Open Blogging Opportunity!
Any topic is fair game. Tell us what you think was the biggest story this week and why?
On the show this week Mike Cutler a former border agent who has testified before Congress numerous times on the immigration issue and is considered an expert on the topic.
Mike has appears on a daily basis on radio shows and network TV across the Country on this issue.
Control Congress Radio is on Saturdays between 2PM and 3PM Eastern standard time on WGKA 920 AM. You can also listen online, just click here. Let your voice be heard by calling into the show (888) 920-2665 or (770) 226-0920.
Anyone out there have a midget sex story they want to share?
Al
When are you going to call the show?
FYI
HERE ARE THE LAWMAKERS WHO VOTED ‘YES’ ON DELETING ANY LANGUAGE THAT WOULD GIVE AMNESTY TO ILLEGAL ALIENS
Alabama: Sessions (R-AL), Yea Shelby (R-AL), Yea
Arkansas: Pryor (D-AR), Yea
Colorado: Allard (R-CO), Yea
Idaho: Crapo (R-ID), Yea
Iowa: Grassley (R-IA), Yea
Kansas: Roberts (R-KS), Yea
Kentucky: Bunning (R-KY), Yea McConnell (R-KY), Yea
Louisiana: Landrieu (D-LA), Yea Vitter (R-LA), Yea
Mississippi: Cochran (R-MS), Yea
Missouri: Bond (R-MO), Yea McCaskill (D-MO), Yea
Montana: Baucus (D-MT), Yea Tester (D-MT), Yea
Nebraska: Nelson (D-NE), Yea
New Hampshire: Sununu (R-NH), Yea
North Carolina: Dole (R-NC), Yea
North Dakota: Dorgan (D-ND), Yea
Oklahoma: Coburn (R-OK), Yea Inhofe (R-OK), Yea
South Carolina: DeMint (R-SC), Yea
South Dakota: Thune (R-SD), Yea
Tennessee: Alexander (R-TN), Yea Corker (R-TN), Yea
West Virginia: Byrd (D-WV), Yea Rockefeller (D-WV), Yea
Wyoming: Enzi (R-WY), Yea
John you should put the gop straw poll on your site, the code’s on the bottom of straw poll website.
Under “Our War of Terror” down below, I get this message—
Comments on this post are now closed.
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Doesn’t happen on other posts.
Female Airman Punished for Threesome
Stars and Stripes | By Scott Schonauer | May 24, 2007
SPANGDAHLEM AIR BASE, Germany — A Spangdahlem-based airman was sentenced Monday to four months confinement for her part in a sexual act with two other airmen.
Airman 1st Class Ashley N. Rains pleaded guilty at a court-martial to two indecent acts charges.
She had faced rape and sodomy charges but admitted to the lesser charges as part of a plea deal.
Judge (Col.) Gordon Hammock also sentenced Rains, 22, an aircrew life support specialist with the 22nd Fighter Squadron, to reduction to the lowest pay grade.
She faced a maximum sentence that included as many as 10 years in a military prison, but Air Force prosecutors argued for a lighter sentence of two years.
The alcohol-induced menage a trois on Sept. 24 in Bitburg included a male airman and a female staff sergeant.
But both prosecution and defense lawyers debated whether it was consensual among the three.
Rains and Airman Christopher D. Hicks are the only airmen charged in the incident because the Air Force lawyers said the staff sergeant was too drunk to give consent.
Air Force prosecutor Capt. Mike Felsen said the staff sergeant “appeared drunk” and slipped “in and out of consciousness” while Rains and Hicks performed sexual acts with her.
Felsen argued the staff sergeant, who did not testify during the trial, was vulnerable and Rains and Hicks took advantage of her.
But Rains’ defense attorney, Capt. Matthew King, called the incident a situation involving three consenting adults with “various degrees of intoxication.”
King argued that Rains shouldn’t go to jail for what amounts to a drunken threesome.
“Does she really have to go to jail for this?” he asked.
The Air Force had charged Rains with rape and sodomy, but prosecutors could not prove the more serious charges, King added, therefore, the question of consent isn’t relevant in Rains’ case.
Rains said she was embarrassed by the episode.
“I’ve learned from this mistake,” she said during a statement she read at the trial.
Hicks faces more serious charges.
The airman, who is assigned to the 52nd Civil Engineer Squadron, has been charged with rape and sodomy and will face a court-martial at Spangdahlem Air Base on May 30.
John this goes to Liberal Don who was concerned about who was going to pluck chickens:
http://everything2.com/index.pl?node_id=1286390
Its a do it yourself project and not all that difficult. I dont know if if he will see this so if you can send it to him.
MIKE
LOL!
