New Economy thread

[Apotheosis]

Ok, to get this started, here's the idea for the thread:

What's the New Economy?
Where do you, from your perspective, see things heading based on the impact of population change, globalization, tax law, etc.. so, basically, in your niche of the world economy, what's happening?

Are the big oil and auto companies really losing money? or is it a farce to get tax breaks, raise costs, etc?

I've done this thread before, but umm, want to see it happen again, and people to take a serious look at the big world picture, as best as they can.

[xtc]

More and more of my clients are outsourcing many of their functions overseas. They are moving manufacturing to lower cost providers in other nations. One client has moved their customer service and accounts payable functions to India.

Labour rates in North America are unreasonably high. Unions have raised labour rates to unsustainable levels. A man working on the line can't earn the same as a professional and in many places this is what has been happening. I think this has caused a false standard of living in the west. Globalisation is redistributing wealth from the west to the east. India and China are prime examples. They have red hot economies with annual GDP growth rates in the 7-8 % range.

General Motors has slashed 25% of its workforce. It costs GM $1500 more to produce an average vehicle than it cost Honda or Toyota to manufacture a car in America. The reason is union contracts. GM has to pay more for health insurance. It has to pay workers to stay home when there isn't enough work for them.

My prediction is that China and India will rise in affluence and dominance in the world. Wealth and dominance are cyclical. China and India were once masters of the world and they will be again. It is our time to be poor.

In the west we have become decadent, self satisfied, lazy and complacent. Like many civilizations this will our undoing.

Personally I have been pursuing business opportunities in India, there is a big opportunity for a man to become wealthy their. However, as I am learning, you can’t just walk in and expect the Indians to bow and scrape and be grateful for the business you can provide. They know that they are in demand and they are slated to become a Superpower. You have to know and respect the myriad of traditions they have, based on 1000’s of years of civilization.

[Edited on 6-21-2005 by xtc]

[Apotheosis]

Yeah, India's one place, but like us, they'll end up the same, too, because the information of people's pricing will rise, with inflation.

If the US gets china to adjust it's currency pegging, then that will give us some more breathing room, but overall, america has to shift their economic towards other areas.

And, honestly, alot of those foreigners are moving out here, despite the fact that there's work there..

While america has this "negative image" because of our recent world policies, it still remains a desireable place for many to relocate. I mean, the housing industry is creating a surplus of empty homes, and when the prices come down on owning a home in some parts of america, you'll see quite a few people immigrating, to get a piece of their american pie.

Once the practice of outsourcing really starts to fuck us, I hope people will wake up and start taking measures to correct that (ie, through protectionist legislation.)

On the other hand, like you pointed out, investing in other country's economies is a big deal, but where is that money going? sure, they're getting paid to live there, but where's the re-investment going? Surely alot of those business people are bringing some of it back to the states, in other types of ventures, (like medical R&D, technology startups, their hobby businesses)

One case in point, alot of the aid we have given to the tsunami victims is coming back to the west, because alot of those resorts/hotels, etc... are the ones getting some of the cash..

So really, the only way to understand what's happening is to follow the money.. where's it going?

I swear to god, I'm getting the feeling that the "money" is just getting shuffled around like that standard 'pick the cup the shell is under' game.

Finally,

what about the information economy that is slowly growing? you have to admit, intangible goods are interestingly enough a good source of income, if it's positioned right.


Oh, and how has china been doing about keeping it's growth rate down? it sounds like there is a problem with them getting too big too fast, and I say we encourage it!!

[Edited on 6-21-2005 by Yswithe]

[4a6c1]

I think civil war will destroy the economy within the next 10 years. In accordance with the prophecy.

[xtc]

Originally posted by JihnasSpirit
I think civil war will destroy the economy within the next 10 years. In accordance with the prophecy.

I must have missed that prophecy. Have you been watching Jack Van Impe?

http://www.jvim.com/

[Apotheosis]

Problem #6500 - Less is more (it can only be true in art)

Less is not more, cutting back on services, quality, among other features is just a bad bad way to go, because people will constantly be expecting cuts.

If you keep shrinking down what you offer as a business, then customers who were used to getting more will be rightly miffed.

