I was originally going go quote by quote with all of you, but it will easier to just state my opinions:
American Manifesto: An assessment from a political moderate (would you buy my book? )
1. There wont be an amero.
Even the euro isnt an optimized currency union. America, Canada and mexico have a lot less political stability to gain (than the EU does) by forming a new currency union.
2. The problem isnt having a service economy, its having a financial services economy.
Its a myth that america doesnt do any manufacturing. Based on aggregates Im pretty sure the US is one of (if not THE) biggest manufactures in the world. The difference is that the US manufactures 747s and other expensive shit, while China makes t-shirts and lead toys. Think of it this way, is it that big of a deal that a US worker cant work in a shoe factory?
The biggest issue is that the US's comparative advantage is selling, inventing and exporting financial assets/instruments (We have a positive Financial Assets balance). This naturally goes along with a negative trade balance (international econ 101). Its our financial innovation that creates our trade imbalance, its not a trade imbalance driving our financial industry.
Naturally, this spotlights the problem: the financial markets have totally changed over the past 100 years and that change has accelerated in the past 10:
- the system was designed with dividends as the ultimate end.
- the system was designed to work best with a long term view.
- the system was originally a lot less liquid, forcing a longer term approach.
Now that the system has become much faster with information, transactions and available liquidity, it has made shorter and shorter horizons more profitable. Shorter horizons that are profitable are obviously favorable due to time value and risk. Thus people abandon the longer term views of the financial markets. With the long term views abandoned, the original purpose is completely lost. No even cares about the dividends and companies openly admit that they will NEVER pay a dividend! Thus the entire thing turns into a casino economy. Our brightest college graduates (MBAs, engineers, physicists etc) are sucked up into the Wall Street casino, which operates on a platform designed for the realities of a 100 years ago, but with modern technology, egos and short term profit goals.
In some ways, the system has just run away from itself. No body takes its basic assumptions seriously anymore (see the listed bullets).
3. Culture Differences Between Europe and America: why social democracy is much less practical for the US:
I think a lot of you Europeans think of the Americans as sort of barbaric. America, to you guys, doesn't seem to value basic 'rights' like education, housing, health care and 35 hour work weeks (France). The Europeans look at the quality of life lists and wonder why the US continues on with an archaic capitalist system that appears draconian and aristocratic.
The big problem with thinking this way, is that it ignores the basic cultural differences between the US and the EU. The average European country is:
- more dense
- more homogeneous
- less religious
Its a lot easier to pay for your neighbor (lets generalize social democracy for sake of simplicity) when you view your neighbor as "part of your clan". The US simply lacks this homogeneity that many European countries have. Secondly, the US is a lot more populous than the average European country. This makes any sort of universal anything (housing, health care, employment, education) about 5-10 times more of a logistical and bureaucratic nightmare than it is in say...Norway. Thirdly, the average European lives in a denser city than an America. Europeans are used to less personal space. Their culture doesnt demand a big apartment or a big car. They can take the subway, the bullet train and live in small enough apartments that they dont reflect NY rents. This again reflects on how much money a person is feels they "need". Cars and houses are huge expenses. Lastly, Europe is a lot less religious. To many Americans, their 'way of life' has been justified by their religion. Its part of the agrarian psyche of the US to have lots of stuff, a big family and open space in order to feel "prosperous". Its related to the protestant/puritan work ethic and prosperity theology. Its much more widespread in the US than in the EU.
The point is, America isnt a horde of archaic, selfish barbarians who are consuming their way to their own grave. A lot of the European solutions simply would not work here due to American culture (as explained in the paragraph and bullets above).
3. American Debt could, but probably wont kill us all.
The Chinese would be fools to call our debt. It would only cause chaos that reaches back to them. They could, however, stop buying our debt. This has already started to happen, and the Fed now actually buys some of our own debt with money it creates out of thin air. This is not as big of an issue as it seems though. Inflation is not as simple as a 1:1 relation to the amount of dollars printed. The money base is not the same thing as the money supply. The money supply has a lot of other factors involved such as the depositors, lenders and the general transaction levels of the economy. If those things plummet, then you can print a lot of money without adding any inflation (this is what has actually happened). If we had been on a gold standard, then we would not have the freedom to add money when needed (as I just explained) and we would have entered a deflationary depression.
American Debt is a problem. However, no one knows for sure at what point of debt/GDP our credibility will run out... Consumer debt is actually a bigger issue than the government debt IMO. The cost of housing and college (two of the biggest purchases anyone ever makes in life) have increased at higher rates than income. Add this to increasing fuel and food costs, and consumer debt will strangle the average person.
4. The way out: Inflation and Buying power can be misleading --> people's demand for more creates a mirage of less buying power
There is a lot of calamity about how much less able the middle class and poor are able to live comfortably today vs 30 or so years ago. People often cite statistics about the cost of housing, college, food, and energy.
What if things only appeared to be more expensive now? If I bought a car for 5000 real dollars in 1975, and payed 8000 real dollars today for a new car (numbers made up), am I really losing the value of my money? A new Car today likely has features that a new car in 1975 simply didnt: better gas mileage, better safety, more space, better performance etc. Thus, there is an illusion, that transportation has become more expensive, when in reality only our tastes have become more expensive.
The same applies to housing, food, energy and college.
Colleges didnt always provide nearly as much "extra stuff":
Are Frivolous Amenities Worth The Extra Tuition | myUsearch blogTuition rates are going up all over the place, but its not the education itself that’s pushing prices up, it’s the campus extras that are doing the deed. Colleges claim they have to offer attractive amenities to stay competitive, but some colleges are taking extra amenities – and their tuition costs – to the next level. The question is, do students really care about these amenities or would they rather just have lower tuition?
“Then there is the burgeoning demand for luxury campus amenities, like the spanking new Academic Village at [Colorado State University], or the food courts, climbing walls, and exercise facilities our students seem to require. Some campuses even offer discounted massages and free Napster accounts. These amenities are, of course, ancillary to the quality of the education our universities provide. Yet provide them we must, or the students will not come. It’s a competitive market, you see.”
Houses, apartments and condos didnt always have as much square footage.
Behind the Ever-Expanding American Dream House : NPROriginally Posted by NPR
The average American food bill has become a bigger burden. However, the average american eats out a lot more now. Some even erroneously think that its cheaper to eat out! This simply indicates that once again, American's tastes have gotten more expensive. If you buy meat, fruit, vegetables, eggs, bread and lunch meat, and know how to cook, it will generally be cheaper (unless you live in an overpriced metro like NYC) than eating out every meal.
Is eating out cheaper than cooking?Originally Posted by MSN
The average American actually drives about twice as many miles than they did in 1977: http://pewresearch.org/pubs/?ChartID=147
Its little wonder that Americans claim that energy costs and gas bills are strangling them!
The over arching point is that middle class Americans actually have a lot more buying power than every before. When people make comparisons to the "golden years" of the American middle class, they have to be fair about it. If the middle class today lived in the houses of the 70s, drove the miles of the 70s, went to the colleges of the 70s, cooked like the 70s and refrained from such extraneous "2000s entertainment" expenses, then the fact is that Americans would actually have plenty of buying power compared with the golden years. Peoples tastes have gotten more expensive. they demand more for each unit of product, yet the price of actual needed utility hasn't changed that much. This then creates the illusion that the middle class has lost buying power, because the middle class is overpaying for what utility they actually need.
This post got away from me ...I do however think it is a very accurate depiction of America. Maybe I will write a book ...