Saturday, March 06, 2010

Our Economy is in Recovery Mode?

When you think about it, unemployment insurance gives people a way to purchase items and continue life and at the same time stimulate the economy. What they buy determines who will stay employed. So if you are buying a TV or a toaster, someone in China gets to keep their job.

Most of what we consume is made in a foreign country; clothing, appliances, cosmetics, footwear, car parts, tools. We still produce our own food, autos and housing. And “by God everyone deserves to own their own home” ---and we know where that went. Now we have cash incentives to buy homes, cash for clunkers, and the old standby, food stamps for those with no cash at all.

Right now the United States is a service economy. We don’t make ANYTHING! It is not hard to figure out our economic future. Our manufacturing base moved off shore because of the cheaper labor. There is little or no incentive to move back to the US, either. The US consumer is addicted to cheap foreign products. How do we stimulate our economy by buying stuff made in Asia? How can we compete against countries that have no health insurance or retirement benefits or unemployment insurance? Imported goods have to rise in price, in order for domestically produced goods to be profitable. The real question is: what sort of industrial production is going to come into play to put people back to work?

“Buy American” might be the final solution. Congress is doing their part (printing money); it now takes eighty US dollars to buy a barrel of oil when it used to take thirty. Put another way, the thirty dollars you put in your IRA 20 years ago won’t even buy half a barrel of oil today.

The President and his men are claiming that we are in a recovery. Bernanke is claiming that we averted a great depression. It's what people want to hear, but sadly it isn’t based in reality. Their solutions are most probably part of the problem. It’s a little like a hooker with VD; you keep quiet about medical problems, it’s bad for business.


Anonymous said...


Love the analogy. Anyway just bought a new dinner table and chairs along with Leather Chair for living room from local new and used furniture store. The owner buys liquidation loads from across country. Best part is I paid about a third what I would have at traditional furniture store. Funny thing is when I was putting table together I turned it over and saw "Made in Malaysia". All the trees growing in Canada I we can't even make a kitchen table anymore. A sad commentary on our economic plight. Nice table though....


rob in ns

Tyrone said...

Unless there is a secret economic weapon the government is not telling us about, this may end with stiff tariffs on all imported goods and services. I believe it is the only thing that will bring the jobs back to this soil.

The alternative is the "strong dollar policy". It goes like this,... we have nuclear tipped ballistic missiles and more weaponry than anyone else on this planet; if you don't do what we tell you, we, and the UK, blow you off the mo-fk'n planet.

On an aside, I had to contact Turbo-Tax to get a replacement CD. I phoned and was talking to a fellow from India. After 15 minutes of him telling me the same thing ("we will send a replacement CD; is there anything else I can help you with?"), I hung up and thought, the CD will NOT be shipped--it did not. One month later, I went to the website and the phone contact info was gone--I was forced to send a written note. In my note, I explained the previous contact, threatened to have my visa charge backed out, and wrote...
Turbo-Tax needs to stop outsourcing jobs to India.
And if you continue sending jobs overseas, there will be nobody left in the USA that needs the product, because we'll all be unemployed.

The follow-up e-mail I received was clearly in the prose of someone from India. I wonder what they thought about my rant.

Jim in San Marcos said...

Hi Rob

There is a good chance that the tree was grown in Canada. The exporting of lumber is a big business in your part of the woods:>) (I can't believe I said that)

Jim in San Marcos said...

Hi Tyrone

As a computer tech, I know what you mean about India and outsourcing. Dell's tech desk for about 5 years was over there. Warranty repairs were a two hour phone call and I got use the the 7-11 accent. It reminds me of the movie "Short Circuit" the robot spoke with an Indian accent--it's a thousand laughs.

I talked to ATT the other day in India. Can't say I'm pleased, but surprised, yes!

Your mention of tariffs as a solution, might come to pass. Congress could dust off the Smoot Hawley Tariff from the 1930's.

The thing that might work is using gold as a medium of exchange between countries. If a country runs out of gold they won't be able to shop the world any more. The net effect, no imports. Of course that would return financial markets back to the "Stone Age."

War could be the ultimate solution. It's a great way to destroy "excess" manufacturing capacity.

I'm using Turbo Tax this year also. That's a horrible name when you think about it. It kind of describes what the government is trying to do to us.

Take Care

Anonymous said...


You could be right. Funny thing is some time ago I watched on local news how there was a tree shortage in my province. All one has to do is look around and you know that that couldn't be true. Then a couple of years later I read about cargo ship loading "firewood" bound for of all places Algeria. The trucks were running Day and night for about two weeks to load it. I wonder if that is end game for the so called Third world countries. Do they intend on turning this continent into place to plunder in exchange for some beads and trinkets on offer from Wal-Mart?


Anonymous said...


India and China both have nukes plus about 40 percent of worlds population. I doubt threats are going to work very well and would likely backfire bigtime...


Ohio Loan Officer said...

Americans are addicted to the "crack" of cheap consumer goods.

Back in 1970, my father was the CFO for a large hospital. He had a house built for us that at the time was considered pretty grand-- a 2400 sq ft ranch. But we could afford little furniture and our TV was a 19" B&W on a stand. My Dad did indulge in one luxury electronic item--- a reel to reel tape deck stereo. No one else had such a thing!

Now, everyone has to have a flat-screen in every room, a new car every two years, the latest cell phone, on and on. Most of it is cheap imported stuff that won't last 2 or 3 years.

I have relatives that can't pay their property taxes or electric bill but each of their children got a new laptop for Christmas. I made the mistake of commenting to the mother about that and her response--- "My kids will NOT do without the best".

Anonymous said...

