Still Manufacturing Myths Aplenty

Then why is New England dotted with mill-less mill towns?

Oh, let's see. Minimum wage laws? Health insurance mandates? Environmental regulations that drove up costs? American consumers who refused to "Buy American" because they didn't want to pay high prices for the clothes they wear?

Here's a question for you, JohnK. How do New Englanders happen to enjoy the highest standard of living in the world if those mills were so important?

Seems someone should introduce JohnK to the concept of Comparative Advantage.

>>How do New Englanders happen to enjoy the highest standard of living in the world if those mills were so important?

I'm not sure how it is sustainable. The only ones paying taxes are the ones in the service industry, and everyone else is either part of the public sector or sucking off the government teat.

I'm not disagreeing with you about minimum wage, insurance, and other regulations. I'm just not so sure that one can reasonably argue that manufacturing is just fine when idle mills are being replaced with welfare housing projects.

JohnK...a service sector worker's money is just as valuable as a mill worker's money, so it really doesn't matter which guy Uncle Sam robs for tax money. Both guys work in the private sector, which is the most important aspect of this equation.

JohnK: "I'm not sure how it is sustainable. The only ones paying taxes are the ones in the service industry, and everyone else is either part of the public sector or sucking off the government teat."

That's not correct. The growth in value added by the goods producing sector outpaced the service and government sectors every year from 2004 through 2007, as reported in December, 2008. Since value added includes both employee compensation and operating profits, it is the goods producing sector (manufacturing) which has seen a larger increase in taxes paid.

Of course, the service sector is larger than either the goods producing sector or the goods producing sector. That's been true for at least 60 years. So, if you are meaning that the service sector is paying more taxes, you would be correct in 1950 and you would be correct today.

What about the service sector makes you believe it's jobs and profits are not sustainable? Do you understand what firms are included in the very broad sector known as the service sector?

Johndewey, you seem to be one of very few on this board with a clue. Thanks for the input.

I know I'm only going to be ignored, but if the trade and current-account deficits don't matter, are irrelevant, are meaningless, are mere "accounting devices," why do we concern ourselves with them at all? If they have no bearing on the real world, who cares, then? If x+ (-x)= 0, then why the hell should I give a crap about x?

Not saying they don't matter, just saying the are not related....because they aren't. The remedial approaches to each issue are entirely different. I'm really not worried about internal debt....it's money we owe ourselves. We need to get our external debt under control.

And internal debt is nearly as much a problem, since it creates imbalances and distortions, the only government solution to which is monetizing the debt, which surely would end in disaster (interesting how similar internal and external debts really are).

"Money we owe ourselves"...So the Chinese possess no American T-Bills? So we can merely inflate our self-debt away? Wow. Didn't realize it was that simple, even if we did truly "owe ourselves."

If the current account can come from the private sector, how can it not also then come from the public sector? I did not know that accounting identities discriminate in such a manner. One learns something new every day.

"I know I'm only going to be ignored"

I admit this is an uninteresting issue for me.

" If the trade and current-account deficits don't matter, are irrelevant, are meaningless, are mere "accounting devices," why do we concern ourselves with them at all?

As Murray Rothbard explained 20 years ago, it once made sense to be concerned about balance of payments accounting:

"The balance of payments, as we said earlier, is a pseudo-problem created by the existence of customs statistics.

During the day of the gold standard, a deficit in the national balance of payments was a problem, but only because of the nature of the fractional-reserve banking system. If U.S. banks, spurred on by the Fed or previous forms of central banks, inflated money and credit, the American inflation would lead to higher prices in the U.S., and this would discourage exports and encourage imports. The resulting deficit had to be paid for in some way, and during the gold standard era this meant being paid for in gold, the international money. So as bank credit expanded, gold began to flow out of the country, which put the fractional-reserve banks in even shakier shape. To meet the threat to their solvency posed by the gold outflow, the banks eventually were forced to contract credit, precipitating a recession and reversing the balance of payment deficits, thus bringing gold back into the country.

But now, in the fiat-money era, balance of payments deficits are truly meaningless. For gold is no longer a "balancing item." In effect, there is no deficit in the balance of payments. It is true that in the last few years, imports have been greater than exports by $150 billion or so per year. But no gold flowed out of the country. Neither did dollars "leak" out. The alleged "deficit" was paid for by foreigners investing the equivalent amount of money in American dollars: in real estate, capital goods, U.S. securities, and bank accounts."

Here's another Rothbard quote:

"The absurdity of worrying about the balance of payments is made evident by focusing on inter-state trade. For nobody worries about the balance of payments between New York and New Jersey, or, for that matter, between Manhattan and Brooklyn, because there are no customs officials recording such trade and such balances."

"Nobody worries about the balance of payments between company A and company B." Accounts payable and accounts receivable? "Nobody worries about the balance of payments between bank X and borrower Y." Chortle. Snicker. Giggle. Guffaw.