And all these 'cuts/rebates, etc.' that the car companies are offering in order to stimulate growth and purchases are creating an effect where they have to keep reducing their costs in order to meet consumer demand. Each time a new cut is released, the bar is lowered, so everyone has to keep scrambling to retain loyalty.

There is STILL a segment of the economy where people do demand quality and will pay for quality, and WANT to pay for quality...

Shit, I go out of my way to buy something that really is better, and don't mind the extra expenditure.. I know this sounds egoistic, and snobbish, but like, I have places that I could get a 5$ tshirt from, but the thing falls apart right away, I could spend 20$ on the same shirt, but the same end result happens.. 35$ for a better quality shirt that lasts longer, and doesn't wear out as quickly, well, I am willing to pay that price.

Take northwest airlines as a case in point: they're cutting themselves into the grave. you hear cuts cuts cuts, from all ends EXCEPT what the executive's are getting for their bonuses.... I love it, these people can totally sink a company, and get rewarded millions for doing it.
-consider consumer backlash from all the cuts they are making.


Final rant: Doesn't cutting cutting cutting create a negative psychological reaction?
if consumers saw that industry was really doing something positive, they may want to actually spend their money there.

[Back]

Originally posted by xtc
More and more of my clients are outsourcing many of their functions overseas. They are moving manufacturing to lower cost providers in other nations. One client has moved their customer service and accounts payable functions to India.

Labour rates in North America are unreasonably high. Unions have raised labour rates to unsustainable levels. A man working on the line can't earn the same as a professional and in many places this is what has been happening. I think this has caused a false standard of living in the west. Globalisation is redistributing wealth from the west to the east. India and China are prime examples. They have red hot economies with annual GDP growth rates in the 7-8 % range.

General Motors has slashed 25% of its workforce. It costs GM $1500 more to produce an average vehicle than it cost Honda or Toyota to manufacture a car in America. The reason is union contracts. GM has to pay more for health insurance. It has to pay workers to stay home when there isn't enough work for them.

My prediction is that China and India will rise in affluence and dominance in the world. Wealth and dominance are cyclical. China and India were once masters of the world and they will be again. It is our time to be poor.

In the west we have become decadent, self satisfied, lazy and complacent. Like many civilizations this will our undoing.

Personally I have been pursuing business opportunities in India, there is a big opportunity for a man to become wealthy their. However, as I am learning, you can’t just walk in and expect the Indians to bow and scrape and be grateful for the business you can provide. They know that they are in demand and they are slated to become a Superpower. You have to know and respect the myriad of traditions they have, based on 1000’s of years of civilization.

[Edited on 6-21-2005 by xtc]

Ok, I’m no economist, but the paragraph I bolded above seems about right, with the exception of the union bullshit. And I can explain...

Business owners will find the cheapest way to do anything. This means they will exploit everything from the government they work under, to their sources for resources, on down to their employees. Its just how it works man.

Like, I’m taking a trip. I’m looking at every flight, hotel and ways of cutting my budget as possible. Its a common-sense approach based on buget/profit. What I mean is, if I can find the cheapest way to make my trip, I’ll have more money to spend while I am there for luxuries.

I think where this system breaks down is when you do not consider your homeland and the people who actually are the workforce who run it. This is only my opinion, but when you undercut your own homeland to achieve your capitalist gains, not only are you cheating your homeland, but you are cheating the peoples you are outsourcing to because they don’t have the standards that the homeland workers have.

[Edaarin]

If only we lived in a country with a free market.

[Apotheosis]

i still believe in getting what you pay for.

[Warriorbird]

Things work in cycles. We could be fine or fucked. The world is always going to end, as Tommy Lee Jones said in MIB.

[Soulpieced]

Yeah, just think that Earth and humans will no longer exist in a few billion years (most likely much shorter than that, but whenever the sun evolves into a red giant, there goes our solar system).

[Edited on 6-22-2005 by Soulpieced]

[Back]

Originally posted by Soulpieced
Yeah, just think that Earth and humans will no longer exist in a few billion years (most likely much shorter than that, but whenever the sun evolves into a red giant, there goes our solar system).

[Edited on 6-22-2005 by Soulpieced]

Dude, thats why this globe’s peoples need to work as one to keep the species going. We aren’t exactly at that point now, but I think we can make it within the next few billion. At least, I hope we can. If the morons don’t fuck it all up.