In a closed topic on jobs, taxes, the economy, currency, etc. I would add these thoughts to any who don’t believe the nation is in severe trouble no matter which party is in control
It takes a Constitutional amendment to get term limits for Congress just like it took one to get it for the President.
Currently money flowing out of the nation is higher than money flowing in for investment.
quote:
Recently released data from the Treasury Department show Americans spent a net $40.3 billion on overseas securities in March, making that the second-heaviest outflow ever behind last December’s $48.7 billion figure.
What’s more, for the 12 months ending March 2007, Americans bought a record $277 billion in foreign long-term securities.
Treasury data also show that Americans bought a net $168.9 billion of foreign bonds over the 12-month period — for all of 2005 the figure was only $45.1 billion.
http://www.newsmax.com/money/
archives/st/2007/5/22/90022.cfm?s=al&promo_code=3472-1
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Paste both lines together for link
Also, we continue to grow jobs but not as fast in manufacturing as the population nor do we grow the increase in Manufacturing GDP as fast as total GDP and thus, continue to lose ground.
From 1992, according to a recent TownHall article by Kudlow, Mfg. grew 70% in that period from then to now. However, GDP grew 140% or twice as much from $5.5 trillion to $13 trillion.
Also, remember that the Government Accounting Office says it can’t make good sense of the financial reports it receives and for 10 years hasn’t had accurate information coming to it. Also for the 3 year running they have warned we face an economic collapse.
quote:
as of September 30, 2006, the U.S. government reported that it owed (i.e., liabilities) more than it owned (i.e., assets) by almost $9 trillion. In addition, the present value1 of the federal government’s major reported long-term “fiscal exposures”—liabilities (e.g., debt), contingencies (e.g., insurance), and social insurance and other commitments and promises (e.g., Social Security, Medicare)—rose from $20 trillion to about $50 trillion in the last 6 years.
The federal government faces large and growing structural deficits in the future due primarily to known demographic trends and rising health care costs. These structural deficits—which are virtually certain given the design of our current programs and policies—will mean escalating and ultimately unsustainable federal deficits and debt levels. Based on various measures—and using reasonable assumptions—the federal government’s current fiscal policy is unsustainable. Continuing on this imprudent and unsustainable path will gradually erode, if not suddenly damage, our economy, our standard of living, and ultimately our domestic tranquility and national security.
http://www.gao.gov/new.items/d07362sp.pdf
==============================
Regarding “insourcing” there are all kinds of stats. However, here is one reason the Auto industry is being hit so hard.
Recently a Toyota plant opened in Texas to compete with the Big three. The article mentioned that Toyota only had a little over 200 retirees (U.S., Texas,? Not sure how broad) and of Course GM has a huge retiree base.
The cost of labor (all cost including pensions and healthcare, etc.) for Toyota was $35 and for GM $81. However, the actual wage wasn’t that much lower for Toyota.
The type of Tax policy Ireland adopted would help here. They tax both workers and wealthy more than here but are 30 pts lower on Corp tax income.
As a result they went from 1/2 our ave. mfg wage up 300% to $1.30 more in the last 20 years. Their national debt dropped from 120% of GDP to 8 months of tax revenue in that same period and they just passed us in per capita wealth (PPP basis).
As the GAO states, we have an “unsustainable” economy.
Also, more talk about a common currency is starting to take place as the dollar continues its fall.
In 2003 for every $1 of dividend from a Canadian oil trust, I got 65 cents. Now, just 4 years later, that same dollar in Canadian money gives me 92.5 cents.
The Euro has risen 60% from 2000. Food is running a 14% inflation rate on an annualized basis, much to do with rising corn prices for ethanol. Also they are planting more corn and the prices of wheat and soybeans rise as less of them are planted.
Energy has gone up 50% since gas dropped to the $2 range here several months ago and is now over $3. So the 2.2% inflation is bogus.
Also, regarding jobs, the growth is mostly in government jobs (in top 2 highest most months) and the other is healthcare. That means tax dollars too since much of that growth is for Medicare and Medicaid spending on an aging population and illegal immigrants and poor using the ER and other medical services that are reimbursed with tax dollars.
It doesn’t matter if any of the comments made in the closed topic are 100% accurate or not, our own government says we are collapsing. Our own government says we can’t fund social security and Medicare. Our own government believes it needs to immigrate 67 to 100 million immigrants legally in addition to those here illegally.
Our nation’s infrastructure has been rated by the Society of Engineers as “C” or worse in roads, airports, bridges, water systems, power grids, pipelines, etc. Yet, we are going to need 1/3 more of everything including schools, hospitals, prisons, government services, etc. for the next 100 million immigrants in the next 20 years. If we can’t afford to maintain what we have, how do we maintain 1/3 more?
