Imports of goods soared, while the already small services surplus plunged to nine-year low.
By Wolf Richter for WOLF STREET.
The US trade deficit in goods and services with the rest of the world, after going from record to record, soared by, I mean worsened by 87% in February compared to February last year, to $71.1 billion, according to the Census Bureau today. As the trade deficit in goods hit another all-time record, the trade surplus in services, which was already small, plunged to a nine-year low:
Trade deficits are a negative in the GDP calculation. They’re not a sign of a growing economy – though that is how they’re often described – but a sign of rampant offshoring of production of consumer and industrial goods to cheap countries.
Imports of goods jumped 10.3% from a year ago to $219 billion, after January’s all-time record of $221 billion (up 8.5% year-over-year). Exports of goods, you guessed it, sagged 5.2% to $131 billion. This produced a record goods trade deficit of $88 billion in February (red columns in the chart below).
Remember back in the day when globalization by Corporate America was still a good thing, and worries about a surging trade deficit in goods were brushed aside with the hoped-for exponential growth in the trade surplus of services, such as movies and software? Well, there is a trade surplus in services, but it’s small, and the surplus of services in February plunged 24.4% to $16.9 billion, the lowest since 2012. Note the deterioration of the services surplus since early 2018 (green columns):
During the Financial Crisis, the goods trade deficit shrank substantially, as consumers cut back buying imported stuff, while the trade surplus of services dipped only briefly and the overall trade deficit shrank substantially.
But instead of reversing the course of the prior two decades of ballooning trade deficits, Corporate America went into hyperdrive during the Financial Crisis to offshore not only production, but also the design work that went along with it.
Most consumer goods bought in the US that are classified as “durable” – from smartphones and bicycles to appliances and clothes – are manufactured overseas. Go into a Walmart and try to find some durable goods that are still made in the US. On Amazon, foreign vendors are now direct-selling their products to US consumers. And even if the product is assembled in the US, such as cars and trucks, many or most of the components are designed and manufactured overseas and then imported.
This is now the pattern: After decades of rampant offshoring of production, US consumers get free stimulus money in the hopes that they will turn this taxpayer money – or rather future taxpayers’ money since this is borrowed money and will have to be dealt with by future taxpayers for all times to come – into a big-fat stimulus for the manufacturing economies in other countries.
Fired up by stimulus money, but also by not being able to spend on services, such as airline tickets, cruises, and concert tickets, consumer spending on durable goods has shot through the roof. And that’s where the surge in imports of goods came from:
This ballooning and record trade deficit is the most predictable outcome ever: Send stimulus checks to consumers and they’ll crank up the economies of China, Mexico, Germany, and other countries. The February trade data does not yet include the effects of the current generation of the $1,400 stimmies, which will show up in the trade figures over the next few months.
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All of this offshoring happened under the watch of Pelosi, McConnell, etc. These people sold out the American people and were rewarded for it. There is no accountability whatsoever. People are so stupid they vote for these corrupt cadavers.
Yet, what choice do any of voters have? Think about it. Are you going to vote for the Green Party, the Libertarians, we are locked in a cycle of escalating crazy and stupid. And it’s going to take a major shock to break that cycle, everyone else around the world sees this, and they are all content to let the US front itself down.
It’s simple – in this system, vote against the incumbent EVERY TIME.
Yeah, we just get alternating jackasses and dumbos in. I for one would like to see the power of the parties broken, and that instead of this mumble jumble mail in ballot, electronic voting machine crap, physical in person voting at a specific site with ID. Call it civic duty.
But I am sure these days, I would be called a r******.
Yes, exactly, break up the cartels. I propose scrapping elections altogether and implementing a lottery system. As it stands today, our constitutional republic has failed.
As a US citizen, for starters, you may be chosen via a lottery system to serve one term in office. Once the term is up, you go home and without a pension or benefits. One and done.
That’s what I’d like to see. Of course, many finer details must be hashed out.
I’d rather see every-day citizens serve as civil servants than what we have now. Oh, and for unelected bureaucrats, the same, one term and done.
Easier said than done, buddy. Here in San Francisco we have been stuck with Nancy Pelosi, who is to the right of a broad swath of the electorate. But many people look at her seniority in Congress and think that that helps us … while she continues to suppress policy actions that the majority of San Franciscans want (many of which are policy actions that a majority of the country as a whole wants).
She’s retiring soon, and her daughter’s probably going to run ….
That Pelosi is considered right leaning is utterly laughable… but given this is SF, it’s also utterly believable… I also really wonder if a majority of the country has the same expectations has SF given how screwed up the city is.
Schools still not open
Homelessness still high
Crime still going through the roof (yeah I know, AOC says it’s because people are poor and still must get food)
Walgreens still closing
Cost of living still unaffordable for many
I could go on but you get the point. If a majority of Americans want that… then we’ll, it’s time to move to China.
There are 6 (six) Walgreens and 3 (three) CVS within 10 minutes on foot from our place. Four of them are within 5 minutes. Two of them are just two blocks apart. Why the heck do they need that many? They haven’t closed any of them yet. But they will likely when as the leases terminate. It’s just too many. They’re cannibalizing each other.
WTF so you read Wolf about the offshoring, stock buybacks to underpin share prices and company execs bonuses while hollowing out the real jobs.
This is supported by both parties
So the Greens are not an alternative to unsustainable delusional perpetual growth model destroying the planet.
I live in Australia where due to lock downs where are almost Covid free.
Please explain why Americans are not the stupidest people on the planet.
Seriously, Green Party is actually slated to gain a majority in the House in 22, and set up for significant gains in the Senate. So, you are right, the Greens are a serious alternative with a bright future in the US. ?
Well, it’s true, I think any country that has managed to sustain its lockdown effort over the last year has managed to weather C19, they are all almost on the cusp of becoming C19 free. Just look at France for example. Nearly there… except for the mutants and variants, but that’s ok, just a few more years of lock down and those will be gone too.
No American should submit to a lockdown until the government puts a stop to people, many of whom are Covid positive, streaming across the border.
Since that will never happen, lockdowns of free citizens should not happen. Seriously, if you are afraid of Covid, make a personal decision to stay home and use all the wonderful delivery services available. Let the rest of us make a choice to be free, whatever the consequence.
Thank-you Crazytown for making sense.
Yea,… it would actually require a little political knowledge and intelligence to vote for a libertarian, and those are qualities the average voter has little or none of…… Can’t expect that.
If Ron Paul was elected all this debt would not have happened , and the Fed would not exist.
From Sundance, not my writing.
Major parties can keep 3rds off the ballot anyways, happened in PA this past presidential election. From talking with the average voter prior to this past election my general idea is they treat politics like sports. They do not understand the effect it has on their lives, not to mention .gov has become so much of the economy in the past 20 years that their job prob depends on one of the major parties (most likely dems). The “recovery” since 2008 has focused mainly in the urban areas, think tech, healthcare, higher ed, everyone else has been left out to dry.
If you have monopolies in almost every important economic sector, why would you expect anything different in the political realm. I’m all for capitalism but we really really need to enforce anti trust laws.
Everybody with the power to decide issues that matter makes their money on Wall Street or on the trickle down derivatives (property, etc) that inflate alongside the earnings of the corporations. Nothing will change.
Assuming you are an American citizen; why not set into motion the creation of a completely new “Party” that will address your, (and many others), concerns? Someone has to set the ball into motion . . . why not you?
There are plenty of other parties. They get stamped out by the Republicans and Democrats who, despite being the radical, most self-serving parties, claim that the others are radical and self-serving. And the voters gobble that up. Without a free press no third party will get out of the quicksand.
A proper delusion that has manifested itself is that we actually think that if we change our particular political incumbents then some other set of characters is going to be able to offer something better. We should long ago have realised that this isn’t about some particular people who sit in positions of power implementing their policies, but rather about a broad trend that goes way beyond politicians, countries and policies.
We are simply at the end of the stolen prosperity started by the industrial revolution, and things from here on are going relentlessly down (as they have already effectively been for most people in the west for decades already).
Unless we adapt quickly to ongoing contraction and a reversal of fortunes we are just going to get much more pain in return for our efforts in fighting the inevitable.
Salt-good to hear from you again. The apparently current propensity to believe that ANYTHING can be remedied with a low-to-painless ‘do-over’ of some sort, while ignoring the long-neglected necessity of whole-environment reinvestment, only magnifies a stunning gap between human belief in unlimited planetary resources and the awareness that this, our only home, cares not a whit if our species survives or not.
may we all find a better day.
Hey 91, cheers! And I suspect you also know that selling prospects is best facilitated by selling them the easy way. People want to see a brighter future.
For the ever growing number of people who have little and ever less, and who are disenfranchised under our current systems, those false prospects are more or less the only way to find hope. And e.g. having kids is something that comes naturally to people, and when people have kids they also need to believe in a decent future.
And the politicians who rise to the top in our political systems will inevitably be those who both feed that hope, and who and also don’t upset the backers and powers that in reality write the rules of the game.
But people aren’t actually stupid. More and more understand what’s happening. Anecdotally I see more people who elect to stay childless because they see little hope in the future.
Offshoring is national suicide. It not only exports our wealth, but it makes us dependent on others to supply what we need. When will we begin to do what is in the best interest of our own country?
A ME Rica.
There’s no we just ME. We would have to rename the country one day.
Maybe it’s the other way around. Foreign countries are sacrificing their sovereign wealth by enslaving their people to work in sweatshops for the benefit of American’s standard of living while Americans get free money. Think about that.
We get to consume their products with printed money. Sounds like we get the better deal.
And the dollar keeps getting stronger so don’t argue back our currency will weaken against the euro, yen, yaun.
This is thanks to the dollar being the reserve currency. Hooray!
It will go on for quite a while longer. Longer than you can fathom.
I have to agree with you on this. Despite trade imbalances, there is an accepted currency. The fact it is a reserve currency is even better.
A couple millenia ago, slaves worked for rulers in exchange for food/clothing/shelter.
We (and the dollar) are the Rulers. As long as those who serve us are fed, clothed and sheltered, we only need to print and consume. Pretty good deal if you can get it, and we got it.
We didn’t get away with it. The party is over. As Chuck Prince said
” As long as the music keeps playing, We will keep dancing”
The music ain’t playin and we ain’t dancin nomore.
This post above must be a joke just to agitate the readers, but I don;t see anything funny about it.
Funny that you say that Beardawg. My dollars are getting less valuable every day and they have been for years. They earn less by a factor of 10 and they buy much less.
Jdog and Changemachine has the proper vision on this issue(below). We have had our lunch eaten and now are losing the farm.
