White House statement: Bin Laden DEAD

[Dr Mordrid]

The problem isn't one of gross numbers but one of a reduction in the number of manufacturing jobs. Some of this is from higher productivity/worker due to things like automation and other productivity enhancing changes, but a lot is because our wacky tax codes (federal + state) pretty much encourage offshore production.

The problems include high capital gains, corporate rates that make no sense (too high max's & too many ways to get to 0% like GE), taxing small businesses at higher individual rates, the workers comp & liability lottery etc.

Making matters worse is one of the dumbest things we do: compared to other nations we heavily tax monies earned overseas if it's brought into the US. All this does is reduce the domesting spending by our multinationals. Want to know why a lot of high-tech manufacturing goes overseas? Look no further.

[cjolley]

The problem isn't one of gross numbers but one of a reduction in the number of manufacturing jobs. Some of this is from higher productivity/worker due to things like automation and other productivity enhancing changes, but a lot is because our wacky tax codes (federal + state) encourage offshore production; including high capital gains, taxing small businesses at individual rates, the workers comp & liability lottery etc.

Actually that isn't THE problem.
I was answering the statement:

"Once dollar looses reserve currency (which is going on now) you will have to export things other than US treasuries to pay for debt and you guys are not manufacturing that much anymore."

Which is simply a myth. The US is by far the largest manufacturer of tangible goods in the world.
I'm sure we have plenty of problems. But lack of manufacturing output isn't one of them.
We are also the second largest exporter behind China. ($1.3 Trillion -vs- $1.6 Trillion)

And if the world economy goes in the tank what do you think will still be needed?
American tractors or Chinese toys?

[Dr Mordrid]

>
And if the world economy goes in the tank what do you think will still be needed?

American tractors or Chinese toys?

Really bad anology. China exports >$600M in tractors a year.

OTOH Ford Tractors are now made by Fiat Agri, AGCO/Massey-Ferguson's US operating income is <$250M a year plus AGCO builds a lot of its stuff in China (3 factories), etc etc., soooo....

[cjolley]

Oh for Pete's sake Doc.
Caterpillar, by itself, exported more than $12 Billion worth of equipment last year, and climbing.

What part of "American factories make fighter jets and air conditioners, automobiles and pharmaceuticals, industrial lathes and semiconductors. Not the sort of things on your weekly shopping list? Maybe not. But that doesn’t change economic reality" don't you understand?

[Dr Mordrid]

We were talking tractors and US production.

Caterpillar makes few tractors, tracked models unsuitable for many uses at that, and makes its stuff in >60 countries so that $ figure is misleading. Of late it's been closing US facilities, including the Georgia unit Obama visited & "saved" and one in NY, and is opening new units in....China.

[Marshmallowman]

Well my "Australian" Victa lawn mower has a US engine, briggs and stratton is still going strong in that respect, and with the US dollar diving that kind of export may increase.

But I fear US military equipment may be skewing you manufactuering numbers..very high value but I think not always a guarenteed revenue... Australia has cut a lot of its miltary expenditure and I think a lot of other countries are doing the same, sure it may be short to middle term but this will last the duration of any recession and a bit longer which is the time when the US needs the income.
But I guess they still have long term contracts.

[Brian Ellis]

Most of US production is for domestic consumption. The USA has fairly low per capita exports compared with many European and Asian countries.

Other than that, the US economy is looking increasingly rockier and once S&P, Moodys etc. start lowering their ratings, as they will, you will need more money just to pay your interest. Treasury bonds will start looking like junk status. This is why the dollar is so weak and it's not improving. Look at http://www.exchange-rates.org/Chart....e=G&filter=180 and this is just 6 months. That look bad? The try over a year at http://www.exchangerates.org.uk/grap...raph-large.png. It doesn't stop here: in 2003, I would have needed CHF 1.7 to buy a dollar, twice today's value. Go back to 1985 and I'd have bought a dollar for CHF 2.37. Today, it's CHF 0.88. Why has a dollar bill been so weak? National debt, national debt and national debt, bolstered by printing more of them. All came to a head mainly in the period 2002-2008 because of what is shown at http://costofwar.com/en/ and you will see that it is still costing the USA $10,000 more every second, despite the phase-outs. The man-in-the-street sees this each time he visits a filling station because crude is well over $100/bbl. You glibly forget this is an inflationary spiral which is held in check only by the Fed, but their power of action is limited in time. I predict that the dollar will become virtually worthless in a few years. China knows it and is lowering its holdings on a daily basis and they will back the RMB on a stronger currency, probably the EUR, and on gold.