Every statistic we get now, CPI, GDP, Exports, etc. is being manipulated. You can only base what is going on by looking at the buying power of people on social security that is supposed to increase with inflation to keep them even. Ask any senior only on social security if they have as much buying power now as they did in 1992.
There are several articles on all aspects of the economy, trade, NAU and currency on website this links to. Anyone is welcome to post an article under any of the topics. Just keep the copywrite rules in mind and only post 150 to 200 words and a link to the article.
Until voters change their attitude (52% now get some type of federal support), we can’t turn this nation around and education of voters is the only thing that will do that. That is why sites like this are so important but, we have to take what we learn here and spread it to others who don’t follow these forums.
Jan Paul,
I always appreciate someone who tries to use facts to back up a position.
US capital flows—-the proper measure is the Current-Account, which is in deficit to the tune of $2,347 million a day ($856.7 billion in 2006).
Since 1960, Republican’ts have run a –3.38% of GDP current-account deficit, Democrats –1.88%. Dubious holds the historic record (average -5.37% over six years).
.
US manufacturing employment has been on a straight-line down hill, every single year since 1943.
This isn’t anything new. The share of employment in manufacturing production workers never, ever rises. 64 years isn’t someone’s blame, just a fact of life.
Manufacturing jobs are low value-added, right down there with dragging stuff out of the ground (farming, mining, fishing). Not exactly the national economic objective for which we should be striving (and, incredibly polluting, too).
.
The share of manufacturing in GDP has been on a near-straight line decline for decades.
The peak was in 1953 (28.3%); the low in 2006 (12.1%). 2006 was the 11th straight year of declining share, and in fact the share has dropped in 40 of the past 53 years (i.e., since 1953). Nothing unusual about this, and certainly nothing new.
.
No, but what is unusual is how a nation, like Ireland, used manufacturing to end their problems. They lowered their debt from 120% to 8 months tax revenue and raised workers wages 300%. They now have passed us in per capita wealth (PPP GDP ranking).
They increased manufacturing from a small fraction of GDP to where it is close to half, if I recall. (46% I believe)
In just 1990, it was only 35%
quote:
The economy is small, open, and trade dependent. Agriculture, once the most important sector, is now dwarfed by industry, which accounts for 35% of GNP
http://www.theodora.com/wfb1990/ireland/ireland_economy.html
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You will find that most growing economies are using manufacturing to grow and the more educated they are, the higher tech the manufacturing is. If it is done right, manufacturing is more profitable when it is local. Shipping things around the world is very expensive. The closer to the retail outlet, the less it costs and the more competitive it is. As Ireland demonstrates by having a 30pt lower tax than we do on business and instead taxing the worker and investment return and high incomes more, they attract manufacturing, pay higher wages and yet, are still competitive in the world market. 90% of all computers sold in Europe come from Ireland. We import our Lipitor from Ireland.
Also, because we have been and are going to continue to bring millions of low skill workers here, we need a lot of low skill manufacturing jobs for them if we aren’t going to reform our government.
Ireland realizes that consumers, not business pays taxes. So why have any tax at all on business? Simple, take that Lipitor we import. We pay the hidden taxes on it. Thus, for exports, a business tax that doesn’t make it uncompetitive, can make sense since then foreign consumers are paying part of the taxes Irish workers want for their social programs.
However, that only works when you aren’t losing those kinds of business and constantly adding the tax burden more and more on the nation’s own consumers. The tax has to be low enough to allow them to pay higher wages and still compete.
Jan Paul,
Nice to see some well thought out discussion. I appreciate it.
Clarification, please: Ireland “lowered their debt from 120% to 8 months tax revenue” ? The percent and months figures are apples and oranges.
PPP, in my view, is utter nonsense. Nevermind, since it isn’t needed for the arguments being made here.
Raising workers’ wages 300% . . . from where to where? From $1 to $3, or from $10 to $30?
46% manufacturing to GDP ratio is distinctly third world. 35% is poor, too. Developed economies tend to be 60-80% services, where the real value is added.
.
“You will find that most growing economies are using manufacturing to grow and the more educated they are, the higher tech the manufacturing is.”
—You’ll also find that growth correlates highly with a low base. Ireland was doing very poorly up until about 10 years ago (give or take), so the base wasn’t all that high. Kind of like the US in the 19th century.
.
“If it is done right, manufacturing is more profitable when it is local.”
—Ut oh, there goes the theory of comparative advantage!
.
“The closer to the retail outlet, the less it costs and the more competitive it is.”
—That works only with the favorite economists’ dodge of “all else being equal,” which it ain’t.