Except every single statistic disagrees with you. NO foreign countries are sacrificing their sovereign wealth. The US is.
China was a backwater 40 years ago and its people could barely feed themselves. Now they have surpassed the US in exports, production, Billionaires, Millionaires, and several other categories. Every single category in which you measure wealth has increased for the people of China while ours has shrunk. Home ownership in China is near 90% vs. less than 65% for the US. China’s poverty rate is 13.4% vs. 15.1 for US. Today half the households in the US have less than $500 in savings. 40 yrs ago, a single breadwinner in America could support a family, those days are long gone. Now even with 2 incomes families struggle, and if one looses their job they are in serious financial trouble. All this without even talking about the fact that our government has spent us into bankruptcy. How anyone can think that this is a good thing just baffles the hell out of me. They must be getting their information from CNN.
You forgot that our nutrition is declining, our infrastructure is crumbling, our freedom is being eroded by increasingly corrupt politicians, crime has exploded, division has become the new national identity and our life expectancy is declining. I’m not sure how that compares to other nations, but it seems like a bad deal.
What you are saying about China is true is large part due to our policies but also due to their aggressive exports across the world. Yes, the American middle class has been hollowed out – but what it has costed Americans so far is but a tiny prelude of what’s ahead. I have to say the boomers and Xers have had it pretty good. The millennials may scrape by, but it is the next couple of generations thats going to pay the real price of all this recklessness. In that sense I agree with what Pedro and Beardawg are saying.
From another viewpoint, it’s not so much the stimulus spending which is the problem (especially during times of economic upheaval), but rather it’s that government keeps slashing revenues.
It’s like having a spouse who loves to shop, and instead of getting a second job to support the family, you now decide to reduce to your work to part time. In the end it all amounts to the same result, a budget deficit.
WTF happened in 1971?
Hard money creates good times, soft money creates bad times.
We’ve almost been in perpetual war since the Fed was created, this is not coincidence.
Yes, China has plans and goals. I would say they have worked well thus far, even the pandemic they started has sped along their ambitions. China is now the world industrial juggernaut. China will power its way into a global currency of some sort as the world pushes for, I think the term is: De-Dollarization
China wants power, they want total control. Taiwan is now in their sights and after seeing the world back off of Hong Kong and the South China sea, they know even the U.S. will hardly defend Taiwan now. Then, on to their hated enemy Japan, then on to the Philippines and SE Asia, S Korea, easy pickings.
You mean America First? Sorry, the voters roundly rejected that idea. It’s jingoistic and peddled by a egocentric narcissist, we should all believe in equality and equity around the world.
And if some country has to be more equal than others, that’s because of the structural r****** in this country. See, narratives that we can all believe in as our companies continue to off shore because it’s good for the bottom line.
So a stolen election means the socialists have a mandate to flush our national interests down the drain….
Sorry, I was being sarcastic, I can’t help but to be sarcastic when it comes to the leadership in the US these days, and that applies at most levels of government.
Fundamentally what has to change is the rot in the core of this country, it starts with an educational system that doesn’t prioritize education at all. Cause showing work and getting the right answer is r*****, and this crap is supported by the Gates foundation.
Seriously, when the leaders in this country are actively trying to undermine it, they all need to be let go. But that’s never happen with our media in charge of the narrative today. The only thing one can hope for is a miracle and sudden infusion of sanity.
And honestly if I look at my last sentence, I find it hilariously naive. The best we can hope for now is to survive as this country goes through whatever crazy phase it’s in, and hope that XJP does something majorly stupid to further offset China’s long term goals, at least that hope is more likely given how much he has messed things up. But balanced in a way that doesn’t end up in a shooting conflict.
Our problems are due to concentrated wealth and power and the lobbyists and politicians that that concentrated wealth and power buys. Corporations with their infinite life, limited liability protections for shareholders and lack of transparency can morph into very dangerous things to individuals and societies.
When we balkanize?
The answer is never
People really need to wake up! And stop buying junk made in china.
They don’t abide by patent laws and steal proprietary information.
and will probably take over as global power.
Yet, the corporate types are the ones hurt by this most. Why don’t they do something about it? They’re the ones with all the lobbying power. That’s how you know they’re scared of China and it’s too late not to be a dog with its tail between its legs. Americans need to realize China beat us because all they had to do was let American greed eat the flesh off its own bones. That started at least 50 years ago in the wake of neoclassical economics. Welcome to the new world order. The EHM corporatocracy model with the CIA, World Back, and IMF managed to turn the rest of the world into hapless victims that would now much rather turn to China. You don’t make a dog loyal by beating it.
The Chinese learned a very important economic lesson..
The US Congressman is for sale.
Trade surplus dollars return for their purchase, among other influences.
Like, why would I care? None of those “issues” are even close to my own problems and totally not something I control, so waste of time!
I think that the USA is going down in a similar way as the USSR did:
First, government lets “the elites” run everything for their own benefit, in return for various kickbacks, thus gradually creating a rigid structure of “government guaranteed profits”.
Second, government honouring all of those guarantees made, turns the country into a “can’t do nutting”-state. Because, every change will pull someone important’s purse-strings and those people invest a lot in, political campaign contributions, lobbyists, lawyers, Harward professorships, disinformation campaigns, u.s.w. specifically to *not* have anyone interfere with their strings!
China does not have this problem yet, they will get to it, or maybe they won’t.
But, It will be fun to live to see China move in and buy up everything like the USA did to the USSR.
This is getting difficult. Even the Webber grill I just bought is Made in China. Hard to find this information but if look long enough and have a good magnifying glass, you can find the”Made in China” label.
It’s funny Trump never rallied his supporters to stop buying Chinese. He could get them to not wear masks and whatever. When have we ever heard a president or any leader ask their followers to buy more U.S.-made? Just say people: “Walk into a Walmart, demand U.S. products, then walk out.” But no, it will never happen.
Jdog said: ” When will we begin to do what is in the best interest of our own country?”
I propose not when we elect Libertarians. Me-ism, has led to the buy-offs and sell-offs, and is what has contributed to the mess we are in.
(End the FED)
Dear Readers and Commenters,
There has been a change, as some of you have seen, in where my interviews that used to be with Peak Prosperity are posted. Peak Prosperity has spun out Wealthion, and they’re now two separate companies, and therefore two separate channels on YouTube.
The new YouTube channel where my future interviews – and those of other regulars, such as Jim Grant, Jim Rogers, Ron Paul, Grant Williams, Stephanie Pomboy, Jim Bianco, Luke Gromen, and Danielle DiMartino Booth – will appear is Wealthion’s YouTube channel:
To subscribe and be the first see the interviews, go to Wealthion’s YouTube channel and click on the red “Subscribe” button. YouTube will then send you an email notification when a new video interview gets posted. Cheers.
Is this a splitting of Adam and Chris or what? Haven’t seen Chris posting videos in months.
Exactly. All on best terms. Peak Prosperity got bought out as a whole a while ago, and now Chris’ end of Peak Prosperity is being spun out. And Adam’s end of Peak Prosperity (Wealthion) is staying with the acquiring company. That’s my flawed understanding.
I have been watching the West Wing for the first time. Bartlett is meant to be an economist,.which is true because they often have little common sense, but the prevailing opinion was that the US in an episode I watched was that they would get cheaper goods and the economy could be re-skilled to offset job losses. That doesn’t appear to have happened. For all his faults Trump seemed to have worked this out, but it’s like pushing water uphill. There is no turning back. China al the way basically.
I give Trump a huge amount of credit for three big initiatives, two of them are: standing up to China and trying to deal with the trade deficit. No President before him had the gumption to even bring it up. Biden seems to follow the trail that Trump blazed. And that’s good. Trump, imho, bungled it, but at least he tried. He didn’t want to take on Corporate America, which is largely responsible for this. And the entire establishment (politics aside) was fighting him on it. And so he failed to make significant headway. But it’s a start.
They Nixon him.
Wolf, you realize Biden is doing this because it’s politically expedient right? If XJP does anything remotely conciliatory and back off, Biden wouldn’t have a leg to stand on, all of our corporations would be telling him to toe the line, kiss and make up or become a one termer.
Biden is lucky that XJP has too much face to lose if he backs down now and likely won’t survive if he did, if it had been anyone else who followed Deng’s plans like Hu and Jiang did, we wouldn’t be here today. In the end, only XJP can make XJP lose.
Biden is taking on Corporate America, which Trump never did. Corporate America is the main culprit in this. Not sure how much headway he will make though.
I think you’re just seeing more propaganda from the guys (both Dumbos and Jackasses) that are drunk on power.
Having been so coddled by their different corporate supporter, it takes a lot to get seriously scrutinized. Twitter and Facebook are being made examples of because they are easy targets and hated by both sides, ie spread of misinformation and censoring free speech. But meaningful effort to remove these companies that are harming the fabric of society, NEVER, are you kidding me, these are fantastic tools for broadcasting propaganda. Look at all the lemmings following your celebrity of the day on Twitter or the massive but targeted reach on Facebook, who in their right mind would get rid of such useful tools for control.
Do we see any meaningful actions vs for example Apple, or Tesla, or any of the mainstream media who basically lies or gloss over facts in favor of the “narrative,” no. I don’t see Biden making headlines demanding Apple to bring back jobs, or any such thing.
The Yellen tax idea not withstanding, I just don’t see this happening. I think if anything these guys look at what’s happening in China and realize that they are been outmatched when government (centrally directed) provides so many incentives to corporations that China Inc is the largest threat to US corporations.
Break up Amazon, or Apple, only if you want to make sure Alibaba and Huawei dominate the world. Kill Twitter and Facebook, hey, they actually see what China is doing with Baidu, Tencent and so on, what a great model to emulate. Social control.
I knew he would fail when I saw a photo-op with T and all the CEO’s of the largest corporations in the Oval office. These people WERE the problem, NOT the solution to the problem.
My sentiments exactly about that picture.
Greed.. the undoing of the USA
“Biden is taking on Corporate America”
This is how the shakedown begins….
Biden’s “collection department” is waiting in the wings.
In my dreams, I hoped he would end some of our Forever Wars and get us out of Iraq, Afghanistan, and end hostility towards Russia. Sadly that didn’t happen. But boy was it fun watching him trash and ridicule GWB Hillary & the Establishment for their disaster fraud in Iraq and a few other misadventures the MSN would never dare report the facts about.
Yep, going after Jeb and Hillary was his finest hour.
The Chinese learned a very important economic lesson..
The US Congressman is for sale.
And for those who explain how trade deficits “don’t matter” because the dollars must return, there you are.
With the return, influence and ownership change. Academics seem to miss this point.
