Thursday, December 11, 2008

The New Economy

The Trade Deficit is growing again, which means We are importing a lot more than We are exporting; this being a chronic condition, but the spread is widening. A few Comments should be made on it. The Trade Deficit has many implications, though the long-term impact will be an equalization of Living Standards with the rest of the World. This is an acceptable practice if the living conditions of the World improve, another story entirely under a erosion of the quality of American life. Businessperson and Economist spot an advantage in the Trade Deficit, espousing the creed that it allows foreign Consumers to purchase American Goods, and that the Trade Deficit will disappear with increased Sale of American products. This will never happen! There remains a basic disconnect between American Consumption and American Exports. The later must be funded by foreign willingness to purchase, and that willingness to purchase will never arrive as long as the rest of the World can produce more cheaply than American production Costs. America will be saved by a Quality increase of American products alone, where both the life-span and durability of American products increase dramatically with Energy consumption in the usage of such products decrease. The American economy has long required a shift to produce less, but higher quality, products.

The Above is repugnant to American Business ethos, with its traditional award system based upon the rapid and high production of Goods. This policy fall before the Wind of loss of Consumers, or their loss of ability to pay. The Result is not pretty, with a drop of 1.1% in Wholesale inventories, because of a 4.1% loss of Wholesale Sales last October. November may look even worse than October, and Everyone can feel the crunch in the economy as Production seeks to downshift Production. A Switch to specialized, high-quality Production would reduce the immediacy of the dependence on Sales.

I will cite this Post to finish this Post, giving Reach to Readers who may desire access to the depreciation/appreciation methods of Currency exchange; a sophisticate arena with ramifications which might escape this author. China is in trouble because of a basic disregard for development of their own domestic Consumption market, while American Economists wish We could imitate the Chinese. Neither the Chinese or We Americans will be saved by wistful thinking, and structural changes are necessary in both Economies; the Question remains how much loss in Living Standards must be endured before a more realistic economic structure is adopted. lgl

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