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Thread: Buying Local at higher cost

  1. #1 Buying Local at higher cost 
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    I think what we ignore about buying local is that, from a macro-economic perspective, buying local is like getting a rebate.

    Suppose there are two guys selling shoes. One guy charges $20.00, and the other guys charges $25.00, but if you buy from the second guy, he'll mail you a check for $10.00 in a week.

    That's not different from if a foreign factory is charging $20.00/unit, and an American factory is charging $25.00/unit, but if you pay American workers to make the shoes, they turn around and spend their paychecks in the local economy, while the foreign workers don't. As a country, we're getting a portion of the extra money we paid for goods and services back when it recirculates, even if, as individuals it's not obvious how that money will make its way back into our own individual pocket.


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    So why not tariffs on imported goods to encourage domestic production? Revenue could lower taxes too. Has been tried before and worked up until WWI, when income taxes first imposed. Nobody liked them then and not much has changed, so, back to the good old days?


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    if a foreign factory is charging $20.00/unit, and an American factory is charging $25.00/unit, but if you pay American workers to make the shoes, they turn around and spend their paychecks in the local economy, while the foreign workers don't.
    Given a choice most US shoe buyers will buy the $20 shoes and keep the $5 in their pockets. (BTW where can you get $20 shoes?)

    Looking at the longer term if you buy the foreign made shoes, eventually you help that foreign economy to grow and become a market for our goods. This is a better way to employ more US workers than artificially distorting the market.

    GM said Saturday that it had signed a two-year agreement worth $900 million to export Cadillac, Buick and Chevrolet vehicles and components to China. The deal was part of a series of trade agreements between China and the U.S. signed during the visit of Chinese President Hu Jintao to the U.S. last week. The vehicle exports are valued at $500 million and the component exports are valued at $400 million.
    Gm China | GM's China sales top U.S. total, a first for the automaker - Los Angeles Times
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    "Artificially distorting market?" Market is artifact itself, not some kind of ecosystem, pristine before human discovery like maybe Antarctica. Is therefore controlled, dominated, and manipulated much in manner of automobile, another example of artifact. Is simply question of who is in metaphorical driver's seat, and whether they will bail out before it goes over cliff.

    Chinese economy has exhibited much robust growth recently, maybe time for USA to catch up.

    Why were tariffs so popular in early days of Republic? To stimulate domestic industry. This paid off for Union during Confederate Rebellion- made rifles, artillery, ships, et cetera. Treasonous Rebel bastards were busy "helping foreign economy" in Europe, exporting raw material cotton in exchange for arms and even simple basic commodities like SALT, for God's sake.

    All know how THAT story ended.
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  6. #5  
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    Quote Originally Posted by kojax View Post
    while the foreign workers don't
    And that's where your argument falls down.
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    Quote Originally Posted by Strange View Post
    Quote Originally Posted by kojax View Post
    while the foreign workers don't
    And that's where your argument falls down.
    How so? If foreign workers are not subject to tariffs or equivalent, they have incentive to choose locally produced goods by virtue of lower transportation costs.
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    Quote Originally Posted by The Finger Prince View Post
    How so? If foreign workers are not subject to tariffs or equivalent, they have incentive to choose locally produced goods by virtue of lower transportation costs.
    It is the naive assumption that trade will all be one way. Those shoe makers will look for a variety of ways to spend their increasing wealth. Eventually, they will end up buying something from the country where the shoes were sold (or buying something from someone who buys from someone .... who buys from the country where the shoes were sold).

    Tariffs and other trade barriers may appear to work in the short term but in the longer term they are just like a Ponzi scheme and end up damaging the country applying the tariffs.
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    Then why did such a policy work so well during period of greatest expansion of USA, XIXth century?
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  10. #9  
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    We're trading with countries that don't unionize. Those workers don't get the money. That's why they don't spend it, and their quality of life isn't going to rise. Look at Mexico. It's a middle income country according to its GDP. How much do workers down there make? Clearly it's not a question of trading or not trading with poor countries. It's a question of trading with countries that have poorly structured societies and poorly distributed wealth.


