Register to reply

What U.S. Economic Recovery? Five Destructive Myths

by rhody
Tags: destructive, economic, myths, recovery
Share this thread:
rhody
#109
Oct25-11, 05:51 PM
PF Gold
rhody's Avatar
P: 765
Quote Quote by mheslep View Post
What is the source of that quote? There's no chance that US primary education is the world's best as it says there. Edit: I see now, its from a reader on your Motley Fool link. The Fool must be referring to US universities. While they may be the best in an absolute since, I doubt it they're the best for the dollar. - a consideration given the thread context.
Agree, mheslep,

The larger issue is how credible and accurate is Motley Fool to begin with ? That's why I said multiple sources that corroborate or refute each claim that is made. For those who know, please jump in here. There are still plenty of points to discuss. Some with figures so they are generally easier to check.

Rhody...
JonDE
#110
Oct28-11, 10:08 PM
P: 59
Quote Quote by John Creighto View Post
I don't think that GNI numbers are not that different then GDP numbers. You also missed the point. Phantom GDP doesn't have to do with ownership.

Consider the extreme case where a company manufactures most of a good over seas, ships it to an American plant and sticks a label on the product like Nike or something. If it costs almost nothing to produce it over seas then subtracting the over seas cost from the total coast of production makes it look like the American factors are adding significant value to the product per worker when in fact the bulk of the work is done over seas. Measuring productive output is very difficult and trying to use the net production costs of a product does not give any relevant apples to apples comparison.
Sorry I kinda forgot about this thread. But you are thinking about it wrong. Consider this example.
An American corporation runs a factory in China that produces a product for $1. It then spends $1 to ship it to Europe where it then sells for $10. What value did it add to the American economy? Well the company ends up with $8 per product sold nothing was taken from the economy, so the total addition to the economy is $8 (assuming a non-american shipper).
Now assume that same company sells it in America. $10 is taken out of the economy but $8 of it is kept in the country. This is what GNI does, it adds our foreign sales in and subtracts what we spend outside. GDP does the same thing, when you account for the trade deficit/surplus.
Another way to think of it is this, the factory is China IS producing $10 of stuff, The American Corporation is just paid to "steal" it from them at a fraction of the cost. There is still a net gain for the American economy in that situation. While the American corporation is not adding value, it is stealing value.
WhoWee
#111
Oct29-11, 09:52 AM
P: 1,123
Quote Quote by JonDE View Post
Sorry I kinda forgot about this thread. But you are thinking about it wrong. Consider this example.
An American corporation runs a factory in China that produces a product for $1. It then spends $1 to ship it to Europe where it then sells for $10. What value did it add to the American economy? Well the company ends up with $8 per product sold nothing was taken from the economy, so the total addition to the economy is $8 (assuming a non-american shipper).
Now assume that same company sells it in America. $10 is taken out of the economy but $8 of it is kept in the country. This is what GNI does, it adds our foreign sales in and subtracts what we spend outside. GDP does the same thing, when you account for the trade deficit/surplus.
Another way to think of it is this, the factory is China IS producing $10 of stuff, The American Corporation is just paid to "steal" it from them at a fraction of the cost. There is still a net gain for the American economy in that situation. While the American corporation is not adding value, it is stealing value.
No, the Chinese factory is producing $1 of stuff. If they could sell it for more - they would.

The shipper is contributing $1 of value. Next the wholesale company, marketing company, and retailer are adding (producing) $8 of value to ultimately sell the product for $10 - it could just as easily sell for $1 - $2 again if the value isn't produced.

Label this IMO - I have a shed full of product samples with $0 retail value in excess of production + shipping cost. I can give them away - but need to spend money on marketing to sell them for more than I would pay.
Astronuc
#112
Oct29-11, 01:07 PM
Admin
Astronuc's Avatar
P: 21,827
I found this an interesting talk - Dr. Jeffrey Sachs @ The Commonwealth Club
Mon, Oct 10 2011 - 7:00pm

Dr. Jeffrey Sachs, Director, Earth Institute, Columbia University, Special UN Advisor; Author, The Price of Civilization

... Michael Moritz, Managing Member, Sequoia Capital - Moderator

Sachs gives a startling account of the inadequacies of US-style capitalism. He offers a bold plan of reforms relating to sustainable infrastructure, taxes, job training, etc., that he says must be taken to avoid further damage. One of the most influential international economic advisors, Sachs was the director of the UN Millennium Project and is the president and co-founder of Millennium Promise Alliance.

Location: Schultz Cultural Hall, Oshman Family JCC, 3921 Fabian Way, Palo Alto

Also know: In association with Oshman Family JCC

http://www.commonwealthclub.org/even...-jeffrey-sachs


I think Sachs, or perhaps it was a reporter on Marketplace, that most of today's wealthy did not inherit money, but worked for it.