The irony is that I think this is as static a view of the current-account deficit as is Krugman's view on the slicing of the GDP, yet no one's understanding is nuanced enough to appreciate this.

The fact that we are the de facto world currency entirely changes the game, and that is the point that many have missed. It makes it more akin to a fractional-reserve banking system confined to a single country.

When the Chinese, Japanese, and Arabs dump the dollar, technically, arithimetically, and accountingly speaking our "balance of payments" will "cancel" or "equal" out, but does that cause to disappear the hyperinflation, loss of wealth, and economic chaos that will ensue? You're confusing accounting reality with economic reality, concluding that since it works out as an accounting identity that it has no real negative impact in economic terms.

The Federal Reserve always has a "balance of payments" when it artificially increases credit and the money supply above what is natural; it simply prints more money or issues more money to compensate for any "deficits" or "losses." But this is merely in monetary, accounting terms. In REAL terms, that is, in terms of wealth and sustainable growth, this still amounts to recession and a loss of wealth, to malinvestment and a period of liquidation. Banks may never fail under the Federal Reserve, but the economy sure does, and that is what I am talking about.

"Protectionists focus on the horrors of imports being greater than exports, implying that if market forces continued unchecked, Americans might wind up buying everything from abroad, while selling foreigners nothing, so that American consumers will have engorged themselves to the permanent ruin of American business firms. But if the exports really fell to somewhere near zero, where in the world would Americans still find the money to purchase foreign products? The balance of payments, as we said earlier, is a pseudo-problem created by the existence of customs statistics."

Quoting Rothbard is pretty, but he misses the point, or at least, I think you miss the point concerning Rothbard. Rothbard says that these arguments imply that "(free) market forces continue unchecked," but what is free-market about our central bank colluding with a foreign central bank? And "where would Americans find the money to purchase foreign products"? I know where! A de facto world currency, a world reserve currency, that's where! This is perfectly consistent with what I have talked about; his assumption isn't simply a fiat-currency system, versus a gold standard; his assumption is an ordinary fiat-currency system, versus a fiat-currency system that is the DE FACTO WORLD RESERVE CURRENCY AND WORLD FIAT CURRENCY SYSTEM, I.E., THE DOLLAR. It's the same as claiming that Rothbard would not expect a bust when the banking system of a fiat-currency country systemically and artificially issues credit above and beyond the real money supply. You have proved NOTHING.

The beauty of it is that he is correct EXCEPT in a situation where a de facto pyramid scheme exists, as with the American dollar. Man, vindication never came this easy.

If Assets - Liabilities= Equity, and liabilities exceed assets, how is equity not negative? The equation still "balances," yet equity is still negative. (Or if liabilities exceed equity, assets are still negative. The equation "cancels out" or "balances," but the situation has obviously declined.

For that matter, why not leave this matter to the accountants? Why should economists care at all, if it's a mere accounting problem? And why not then run up a massive trade or current-account deficit? Why stop at 7% of GDP when 700% can be achieved? Whatever. No one here has done anything to convince me except blow smoke.

"We show that, under the same assumption, fiscal deficits
can have worrisome implications if they turn out to be permanent. First, if they occur in large
countries they significantly raise the world real interest rate. Second, they cause a short run
current account deterioration equal to around 50 percent of the fiscal deficit deterioration.
Third, the longer run current account deterioration equals almost 75 percent for a large
economy such as the United States, and almost 100 percent for a small open economy."

--IMF working paper

JohnK: 90 percent of the U.S. workforce today is in the service industry. You seem to suggest in your e-mail that that's an unfortunate fact. If so, can you tell me what's so unfortunate about this fact? What's so unfortunate about working in the service sector?

I did not mean it that way. I just don't see how it is enough. I see mills closing and be replaced with housing projects, I see once productive people becoming wards of the state. It just doesn't seem sustainable. I hope I am wrong.

I just don't see how if our country is tending toward a 100% service economy, and manufacturing growing or not (and if growing, obviously growing at a rate smaller than the service sector, otherwise, obviously, the service sector would not be an increasing percentage of the economy), our debt to foreigners is increasing relative to the GDP in terms of BOTH the service and manufacturing sectors, and services are largely internationally non-tradeable goods, how we can ever repay these debts while on this path. Perhaps I'm being simplistic and ignorant, I'll allow that, but no one has convinced me otherwise, and I'll give my integrity this much credit: when I know I've been proven wrong, I'll admit it and shut up. I'm earnestly pleading here. It was initial disrespect on the part of others that evoked my sarcasm, and if someone could simply be civil about answering me, I would reciprocate.

"bo" is actually me. Damn, I must have been drinking longer than I thought.

That's for sure.

I'm not sure how you're linking debt that the US government owes to foreign governments to how the US economy is divided between service and manufacturing.

I have no formal training in economics, but from my vantage point, the US government's growing debt to foreign governments is a reflection on the US government's inability to control its own spending, and that debt is going to be paid back by taxing the productive, whether they're productive in manufacturing or productive in writing software.