    People keep playing this off like we're going to bolster their middle class until they become a consumer economy. Since when did they ever plan to use the money in that way? What guarantees that, if Mexico's GDP doubles, triples, quadruples or even exceeds that of the USA, those workers will get a part of it? They're barely getting a sliver of what's already there now.
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    Excellent point, under NAFTA, no tariffs, so Mexico remains backward raw materials exporter and source of cheap labor. "Helping economy"? Guess again.
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  12. #11  
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    Quote Originally Posted by Strange View Post
    Quote Originally Posted by kojax View Post
    while the foreign workers don't
    And that's where your argument falls down.
    No. In theory he might buy locally produced US goods, but in practice he could very well not do so. unless the chinese worker calls a plumber from Chicago to repair his faucet in Shangai, goes to the local diner on main street USA for lunch on a regular basis, and so on, instead of getting these services locally, you just might find that a greater % is spent locally. Plus nothing says the foreigners will buy "products" as opposed to buy the apartment complex to collect rent as land LORD from the workers that were laid off and now work at WalMart.
    Last edited by icewendigo; November 18th, 2011 at 12:50 PM.
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    Fair trade permits each trading nation to build on its strengths and buy goods and services from others where they are strong. So American sells Boeings and Microsoft ware to China. If you find that the trade becomes too much one sided, then the fault lies with the weaker partner, which is not building its strengths enough.

    Reminds me of why Japanese car makers gave American car makers a kick in the rotunda. It was because the Japanese concentrated on high quality at low price, while the American car makers rejected quality management strategies.

    In other words, if you cannot trade fair, then work harder and smarter rather than trying to cheat! The USA has oodles of talent. Use it!
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  14. #13  
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    Quote Originally Posted by skeptic View Post
    Fair trade permits each trading nation to build on its strengths and buy goods and services from others where they are strong. So American sells Boeings and Microsoft ware to China. If you find that the trade becomes too much one sided, then the fault lies with the weaker partner, which is not building its strengths enough.
    What if the "strength" of one country is just the simple fact that workers can be beaten, threatened, or killed for refusing to work for the local factory at a subsistence wage (which only reaches subsistence levels if they work an 80 hour week every week)?

    Or, for a softer version, what if the "strength" is that every time a local business person tries to set up a new operation to employ people, his shop is burnt to the ground by local police, so those workers will have no other option but to work for said factory? Then it's not so much direct coercion as indirect coercion. There's only one path to go through ( a bottleneck) and the workers either go through it or die.

    The world you're imagining is one where freedom or social equality is "weakness", and barbarism is "strength". Could any amount of economic progress, any at all, ever be worth that price?


    Reminds me of why Japanese car makers gave American car makers a kick in the rotunda. It was because the Japanese concentrated on high quality at low price, while the American car makers rejected quality management strategies.
    That was entirely different from the current situation in every meaningful way. All the two situations have in common is that the USA was losing. But we were losing against an industrialized nation that gave its workers basically the same pay and privileges as our own receive. That kind of competition encourages innovation. The present type of competition encourages nothing of the sort.

    In other words, if you cannot trade fair, then work harder and smarter rather than trying to cheat! The USA has oodles of talent. Use it!
    I guess that appeals to our vanity. Naturally we're racial/culturally superior to these third world nations, right? We should be able to win with 1 arm tied behind our backs. Nay, 2 arms tied behind our backs. Hell, let's make it 2 arms and a leg.

    How would the present situation be different from say.... having a new foreign team join the NBA, which is permitted to use steroids, but that team is composed of foreigners (who are therefore inferior anyway, right?), and if the Lakers, Kings, or other existing NBA teams start losing to them we just tell them to train harder? Would it be better to:

    a) - allow the Lakers, Kings, ... etc to use steroids also, so it's a fair competition
    b) - exclude the new team from the league.
    c) - leave things alone and let that team always win?

    There is no option d) - impose rules on the new team that require its members not to use steroids.

