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Termyn8or -> RE: Reports show economy worsening (3/24/2008 1:56:00 PM)
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On a side note, it's getting so bad that a penny is just about worth a penny.
Dad's retired and may just have too much time on his hands :-) The other day he told me he figured out it takes about 178 pennies to make a pound of copper, that is if you're talking copper pennies, new ones are not.
Actually even the old ones were alloyed as copper is soft. So we can't actually say a penny is worth a penny, but it seems to be getting close.
So if the trend continues soon it may become profitable to scrap pennies. When a coin of the realm becomes worth more to melt down than to use as money, I think that is a damn good indicator of a collapse.
Thing is I am not talking silver dollars here, this is something commonly traded at face value.
Among my near daily purchases at the local convenience store, basically cigarettes and beer and a few other things, alot of times it comes to $24.77. From thirty bucks they give me a quarter change. Keep watching, one day I might have to insist on paying the two cents, to get my three pennies.
And as for production, I understand that yes we make some things still. In fact we make many things that did not exist say twenty years ago.Specialized computer systems, CAT scanners. Things like that. I will also not dispute that the dollar value is higher than in say 1960, but that's dollar value.
There are two things making the current GNP inadequate, one is the sinking dollar of course, and the other is population growth. The products we make are for specialized markets, they are not going to sell ten million units per year. There are, again, exceptions of course, like car computers.I do believe a good portion of domestic cars are equipped with one built here. But that is only one example.
The last time I saw "Made in the USA" it was on a box of paper clips. Stupid Chinese, they can make a plasma TV but not paper clips ? What gives ?
When they start exporting manufacturing jobs, it is usually mass production. These people know it is easier to get a dollar out of a million people than a million dallars from one.
I don't know if the figures are available, but I'd bet that if you took the portion of the GNP from manufacturing only and compare it to the sales of "durable" consumer goods you would agree that the situation is indeed unsustainable.
We import ALOT. People are now going into a round of buying TVs again because of the FCC mandate effective next February. This will appear to stimulate the economy, and millions of units will be sold. But not a one of them built here.
Thelast time I even saw "Assembled in the US of US and foreign components" was on a Pioneer bigscreen, ten years old. But almost every semiconductor device in it is foreign, there are only a few exceptions. Actually Pioneer did sell some of their chips to foreign manufacturers. I must admit that at the time they were very advanced chips, for controlling the geometry of that picture, something that is no easy task. That is but one example though and when they sold them, they were used in products that were chiefly sold in the US. So was that really an export ?
You sell three of these PA0002 chips to Sony for about $5 each I would guess (educated guess) and they are used in a product sold here for $2,000 - 3,000. So is that really a viable export advantage ? I think not.
The percentage of CD players sold here, that are made here is less than one precent. This is something that almost everyone has. In fact each person is likely to buy at least a half dozen of them in their lifetime.
Then the discs, Telarc, one of the first CD companies here for a time could not produce an error free disc. Foreigners came to teach them how to do it. And interesting to note, the standards for the CD format and methods were developed by Phillips and Sony, neither one of them a US company. In fact even the old cassettes were developed by Phillips, which is not and never was a US company.
Moving along, look under the hood of your car, and I mean a Buick, Ford or even a Chevy truck. I bet you'll see the word Bosch somewhere. They are a German company. Their electronic components for automobiles are sold all over the world, including here. They also make fuel injectors, and cars could have four, six or eight each. How many cars are sold ?
That is how to make money, get that dollar from billions of people, rather than the other way around. Here, Henry Ford invented the modern production line, but I can't say that a parallel development was not taking place elsewhere.
At least thereis some controversy on some things. Like TV. At almost the same time, Farnsworth invented it here and Baird invented it in England. We can rightly lay claim to the fact that we invented color TV, but then developments in Europe turned out a better system, in fact a couple of better systems. The only one worse than ours in picture quality was the Russian system. And then based on our own system, Sony invented the COMB filter, without which VCRs would be practically impossible to make with acceptable performance. And you might think about the Batamax when ytou think of Sony, but they also developed VHS, but sold the system to JVC and went on to develop the superior Betamax.
However it went by the wayside, they missed the mark, and the they were the ones who got sued. An aside, realize that if not for Sony, recording TV shows would be illegal in the country. And for their effort, their superior system went by the wayside. Just goes to show, just take that dollar from that million people, rather than trying to get two dollars from a half a million people.
This is what makes the real money, and this is what we do not do.
We are fairly proficient at building war machine, but then go around telling half the world that they arem't allowed to have them. In fact some do not want them. They want MIGs, Moskit IIs, alot of other things. Of course they don't trust us either, after what haoppened in Iraq in 1991, Iraq's missile defense was built here, but there was a software glitch in it and it did not function. If I were them I wouldn't even buy our paper clips.
So this is where we are at. If anyonehas any optimism about the issue I would love to hear it. We can't recover on CAT scanners and paper clips. The two opposite ends of the spectrum almost. With CAT scanners, I don;t think anytime soon they will be a household item. And paper clips are not in vogue anymore as we mave towards a comuter based society. There is alot less actual paper shuffling now, and in the future there is bound to be less.
Quick tertiary issue, my buddy who used to work in a factory and now works for Diect TV tells me that in their call center they are not allowed to have pencils, pens or paper. This obviously because they process customers' credit information, and in fact do a credit check. Somebody with a photographic memory could steal alot of money. But with pen and paper, anyone could do it. I would say that their paper clip comsumption is quite low.
Actually we do not do so bad when it comes to intellectual property. It is sold all over the world, but still that is only one example.
