Tarek Morgen

yes it is

20% of 13 trillion are..2.6 trillion (like I said..about the same size)
if it is about 15% of 13 trillion it are 1.95 trillion, which is 75% of 2.6 trillion.

So uhm..my comment still stands...the manufacturing sector of the U.S. is not bigger than the whole German economy. At best (the mentioned 20%) it is pretty much the same, at worst (the 15% you mention) it is about 3/4 of our economy.

crooks

The US has a large R+D sector, and is still a major creative force in most fields, I reckon the Knowledge economy could take off strongly in the next 20-30 years, and of the G8 at least the US is at the forefront of this, so I doubt reccession will happen, merely an alteration of priorities, that might be painful but will hardly mark the end of the world.

No G8 nation can honesty boast of having a strong and getting stronger manufacturing centre (Germany and Japan are doing best, Canada decent, I feel), it's a western thang, not a US thang, this malaise has been coming on for a while - the weak dollar is a reflection of confidence, but that too can pick up, the Bush years just haven't been kind to the term "Confidence in the US economy" - not to any fault of his, it's just been a sign of the times.

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'I firmly believe that Ireland and history shall remember Michael Collins with reverence, pride and passion...and it shall be at my expense'- Eamon De Valera.

smalltexan

Don't you get it? It's NOT good for us. The dollar is down-our exports are cheap, our imports are pricey. This affects our prices of oil, of EVERYTHING here at home. China and Japan EACH holds $1.3 trillion dollars of our national debt. We have more dollars in debt than dollars we take in-a VERY BIG trade deficit. We've outsourced a LOT of manufacturing jobs under NAFTA and other free trade agreements, so now we DON'T have the industries and employees to help stave off the worst of a recession with increased production. There will be very few "Made in USA" labels.
The Feds are churning out more newly printed money with nothing solid to back it up. NO LIQUIDITY. Remember that Bush has pissed off quite a few VIP's in countries we might have asked for assistance.
Now then, what do you think will happen when the countries who hold our debts begin to dump their US bonds and notes? Hint: we'll have lots of company when we go down.
US Heads for Recession as Foreign Investors Rush for the Exit from US Dollar Holdings :: The Market Oracle :: Financial Markets Forecasting & Analysis Free Website

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I have never let my schooling interfere with my education.-Mark Twain

gunnut

No. You don't get it. It's good for us.

Exactly. We will buy fewer foreign goods and buy more American goods to keep money at home.

So expensive oil will make us drive smaller cars and conserve. Isn't that good?

So? What are they gonna do?

How big? What is the percentage of that trade deficit compared to our GDP?

We outsourced because dollar was strong and our labor was relatively expensive. Now cheap dollar makes foreign labor expensive and outsourcing unattractive. Businesses are not stupid. They will move jobs back here.

That will be true if the dollar stays strong.

There hasn't been for more than 30 years. Where were you?

Oh yes, let's blame this on Bush too. By the way, what kind of assistance do you want to ask? Do we have to pay them back? If so, isn't that like China and Japan holding our debt?

That alone will keep them from dumping our currency. We go down, the world goes down. There's every incentive for China and just about everyone else to keep the US afloat.

Do you know what a strong Euro is doing right now? It's killing Airbus. Boeing's product just became 20% cheaper overnight. What airline would turn down Boeing's product (expect to keep Airbus around as a hedge)?

Similarly, Japanese and German cars just became more expensive overnight. There are those marginal consumers who would shift from otherwise buying a foreign car to buying an American car. Of course the infinite wisdom of UAW decided to go on strike and squander this golden opportunity to push American cars into the hands of consumers.

And stop using socialist liberal commentary as business/economic analysis.

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"Only Nixon can go to China." -- Old Vulcan proverb.

Shek

First, it doesn't really affect the price of oil. Oil is transacted in dollars, so how the dollar moves doesn't have a big impact. Next, exchange rate movements in any direction will impact prices. However, a floating exchange rate is the best thing for the US.

In absolute terms, maybe, but not in relative terms. As gunnut said, look at how it compares to GDP. Also, your conflating terminology when talking about debt on one hand and then I assume the export of goods since you talk about the trade deficit.

As a question, are you concerned about Wisconsin having a trade deficit with Florida? They import lots and lots of oranges and spend lots of tourist dollars in Florida. Should Wisconsin grow oranges to shrink the trade deficit and build a Disney park?

