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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (14330)	10/29/2004 8:56:10 PM
From: Crimson Ghost	Respond to of 116555

Another excellent day for junk bonds. Very similar to the last blowoff top in early 2004.

To: mishedlo who wrote (14330)	10/30/2004 12:53:42 AM
From: GraceZ	Read Replies (1) \| Respond to of 116555

Consider manufacturing as a whole for the last 50 years. Yes, lets. The US in 2000 manufactured 12 times what it manufactured in 1940. In 1940 or so 15 million people were employed directly in manufacturing, in 2000 the number was around 16 million. Obviously some serious productivity advances over that period. While the percentage of people in this country employed in manufacturing dropped precipitously during that time frame there are more people employed in manufacturing now. Simultaneously the standard of living rose across the board for everyone in the US. During that period cars became ubiquitous, electricity, TVs, telephones, airplane travel, household appliances, etc. The list of medical procedures which someone in 1940 could barely imagine became routine, things like organ transplant became everyday ordinary occurrences. How did that happen, surely we all lost our jobs to the productivity increases!? Hardly. In 2000 we had about 142 million people employed in this country, ten times the number who were in manufacturing in 1940. Every advance in productivity requires fewer workers. China has actually lost manufacturing jobs. Do you for one second doubt that? Do you doubt that it takes fewer than ever people to produce a car? No, I don't doubt it, I know it is true, that it takes fewer and fewer people to create everything manufactured. But we keep making more and more goods and this makes them cheaper and cheaper. This is why I have an order entry accounting module which allows me to put a price in for a product with five places right of the decimal point. The cost to manufacture some common goods like nails and screws are closing in on free. Continually falling cost makes more of these goods available for those who could only dream about owning them before, like about a billion of this Earth's inhabitants who don't have cars or phones or enough to eat actually have a chance that they might get a chance to buy what we have taken for granted here in this country for the last 50 years. Do you doubt there is unmet global demand out there? As more manufacturing moves to these previously undeveloped countries they slowly raise their collective incomes and can buy those things. Productivity advances are never equal across all industries. As they are applied on a macro level raising the living standard on average in a country, individual occupations or industries can suffer if they lag. This is why countries like our own have to move on to or invent those industries which have the highest productivity advantage and shed those that lag. There are lots of reasons why industries lag. Some industries are mature and have had all the excess labor wrung out of them. The only choice at this point is to move to a country with lower labor costs because they can't pay enough for people to live in the higher cost country. Sometimes industries lag because productivity gains are thwarted. In the 70s it was the monopoly power of their labor unions which kept the auto and steel industries from adopting the labor saving automation that the foreign counterparts employed, therefore the US lost it's lead in those two industries to more efficient producers. Now we have the dockworkers on the West Coast preventing automation of West Coast ports. Monopoly labor was one of the biggest reasons productivity stagnated in the 1970s. Our standard of living not too long ago was rising with ONE wage earner. Now it has STALLED (IMO) with two wage earners. Unfortunately there is no scenario with three wage earners that makes any sense. So where to from here? You are living in some 50s Ozzie & Harriet inspired dream world. For the two centuries during which the US could boast rising standards of living it was customary for the father, mother and all of the children to work on the family farm and the family business. Women got maybe a decade and a half post WWII (1945-1960) when they got to stay home with kids and this is because after the War they kicked us out of the workforce to make sure the returning vets got good jobs. The movement of women into the work force in the sixties may have kept average wage gains down but they certainly didn't effect the standard of living. All you have to do is watch a movie from the sixties or seventies to see how much we've gained. I watched an old 70s movie the other night and I almost burst out laughing when the lead character wakes up in a hospital room because it was positively primitive! Furthermore, the plain and simple fact is that the internet created a GLOBAL wage arbitrage such that I sincerely doubt that the next boom is of tremendous JOB/WEALTH benefit to the US. The Internet didn't start this, it's been going on as long as international trade existed. The next big thing in the US is happening even as I type this out. All the pessimism in the world couldn't stop it at this point considering that we have the confluence of huge amounts of cheap computing power, networks and a million patents and ideas floating around on them. Somewhere in a lab a highly automated machine which is the culmination of years of robotics advances as well as genomics and biochemical research is testing assays by the thousands per day, research that will be used for drug discovery. Somewhere a tech sitting at home is monitoring the progress from time to time using a simple web cam and Internet connection. Elsewhere a doctor is doing computer assisted surgery on a patient using virtual reality technology developed originally for combat training and used mostly in computer games. Someone else is making an appointment because the new laser technique will cure presbyopia, while 10 million more Boomers realize they can't see near or far. Tell me we've run out of complicated intractable problems to solve and then I'll say we are at the end of things we can make a living doing. Yes the SOL in the WORLD may very well rise. But what about the SOL in the USA itself in light of my arguments. I say it sinks. Oh for sure you'll be one of those cranky old guys that will tell any youngster around how much better things were in the old days, that they peaked in the 90s. He'll roll his eyes just like we did when we had to listen to that crap from some old fart when we were young. Then he'll check his wireless handheld to see if his parents are home yet, when I say "see" I mean he will actually see them.