I just read a very informative article about the state of our economy. It's fairly long but a good read. Overall I'm getting the impression that Americans want to have the pie and eat it too and some fiscal discipline, both from the government and the public, is much needed. A few interesting quotes:

To read the whole article:
http://apnews1.iwon.com//article/20050827/D8C88SP80.html?PG=home&SEC=news

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The governments of other countries will continue to invest in our country because we are the most liquid, safest, most open as far as disclosure is concerned, and least restrictive place to invest in the world. Best of all our government is the among the most pro-business governments on the planet. We are a stable entity.

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Lawrence Coppari

2002 SLK32 AMG
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Maybe, assuming that the government acts in the best interests of the voters and taxpayers. You want a realistic discussion of related topics?

Maybe what attracts foreign investors is that they can easily find willing partners in crime here at every level of enterprise.

OHYEA! that makes alot more sense than what Larry said. (If your a neurotic, delusional, pessimistic, self hating liberal democrat)

Spock, engage the foil shields!

Aye-aye, Captain!
Bot

They will also continue to invest in our country because they want a piece of it, and we're only too happy to turn chunks of it over to them....on a regular basis, just so long as it means we can keep consuming more and more stuff.

Keep pushing those rose colored glasses up on your nose.... but they's going to be a reckoning.

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1986 300SDL, 362K
1984 300D, 138K

Remember the story about the natives selling the island of manhattan for some trade beads? We are now reselling the whole country for oil and cheap, inferior, disposable goods made with slave labor in third world countries. History repeats, what goes around...

I'm curious do you use PC or Apple?

There is a potentially fatal flaw at the heart of the global economy: the strong possibility of financial meltdown following a collapse of confidence in the greenback, Clyde Prestowitz tells Bruce Stannard

August 29, 2005
THE nightmare scenario that haunts global strategist Clyde Prestowitz is an economic September 11 -- a worldwide financial panic triggered by a sudden massive sell-off of US dollars that would lead inexorably to the collapse of economies around the world.