Sorry, Wolf, but this is all too little too late. The US has benefited from globalisation (at least the elite), but it is also a fact that the US imported disinflation, by exporting production of consumer goods to Asia. So globalisation gutted out the industrial America, but all the goods became cheaped from the 90’s on.
It is also true that a service economy without an industrial base is useless and that was a major mistake. Germany, for instance, never bought into this idea, although the Germans exported some production to the east. But otherwise Germany is the motor of Europe and an industrial powerhouse (cars, engineering, industrial machinery … etc.).
The belief that you can actually compensate the export of industry by tarifs is wrong. Imposing tarifs on foreign steel to make domestic production “competitive” is nonsense. The cost of higher comodities only trickles down into the cost of goods, which have steel components. It has been already tried in Brasil. Initially it made steel production “competitive” but actually bankrupted other industries, which used steel in their products because they became more expensive.
An isolationist position in a global market it’s nice to see, but frankly, it doesn’t really do much for the economy (except for North Korea).
When the US spends 730 billion a year for the “war machine” … it looks more like the Soviet Union in the 80’s … It seems that the American elite is still in the cold war, thinking that it can win a war, that no American really wants to fight. Waging wars you can not win (Iraq, Afghanistan) is not “making America great again” and even Trump knew that, so a harder look at the defense budget and health care costs is the way to go. There is a need for deep, structural reforms, but lobbies, corrupted politicians and also a complete lack of understanding of the situation America is in, will probably prevent that.
Nope. Corporations got a huge tax cut in 2018, and they didn’t pass that on to consumers either. Tariffs are a tax on gross profit margins of imported goods. But consumer prices are set in the market place. And corporations always charge the maximum price they get away with, and if their costs go up, their profits go down because prices charged are already at the maximum. That tariffs are tax on consumers is a classic red herring put out there by Corporate America and Wall Street.
Taking on a political interest is usually least efficiently done by taxing (confiscation).
The most efficient way is to 1. recognize the business model (e.g. is it a utility?/natural monopoly? – then regulate) or 2. change their market so they have competition, where applicable.
There is competition needed in the labor markets as one example. In that case, some “protection” is needed, i.e. emerging labor markets have advantages in various ways- less safe workplace, lax environmental practices. If the US would adjust labor prices for that, a lot would change (instead of raising corporate taxes).
I don’t think it’s about any particular administration. I believe the hardening stance of the US relative to China is a result of the US military and intelligence apparatus finally mobilising, and imposing that stance on whoever happens to inhabit government positions.
Even as a foreigner myself, I made the claim long before the Biden win that the next administration, whoever won, would continue the same China policy that became apparent under Trump.
Clashing geopolitical and trade interests have long predicted a sharpening of relations between the current superpowers in the world.
Imagine the day when most consumer electronics are made in India or Africa. A whole new market of cheap labor and insatiable demand for US dollars that desperately needs them to elevate their economies into modern nations.
Once all third world labor forces are exhausted and depleted then we should worry about the dollar loosing its world reserve currency status. That’s probably 50-100 years off.
China is loosing the battle as the low cost maker going forward. I recently picked up a consumer electronic device made in Vietnam. India is already making iPhones. Manufacturing doesn’t need to be made in expensive places like China anymore. Just like Japan moved its manufacturing to SE Asia and Beyond.
50-100 years? LOL. I’d be shocked if it lasts beyond 2030.
You can tell when a society is on the verge of collapse when their sense of entitlement outweighs their intelligence and common sense.
Some of the comments here prove we are dangerously close to that inevitability…..
JD, I’d leave off the word close. We’re already there. The only thing that matters now, is who’s going to survive.
Minimum wage in Vietnam is around $2k/year in the most prosperous region. In the USA, it’s about $16k/year currently, about to go up to $32k / year. That means it’s 8-16 times as expensive in highly labor intensive tasks.
Sure, you can have more automation in the US to drive down labor costs, but that’s also in lieu of employment.
That’s why companies offshore.
So then why is Haiti, at about $1k/year, not a manufacturing powerhouse only 100 miles from the United States?
I have worked in manufacturing all my life.
In the higher end items, labor is about 15% of the product’s overall cost. So even larger savings of labor costs doesn’t really move the needle.
Here is why factories close (from personal experiences that I could back up with plenty of stories).
Insane government regulations at federal, state and local levels.
Out of control taxes at every level.
Here is an example. At a heavy industrial plant I worked in, the labor union didn’t get one or two minor items in the new contract negotiations.
They proceeded to sabotage the product and the union started giving out press releases on the poor quality of the product.
They won in union contact negotiations.
They lost, when a few years later, the factory closed and they all lost the best paying jobs with benefits in the region.
And no, welders don’t make good coders.
+1. It’s not just labor cost. Not just Haiti, low cost countries are a dime a dozen. After all there are a lot of poor countries out there. Like why don’t European countries manufacture in African countries? Makes far more sense distance and logistics wise.
Whole industries are crippled in the western world due to insane regulations. For instance whole decades were spent deliberately killing biotechnology.
Care to cite a few of those insane regulations?
Seems to me at least it’s rather important for countries to have regulations which prevent companies from becoming toxic waste superfund sites. Companies should not be allowed to extract profits from natural resources and leave it to the taxpayer to clean up after the company has either moved on or gone out of business.
Would it be “insane regulations” that allowed this situation to happen, or would it be “insane regulations” that makes these things mostly a feature of life in China, Russia and the USA!?
(Hope you will see this, I can not find how to reply to your comment)
Easy: The insane regulations put on GMOs crippled the whole biotech industry. Right now the average GMO approval takes seven years and costs several million dollars.
We invented the next industrial revolution and then promptly banned it.
Haiti is basically rubble. Manufacturing requires infrastructure and political stability. Haiti ain’t got it. Might as well as why Zimbabwe isn’t an industrial powerhouse.
China has superb infrastructure, almost-unmatched expertise, and extensive industrial clusters. Need a part for your new design? Drive two minutes down the road and find somebody who makes it.
There is some low-value manufacturing that is moving out of China to places like Vietnam (e.g. textiles) – but China is still the “factory of the world” in most areas.
I just price a Generac generator at the local hardware store. You know, Generac — made in the USA! Not this one…made in China (like almost every other freakin’ thing!).
I had my whole Carrier Central Air conditioning system replaced with a Bryan one about 5 years ago. The whole system was defective. I tried to get it replaced under the warranty but the manufacturer blamed the installer. The installer wouldn;t replace it so I sued the installer and it wound up in small claims court. We settled out of court for about 1/2 of my out of pocket expenses. I threw the whole system out into the junkyard. The system was manufactured in Mexico using cheap labor. Same thing happened with Carrier. They outsourced their production to Mexico.
I now have a Lennox system. The label says Dallas Texas. But if you look carefully in fine print you see “Assembled in Mexico” . You need a microscope to find this.
In Haiti they’ve caused serious environmental damage by cutting all the trees that prevented soil erosion. The place is unsalvagable.
Haiti and Guatemala have the highest fertility rate in the Western Hemisphere 2.9 children per woman.
The highest fertility rate nations in the world are in Africa and they are the poorest.
You can’t compare Haiti to anywhere capable of production. Earthquakes, hurricanes, cholera, govt coups, no reliable power etc. etc. The only comparables are the worst cases in Africa, where there is no functioning state. The only merciful thing is for the place to be placed under outside admin. Not colonized or exploited, but as with some of the African cases, there is no longer any hope. One thing is certain: well- intentioned foreign aid is not enough. Nor are rock concerts.
Don’t forget to include the US government in your list of disasters that have handy capped Haiti. Like through out the world, we’ve meddled in Haitian domestic affairs to install horrid corrupt pro US biz puppets.
Worse than that we unleashed Harvard economists on Hati.
The convinced Hati to eliminate tariffs on food and allow citizens to purchase cheaper food from other countries, saving them money.
The farms all shut down.
This worked perfectly and everyone was happy until the 2010 earth quake destroyed most of the buildings in the country ( the president’s wifes family owned one of the two local concrete companies ).
No one had money to buy off island food.
Watcha gonna do?
Yes, and Harvard didn’t just destroy Haiti….add Russia to that list. The Harvard Business School ravaged Russia. Thank God they had a sane rational mental giant (well at least compared to anyone the West has) who saved her from US design.
“no longer any hope”
presumably no hope results from a very dire situation composed of every possible failure intertwined – like cholera on top of etcetc
so ‘someone’, an outsider, is going to take over and solve all this earthquakes included and set the poor countries right
sounds like Irak Afghanistan Vietnam or any other place where intervention was deemed absolutely necessary to save the natives
what you are trying to sell is a great deal worse than what these places already got – but it’s tough to keep a really bad idea down – what didn’t work all those other times is sure to work this
I have been to Haiti-it is a different world. I was in Cap Haitian, on the north end, and could hear the voo-doo drums each night. Infrastructure does not exist. They are only worried about today, not about the future. If they have a mango tree giving them fruit each year, and they need firewood, they cut the mango down because they need firewood today. I left from Port-au-Prince on a DC-3 and we lost an engine and had to make an emergency landing back on Cap Haitian. We circled back to Cap Haitian flying along the coast. (DC-3s fly pretty good on one engine). From the plane I could see how all the trees are stripped off of the Haiti side of the island. The idea of planning ahead just does not exist there. If you get ahead by hard work, you are accused of Voo-doo. If I were Haitian the first thing I would do would be to cross the border to the Dominion Republic.
I kind of envy you that DC 3 flight. I took one from Vancouver to Victoria a LONG time ago.
A real trooper of a plane. Buffalo Air operates or used to, the last 3 scheduled service between Yellowknife and Whitehorse. They had one there that had dropped paras on D-Day.
Entered service in 1933 I believe. Miles ahead of its time. Could outpace RAF fighters, which were still biplanes with wooden props.
Interesting note that to gain freedom from England the Haitian government had to pay off the value of all slaves to their English owners. That was quite a debt. It was not paid off till 1983 I believe, more or less true story. Keeps you poor and with that uneducated. Yes they have a strong border with DR
I took a DC-3 flight from Caracas to Ciudad Bolivar around 1990 on a trip to Angel Falls. From CB is took two days by river in dugout canoes powered by outboard motors. On the return trip the pilot was a co-pilot that my Father-in Law used to fly with during his career as a Captain. I owned a Cessna 150 so on that flight I got to fly the DC-3 for about a half hour over the jungle in Venezuela with my second can of Bud between my legs.
Amazing plane that handled about the same way as my plane.
By the way Ron, I’m from Toledo.