[Soulpieced]

Some people just don't get the big picture.

[Warriorbird]

If we don't kill ourselves off, maybe we'll find another M-Class solar system we can reach by that time.

[Valthissa]

Originally posted by xtc


In the west we have become decadent, self satisfied, lazy and complacent. Like many civilizations this will our undoing.

[Edited on 6-21-2005 by xtc]

Can you reconcile this assertion against the growth in US productivity over the last two business cycles? I'm certain you know that US labor is the most productive (per hour) in the world, so why the pessimissim?

C/Valth

[Fengus]

Originally posted by Backlash

Originally posted by xtc

Labour rates in North America are unreasonably high. Unions have raised labour rates to unsustainable levels.


Business owners will find the cheapest way to do anything. This means they will exploit everything from the government they work under, to their sources for resources, on down to their employees. Its just how it works man.

First Backlash is correct, buisness is only self-interested. However, while its obvious labor costs more in USA than China, its not the fault of Unions or anything, its simply labor is cheaper in China.
Moreover, if unions didn't exist labor would still be cheaper elsewhere. THis obviously can be seen in many fields where Unions do *not* exist yet still jobs are lost to China and India.
Also labor is not "unreasonably" high, thats big buisness propaganda. Also losing jobs in one field generally creates problems for the individuals but this is typically supplanted with something else, so people that want to work can, they just need a different job. Although, unfortunately that may be Walmart clerk.





General Motors has slashed 25% of its workforce. It costs GM $1500 more to produce an average vehicle than it cost Honda or Toyota to manufacture a car in America. The reason is union contracts. GM has to pay more for health insurance. It has to pay workers to stay home when there isn't enough work for them.


What exactly do you mean here, that it costs GM more to produce cars in American than Honda and Toyota in america?
If thats not what you are saying this sounds kinda flimsy since both Japanese companies have plants in american and thus employ americans. So if they can produce cars better and cheaper in american then they are the better company.
Or are you suggesting that unions don't exist at Honda and Toyota plants, or that neither offer health insurance to their american workers? I doubt either is true. Where did you read this info anyway?

[Tsa`ah]

Originally posted by xtc
More and more of my clients are outsourcing many of their functions overseas. They are moving manufacturing to lower cost providers in other nations. One client has moved their customer service and accounts payable functions to India.

Which further damages the economy. You can't buy/use/subscribe if you don't have a job.


Labour rates in North America are unreasonably high.

I would say that the cost of living is unreasonably high. The wages either have to go up, or the costs have to come down.


Unions have raised labour rates to unsustainable levels. A man working on the line can't earn the same as a professional and in many places this is what has been happening.

And this is the arrogance of management. The life blood of any business is two fold. The customer and the person providing service. Those two factors, and only those two factors, are what sustains a company. The existence of 90% of any management force is parasitic in my opinion. I've proved this in a round about manner time and time again by cutting management and doing what I'm paid to do ... manage ... not delegate my responsibilities. While the poor bastard that sweats his ass of on the lines doesn't have the education to "network", "multi-task", "motivate" and "culture a positive work environment, he is performing the most critical task in the company. To make the attempt to justify the chasm that is the earning difference is the mother of all attempts to intellectualize a travesty.


I think this has caused a false standard of living in the west. Globalisation is redistributing wealth from the west to the east. India and China are prime examples. They have red hot economies with annual GDP growth rates in the 7-8 % range.

And when the laborers to the east start seeing longer days for less pay while their bosses are working less and making more ... you'll see solidarity in the work force when they demand their due.


General Motors has slashed 25% of its workforce. It costs GM $1500 more to produce an average vehicle than it cost Honda or Toyota to manufacture a car in America. The reason is union contracts. GM has to pay more for health insurance. It has to pay workers to stay home when there isn't enough work for them.

It's not that simple. Workers demand better health coverage because of the repetitive injuries they develop doing repetitive work. They demand better wages because the company is not willing to match the rising cost of living. GM is also a prime example of a bloated style of management.


My prediction is that China and India will rise in affluence and dominance in the world.

With management and ownership ... absolutely. The labor force ... not likely.


Wealth and dominance are cyclical. China and India were once masters of the world and they will be again. It is our time to be poor.