    If d) were an option, however, I'd be all for letting them join.
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    Quote Originally Posted by The Finger Prince View Post
    Excellent point, under NAFTA, no tariffs, so Mexico remains backward raw materials exporter and source of cheap labor. "Helping economy"? Guess again.
    As already pointed out Mexico is doing pretty well. What handicapped NAFTA doing even a better job boosting Mexico is they were still out competed by China.
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    As already pointed out Mexico is doing pretty well.
    Indeed, and not through just exporting raw materials. There is a lot of quality manufacturing of engineered equipment - pumps, compressors, heat exchangers, pressure vessels.
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    As a country, we're getting a portion of the extra money we paid for goods and services back when it recirculates, even if, as individuals it's not obvious how that money will make its way back into our own individual pocket.
    I suggest that people should have right to create a movement based on free choise.There could be created a network of domestic factories with diverse production.When you are accepted for a position on one of the factories you sign an agreement to purchase goods from one of those factries in first pace.I don`t know if it`s leagal for now and do not contradict NAFTA and similar agreements.
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    American's had a similar choice for years. They chose to save a dime to buy something made in China rather than purchase something from Mexico and partially solve the huge immigration problem.
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  19. #18  
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    Quote Originally Posted by Stanley514 View Post
    As a country, we're getting a portion of the extra money we paid for goods and services back when it recirculates, even if, as individuals it's not obvious how that money will make its way back into our own individual pocket.
    I suggest that people should have right to create a movement based on free choise.There could be created a network of domestic factories with diverse production.When you are accepted for a position on one of the factories you sign an agreement to purchase goods from one of those factries in first pace.I don`t know if it`s leagal for now and do not contradict NAFTA and similar agreements.
    I suppose they could issue their own currency. Maybe give people a card that's only usable at certain stores. It's not unlike the way food stamps work already. I don't know how for sure minimum wage laws would affect it (maybe the minimum wage has to be defined as an actual sum of normal money?). At the very least it would be an interesting social experiment.


    Quote Originally Posted by Lynx_Fox View Post
    American's had a similar choice for years. They chose to save a dime to buy something made in China rather than purchase something from Mexico and partially solve the huge immigration problem.
    You do understand that Mexico is a middle income country, right? It has plenty of GDP, but really really poor income distribution. How would buying from Mexico solve their income distribution problem? Wouldn't it just make their most wealthy 10% wealthier?

    You're assuming a manufacturing operation has fixed ratios. Say 10% for labor, 30% for management, 15% for owners, and the remaining 55% for other stuff (like rent, machinery, materials....etc) If that were true, then increasing the factory's overall gross income from say 1 million a year, to 2 million a year would effectively double the laborer's wages. That would be great. I wish the world did work like that. (Wouldn't mind if someone legislated for it to work like that.) More likely, the ratios will simply adjust and the workers will get a smaller cut. Their bargaining power is determined largely by how much scale is involved. If a godzillion workers are all employed by one guy, each individual worker has very little power to assert themselves when it comes time to ask for a raise.
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  20. #19  
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    I am definitely in favour of the global market. It is up to each nation to compete according to their strengths. When I said earlier that the USA had heaps of talent, that was not an appeal to ego. It is a reality. The amount of productive talent in any particular nation is directly proportional to the number of university graduates in relevent subjects (like science and engineering) it churns out each year. The USA churns out lots of such valuable people. On a per capita basis, far more than China or Mexico.

    So stop pitying yourself, and use that talent.

    Another vital ingredient, besides talent, is capital. That is : the amount of money available to invest. Again,. the USA is well off. Heaps of money to invest. That money can be invested at home in America, or overseas in China and other places. Money invested offshore is not lost. It returns an ongoing dividend which assists to create a better life for those who receive the income.

    Of course, it is idiotic to try to compete where low wages are the key to success. That is why Nike gets its sports shoes made in Indonesia. But the talent of all those engineering and science graduates permits successful enterprise in areas where expertise is the key.

    Here in New Zealand, we are too small to have much in the way of graduate talent. However, we have developed our agriculture to the point where it is a world beater. New Zealand is the world's largest exporter of dairy products. Our butter, cheese, milk powder, casein and other specialty products go all round the globe. This is an example of how local expertise and skill makes one successful in a particular area. We also export, very successfully, such things as wine, meats, seafood, and earn heaps from tourism. New Zealand, on the other hand, buys in all its cars and electronic goods.

    For the maximum wealth for the maximum number of people, global trading is essential. If we are smart, we will accept that we cannot be good at everything, and buy in what someone else does better, while putting enormous effort into what we locally do well, and export that.
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  21. #20  
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    Quote Originally Posted by skeptic View Post
    I am definitely in favour of the global market. It is up to each nation to compete according to their strengths. When I said earlier that the USA had heaps of talent, that was not an appeal to ego. It is a reality. The amount of productive talent in any particular nation is directly proportional to the number of university graduates in relevent subjects (like science and engineering) it churns out each year. The USA churns out lots of such valuable people. On a per capita basis, far more than China or Mexico.
    What do you mean by "strengths"?