Haiti gained freedom from England?
history is bunk
If a Dc-3 is a Dakota(UKspeak) we used to charter these for private trips in the Channel Islands in the 1960’s. Magic, nothing like it, the way the canvas rear seats rose 6ft on take off while the front stayed level at v1 rotate. Loved the oil streaks from the big radials along the cabin windows. Pilots used to actually have to drive them, with manual trim screws and chokes and throttles. Life is so dull nowadays. Board & bus.
2B, that sounds like exactly what happened to the manufacturing plant I was manger of in Connecticut in the early 1980’s. When I go back to CT to visit my remaining sister, and a few friends that have not moved to another state for a good job, all the old plants have plywood windows or were torn down and a strip center is there in its place.
In my old CT town of 100,000+ people, the two largest employers are 1) the city, and 2) the big hospital. Crime is rampant and taxes are out the Wazoo. (that town was once “The Brass Center of The World)
We need at stiff VAT on all products made overseas and an abolition of federal income taxes for incomes of 100k or less. They only way to save any of this economy. It will still reduce consumption to the point we won’t be leaking all our wealth to the 3rd world.
Bristol Brass & Copper Company?
BuySome: There were dozens of non-ferrous companies like Chase Brass, American Brass, Scovill, etc and they employed thousands. There were also companies that rolled sheet and other companies that operated stamping and deep drawing manufacturing. All Gone.
The city was Waterbury. Now it’s a slum.
Haiti’s a mess because the West never treated it as anything but a resource colony to pillage, even after it won its “independence” (not really, since so many leaders were installed dictators).
China’s in the process of spending $30B to rebuild Haiti’s infrastructure as part of Belt and Road. Power plants, sewer treatment, water purification facilities, highways, 5G, etc
What resources does Haiti have?
Others have commented on Haiti – the difference between it and China is that China has a heritage of looking ahead, and the leadership in the early part of the 21st century has been aggressive on building infrastructure and an educated populace.
Anyway, I wanted to comment on labor being 15% of the product. Think of a product costing $10 made in Asia, $8.50 materials, etc. and $1.50 labor. Assuming that the material price doesn’t rise in the US (a bad assumption, actually), now the materials cost $8.50, but the labor has risen 8x (to be generous) to $12, so now your cost of product has risen from $10 to $20.50 – more than doubled.
The other low-cost factor in Asia (and this brings out the hypocrisy of business) is the lax environmental regulations, which reduces overall costs while killing the environment.
In UK BR had ‘firemen’ sitting beside diesel engine drivers for years, just in case the driver didn’t see a signal or hear his Aws buzzer or fall with his weight on the ‘dead man’s’ handle. All perfectly reasonable, of course. Question is, are trains unsafe now without them? That was then, this is now.
You’re right, we don’t dare make Apple move jobs to US because their profile margin might decline from the 40-80% range to 39% and the stocks might fall down go boom. The horror!
USA has no leverage to ask any multinational to do anything.
To paraphrase all those US Chamber of Commerce surveys: We love you, America, but we’ve chosen China.
The importance of the PRC market and its exploding middle class is dwarfing that of the declining US market.
You’re right. US has no leverage on Apple or other corporations. That’s why powerless US can’t pass or enforce any laws upon then, make them pay taxes, impose tariffs, regulate them, or require US made content in their products like we do in other instances and like other nations such as India does to multinationals. Maybe we should just ask them what they want US government to do, wouldn’t you agree.
There are no land borders in the empire of US Corporatocracy!
China didn’t steal our jobs or factories. US Multi-Nationals did it with the consent of Congress both parties, since 2000. Patriotism doesn’t add to their bottomline!
They can devalue the dollar.
I very much wish we had the backbone to do all those things you propose.
Reindustrialization on some scale is possible – but it’s going to require more legislative backbone than we seem to have in the “Citizen’s United” era.
As expansive a morass as HR1 is – it would do little or nothing to take a bite out of “Citizen’s United”.
Somewhere there’s a link by the Cato Institute…or maybe it was the American Enterprise Institute?…or maybe the Foundation for Economic Education?…or maybe the Heritage Foundation? that stated that Citizen’s United would supercharge job’s growth. I’d spend more timing look for it but it would just induce nausea if I read it again…
Basically agree with you and in long run US isn’t going to be better off paying 8x as much to onshore…
There is a follow-on, value-add step that America has somehow managed to completely forget.
Assembly of most products occurs in stages, made up of components.
This is clearly seen in China’s assembly of cell phones/computers (1 of 2 or 3 backbones of Chinese trade supremacy over America).
China *imports* many integrated circuits and other components, which are then assembled (in China) into the final pdt exported to America.
While all countries in the supply chain profit, my guess is that the final assembly stage (in China) profits disproportionately (Apple jedi mind mktg in US notwithstanding)
And that “final assembler/integrator” stage is what America has most definitively forfeit over the last 20 years.
And the US has paid for it heavily.
So instead of domestic demand enriching domestic production, it now enriches foreign production.
But…there is no particular reason why imported products from China cannot be cast in the component role, if America could only find the wit to develop final products that subsume the then component products from China.
Labor has always been cheaper in some places. Highly skilled factory workers in Europe were begging for work in the 1950s, and would have worked for nearly nothing. Our companies DIDN’T ship jobs overseas until 1970. It’s not about cost, it’s about a desire to destroy this country.
This is correct. But the reason is not because corporations were more patriotic or moral in the 1950’s, it is because the people of that time would not stand for it. They would have revolted in mass.
I hate to say it, but the current generation does not deserve prosperity, they do not deserve their government to protect their interests, they deserve nothing.
They do not have the courage to stand up for themselves, so they are getting the shaft, and that is exactly what they deserve.
You yourself are one of our greatest stumbling blocks; the working class people who don’t know whose side they are on. Way to justify the billionaires’ low opinion of us and their nasty schemes visited upon us, brother.
The real outsourcing accelerated in 2000. I used get the magazine Computer world. After the year 2000, most of the articles in the magazine were about using IT, the expanded Internet and broadband to shift service jobs overseas. I knew it was all over then. This is exactly what happened.
Remember people. America is not a country, it’s just a business, that’s why American companies offshore.
Is this a quote from the Brad Pitt film?
Its not a direct quote but its similar to one said by brad pitt in “killing them softly” great movie, came out two years or so after 2008 and was quite the ridicule of America and the response to the GFC that i enjoyed. The quote you’re prob thinking of below.
“My friend, Thomas Jefferson is an American saint because he wrote the words ‘All men are created equal’, words he clearly didn’t believe since he allowed his own children to live in slavery. He’s a rich white snob who’s sick of paying taxes to the Brits. So, yeah, he writes some lovely words and aroused the rabble and they went and died for those words while he sat back and drank his wine and f***** his slave girl. This guy wants to tell me we’re living in a community? Don’t make me laugh. I’m living in America, and in America you’re on your own. America’s not a country. It’s just a business. Now ******’ pay me. “
Thanks for the quote – the movie was alert and accurate about Obama when most everyone was still in love
Lest we forget – Thomas Jefferson lived very well – mostly on debt.
Obviously those Vietnamese do not understand the proper concept of communism. That means everyone should be earning the same, quick, lobby the unions in Vietnam, their minimum wage need to be $15/hr.
And that’s why the notion some fool was going to “bring back the jobs” and simply REVERSE GLOBALISM was always utterly and completely ridiculous to anybody with 2 brain cells to rub together.
Don’t get hung up over a verb, such as “bring back,” in the literal sense. For example, producing more automotive components in the US means automation, robots and software, infrastructure, construction, tech workers, coders, people that install, maintain, and service the robots, and the like. And it also means some highly trained manufacturing workers. These are ALL great jobs to have in the US. Now they’re in China. And YOU are sounding, to use your very own words, “utterly and completely ridiculous to anybody with 2 brain cells to rub together.”
It also means not running out of chips to put in cars because of overseas supply chain disruptions, Suez canal blockages, Wars, etc, which cripple the entire automobile production process.
These things are all going to happen. Cheap labor in other countries is not going to stay that way as labor costs go up in other places. This is already happening with production leaving China for other countries and returning to the U.S. It is starting to be the case that there is becoming less and less an advantage to manufacture overseas especially with the advent of robotics as you mention.
But this will not mean a massive increase in employment here. We already are (or should be) producing the robots and writing the software and besides, a company like Apple can double the number of phones it sells with very little in the way of hiring more people. The same number of developers are needed to write the software regardless of how many units they sell.
Sure there will be some jobs to maintain the equipment and oversee the manufacturing but that is extremely marginal compared to when manufacturing was labor intensive.
“And that’s why the notion some fool was going to “bring back the jobs” and simply REVERSE GLOBALISM was always utterly and completely ridiculous to anybody with 2 brain cells to rub together.”
No, the fools are the people who believe in a lie that you can’t domestically produce goods for domestic consumption because it would be too expensive and everybody would be poor. Quite the contrary. But that doesn’t fit into the narrative of the billionaire globalists and their bought and paid for media, with ignorant sheep parroting their lies ad nauseam.
How about congress passing a law that no U.S. Tax dollars can be spent on foreign products? Give five years to allow onshoring. the U.S. government is a big customer. Also, would include all aid to states and cities. Buy American or forfeit the tax dollars.
And why they are at it, no tax deductions from business income for any worker not vetted by E-Verify. Want to hire an illegal? Fine, you cannot write off their wages against income.
Don’t feel so bad,
This coming from the same dude that told me I was hoping for an acquittal of that bad cop in Minn, so the cities across the country would burn down.
You are correct. The jobs will not be coming back, and the faith placed in Trump was not only misplaced but mystifying.
US manufacturers, aided by our corrupt elected representatives, pursued “free trade” so that they might cut their labor costs, destroy unions and evade environmental laws and workplace safety standards. They succeeded. Free trade was always a ridiculous concept because the countries with whom we were trading hadn’t renounced mercantilism. It was obvious to me then, a poorly educated working class individual, that manufacturing in the western world would move to the developing nations and the middle class here and in Europe would shrink. Could manufacturing return? Perhaps, but there is no motivation to do so while transportation of goods remains relatively cheap, and international relations remain stable. The corporatists are not patriots. They are capitalists, and the wealth redistribution and disparities are of no concern to them.
Is this just cars and trucks, or electronics as well? What is driving the durable goods surge by category?
It’s just about all durable consumer goods, as I pointed out: “from smartphones and bicycles to appliances and clothes.”
The plutocracy has essentially implemented a textbook leveraged buyout of USA, Inc. They paid off the management (politicians), offshored jobs, loaded the “company” with $28T of debt and extracted vast sums of wealth from the enterprise via money printing, interest-rate repression, low capital-gains tax rates and wildly excessive executive-compensation.