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If you like Ireland’s taxes, you’re going to love Hong Kong:
Salaries taxes (only): 16.5%
Payroll taxes: 0%
Corporate profits taxes (domestic transactions only): 17.5%
All other capital taxes: 0%
Sales tax: 0%
All else: 0%
Import duties: only for alcohol, tobacco and petrol.
.
Oh, and in that wonderful tax environment, 3% of the economy is in manufacturing (down from 20% 20 years ago).
We moved on to more profitable things, like IPOs.
Quote:
Ireland went from the tremendous debt of 120% of GDP in 1986 to 74% of GDP in 1996. The last part of the 1990’s saw even further reductions, spurred on by huge growth in Ireland’s economy. The government has been in surplus since 1996, attributable in large part to the huge increase in GDP during that period.
This increase in GDP meant a near tripling of government revenue during those 4 years. This
made it very easy for the government to work on not only spending down the debt, but insuring
that new deficits were not created to add to national balance due. At the end of 1999, Ireland’s
debt was down to 52% of GDP, which is quite manageable and right on target.
http://www-personal.umich.edu/~kathrynd/ireland.556.pdf
=================================
Quote:
Interest payments on Ireland’s national debt are just one fifth of what they were 10 years ago, according to the National Treasury Management Agency.
In its latest annual report, which was published today, the NTMA said Ireland’s total national debt had also been reduced to the equivalent of around eight months’ tax revenue.
When the agency was established in 1990, it took more than three months’ tax revenue just to pay interest on the debt.
http://www.finfacts.com/irelandbusinessnews/publish/article_10002587.shtml
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The best source for wages from where to where is the Bureau of Labor Statistics.
Ireland went from ½ our wage in 1985, about when reforms started helping, of $5.06 (we were $10.24). Currently, we have gone up to the last 2005 report (2006 isn’t on their site yet) of $18.32 while Ireland has $19.86 or about $1.50 higher. That is about a 300% move up for them and about a 79% increase for us which doesn’t even come close to the increase in GDP (which includes government spending).
Regarding PPP. It is the only way to compare countries. You can make five times as much as another nation but, if they can buy as much as you do, they are equal to you.
Quote:
Purchasing power parity (PPP) is a theory which states that exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries. This means that the exchange rate between two countries should equal the ratio of the two countries’ price level of a fixed basket of goods and services. When a country’s domestic price level is increasing (i.e., a country experiences inflation), that country’s exchange rate must depreciated in order to return to PPP.
The basis for PPP is the “law of one price”. In the absence of transportation and other transaction costs, competitive markets will equalize the price of an identical good in two countries when the prices are expressed in the same currency. For example, a particular TV set that sells for 750 Canadian Dollars [CAD] in Vancouver should cost 500 US Dollars [USD] in Seattle when the exchange rate between Canada and the US is 1.50 CAD/USD. If the price of the TV in Vancouver was only 700 CAD, consumers in Seattle would prefer buying the TV set in Vancouver. If this process (called “arbitrage”) is carried out at a large scale, the US consumers buying Canadian goods will bid up the value of the Canadian Dollar, thus making Canadian goods more costly to them. This process continues until the goods have again the same price. There are three caveats with this law of one price. (1) As mentioned above, transportation costs, barriers to trade, and other transaction costs, can be significant. (2) There must be competitive markets for the goods and services in both countries. (3) The law of one price only applies to tradeable goods; immobile goods such as houses, and many services that are local, are of course not traded between countries.
==================================
It isn’t what you make that is important, but what you can buy. If hidden taxes in goods raise the price, you can’t buy as much. If more tax is taken in payroll taxes or income tax, you can’t buy as much. It is only what you can buy with what you have that allows real comparison (in high standard of living nations). Chinese have 4 or 5 times the buying power but their standard of living is much worse but that is another comparison that needs to be considered in where you live. Purchasing power is certainly high up on the list but so is Standard of Living. The decaying infrastructure and declining standards of living in the U.S. are starting, however, to become a problem area in what used to be our strongest point.
You mention a low base, like we started from and I agree that is important. But, the trend is decline for us as we lose high tech manufacturing and it goes to Ireland where they are stressing education while we dumb our students down. You will always see low skill manufacturing go to low wage nations when taxes, compliance, government stability, and other factors are favorable but, any “world power” should be able to compete with high skill manufacturing high wage manufacturing like Ireland is. Also, if you have trade policies that aren’t regulated by international bodies that favor one nation over another, you can have both free and fairer trade but you retain the sovereignty instead of giving it away as we have done. Also, when the nations you trade with are your bankers, you have a lot less power to make demands of “fair trade.” We can’t survive without China, Russia, OPEC and other “friendly” nations lending us trillions of dollars for our rising debt.