I should point out that Sachs is rather critical of Ayn Rand and folks like Alan Greenspan.
John Creighto
#113
Oct29-11, 04:35 PM
P: 813
Quote Quote by JonDE View Post
Sorry I kinda forgot about this thread. But you are thinking about it wrong. Consider this example.

An American corporation runs a factory in China that produces a product for $1. It then spends $1 to ship it to Europe where it then sells for $10. What value did it add to the American economy? Well the company ends up with $8 per product sold nothing was taken from the economy, so the total addition to the economy is $8 (assuming a non-american shipper).
I'm not sure we should assume that $8 of value is added to the American economy. If they were doing this in an efficient and low cost way then sure I could agree. If they are making huge margins and incurring all sorts of unnecessary cost like a large amount of marketing and administration then I think that much of the supposed value creation is due to inherent inefficiencies.


That said even if the $8 was due to reasonably efficient and competitive business practices it says nothing about gains in American manufacturing efficiency. Well manufacturing output statistics may be account for if the product was shipped directly to a store, the statistics often show phantom gains when the final stage of production is done in America.

Moreover, much of the gains achieved this way are achieved through keeping the Chinese currency artificial low through dollar PEGs. That is we are not paying fair value to Chinese workers for the products we buy. Is this analogous to slavery or is it simply a forced savings by the Chinese to develop their industrial capacity. Additionally if it is a form of forced savings should it come at the expense of American industry.

Now assume that same company sells it in America. $10 is taken out of the economy but $8 of it is kept in the country. This is what GNI does, it adds our foreign sales in and subtracts what we spend outside. GDP does the same thing, when you account for the trade deficit/surplus.
So you are effectively saying GNI and GDP are pretty simmillar measures.

Quote Quote by WhoWee View Post
No, the Chinese factory is producing $1 of stuff. If they could sell it for more - they would.

The shipper is contributing $1 of value. Next the wholesale company, marketing company, and retailer are adding (producing) $8 of value to ultimately sell the product for $10 - it could just as easily sell for $1 - $2 again if the value isn't produced.

Label this IMO - I have a shed full of product samples with $0 retail value in excess of production + shipping cost. I can give them away - but need to spend money on marketing to sell them for more than I would pay.
What is a reasonable amount to spend on marketing?
JonDE
#114
Oct29-11, 04:43 PM
P: 59
Quote Quote by WhoWee View Post
No, the Chinese factory is producing $1 of stuff. If they could sell it for more - they would.

The shipper is contributing $1 of value. Next the wholesale company, marketing company, and retailer are adding (producing) $8 of value to ultimately sell the product for $10 - it could just as easily sell for $1 - $2 again if the value isn't produced.

Label this IMO - I have a shed full of product samples with $0 retail value in excess of production + shipping cost. I can give them away - but need to spend money on marketing to sell them for more than I would pay.
I think we are kind of arguing the same thing. My point was to Johnny who said that the marketing company and retailer aren't adding value. Your view and mine are just different ways of thinking about the same thing.
WhoWee
#115
Oct29-11, 05:45 PM
P: 1,123
Quote Quote by John Creighto View Post
What is a reasonable amount to spend on marketing?
That's going to depend upon several factors including where the product is in it's lifecycle.

1.) Is this a product that is known to consumers - offering a price advantage - such as a flashlight? This will require Point of Sale marketing materials in high traffic locations - very low budget.

2.) Is this an improvement to an existing product type - such as a new kind of portable electric saw? This will require some consumer education focused on competitive advantages and value, point of sale materials and placement on shelves. Depending upon cost might be a candidate for infomercials. A definite plus if used on cable TV remodeling shows. Depending upon the scope of the distribution - perhaps $50k for a regional rollout

3.) Is this a "new-fangled" item that is new to consumers - such as a hand held gyro ball that simulates the effect of ben-wan balls (a real product). This is the most expensive and complicated product launch. It requires a complete marketing plan that includes product, price, place, and promotion. The product must first be sold to distributors. If they don't believe it will sell - it's a big challenge. Next, you need to create a market by educating the consumers. They don't know what is is, how to use it, or why they'd want to use it (or be seen with it). If possible, it's a good idea to show the fun/cool/social aspects to kids. This might include social media, print, point of sale - anything and everything visual - along with in-store instruction and trial. This product would eventually need TV exposure. The $.50 cost of the item (a 2" item in container quantities) might increase to $15 to $20 per item and the first (only) container (might ultimately be) sold only on the counter of health food stores or medical equipment locations. (Label IMO on this product and note it's based on a true story)
mheslep
#116
Oct30-11, 08:08 PM
PF Gold
P: 3,081
I have lost any use for Sachs as everything he writes or speaks lately seems wholly absent argument and is instead loaded with sermons propped up by hubris.

