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Originally Posted by ratbastid
Even so, it's a clear policy shift from the top. So, TFP neocons: you shifting with your bosses?
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I am an independent thinker. Bush's speech was pure PR. The policy changes he announced will have no real impact on the economy other than a psychological impact. In your cite FHA states 80,000 more people will finance under FHA secure. That is going to be about $3.2 billion in loans.
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Originally Posted by kangaeru
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. |
I think the Leontief Paradox fails to take into consideration the value and static nature of infrastructure. In the short-run there appears to be a contradiction to the H-O model but I would argue that is not true in the long-run. If labor intensive industry develops first and then more capital intensive industry becomes available and becomes more common, I think what you have is a pattern of leap frogging from because of the static nature of infrastructure regardless of labor or capital efficiencies. For example in the US telecommunication industry, our system was based on land lines and was highly labor intensive. In developing nations that never had the infrastructure of land lines got a more immediate benefit from cellular technology as telecommunication developed in the countries. So, let's say in 1995 it took our nation more labor to deliver a financial transaction via telecommunications than a country like Norway. However, that will most likely not always be true although still currently a country like Norway has systems in place where they can do much more with cellular telephone technology than we do.
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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.
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We also have situations where companies like Toyota, Nissan, BMW opening manufacturing facilities in the US. One of the problems with Detroit and the automotive industry seem to be in there inability to adapt to changing market conditions. Again, the infrastructure put in place in 1950, with by today's standards inefficient labor cost structures and facilities, has hurt their ability to be competitive in the world market place. Also, one could argue that government tax policy, interference, regulations, etc, has hurt as well. I agree the the value of the dollar is a factor, but I think it is a small factor.
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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--
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Companies that stay in business over the long-run are more designed to offer value. If people felt they were not getting value for the "more money than you wanted to" spend, the spending more would not last long. The "Would you like fries with that? Yes I would" works because I actually feel that the fries added more value to my lunch than the cost. If I did not think that was true, I would do it the second time.
People went into big debt with real estate speculation and second mortgages because there was a strong value proposition in doing so, from lenders and borrowers points of view. Now that value is not as strong and conditions will and have changed. I think this is a pretty normal market cycle except for the over-reaction.