You said we moved to more profitable things like IPO’s We are now losing them too. We are losing information industries, research industries, high tech industries, manufacturing, importing more food, importing more distillates, losing more listings on the NYSE to London and Hong Kong so where is this trend taking us?
Quote:
A recent study by PricewaterhouseCoopers showed that the number of IPOs on U.S. exchanges was down by 15 percent in 2005 over the previous year. At the same time, European exchanges showed a 40 percent jump, and there is a similar trend reported in Asia. Just yesterday, the Wall Street Journal reported that New York received only four of the top 25 global IPO’s in each of the past two years, fewer than Hong Kong and far fewer than London.
It is important to ask: Are we outsourcing America’s long-time predominant role in capital formation? What impact will this trend have on mutual funds and other investors? Will the U.S. markets continue to offer them access to the widest possible range of listings?
The apparent downturn of listings on U.S. exchanges has prompted new concerns about how our rules and regulations affect the markets.
http://www.ici.org/issues/glo/arc-eur/06_equity_stevens_spch.html
===========================
Name some trends in the U.S. that are favorable to the workers. We have declining buying power, declining standards of living, rising taxes, rising cultural clashes, open borders, a falling currency, and a Congress that wants to flood the labor pool with 100 million more workers over the next 20 years to save social security.
You stated that if I like Ireland, I would love Hong Kong. But, as I stated in the PPP comment, you have to also consider standard of living and while it is high in Hong Kong and Hong Kong is rated number one in Economic Freedom, speech and other things aren’t as free. That is one area we are high in but beginning to lose as well if they start passing “hate speech” and more bills like McCain/Feingold restrictions on political speech.
Yes, they are attracting business from all over the world for their low taxes and many people actually love living in Hong Kong. Jim Rogers who is a frequent Commodities expert on Fox News is moving his family there. Thousands of young, highly skilled employees with international companies in the U.S. are moving there and many love it and love going to Macau. They are rapidly improving their infrastructure and building new cities to replace their old ones and yes, some day they will have more modern cities than we do.
Quote:
Old urban centers – most of them frozen in time since the Communist Party took over in 1949 – are being demolished, millions of residents are being relocated, and construction crews are fanning out to build the cities of tomorrow.
In Shanghai, the government is clearing 1,300 acres of riverfront land and relocating about 50,000 residents and more than 270 factories, including the country’s largest shipyard, to build a site for the World Expo to be held in 2010.
Out west, in the city of Kunming, there are plans to create three new areas that will ring Dian Chi Lake, doubling the city’s size to five million by 2020.
In Zhengzhou, the capital of Henan Province, the city hired a Japanese designer to develop a master plan for a new 58-square-mile town.
And in Changchun, the capital of Jilin Province in the north, the city government and the central business district are also being relocated to a new city center.
“Every government wants to do big things, and they want them done fast, while they’re still in office,” says Eva Wang, who runs EWS, a Shanghai-based architecture firm. “They all want to get credit for creating something really astounding.”
Few urban projects, however, are as ambitious as the one being planned here in Harbin, a city of nine million. In early 2004, Harbin officials won approval to build a new city center called Songbei – a 285-square-mile area that will be packed with residential high rises, office towers, luxury villas, five-star hotels, shopping and entertainment complexes, trade zones and industrial parks. Songbei is roughly the size of New York City.
http://www.nytimes.com/2005/11/25/business/25cities.html?ei=
5090&en=65e77e0cd58cedb4&ex=1290574800&adxnnl=
1&partner=rssuserland&emc=rss&adxnnlx=1157224166-
YgOcZmZmBq14PhDoZ4QKSw
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Paste all together as one line for link
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They are developing clean coal technology, building 40 nuclear power plants, developing hi-bred cars for pollution improvements. They are taking factories to the rural areas since the people there aren’t moving to the cities. New roads, rail lines, pipelines, etc. are all being built to bring the rural areas into the 21st century. Still, I am not ready to move there but many are and certainly thousands of businesses are enjoying a government that rewards them with low taxes and a rising educated work force. China now graduates 350,000 engineers a year and are constantly increasing the education level of their work force. Middle class consumers who business sells to is growing rapidly and become the major consumer base of many companies that used to depend on exports to the U.S. for profits.
Quote:
Since the mid-1990s, Kodak says, sales in China have climbed from nowhere to first place; revenue grew 40% during the first half of this year. The company says it is now ahead of plan to recoup its investment, with China’s profit margins on par with those worldwide.