Sach's has a new book out, The Price of Civilization, that has been reviewed, interestingly, by US Representative Paul Ryan, WI.

America's Enduring Ideal
Jeffrey Sachs is only the latest in a long line of thinkers to reject the values of our commercial republic.
By PAUL RYAN
http://online.wsj.com/article/SB1000...204327736.html

Quote from Sach's book:
Quote Quote by Sachs
Yes, the federal government is incompetent and corrupt—but we need more, not less, of it.
rhody
#117
Nov1-11, 12:00 PM
PF Gold
rhody's Avatar
P: 765
Some good news on oil boomtown jobs in North Dakota, but it has potential for a downside as well:

My students make twice my salary
Jim Stout, an English professor at Williston State College in Williston N.D., started losing some of his best students to the oil fields last year.

It was too hard to compete: The students could either spend thousands of dollars on a college education or earn $100,000 a year working on the rigs, performing maintenance on oil wells or driving trucks.

"At some point they decide, 'Well, college will always be here ... but the oil boom won't,'" he said.

and

And as the classes grow more crowded there's another challenge that's popping up: The oil fields are taking some of the college's professors and staffers, too.

Since spring of 2010, Williston State has had a 25% employee turnover rate. Recently, two diesel technology instructors were among a handful of teachers who quit to take higher-paying oilfield-related jobs, said Stout.

Hiring new teachers -- or any other school employees -- is extremely difficult, because of the housing crisis.
Looks like some can't resist the good money without a full college degree, in many cases that stay just long enough to get a background in a needed skill, welding for example, and then they quit to work for the oil industry. It will be interesting to see if the "boom" lasts. If not, will the students who gave up the education for the easy money regret it later.

Rhody...
JonDE
#118
Nov1-11, 12:23 PM
P: 59
Quote Quote by rhody View Post
Some good news on oil boomtown jobs in North Dakota, but it has potential for a downside as well:

My students make twice my salary


Looks like some can't resist the good money without a full college degree, in many cases that stay just long enough to get a background in a needed skill, welding for example, and then they quit to work for the oil industry. It will be interesting to see if the "boom" lasts. If not, will the students who gave up the education for the easy money regret it later.

Rhody...
Hopefully they are smart enough to save some of that money. If they can save 5-10k a year they could eventually go back to college and pay for it and not leave college loaded with debt, although I have a feeling that most wont do this.
rhody
#119
Nov1-11, 02:13 PM
PF Gold
rhody's Avatar
P: 765
Quote Quote by JonDE View Post
Hopefully they are smart enough to save some of that money. If they can save 5-10k a year they could eventually go back to college and pay for it and not leave college loaded with debt, although I have a feeling that most wont do this.
JonDE,

Great idea. If young people can have the foresight to do this in their early 20's, their sense of fiscal restraint and ability to save will serve them well later in life. We still manage our daughter's finances, early 20's, only allowing her to withdraw so much from her bank account, so that she always has a reserve in case of emergencies. She is paying off a student loan too. I just checked, her gov't loan is at 6.55 %.

Rhody...
WhoWee
#120
Nov1-11, 05:22 PM
P: 1,123
Quote Quote by rhody View Post
JonDE,

Great idea. If young people can have the foresight to do this in their early 20's, their sense of fiscal restraint and ability to save will serve them well later in life. We still manage our daughter's finances, early 20's, only allowing her to withdraw so much from her bank account, so that she always has a reserve in case of emergencies. She is paying off a student loan too. I just checked, her gov't loan is at 6.55 %.

Rhody...
I have a friend that spent 10 years as a Merchant Marine - saved about $150k. Another friend (SEAL) was injured in Desert Storm and retired. After 2 years of recovery and additional college, he rode a few lobster boats to accumulate cash - enough to start a business and buy a house.
mheslep
#121
Nov2-11, 04:43 PM
PF Gold
P: 3,081
Quote Quote by Astronuc View Post
I found this an interesting talk - Dr. Jeffrey Sachs @ The Commonwealth Club
Mon, Oct 10 2011 - 7:00pm

Dr. Jeffrey Sachs, Director, Earth Institute, Columbia University, Special UN Advisor; Author, The Price of Civilization

... Michael Moritz, Managing Member, Sequoia Capital - Moderator

Sachs gives a startling account of the inadequacies of US-style capitalism....
Sachs and historian/author Niall Ferguson had a heated debate on CNN's Sunday program. Ferguson attacks and Sachs condescends. Around the 8 minute mark as part of Sach's price of civilization theme, he states that the US collects tax revenue at all levels (local, state, federal) of "about 27% of national income ... compared with 35% and above in other countries", calling this the "decency" gap. That appears misleading. At the worst of the recession in 2009 it is true according to this source that US revenue dipped down to 26% of GDP. However, US revenue from all government levels was 37% of GDP in 2007, and above 34% continuously from 1995 through 2001. The truth gap is the problem here. This year total revenue is back up to 31% of GDP.

