Re: The Down economy

Josh Hill <usereplyto@xxxxxxxxx> wrote:

On Sun, 20 Jan 2008 03:06:14 -0700, boots <no@xxxxx> wrote:

Josh Hill <usereplyto@xxxxxxxxx> wrote:

On Sat, 19 Jan 2008 04:37:12 -0700, boots <no@xxxxx> wrote:

That's why the dollar isn't locked to silver or gold or anything else,
they can print whatever they want, and as long as people accept it as
"money" there's no problem. It's when confidence drops that the fit
hits the shan, as the Enron guys could tell you.

It's goods and services that are real, not money, whether it's pegged
to silver or wampum or nothing at all. For that reason, in a modern
economy, money can't be pegged to a commodity like gold without
causing serious depressions. It has to be printed in quantities
sufficient to accommodate growing economic output. But the government
isn't free to print any amount it pleases. If it prints too little,
there will be a recession, and if it prints too much, there will be
inflation. Hence the Fed's fiddling of the prime rate, the margin
rate, and other things that affect the money supply.

Unfortunately the US is not as comparatively strong as it once was on
a worldwide basis in terms of producing said goods and services. The
term "growing economic output" is of dubious validity these days.

Fiddling the prime rate and friends can keep the rubes at home happy
for a while but does not similary impress outsiders. Then the rube's
ARM gets adjusted and s/he to choke up another thousand bucks a month,
goes looking for a higher-paying job, and has to move to Dehli to find
it.

I suspect that one of the problems involved in the mismanagement of
the US economic system revolves around the use of economic theories
which assume a closed system to determine how said economy will behave
in an open system. It seems both more complex and simpler than we
wish to make it. Worldwide economics seems about as complex as
weather prediction but the human variables have more weight.

But it all comes down to what you or your country can produce that
others can't. Lately the US seems to be producing weaponry, hot air,
and grossly wealthy expatriate former CEOs.

Well, yeah, hot air. What's happening, in essence, is that we're
living off borrowed money and intellectual capital -- we (and the
other industrialized countries) are still the ones who know how to
build a factory, design an automobile, run a company that employees
100,000 people.

We're using that intellectual capital to build factories around the
world that can take advantage of cheap labor and slack regulation. But
it doesn't take very long for a country like China to acquire
intellectual capital -- at which point they'll have the factories, the
jobs, and the wealth. What's more, we're doing essentially the same
thing with our economic capital, taking several generations of money
that could have been used for investments here and using it to build
factories overseas -- factories that don't employ Americans.

Labor is a commodity; it responds to the laws of supply and demand.
And when you increase the supply of something faster than you increase
demand, the price drops. Our skilled labor is still valuable. But our
unskilled labor is increasingly pooled with several billion poor
unskilled laborers in other countries. That applies downward pressure
on the wages of the unskilled. If the downward pressure is too severe,
it will cause a reduction in demand and a recession. Hence massive
loans and deficit spending by governments. It is, as you suggest, a
house of cards.

Economic theories are just that.

You said "labor is a commodity; it responds to the laws of supply and
demand", but supply doesn't starve or die or revolt like people do.
The price of labor and the quantity of labor that is available may
exhibit the numeric relationships that the "Law" of supply and demand
indicate, but that's not even the tip of the iceberg.

Folks can flap their gums about Keynesianism or whatever economic
esoterica they choose, what matters is whether they come home from the
grocery with food, or if some security guard shoots them dead because
they had no money and stole a loaf.

"Intellectual capital" is easily transferrable as you noted, and we
know that intellectual property can be stolen. Unskilled labor would
seem to be the ultimate victim of any system, on the other hand it is
almost always paid by the hour and many unskilled laborers have held
multiple jobs and prospered while the overspecialized salaried became
victims of market oversupply and joined the unskilled labor market.

Anybody with minimum abilities can set up a factory, but few have what
it takes to run a factory that consistently produces high quality at a
reasonable price. Anybody can copy data cd's that contain the latest
operating system, but few can develop a better one. It isn't the work
that determines what people are paid, it's how they do it, and how
much of it they do.

Americans kicked major ass once upon a time, or perhaps that's a
legend handed down by our ancestors... either way, the rest of the
world apparently used to believe it just as we did. Unfortunately at
some point in time satisfaction with a job well done was
transmorgified into lard-assed self-glorification and decay set in
with a vengance.

I wonder what an "I Like Ike" button would bring on the antiques
market. I wonder who really shot JFK. I wonder what idiotic reasons
really drove America to VietNam to receive a comeuppance.

Mostly I wonder what level of shit it will take to force America to
pull its head out of its collective ass.

--
just write it
.

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