It’s no coincidence that Chinese are bringing home more memories from trips. The World Tourism Organization says 20 million traveled abroad in 2003 and that this number should quintuple by 2020.
http://members.forbes.com/global/2004/1129/054.html
======================
Again, though, it isn’t so much the rise of the other nations but our decline that has many concerned. It is our declining buying power and declining standard of living with decaying infrastructure that concerns young workers entering the work force. We now have something 6 of 10 students seeking a Phd. that are foreign born because education is such a high priority in most emerging nations but declining here. We are also losing our ability to compete with foreign Universities in education standards and starting to drop in ranking in the “contests” that pit students from universities around the world against each other. In a recent “high tech” contest, only MIT finished in the top 10, if I recall the results correctly. Russian and Asian universities have moved up greatly.
We are still the best place to live but heading down, while the other nations are worse but rising. As John points out, it is the trend that is so disturbing.
Jan Paul,
“Ireland went from ½ our wage in 1985, about when reforms started helping, of $5.06 (we were $10.24). Currently, we have gone up to the last 2005 report (2006 isn’t on their site yet) of $18.32 while Ireland has $19.86 or about $1.50 higher. That is about a 300% move up for them and about a 79% increase for us which doesn’t even come close to the increase in GDP (which includes government spending).
Regarding PPP. It is the only way to compare countries. You can make five times as much as another nation but, if they can buy as much as you do, they are equal to you.”
-o- Well, you (BLS) haven’t translated those hourly wages using PPP, have you? Those are market exchange rate based wages, aren’t they?
-o- It is simply not acceptable to use PPP only when it serves to make a point. If it won’t be used to deflate China’s trade balance or Japan’s foreign exchange reserves (or Ireland’s wages) – which wouldn’t be very supportive of the view that the US has massive trade and investment problems – then it shouldn’t be used selectively on wages.
Try paying some of that Irish foreign debt on a PPP basis and see how far you get . . .
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“Name some trends in the U.S. that are favorable to the workers. We have declining buying power, declining standards of living, rising taxes, rising cultural clashes, open borders, a falling currency, and a Congress that wants to flood the labor pool with 100 million more workers over the next 20 years to save social security.”
—You certainly got a lot of the negatives. Makes me wonder why all those millions of illegal immigrants want to come to America.
Oh, yeah, now I remember! Relatives! America is relatively better than where they are coming from.
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Short answer on PPP:
Markets say a thing is worth what someone will pay for it, nothing more and nothing less. Show me on person, anywhere, who will accept any number of PPP dollars in exchange for a single real one, and I’ll believe it.
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Long answer (edited from yours):
Purchasing power parity (PPP) is a theory [arising out of the exchange rate chaos of post-World War I Western Europe] which states that exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two [highly similar] countries. This means that the exchange rate between two countries should equal the ratio of the two countries’ price level of a fixed basket of [urban consumer] goods and services [no, services were not part of the original PPP theory]. When a country’s domestic price level is increasing (i.e., a country experiences inflation), that country’s exchange rate must [no, "should" over a long and undefined period, perhaps decades] depreciated in order to return to PPP [or, prices should fall].
—The key problems with PPP are that it is inappropriately used and that it is used to compare dissimilar economies. The only validity is between two highly similar urban consumer baskets of goods (only). No agriculture, no manufacturing, no mining, no investment, no dry cleaning or banking and certainly no foreign trade. That’s what the original theory said, and it worked.
—The only answer that arises from PPP is a theoretical exchange rate: My $10 buys the same bread and potatoes as your X100, therefore the exchange rate “should be” 1:10, rather than the 1:12.5 it trades for in the market). That exchange rate should not be used for anything else, and most particularly not for “revising” total GDP or GDP per capita. Totally inappropriate.
Unless, of course, one strips out agriculture, manufacturing, mining, investment, dry cleaning, banking and foreign trade.
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“Chinese have 4 or 5 times the buying power but their standard of living is much worse but that is another comparison that needs to be considered in where you live.”
—Ah, but you see, that’s where I live!
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“You said we moved to more profitable things like IPO’s We are now losing them too.”
—Depends on who “we” might be. I live in Hong Kong; what New York City and London lose, we gain. Kind of like the garment industry: what used to be in New York has moved away, to where it makes more sense to conduct land- and labor-intensive work.
.
“We are losing information industries, research industries, high tech industries, manufacturing, importing more food, importing more distillates, losing more listings on the NYSE to London and Hong Kong so where is this trend taking us?”
—Where are you trying to go? Or, have you given up?
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“Are we outsourcing America’s long-time predominant role in capital formation?”
—Outsourcing is when you deliberately move abroad; when the customers decide to do things somewhere else, that’s called “the competition is eating your lunch.” Big difference.
Don’t expect the ones who come up behind you flashing their lights and honking the horn because they want to pass you to provide a tune-up so your old car can stay in the race.
And, it isn’t considered good form to swerve from side to side so the ones behind you can’t pass. Not nice.