In the case of the mill towns without mills, the government has stepped in to take care of the now jobless people, and these social services are paid for in part with foreign debt.
So instead of producing goods to be sold overseas and having that money keep the town alive, we're selling debt overseas and paying people to do nothing.

Such a system can't go on forever.

No, it isn't paid for by foreign debt. It's paid from a domestic account. Again, the budget deficit is internal....money we owe ourselves. The foreign trade deficit is money we owe to other countries. The only thing you've hit on correctly is that you can't continue to pay people to do nothing forever. It has nothing to do with what you sell overseas...that is called mercantilism, and it has its own pitfalls.

Again, the budget deficit is not a strictly internal phenomenon; why is this obvious untruth repeatedly stressed. Who do you think is the primary lender to our government? FOREIGNERS, namely, THE CHINESE. How can this not affect the current account? Nothing you have said refutes or comes close to contradicting anything I have asserted.

Purchases by foreigners of our debt will tend to strengthen the dollar; dollar strengthening will tend to give an advantage to foreign manufacturers over domestic; such an advantage will tend to reduce the presence of domestic manufacturers; such a reduction will increase our reliance on and the advantage of foreign manufacturers; such reliance will increase our need for foreign debt; our decreased manufacturing base will reduce our ability to repay said foreign debt, since service production is internationally non-tradeable; the process repeats, until the entire U.S. economy is unsustainable and breaks.

Not true. The purchase of our debt instruments does not determine the value of the dollar.

You must be a fan of Aesop's "Just So Stories."

And don't forget, we, unlike every other country or any involved in a theoretical model, can repay our debts in our own currency. Surely, that has some effect on the outcome.

Barbarossa, it seems that the only way you're going to understand or agree with the principles of macroeconomics is if the entire world goes back to the barter system. I don't mean this in an insulting way, but you don't seem able to grasp the concept of currency and foreign exchange. Hang in there!

You make the "barter" accusation of me, because you fail to grasp the fundamental "barter" or "exchange" nature of economics and its facilitation by the medium of exchange also known as money!

Macroeconomics...Wasn't that an apparition conjured up by Keynes? Isn't it a false distinction in the field, based on misconceptions and fallacies and irrelevant or inapplicable aggregates? Do you believe in an amorphous and mathematically manipulable K that doesn't recognize the complex, temporal structure of production? And how have I not adequately demonstrated my grasp of the concept of currency and foreign exchange?

And it's not like most of this debt was actually accumulated for investment purposes, in which case it might legitimately be said that the debt was a "good" thing or "indeterminately good or bad." So much of the debt was not done on the free market, but was done by foreign central banks/governments and/or through our own central bank/government. And any debt that our government incurs can rightly be categorized as wasteful consumption, something on which Mises, certainly Hayek, would agree. Foreigners see Treasuries as "investments" because they are "guaranteed" by the U.S. taxpayer, but Austrians of course know that government expenditure and debt can never be considered investment in any real sense, only in a faux or illusory sense, as has been the case with foreign creditors. Though they may perceive such debt as investment, it is only investment insofar as it is able parasitically to drain the productive sectors of the economy through taxation or inflation, and thus such debt, if continually increased, can never be sustainable. Even if foreign central banks (read: non-free market entities) weren't such major purchasers of T-bills and our debt was purchased entirely by private economic actors, such purchases would nonetheless remain non-free market and would therefore be tantamount to wasteful consumption expenditure as well as a real loss to the productive sector. I've been drinking, so I hope at least some of this makes sense, but I won't begrudge anyone who shuts me down or dismisses me simply as an alcoholic.

Barbarossa,

I just skimmed, because I'm on my way to bed, but even if your assertion that service jobs can't be exported is true, I don't see that it matters. The debt will be paid by the US government taxing the shit out of producers, even if those producers are only producing services for their fellow Americans.

And, even if our economy was driven by heavy industry selling locomotives to Bolivia, the debt will be repaid by the government taxing the shit out of locomotive builders.

Exactly! For some reason, there are those that don't seem to understand that an idea can be exported for money in the same way as a widget, often at a higher price. Is it better to export an automobile muffler or a computer program? Does it matter? Nope. People are relying too much on what they see in their immediate vicinity. The old adage is that if my neighbor is unemployed, we're in a recession. If I'm unemployed, we're in a depression. Seeing mills close down near you can be disheartening, but the fact is many of those businesses actually relocate to another (less expensive) location in the U. S. It's a big picture kind of thing.

If these factories are relocating to another (in many cases, NOT to a "less expensive") country or to a "less expensive" (what a crude, un-nuanced term) part of our own country, then that only indicates, not some differential in wages per se, but a competitive cost advantage, or, really, a competitive advantage in the use of the factors of production, specifically in the productivity to be had by capital goods. If wages are equal between Japan and America, and jobs move to Japan, then that means, ceteris paribus, Japanese workers are more productive and more efficiently use capital goods, and this will eventually result in a rise of their own wages relative to our own. Ideas are internationally tradeable, but how is it that we are outsourcing not only software programming, but software design (in other words, "ideas")?

