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Originally Posted by NCB
1. Europe has a higher enemployment rate (often in double digits), but their labor market is stronger becasue the unemployment rate rarely changes? That tells me that their labor markett is weak, not strong.
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Part of the higher unemployment rate is longer and more generous unemployment benefits.
Lets say that it takes 1 year to get your job back, but your benefits run out after 4 months in the USA, or 1 year in Germany.
After 4 months, you are no longer "unemployed" in the US, you have been considered to have left the labour market. You are still unemployed in Germany.
(this is low reliability information)
As far as I'm aware, that is what is known as 'structural unemployment'.
In addition to that effect, the US military and prison system has unemployment lowering effects. An otherwise unemployable person who is in prison or in the military is either out of the market or employed. Other forms of government support don't nessicarially remove someone from the labour market or mark them as employed. The US has an unusually large prison and military population (over 2% of the US's workforce).
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Originally Posted by chickentribs
I was responding to your assertion that a weak dollar was a good thing because it would stimulate US exports due to increased purchase power for the EU and Asia. My point was that the rise in our import costs would wipe out any benefit realized on exports seeing how we import at about a 2:1 ratio.
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A lower dollar is "good", but not in a way that means "make USA wealthier".
A lower dollar means importing goods makes less sense and exporting goods makes more sense.
The interesting part here is how much of the US's debt and current-account deficit is being financed by a handful of large overseas banks, purchasing large amounts of US government bonds.
And many of those banks are talking about 'diversifying' their reserves. Which makes sense -- the current rate which they are purchasing US debt is insanely unsustainable, even in the short term.
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Originally Posted by chickentribs
Unfortunately most of what we import tends to be raw goods with steady demand that we can't supply from the US (ie. Oil) so we couldn't respond to cost pressures if we wanted to.
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Imagine Wal-mart prices going up 25%-50% (and Wal-mart stock going down 75%!). Imagine petrol prices hitting 3-4$. Imagine imported fruit doubling and imported cars going up 50% in price.
You can do without. You won't want to. But you can do without.
The alternative is to start investing in productivity improvements now. Educate your populance, pump out Engeneers, work on robotics to make manufacturing cheap, and start before things get bad.
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Originally Posted by james t kirk
Then we'll be really screwed because it will cost way more to buy the crap we are buying now for peanuts and they won't bring those jobs back to North America that they are shipping over there right now.
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Actually, the jobs will come back. You'll be forced to work to provide for Chinese workers. Every unit of work they do for you, you will do for them.