I would have to admit that in a less imperfect world, if we hadn't blown it, and run up all this debt, we might be sustainable based on what we can still do. But it is not enough for a recovery.
Fact is we either go into default soon or we start exporting alot of goods, and I mean alot. And money has to be made so we might see third world wages to do it, in fact just to survive. We need our own mass production to recover, and a market. I mean mass production. To achieve this there are two way, one is a high degree of automation, another way is to pay each employee less. You invest in the machinery and it now takes twenty people to do what two-hundred used to do. And in most cases you would borrow the money to implement the automation, so even if you are saving alot on production costs you have the taxation the way I described it, in the form of debt service.
The only real mass production engine that is still working here is the auto industry. It is not doing all that well, but at least it is something. Maytag used to be something, but they moved out.
And then there is one of my tenets of business, it goes against my grain but it is true. Make something useless.
I know how that sounds on the surface, but it is true nonetheless. If you want mass production you need a product that fulfills a want, not a need. Ok we got two dryers, two refrigerators, a deep freeze, two vehicles and one house. All important but as long as everything works, we are not in the market for more.
But if you sell knick-knacks, decorative items, formsof art or something else that is useless for survival, it has not fulfilled a need. People who buy alot of stuff like that are going to buy more. Then you can get that dollar more than once from alot of people.
Same with CAT scanners, once a hospital has a couple, they simply don't need any more of them. That is what is unatractive about durable good of that nature, the appliances are referred to in the business as "whitewares". Large retailer do well at it because if you have a positive experience there you might come back and go shopping. When you need a refrgerator you are not shopping, you went to get something. You must make a selection, but in many cases all you might but is an icemaker kit. But down the road you might think "Hey, they had those at where we bought the fridge, let's go have a look". This is not bait and switch, but it works almost the same way.
Business has become a sophisticated science, and I am surprised that I understand as much of it as I do. By no means do I know everything, in fact I am still learn. We all are, we all must.
It was twenty years ago when I read a statement froman economist who's name I will never remember "We use cost driven pricing and they use price driven costing". The article referred to the auto industry and the foothold foraign manufacturers were gaining on the US manufacturers. What it means, as least as explained then, is that at Honda for example, they decide what they want to sell a car for, what the market willbear easily. Then they set out to engineer the best car for the money while still allowing for a profit margin.
However at Ford for example, they would design and build a car and then figure out how much they have to sell it for to make a profit. I wish I could remember the guy's name, the staement might be findable on the web, but really I think it unnecessary.
I am not that smart, but I have been exposed to alot in life, and this is one of those things that I have had twenty years to think about. The concepts that can pull us out of the muck have been around for a long time, it's just it took too long for us to start implementing them. Our major industries have suffered because of this.
In the US it seems common that the wrong people are put in charge. Ross Perot comes to mind. I hear he walked through the Crysler plants and fired people that he saw idle. It is said he saved Chrysler, but he had some big government loans. Hell I could've done it with that.
But, now get this, Perot's fortune was made in part by inventing and developing the comptuerized engine management in today's cars. Actually I like it, it can be sub-zero out and your car starts right up, no pumping, no flooding and there is no choke needed.
A buddy told me something else about Perot. He had a factory in another country and all the employees were detained. There was some unreast there I suppose and it got nasty. But it wasn't our embassy so it was not plastered all over the news. Perot got a team to go get his people out and then paid them for the whole time they were held. I think that's pretty cool but ..........
Why did he have a factory in another country ?
My Uncle did really well at Ford. Eventually he went onto management, but he started out in the foundry. But everything this guy touched turned to gold so to speak. He got a job waiting for me, just sweeping the floor, before the tier system was implemented. That means I would make eighteen dollars an hour to sweep the floor. I would have probably come up through the foundry and who knows where I might land, but I would have to work at the Lorain plant. This is back then when they were selling jobs. My Uncle of course wouldn't charge me the usual five hundred, but that's what they were going for.
I don't know exactly how it worked but somehow certain employees had some pull as to who gets hired and who does not. Many paid the half a T note, but made it back the first week. I turned it down because it would mean a very long drive (IMO) to work every day. Plus I was starting to get decent money in my field so it would not have been the world to me.
But eighteen dollars an hour to sweep the floor back in the eighties ?
And that is nothing compared to what the suits make.
The union was strong, and there is another thing, that maybe wasn't so bad by the time I would've gotten in, but working for Ford used to be hard. In the beginning Ford was one of the highest paying companies one could work for, but even with the assembly line, people DIED working there. I don't mean something fell on them, I mean they keeled over because they could not handle the work under the conditions. But if you actually could make it there, you were making many times over what your neighbors were making.
Henry Ford's vision, and he came very close to achieving it, was the total assembly line. Think of the mentality.. "We gotta sit here and wait for the parts to come on a truck, we gotta send things out for plating, and other operations, fuck all that. I want raw steel to go in one side of the building and cars ready for sale driving out the other side". He was right.
They had their own foundries, rolling facilities for sheet metal and other things, their own stamping facilities along with all the machines need to produce a car, there was no waiting for anything. And no waiting for you either. If you worked on the production line itself you had to give a signal and get relief just to go to the bathroom. Nothing can stop the line. Death was excusable, but nothing else. Nothing else. You would be summarily dismissed for that, and you agreed to that when you got the job in the first place.
We need something like that to recover, a true innovation. We need to export more than we import, and no matter if we do have a couple of strong points in that area, it is not enough.
Basically IMO untils the trade balance works in our favor instead of worjing for us, we are going nowhere.
T
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