Why are we in a recession again?

[teamnelson]

According to this, we reduced our trade deficit and increased exports from 2003-2008 - a single administration - and that's with strained diplomacy with China. Now we're in recession with rampant unemployment, and some are proposing we need to go into isolationism for the good of the country and economy. To my mind, isolationism will hurt the one thing that is working for us, but I'm open to having someone explain how that will work. Everything I've read leads me to think our recession is the product of rampant personal fiscal irresponsibility, not poor trade decisions.

---
U.S. EXPORT FACT SHEET - Dept of Commerce
December 2008 Export Statistics Released February 11, 2009

EXPORT OVERVIEW:
- With the release of December 2008 U.S. International Trade in Goods and Services report by the
Department of Commerce’s U.S. Census Bureau and the Bureau of Economic Analysis, U.S.
exports of goods and services grew by 12.0% in 2008 to $1.84 trillion, while imports increased
7.4% to $2.52 trillion.
- In December 2008, the U.S. goods and services trade deficit ($39.9 billion) was the lowest
monthly deficit since February 2003. This led to a 3.3% improvement in the annual goods and
services deficit for 2008.
- Exports comprised 13.1% of U.S. GDP in 2008. To put in historical terms, exports were 9.5% of
U.S. GDP five years earlier (2003), and 5.3% 40 years ago (1968).

TRADE SPOTLIGHT: RELEASE OF ANNUAL 2008 FIGURES
- The largest export markets for U.S. goods in 2008 (with percent increase over 2007) were Canada
($261.4 billion, up 5.0%), Mexico ($151.5 billion, up 11.4%), China ($71.5 billion, up 9.5%),
Japan ($66.6 billion, up 6.2%), and Germany ($54.7 billion, up 10.2%).
- Capital goods represent the largest goods export category (end-use) for the U.S. with $469.5
billion worth of exports in 2008. The U.S. trade surplus in capital goods rose $12.8 billion to
reach $15.7 billion in 2008, up from a surplus of $2.9 billion in 2007.
- The top growth categories for capital goods products in 2008 were medicinal equipment (up $3.3
billion), materials handling equipment (up $2.7 billion), industrial engines (up $2.7 billion),
telecommunications equipment (up $2.6 billion), and civilian aircraft engines (up $2.5 billion).
- Industrial supplies the largest growth category in dollar value represented $387.3 billion of U.S.
exports in 2008, up $70.9 billion (or 22.4 percent) from 2007.
- The top growth categories for industrial supplies in 2008 were fuel oil (up $19.3 billion), other
petroleum products (up $8.5 billion), nonmonetary gold (up $5.4 billion), chemicals-fertilizers (up
$4.5 billion), and steelmaking materials (up $4.3 billion).
- Foods, feeds, and beverages represented $108.4 billion of U.S. exports in 2008, and was the
second largest export growth category (end-use) for the U.S., with exports rising $24.2 billion (or
28.7 percent) over 2007. The U.S. trade surplus in foods, feeds, and beverages rose $16.8 billion
to reach $19.4 billion in 2008, up from a surplus of $2.6 billion in 2007.
- The top growth categories for foods, feeds, and beverages in 2008 were soybeans (up $5.6 billion),
meat and poultry (up $3.7 billion), corn (up $3.4 billion), and wheat (up $3.0 billion).
U.S. services exports totaled $551.6 billion in 2008, up $54.4 billion (or 10.9 percent) from 2007.
- This rise in exports helped the U.S. to have a record trade surplus in services at $144.1 billion, up
$24.9 billion (or 20.9 percent) from 2007.
- The top services export categories were other private services, which includes items such as
business, professional and technical services, insurance services, and financial services ($241.0
billion), travel ($111.5 billion), royalties and license fees ($91.1 billion), other transportation
($60.2 billion), passenger fares ($31.4 billion), and government services ($16.3 billion).

[Dixie Dude]

If we would switch to natural gas, or synthetic oil from coal gasification, and stop importing foreign oil , we could eliminate most of our trade deficit.  This would stabilise the dollar and cause it to have more buying power.  It would only take around 5 years to do this. 

