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The Damage Is Done... Something Will Have To Give
Submitted by Eugen von Bohm-Bawerk via Bawerk.net,
In several articles we have shown how the world changed from the 1970s with the breakdown of the old Bretton-Woods system. For example, in China’s unfortunate dependence on the Eurodollar expansion we showed how economies like Japan and China boomed on the back of what appeared to be real demand for their products, but was nothing more than an un-backed expansion of the world reserve currency; which promptly collapsed when further ‘dollar’ expansion came to an abrupt halt, either as a result of political intervention (Plaza Accord) or because of too much capital consumption and subsequent financial crisis (Lehman).
In Goebbelnomics – paper propaganda we showed how today’s monetary masters and their henchmen tries to condition the broad masses of people to spend and borrow money in a fallacious belief that an ever increasing level of spending – i.e. increased velocity of money – can maintain an economic perma-boom and by extension abolish the dreaded business cycle.
We will change tack a bit from here and now show how exponentially issuance of ‘dollars’ structurally changed the US economy itself and why it will eventually end in tears.
Exhibit 1 depicts the structure of the US labour market where we calculate the share of the labour force employed in primary, secondary and tertiary sectors of the economy.
Source: US Census, National Bureau of Economic Research (NBER), Bawerk.net
In the early 1800s most people in the US were unsurprisingly working in primary, or agricultural, occupations. Almost 90 per cent of all workers were employed in this line of work, while only a tiny fraction worked in manufacturing and service based industries.
The reason was simply because agricultural output could scantily support more than the family working on the farm, producing very limited surplus to support other parts of the economic structure. However, as increased productivity in farming, first through opening up the western frontier and mechanization and later through crop yield improvements, surpluses grew and thus freeing up resources to be allocated to other sectors.
Source: Meiburg and Brandt “Agricultural Productivity in the US 1870 – 1960“, US Department of Agriculture (USDA), Bawerk.net
A relatively free and unhampered market meant workers got the right incentives to find different work than farming as a better life could be had by shifting from primary to secondary and tertiary sectors. In addition, change was slower, so shifts were to a larger extent allowed through generational leaps rather than costly individual reallocation.
As more capital and labour found its way into manufacturing its productivity grew and could in turn support more service workers by freeing up resources through new innovations permitting production for the masses. Henry Ford’s assembly lines spewing out Model-Ts come to mind. From 1800 to the 1970s the share of manufacturing and service employment grew more or less in tandem as a manufacturing worker could more easily support more service sector workers.
From the 1970s on the other hand the share of manufacturing employment in the labour force started to diverge from that of service sector jobs.
If manufacturing output witnessed a sudden surge in productivity akin to that of bushel per acre in the agricultural sector from about 1940 we could conclude that this was a sustainable trend. But that is not what happened. On the contrary, from the 1970s US labour productivity growth slowed down considerably and the hyped productivity “surge” in the 1990s only helped slow the downward trend which actually accelerated its downward slide after the brief Clintonian hiatus.
Source; Bureau of Labor Statistics (BLS), Bawerk.net
So no, manufacturing productivity cannot explain the diverging trend in employment from the 1970s, but the rapid expansion of ‘dollar’ issuance can.
Instead of relying on increased productivity domestically, Americans exorbitant privilege made sure they could consume tradable goods from vassal states such as Germany, Japan and South Korea more or less for free.
When the Chinese voluntarily entered the scheme of getting paid in non-redeemable claims to non-existent US manufacturing output the edifice took on a whole new dimension. The paradox of accepting these claims is so absurd simply because had China and the vassal states not accepted them, they would continue to be money good; securely backed by a healthy manufacturing base. It wasn’t until the Americans were free to issue unlimited amounts of ‘dollars’ that these claims lost their soundness in a rambunctious belief in the never-ending global supremacy of US manufacturing.
Now the damage is done. The gross misallocations that have plagued the world economy for well over four decades cannot be corrected without a cataclysmic event that will dramatically change living standards as the US realign their manufacturing and service sectors. But it cannot continue indefinitely either. Something will have to give.
Needless to say, when it does “give” it will obviously have worldwide consequences. The major exporting nations will understand that they are overexposed to manufacturing to the same extent that the US is overexposed to service sector industries. Further down the value chain commodity producers will see less demand for their produce as manufacturing powerhouses falters.
The best case scenario is that this process will be orderly with capital and labour reallocations steady over several years, if not decades. A more likely scenario is that it happens more sudden in a global depression where all forms of general government balance sheet expansion becomes counterproductive as people loses confidence in both central banks and various fiscal regimes.
Next week, in the second episode, we will show how this has affected the US worker more specifically.
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38 days and counting, get ready bitchez!
Break that down clown, why 38?
ends jewish year 5775. atonement begins
all that has to give is the supremacy of the $US. Manufacturing cannot recover until then
What changed since 1970 is GLOBALISATION.
Manufacturing jobs can be exported, hair salons cannot.