WhoWee
#122
Nov2-11, 06:55 PM
P: 1,123
Isn't it a bit deceptive to compare US spending to other countries in percentages rather than dollar amounts?
mheslep
#123
Nov3-11, 10:18 AM
PF Gold
P: 3,081
Quote Quote by WhoWee View Post
Isn't it a bit deceptive to compare US spending to other countries in percentages rather than dollar amounts?
Yes.
WhoWee
#124
Nov3-11, 11:12 AM
P: 1,123
Should we laugh or cry? my bold

http://www.washingtonpost.com/blogs/...6BiM_blog.html

"Yet Obama, facing his own economic problems at home, has few resources at his disposal to use as leverage, with the United States unlikely to offer significant financial assistance for the bailout.

Instead, Obama has been offering his European counterparts advice gleaned during his response to the U.S. recession two years ago.

The U.S. and this administration acted with overwhelming force and put up the necessary resources to deal with the crisis--we insisted on robust stress tests, financial institutions dramatically increased by double their capital,” Froman said. “One thing we can contribute is our experience and ideas moving forward and support in doing so.”

After his bilateral meetings, the president took part in a gathering of the L-20, a collection of top labor leaders, before heading into a formal round of G-20 meetings Thursday afternoon.

Analysts said the president could have a difficult time rallying support for a common agenda, considering that the U.S. has offered a muddled message so far.

“On the one hand, you have both the president and Secretary Geithner saying, we have full confidence Europe can handle this issue; they have the resources; we know they can do it. And then you waffle back and [they are saying] Europe is scaring the world; get your act together,” said Heather Conley, director of the European program at the Center for Strategic and International Studies.

“Secretary Geithner has repeated visits to Europe . . . [but] European finance ministers have not been fully appreciative of U.S. advice and counsel on how to deal with the European crisis because of U.S. domestic challenges,” Conley added. “So it’s a point where we’re not seeing that coalescing of leadership to resolve the issue. We’re starting to see where tensions and nervousness are rising.”"
rhody
#125
Nov7-11, 09:48 AM
PF Gold
rhody's Avatar
P: 765
The $8 Trillion Internet: McKinsey's Bold Attempt to Measure the E-conomy
The Internet -- that 200 million-person, $8 trillion global economy -- accounted for 21 percent of GDP growth in the world's largest economies over the last 5 years, McKinsey found in a report released this week.* As an entity, it accounts for more GDP than the Spanish or Canadian economies, and it's growing faster than Brazil. As a sector, it is now larger than these countries' agriculture or energy industries.

and

There is a lot of Internet to measure, with two million global consumers and $8 trillion in total revenue. So McKinsey's report limited its scope to the online economy in the G-8 countries plus five more: Brazil, China, India, South Korea and Brazil. It defined Internet activities as private consumption (electronic equipment, e-commerce, broadband subscriptions, mobile Internet, and hardware and software consumption); private investment (from the telecommunications industry and the maintenance of extranet, intranet, and Web sites); public expenditure (spending and buying by government in software hardware and services); and trade (which accounts for exports of Internet equipment plus business-to-business services with overseas companies).
If internet were a sector here's where it would fall as a percentage of total GDP, 2009
Interesting, no, assuming the data as reported is verifiable and accurate from the Atlantic Monthly source.
  • Real estate 11.0
  • Financial services 6.4
  • Health care 6.3
  • Construction 5.4
  • Discrete manufacturing 5.2
  • Transportation 3.9
  • Internet 3.4
  • Education 3.0
  • Communication 3.0
  • Agriculture 2.2
  • Utilities 2.1
  • Mining 1.7
Rhody...
WhoWee
#126
Nov7-11, 10:03 AM
P: 1,123
Quote Quote by rhody View Post
The $8 Trillion Internet: McKinsey's Bold Attempt to Measure the E-conomy


If internet were a sector here's where it would fall as a percentage of total GDP, 2009
Interesting, no, assuming the data as reported is verifiable and accurate from the Atlantic Monthly source.
  • Real estate 11.0
  • Financial services 6.4
  • Health care 6.3
  • Construction 5.4
  • Discrete manufacturing 5.2
  • Transportation 3.9
  • Internet 3.4
  • education 3.0
  • Communication 3.0
  • Agriculture 2.2
  • Utilities 2.1
  • Mining 1.7
Rhody...
I have to wonder how much of the commerce on your list was accounted for in this internet calculation?


Register to reply

Related Discussions
Economic Recovery Current Events 603
Best economic indicators for the economic health of a country? Social Sciences 14
Germany's Economic Recovery Despite Lack of Stimulus Current Events 36
How did the myths start General Discussion 35
Global Economic Recovery Current Events 7