[Yankee1]

We have the oil. More than every country in the world combined but we are not using it. Source US Geological Survey. Where? The Bakken and under the Rockies.  However we have lobbiests preventing its utilization.  You don't hear too much about it meanwhile we just keep buying Arab oil. I wonder why?
                                   Yankee1

[45-70.gov]

same  reason  we  have  welfare

TO  KEEP  THEM DEPENDENT  ON  US  OR  SHOULD  I SAY  THE  US GOVERNMENT

[teamnelson]

If we would switch to natural gas, or synthetic oil from coal gasification, and stop importing foreign oil , we could eliminate most of our trade deficit.  This would stabilise the dollar and cause it to have more buying power.  It would only take around 5 years to do this. 

So to which foreign oil provider are you referring? Our top two providers for crude oil are Canada, then Mexico. We imported 1,938,000 barrels per day from Canada in Sep 09, and 1,124,000 per day from Mexico in the same period.

The largest export markets for U.S. goods in 2008 (with percent increase over 2007) were Canada ($261.4 billion, up 5.0%), Mexico ($151.5 billion, up 11.4%)

Canada & Mexico are our fastest growing consumer markets for our exports, which includes petroleum products made from the crude oil we get from them. So if we cut down or off the importation of our crude oil from them, how do you suppose they'll respond?

There are 143 petroleum refineries in the US, scattered across most every state, 60 some of which process 100,000+ barrels a day. If you cut off their top 2 buyers, what does that mean for jobs, businesses, towns, state revenue?

I would agree that we need to cut off imports of crude oil from any source that does not in turn buy our petro exports, like the Middle East, South America and the Middle East.

[Yankee1]

Hi Chaplain
     Canada is getting a lot of their oil from the Bakken fields just over the border from our section of the Bakken. I also understand that we have over 2 trillion barrels under the rockies.  The article I read said it could sell for 16.00 a barrel and still make a good profit.
                                    Yankee1

[alsaqr]

We are in a recession because our elected political perps sent the manufacturing base of the US off to the communists in China. 

[teamnelson]

We are in a recession because our elected political perps sent the manufacturing base of the US off to the communists in China. 

The top growth categories for capital goods products in 2008 were medicinal equipment (up $3.3 billion), materials handling equipment (up $2.7 billion), industrial engines (up $2.7 billion), telecommunications equipment (up $2.6 billion), and civilian aircraft engines (up $2.5 billion).

Our top growth in capital goods exports were all in manufacturing, contributing to a trade surplus. So its not manufacturing as a whole, right? Just certain products. Which ones were moved to China? Looking at their exports, they are making their money in high-tech manufacturing - electronics. Did we lose alot of electronics jobs to China?

[Dixie Dude]

We have two major textile manufacturing plants in my area that recently relocated overseas.  Took with them about 2,000-2500 jobs.  They, however have been replaced by Kia and Hundai and some auto suppliers.  I know we import more oil from Canada and Mexico.  I saw somewhere that Saudi Arabia was a close third, followed by Venezuela, Kuwait and other Arab countries.  We can switch fleet vehicles in the US to natural gas and cut 40% of the imports.  Drilling our own and/or making synthetic oil from coal can cut most of the other.  I learned in economics that every dollar spent goes through 7 hands before it returns to you.  So, if we spend it overseas, that cuts out a few American hands who would benefit from it.  Foreigners do not have to spend it by buying our products, they can buy European or Japanese.  If the money is circulated in America buying from Americans and American made products, it will provide jobs here. 

[teamnelson]

Could we make everything we want here, at a cost that would keep business competitive and profitable?

[Squib]

not without bottoming out... and that means someone goes bankrupt or has to sell for almost nothing....  corporatist statesmen would intervene and "save" us

[Matt]

Could we make everything we want here, at a cost that would keep business competitive and profitable?

In one word Yes... Competition drives down the cost and demand fuels profits. According to you most of what we import is high end electronics. The actual cost of most of these devices are 1/6th the retail price if not less. Most everyone I know in retail tries to get around 30 to 40 percent profit on what they sell which keeps the price down and the customers coming back. In wholesale it is around 10 to 15 percent so as long as no one tries to make huge profit margins on every product they sell and make it in volume then yes it can be profitable.

