You Guys Should Enjoy This- Howard Davidowitz Says Americans Going Downmarket

[haha]

"Worst Is Yet to Come" Americans' Standard of Living Permanently Changed: Tech Ticker, Yahoo! Finance

[ziggy29]

I actually agree with the part about the diminished standard of living -- I saw that article yesterday.

I think we've spent the last 30-35 years denying that the post-WW2 U.S. economic bubble was unsustainable, and was the result of a period of time when the U.S. was the only major undamaged infrastructure in the world, and there was a HUGE demand for U.S. industry to rebuild the world.

For many years after that -- particularly starting in the 1970s when it was apparent the game was changing globally and there was a rise in low-cost foreign competition -- we tried to give people the same deal that the generation working through that era received. Through borrowing, budget deficits and giving new employees less of a deal than their predecessors, we were able to pretend that the deal received by the middle class American worker was permanent and sustainable.

But it wasn't sustainable. Job security. Pensions. Social Security. Wages that outpace inflation. Inflation-adjusted debt per capita (public and private). All of these are creating headwinds for younger generations. Basically, I think at some point maintaining prosperity for today's generations required "borrowing" some of it from future generations.

But the more time went on, whether as an individual, a business or a government, the more we had to borrow from future prosperity to pretend that we could still live the same lifestyle and receive the same benefits waiting for our future. And it became harder and harder -- and costlier -- to keep the house of cards propped up. And I think we're at or near a crossroads now because it's getting to the point where no amount of money (that can be paid back) is capable of sustaining the largesse the American middle class received decades ago.

[Gpond]

When you outsource your manufactoring base a decade later you outsource your quality of life.

Happens every time.

[youbet]

Quote:

Originally Posted by Gpond When you outsource your manufactoring base a decade later you outsource your quality of life. Happens every time.

Wow! Another observation to agree with! As a retired manufacturing guy, I think you're spot on. It was inevitable that our offshore sources of manufactured goods and natural resources would only be willing to send them to us in exchange for our "paper shuffling" abilities for so long.

[Stevewc]

Hey Guys I'm still pumping money into this stock market.
Please lighten up a little, I don't think I can take that much reality right now.
You got me questioning and talking to my self,
Steve

[bbbamI]

Quote:

Originally Posted by Stevewc You got me questioning and talking to my self, Steve

I've been doing that for years!

You can't appreciate the good without experiencing the bad. Just think how good it's gonna feel...one day.....

[BunsGettingFirm]

Quote:

Originally Posted by youbet Wow! Another observation to agree with! As a retired manufacturing guy, I think you're spot on. It was inevitable that our offshore sources of manufactured goods and natural resources would only be willing to send them to us in exchange for our "paper shuffling" abilities for so long.

I don't know about that. Some of the paper shuffling jobs I have done have been pretty freaking hard. Imagine sitting at your desk at 2 AM knocking your head against the monitor because somebody wrote some weird bug in a program, and the program needed to be fixed by 8 AM the next day.

As long as somebody is willing to pay for your expertise, then it doesn't matter if your jobs involves heavy iron and heavy lifting.

[samclem]

Quote:

Originally Posted by Gpond When you outsource your manufactoring base a decade later you outsource your quality of life. Happens every time.

Yes, an economy based on manufacturing is comforting--it's easy to see how it works and why it works (creating increased wealth by taking less valuable raw materials + labor = products of greater value). And, I'd be more comfortable if our economy had more of it. But, that's not the only way: Switzerland has been prosperous for hundreds of years, and has done it with a service-based economy. Yes, they were able to do it because of nearby industrial countries, but they did it just the same. Likewise, a surgeon or schoolteacher produces valuable, if intangible, "products."

[Gpond]

Quote:

Originally Posted by samclem Yes, an economy based on manufacturing is comforting--it's easy to see how it works and why it works (creating increased wealth by taking less valuable raw materials + labor = products of greater value). And, I'd be more comfortable if our economy had more of it. But, that's not the only way: Switzerland has been prosperous for hundreds of years, and has done it with a service-based economy. Yes, they were able to do it because of nearby industrial countries, but they did it just the same. Likewise, a surgeon or schoolteacher produces valuable, if intangible, "products."