No offense, but do you not see the error in your logic? The whole point of money is to facilitate exchange by being a medium thereof; otherwise, money is meaningless; therefore, what really concerns us is what is indeed exchanged, in this case between the United States and its foreign creditors, and that is goods. If services are internationally non-tradeable, as you have just granted, and the debt is supposed to be paid for by taxing the producers, and the producers are the providers of services, how then, is the tax paying for our debt? The only way for it to pay for our debts in reality is by providing foreigners with goods for the ones that they have sold us; in your scheme, the foreigners are either provided with mere money, i.e., additional IOUs on tangible products, or they are provided with services, which they could only enjoy by leaving their country and entering the United States. The whole pyramid scheme that is the American economy is a legacy of the fact that we used to be manufacturing-based, used to have a trade/current-account surplus, and, for that matter, used to produce goods that both foreigners and Americans alike desired. The pyramid scheme would not be possible without the dollar as the de facto world currency. It's basically an instance of the left hand not knowing what the right hand is doing. Foreign exporters are able to sell their products to Americans due to the latter's voracious demand for them; they receive dollars, which they then exchange for their own currency in order to make purchases for themselves; these dollars arrive in the hands of foreign investors and central banks who then funnel this money back into America through purchases of assets and securities, though largely T-bills and actual dollars, and the whole process repeats and appears to grow as the government prints more money and issues more debt. The exporters feel rich because they sell their products and can exchange their dollar proceeds for the native currency; the investors feel rich because their dollar assets are continually augmented; the central bank feels rich because it's foreign reserves have likewise been augmented; we Americans feel rich because we have received something for nothing, or something tangible for a paper IOU, which we pay back with yet another IOU. And as long as each participant is focused solely on his own stake in the game, his own economic microcosm, everything appears right, and it seems that actual wealth is being produced. But that's not the case; the wealth of Asia and the rest of the world is being squandered by American consumption, at the government and private level. HOW IS THIS NOT AN UNSUSTAINABLE PYRAMID SCHEME?

Services are most certainly internationally tradeable. Where did you get the idea that they aren't? The government tracks balance of payment accounts for both services and goods.

Oh, I'm sorry, I didn't realize that barbers, Walmart employees, McDonald's burger-flippers, mechanics, couriers, waiters, retail employees, apartment locators, etc., were all internationally tradeable. God, MY BAD! Where did I go wrong? The exception repudiates the rule!

I forgot to mention baby-sitters, bus drivers, taxi drivers, valets, barristas, bartenders, personal music instructors, and truck drivers. What an ignoramus am I! Woe is me!

I used "it's" incorrectly.

"Provoked" would have been better.

Whether we enjoy the highest standard of living in the world is irrelevant. The question is: is it sustainable? And I would answer in the negative. Remember, booms caused by artificial credit creation give the appearance of a high standard of living, but they aren't sustainable. Tell me, if we have been the de facto world central bank since 1971, how has there not been decades-long malinvestment and misallocation of resources? If Bernie Madoff's pyramid scheme was not sustainable, how is the American economy supposed to be? Is long-term vendor-financing by China, Japan, etc., not akin to a pyramid scheme? Why is it that our government is increasingly unable to sell long-term debt to foreigners? Is that a dangerous sign? How is our economy going to thrive when we have a negative net savings rate? When the vast majority of services are non-tradeable and we spend the vast majority of our money on services here at home and goods from abroad, how are we going to pay back our debts to foreigners, manufacturing "growing" or not? Ultimately, we have to pay back foreigners in tangible GOODS, not additional IOUs. John, pardon the questions; I'll leave them to someone who is actually interested in learning and solving problems. I replied to your post merely out of convenience.

No, we don't have to pay back our "creditors" in tangible goods. That's the risk the Asians run by implementing mercantilist policies. They sell us tangible goods in exchange for a piece of paper..i.e., a dollar, the value of which will fluctuate. This is why the Chinese are so nervous...they are afraid of being repaid in inflated (read worthless) paper dollars. Hence their jawboning about diversifying away from the dollar. They hope the U. S. will raise interest rates to boost the dollar, thereby raising the value of their investments. And NO, the U.S. economy is NOT a Ponzi scheme any more than any other economy. Where the hell did you get that idea?

Oh, and forget the fact that some estimates place our national debt at 100 trillion dollars. That's manageable, I'm sure.

Come on dude....you should know that the national debt and the trade deficit are not the same thing.

Prof. Boudreaux et. al., would you mind linking me to a brief paper/article that accurately describes the state of manufacturing in the US?

Cheers

Prof. Boudreaux et. al., would you mind linking me to a brief paper/article that accurately describes the state of manufacturing in the US?