As an example here is some prices I was given from a manufacture in china several months ago when I was thinking of getting into the retail electronics business.

Quote from GlobalSpec:
Portable DVD player with 10" swivel screen Retails for 89.99 and up
Manufacturing cost : $9.00 including labor and all over head
Export Price : $16.00
Shipping Cost : $2.00 per unit
Total price for 20' container (2500 units)
$45,000.00

Gross total if sold for $69.99 (gotta give a better deal than the competition)
$174,975.00

For a profit of:
$129,975.00

So yes I think that we could build this same unit here in the US for close to the same cost and everyone still make money as you can see there is a lot of profit to be made. This is just an example of one of the items on the list which includes 42" LCD TV's for $98.00 shipped also on it was 12mp 10x optical zoom cameras w/ 3" LCD Display for $34.00 shipped and my favorite Complete 32 camera CCTV system with DVR and 1 Tera-byte hard drive for $163.00 shipped. That last one I deal with a lot and my cost on a complete 32 camera system (made in china version) is around $1800.00 and that is a great deal on a system like that.


But that really is not what matters anyway. Yes we could make everything we want here but more importantly we for damn sure can make everything we need here and that is what really matters...

Matt

[Squib]

you gotta remember the huge conglomeration of leeches sucking on your sales profits via;
sales tax
insurance on your inventory
store upkeep, lease, utilities, rent or whatever
1/3 of your dough at the end of the year, plus 1/2 your income since you'd actually be out of the poverty income brackett
security guard (you're secure not stupid right)
advertising

uncle sam would get you from behind so you would have to keep diaper-doo in your pockets matt, you're right that we can do it all in this nation but we have huge overhead costs (we're crowded out by the major retail chains that use foreign products to keep you and others undercut)

that's part of the corporatism deal-- crowd out the little guys and keep the giants happy, it's a perpetually deepening grave but the consumers just see the raw goods and not the hole that they came from (that deepening grave)

nevermind, the grave has an end... it opened up in china!  

[Matt]

I am well aware of the overhead as I have been doing this for going on 15 years now. But the question I responded to was "Could we make everything we want here, at a cost that would keep business competitive and profitable?" and the answer to that is yes we could make it and it be profitable. This was posed in the isolationism context so if this was the case then I would think that we would have to have a complete house cleaning in DC and thus much of those taxes and such you mention would be removed from by a sensible government as that is what it would take for us as America to take the isolationist stance.

Matt

[Squib]

... no tariffs or huge 1/3 business revenue tax would be nice... there has been a lot of talk about using sales tax as the primary revenue source in the us, but I've not heard of anyone trying it


so how much of that 129k from above would you likely keep after all your government patronage???  I'm not an entreprenuer but I hear it's not pleasant..... what do you do?  wire up electronics, software, installation?  I'm not of a tech background so assume total ignorance on my part

[Matt]

... no tariffs or huge 1/3 business revenue tax would be nice... there has been a lot of talk about using sales tax as the primary revenue source in the us, but I've not heard of anyone trying it

As best as I remember one of the Flat Tax models used this idea... don't remember who's it was but I do remember reading something about it.

so how much of that 129k from above would you likely keep after all your government patronage???  I'm not an entreprenuer but I hear it's not pleasant.....

Well it would really depend. I was thinking Internet sales would be my base with the retail store being a place to go everyday and talk tech with other like minded folks. I would expect the breakdown to be about 2% labor, 5% overhead (lights building and such) and 30-35% taxes depending on how the items sold so realistically one could expect to get cut 37 to 42 percent which taking the higher figure would be $54,589.50 which leaves $75,385.50 actual profit and this is still way over 100% profit which is far more than is needed to keep a business going.

edit:  keep in mind this was but one of many products and the time frame to move the full lot would be 30 days.

what do you do?  wire up electronics, software, installation?  I'm not of a tech background so assume total ignorance on my part

Well it would be quicker to tell what I don't do... which is not much... I have several ventures from this website to my electronics company "Diversified Technologies" which we repair, service, design and prototype all types of electronics. I also have a Video Surveillance company called "VidPro" which handles video security for an increasing number of businesses and even homes here in Alabama and Georgia. In my spare time I build and sell wood furniture although there has not been any of that lately. I am a part time inventor with 4 inventions that I am trying to accumulate funding for patents. I still maintain about a dozen or so networks for some doctors and a few lawyers here locally which is a carry over from "CbD Enterprises" my first computer business that got this whole thing started 15 years ago. I do automotive repair and am now venturing into alternative energy production via wind and solar as well as solar water heaters and passive solar heaters and most anything solar. The list goes on but I think thats good for now...