    What these countries have is different laws. Suppose the Denver Nuggets basket ball team squares off against the Los Angeles Lakers, and the Nuggets are permitted to punch the Lakers in the face when defending their basket. However the Lakers are not permitted to do the same. That's exactly what globalization is like. Two teams are squaring off on the court, and one is allowed to do things the other isn't.

    How do you honestly convince yourself to call that "competition"?


    Another vital ingredient, besides talent, is capital. That is : the amount of money available to invest. Again,. the USA is well off. Heaps of money to invest. That money can be invested at home in America, or overseas in China and other places. Money invested offshore is not lost. It returns an ongoing dividend which assists to create a better life for those who receive the income.
    Any nation can deficit spend. It's not that hard.

    Of course, it is idiotic to try to compete where low wages are the key to success. That is why Nike gets its sports shoes made in Indonesia. But the talent of all those engineering and science graduates permits successful enterprise in areas where expertise is the key.
    India is entering the engineering and science market now, so wages will soon be the "key to success" in that field as well.


    Here in New Zealand, we are too small to have much in the way of graduate talent. However, we have developed our agriculture to the point where it is a world beater. New Zealand is the world's largest exporter of dairy products. Our butter, cheese, milk powder, casein and other specialty products go all round the globe. This is an example of how local expertise and skill makes one successful in a particular area. We also export, very successfully, such things as wine, meats, seafood, and earn heaps from tourism. New Zealand, on the other hand, buys in all its cars and electronic goods.
    It looks like your country's main advantage is a favorable population -to- arable land ratio. You have resources and you're using them well, and probably few other countries have the potential to out-compete you for that reason. Farming jobs can't be exported. However, if your people ever become as greedy as the American people, you might start importing lots and lots of foreign workers who will soon crowd out your domestic workers and ruin your economy as well.



    For the maximum wealth for the maximum number of people, global trading is essential. If we are smart, we will accept that we cannot be good at everything, and buy in what someone else does better, while putting enormous effort into what we locally do well, and export that.
    Just make sure the lenience of their laws isn't what they are offering you. If they've got better wineries to grow wine, by all means by their wine instead of trying to grow your own in futility. If they've got bigger iron deposits, by all means, buy their iron. But cheap labor is not a wise thing to become dependent on. Especially when the low price arises from an abusive relationship between business owners and their employees, as it does in a lot of countries.

    When you buy from an abusive relationship, you perpetuate that abusive relationship. If workers are being beaten and killed because they ask for a raise, and kept so near the subsistence level of pay that they can't afford to change jobs, and you buy what they're making, the business owners will use that money to pay their thugs to keep that relationship going indefinitely.
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  22. #21  
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    To Kojax

    What do I mean by 'strengths?'
    Well, for the USA, a major strength is your advanced position in a range of high tec industries. Apple Mac is not successful because of low wages, but because of expertise. Boeing is a world leader for the same reason. The USA has enough of a head start in many high tec specialties to remain highly competitive, if the effort is put in.

    Here in New Zealand, we are world leaders in the dairy field mainly because of our expertise in this. New Zealand farmers can generate more milk products per acre than any other nation, except those who lock up their cattle and bring food to them - an expensive option.

    On competition. You do not need the proverbial 'level playing field' to be competitive. You just need to be very good at what you do. New Zealand agriculture is a good example. Back in 1984, our government removed all state support from farming. No more subsidies, tax breaks, protective tariffs etc. We now have the leanest and most efficient system in the world, and we kick arse when we export agricultural products to nations that protect their farmers.

    However, New Zealand is not going to start making iPads or the equivalent. If we tried, we would be pummelled by the far more efficient manufacturers who really are expert in that industry.

    So, as I said, import what you are not good at making, and export what your skills and expertise make excellent. Concentrate on those areas of expertise, and be successful.
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  23. #22  
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    Quote Originally Posted by skeptic View Post
    To Kojax

    What do I mean by 'strengths?'
    Well, for the USA, a major strength is your advanced position in a range of high tec industries. Apple Mac is not successful because of low wages, but because of expertise. Boeing is a world leader for the same reason. The USA has enough of a head start in many high tec specialties to remain highly competitive, if the effort is put in.
    That's essentially like arguing that in my previous example of the Denver Nuggets being allowed to punch the Lakers in the face when they play against them, than it's still a fair game because the Lakers have Shaquille O'Neil and he's taller and stronger than most of the Denver Nuggets' players, so the Lakers should just play to their strengths and stop complaining that the Nuggets are getting a "unfair" advantage by being allowed to play by different rules.

