Avoiding the Coming Wave of Economic Collapse
America is sailing into dangerous economic waters, chiefly due to our massive debts and inability to manufacture competitively. The months ahead could determine the success or failure of the nation’s economic course; will we right the ship- or sink into the history books as another former superpower.
Vanishing Industrial Base
Opportunities to produce goods in America have all but vanished; nearly all manufactured goods now coming from overseas. The labor force is being quietly redeployed into lower-paying service, retail, hospitality, assembly, or distribution jobs that are transient, do not support communities, careers, or provide benefits.
Even vaunted finance, high-tech, medical, and academia jobs are being pressured by the surfeit of talented college graduates who are dumping their elected disciplines to “follow the money” into these few remaining propitious fields.
The Dollar Sinking Scenario
America’s fundamental economic underpinnings have been slipping. The indisputable evidence lies is the present devaluation of the US currency. Foreign investments are reaching a saturation point. In the past these investments have been used to temporarily prop up our government’s deficits by lending to the Treasury and buying our corporate equities, real estate, and providing jobs to our blue-collar workers. This will end soon.
Central banks in Asia and the Middle East are overflowing with trillions of US dollars. Few goods are now produced using dollars and fewer investment opportunities remain (Many of our best US companies have been already sold to foreign purchasers, creating an environment where additional lending and purchases of US goods will require printing ever more dollars, and result in devaluation.
This devaluation will result in real inflation – higher prices for imported merchandise and commodities. The advantage to US exporters will be real but of little benefit to most in this country since so little of our economy is driven by manufacturing and exporting. In fact we will be “shooting ourselves in the foot” as the remaining ownership of companies instead of products will continue to be our chief export, compounding the negative effect.
Righting the Ship
It’s time to reform our economic policies and priorities.
We must look to the government to help reign in the deficits principally caused by our inability to produce competitively in this country. The solution is to acknowledge the problem, study it and treat it as a national priority, akin to the Manhattan Project of WWII.
To accomplish this we must create conditions that promote profitable manufacturing through incentives, subsidies where needed, and tax law changes. We must also curtail irresponsible consumption and prevent the sale of our best companies to foreign interests, as is done in other successful countries.
The end result should be that it is more profitable to build domestically-owned factories, and to do research and engineering here rather than abroad. With this renewed investment will come “jobs,” tax dollars, pride, and opportunities for all classes.
The transition may be rocky, but if we acknowledge the problem and carefully study the alternatives now, we may be able to right this ship. If we continue to flail about doing nothing, we cannot hope to avoid drowning in the tidal wave of misguided policy and foreign competition that has been building for decades.
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This Work, Avoiding the Coming Wave of Economic Collapse, by Thomas Heffner is licensed under a Creative Commons Attribution-No Derivative Works license.
Copyright © 2007 EconomyInCrisis.org
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43 min 57 sec ago - Political bent of E.I.C.
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One possible solution that is yet to be designed?
“Manufacturing is one of the pillars of the American economy and the middle class, providing good-paying jobs to 11.6 million Americans, producing nearly two-thirds of our exports, and ensuring we can provide for our defense without depending on foreign countries,” Congressman Lipinski (IL-03) said. “But an astounding one-third of U.S manufacturing jobs have disappeared in the last decade, and the level of support that China and many other nations provide their manufacturers goes far beyond what we offer. To level the playing field and make sure American manufacturing can thrive in the global economy, we need to take action immediately. The National Manufacturing Strategy Act will bring the government and the private sector together to produce a focused, comprehensive, results-oriented plan for revitalizing manufacturing and creating jobs.”
The National Manufacturing Strategy Act requires the President to conduct a comprehensive analysis of the nation’s manufacturing sector that covers workforce requirements, innovation-enhancing research, trade barriers and agreements, access to capital, federal procurement rules, global competitiveness, emerging markets, problems facing small- and medium-sized manufacturers, and many other important issues. This analysis would form the basis for a National Manufacturing Strategy that reflects the input of a task force of federal officials and two state Governors from different parties; recommendations gathered at public hearings; and the advice of a 21-member panel of private-sector manufacturing leaders and stakeholders. The strategy must include specific goals and recommendations related to improving domestic production, investment, international competitiveness, and assuring an adequate defense industrial base, among other matters.
