Hi Darleen.
((The US dollar decline is mostly internal as it takes too many dollars to create value for the dollar. Credit has aided this because the debt service business I believe has become the prime business.))
Sorry Darleen. But I don't know what you are trying to say here.
((3 - Poor outlook for the labor markets given on-going corporate layoffs. ... This has more to do with the cost of labor and expansion than it has to do with layoffs so, in a way you are right but it is mostly the wage market here has outpriced itself when compared to the world labor market. Our wages are inflated in other words.))
... I don't entirely agree here Darleen. There is something more deeply wrong on the labor front than simply U.S. workers being outpriced in the global labor market. While I agree that this is a part of the problem, the Credit bubble of the 1990's resulted in very poor allocation of capital IMO. An example, IMO, that free capital markets do not always result in a skillful allocation of capital, particularly when coupled with massive Credit inflation. In other words, the U.S. labor market IMO suffers more from the misallocation of capital in the 1990's than mispricing in the global labor market.
((Continuing concern for lack of integrity in U.S. financial accounting practices. ... The hidden costs of doing business here I feel can basically be attributed to legal costs that inturn created to much pressure for innovation on modifying rules in order to meet profit expectation.))
The lack of integrity IMO is an ethical issue, not a legal issue, though it is also definately compounded by the absence of a proper regulatory framework. As far as excess legal costs as a hidden cost of doing business in the U.S., that may also be the case.
((Costs are high we maintain low cost by reducing labor costs. As other economies increase in wealth their cost will increase as more members of the community will require more goods and the expansion to sevice more people creates increased costs. This will result in an increase in price of the products we buy from them so our largest foe is inflation. ))
I do not agree with your position in the above paragraph Darleen. On aggregate, an economy cannot make labor cost reduction its primary manner of reducing costs. This must come about via increased productivity - i.e. innovation. Reducing labor costs, if done at a time of declining business activity, is in every firm's own self-interest, and is collectively a macro-economic disaster, as the results is a massive loss of purchasing power of consumers - who are also the workers. This is an important correlation to appreciate - workers = consumers.
Your second statement above:
As other economies increase in wealth their cost will increase as more members of the community will require more goods and the expansion to sevice more people creates increased costs.
... is a bit unclear to me. Are you saying that as other economies become more wealthy, the costs of production that are inputs to that economy will also increase?
That is not necessarily true. Cost is a function of supply and demand - both of goods and money. If the input can be supplied in an equal or greater amount than the demand for that good or service, then input costs will not increase.
Where things could get particularly dicey IMO, is if you have a fundamentally scarce resource that is in limited supply. Take oil for example. If other economies industrialize, and the world is not able to produce more oil to normalize oil prices at existing levels, then the price of oil will inevitably rise. Whether the global economy experiences overall Credit inflation in this situation is entirely dependent on the degree to which Central Banks increase the money supply.
And your final comment:
((This will result in an increase in price of the products we buy from them so our largest foe is inflation.))
... again this is not necessarily the case. If supply of the factors of production increase in proportion to the increase in demand, then prices need not increase.
Also, it depends on the growth in the money supply as well. If the money supply expands at a rate that exceeds the growth of the economy, the result will be a rise in the price level - i.e. inflation. If growth in the money supply does not exceed the rate of economic growth, then the overall price level will not rise. In this case, a price rise will only be good-specific - say a rise in the price of oil perhaps - but only if the supply of the good or service cannot keep pace with the increase in demand.
Do you agree with my analysis above Darleen? Or do you see things somewhat differently?
Best regards,
Glenn |