Ohio Loan Officer

You are so right with that anecdote. That Mom saying she only wants the best for her kids is dooming them to a life of debt servitude.

Anonymous said...

Robinson builds (the best selling one in the world) helicopters here in CA. Boeing builds airplanes in seattle.

frakrak said...

It all comes down to buying and selling Jim, not printing money!

More selling much less buying!! Trading blocks seem the obvious solution, but we would have to go thru the "D" word to get there, Benanke won't like it, it will mess with his theoretical framework!

After we do the D, we may be in a position to sell rice bowls to China, for that matter "china rice bowls". We could even design products that last two uses, or products that only work in half the capacity for what the packaging claims.

We would print "instructions" with our goods that are designed to confuse and anger the purchaser.

I wonder what sound a billion Chinese would make scratching their collective heads in union, this could actually have far more upside than just our balance of trade!!!

Anonymous said...

To truly recover, we need more than just products. We need freedom, intelligence, education, ambition, and opportunity.

For freedom, we have a socialist police state.

For intelligence and education, we are firing our teachers and closing schools.

for ambition, we are now paying people two years of unemployment.

For opportunity, we tax and regulate small business into bankrupcy.

As far as tariffs, didn't we try protectionism in the 30s? It didn't work.

Jim in San Marcos said...

Hi Ohio Loan Officer

I know people just like you mentioned. It reminds me of something my grandfather said to me; "Earning money is easy, saving it, isn't."

I have a quote on my desk here that gives me a laugh every time I read it; "The easiest way to teach your children about money is for you not to have any."

The party is over. Not everyone has figured it out yet. No sense in stopping them from "stimulating" the economy.

Thank you for your comments.

Jim in San Marcos said...

Hi Frakrak

I like the rice bowl idea. We could paint them with lead paint.

I think that China may be more interested in rice to put in the bowl. We could see food production in the US and Australia become very profitable--our governments can't print food.

Jim in San Marcos said...

Hi Anon 6:00

You raise many good points.

As far as protectionism and tariffs not working; I have heard it repeated many times. But just repeating it, doesn't make it true. I tend to believe that tariffs and protectionism worked, just not quite as expected. South Africa during apartheid had to manufacture everything that they imported from the US. It turned out pretty good for them. We tried to punish them and they proved that they didn't need us.

Thank you for your comments.

Tyrone said...

Obama has a solution to the lost manufacturing jobs.

Don't like the numbers? Just stop reporting them.

Obama Solution to Stop Outsourcing – Stop Counting Jobs Outsourced
Since 2000, the U.S. has lost 5.5 million manufacturing jobs, with 2.1 million of those jobs being lost in the last two years alone. Since 2001, over 42,400 factories have closed in the U.S., and another 90,000 are considered at severe risk of closing. The last time so few were employed in manufacturing was in 1941, before World War II spending pulled that sector out of its Great Depression slump.

Numbers like these make me want to cry.

So President Obama has come up with a big and bold solution to deal with problem. He’s going to shut down the federal office that counts how many jobs are being shipped overseas.

How can this be an accident?

frakrak said...

Yeah Jim that’s my take with tariffs and restrictive global trade, who knows?

The systems teetering at the moment, I guess it could be a moral high ground thing, who wants to go down in the history books as the pivot for the greatest catastrophe in recorded history by bringing in these practises again? It’ll surely bring it on ….. Depression wise that is??!!

My take (from the financially ill informed) would be to be honest, stop the presses, let the market find its own level and not give your enemies an advantage. At least a depression will affect everyone, where looming hyperinflation will only deliver the West to oblivion and leave the emerging markets standing!! Is this true?

One thing that holds true with this is that we are living in a very different global trading environment than the 1930’s, the West has real competition now and the dynamics have definitely changed!

Not sure if this is an untapped sociopathic side of me or just basic good sense to face the music now instead of later!

If Benanke was so smart he would have stopped the printing presses and brought in the inevitable cashless society. If the printing goes on much longer the paper supply alone for the American dollar will denude Canadian forests:)

Like your idea of producing food for China by Australia and the U.S. so long as we can repay in kind by making it low quality, and labelled with incoherent eating instructions!!

Jim in San Marcos said...

Hi Tyrone

I heard of another problem today on the radio driving home. Obama wants health care passed so they can teach the insurance companies that they can't keep raising rates.

With the government presses running at full tilt, is it any wonder that health care is becoming unaffordable? Our paychecks aren't getting any bigger.

It is kind of hard to believe let alone listen to anything that comes out of the What (what did you say) (White) House.

Ohio Loan Officer said...


These are the headlines we are hearing. Cheerleading by the Whitehouse as evidence the Great Recession is truely over. It must be over if people are out shopping.

Like some neighbors I know who we ran into at the mall this weekend. I know for a fact that their house is in foreclosure. But there they were in the American Eagle store picking out a dozen outfits for their kids and themselves.

America is going to turn into a 3rd World nation. I was recently in Honduras. The people there live in these shacks made from old pallets with tin and tar-paper roofs. But I saw big screen TVs in several (many homes have the door hanging open for ventilation). I saw shacks with Cadillacs parked out front. I asked a local about it and he told me in his country you cannot get a mortgage to buy a home, but anyone can go into town to Best Buy and buy a TV on credit.

JMS said...

Some anecdotal evidence.

Woman robs 11 people in california and only makes out with 6 bucks.

Jim in San Marcos said...


In New York State where I was raised, A robber would shoot you if you weren't at least carrying a $20. You got shot for wasting their time.---times have changed a bit.

AIM said...

The clowns are in charge.

True logic, principles, axioms, formulas, lessons of history matter not.

America's ignorance will prove to be very destructive, expensive and painful.