Currency War

[Uncle Ted]

Brazil can feed itself and can export energy well beyond its consumption. If they get this new dam built, they will be primed. Petrobras is constantly finding offshore fields, sugarcane ethanol is actually worth it, and most cars in Brazil can run on gas, gas/ethanol, or pure ethanol.

Oh, and the World Cup and the Olympics are heading onde Judas encontrou as botas.

The US needs to stop subsidizing corn and adding huge tariffs on cheap imported sugar cane ethanol. Now that John McCain isn't running for president the truth about corn subsidies comes out.

Corn ethanol is actually quite costly. We may need all the corn we can grow for food.

[EuropeanFootballMale]

The other thing I remember from the 1980's was the 100% assured fact that the Japanese were unstoppable and the U.S.'s days as a world economic power were over. I don't guess I'm going to start trying to get Chinese or Brazilian citizenship just yet.

[NorthwestUteFan]

Ted, we see eye to eye on the ethanol issue.

Soccerman, don't worry too much about the Chinese. Their population in 20-30 years will be very, very old with only a small portion of the population in the 18-40 yr old age range and a very large portion of the population in the 50-80+ yr old range. They also have something like 30M - 40M more males than females, so they won't have a baby boom to fill in the gaps (unless they somehow import females - and 'mixed marriages' to non-Chinese people are still a big cultural taboo). Their economy will be strong, then it will wither under its own weight.

[KillerDog]

Ted, we see eye to eye on the ethanol issue.

Soccerman, don't worry too much about the Chinese. Their population in 20-30 years will be very, very old with only a small portion of the population in the 18-40 yr old age range and a very large portion of the population in the 50-80+ yr old range. They also have something like 30M - 40M more males than females, so they won't have a baby boom to fill in the gaps (unless they somehow import females - and 'mixed marriages' to non-Chinese people are still a big cultural taboo). Their economy will be strong, then it will wither under its own weight.

What happens when a country has an extremely large unmarried male population? They go to war.

On the subject of the US economy. I recently read US manufacturing numbers that indicated we still do a very large amount of manufacturing but we do it with a very small number of people because capital is cheaper than labor unions. This has allowed our services sectors to expand dramatically but it has also created various "bubbles" as a result. It was a very interesting article.

[KillerDog]

I'm not good with numbers but I found this link to some manufacturing statistics.

http://www.wisegeek.com/what-are-the-top-manufacturing-countries.htm

The US manufacturing has decreased for decades as a share of the economy (check Census Bureau for verification) but the overall manufacturing has been on the increase. We are not decreasing in gross manufacturing output, only as a percentage of GDP. Based on the information regarding the size of the manufacturing output by the US and its nearest competitors in the above link, can someone here say how much more the US produces through the manufacturing sector than its nearest competitor. The fact that the US number is in trillions and the #2 is in billions is interesting but I can't figure what they are meaning because they are talking of thousands of billions.

[SCcoug]

1,000 billion = 1 trillion

[KillerDog]

1,000 billion = 1 trillion

That's weird. In the same article they reference 1.8 trillion and 1,100 billion. I guess they are trying to make the gap larger. Damn statisticians.

[NorthwestUteFan]

We stopped making shoes and shirts and door hinges and paperclips, but still make airplanes and aircraft carriers and expensive chemicals and iPods (the expensives parts are designed here, programmed here, important chips made here, etc), and other high-dollar value products. We allowed the 'cheaper' stuff to move overseas.

I beileve the sticking point about 'manufacturing jobs leaving the US' revolves around the notion that everybody and their neighbor used to work on an assembly line, but now our manufacturing is more automated and we have fewer manufacturing jobs, although our manufcturing sector remains very impressive.


Frigging Awesome: [YOUTUBE]I5QwKEwo4Bc[/YOUTUBE]

My favorite part:

<BRYAN DAWE: Correct. Why are people selling the European currency and buying the US dollar?

JOHN CLARKE: Because the US economy is so much stronger than the European economy.

BRYAN DAWE: Correct. Why is that Roger?

