Updated - - -

The real problem we are going to have is finding enough people to work the jobs when the boomers start retiring en masse.

 

the war kept it hidden, all those people left the job market to go to fight in the war happened around the same time as the jobs were leaving overseas

.

 

How did the war keep it hidden?

You'll have to show me evidence that there was some great upsurge in outsourcing in 2008-09 for me to believe that. I'm not aware of such an occurrence.

 

I saw it all around me, not sure how to prove it to you, but many of the corps I worked for were outsourcing many of their customer service and IT jobs overseas, when did you start to notice foreigners answering the phone when you called into customer service, that is when it happened -- oh and walmart has not helped local economies either

when was it Bush tried to Outsource Port Security? 2006?

http://www.cnn.com/2006/POLITICS/02/20/port.security/

"WASHINGTON (CNN) -- President Bush on Monday faced political pressure to block a deal that would give a United Arab Emirates-based company management of six major U.S. seaports."

how did the war hide it, think about it, if you brought ever soldier back tomorrow, how many would need jobs? as they were leaving to go to war the reverse was true, common sense
.