    A systemic advantage, like China's lax environmental laws and unlimited oppression of its workers is not going to be overcome just because the USA has better skilled professionals (for now). In the first place, those professionals are going to retire sooner or later, and so in the long run the real test will be to see if your education system can outperform theirs. In the second place, on a global playing field, we have to pay those professionals an amount of wage that kind of cancels out against their ability. Our only real advantage for recruitment is having a country where people like to raise their families in, which slightly reduces how much we have to pay in order to outbid China.



    Here in New Zealand, we are world leaders in the dairy field mainly because of our expertise in this. New Zealand farmers can generate more milk products per acre than any other nation, except those who lock up their cattle and bring food to them - an expensive option.

    On competition. You do not need the proverbial 'level playing field' to be competitive. You just need to be very good at what you do. New Zealand agriculture is a good example. Back in 1984, our government removed all state support from farming. No more subsidies, tax breaks, protective tariffs etc. We now have the leanest and most efficient system in the world, and we kick arse when we export agricultural products to nations that protect their farmers.

    However, New Zealand is not going to start making iPads or the equivalent. If we tried, we would be pummelled by the far more efficient manufacturers who really are expert in that industry.

    So, as I said, import what you are not good at making, and export what your skills and expertise make excellent. Concentrate on those areas of expertise, and be successful.
    This is not an "all or nothing" proposition.

    I'm not recommending that worse industries protect against better ones. Most people would agree the Lakers have more talented players on their team than the Denver Nuggets. I wouldn't recommend granting the Nuggets a handicap bonus, like extra starting points on the scoreboard or something in order to level the playing field in that sense. I totally agree that the better team should win.

    I just don't like "different legal system" being the same thing as "better team". China's low wages are not the type of advantage that fosters good competition. Good competition makes a company leaner, fitter, and more efficient, not more abusive to its workers. The only way American companies could use increased efficiency to count against low wages would be if absolutely every improvement they ever made were patentable, and they withheld the patents from China.
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    The only way American companies could use increased efficiency to count against low wages would be if absolutely every improvement they ever made were patentable, and they withheld the patents from China.
    You do realize that China is notorious for completely ignoring American and European Patent law.

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    Also Kojak, you make an excellent point about Mexican economy. Your comment prompted me to research their unemployment rates over the past few decades; they were consistently lower than 5%. I was wrong about my assumption.
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    Just make sure the lenience of their laws isn't what they are offering you. If they've got better wineries to grow wine, by all means by their wine instead of trying to grow your own in futility. If they've got bigger iron deposits, by all means, buy their iron. But cheap labor is not a wise thing to become dependent on. Especially when the low price arises from an abusive relationship between business owners and their employees, as it does in a lot of countries.
    To Kojax

    What do I mean by 'strengths?'
    Well, for the USA, a major strength is your advanced position in a range of high tec industries. Apple Mac is not successful because of low wages, but because of expertise. Boeing is a world leader for the same reason. The USA has enough of a head start in many high tec specialties to remain highly competitive, if the effort is put in.

    Here in New Zealand, we are world leaders in the dairy field mainly because of our expertise in this. New Zealand farmers can generate more milk products per acre than any other nation, except those who lock up their cattle and bring food to them - an expensive option.

    On competition. You do not need the proverbial 'level playing field' to be competitive. You just need to be very good at what you do. New Zealand agriculture is a good example. Back in 1984, our government removed all state support from farming. No more subsidies, tax breaks, protective tariffs etc. We now have the leanest and most efficient system in the world, and we kick arse when we export agricultural products to nations that protect their farmers.

    However, New Zealand is not going to start making iPads or the equivalent. If we tried, we would be pummelled by the far more efficient manufacturers who really are expert in that industry.

    So, as I said, import what you are not good at making, and export what your skills and expertise make excellent. Concentrate on those areas of expertise, and be successful.




    I agree with both Skeptic and Kojax.