And then the fight will start as to - not in my backyard? Do you think, the act will have some TEETH?
BiGuru -- You know this is horsesh*t! Our president, and the people who prop him up do not want to save manufacturing or the middle class. They want the middle class to go away.
This is just another "Committee to Recommend Ways to Rearrange the Deck Chairs on the Titanic" as she slowly sinks into the sea.
All of the manufacturing that I was involved with (whole industries) had already gone to China ten years ago. Our government is just stringing us along with incessant talk about "creating jobs," but the truth is, there are no value-adding opportunities left that can't (and won't) be done in China or India at one tenth the cost.
We are on "The Road to Serfdom," just as Friedrich Hayek predicted and the Progressives are driving us full-throttle toward an economic collapse so they can take over the remainder of our economy.
I am beginning to suspect that EIC is happy to go along with that plan. They are certainly giving aid and comfort to the enemy.
Bruce Bishop
There you go again Bruce. EIC is not happy to go along with the plan. Granted, it took EIC several years to get to the crux of the matter. That is because, the whole country is operating with the old economic models. It is same in Europe too. (we are not the only idiots!). The Greece government is looking at their finance ministry to save them. I told them, they are barking up at the wrong tree. But they are not willing to listen. They want to experience the coming disaster before changing course. So we wait. I think, we are in a similar boat with a year behind.
Our Government failed to look out for America's Interest. How can an average middle class citizen with a college degree and many years of work experience keep a roof over their children’s head on a lower waged job? There is also an age disadvantage for the middle class American to compete in today's job market.
We are losing our homes, retirement savings and everything we worked so hard for our entire lives in pursuit of our American Dream. Our Government sold us out for the interest of World Balance.
Our links to the world through trade, travel, technology, and communications are very important to our economy and our economic prosperity, just as the prosperity of other nations depends on the openness of U.S. markets and trade. The only problem is that other Nations looked out for their people's interest and the U.S. failed to do the same.
FDR did not believe that it was possible to lay out a long term, specific plan in foreign policy.
Franklin D. Roosevelt
"Frankly, I do not know how to effect a permanency in American foreign policy."
lots of talk about what we should do and what we can do. But we need ACTION. sadly i don't think that all the pushing the people do that the dumb politicians will do anything. we don't have an FDR anywhere near this bunch. i hope to god i am wrong.
We are heading to where Greece is today, except we can print money.
The only way our economy can turn around is when we start exporting from $1 Trillion to around $3 Trillion worth goods. That is the metric that would indicate how we are doing month after month.
There is no chance of recovering our industrial base, cause the way our political parties are fighting among each other.
Re: "We must look to the government to help rein in the deficits."
Surely you jest. Not in this lifetime; not this government. Maybe you don't think the Cloward-Piven Strategy is a factor here, but you must admit that Progressives, in both parties, have always despised manufacturing and the people who work in manufacturing.
I am not saying, necessarily, that Progressivism is the reason we lost our manufacturing base, but if our intellectuals are so smart, they would have seen it coming. Moreover, if they saw it coming, they could have stopped or delayed it. Of course, if our manufacturing base and the middle-class folks who comprised it were slowing the progress of progressivism, then maybe they just ignored it or just sort of let it happen.
I am still not clear as to why we are doing business with Communist China, but not with Communist Cuba. We cannot compete with China on any manufactured product. Their labor is one tenth the cost of our labor, and contrary to popular belief, manufactured goods are comprised mostly of labor. Also, there are the "minor" matters of environmental destruction and human rights issues.
Outsourcing is actually the re-location of American technology to countries with weak currencies. If you look at China, it has had a Currency peg since 1994 and the Mexican currency has continued to devalue faster against the Dollar since it enacted NAFTA. Without the protectionst currency manipulations then why would companies outsource if they knew the price advantage would increasingly narrow once goods started to be exported in high quantities to the US. Follow the money printing.
China's wages are as low as fifty cents an hour. Our wages are as high as fifty bucks an hour (UAW, fully loaded). In other words, our top wage is one hundred times their bottom wage. (Our minimum wage is fourteen times their "minimum wage.")
Now, about that exchange rate . . .
We continue to argue about the molehill while ignoring the mountain.
Sadly, we can't do anything about either. We can only impose limits on imports -- something our government is not willing to even discuss.
Bruce Bishop
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