An economy does not end at your border, it ends at the borders of all your trade partners. It's just plain wrong to talk about a US economy any more, the "US economy" is just a very porous area within a much larger global economy.
Although people forced into shit for pay jobs can't afford $100 at the hair salon. Well, unless you're some cunt named Clinton. And you can think her alcoholic drug addict cheating hubby for that. You ruined the hair salons motherfucker!!!!!!!!!!!!!!!!!!!
QE4
"Instead of relying on increased productivity domestically, Americans exorbitant privilege made sure they could consume tradable goods
from vassal states such as Germany, Japan and South Korea more or less for free."
Why the hell didn't you guys tell me they were giving stuff away!?! All this time I've been paying for cars, TV's and Kimchi when
it was more or less free?!? Well, I'll remember this bullshit!! When the next gravy train rolls mum's the friggin word my fiends!!!
His name was Edward Quince, His name was Edward Quince
"Break that down clown, why 38?"
It'll be September 14th, man... don't you know anything?!
Don't you know the FED will never ever raise rates?
Janet, rates, and lies, he'll be singin another 90 days in 38.
Nope 56 days and counting: 2015.75
Those Chinamen stole our bread and butter.
All that is left is the joo circus.
https://biblicisminstitute.wordpress.com/2015/07/28/how-the-ashkenazi-je...
Good stuff, however, should not one be focused on what they do, more so than what they are.
Granted, most of the Zionist tyranny that ails us is Jewish, but not all. Some are crypto-Jews, like Kerry, and then many of the rest, like McCain, Cheney, Pelosi, Reid, the Bushes, etc. are not Jewish.
So I would think that the criteria should be their behavior--Grifting banksters, slithering pols and crats, shyster streeters, violent gun and badge thugs, regardless of ethnicity, should, shall, be held accountable for their crimes against the American people and humanity.
Not one of the treasonous, murderous thieves should be permitted escape or quarter, but be tried and guillotined for their crimes. Not just for justice and Retribution, but as a cleansing; Unless one sees any of the criminals filling a productive role in a Restored American country and society?!
Liberty is a demand. Tyranny is submission..
The Four Rs
Rejection: Stop Paying, Stop Obeying, Stop Playing, Stop-up the System.
Revolution: It is inevitable, so prepare, as they are.
Restoration: Restore the American people, country and Constitutional republic.
Retribution: The guilty must answer for their crimes against the American people and the Constitution.
this is what i love. anti-semites claiming out of the closet operation paperclip tied nazi's like THE HEINZ FAMILY and kerr are 'jews'.
yes yse and hitler was a crypto jew as well!. thank you.
it is the paid anti-semitic trolls on zh that seem to be the most persistent over the years.
worse, you are poisoning the 'liberty movement' purposefully in an attempt to divide and conquer it and bastardize it the same way occupy wall street was either infiltrated or , from the very beginning organized by these same elements whose goal it was to subvert the social cohesion of a potentially promising movement (well not really) for its own purposes.
you nazis are clever enough to fool the morons out there. and htere are plenty.
don't worry , we dealt with you before, we survived you and we'll survive your kind again. and by we i don't mean jews, i mean human beings that threw off the yolk of the nazis over europe. they will do the same again to america, they already have. and they use jews as the scapegoats.
as if hitler didn't have his own central bank. as if nazis don't know how to wield the power of inflation and the tools of monetarism and money printing to their own evil agenda of conquering the world.
as if igfarben and the big pharma companies that run a substantial swath of the western economy aren't owned by the same board members that outright planned the existence of the EU and that currently call for a federalized europe that has a european paramilitary and european tax mechanism . the same people that toook over france politically before the nazi's ever openly annointed a 'vichy' government.
as if the us and 'nato' don't use operation gladio on the nazis behalf to silence the humans in europe that want some santity in their own governance let alone some of their own control over their own
Who gave China Most Favored Nation Status?
That would be Bill the stain Clinton
Wi Num Bah Won
Eeeek septic annul
It's the FED's fault. QE ad infinitum.
Your second sentence sounds like a Harry Potter spell
I would love to see the "Output Per Acre" graph and stripping out Grain.
I don't think you would see the exponential growth as much. Sure, Corn, Wheat, Soy...
What does the Veg. graph look like?
It used to be that 100 bu/acre was a pretty high yield for corn. Now, they can get 150+ pretty easily and in some cases, 250+. However, the amount of farmland avaliable, at least in the US, is shrinking as housing developments go up.
It'll be interesting to see what my corn does in the future once it becomes a bit more homogenious. I have been abusive with it for the past couple of years, so what survives is tough. I just watered it for the first time in a couple of weeks, and I live in NM. Only one stalk was showing signs of water stress.
That's awesome! I've decided to do something similar, but have only just begun tinkering. I know the parameters I want to tinker with, and have a good starter variety that I bought as a curiosity and then grew to admire.