    The U.S. should play to its strengths. And we happen to possess manifold strengths to exercise in a global marketplace. WHY AREN'T WE DOING THAT THEN?
    From my economic layman's perspective, I cannot understand why we have outsourced so many industries that we once prospered in.

    Cheap production costs in other countries seems lucrative to many companies, but its often a bad move.
    if a foreign factory is charging $20.00/unit, and an American factory is charging $25.00/unit, but if you pay American workers to make the shoes, they turn around and spend their paychecks in the local economy, while the foreign workers don't.


    Given a choice most US shoe buyers will buy the $20 shoes and keep the $5 in their pockets. (BTW where can you get $20 shoes?)

    Looking at the longer term if you buy the foreign made shoes, eventually you help that foreign economy to grow and become a market for our goods. This is a better way to employ more US workers than artificially distorting the market.


    GM said Saturday that it had signed a two-year agreement worth $900 million to export Cadillac, Buick and Chevrolet vehicles and components to China. The deal was part of a series of trade agreements between China and the U.S. signed during the visit of Chinese President Hu Jintao to the U.S. last week. The vehicle exports are valued at $500 million and the component exports are valued at $400 million.




    Gm China | GM's China sales top U.S. total, a first for the automaker - Los Angeles Times
    Bunbury is saying that U.S. citizens buying foreign goods will help boost their economy to the point it becomes a viable consumer is rubbish.
    BUILDING PLANTS IN FOREIGN COUNTRIES OR BUYING FOREIGN PRODUCTS DOES NOT HELP THE UNITED STATES. PERIOD.

    When a person buys from his local economy, or even within his/her own country, that money goes back into his/her own country. That is not a hard concept.

    Two people stand in front of me. One is a foreigner, one is a U.S. citizen. I'm going to give one of them $1000 dollars.
    The foreigner receives the money, returns home to his own country, and spends it in THEIR economy.

    Or....I give the money to my neighbor, who goes down the street and buys lunch. The deli owner in turn takes that money he received in profit and spends it at a local grocery store. Those employees spend the money they receive in my town also. One of them comes into my tire store, buys an American made tire, and leaves. I take my income from that and spend it at the deli and so on and so forth.....

    SEE?? The ONLY sure-fire way to create, boost, stabilize and support a local economy is to SPEND YOUR MONEY AT HOME, NOT ABROAD, NOT ON FOREIGN PRODUCTS!
    That in turn, if given room to breathe, will in time spread to other cities and states, which will then help the entire country.

    Our governments policy of only helping the big guys ultimately hurts us all. Even the big guys.
    Murphy's Law: More or less, if a cat always lands on its feet, and the bread always lands peanut butter side down, then if you strap a piece of bread to a cat and drop it, what happens? It implodes.
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  26. #25  
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    Let me amend my remarks slightly. I DO agree with Kojax, but I must say that I would only advise our country to import from another one if it had no other viable alternative. We cannot be a closed society, but I feel we import far, far too much.

    Even a brief perusal of the rise and fall of the great American steel industry from the 1940s through the 1980s and till now, will show how we once held sway in an important market. Now....the U.S. is 8th in world steel production, as of 2010. (See World Steel Association - worldsteel top producers 2010)
    Murphy's Law: More or less, if a cat always lands on its feet, and the bread always lands peanut butter side down, then if you strap a piece of bread to a cat and drop it, what happens? It implodes.
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  27. #26  
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    If an American wants to buy locally made goods, let him choose those that are made efficiently, and are locally competitive. Buy an iPad? Why not? It is a wonderful item, and a lovely example of American technological knowhow.

    Buy American grown rice, when rice imported from Thailand is half the price? Pure idiocy!
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    I agree with you about the rice...since you live in New Zealand I wouldn't expect you to buy American made produce. But its Americans that need to deliberately choose to support their country. AND our govt...which seems to no longer care about the welfare of our country.
    Murphy's Law: More or less, if a cat always lands on its feet, and the bread always lands peanut butter side down, then if you strap a piece of bread to a cat and drop it, what happens? It implodes.
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    Blacksand

    Your government appears to have gone right off the rails. Since 9/11 the ideals that would have made America worth living in appear to have been betrayed by your administration repeatedly. Maybe sanity will reappear given time?
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    It's not only just the question of the money flowing back into our economy. In theory, if they bought as much from us as we did from them (even trade balance), we'd be getting back as much money as we spend.