JOHN CLARKE: Because it's owned by China.>

[Uncle Ted]

We stopped making shoes and shirts and door hinges and paperclips, but still make airplanes and aircraft carriers and expensive chemicals and iPods (the expensives parts are designed here, programmed here, important chips made here, etc), and other high-dollar value products. We allowed the 'cheaper' stuff to move overseas.

I beileve the sticking point about 'manufacturing jobs leaving the US' revolves around the notion that everybody and their neighbor used to work on an assembly line, but now our manufacturing is more automated and we have fewer manufacturing jobs, although our manufcturing sector remains very impressive.

[SCcoug]

IMO in the coming years 3D printing will be where it is at with a significant portion of manufacturing. Right now I'd say it is about where computers were in the late 70s. There are large expensive ones like the Zprinter 150 from Zcorp for around 15K.



And DIY models like the rep rap or a kit like the ThingoMatic from Maker Bot.

[YOUTUBE]F78xsFptveU[/YOUTUBE]

see also and Economist story on 3d printing.

[statman]

Ummm. What if China just refuses to buy our hyperinflated currency backed bonds? And we can't just keep on printing money and expect other countries to maintain the dollar as a key currency.

The reset button ignores anything having to do with maintaining the foreign value of our currency. If no one wants to buy your bonds you simply don't worry about it. A reset is a reset...

I agree with Blue Hair - I think we've probably fallen too low. I think in reality we could still dig our way out, but only if we have a government that wants to actually solve the problem. But what we have is a ruling class that sees the demise of the country as their meal ticket. They're going to be more important in the next few years than they've ever been.

[statman]

In addition to the ones KL mentioned it makes U.S. assets cheap for other countries. Foreigners will be buying up U.S. companies, real estate, etc. This happened to countries like France after WWII and it wasn't pretty (for them). The companies providing those manufacturing jobs may just end up foreign own if they become cheap enough.

Also, while it would help our exports the price on imports would jump. Americans are accustomed to buying cheap goods that come from low wage countries. Therefore, expect the cost of living to go up.

More accurately, expect the cost of EVERYTHING to go up. Expect your standard of living to drop appreciably.

[statman]

The other thing I remember from the 1980's was the 100% assured fact that the Japanese were unstoppable and the U.S.'s days as a world economic power were over. I don't guess I'm going to start trying to get Chinese or Brazilian citizenship just yet.

The Chinese are actually a disaster waiting to happen. They are facing an absolutely gigantic demographic bubble unlike anything the world has ever seen. Their one baby per couple policy has drawn a very real hard stop in the sand. They've got 15 years tops. When the generation that only had one child retires, in a world with no social safety net, all those single children are suddenly going to be supporting both their parents. The fact that the since the single child generation started, there's also a serious imbalance or males to females in the country is also a significant problem.

I don't see anything that's going to help China except a war. Seriously. Killing off a few million of it's men would be helpful to them right now - especially if by doing so they could capture vast natural resources to their north and vast human capital to their south. In my opinion, the huge expansion of their military is not without cause...

Yeah, I know - it sounds crazy. But the Chinese literally are facing issues that are unprecedented. It's hard to see what their viable alternatives really are at this point...

[NorthwestUteFan]

I think we've probably fallen too low. I think in reality we could still dig our way out, but only if we have a government that wants to actually solve the problem. But what we have is a ruling class that sees the demise of the country as their meal ticket. They're going to be more important in the next few years than they've ever been.

Excellent trio of posts statman, thanks!

The only way to dig out of our problems, as I see it, would be to SIGNIFICANTLY decrease government spending and SIGNIFICANTLY increase taxes. Doing these two things will likely kill what is left of our economy.

Because we have a very low savings rate, we are basically screwed.

[statman]

Savings rate is a vastly overrated statistic. In fact - it's a meaningless statistic.

Americans have had the lowest "savings rate" in the Developed World - ic fact for long stretches of time over the past 30 years, we've been told it's actually been" negative." And yet Americans also have had the highest personal wealth in the Developed World - and even with the troubles of the last 3 years, we still have the highest personal wealth.

We "save" in our 401Ks, IRAs and brokerage accounts. But those aren't "savings" according to the statistics. Only bank deposits are "savings". And even now, why put your money in the bank?