Matt

[Squib]

that's ambition-

I was considering a small-timer or first-timer attempting to get business going strong to capitalize on the vacuum if american import/export is drastically changed.  taxation is running lots of people out (even the big businesses that aren't bought out by congress) except the gun industry.... then again that wouldn't be doing so well without nutty pelosi and crew.  I was thinking of small shops and self-employed craftsmen.. how could they make it work?  the obvious answer is to just tough it out but I wonder if you have a specific idea... any safety-net for the transition back to american labor?

[Matt]

I was thinking of small shops and self-employed craftsmen.. how could they make it work?

Well I know many one man operations that are doing ok so to speak. They are not going under so they are doing ok in this economy. I think that diversification is a big thing. If you are able to handle a range of jobs then you open yourself up for more opportunities to make money. A one trick pony is not the way to be right now if you are the little guy. I also recommend befriending the other little guys and then pool your resources and buy together to lower your costs and keep profits and success close to equal. There is enough money out there to be made if everyone would stop being hogs and just be pigs for a little while.

the obvious answer is to just tough it out but I wonder if you have a specific idea... any safety-net for the transition back to american labor?

Back to American labor? as in kick out the illegals and close the border?  transition? round them up buss them to the nearest border or put their ass on a plain home... whatever it takes... the system will correct itself... there are Americans out there that will do the jobs and even for minimum wage.

Matt

[Squib]

from what I've heard- organ harvesting would do it all

I know I'm all about the military not doing evil BUT the enemy here is a domestic threat that has envaded our physical border

taking organs would cause great fear, it would help sick americans, it would drastically lower expenses for people needing lungs and such, and the scraps could replace food stamps (scare off welfare bums too)..... it's wrong but that's the only all-encompassing solution I've heard or thought of

on a REAListic agenda.... our border patrol and national guard could actually kill any and all illegal immigrants.  if they look mexican, can't speak english, and don't have a birth certificate with a spanish name on it while "co-incidentally" not having a social security number or photo id- just kill them right there, or in the street, or lynching... specific methods don't matter.  

bussing would be expensive- and me and you driving to work is a great burden on the world's atmosphere already, can't bus them (use a liberal argument that's grounded in reason    )

[slim rem 7]

 what no cz or taurus ,,made in argentena ..
i believe..isolationism is at best just what greed from corporate
 america has forced on us.. i don t see any other way for free enterprise to survive..
 when communist china survived the so called fall of communism..it left a non competing huge society
[not free society] supplying goods without the normal checks and balances that are present in free interprize.. in short the communist in china found away to feed the enemy to death.. that being capitalism..
 gotta give them credit for thier genius.. me thinks it may back fire on them though.. just how much
of a foot hold freedom gets over thier will determine that mabe....slim
 ps it still not the enemy from outside we should be wary of but the one from within..

[Dixie Dude]

We made EVERYTHING we needed in 1960, EXCEPT coffee, tea, bananas, cocoa, and titanium.   45% of people worked in manufacturing.  We had a strong and growing middle class.  Most women didn't work.  Yes, homes were smaller, about 1200 Sq. ft. on average, and most only had one car and one tv.  Our own desires for more caused women to enter the workforce, homes increased in size to over 2,000 sq ft now on average, and most have two cars, more than one tv, and now computers, cameras, video cameras, video games.  Most hunters only had about 3 guns, a deer rifle, .22 rifle, and a shotgun.  Now they have atv's and 4 wheel drive trucks.  Free trade with other countries is great, as long as it is fair trade.  Do they have environmental laws, child labor laws, 40 hour minimum work weeks, social security, etc.  China and Japan do not have social security for all people.  In China it is only for the men.  None in Japan.  None in India either.  Most save about 25% of their income for retirement or long term disability.  Canada and Europe are equivalent to us, but other countries are not, so should we put tarriffs on goods from countries who do not gradually factor in the same restrictions as our industry?