    The other question is how much of the money is going to our workers. If it's not going to the middle and lower class workers, then it's not increasing consumption. It's going to people who are going to save the money instead of spend it, which lowers interest rates, but doesn't increase economic activity as a whole. And that's exactly where we are right now: low interest rates. As one might expect. The shift towards consolidating all of our wealth to the top 1% is killing our economy in total, not just the people who aren't in the 1%. It's the natural result of trading with any country that has a low wage. Both countries move toward consolidation on 1%.

    An ideal outcome would be for more of the money to go to consumers. It's a balance. If too much goes to consumers then interest rates get really high and it's difficult to start a new business. If too little goes to consumers, then the market for goods gets to be a bear market and...again... it's difficult to start a new business.
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    Quote Originally Posted by skeptic View Post
    Blacksand

    Your government appears to have gone right off the rails. Since 9/11 the ideals that would have made America worth living in appear to have been betrayed by your administration repeatedly. Maybe sanity will reappear given time?
    I sincerely hope the sanity will reappear. Sadly, I must agree completely with your comments. Upon reflecting on what you said, this could be an entire thread topic by itself.

    America is far from perfect. But the ideals we touted to the world made us both strong and vulnerable. When the time came to reassert ourselves (post-9/11), we failed to do so.
    Murphy's Law: More or less, if a cat always lands on its feet, and the bread always lands peanut butter side down, then if you strap a piece of bread to a cat and drop it, what happens? It implodes.
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  32. #31  
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    Quote Originally Posted by kojax View Post
    It's not only just the question of the money flowing back into our economy. In theory, if they bought as much from us as we did from them (even trade balance), we'd be getting back as much money as we spend.

    The other question is how much of the money is going to our workers. If it's not going to the middle and lower class workers, then it's not increasing consumption. It's going to people who are going to save the money instead of spend it, which lowers interest rates, but doesn't increase economic activity as a whole. And that's exactly where we are right now: low interest rates. As one might expect. The shift towards consolidating all of our wealth to the top 1% is killing our economy in total, not just the people who aren't in the 1%. It's the natural result of trading with any country that has a low wage. Both countries move toward consolidation on 1%.

    An ideal outcome would be for more of the money to go to consumers. It's a balance. If too much goes to consumers then interest rates get really high and it's difficult to start a new business. If too little goes to consumers, then the market for goods gets to be a bear market and...again... it's difficult to start a new business.

    Yes, agreed. Now...how to begin that change? Especially when our middle class, not to mention the lower class, is rapidly fading away.
    Our grandparent's generation was able to work and get ahead. My generation (I'm late 30s) works to get farther behind. Technology is good, but as its enabled business owners to increase their income and profits, it hasn't benefited the worker.
    Murphy's Law: More or less, if a cat always lands on its feet, and the bread always lands peanut butter side down, then if you strap a piece of bread to a cat and drop it, what happens? It implodes.
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  33. #32  
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    Our grandparent's generation was able to work and get ahead. My generation (I'm late 30s) works to get farther behind
    That's mostly rose colored glasses for the past. We are doing way better by many measures than our grandparents did.
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    We are doing way better by many measures than our grandparents did.
    Probably true in many senses. But one thing is gone for the moment. The idea that you and your children can make a better life through education and hard work. Many middle-class families expect that their children will be unable to continue the family's income and status.

    Inequality in the USA is back where it was at the time of the Great Depression. And social mobility is declining in most of the English speaking nations as well as a few European ones.
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    Go figure. We're trading with countries that don't offer upward mobility to their citizens. When we race against them toward the bottom, well.... what kind of bottom did we expect we would be competing to achieve? Clearly the country with the least upward mobility is the winner of this competition, because less upward mobility means workers have fewer options and have no choice but to accept a poor wage.

    In micro economics, the presence of alternatives is called "substitution". The less "substitution" a good has, the higher the price the seller can charge. In this case the "good" is a job. The price of the job is paid in labor instead of money, but it's still a price in every other sense. The less "substitution" people have for this particular good, the steeper the price in hours can get per unit of pay.

    But, it doesn't affect everyone equally. It only affects people who are in need of a job. It doesn't affect people who are independently wealthy and live off of their investments. Indirectly the general economic slow down affects them because it causes their investments to be more likely to fail, but otherwise they're safe. They get to make the decisions, but are safe from the consequences of those decisions. A very bad combination.
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