On the global scale, yes we're rich. The reality of the grand picture is that the rich are far richer and the poor have to work longer for less than their parents did. In order to compete the cost of living has to be attainable. In order to do that the corporations have to reassess their philosophy.

Is James the "reliability" manager really worth 60k a year? Is he really worth 3 assembly line Franks?

The answer should always be "No, he's not".

In my past 3 jobs I cut out no less than 60% of the existing management and was able to raise productivity, efficiency, atmosphere, revenue, and wages.


In the west we have become decadent, self satisfied, lazy and complacent. Like many civilizations this will our undoing.

I would agree that the upper crust has done all of this. Above all, I believe they have become self absorbed, self deluded, and most importantly ... greedy as hell.


Personally I have been pursuing business opportunities in India, there is a big opportunity for a man to become wealthy their.

A prime example of what is wrong. We're so wrapped up in wealth. So much so that we buy into this facade of "comfort" and will do anything and everything to achieve it.

[Back]

Originally posted by Tsa`ah
On the global scale, yes we're rich. The reality of the grand picture is that the rich are far richer and the poor have to work longer for less than their parents did. In order to compete the cost of living has to be attainable. In order to do that the corporations have to reassess their philosophy.

Actually, I think the reality of it is, the average American may be more in debt.

[Apotheosis]

tsa'ah's comments about the following reflect exactly what I believe to be true about the state of wealth and the problems at companies.

unfortunately, there's too much to quote there....

What I am really questioning is, will the situation with all the cutbacks in labor (be it technical, manual labor, and other sectors) force people to be more innovative in their job search/profession choice?

What I mean is, will this force our economy to focus more on service, and work towards IT, Biotech, R&D and other startups that are not necessarily dependant on cheap labor?

Only SO MUCH of IT can be outsourced, and if we do get a protectionist attitude in our voter base, will that help much?

the widening gap between the rich and poor scares the hell outta me, and I'm trying to be on the side where I can afford to retire and take care of my family.

[Apotheosis]

Originally posted by Backlash
Actually, I think the reality of it is, the average American may be more in debt.

debt is a real issue, especially out here, (and other places, I suspect).
Alot of people are now qualifying for these 5 year 1.9% loans, which they will not be able to pay off once their low interest rates expire.

I have learned a lesson from my family, and other people and have decided just to live simpler, rather then take on debt that is, in some cases, un-necessary. Sure, I'm not driving the mustang, or going to a prestigious college, but I am making do with the means I have available.

[Back]

Cut up that credit card. Best thing I ever did.

[Tsa`ah]

Originally posted by Backlash
Actually, I think the reality of it is, the average American may be more in debt.

When I say globably, I mean running utilities and convieniences. Debt is also a two fold issue. Wanting what you can't afford (irrisponsible spending), and not being able to afford the rising costs of living. The one rule to being a successful lender is to always keep your lendees is debt.

This does not negate the diffences in our quality of life in comparison to a third world nation's quality of life. In that one aspect we are the richest on a global scale.


Originally posted by Yswithe
What I mean is, will this force our economy to focus more on service, and work towards IT, Biotech, R&D and other startups that are not necessarily dependant on cheap labor?

In this day and age, labor is the hardest to outsource, service is the easiest. Some aspects of service can't be outsourced. You can't send your automotive service department to Mexico to service cars in the US. You can send all aspects of non-interactive (person to person) anywhere you want so long as there are satellites in orbit.

As it stands, labor and those jobs requiring a local force to handle, are the only safe jobs outside of agriculture and construction. Importing is costly when only 20% of the populace can afford to buy the products.


Only SO MUCH of IT can be outsourced, and if we do get a protectionist attitude in our voter base, will that help much?

It would help immensely. Our government currently aids in facilitating outsourcing. It's not much different than a company operating in the US (Carnival Cruise lines), while being outside of taxable reach.

In order to protect against outsourcing, those profits gained from outsourcing have to be taxed. There is currently a movement in IL to do exactly that. The only draw back to doing it on a state level is that the company just needs to change office locations to another state. It needs to be on a federal level.


the widening gap between the rich and poor scares the hell outta me, and I'm trying to be on the side where I can afford to retire and take care of my family.