Cheers

First, the real value of U.S. manufacturing output today is four times what it was during the alleged golden years of American manufacturing might, the 1950s, and more than twice what it was in 1980.
--
Explain the declines in quality that logically happen when you cut out First World nations from production?

sethstorm: "Explain the declines in quality that logically happen when you cut out First World nations from production?"

What logic is that, sethstorm? from some parallel universe?

Have you lived in the U.S. the past five decades? Have you not seen how companies in Japan and other Asian nations adopted Deming's quality control methods and forced U.S. manufacturers to follow? Have you not observed the productivity increases realized in all sectors as Asian robotic technology eliminated so much of the defective crap we were once forced to consume?

Of course, your question is not valid in the first place. First World nations have not been "cut from production" Manufacturing output in First World nations is higher than ever before in history. The U.S. and Germany and Japan and the other First World nations continue to produce and sell medical equipment, aircraft, complex chemicals, automobiles, and all sorts of goods - most of which are many times more sophisticated than what we produced four and five decades ago.

Who boy!

You'd really like to compare American cars of the 1970s to cars made in Korea today? Used to be that a car that reached 100,000 miles was a great car. Now if a car doesn't reach 100,000 miles, it's a piece of crap.

Also, we didn't cut out First World nations from production. Unions can take the bows for that one.

brotio: "Unions can take the bows for that one."

We usually agree, but not on this point. First, as I pointed out to sethstorm, First World nations have hardly been cut out from production. Many First World production workers have been "cut out" as their mindless, dangerous jobs have been automated.

I agree that concessions to unions by past generations have made some American plants, with their productivity-limiting workrules, no longer economically viable. But I do not fault the unions for that. They were properly acting in their own self-interest. It is the manufacturing executives and Congress who jointly share the blame for any union-related job exodus.

The executives didn't have to give in to union demands. They were charged with balancing the demands of workers with the economic requirements of the business. They failed.

Congress equally failed. For too many decades they ignored the welfare of consumers and implemented laws which allowed unions more power.

You can argue that union bribery assured the downfall of some sectors of U.S. manufacturing. If that is true, the fault is not with the unions but rather with the representatives of the people who made such bribery legal.

John,

No major disagreement to your points. It was probably too much of a shortcut on my part to just simply say 'union', when it would have been more accurate to say, 'unions and and their enablers', which includes the parties you listed.

Congress equally failed. For too many decades they ignored the welfare of consumers and implemented laws which allowed unions more power.

That's probably the most significant point of your post.

Thanks

You mean the like the declining quality of computers and cell phones?

"... hardly evidence that the financial sector is growing cancerously and destroying or crowding-out Americans’ capacity to produce non-financial outputs."



I've read tis 5 times over or more. It's unfathomable. But I guess there are climate scientist who think we aren't responsible for climate change and biologist who don't believe in evolution. But the statement does seems extraordinary.

http://www.monthlyreview.org/images/080401foste...

http://www.monthlyreview.org/080401foster.php

Yes, and it appears that even the climate "scientists" that think man causes global warming don't even believe their own arguments based on the recent Climategate e-mail scandal. Seems the climate isn't the only thing being "cooked". Furthermore, the statement you are unable to fathom is saying that the financial sector is NOT serving to crowd out the manufacturing sector, which is true. It isn't a zero-sum game.

"But I guess there are climate scientist who think we aren't responsible for climate change"

Muirdork the sheep. Baa baa. Lead me to the slaughter, baaa baaa. Call yourself a scientist and I'll believe anything you say. Baa baa.

Your link has a little bit of useful information and had at first a lot of promise, until I realized that the author was shoveling implicitly Marxist bullshit.

Yep. This dude is drinking the Krugman kool aid.

You need to realize that being against unregulated capitalism does not make you a marxist.

If fact my position and most rational people who warn of the dangers of unregulated capitalism do so for fear of the loss of liberty and control such a system foist on the majority of people.

I may be wrong. I don't think I am because I have facts and history on my side. But even if I am wrong my goal is one of an efficient economy and maximized liberty.

Most people like me support capitalist competitive markets we just understand they need to be balances by a government of the people.


The idea that markets are more efficient then democracy has been thoroughly debunked IMO.

What the hell are you talking about. Markets and democracy are apples and oranges. There is no empirical evidence whatsoever that a planned economy is superior to a market economy. History is littered with failed states based on a command economy model. Why do you insist on trying to replicate a failed model?

If you think we have anything even remotely resembling unregulated capitalism in this country, you are not paying attention. Our financial markets and institutions are regulated out the wazoo. The idiots in Congress (Dodd, Frank, et al) are distorting the market with their self-serving stupidity. We need less, not more, Uncle Sam.

"If fact my position and most rational people who warn of the dangers of unregulated capitalism do so for fear of the loss of liberty and control such a system foist on the majority of people."