Haven't been to Switzerland lately, huh? It is a train wreck.

Prosperity through funding both sides of wars and fees on money laundering operations is very profitable. I will give you that.

[Alan]

Quote:

Originally Posted by Gpond When you outsource your manufactoring base a decade later you outsource your quality of life. Happens every time.

I don't believe this is true. In the 70's and 80's the UK lost most of its manufacturing base - Cars, Steel, Ship Building, Coal Mining all gone, but the economy thrived in the 90's and quality of life has not suffered.

[Grep]

Quote:

Originally Posted by Alan I don't believe this is true. In the 70's and 80's the UK lost most of its manufacturing base - Cars, Steel, Ship Building, Coal Mining all gone, but the economy thrived in the 90's and quality of life has not suffered.

Hmm, wasn't all that substantially replaced by their becoming (even more of) a financial capitol of the world, complete with a real-estate bubble that made the U.S. bubble look penny-ante?

[Alan]

Quote:

Originally Posted by Grep Hmm, wasn't all that substantially replaced by their becoming (even more of) a financial capitol of the world, complete with a real-estate bubble that made the U.S. bubble look penny-ante?

Absolutely agree, that disputes the statement

Quote:

When you outsource your manufactoring base a decade later you outsource your quality of life. Happens every time.

Accepting the fact that the loss of manufacturing is a sure thing to losing your quality of life is not the attitude that made America great.

[. . . Yrs to Go]

Those who borrowed a higher standard of living than they could afford will see their quality of life decline. But it is wrong to extrapolate that idea too broadly, as many tend to do. U.S. wealth isn't a mirage. It is a function of worker productivity where the U.S. still ranks #1. And hardly resting on our laurels, the gap between the U.S. and the rest of the developed world has actually been growing in recent years.

Quote:

the report also shows that the productivity gap between the US and most other developed economies continued to widen. The acceleration of productivity growth in the US has outpaced that of many other developed economies: With US$ 63,885 of value added per person employed in 2006, the United States was followed at a considerable distance by Ireland (US$ 55,986), Luxembourg (US$ 55,641), Belgium (US$ 55,235) and France (US$ 54,609).

New ILO report says US leads the world in labour productivity, some regions are catching up, most lag behind [Press releases]

What's more, standards of living aren't a zero sum game. It isn't true, despite what seems widely assumed, that if developing countries improve their standard of living than ours necessarily needs to decline. As India and China, and elsewhere become more productive, their standard of living increases, and the world becomes richer in aggregate.

[ziggy29]

Quote:

Originally Posted by . . . Yrs to Go What's more, standards of living aren't a zero sum game. It isn't true, despite what seems widely assumed, that if developing countries improve their standard of living than ours necessarily needs to decline. As India and China, and elsewhere become more productive, their standard of living increases, and the world becomes richer in aggregate.

I agree, which is part of the reason I believe protectionism would be a mistake. When India and China rise, it may put a damper on our growth, but in the end if they gain $10 and we lose $1 ultimately the world economy is $9 richer.

[samclem]

Quote:

Originally Posted by . . . Yrs to Go Those who borrowed a higher standard of living than they could afford will see their quality of life decline. But it is wrong to extrapolate that idea too broadly, as many tend to do. U.S. wealth isn't a mirage. It is a function of worker productivity where the U.S. still ranks #1. And hardly resting on our laurels, the gap between the U.S. and the rest of the developed world has actually been growing in recent years. Quote: the report also shows that the productivity gap between the US and most other developed economies continued to widen. The acceleration of productivity growth in the US has outpaced that of many other developed economies: With US$ 63,885 of value added per person employed in 2006, the United States was followed at a considerable distance by Ireland (US$ 55,986), Luxembourg (US$ 55,641), Belgium (US$ 55,235) and France (US$ 54,609). New ILO report says US leads the world in labour productivity, some regions are catching up, most lag behind [Press releases] What's more, standards of living aren't a zero sum game. It isn't true, despite what seems widely assumed, that if developing countries improve their standard of living than ours necessarily needs to decline. As India and China, and elsewhere become more productive, their standard of living increases, and the world becomes richer in aggregate.