Somehow, the little guy got the short end of the stick on this LBO.
Taxes are THEFT after all. Their gods Friedman and Hayek have *said* so…
Milton Friedman created the income tax withholding system during WWII.
Taxes are not theft, and no one ever said that. Forced taxes are theft. Perhaps you are not educated sufficient on the subject to know the difference, between a moral voluntarily tax, such as a use tax, or sales tax, and a immoral forced tax such as income tax or property tax. That, or perhaps you just prefer socialism to individual sovereignty….
Jdog- Yes, all of these famous “quotes” are used to mislead.
“Greed is good”- no, enlightened self-interest/profit maximization in a free/fair market is good. ( I can already hear people skipping/ignoring the word “enlightened”- which includes economic externalities- done fairly)
“Taxation is theft”- no, taxation outside of the “proper” functions of government is theft- defense, law enforcement, etc. are proper functions. Social/welfare systems (redistribution) through forced taxation might be theft.
Jdog said: ” a moral voluntarily tax, such as a use tax, or sales tax, and a immoral forced tax such as income tax or property tax.”
In the end a handful of kings will own everything in America from the stock market to the houses and the rest of us will just have to kneel before his majesty and beg for the opportunity to be an indebted serf to our lord.
After all, stopping our new god-emperors from controlling everything would be “socialism” and we can’t have that!
That’s why the 2nd Amendment is so important. You end them before it ever gets that far.
You do that I will fight back
You have it backwards. Socialism is feudalism. That is why corporate structure is socialism. It is the government giving preferred rights and immunity to special groups. If you bother to study history, you will find that corporations were not even allowed in early America, except in cases where they were temporary for large public works projects.
The forefathers hated corporations and said so often in their writings.
When was the trade deficit last at its worst, hmmm let me think, can’t think of the year, anyone have a clue?
Here is the answer, the goods trade deficit (without services):
And the trade deficit, goods and services:
Wolf, with running a trade deficit, is the US inadvertently, or advertently, exporting inflation? Countries that use the surplus to buy US treasury or bonds would be slightly better off, getting 1.5% back instead of nothing at all?
From the charts, looks like the total trade deficit peaked in 2006, around the peak of the Mr. House market.
Ah ha you got my point ;). fall 2019 was the beginning of the next leg down since the dot come boom! Thank god for the CARES Act!
Thank you for the detailed charts Wolf!
Mr. House market ==> Mr. House bubble.
Had (what I think) was the same thought earlier. Consistent with the “too many shoeshine boy indicators flashing red” theory.
In the year of our lord 2007, I was 25 and about to enter a full time MBA program (oops!). Although I was an inexperienced chucklehead, things (economic things) still felt obviously “weird”. Gas was really expensive, everybody was telling me to buy a house (I didn’t), and there were rumblings that something was generally awry.
We shouldn’t fight the last war, but wtf somethings got to give.
Glad we here amirite?
What if the last war never ended and its all we’ve been doing? But some people try their hardest to make you think happy days are here again! I’m just happy the slobs who run this country aren’t talking about green shoots again…… that was unbearable
The green shoot were only up on the hill where the lights were.
Also why it costs $1 million to build a decent new construction home. The whole country is a house of cards. All for what? To buy another flat screen for $400?
All so those who consider themselves better then us and all others get to remain in power. You aren’t a person to them, just a number.
Is YouTube part of offshoring, or onshoring?
How much does it contribute to the economy, and how much did it already kill? I noticed live music events are mysteriously down.
Youtube makes foreign Youtubers pay US taxes, so its part of the onshoring.
How did we ever get by here in America without YouTube?
I know your question is somewhat rhetorical, but…
I don’t do Youtube, Facebook, Twitter, Debt, China, no Apple, no Google. Still own a 3G flip phone. Consume very little.
For me, having recently discovered this website, the question is:
How did I ever get by here in America without Wolfstreet.com?
Yes indeed, “… try to find some durable goods that are still made in the US.”
I go out of my way to do so, but it is not easy, and sometimes it is not possible.
When I bought my Bianchi road bike last fall, I wanted the best machine I could get, but there’s nothing made in the US that compares. I did choose to go with a SRAM groupset instead of Campy or Shimano, as SRAM is headquartered in Chicago. The majority of SRAM components are made in Taiwan. Even Bianchi has the carbon fibre frame fabricated in Vietnam and then brought back home to Italy to be finished.
Still waiting on my made in Florida JL Audio subwoofers as they are on back order from the factory. I went with them because they are the only, and I mean only, made in the US subs out there in the marketplace.
When my ten year-old Panasonic plasma TV needs replacing, what the hell do I do? (I know, Wolf’s answer, “TV, … don’t need no stinkin’ TV!”) Gotta go now as PSG & Bayern Munich just started …
Since it’s halftime, I had to check for a US made carbon frame which is high-end. There does exist an option.
Denver, CO is home to alchemybicycles dot com, and they make a nice looking (via the internet) frame called ‘Atlas.’ Hand made and set for disc brakes.
IMO, the best wheels do come from Minnesota, and of course I have a pair of HED Vanquish carbon fibre wheels on my ride.
I bet that no one knows that Taiwan has outsourced a lot of their manufacturing to mainland China. If they go to War I wonder what will happen to the trade volume.
Reminds me of Serbia exporting all their pig production to Austria Hungary just before Austria Hungary invaded Serbia. Those Serbian pig farmers really took it in the chin.
What would become of Taiwan Semiconductor, for example? Intel stock might be the hedge even though the stock is in a 21 year trading range. An invasion of Taiwan could be the catalyst for a breakout.
On the other hand (now thinking like an economist) China wouldn’t pull such a stunt with Biden in office.
You mean Honhai is not a Taiwanese company!?!?!?! Oh the horrors…. what will we do if they stopped making iPhones, or if Sunny stopped making camera modules for the iPhones or if … OMG, it’s too terrible. What would I do without my next iPhone.
FULL STOP, this is a National emergency, how can I check my Twitter feed, or watch cat videos on YouTube, or use Instagram without my iPhone, OMG. ?
Oh believe me, they all know. That little tidbit is actually in the FORWARD of Ian Easton’s 2017 book on the defense of Taiwan. There are over ten million workers in China whose (electronic) paychecks will not go out to them in the event of an invasion. Patriotic middle-aged office managers across Taiwan will push a button on their computers… and BOOM… angry mobs appear in China.
Moreover, I had lunch with an old boss yesterday who has dumped his shares of TSMC due to the enhanced invasion threat BUT is buying stock in the companies that TSMC is using to build manufacturing plants in other countries. He enjoyed my rundown of Easton’s book on how hard a successful invasion of Taiwan would be but is going to stick with his investment plan.
So everyone knows that needs to. The CCP has to take into account both the fact that an invasion would cause major unrest in China since ten million unemployed workers is a lot of people… AND that they may be unemployed anyway if TSMC outsources that work in preparation of an invasion attempt.
Damned if you do… Damned if you don’t.
The Tiawanese would fight to the death to save their country. I was there twice in the early 1970’s. It was a wonderful country, and if I had to move anywhere I would move there. They loved Americans and treated them well. The weather there was great. Sort of like South Carolina in the USA. The rail system makes Amtrak look like a sorry joke.
One thing I did notice, was that there were army troops with machine guns on nearly every street corner. Even back then they were worried about an invasion from mainland China. I can imagine what they are going through now, looking at what what has happened in Hong Kong.
Buy Speed Queen washers and dryers, still manufactured in Wisconsin, great quality only be prepared to spend a little more.
Well, well. PSG vs. Bayern Munich is a foreign services import. But if you shop around a little, you can find a lot of consumer, non-food goods made in Germany, Sweden, France and Italy, although not for Chinese prices.
Great idea! In fact I’m waiting on some adjustable foot pegs to arrive this Saturday from Motacc in Tenengin, Germany.
Since my recent knee replacement has limited my flexibility, I can’t sit on my Italian made Aprilia Tuono motorbike with the stock set up.
And even though I’m good with steel fabrication and TIG welding, I figured I’d just get a set that was pre-made. I know, I’m getting lazy in my old age. But, one thing I did last year when I bought the bike, was say no to buying a Chinese made rear stand to lift the bike to adjust the chain. Couldn’t bring myself to do that, so I did make my own.
You are right though; watching Champions League soccer from Europe is consuming a foreign services import. Never thought of that way, but I will from now on.
I was just joking. There is nothing wrong with watching Champions league.
However, on another level, pro soccer is full of bloated egos and you would probably find institutional corruption, which is one reason why I am not a fan.
My bikes were likely made in Taiwan.
However, I managed to snatch some of the last pieces of Made in Italy Bialetti stovetop coffee makers.
Also have a Le Creuset French oven, and a few pieces of Woolpower clothing made in Sweden, to name a few.
It may not have moved the needle yet, but I am seeing some inklings of production being brought back onshore. I have been a small scale manufacturer of components since 1987, and for my entire career it has been a trickle-trickle-trickle of production to overseas. But due to increased costs and supply chain problems a few things are coming back. Just today I bid on doing the forming on a sheet metal bar accessory ( for making drinks) that had been made in China but the the customer wants to have made in the U.S. even if it costs more.
It is not rocket science. If you truly want manufacturing to return to America and boost jobs and income all that needs to be done is change the tax code to make it more profitable to manufacture here than overseas.
Of course that would mean less profit for the corporations, and it is the corporations who own the politicians, by use of bribery, so the chance of that happening is nil. At least until we have the courage to force an end to bribery of elected officials by corporations….
If consumers had to pay a little more to buy domestically produced durable goods, that would be OK with me. The money would recycle through the communities here and provide more jobs and a higher standard of living for everyone overall. Unfortunately, no one is making the case for this. The Internet and companies like Amazon have promoted the “Lowest Price” mentality to the exclusion of the above argument, which you hear almost no one talking about.
Anything where quality control is critical is critical is likely to be considered for onshoring. My brother was talking with a parts manufacturer in Texas a few years who was getting more and more orders from the oil industry because Chinese parts were failing when put under the extreme pressures of drilling. They shouldn’t have failed but there is a lot of corruption in China and the time to find out that some small washer or whatever was not made to the specifications you paid for is not when your equipment is a thousand feet underground.
So look for mission-critical parts that can be made in small batches to come back first… particularly in rich industries. The pandemic (and China’s belligerence) has shown the dangers of leaving our pharmaceutical production in unfriendly hands. Plus anything that can be considered wartime critical. Last but not least… anything where China forces a company to turn over the intellectual property after fifteen years… American companies (and investors) have figured out that game which only benefits the CEOs who will be in power for five years on average.