Freedom is Slavery, Ignorance is Strength...just keep chanting that party slogan.

ydmfi

es&dfw

"...my goal is one of an efficient economy and maximized liberty."

"[markets] need to be balanced by a government of the people."

The economy isn't yours to make efficient. Neither free markets nor the wealth created there belong to "the people". The free trade agreements made by productive neighbors are no business of government, democracy, society, etc. They are our agreements, and you have no right to exploit us.

"The idea that markets are more efficient then democracy has been thoroughly debunked..."

You compare apples and oranges. The legitimate purpose of markets is to create wealth. The legitimate purpose of democracy (or any government), is to preserve life, liberty, and property. A market that does not create wealth is a failure. A democracy that does not preserve life, liberty, and property is illegitimate.

The economy isn't yours to make efficient. Neither free markets nor the wealth created there belong to "the people".


Bull F'ng S*it. The economy also isn't yours to design either.

The economy exist FOR the people... the people DO NOT exist for the economy. Man have you got it ass backwards.

We provide a common defense and infrastructure and to hell if the people are going to do so for the benifit of a wealthy elite few.

http://ablankspotonthemap.blogspot.com/

No, idiot. The economy is for maximization of the INDIVIDUAL, not the collective. Each person makes his/her own way, based on their individual intellect, talents and effort. Period. You spout individual liberty out one side of your mouth and in the next breath want a group of bureaucrats to regulate everything. Where did you go to school...the Karl Marx school of business?

"The economy also isn't yours to design either."

Not all of it, of course. Just the part of it that I create. The economy as a whole is just an idea, a classification, and it doesn't belong to anyone.

"The economy exist FOR the people...

First, there is no such thing as "the people". Second, the economy is the creation of the productive class, and each member of the productive class has a property right in his or her part of the creation. That is, a labor theory of property.

"...the people DO NOT exist for the economy."

Of course not. Who ever said that they did? No one is required to create and trade.

"We provide a common defense and infrastructure..."

On the day that the political class starts selling these "services" on a voluntary basis then I will give them credit. Until then, the logical conclusion based on the evidence of forced participation is that they are doing these things for their own benefit, not mine.

Wrong the economy is policy and rule deopendent. And yes there ARE the people... as oppopsed to THE people like those that live in a different country under different rules... like say China. Yes the people CAN be made to exist for the economy as history shows. Railroad batrrons and Coal Mine owners basically enslaved their workers who had no other options.


"On the day that the political class starts selling these "services" on a voluntary basis ...."


You ARE accepting them on a voluntary basis by choosing to be secure and use these services nearly every hour of your lfe and NOT choosing to relocate to the country of your choice.

Man Randy you are a guy who wants all the comforts of a planned civi; society but non of the responsibilty. You must have neen a spoil litle brat as a child.

Man, you just get farther and farther from reality. Enslaved their employees because they had nowhere else to go? You really can't be serious. The employee provided a service to the employer in exchange for money. No one held a gun to anyone's head. Of course they have other places to go. But you know what? Coal miners make some of the highest wages in the country. How, exactly is that slavery?

"You ARE accepting them on a voluntary basis by choosing to be secure and use these services nearly every hour of your lfe and NOT choosing to relocate to the country of your choice."

This is my home, an essential human condition. As I live in my home, and care for my family in my home, I obey the rules made by the rule makers because it makes my life easier than to not obey them. It doesn't follow that the rules are good rules just because they exist.

"...you are a guy who wants all the comforts of a planned [civilized?] society but none of the responsibilty."

Responsibility to who? To those who claim a right to speak for "society"? To those who exploit? Not a chance. The only responsibility I accept is the responsibility to deal fairly with those who deal fairly with me.

"people CAN be made to exist for the economy as history shows. Railroad batrrons and Coal Mine owners"

HAHAHAHAHAHA We're back to coal mines and robber barons!!!

"you are a guy who wants all the comforts of a planned civi; society"

Planned. Spoken like a true totalitarian. Nice job, muirquack!

"The economy exist FOR the people... the people DO NOT exist for the economy. "

The economy is the actions of the people, you dork muirzebub! And according to you Barney Frank and Chris Dodd had it working perfectly until just a little while ago!!!

HAHAHAHAHAHAHAHA

Yasafi posted the links.