And you'll die with that fear unless Corporate America decides to actually care about the people lining their pockets with the green.

[Apotheosis]

Hell, i'm not even planning on having children, to be honest, I'm just hoping that I can help my parents when my father retires in the next few years (although they will be ok, for the most part).

[4a6c1]

Originally posted by xtc

Originally posted by JihnasSpirit
I think civil war will destroy the economy within the next 10 years. In accordance with the prophecy.

I must have missed that prophecy. Have you been watching Jack Van Impe?

http://www.jvim.com/

rofl @ that site. bookmarked tho. ;)

Also, I was doing the funny haha thing with prophecy talk. I dont think it worked. :sniffle:

[Gan]

First off, excellent thread Yswithe.

I've watched this thread a little without contributing just to see the direction it would go and I love the discussion thus far. At the same time I've been attempting to form a response in my head that wouldnt take up multiple pages. Even as a student of Economics (I dont consider someone an Economist until they've achieved their PhD in that field of study) I find it difficult to be brief, but I will strive to do so here.

Where do I see the global economy going?

I see a re-distribution of wealth where the US becomes more of a consumer than a producer (see the current trade deficit as an example). I see nations that are holding the keys to specific resources (oil, food, etc) finally allocating investment from those resources back into their own economy and public sectors (building infrastructure, increasing education, etc) instead of lining the pockets of one or two leaders. I see this as a natural cycle that will last as long as either the availability of the resources or the demand for the resources remains constant. Once either of those change, then you'll see a shift. So smart nations will take advantage of the investment while they can.

Earlier in this thread I saw someone talk briefly about protectionism. Let me add a few thoughts here. Protectionism is not a good thing, and here's why. When you start adding tarriffs and tax to unnaturally inflate the market pricing of goods and services then you're creating inefficiencies. Specifically you're inflating prices in order to prop up inefficient markets under that protection. Protectionism is much like labor unions in that it does not promote efficient existence of operations. Not only that, but if the US starts the tax/tarrif game on all imports, then other nations importing the goods we export will return in kind. All that does is inflating pricing for everyone. And as the US fails at curbing their level of consumption then you're going to hurt the US more than help it.

Optimally I see global markets increasing as more and more players enter into the field. Each player bringing to the table their own comparative advantage to the production of goods and or services that will drive innovation and advancement through competition. I'm excited at what that will mean for the global economy in 50 years. Does that mean we wont be the richest kid on the block anymore? I'm sure it will, but that doesnt mean we cant play smarter and more efficient. However, that will mean a huge culture change for those of us in the US, and the pride that goes along with that will indeed be hard to swallow by some.

[Atlanteax]

I forsee the US finishing and perfecting its missle defense program and then nuking China, India and other 3rd world places of cheap labor... to force US companies to hire US workers. :smug:

[Warriorbird]

I'd back the that, though I doubt either of our political parties would (they're too much in the pockets, both of them). We'd need a lot of nukes for China though.

[Gan]

Well, we could just conspire to replace all forms of contraception in China with placebos and let them implode from within. Those prolific rascals... :lol:

[Apotheosis]

Originally posted by Ganalon
Well, we could just conspire to replace all forms of contraception in China with placebos and let them implode from within. Those prolific rascals... :lol:


LOL that's just wrong...

I'm not so worried about China, because sooner or later, they will have to fix their currency, which will bring much more balance to the american economy.

Plus, the citizens need to get off their asses and lobby their politicians to do something.

[Gan]

As the population explosion gets to the age where they can impact their government without being slaughtered in the middle of a public square then you'll see lots of change. If we cant change the thinking of the old leaders, we can educate and influence the minds of those who will succeed them.

[Tsa`ah]

Originally posted by Ganalon
Earlier in this thread I saw someone talk briefly about protectionism. Let me add a few thoughts here. Protectionism is not a good thing, and here's why. When you start adding tarriffs and tax to unnaturally inflate the market pricing of goods and services then you're creating inefficiencies. Specifically you're inflating prices in order to prop up inefficient markets under that protection. Protectionism is much like labor unions in that it does not promote efficient existence of operations. Not only that, but if the US starts the tax/tarrif game on all imports, then other nations importing the goods we export will return in kind. All that does is inflating pricing for everyone. And as the US fails at curbing their level of consumption then you're going to hurt the US more than help it.