Ned Beatty’s beat down speech in Network (1976) says it all. Essentially nations no longer matter. Corporations are the new nation state.
Loved the scene of the Angela Davis like Communist with a huge affro hair do fighting like a ruthless seasoned Wall Street barracuda for her share of the profits.
Amazon doesn’t disclose whether a merchant is American or not…the problem is that most Amazon shoppers in the US probably don’t even care at this point.
Approximately 40% of Amazon merchants are Chinese.
In Europe, Amazon is required to display that information only because Europeans demanded it via regulation.
Have read that even US service uniforms are made in China. But I’m sure our enlightened leaders are aware of this and plan accordingly.
They do. It’s called “Gold and a getaway plan”.
Or more aptly put – “do your looting before the burning starts”.
Indian garment workers are much less expensive than Chinese garment workers. India’s manufacturing is growing fast.
The Indian Express, 4/7/21:
“IMF projects India’s growth rate to jump to impressive 12.5 per cent in 2021”
It’s not just about labor and material costs, it’s about maximum profit.
That’s ALL it’s about. GREED.
Oh and the trade deficit is likely to get worse for at least several more months. Although the data suggests Americans are more likely to stuff EIP3 in the bank then spend it – we might be heading out of the pandemic just as other countries (e.g. EU, LatAm, Near-East, etc.) double-down on lockdowns.
The bigger the deficit the deeper the screwing of China.
America has enslaved the world with the green buck, not only do we send them pieces of paper for real manufactured goods, but we keep the inflation low by exporting printed dollars, ingenious indeed.
We got to keep the chinese busy.
When is the next round of checks hitting my account?
They get to practice their manufacturing skills though. And eventually once America no longer buys stuff from them, they’ll just produce good quality stuff for each other. Insane idea, I know!!!
I just watched this video on Youtube about top Google search terms that mention China in 2020, and people ask all sorts of questions like “Do the Chinese have cars”, etc, etc.
I can’t honestly believe how many of our countrymen are so stupid. A product of our education system and our corporations, thanks Google.
A comment on dollar dominance, if you look at Iran and China, and how they trade oil, things are already changing. The dollar is just a secondary concern.
I understand the economics driving offshoring. And as our middle-class becomes poorer and increasingky sensitive to consumer prices, the pricess will continue. I intentuonally go out of my way to buy American-made, but much domestically produced items use “globally sourced” material (read that as China). My goodness, the fence clips I bought for attaching fencing to the fence posts I’m building around our garden are “proudly” made in the USA (flag and all), but the metal to make them was imported. Probably true too for the steel t-posts and the fencing material.
I’m not sure what the solution is. Maybe there isn’t one and nature will take its course.
You will find that the stuff made in USA now days is just as crappy as the one made in China but twice as expensive.
But at least Yellen introduced today the “made in america tax plan” so we do make smth in this country afterall.
No, that’s a false generalization. There are a lot of things no longer made in the USA. However, there are a lot of things made here that are the best, and are fairly priced when compared to the global competition.
Want the most accurate sounding loudspeakers for under two and a half grand? I know I do. Made in Minnesota Magnepan 1.7i speakers sound better than competition costing many times the price. When properly set up, close your eyes and you’ll swear the orchestra is playing in your living room!
Plenty of other examples out there in all kinds of products to prove you wrong.
The tariffs and tax cuts were supposed to convince producers to bring the jobs back. They did neither. It just made the cost of imports higher, thus worsening the trade balance. Also, foreign investment in the US is high, because we allow foreigners to buy real estate and companies willy nilly, shutting out the Americans who might wish to buy instead.
Our biggest export has always been farm goods, not manufactured goods, and we ticked off China and Europe with the tariffs so they reduced buying our farm goods so the tax payer had to pay farmers a special subsidy to put up with this. WEll, the US should try to learn from others, like the Germans, to compete on QUALITY instead of price, to produce quality goods, not the cheapest, as the Germans and Danes for example, have globalized and not lost their manufacturing?
Quit repeating this clueless trade BS. I just replied to the same clueless trade BS above, and now you’re repeating it. You’re factually wrong. So I re-post my reply, hoping that you will see it.
Below are the top export categories of US goods, in February, in billion $.
All food and drink categories combined are in distant third place ($13 billion or only 10% of total exports). This includes food commodities, which get a lot of political attention but are small in dollar terms. Wheat, Soybean, corn, and other grains accounted for only $5 billion. But these exports of the ag commodities have nearly DOUBLED from a year ago.
Note the top two categories and edge them into your memory. They account for two-thirds of total exports:
1. Industrial supplies and materials: $46.4 billion
2. Capital goods, except automotive: $39.1 billion
3. Foods, feeds, and beverages: $13.2 billion.
4. Consumer goods: $15.1 billion
5. Automotive vehicles, parts, and engines: $11.9 billion
6. Other goods: $5.0 billion
The problem with the trade deficit is Corporate American and its reckless pernicious drive to bring down production costs at all costs. Tariffs make Corporate America think twice about offshoring production because they alter the cost equation.
Is defense export separate.
“pernicious drive to bring down production costs”
‘That US 2020 trade deficit is higher than in 2019 when it was $576.9 billion.’
The Canadian trade deficit in 2019 was 16.7 billion.
Since Canada also buys a lot of Chinese stuff, I don’t know what explains the roughly 3.5 times greater US trade deficit per capita. Weaker C dollar?
Dear Mr. Kelly,
I think part of the reason it is higher now is because tariffs on imported goods increased the price of the goods imported. Also, the USA main export is farm goods. These exports fell dramatically due to the fact that the Canadians and the Chinese and Europeans drastically reduced the import of our farm goods in retaliation for the tariffs we put on their goods.
Good lordy. Almost everything you said is factually wrong.
Lumber prices have surged GLOBALLY, not just in the US. So forget your red-herring tariff story.
Below are the top export categories of US goods, in February, in billion $.
All food and drink categories combined are in distant third place ($13 billion or only 10% of total exports). This includes food commodities, which get a lot of political attention but are small in dollar terms. Wheat, Soybean, corn, and other grains accounted for only $5 billion. But these exports of the ag commodities have nearly DOUBLED from a year ago.
Note the top two categories and edge them into your memory. They account for two-thirds of total exports:
1. Industrial supplies and materials: $46.4 billion
2. Capital goods, except automotive: $39.1 billion
3. Foods, feeds, and beverages: $13.2 billion.
4. Consumer goods: $15.1 billion
5. Automotive vehicles, parts, and engines: $11.9 billion
6. Other goods: $5.0 billion
Lumber prices have tripled in the past year, but timber prices are only up 20%.
Some fat cat’s enjoying that spread.
The attempts by President Trump to stop the trade imbalance showed how inept the guy is. He put tariffs on products, but that only caused the manufacturers to find other low-cost countries to produce their goods. And he allowed alot of loopholes.
The mass media does nothing to educate the people about how our system is designed perfectly to prop up billionaires, but destroy workers and small/medium business owners.
Now with Biden, we have a President even more inept than Trump. He doesnt even understand the problem, let alone a solution to fix it.
The very simple answer is devise a tax system that put a massive tax burden on manufacturers that ship jobs overseas. So Apple can pay a tax rate of 40% until it returns production to the US market, same thing for GM exporting jobs to Mexico, etc. And also destroy all of the red-tape that companies face in constructing new factories here in the US.
But we need to get rid of any minimum wage laws. Dramatically increase low-skill jobs and we wont need minimum wage laws, companies will be forced to compete for employees, which is the way a free market economy should work.
You’re forgetting that with low-skilled labor, the US has an unlimited supply of labor due to mass immigration and illegal immigration, which are just systematic forms of wage repression. So there can never be a real labor market when you have unlimited supply of labor and very limited demand for labor. Hence minimum wages to protect the bottom end from slavery.
The real solution would be to shut down illegal immigration, institute rigorous E-Verify for all employers, including households employing nannies, impose big per-day penalties on employers for violations, and curtail mass legal immigration such as H1-b visas.
As a former software engineer, why didn’t the last administration institute E-Verify for all employers, and fine those who violate it? It would have been easy to administer as it is nothing but a software tool that anyone can run on a PC in their garage. It would have stopped the hiring of illegals who are usually paid under the table, raising a lot of tax revenues, and collect money in fines from employers who violate immigration laws. Win, Win Win.
Compare the ease of doing this to all BS about a Wall and who is going to pay for it, and finishing it, which hasn’t happened.
I think (based on vague memory) the Obama administration got sued on E-Verify and lost a major court case (reliability of the system) and stopped pushing it. It essentially went dormant. There were too many potent interests lined up against it.
^ This right here. You are on a roll Wolf. Few actionable items are as obvious and simple as gaining control of the labor market. It would take several years to sort out but wages would improve, automation or not. I really believe there is a political opportunity to draw support from many groups were this taken seriously and implemented as you suggest. Many problems still left but this one is huge.
Sound policy … I’m starting to sound even older than I am. We remain short on leadership, unfortunately.
Wolf-thank you, thank you, thank you!
My first encounter with this national labor abuse was at the AFEES station fleabag hotel in downtown LA the night before i was inducted-every employee other than the head desk clerk) blanched and vanished from view when i asked ‘…carta verde?…’. (I could be sure, though, that their slice of the government dime was nearly transparent, and that the owner of the fleabag’s slice was pretty opaque. Reckon equivalent things haven’t changed much in the subsequent half-century…).
May we all find a better day.
Wow..you just jogged my memory of that last night in the City of Lights. Next day was TWA to Saint Louis, then bus to Lost In The Woods. But tell me, got any of the great medcorps cough syrup (the field strength kind) stashed away. Can’t get that in a bar anywhere.
Buy-LOL. nah, all the residual meds have long-since been consumed/aged out.
You jogged MY memory, though. The hard-core alkys in my Basic bn desperately awaited their free hours to run to an Ord PX to load up on Nyquil (50-proof at the time).
(There seemed to be a uniformly-pardon pun-low bar for RA enlistment screenings at the time. The pair of underage, not-discovered-until-after-they-had-completed-the-booby-trap-course East Los gang members is only one different tale…).
may we all find a better day.
Wow, Wolf, how RACIST of you! Not really, that’s just the narrative and media response to anybody who talks about securing our borders and labor market.
Depth-not racist, it’s the story of America, and in fact the world, is that of people moving to an area of perceived better opportunity, and may the fates help you if you live in an area of relative population vacuum relative to an exploded world population- especially if you are a now-NIMBY descendant of a prior wave of immigration…(Scorsese’s ‘Gangs of New York’ an interesting interpretation, here…).