I'd be interested to know what the ILO used to compute the value of the goods and services produced inthe US. I think many people wonder if the productivity they are measuring is real or some inflated thing based on the pushing of papers and doing esoteric financial transactions. For example, how does the ILO figure the value of the goods and services produced by a real estate agent? Is it just the value of the commissions he/she earned--which were in turn based on inflated home prices and a super-churning housing market fueled by easy cash? How about bankers, insurance agents, appraisers, etc. Even doctors-- Does the ILO value a tonsillectomy performed in the US the same as the tonsillectomy "product" produced in Botswana? I think the ILO probably can easily figure out the value of crates of sneakers and TVs shipped from China, but I don't know if they can do an accurate job figuring out the value of this intangible "production" in the US. I suspect it is partially a mirage.

Also note that while US workers may be the most productive, that doesn't mean that a dollar spent on labor costs inthe US buys more productivity than anywhere else. Far from it. It might just mean that the $75/hour US factory worker produced $200 in products, while the $5/hour Indonesian worker produced $199 in products. That's a tradeoff businesses are willing to make, and why factories are leaving the US despite higher US productivity (if it really is higher--see above).

[. . . Yrs to Go]

Quote:

Originally Posted by samclem Is it just the value of the commissions he/she earned--which were in turn based on inflated home prices and a super-churning housing market fueled by easy cash? How about bankers, insurance agents, appraisers, etc.

Yes. The same way G.D.P. is measured.

Quote:

Originally Posted by samclem Even doctors-- Does the ILO value a tonsillectomy performed in the US the same as the tonsillectomy "product" produced in Botswana?

I assume some version of purchasing power parity is used to compare international output, but one would have to dig in to the methodology to be sure.

Quote:

Originally Posted by samclem Also note that while US workers may be the most productive, that doesn't mean that a dollar spent on labor costs inthe US buys more productivity than anywhere else.

More productive workers will get paid more than less productive workers, period. And you can be absolutely sure that worker productivity is higher today than it was before. According to the Bureau of Economic Analysis, durable goods production in the U.S. increased more than eleven fold since 1960 as measured in constant dollars. Over the same time, manufacturing jobs declined from about 30% of all jobs to about 13%. Much more production with far fewer jobs is called increased productivity . . . it's real.

[youbet]

Quote:

Originally Posted by ziggy29 Basically, I think at some point maintaining prosperity for today's generations required "borrowing" some of it from future generations.

Couldn't agree more. In fact, I think your observation clearly deserves the "Youbet Understatement of the Day Award." Congratulations!

[Walt34]

You mean (gasp!) people will have to start living within their means?

OMG! What are they going to do without the daily latte? The new car every three years? The 30-foot boat? The seventeen-room house? Buying lunch instead of brown-bagging it and dinners out three times a week? No more lavish vacations twice a year?

How will the poor dears cope?

[youbet]

Quote:

Originally Posted by Walt34 You mean (gasp!) people will have to start living within their means? OMG! What are they going to do without the daily latte? The new car every three years? The 30-foot boat? The seventeen-room house? Buying lunch instead of brown-bagging it and dinners out three times a week? No more lavish vacations twice a year? How will the poor dears cope?

I think it means a little more than a reduction in lavish life styles. I think we're talking about the future middle class living like today's lower middle class.

[bbbamI]

Quote:

Originally Posted by Walt34 You mean (gasp!) people will have to start living within their means? OMG! What are they going to do without the daily latte? The new car every three years? The 30-foot boat? The seventeen-room house? Buying lunch instead of brown-bagging it and dinners out three times a week? No more lavish vacations twice a year? How will the poor dears cope?

Yep....here's something my mom would do when I felt pitiful....