[Dixie Dude]

I think we need to at least maintain the industry needed to produce weapons, clothing, and food for the military if we ever do need this, especially in a long term conventional war.  I do not think we need to import any food that can be produced here. 

[SHOOTALL]

Look to Banking .
They create money IE , each bank must have deposited 10% of the value in the Fed res bank of the loans they make . They can borrow 90% from the Fed to make a loan  . Couple that with say the construction of new homes where cost were inflated beyond reason and these loans from "created money" were approved with out regard to actual value it was only time until it failed .
 Ok what do i mean about housing cost inflated ? A quick example - when a customer wanted an up graded kitchen sink the cost to the plumber over the org. sink may have been $75.00 . The cost to the builder may have been $125.00 BUT the cost to the consumer was often over $ 1200.00 dollars . Now som guy is paying intrest on over a $ 1000.00 for 30 years . Since KS faucets last maybe 20 years where is the value ? Why would such an unsecured load be approved ?
This was a fact in the industry i work in , how do banks figure in your industry ?
So the fed held 90% of the risk while the banks made the lions share of the profit nice position to be in .

[MGMorden]

so should we put tarriffs on goods from countries who do not gradually factor in the same restrictions as our industry?

That would do a lot to stabilize the economy, but it's political suicide.  BOTH the super rich and the poor will roast any politician that suggests it over an open fire.

The reasoning is simple: the big business man doesn't get to outsource as much.  You have just put a serious hamper on his profits because he can no longer get someone in another country to do his work cheaper.

The poor (and even well into the middle class) will react equally negatively.  You tell a nation full of people that the appliances that they were getting a Wal-mart for $15 are now going to cost $40, and the cars that they were getting for $12,000 are now going to cost $30,000, and they'll be ready to riot. 

The simple truth is without cheap imports people WILL have to reduce their quality of life.  We saw a huge upsurge in that recently because we tapped countries full of millions of people who were near starving for almost unlimited cheap labor.  Our money was as good as gold at the time and they wanted it.  The short term gain is amazing, but the longer this goes on, the more and more worth gets siphoned from our economy over to theirs. 

We are going to have to accept a lower standard of living eventually.  We couldn't maintain what we have now when we were doing everything ourselves.  We can't maintain the status quo for much longer.  As the world balances out we're going to have to find our place.  A lot of that will mean going back to the way things were.  I have 38 guns last I counted.  How many do I really need?  Maybe 4 when you get down to it.  It's just that I could AFFORD a lot more than that with the way the economy was previously.  I like to play the guitar.  I really only NEED 1 nice one.  I've got 5 of them though.  I'm a computer programmer and really into computers as a hobby.  I've got 6 functioning computers at home (just for me) and enough scattered parts and pieces to throw together 3-4 more.  My computer typically gets a full overhaul/upgrade ever 18 months to 2 years, even though it still works fine.  Notice how many electronics, cars, or other things get thrown away or scrapped after simple malfunctions that would cost only a few $$$ in parts to fix.  That's because imported replacment units are so cheap.  I doubt that'll remain the case though.

Part of this "recession" is just things balancing out.  Job loss will recover eventually (tons of unemployed people will figure out something to do amongst themselves and bring domestic industry back), but everything has to be be scaled back eventually, and we're seeing it start to happen.

[teamnelson]

Matt: According to you most of what we import is high end electronics.

Just to be clear, according to Dept of Commerce data, most of what China exports is high-end electronics; whether that is our primary import, I don't know.

Methinks MGMorden is talking about the issue - our expected quality of life has outstripped our national ability to support. Many have already experienced a forced change through unemployment and the housing bubble burst; the rest of us will experience the change through inflation. The more I peel back the layers the more it all boils down to simple consumer expectation - regulation and deregulation aimed at protecting ourselves from our own bad decisions, stimulus packages to banking that enabled our own bad decisions ... its still all driven by our own bad decisions.