You can take the following quiz to see how much NAFTA has depressed US manufacturing:

Cafe Hayek: The State of Manufacturing in the U.S.

1) In what year did U.S. Manufacturing output reach its all-time peak?
a. 1966 b. 1976 c. 1986 d. 1996 e. 2006

2) In what year did U.S. Manufacturing revenue reach its all-time peak? (inflation adjusted)
a. 1966 b. 1976 c. 1986 d. 1996 e. 2006

3) In what year did U.S. Manufacturing profits reach their all-time peak? (inflation adjusted)
a. 1966 b. 1976 c. 1986 d. 1996 e. 2006

4) In what year did U.S. Manufacturing exports reach their all-time peak? (inflation adjusted)
a. 1966 b. 1976 c. 1986 d. 1996 e. 2006

5) Average annual compensation (wages + benefits) for US manufacturing jobs is
a. $36,000 b. $46,0000 c. $56,0000 d. $66,000

6) What are the relative sizes of the US and Chinese manufacturing sectors?
a. China outputs 2.5 times the US b. Equal c. The US outputs 2.5 times China

7) Which country produces the largest share of total world manufacturing output?
a. China b. Japan c. Germany d. France e. US

There's no doubt that FTAs have resulted in manufacturing jobs from declining and dying industries moving overseas, but you overstate its effects and ignore all of the benefits and gains to consumers and producers.

I'd rather have fewer labels and grow the economy than to "tax" all US citizens by protecting dying industries.

Who's going to provide assistance to the world's largest economy? Please. As far as churning out money, fiat money has proven to be much better for the economy. Did you like the price stability of the past two decades?

China holds sheets of paper that say IOU. If they dump them, then their IOUs become dirt cheap. If you held enough of an asset that your selling them in large quantities would cause you to start getting pennies on your dollar investments, would you do it? A red herring of an example as it involves China committing economic suicide at a time when the growing economy is holding things together for the communist party.

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"So little pains do the vulgar take in the investigation of truth, accepting readily the first story that comes to hand." Thucydides 1.20.3

smalltexan

To all:
BEA: News Release: U.S. International Trade in Goods and Services

Export-Led Growth: The Elephant in the Room - Social and Economic Policy - Global Policy Forum

Testimony: The US Trade Deficit and China

A New Illusion: The Falling Dollar

Kurt Richebacher

Prices have actually INCREASED steadily over 20 years, not remained stable.
Greenspan's stability was to encourage spending with credit, and directing the Feds to print more money so that more spending would take place. That's the bubble-there's activity, but nothing but a vacuum keeping it afloat.
The central banks have been selling credit with the bonds, notes, securities, to foreign investors.
Exports have just begun their improvement. Is it permanent?

gunnut

Yes, that did happen. But our income has grown even more.

Adjusted for inflation, gasoline is actually cheaper now than it was in 1980.

As a percentage of household income, gasoline is half the cost as it was in 1980.

Our household is smaller now than it was in 1980.

There are many factors to consider. Not just the raw numbers dollar-wise.

The fed's job is to keep inflation in check. As long as the inflation is at around or less than 3%, the fed is free to lower interest rate and as you said, print more money. When there's upward pressure of inflation, the fed puts the brakes on by increase rates. That's what happened over the last 2 years.

And it's not a bubble economy. The increase is sustained by the increased efficiency in labor from our economy. We can do more with less. That increases wealth.

Japan's bubble economy might have something to do with their closed system. Major Shek might be able to tell you more about it if you are interested.

Shek

Price stability means that expected inflation and actual inflation are one and the same, which they have been. It doesn't mean that there is zero inflation.

Your conflating actions here as well as overstating the role of the Fed. Monetary policy is a tool to smooth out the fluctuations of the business cycle. Greenspan both lowered and raised interest rates according to the macroeconomic indicators to maintain price stability. If you have price stability, then you can be insulated against inflation risks and therefore be able to better long-term commitments to projects. This increases growth.

To conduct monetary policy, you cannot have a fixed exchange rate (there are plenty of other reasons why fixed exchange rate regimes do poorly). Thus, we must allow our currency to float.

Back to the topic at hand, you must introduce more currency into a growing economy unless you want to stifle growth. As an example, look at the crisis in the late 1880s in the US. No currency growth possibility because of the fixed amount of gold. You can create more production, but without steady monetary growth to accompany production growth, you end up with deflation. It may sound good, but it isn't.