A very great problem we have is that we as a nation want things both ways-secure borders, but cheap labor/goods-which hypocritically negates our professed belief in one of the values of citizenship-that average, everyday employment should provide a decent, if not lavish, living to the majority of those citizens, with opportunity truly available to the more energetic among us. Big Business seems to rarely consider ‘patriotic citizenship’ as anything but a public-relations cost-entry in the ledger until times of great international crisis (and maybe not even then), and will opt for acquisition of cheaper labor, domestic or not, every single time, cynically fighting any serious verification scheme to the last ditch.
The working citizenry is culpable here, as well, voting with their wallets for cheap foreign goods while decrying ‘…why can’t i find something made in America?…’ (this is a long-term boiled frog situation-Gandhi fought the Brits on this with the spinning wheel, but not enough folks see/understand the neocolonialism of the multinationals at hard labor, and despite well-intentioned pronouncements, will continue to vote with their wallets).
All this, though, ignores the larger reality-a huge human world population using a massively resource-consumptive technoindustrial operating system. Any way we slice it, all things will be getting more expensive, goods generally, food and water particularly.
Plan your future diets accordingly.
may we all find a better day.
Thank you Wolf!!!!!
I really do not understand why people have such a hard time understanding that labor is subject to the same laws of supply and demand as everything else. For every action, there is an equal and opposite reaction.
Mr. Richter- Yep.
Social welfare, workplace protections, environmental protections= (desirable, probably), higher costs for labor. You can’t have open borders with labor cost structure like this. Minimum wages would not be necessary if the border (read labor market) was protected properly. (Note- it is expensive to have a clean environment- you have to create wealth to do it.)
People have forgotten the “E-verify” concept that was introduced in the ’80’s under Reagan. The government never got around to it because all politically powerful constituencies don’t want it.
Mexico had the wealth disparity gap decades before it arrived in the US. When growth is held back due to government policy, the few owners prosper by exploiting the many, a large pool of labor. That is really what is happening in this country, through Fed interest rate policy. Pre pandemic the labor market was very tight, and GDP was lagging, and the experts were worried about a (labor) recession. 2/3s of the economy was services. Manufacturing business managers could not find qualified workers. To seqway to those manufacturing jobs we need a larger immigrant workforce. When Covid clears up we are going to get the economy we had when the pandemic started. Immigrants fill manufacturing jobs and more highly skilled resident workers take jobs in logistics and support (tech and transportation, and finance).
1) Import became vertical to the downside since Mar 2020.
2) If USD rise, it will bounce back.
3) US30Y futures monthly. Support line from 1984 low to Jan 2000 low.
Resistance from Dec 1999 open, big red dotcom crap.
4) US 30Y huge selling tail in Mar 2020. US 30Y breached support in
5) If US Futures come back to the half line ==> import will drop.
6) Silver is bouncing up and down on Jan 2011 hi/lo, for 10 years.
7) Gold Futures made a round trip to Feb 24 2020 high @ 1,711.40.
8) US gov isn’t China 100 bagger.
This is all agenda 30 and 20 ,what do you think the G8 and the G20 get up to? If I may just have read up on it.
Flip that chart you have Housing Bubble one and two. It’s all variations of the same underlying entity, credit. Stimmies are credit as money rather than credit as leverage, consumers have debt as consolidation. Having your student debt cancelled is the ultimate consolidation. You cannot inflate credit away, just raise the limits. Cash stimulus is more generally a Republican plan, which these Republcians did not recognize. The govt would like to nationaiize the credit agencies, then they can control the whole thing. Consumers will buy more services, (the automakers have tried to make their product a service by not selling for cash, leasing on a monthly charge, or 0 APR) because credit works for services not durable goods. The economy will go boffo if they give consumers credit points, not cash, including housing, which is a service as well, with yard and house cleaning.
More credit is useless to those on fixed income.
The US government administration view on policy……..we might be headed to bankruptcy and significant dollar devaluation…….but……let us pass some infrastructure so the road getting there will be really smooth.
We need a VAT something awful but these jokers can’t even pass a tax to balance social security when they know the iceberg is right in front of them. You want to see a depression…..cut ss benefits.
I’ll have mine on the rocks.
Read a good article that in theory infrastructure should increase productivity and therefore long term standard of living, but in practice this does not happen. Very difficult for good capital allocation to be done from a conference room in DC.
Big deficits and money printing short circuit one of the main functions of money which is to force us to choose what is most valuable to us as in everything can’t be number one.
1) There was no stopping of the invincible unions, until Nixon.
2) For 100 years the huge unions army march was unstoppable.
3) They sucked US corporations and cities and states, but the gov supported them, during the good times and the depression.
4) Communist China was the unions vaccine.
5) Nixon was pharma.
6) Carter fell in love with China. This marriage last for 50Y.
7) US was evicted from China in 1949.
8) Nixon brought China back and stole Egypt and the Suez canal and kicked USSR fleet from Port Said.
9) Nixon divorced gold for LBJ smoke screen.
10) The elite hated him, but he changed the world and they cannot take it until today !
11) Iam not a Nixon fan, for very good reasons.
The dumb ass fed says there is no inflation…..
when you export 80 billion per month…..dollars not goods…..those are dollars leaving your country…….duh! The repatriation is not in the purchase of US goods.
They ought to lined up against a wall.
What is healthy about handing consumers cash to watch it stimulate China and bankrupting the US.
We import deflation…from the Pacific Rim.
We trade our dollars for items that will end up in a dumpster in a few years.
The dollars return and with the return comes the change in ownership and influence…and we lose the country.
Washington splashes money around the country…and it ends up in China’s pockets..
All together now..
TRADE DEFICITS DON’T MATTER
from the Bernanke, Krugman, Summers, Yellen and Powell crowd..
Sure the dollars come back, and they buy things like our cities, our companies, and our Congressmen
1) Replace China and the Asean nations with : PR, Haiti, Santo Domingo…great ladies, great guys, they love their babies.
2) Let them do consumer electronic piece work. Piece work is beat the min wage.
3) The good workers will take a limo to work, because they will make so much money in Santo Domingo. They can acquire skills faster than any zoomer.
4) The infrastructure is 30 min flight with American Air Line from the Caribbeans to Miami, or 3h to JFK.
5) Phase out China and the Asean countries, for national interest
reasons, to build a deep backdoor. Let the sugar island compete with Mexico, because Mexico acquire too much power on us and developed a huge ego.
1) Replace China and the Asean nations with : Detroit, Chicago, (& other deindustralized American cites)…to best rebuild great American ladies & great guys, who can again afford to love and raise their babies as middle class Americans with economic and social potentials.
2) Let Americans re-establish a middle-class, restore benefits and wages by restoring the majority of production in America, with the majority of profits to productive America labor.
2a) Let the reemergence of a middle class in America following the impostion of these policies push aside the last, lost 13 years of (really below zero) low interest rates accompained by this massive debt load, that has not served to replace the lost American demand destroyed by the destruction of the middle class, but only saddled our poverty-stricken working classes to potentially endless taxation to pay the costs of keeping the rich rich as they stripped out the source of their profits, being our now lost middle-class earning/purchasing power.
3) Following these policies good workers will again cherish work, because they will make so much money as honest Americans, rather than as cheating scammers in a broken system. Then let’s export real American working-class standards to the rest of the world, rather than importing their tyranny, poverty, and desperation here. That will be better for everybody, and their kids, and kids Kids.
4) We have (had) an infrastructure designed to dominate national and international markets…
5) Phase out China and the Asean countries, for national interest
reasons, to build a deep home advantage, as we once had. Let Uncle Sugar and his corporate masters bury Mexico, because Mexico is one of the, “models,” for American Corporate Corruption to emulate and incorporate (fruits of, “diversity”), being the, “conquistador-peasant,” model, along with shit-canning the, “China Model,” (that our leaders are also emulating) consisting of totally centralized control of power, authority, and finally, wealth, the both of which totally corrupted nations have acquired much too much power through helping our corporate masters asset-strip this, our nation, helped them devastate our founding principals, all by putting (their elite and ours) self-interests far above the core principals and clean practice of the principals of our once democratic republic.
Nuke them, it is all you have left as a nation, better do it while you still can.
Perhaps we needs to reassess the rights, privileges, and path to citizenship, including for those naturally born in the USA.
Mandatory service requirement at age 18 (and for all immigrants of any age) to receive tax funded benefits of citizenry, and participation in the political process.
Implement stringent e-verify.
Then campaign finance reform, roll-back Citizens United.
Place the vast majority of public investment in highest quality, merit channeling, public education, early childhood support, and citizen wellness.
Human capital is the only tangible capital. The children are our only future.
The purpose and responsibility of the US government is to represent and protect the interests of the American people. Not the people of Central America, or Somalia, or any where else. Period.
It is not in the interests of the American people to flood the labor market with people desperate for work who displace low wage Americans.
It is however in the best interest of the corporations to exploit cheap labor both here and abroad.
The corporations spend billions every year bribing the politicians, so what you get is the screwing of the American people to benefit corporations, who are many times multi-national and could not give a damn about the welfare of the American people….
I totally agree, but only after restoring the 13th Amendment to its original form, which was never intended to grant citizenship to the childern of illegal foreign nationals, (or anyone here, “not under the jurisdiction,” of the American Govt, ie, which directly speaks to illegal and temporary visitors.) The elimination of stealing (or buying) citizenship, this brutal, intentional misinterpretation of the 13th must happen FIRST.
American citizenship is not based on racial terms or standards, but a set of philosophical positions designed to thwart just the type of corrupt people and corrupted politics running the show today. If you don’t share these fundmental principals, you are not an American, independent of your color, your creed, or your place of birth.
No, our Constitutional principals are not based on your level of greed, how far you put your self-interests above our laws (at the border, or anywhere else in this country or the world…), but how well you restrain yourself within the limitations of our founding principals. Citizenship is not legitimately based on how big an oppertunist you are…despite the endless propaganda to the contrary.
Our principals cannot be stolen nor purchased… (They are, and have been both stolen and purchased, and look where that’s brought us; Our current situation sure does not resemble the 1950s America I was born and raised in, but sure looks a lot like the 1880s America that the Robber Barrons took charge of…right before they turned us from a Democratic Republic into a corporate imperial power.).
Our next structural changes as a nation are going to be much worse than the Robber Barron/ International Empire period of the late 19th century, if we can’t get back to actualizing our founding principals. (Being a modern reprise of the 19th century Robber Barron victory over America, which led to Empiric adventures, WWI, Dust Bowl, Great Depression, & WWII. This time our failure to maintain our principals is going to be worse in every catagory, last a lot longer, and not resulting in the USA coming out, “on top,” as it happened the last time…
This time will be totally different.