While I agree that unnatural taxes will have adverse effects on our national economy, I don't agree that not taxing corporations that operate within US borders, but have PO boxes off shore is just as damaging as not taxing revenues generated by US corporations that capitalize on outsourcing strategies.

If you, I, and every other private citizen of this nation are taxed on income, corporate entities must also contribute.

[Edaarin]

Originally posted by Backlash
Cut up that credit card. Best thing I ever did.

You'd have to be pretty shitty with money to end up paying interest on a credit card.

[Apotheosis]

Well, this just in,

A large chinese oil firm put in a bid for UNOCAL (major US oil firm), it was higher then another group's bid

AND

Another chinese (State owned corporation), Haier, has put in a high bid for Maytag


I really really hope those bids don't go through.

[Back]

Originally posted by Edaarin

Originally posted by Backlash
Cut up that credit card. Best thing I ever did.

You'd have to be pretty shitty with money to end up paying interest on a credit card.

Thats why I cut them up. Because its too easy to fall into the trap of spending more than you earn. Now my total worth is not my borrowing limit, its my actual limit, and I find it a much better metric.

But even doing that, you go for a house, 98% of people HAVE to borrow. Now, I realize that putting money into property is like putting money into a better return than a savings, but you are still going to pay interest and are in over your actual worth.

[Gan]

Originally posted by Tsa`ah

While I agree that unnatural taxes will have adverse effects on our national economy, I don't agree that not taxing corporations that operate within US borders, but have PO boxes off shore is just as damaging as not taxing revenues generated by US corporations that capitalize on outsourcing strategies.

If you, I, and every other private citizen of this nation are taxed on income, corporate entities must also contribute.

Agreed. Thats just pure evasion and taking advantages of loopholes. I only agree on not playing the protectionism game on foreign corperations - not US owned corperations.

[longshot]

Originally posted by Yswithe


Another chinese (State owned corporation), Haier, has put in a high bid for Maytag


I really really hope those bids don't go through.

The reason Maytag made news was because it was re-evaluating a previous offer by a private equity firm called Ripplewood Holdings.

Ripplewood does most of their leverage buyout work in Japan, where they became famous by restructuring a distressed national bank. They earned so much money on the deal (over a 7 to 1 return) that Morgan Stanley decided to pump 700 million dollars into buyout operations in Japan to follow suit. It was the deal of the century.

It doesn't matter who owns Maytag... they are going to strip that bitch down, and move operations out of Buttfuck, Oklahoma, and overseas. Chinese or American, the result will be the same...



One other note-- the $1,500 a car disadvantage GM has is directly related to healthcare costs. Nothing else. Just healthcare of its current workforce and retirees that it supports.

[longshot]

Originally posted by Backlash

But even doing that, you go for a house, 98% of people HAVE to borrow. Now, I realize that putting money into property is like putting money into a better return than a savings, but you are still going to pay interest and are in over your actual worth.

Whether or not you look at property as an investment, there are some fundamental differences.

The interest on your credit card is not tax deductible. The interest on your mortgage is.

Also, the property you own can by used as collateral to secure financing in other ventures. It's a tangible asset. Your I-pod and your bar bill from last Saturday night are not...

[Fengus]

Originally posted by Yswithe
I'm not so worried about China...


I'd be very worried about China if you are concerned about being the best and most powerful nation, or if you aren't so good picking up new languages.

[Back]

Originally posted by longshot

Originally posted by Backlash

But even doing that, you go for a house, 98% of people HAVE to borrow. Now, I realize that putting money into property is like putting money into a better return than a savings, but you are still going to pay interest and are in over your actual worth.

Whether or not you look at property as an investment, there are some fundamental differences.

The interest on your credit card is not tax deductible. The interest on your mortgage is.

Also, the property you own can by used as collateral to secure financing in other ventures. It's a tangible asset. Your I-pod and your bar bill from last Saturday night are not...

And you are going to tell me that someone is not making money off my loan?

I don’t own an iPod, genius. And I don’t pay bar bills that I cannot afford.

Maybe you do. Maybe thats your point. That its OK to be thousands of dollars in debt when your real worth is only a fraction of that. Thats the American way, isn’t it?