Next, while there is currency growth to match production growth, the Fed's interventions don't occur from printing money. It's due to the buying and selling of securities to contract/expand the monetary supply to affect short-term interest rates and the decision to consume/invest.

However, in the end, the long-term real interest rate is actually determined by the propensity to save. That's right, it's not Greenspan or Bernanke, but the American people. We, on average, have chosen to spend and not to save, and that's what has caused the current imbalances. China (and other Asian nations) have helped us out by buying up our debt and linking their currencies to ours (we are the path to the export-driven growth).

They sell the securities to whoever buys it in the open market operation. Does it matter who buys it? Not unless your paranoid about China committing economic suicide (which no one to date on this board has given any plausible reason why they would).

Exports have just begun their improvement. Is it permanent?[/quote]

No, and it doesn't matter for long-term growth. Nominal variables (spot FX rates) don't drive fundamentals. They can provide speed bumps or boosts as sectors adjust, but they the real variables adjust and it's back to fundamentals.

Dwarven Pirate

Is this in any way of bearing to your discussion?

The Fed Bought What? - Mises Institute

omon

few years ago i was in toronto, and prices there were higher than in nyc, now it makes sence for canadians do shoping in us, their dollar is the same as ours but our prices are lower, it is good for both of us, they get cheaper(if the trip worth it) goods, and we get more buisness. i,m not too good with global economy, is my assumption right?

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"Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote!" B. Franklin

Canmoore

In Canada, prices are not reflecting the stronger Dollar. It is true that part of it is due to how fast the dollar rose, in 5 years it rose nearly 40 cents. From the basement in 2002 at 64 cents, to parity last Thursday.. today it closed at 99.6 cents.
Most businesses buy there stock long in advanced, even just a month ago the dollar was in the 80cent range. However this does not excuse prices being as much as two times the price for identical american products.

Canadians should be paying less for our goods that we currently do. A glaring and most disturbing example is Automobiles. A Canadian can go to the United States and purchase a vehicle for 10,000 dollars while the same make, year and model will cost 20,000 in Canada!!

Today a lawsuit has been filed against automobile makers, for artificially inflating prices.

CTV.ca | Lawsuit accuses car industry of inflating prices

"A class-action lawsuit launched in Toronto accuses major automakers and dealers of violating competition and consumer protection laws by conspiring to artificially inflate car prices in Canada."

However, it does not stop there. Everything from books, technology, clothing you name it.. is still priced higher. Canadian businesses are ripping people off, every where.

In the news today, it said that as much as 60% of sales in some American border town businesses are from Canadians! Canadian businesses in border towns are getting hit hard. Canadian Business needs to stop ripping Canadians off, if they want people to shop in Canada rather than the States.

smalltexan

No, and it doesn't matter for long-term growth. Nominal variables (spot FX rates) don't drive fundamentals. They can provide speed bumps or boosts as sectors adjust, but they the real variables adjust and it's back to fundamentals.[/quote]

This is why I like this board so much--I learn so much from the posters.
After all my questions, I finally have come around to your thinking and could find nothing further to counter your explanations. Thank you for answering and being very patient.

http://www.bruegel.org/Public/fileDo...ing_update.pdf

FOREX.com > About > Newsroom > News & Media > Research Note: Chinese Yuan Revaluation: What Does it Mean?

gunnut

You are correct.

Canadians still pay the same price if they stayed in Canada. But as soon as they traveled to the US, their relatively high currency value gives them more purchasing power.

For example, NHL players usually negotiate their contracts in US$. There might be some oddball players who went for the CDN$, but on par with US$ at the time. Bob gets paid in CDN$ 1.2 million, which is on par with a player his caliber at time who gets paid US$ 1 million. US$ goes down in value and is now even with CDN$. Bob is still getting CDN$ 1.2 million, except he now has the purchasing power of US$ 1.2 million...if he comes to the US. There is virtually no difference in standard of living between Canada and the US so lots of Canadians will come over here to vacation and shop.

A sinking US$ means people all over the world whose currencies are not pegged to ours have more purchasing power when buying American goods and if they travel to the US. Money will flow into the US. More money in this land means less trade deficit and more wealth to boost US$ value.

At least that's how a free market economy should work. There might be other factors impeding this process.

Is CDN$ the correct symbol? I'm too lazy to check.

Expat Canuck

CDN is right my man.

Canmoore

Or you can just call it the Loonie! you can also call two loonies a Toonie!

Yeah I know, we Canucks are a crazy bunch.