What did you expect? :-D

Your percentage figures for "gross value added to U.S. GDP by nonfinancial corporate businesses" does not really support your argument about the state of domestic manufacturing, since, along with the obvious percentage decline, the figure does not reflect growth in nonfinancial SERVICE jobs. And does manufacturing compose the same percentage of GDP? If not, is that a good thing or a bad thing or neither here nor there?And you say the "real value," so I assume you have adjusted for inflation? Have you adjusted for the fact that government inflation statistics have changed since the 70s (and continue to change), resulting in inflation's being understated? Has the classification of what is or is not considered manufacturing changed? If so, how can we consider such statistics relevant? And why is it that the output of consumer durables has declined by 30% in less than ten years? Is that an indication of anything? If our output of manufactured consumer goods has steadily increased but our output of capital goods has declined, is that something to worry about? How is it that television and other electronic manufacturing disappeared from the U.S. and went to Japan, when they had wages equal to our own? Are the trade and current-account deficits really nothing to worry about, as you have before seemed to imply? Is there no danger to the dollar? How can our deficits not matter when they are being financed by borrowing and the printing press? Don, I agree with you on 99% of everything else, and I think your very existence is invaluable to our country, but I have long disagreed with you concerning the trade and current-account deficits and always found your position thereon slightly suspect.

barbarossa: "How can our deficits not matter when they are being financed by borrowing and the printing press?"

You seem to be simultaneously referring to our current account deficit and our federal government deficit. Those are two separate entities. The federal government deficit will have to be paid for at some point by the taxpayers - either through taxation or through inflation. But that federal deficit exists whether or not U.S. consumers import more goods. Those T-Bills would be there regardless of whether China bought them up. In fact, if China and other nations did not buy them, the Fed would have to raise interest rates, and the federal government deficit would crowd out the legitimate borrowing needs of the private sector.

Don't confuse a mere accounting device which has no negative economic impact - the current account "deficit" - with a legitimate deficit which will lower our standard of living - the federal government deficit.

Yes, this is one of the points made by Marc Chandler in his book "Making Sense of the Dollar". In federal accounting, money does indeed come in different colors.

Funny how you and our illustrious Treasury Secretaries always refer to the current-account deficit as a mere "accounting device." I'm glad someone here besides muirgeo is eager to advance any and all government agendas. I understand the difference between the two, but you're telling me that the fiscal deficit DOESN'T contribute to the current-account deficit? Seriously? Who do you think the government borrows from?

"Those T-Bills would be there regardless of whether China bought them up."

That is the sad fact of the matter. Our government would continue its profligate ways even if it had to turn to its last resort, the Fed. Hyperinflation would ensue. And this is the problem that concerns me.

"the federal government deficit would crowd out the legitimate borrowing needs of the private sector."

How is that not already occurring?

Budget deficit and current account deficit are two very distinct and separate animals! This is not rocket science.

barbarossa: " but you're telling me that the fiscal deficit DOESN'T contribute to the current-account deficit?"

Yes, I am telling you exactly that.

barbarossa: "How is that not already occurring?"

It hasn't to the extent that it might because China and other nations have been buying our federal debt.

barbarossa: "And this is the problem that concerns me. "

And well it should. But eliminating the current account deficit will do nothing to stop Washington from spending.

Basbarossa, you ask a lot of questions without providing any answers. Why don't you contribute a little more to the discussion by providing a few answers yourself? We're not all here to do your legwork for you.

Barbarossa: "Has the classification of what is or is not considered manufacturing changed?"

What has really happened to skew the figure about manaufacturing: jobs once part of manufacturing plants - and the dollars they represented - have been outsourced to service firms and are now considered part of the service sector. As factories have outsourced everything from janitorial staffs to security guards to computer programmers, the manufacturing sector has seen an artifical reduction and the service sector an artificial increase. Yet despite this shift, manufacturing GDP has continued to grow.

You're correct.

Don is the expert here; I am not; therefore, I ask a lot of legitimate questions that were not answered in his letter in support of his claim. Don't bullshit me about "legwork." How are questions not a form of contributing to discussion? Are we never to ask questions, only to accept answers from on high? That's called arrogance; that's called stifling intellectual inquiry; that's called Stalinism. Ever heard of the Socratic method?

If your entire contribution to this blog continues to be asking a bunch of questions, you're going to soon be ignored. No one has time to research a bunch of questions just to satisfy your curiosity. Research them your self.

Not everything I have contributed has been questions, and thus far YOU have contributed no real answers. My questions are for the most part very broad (and did I mention before, legitimate?), so that no real research is necessary, only accessing one's own knowledge on the subject (as you did previously concerning GDP). I ask these questions while operating on the assumption that SOMEONE (Don, you, not Muirgeo, whoever) can quasi-extemporaneously respond to such questions, if only in brief. All you have done is spat vitriol and hostility, which to a casual observer seems only to indicate an irrational intellect incapable of any real discussion.

How do you know these outsourced jobs are now considered service sector? You make no support for your claim, nor give any rationale why their classification would change simply because they have been "outsourced"? Whether security guards or janitors have been outsourced by factories is irrevelant anyway, now that I think about it; we're talking about manufactured goods produced by factories, not whether they continue to employ such people. What you're saying is akin to the "lost jobs" fallacy that Brian mentioned.

Johndewey is correct.

barbaossa: "Whether security guards or janitors have been outsourced by factories is irrevelant anyway, now that I think about it; we're talking about manufactured goods produced by factories, not whether they continue to employ such people."