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“. . . and while it is high in Hong Kong and Hong Kong is rated number one in Economic Freedom, speech and other things aren’t as free.”
—What makes you say that? I’ve lived in Hong Kong for the past 23 years, and the only time I worried about freedom of speech was when I went back to Dubious-dominated America!
Jim Rogers is behind Stephen Roache on moving to HK, and behind Pam Woodall (economics editor of The Economist). We are where its at, my friend.
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“They are rapidly improving their infrastructure and building new cities to replace their old ones and yes, some day they will have more modern cities than we do.”
—Sorry, we don’t do that. We built the cities long ago, and now we are milking the ROI.
Hong Kong makes Manhatten look a bit dated.
Oops. Now I see you were referring to Shanghai and other mainland cities. That’s not Hong Kong. Big difference, night and day, capitalism and whateveryoucallit.
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David:
Try paying some of that Irish foreign debt on a PPP basis and see how far you get . .
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Not far but that is the advantage they say inflation has. You pay debt back with cheap dollars and that is supposed to be why inflation is preferred over deflation.
If my wages go up but my debt payments stay the same, I am supposed to have gained. But, even if my debt payment is the same, paying more for everything else can easily wipe out any gain I have from debt payments being a lower percentage of my pay check.
Still, debt is important. Many nations have used this boom to pay down debt which has made the IMF less profitable as they are now getting less interest payments from the nations that paid off their loans early.
The U.S. however, inflation driven or not, is raising its debt faster than ever and yet, we are also in a boom. What happens in the next recession? How do we lower debt in a downturn or recession if we can’t do it in a boom?
You are 100% correct about Hong Kong and mainland China where Harbin is. They also rank at about 119 on the economic freedom scale, so a very long way from Hong Kong.
I am so glad to have somebody from Hong Kong on here. This will help, I am sure to separate Hong Kong to mainland. As you imply, the difference is like night and day. Many were afraid that China would quash Hong Kong after British rule ended. Fortunately, that fear was overblown.
Please post often on what is going on there. Last night we had the drop in their market due to their changing requirements to try and slow the market down. This is very good, I think. If we can prevent that bubble from growing and popping, it will spare the U.S. a huge problem.
Today the dow was down, then up now down (2 hrs to close) and all the morning news was “how is the drop in the China stock market affecting us.”
By the way, speaking of Manhatten looking dated, check out this article on Detroit.
The Cheapest Skyscapers in the World
http://www.dailywealth.com/archive/2007/may/2007_may_24.asp
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Also, I read that mainland China has seen a lot of manufacturing go to Vietnam and other lower wage nations while more skilled manufacturing is coming to China. Can you give us some more info on the trends in China? How fast do they say the middle class of China is growing?
Some more on PPP. It is true that you have to be careful how you apply it.
But commodities are bid on a world wide basis and what they cost in one nation isn’t what they cost in another when placed in that currency.
When you get a chance, look at the price of gold in euro’s on a chart and the price of gold to the dollar and you see two different patterns because of the PPP of each in relationship to each other.
Look at the price of oil when translated into the Euro and again you see a different pattern because of the Euro’s rise to the dollar which most oil is still priced in.
But, for most of us, it is the price of things a Walmart that will determine the difference on us. Once the Chinese product hits our shores, not only has the shipping cost driven the price up but so do the wages and profits of the longshoremen and the companies off loading. Then add the trucking companies taxes, compliance costs, profits, and expenses. Follow the truck to the warehouse and enegy prices, labor, property taxes, etc and then ship it again to Walmart and stock it on the shelves.
For the Chinese worker buying that product that was made in China with 29 cent to $2 an hour labor, low taxes, low compliance costs (in the economic zones) and living close to work (no car payment or car insurance) and in a 200 sq. ft. home that was given to him (no house payment) and he can save 40% for the mandatory personal social security and health savings accounts.
I hope David can fill us in more on those programs and how well they are working.
Also, regarding PPP and wages. It doesn’t help with “benefits” For example, if they get nothing included (I believe corporation do have to contribute to social security) then you have to move to “total compensation.” However, many U.S. workers don’t get much in the way of benefits like the used to.
The BLS does track that as well but, I prefer actual wages computed in dollars based on the exchange rate at that time.
For example, while Mainland China isn’t listed, Hong Kong is and its wage is given as being much higher than what I have read about the mainland wages. Hong Kong for 2004 was given as $5.17.
What are some prices in Hong Kong for basic food items, clothes (good suit) apartment, etc?
Jan Paul,
We here in Hong Kong remember eight straight years of deflation, second longest in the world (after Japan) since the 1930s.