If that happens, Prestowitz predicts: "It would make the Great Depression of the 1930s look like a walk in the park."
Australia would be sucked into the vortex of such a recession, which would cause great hardship throughout the world, he warns.
Prestowitz is not a doomsayer, neither is he alone in his views. As president of the Economic Strategy Institute, a Washington think tank, he is in regular contact with the most influential US business leaders, several of whom -- Warren Buffet and George Soros included -- have taken steps to hedge their currency positions against the possibility of a cataclysmic plunge in the greenback.
"Right now," he says, "we have a situation in which the US is running huge trade deficits -- about $US650 billion ($766 billion) in 2004 -- which are financed by borrowings from the central banks of Asia -- mainly the Chinese and the Japanese. All the world's central banks are chock-full of US dollars -- they're holding many more dollars than they really want. They're holding those dollars because at the moment there's no great alternative and also because the global economy depends on US consumption. If they dump the dollar and the dollar collapses, then the whole global economy is in trouble.
"However, some countries have a bigger stake than others in maintaining the status quo. China and Japan have a big stake in maintaining the flow of their exports to the US and keeping the US economy humming. Russia, on the other hand, does not export much to the US. India doesn't export much to the US. Yet Russia and India are also big dollar-holders. They hold many more dollars than they really want or need.
"It doesn't take any great stretch of the imagination to see what could happen if one of these central bank managers decides to dump dollars. We had a situation recently when a mid-level official at the Central Bank of Korea used the word 'diversification'. It was a throwaway remark at some obscure lunch, but there was instantaneous overreaction. The US stock market fell by 100 points in 15 minutes because the implication was that South Korea might be shifting out of US dollars.
"So picture this: you have a quiet day in the market and maybe some smart MBA at the Central Bank of Chile or someplace looks at his portfolio and says, 'I got too many dollars here. I'm gonna dump $10 billion'. So he dumps his dollars and suddenly the market thinks, 'My god, this is it!' Of course, the first guy out is OK, but you sure as hell can't afford to be the last guy out.
"You would then see an immediate cascade effect -- a world financial panic on a scale that would dwarf the Great Depression of the 1930s."
Prestowitz says the panic could be started by something as simple as a hedge-fund miscalculation.
"We had exactly that scenario in the US recently," he points out, "when a big hedge fund called Long Term Capital Management went belly-up. These guys were pros. They had two Nobel prize-winning economists writing their trading algorithms, and their traders were the creme de la creme among New York bond traders.
"They made a big bet -- a trillion dollars leveraged 20 to one, and they blew it. They went belly-up. That threatened to bring down the whole system so US Federal Reserve chairman Alan Greenspan had to organise a bail-out through the Federal Reserve Bank of New York.
"Now consider this: there are currently 8000 hedge funds in the US alone. Every day $6 trillion of derivative instruments trade on international markets. If there are four people in the world who understand those trades, I'd be surprised. So the potential for another disaster is not insignificant. This is why Warren Buffet, chairman of investment giant Berkshire Hathaway, is betting $US21 billion against the dollar. This is why currency speculator and hedge fund manager George Soros has also made a big bet against the dollar.
"Soros is one of the greatest currency speculators of all time. He was the guy who broke the British pound in the early 1990s by betting $US10 billion it would fall. He made a quick billion when it did. In 2002, he warned that the greenback was in danger of losing a third of its value. Of course, it could be argued that Soros is a professional hedge fund manager whose job is to play the ups and downs of currencies and his remarks could be seen more as manipulation than prophecy. And yet, in conversations with me, Soros has expressed concern about the market fundamentalist view that prevails in Washington and parts of Wall Street.
"This is the belief that markets are self-correcting and best left alone. Soros calls this a dangerous siren song. Far from being self-correcting, he emphasises, markets tend to excess. They over-shoot. Anyone with any experience of markets knows this.
"When markets are going down, all the weaknesses get concentrated, and you need intervention at the right time to stop things from getting out of control. If the dollar started to melt down, the results could be really nasty. A 1930s-style global depression is not out of the question."
To underscore the point that he is not alone in this, Prestowitz cites Paul Volcker, head of the Federal Reserve before Greenspan, who has said publicly there is a 75 per cent chance of a dollar crash in the next five years.
"No wonder people look at this and say, 'Holy cow!'," he says. "No one knows for sure what will happen, but clearly the global markets could implode very quickly. The lack of an alternative to the dollar is the only reason it hasn't taken a big fall already."
Prestowitz, formerly a trade adviser and negotiator for former US president Ronald Reagan, believes the US will continue to be the world's most powerful economy for the foreseeable future. But he foreshadows an inexorable decline, a trend that is likely to continue "depending on the way we play our cards".
"Right now, we're playing them just about as badly as it's possible to play them, and that has geo-political implications." he says. "We've outsourced trying to deal with North Korea to China, we really can't deal with Iran, so we've outsourced that to the EU, which is struggling, and Iran is cozying up to China. Other bad actors like Zimbabwe's Robert Mugabe and Sudan are cozying up to China.
"America's global hegemony is already under challenge, and that challenge is going to become more and more evident as the extent of the relative US economic decline becomes evident. Right now, the US dollar is probably 40 per cent overvalued versus the Japanese yen or the Chinese renminbi. How's the US going to look as a global power when the dollar is at 50 per cent of its current value?"

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"The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane."
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Q-Waves from Traflammadore.

Bot

yea, yea, yea, and Japan was gonna buy up all of the US in the seventies....blah, blah, blah,,,my god you guys are doom and gloom, what a sad lot.....

I recall in the late 70's my computer geek roomate saying the US was turning into a service and information-based society. I countered that you need a manufacturing base to keep the flow of goods from getting lop-sided. What good is an economy that doesn't produce tangible things? Why lose all that manufacturing know-how and flexibility that, for example, got the US thru WWII? Well he was proven to be right. What wasn't obvious back then was how the playing field would spread world-wide, pitting us almost directly against a cheap Mexican and Asian labor force, who by the way, also are good with information technology.

Where does that leave us? We need to exploit niche markets. China's booming economy could bring many opportunities. For example we have 30-40 years of experience with occupational safety and environmental standards. A lot of their dirty industries need to be cleaned up before they suffocate in their own filth, and these are skill and technologies we can readily provide. As China's oil consumption goes up, we will find innovative and practical ways to harness other energy sources, possibly opening whole new markets.

Trade agreements everywhere will continue to flatten the differences between countries. This means more pain in the form of shrinking incomes and less job security as we adjust to the new reality. Perhaps shipping costs will make foreign goods more expensive, ie less competitive, but I don't expect a reversal of this trend any time soon.

Interesting, Hyundai opened a big new plant in Alabama alongside others including Mercedes, making that state a major international player. Whoda thunk?

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Well... Hmmmm... You're right. I never see any Hondas or Toyotas on the road. And heavy equiptment? Nahhhhh... I only see Cats on the job sites.

What about electronics? Never see Made in Japan. Sony? Who are they.

Those companies all have the same market share as they had in the 1970's... just like you said.

Right.

You get to wear the Maroon shirt this year for SURE!

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