Perhaps when you learn how the federal government calculates GDP by industry you will understand why it is relevant that the jobs of security guards, janitors, and computer programmers were outsourced. Until you take the time to do so, please accept this brief explanation:

For each firm, the federal government ( the BEA, I believe) adds the total compensation for all employees, the gross operating surplus (operating income), and taxes on production and imports. This sum is the estimate of the value added by each firm. Such value added sums are then classified according to the NAICS code supplied by the firm. BEA then totals the values for NAICS codes, and greates grand totals for each sector (goods producing, service, government, etc.)

What that means, barbarossa, is that the compensation for a janitor in a factory is included in manufacturing GDP if the janitor is employed directly by the factory. But when the janitor is employed by a janitorial firm, the compensation for that janitor is included in the service sector.

Hope this very brief explanation helps.

It does help: to support the irrelevance of your point. If janitorial salaries are used to determine the value of final manufactured products, then that is a bogus statistic. If the firm produces the same value of manufactured goods while outsourcing the janitor, how can it be said that the value of such goods has increased (or decreased)? It CAN'T, so your point is irrelevant (though very pretty in the knowledge it invokes).

You obviously are confusing GDP with value of manufactured goods. They are two different things. GDP is the measure of economic activity associated with a product or service, not just the "price" or value of that product or service. EVERYTHING that goes into the production of that unit is counted as GDP (sales price, labor, materials, marketing, transportation, etc.) I'm sure you've heard that 70% of U. S. GDP is consumer spending; that's because it represents economic activity vice production.

barbarossa: "How do you know these outsourced jobs are now considered service sector? "

1. Because I've owned businesses, I've worked as a controller for others, and I've contracted with suppliers for both. I know how businesses I owned, businesses I worked for, and suppliers for each have classified their firms when they file reports with state and local governments.

2. Because I have read explanations from the Bureau of Economic Analysis about the method used to calculate GDP by industry. Page 29 of Advance Statistics on GDP by Industry for 2008 (the 8th page at the PDF link I just provided) is one place where you can learn how BEA uses the NAICS codes supplied by businesses in deriving the value added by industry and by industry sector.

"Has the classification of what is or is not considered manufacturing changed?"


Great question I would love to see the answer to. I can't seem to find it anywhere.

Actually, it has changed (don't have the exact time frame, though). I believe it was the early 80s. At one time, ALL jobs at a company that built things (e.g., GE) were counted as manufacturing jobs (accountants, janitors, etc), but they were later reclassified as service positions. I don't know how significantly impacted the overall distribution percentages.

Agriculture in the U.S. is a mere shadow of its past proud self! Bob Herbert should be sent to investigate for us why we aren't all starving.

You're trying to conflate the agricultural decline with the ideas of an unrelated economic subject. Your purpose for doing so is to demonize by extending an unfavorable association.

No thanks.

Who am I demonizing? What unfavorable association? That sentence is barely comprehensible to me.

They are not unrelated. It is routinely asserted that the U.S. manufacturing base has been eroding by pointing to declining manufacturing jobs. This is a misguided argument, which I choose to highlight by pointing to similar declines in agriculture (which also once dominated our economy) that happened for the same reason: productivity gains.

We employ fewer people to manufacture goods for the same reason we employ fewer people to produce food: we are capable of making more (as we are doing) with less labor. This is not a catastrophe; it is progress.

Brian Garst, Agriculture and Manufacturing have both seen tremendous productivity gains. The difference between the two industries is that Agriculture value added is almost completely a domestic occurance. Manufacturing value added can have a significant content of foreign sourced inputs for products manufactured in the U.S.

The final product being sold as a manufactured item in the U.S. has no accounting for the foreign sourced cost of inputs as far as an economic reported manufacturing statistic. Thus, we don't subtract foreign inputs from manufacturing output and arrive a reportable U.S. manufacturing figure. I think we should.

Seeking..
I think I see your point, which is we need to revamp the way we calculate imports and exports due to globally sourced components in a final product (such as a car). This would give us a somewhat different picture for balance of payments. This is discussed in a book called Making Sense of the Dollar by Marc Chandler.

You're trying to associate the agricultural decline with the current decline. Where you wish to demonize it is with your reference and indirect association to debunked Malthusian arguments over food supply.

What you wish to have happen in the long run is that US citizens have to be subservient to despotic (Third World/BRIC) nations; if so just because "that is where the jobs are".

Less labor and increased dislocation is not good practice for keeping a nation prosperous on the long term. But if you wish to allow for a decline to "a nation amongst world peers", I cannot agree.

That's not what Brian said nor meant.

"Less labor and increased dislocation is not good practice for keeping a nation prosperous on the long term."

As in the example of....

This wins the thread! Nomore comments needed.

Well maybe just one more.....


http://www.cattlenetwork.com/AMI--USDA---U-S--H...

The poll question matters more than the poll results.

In any case, being a rich (and generous) doctor, you must donate a lot of money to food banks, right?

that guy is not a doctor.