On a personal note, I have some equities in USD. Currently, in real money, I have lost about 25% on them. My bank counsellor has suggested I take the loss and sell them off NOW. I know economics 'experts' are more gamblers than knowledgeable, but this reflected my own thinking.

Until the USA stops crippling itself with debt, that you are incapable of paying back, it is doomed to failure. Your credit card has reached the limit and the only way to go ahead is to economise. You are incapable of exporting cheaply manufactured goods to help; you cannot compete even with a dollar without value, because your sales people have the wrong approach and get their clients' back up.

[Dr Mordrid]

All of which is why Rep. Paul Ryan introduced an austerity budget, which passed the House, that tackles many of those issues. Some provisions are political hot potatoes, and some couldn't make it through even a Republican Senate much less today's under the Dems, but he deserves credit for starting the conversation in a serious way.

With Obama & the Dems totally ignoring their own Bi-Partisan Debt Commission's findings someone had to do it, and the Commission Co-Chairmen agreed with most of what Ryan offered up. The main question now is if Obama & Co. are going to demogogue the issue or get serious about it.

So far it's the former as the Senate hasn't even offered up a bill, much less pass one, and Obama is in full campaign mode for 2012. He needs to be, as the economy and deficits are going to be THE issues, and his numbers on that subject are abysmal.

[Umfriend]

The doomsayers on the USD$ are of course slightly overreacting.

The EUR stands at 1.44 USD which is lower than around august 2008 when it had a high of 1.56 or somesuch. I hardly think CHF is a relevant measure BTW.

It is true that the US export far less than European countries relative to GDP but that picture changes somewhat when you consolidate the EU (as much im/export is within the EU). Moreover, the US imports less in terms of GDP as well.

The USD weakness is mostly due to its low interest rates. Inflation is still (too IMO) low.

I am hoping China will float the RMB soon but that seems unlikely. Given the size of their reserves, any asset being used as a reserve will suffer. For our sake I hope they do not turn to EUR soon.

[Brian Ellis]

I hardly think CHF is a relevant measure BTW.

There are more international investments going into CHF than JPY, EUR or USD at the moment. It is, by far, the strongest currency and is being used as a safe haven. That is why I chose it as reference. Interestingly, the two big Swiss banks, the UBS and the Crédit Suisse are not benefiting as much as many of the smaller public and private ones. This is because the big'uns have a tarnished reputation after their BIG mistakes over the last 3 years.

If the USA wants to recover, their best bet would be to withdraw completely from Afghanistan and Iraq, while not getting involved in Libya and Syria. This would give them $800,000,000 per day to pay back a bit of their debt, or at least pay the accruing interest. That's 300 billion/year, $1,000 per person, $4,000 per family of four, >10% of average take-home pay.

[cjolley]

We were talking tractors and US production.

Caterpillar makes few tractors, tracked models unsuitable for many uses at that, and makes its stuff in >60 countries so that $ figure is misleading. Of late it's been closing US facilities, including the Georgia unit Obama visited & "saved" and one in NY, and is opening new units in....China.

Sigh.
1, I don't think tractor means what you think it means.
2, Caterpillar makes and sells a LOT of track type tractors.
3, I didn't say they manufactured $12B of equipment. They export >$12B worth of equipment from the US every year. They manufacture and sell a lot more than that world wide.

It isn't a matter of opinion, it's just numbers. The US manufactures 40% more dollars worth of manufactured items than the next biggest manufacturer, which is China. Much of it is consumed here, which is why we have a trade deficit.
The decline of US manufacturing is a myth.
The decline of US manufacturing jobs is another story.
But these are not the same thing.