Deflation flips the debt vs. equity ratios, makes buying a home a real gamble (we have what are known as “underwater mortgages” – home worth less than mortgage value) and destroys any incentive to go shopping (it’ll be cheaper next month).
You don’t want to know what it does to interest rates . . . 5% prime rate minus (–5%) price change = +10% real interest rates.
Horrible stuff, deflation, and we had it bad in 1998-2005, real bad.
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China trade—–There is some low-end garment manufacturing and a bit in the electronics moving to Vietnam, but there is higher end stuff in both areas coming in. Hong Kong companies manufacturing in China (30% of China’s exports) give up on flashlights and move on to disc drives. Other foreign companies manufacturing in China (30% of China’s exports) give up on T-shirts in favor of fashion jeans. The other 40% of China’s exports are a mix of local state-run (10%) and private (30%) companies that tend to be in industrial products, with a few home appliance makers thrown in for good measure.
China middle class–—What’s a middle class? When you have a billion farmers and a few people living in the cities (400 million), how do you define the middle class?
Farm families have electricity, running water (90% + in all categories), color TVs, sewing machines (60%+ in those categories), and motorcycles, washing machines, telephones (40%+).
Urban families have washing machines, color TVs, electric cooking appliances, telephones, mobile phones, refrigerators and air conditioners (80%+). How do you decide where the dividing line is between poor, middle class and rich?
Since 1990s, urban disposable income is up +678.6%, but rural income only 422.7%. Does it matter if the gap widens, with both are richer than ever before in history?
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PPP—– “The BLS does track that as well but, I prefer actual wages computed in dollars based on the exchange rate at that time.”
—All I can say is, Amen!
I’ve tracked gold in euros, but I find the ratio between oil and gold more interesting. Way back when, $35/oz and $3.50/bbl (10:1), and now $685/oz and $68.50/bbl (10:1). Highly consistent.
But, when that Chinese consumer whips out his Rmb300 (US$40) to buy a nice dinner for the family, it still represents more than 30% of the urban monthly disposable income. Average monthly wage in China is Rmb18,364 in 2005 (latest at my fingertips), which was US$2,215. Clearly, you can’t have a TV and all the other stuff on that income.
Caveat: statistics in China suck. There’s lots of data, but almost none of it is accurate.
Oh, and the 200 sq ft home you described sounds more like India than China. And, there isn’t any 40% mandatory savings (that’s Singapore).
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The Hong Kong average wage in manufacturing is . . . meaningless. Only 3% of the economy is still in the low value-added areas like manufacturing. But, that’s the way data is collected so I can report that the average wage is about US$7.50/hr, and no taxes or deductions.
What we don’t do very well is collect income data on the lawyers, accountants, actuarials, bankers and consultants who dominate the professional services (40% of the economy), and trying to figure out the difference between profit and salary in a family owned trading company can drive you crazy.
Prices: gasoline $7/gal, apartment (2,000 sq ft in a good area) $10,000/mo, bottle of $5 wine in the supermarket is $10 and in a restaurant $25. Custom tailored suits cost the same as off-the-rack ($400 for good work and materials), as do shirts and shoes. Casual clothing is 1/4th the price it is in the US. Appliances and daily consumables (drug store stuff) is about the same as New York or San Francisco.
Great information. Keep us posted on new trends when a topic touches on China.
I just read the Daily Reckoning about the stock market growth and it is scary 1929 stuff, it seems. Give us some thoughts on that.
quote:
on Memorial Day alone, 455,111 new brokerage accounts were opened in China. That’s as if every man, woman and child in the city of Luxembourg had opened an account, and it’s happening every day.
This puts the number of investment accounts in the People’s Republic at over 100 million. Naturally, the market reflects all this new buying pressure from The People. Stocks in Shanghai have doubled since the spring of 2005…and doubled again. Just look at the chart. Prices have gone parabolic – rising almost straight up. It’s the Peoples’ Own Bull Market…when the people are enjoying their own precious moment of happy delirium.
“It is glorious to get rich,” said Deng Tsaio Ping. And now, millions of Chinese are getting gloriously rich.
http://www.dailyreckoning.com.au/china-stock-accounts/2007/05/31/#more-1014
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Do you think this can last? 100 million is only 1/14 of the people so aren’t there still a lot of people available to keep this going?
Jan Paul,
The Hang Seng index is up 3.7% since end-2006; it is Shanghai, not Hong Kong, where the casinos are located.
The new gamblers entering the Shanghai Stock Casino are sitting down with half a dozen bets on the roulette table. Multiple brokerage accounts held by a single individual means you can get around the margin calls, at least for the moment.
RE: Daily Reckoning – I’ve be cautious about getting insight from someone who can’t even get Deng Xiaoping’s name right!