You can shift our economy to USA First, you can implement a Fair Tax code, you can overhaul the entire government and free up the red tape for commerce to flow, you can engage in a non-interventionist foreign policy, and streamline the Fed at every level - please do all of that by the way. You still have not addressed WHY we are where we are ... just the HOW. To fix that, you have to convince the American Individual that it is in their best interest to not want so much, or we'll be back here again eventually and it should matter to us what we leave to our great-great grandkids.

[SHOOTALL]

If you don't live as well as your parents then his case is made in your case anyway.

[Dixie Dude]

I disagree about scaling back.  In the past when something got scarce, we invented a substitute.  Steel got expensive, we developed plastics and aluminum.  We have to invigorate and inovate and invent new things to replace the older expensive ones.  Printed electronic circuits replaced jewels an gears in watches at a lower cost.  Doesn't matter that much where some things are made if a substitute is just as good at a lower price.  About 1/3 of manufacturing jobs have been replaced with robots and computers.  Those that haven't have moved overseas for lower labor.  Robots and computers will eventually take over 90% of manufacturing jobs probably.  It will take technicians to keep them running smoothly.  My late dad worked at Ford in Dearborn, Michigan.  He said it took about 8 men in 1960 to paint a car.  Now it is done with robot arms.  One man just watches the robots for breakdowns.  I hear a few years ago that GM produced the same number of cars today as in 1960 yet with less than half the old labor force.  I visited a pipe manufacturing company in Birmingham, Ala.  It produces 42' lengths of steel pipe of various sizes with only 8 workers in the entire line, from rolls of flat plate steel to finished pipe including beveling the ends for welding, and puting a vinal coating on the pipe.  Lots of manufacturing going on, but what we do have requires far less labor than in the past.  Industries that required lots of labor like sewing have moved overseas to low cost labor markets.  These are jobs that did provide a living and insurance for the lower middle class.  

[teamnelson]

My grandparents went through the depression, started families in the 30's. One grandfather was a master machinist, the other a businessman - neither ever worked for a promotion in their life, loved their jobs. One built his house evenings and weekends, the other could afford to buy - both were modest homes, and the only homes they lived in. Paid cash for everything. Each had a couple guns, one wife - valued few but quality possessions. When they retired, they spent time with family & friends, which is how I learned to shoot, fish, hunt and all about the depression. But they wanted "better" for their kids.

Their kids mostly went to college, went into white collar jobs mainly. Worked for promotions and fridays, hated their jobs. Accumulated debt, moved to increasingly larger homes over time, had all the latest gadgets, few more guns, several wives - many but not necessarily quality possessions. Retired, but have to work their butts off to keep up on the bills on their hobbies, RVs, boats. But they wanted "better" for their kids.

Their kids (my generation) all went to college, mostly have masters degrees, massive student loans, white collar jobs where if you don't get promoted you get fired or quit. Multiple partners, but not necessarily spouses, some alternative lifestyles. Multiple homes, so many possessions they have no value, everything on credit. Nobody likes their job, but don't know if we can afford to retire. But I want better for my kids ...

... in fact I want for them what my grandparents had. I am taking steps to get there for myself, and doing all I can to assist my kids in that direction as well, but events may make that the only option for all of us, and that's not a bad thing maybe. I'd just hate to be chatting with my great grandkids about the 2nd great depression watching them about to go into the 3rd because they didn't learn anything.

[Dixie Dude]

I have been at my job for 34 years, got one promotion.  Used to love it, now I don't.  I started by acturally designing the gas systems that were installed, and inspected them.  Now it is all done on CAD, and all standardized.  Used to design each system unique, now all cookie cutter.  Computers have changed things.  Took away skills.  I used a drawing board, t-square, pencil, and compass to design.  Now it is point and click, no skill required.  I used to calculate gas flows using complex formulas, now variables are input into a computer program and it figures the flows.  Sometimes it would take me all day to figure the pressure drop across a system I designed by hand and a calculator (or slide rule), now a computer does it in a couple of minutes, no skill required.  Oh, well, took my old drawing board home.  I used to design house plans from scratch on the side with paper and drawing tools.  Now you can buy a cad program and design your own by pointing and clicking.  Sometimes I hate the computer, but Forums like this keep it interesting.

[Oldshooter]

Sounds like keeping up with the "Jones's" could be the common denominator.

Less faith, more spending seems to be a pit fall to me!