Then, everyone born legally as a citizen, to at least one LEGITIMATE American parent, gets the equalivant of a Green Card at birth, good for life, that allows permenant residency, but no voting. Otherwise, you are a foreign national, born here or not, and should go home if you have no legal right to be here. Cheating our country can no longer be accepted as the basis of American Citizenship…
At the age of maturity the potential citizen gets a chance to swear to uphold the Constitution, (if not, they keep, “Greed Card,” status), and if so they get to do some form of National Service along with full citizenship.
No agreement with our Constitution/Bill of Rights, NO CITIZENSHIP.
As just the tip of the iceberg of, “being American,” is actually agreeing to, and supporting the First Amendment, which requires something we appear to have lost: the mutual tolerence of other American’s differing religions, philosophies, and lifestyles, even when banned or condemned by your own preferences and/or religion, (ie gayness, drugs, guns, ect…), it seems like we need American Standards now more than ever. This mutual toleration is what will draw real Americans together, despite their other philosophical, sexual, and social differences.
Or else it will draw forth a Real Inquistion! It seems to me that, “Cancellation,” “Punch a Nazi,” and Democrat sponsored/protected violent, rascist riots are manifestations of a tyrannical system about to turn into either full, open tyranny, (not a long trip), or, hopefully, spark a resurgent appreciation of the exceptional principls of our founding documents, which were designed to thwart the concentration of aristocratic levels of wealth and the political privilidges that always accompany such wealth.
It’s time to make them work, to put our fundamental Constitutional principals back into operation, or lose the material advantages we once had forever, as we have lost the philosophical/motivational advantages once conferred by our Constitution. Losing the former has led to the squandering of the latter.
Any idea when this spike in durable goods spending will end, Wolf?
There isn’t anything wrong with the economy that President Meghan Markle can’t fix.
We still have a Hamilton Beach electric hand mixer received as a wedding gift in 1974. Still works fine. A faded fancy sticker says Made in the USA. So they were worried about foreign competition even then. Walmart was running made in the USA promotions about the same time- while importing like crazy, of course.
India is still one of the biggest in pharma formulations with lots of US FDA approved factories. but China still calls the shots globally as it supplies to India key API& KSM to manufacture formulations.Now it is putting the screw on Indian Pharma companies by increasing prices by 20-40% to dent Indian pharma’s growth.
During the nineties China made less than 5% of the bulk drugs globally. “There were more than a dozen multinationals in the fray, all of them leaders in different product ranges of APIs and KSMs. Pfizer, Teva, Sandoz, GSK, Novartis, DSM, Gist Brocades, Merck, Roche, Daiichi, Sanofi and Deretil besides two Indian players Ranbaxy and Aurobindo were in the big boys league of bulk drugs. But each multinational was offered almost similar terms like DSM by China to relocate to China. With excellent infrastructure and cheap power supply and no worries of effluent treatment and pollution control, it was a deal too lucrative to ignore for the pharma majors.
Despite concerns about IPR piracy, the shift to China was across the industry. The fermentation processes needed for making bulk drugs was both power intensive and extremely polluting. Shifting manufacturing facilities to China solved both those problems. Over the next twenty years China induced all major multinational drug makers to start production in mainland China first, and then coaxed and cajoled them to tie up with Chinese companies that gave the Chinese the necessary knowhow and absolute control of the bulk drugs market.
According to data from the Trade Promotion Council of India (TPCI), India currently imports 53 APIs and KSMs from China. Over 70 per cent of its API import requirement from China is mostly for antibiotics and vitamins.
Yeah, but China made a major mistake when early on in the Pandemic it got cute and belligerently threatened to cut off our supplies of pharmaceuticals. Now the relocation of that industry to a non-threatening nation (if not to our own shores) is on the radar of all the powers that be in America… Pentagon, FDA, Congress, Executive Branch, Big PHARMA, etc.
It will take time and effort, but that is going to happen. Before China was admitted to the WTO tax incentives put much of that manufacturing in Puerto Rico. It won’t take much to do something similar.
Forgive me for my ignorance, macro economics is not my strong point and there are very smart commentators here, as is the host.
But I’m good at solving problems and thinking outside the box.
From what I’ve been reading in the comments above, we buy “goods” made in China with USD. The Chinese accept USD for their “goods.”
Some of that USD is used by Chinese nationals to buy companies, real estate, politicians, etc., in the United States. That is very concerning to me.
The trade deficit is not going away anytime soon. But what if we stopped paying China for their “goods” in USD? What if the Fed started printing Renminbi specifically to finance the trade deficit?” Is there a law that prohibits the Fed from printing Renminbi? Then the Chinese would posses much less USD to buy assets based in the U.S.. Do the Chinese accept payment in their own currency for their “goods?”
Well… think about it. Why would anyone in China accept counterfeit Renminbi printed by the Fed as payment for the goods that they produce? For that matter, why does the Fed get to have all of the fun? YOU could set up a printing press in your basement and print out Renminbi for use in international trade by American companies.
All kidding aside, what you are describing is considered to be an act of war by most nations. In fact it is a rather routine military strategy. When Americans caught British agents doing it during our Revolution, George Washington ordered them to be hanged on the spot.
“YOU could set up a printing press in your basement and print out Renminbi for use in international trade by American companies.”
Yes, I’ve been doing exactly that for quite some time now and is what made me think that if I could do it, so could the Fed. :-]
Appreciate your humor and the history lesson!
Now why didn’t I think of that!
Authoritarian government tax. Free trade only with free people. Good idea or bad?
Good idea. I’ll even go a little further.
No trade with an enemy state.
This is little off topic, but I wanted to inform the readers of something I recently discovered regarding the performance of this Web Site “The Wolf Street Report” and others for that matter. Over the past 2 years I gradually upgraded most of my PC’s to Windows 10, which also had the new Intel I5 processor, and advanced hard disk optical technology. My Windows 7 machines purchased before 2016 were performing in a substandard fashion, which became more and more noticeable. With all the pop up ads, and scripts running, the machines were always bogging down and sometimes hanging up completely. The problem completely disappeared after the upgrade to Windows 10 and the new hardware technology. The performance is outstanding even with all the pop up ads. The investment was well worth it.
Hilarious! Bill Gates is still the chairman of Microsoft and he is telling us WE need to consume less to save the planet, yet his forced obsolescence via software has done enormous damage to the planet and that hasn’t changed and has been going on for decades! Such hipocracy.
For reference sake, we’re still using a MacBook Air from 2011 that works flawlessly.
It gets even funnier than that.
Some US crew is launching a system of at least 20 satellites to monitor carbon emission hotspots round the world.
What bets the first thing that shows up is their own production facility?
Thanks for the update. But my site doesn’t run popups. So if you’re getting popups, there from somewhere else. If you’re getting them while on WOLF STREET, you probably should delete the entire browsing history in your browser (cache), all items including passwords and the like, because you likely downloaded some code from somewhere that does this. Deleting the browsing history will likely resolve the popups on WOLF STREET.
To clarify, the ads that run on both sides of the text comment narratives are not what you would call pop ups. And the ones that run in the boxes in the middle that come and go, same. They are just Google ads? That’s OK. Then I’m not getting any pop-ups as it is. I was mistaken. I haven’t bought anything yet from those ads, but I saw one that was selling Mexican gold coins that looked attractive. Any recommendations?
Anyway, I’m doing fine with Windows 10 on “Wolf Street” The Win7 problem was something else. A script problem that was hanging the machine and the causing the issues you described above. Also, Just obsolete technology. The problem was on more than one Win 7 machine. The Win 7 PCs were purchased in 2013, 2015. I’m probably going to get rid of them. Thanks for the feedback.
SC – Not so glad to hear that you’ve traded reasonably secure 7 for 10. Hope you’re happy sending hourly info about what you’re doing through the MS background processes.
Isn’t a lot of this just about tradeoffs. I’m sure most of you weren’t unhappy when your stock holdings were rising because Apple was making money by utilizing cheap labor overseas. And sure, we can all pay more for our goods and have less to spend on services or just do without as much stuff (which isn’t a bad idea).
But it just seems like people think that all we need to do is start making our own things and we’ll have great jobs back here again. The good manufacturing jobs – autos, mining are not coming back the way they were. It will largely be automated. Coal mines have replaced labor with automation so it doesn’t really matter how much coal we use.
Automation is even coming to agriculture and perhaps even housing with 3D printing. The real challenge is that all this automation and software design does not require the same number of people to produce the end-product. Apple isn’t going to hire more developers if it doubles its sales of phones.
I don’t think people holding a large percentage of their wealth in assets are as negatively impacted by the outsourcing and money printing, it’s mainly people who live off of cash and don’t have investments.
However, we should have gone through a massive period of deflation over the last 30-40 years, consumer goods getting much cheaper due to technology productivity gains and cheap foreign labor. The spending power of the dollar should have gone through the roof.
Instead, the Fed targeted 2% inflation, which means they printed enough money to extract all those productivity gains for the people closest to the money spigot and are continuing to do so.
With AI, the cost of everything should also be dropping an insane amount, leading your dollar to go further, helping to mitigate the job loss, but the Fed won’t allow this to happen, instead once again extracting all the gains to a few.
Finally got 1/2 of our stimulus payment. Total $1,400. The “Get My Payment” link Wolf provided worked. Went into Ms Swamp’s Soc Sec bank account. I didn’t get my half. I think the IRS was reading my posts on “Wolf Street” . They didn’t like what they read.
This could get very depressing. It just keeps going round and round in ever increasing circles. If this latest stimulus (ie excess money demand) is still going off abroad as (E-I) the present situation could end up being a good test of whether that is what is suppressing the massive inflation that should have occurred since around 2011 by historical precedent. Of course, maybe the excess money demand this time is so huge that we get massive inflation as well as a massive trade deficit. As I said, if one whisky doesn’t do it drink ten.
Great article showing basic problems free trade has created for our economy.
I remember all the reasons promoters said free trade were great for the USA. Nafta was going to stop reasons for immigrants coming to America for jobs, was going to increase employment and wages for US workers, was going to greatly expand agricultural exports and give The USA trade surpluses.
Since NONE of these goals have been successful after 25+ years (it did increase corporate profits) its TIME TO END this half-baked experiment. Lets call what i was really about – labor arbitrage to enrich corporate owners.
There was one fellow that mentioned NAFTA’s giant sucking sound. Only 18% of Americans voted for him. It now appears that was their last opportunity for sanity.
I was one of those 18% and that was the last time I voted.