Here's something recent:

http://www.fool.com/investing/general/2011/05/11/exports-on-fire.aspx

Exports on Fire

By Morgan Housel | More Articles
May 11, 2011 | Comments (1)
When someone insists the U.S. economy hasn't recovered, has lost its manufacturing base, or is being slaughtered by a weakening dollar, point them to this chart:

Exports are on fire -- up 20% since bottoming in 2009, and easily at an all-time high. And this isn't just exporting services. Exports of physical goods have also blown past prerecession levels, up 43% since 2009. The common notion that America's manufacturing muscle has withered is only true for manufacturing jobs. The actual manufacturing of goods is on a tear, and at an all-time high.
The benefit exports have had on GDP has been massive. Since mid-2009, exports have accounted for 45% of GDP growth, or almost the same amount that came from consumer spending growth, even though the latter's share of the economy is several times larger.
What's behind the surge? Booming nations abroad, and weak dollar.
Exports to China, for example, are up almost 20% year over year. Exports to Brazil are up 42%. Mexico, up 30%. OPEC nations, up 13%. South Korea, up 19%. Some of these countries are growing fast. Those that aren't still have expanding middle classes eager to get their hands on a quality of life that often includes American goods.
Then there's a weaker dollar. The U.S. Dollar Index, a measure of the dollar's strength against a basket of global currencies, is down 20% since last summer, and by roughly the same amount since 2006. Most commentators focus relentlessly on the negative features this brings: higher import prices, which most notice though surging commodity costs, particularly oil.
But almost everything in economics has a tendency to balance. It's a bit like physics: for every action, there's an equal and opposite reaction. A weak dollar raises import prices, but it also raises export demand. The U.S. still imports far more than it exports, so we're simply working our way toward closing the net-exports gap. Still, it's a step in the right direction.
The impact all this has on companies that heavily export is huge. Caterpillar (NYSE: CAT ) , 3M (NYSE: MMM ) , and Eaton (NYSE: ETN ) are all at or near all-time highs, all booming off international sales and exports...

And I might add that we didn't promise to pay our debts in anything but dollars, so as the dollar goes down so does our debt.
And up go our exports.

[Brian Ellis]

When someone insists the U.S. economy hasn't recovered, has lost its manufacturing base, or is being slaughtered by a weakening dollar, point them to this chart:

Excellent example of how to make a chart lie. Just think what a chained 2005 dollar may mean. As the value of the dollar has dropped by ~40% since 2005, the real value of exports in 2011 is not 1.74 billion but about 1.04 billion in real money, right at the bottom of the chart. Apart from that, having the vertical axis covering a small range (44%) is an all-too-common technique for making charts look good.

May the Good Lord preserve me from statisticians!

And I might add that we didn't promise to pay our debts in anything but dollars, so as the dollar goes down so does our debt.
And up go our exports.

Then why is your debt sky-rocketing? Because you have to pay for everything with almost valueless paper, including crude oil and imports from countries with stronger currencies.

[cjolley]

Excellent example of how to make a chart lie. Just think what a chained 2005 dollar may mean. As the value of the dollar has dropped by ~40% since 2005, the real value of exports in 2011 is not 1.74 billion but about 1.04 billion in real money, right at the bottom of the chart. Apart from that, having the vertical axis covering a small range (44%) is an all-too-common technique for making charts look good.

May the Good Lord preserve me from statisticians!


Then why is your debt sky-rocketing? Because you have to pay for everything with almost valueless paper, including crude oil and imports from countries with stronger currencies.

"in real money" ? I'd be interested to know what you mean by that. Considering we buy and sell with dollars that strikes me as a wash.

Our debt is skyrocketing because we are too childish to be willing to pay for what we want.
We have plenty of money to pay for the wars and other important things with higher taxes. It's just that we would rather buy Chinese toys and send the bill to our kids.

PS This is the best example of an off-the-track MURC thread EVER.


PPS "Apart from that, having the vertical axis covering a small range (44%) is an all-too-common technique for making charts look good."
I hate that too. In fact, I keep a copy of "How To Lie With Statistics" on my night table.

[Umfriend]

So have it start at zero and the dip is rather small.

[cjolley]

So have it start at zero and the dip is rather small.

You, me, Brian, MURCers in general, all know that. We're an over-educated bunch.
But it is deceptive.
How many times have you seen "DJ off 30 Points!" with a graph that makes it look like it fell off a cliff, when a graph with a y axis that started at 0 would have a drop too small to see?

I seriously recomend "How To Lie With Statistics". A classic, and funny too.