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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: Mark Adams who wrote (1901)	11/11/2003 12:23:01 AM
From: Mark Adams	Read Replies (2) of 110194

hussmanfunds.com A significant portion of what we “import” from foreign countries actually represents intermediate goods produced by foreign subsidiaries of U.S. companies, or companies formed by direct U.S. investment into those countries. Think about this for a second. We import the same intermediate goods we would have manufactured at home, but at cheaper prices (meaning that the deduction to GDP on account of imports will generally be proportionately smaller than the corresponding loss in U.S. employment). Yet when we turn around to calculate productivity, we don't count the foreign jobs used to produce that output. As Fabrizio Galimberti has noted in the Economist, foreign outsourcing has the effect of artificially raising productivity figures because subtracting imports from GDP does not adequately correct for their impact on final output, yet foreign labor is not counted, so measured output per worker increases. The net effect of all this is that the U.S. “productivity miracle” is almost entirely dependent on growth in U.S. imports and foreign labor outsourcing. addresses an aspect I hadn't considered when issuing the query: How much of what China builds ships to the US is coming from companies that are partially or totally owned subsids of American entities? If a Nike factory in China makes shoes sold in NYC for $150/pair, how do you parse the money spent on Chinese factories and labors, and who ultimately benefits? Happy days.

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