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Old 09-01-2007, 08:13 PM   #30 (permalink)
kangaeru
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Location: on the road to where I want to be...
Not to be a snot nosed bookworm, but international trade and monetary theories are in place, and have been for years, which explain a lot of what we're seeing in the U.S. economy to a large degree.

http://en.wikipedia.org/wiki/Heckscher-Ohlin_model

The Heckscher-Ohlin Model

This will explain why manufacturing jobs are leaving the U.S.

http://en.wikipedia.org/wiki/Stolper-Samuelson_theorem

The Stolper Samuelson theorem

This will explain why unskilled labor in the U.S. has been hurt by int'l trade.

http://en.wikipedia.org/wiki/Leontief_paradox

The Leontief Paradox

A study which seemed to contradict the predictions of the H-O model, however provided labor is divided into more detailed groups than "skilled" or "unskilled" it still holds true.

Basically, what all this means is that what is happening in the U.S. economy is not surprising. The fact that the U.S. dollar is dropping is good--that is the reason that the US automakers in Detroit will be able to export their goods to developing countries like India, Singapore, Thailand, Brazil, Mexico, etc, etc. The falling dollar is what will make American exports competitive abroad once again. Ironically, the fact that the U.S. dollar is falling places less pressure on U.S. firms to outsource jobs to foreign countries.

As far as the credit crunch goes...it's been inevitable. Every business in this country is designed to get you to spend more money than you wanted to--if you sign up for a credit card, you're also usually paying for id theft protection, credit report updates, etc. If you're buying a car you're paying for an extended warranty. If you buy a cell phone you have to get a case, and chargers, and text messaging, and internet service, blah blah. You can't call up to ask a question about your cable bill without someone trying to sell you something.

It's no wonder everyone has financed themselves into debt. However, as Ace has said, people will continue to live their daily lives, the apocalypse will not come, and life will continue on as normal. There is pretty much nothing worse an economy could go through than what happened to Japan when the bubble burst. Think of the federal reserve pulling an Enron--that's pretty much what happened, they used the same accounting practices. Anyways, the market corrected itself, and although there was a long recession people still put food on their tables and rooves over their heads and sent their kids to school.

I don't think we're heading for a correction as serious as the Japanese bubble economy--in the long run, we will be fine.
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