Wind is a killer here in central OK. So, I didn't want anything too tall (lost one stalk out of 60 to wind). I don't mind tillers as long as they are productive (I averaged two tillers per plant, and those were productive). I'm going to tinker with a flint/dent cross, as this will be used for meal mostly, but I'd like a bit more carbs from the dent parentage. I'd like to breed out the tassle-seed mutation that the flint corn parent seems to be prone to (5% approx in the plot I had). Drought tolerance is definitely on the list of things to shoot for as well. Great job man!
It is a stretch of the defination to call the GMO Laden round-up sweating shit that grows out of the ground "Corn"
We need a new word, like "kinda-Corn" or something.
I always wondered if those fat midwestern fucks urine kills the grass if they pee on it.
he he
He said 'orderly'...funny stuff
EASY to blame other people ... BUT this is our own fault.
Nixon went off the Gold Standard. That allowed the USA to switch to the global Petrodollar scheme. Excess dollars "printed" in America were exchanged for a real commodity - OIL. The money flowed to the Saudis, and they used it to buy Learjets and Rolls Royces. It was a brilliant system. And nobody caught on for a long time.
But any system that involves "free money" goes wrong sooner or later. It doesn't matter whether you're an African dictator running a Banana Republic, or you are in the US Congress. If you believe that you "do not have to be accountable" and you can make all of the rules ... you will eventually fail. When the USA debases the reserve currency of the world - THE DEBT DOES MATTER!!!
And here we are today.
And who put that system in place? When did we get to vote on it? Are "we" ever consulted about ANYTHING the "government" does to us?
I will never take the blame for the things oligarchs are doing to me. Other may wish to be a battered wife, but that is their choice. How many people are stupid enough to fall for this ruse?
Are we STILL voting?
Another energy denier.
Yep, easy, all "we" need to do is become the world's factory (of negative EROEI, capital-destroying garbage) ... to sell to .. err,,. using (ever scarcer) resources and capital from ... uhh ... because growth and demand are making a roaring comeback ... any day now ...
Good thing America has 10 trillion years! of cheap oil, coal, and gas.
Fuck it. Just have Fedgov hire everyone.
Much rather be an exporter who has to replace export with domestic consumption, than a chronic net long-term importer who will have to somehow conjure up an export capability in the new world.
“When the Chinese voluntarily entered the scheme of getting paid in non-redeemable claims to non-existent US manufacturing output the edifice took on a whole new dimension. The paradox of accepting these claims is so absurd simply because had China and the vassal states not accepted them, they would continue to be money good; securely backed by a healthy manufacturing base. It wasn’t until the Americans were free to issue unlimited amounts of ‘dollars’ that these claims lost their soundness in a rambunctious belief in the never-ending global supremacy of US manufacturing.”
The Chinese have done very well in what I call the “Wall Street –China Gambit.”
In 95 Clinton signed permanent MFN status to China. This was at the behest of Wall Street; while simultaneously Clinton undermined NAFTA. Both of these actions led up to offshoring of jobs, and the mexinvasion.
http://www.whiteoutpress.com/timeless/how-china-conquered-america746/
In 1991 after Berlin Wall fell, Communism was officially dead. In the early 90’s greenmail raiders would approach Captains of industry and say, “move your operations to China or we will greenmail you.” That means taking a company’s pension money (even though they don’t own it) as well as a company’s assets, and then hypothecating a new credit loan. This loan would then be used to buy out the company, and said company would often be dis-membered into parts.
Greenmailing got a turbo charge boost when Clinton signed into law GLB, which overturned Glass Steagall.
Wall Street wanted wage arbitrage. This is the difference in wages between China and the U.S.
Whole industry was then lifted from the U.S. and transplanted to China. Engineers and Technicians were then dispatched to teach Chinese how to run their new factories.
Chinese State Banks then got in on the act, as they would issue new Yuan loans to attract yet more U.S. and Western Industry.
China Mart would then export the goods back to the U.S. at the China price. The China price is calculated to be just under the American price, to then put remaining American industry out of business.
Wall Street and Captains of Industry (who had relocated) would then take wage arbitrage as their profits. This fed Oligarchy in the U.S, allowed industry to grow in China, and displaced American Labor.
Other rent seekers at the trough are distribution, retail, and dock workers. Dock workers are paid skim from the arbitrage, to then keep quiet. Distribution is paid to move the goods, and retail is paid skim to keep the Chinese goods on the shelf. The U.S. Navy insures transshipment, yet more rents transferred from labor via taxes, toward oligarchy.
Chinese dollars acquired in imbalanced trade can be spent most anywhere in the world, helping the lifting of technology.
This technology and know- how represents the patrimony of generations. It was earned in the trenches of industry as middle class labor figured things out. Gifting it, is the transfer of sweat equity from the past, for easy arbitrage today. It is a time shift that also shorted out a generation. The next generation does not get a transfer the knowledge, the nation’s patrimony, or the means to earn a living – as it was off shored.
This loss of patrimony translates directly into an extreme acceleration of Chinese industry. This acceleration and loss to America means that the debts to China are null and void. It is rent seeking and theft. Wall street is also complicit. 401k’s and Wall Street shows gains, making wall street a hero, but main street becomes a zero
The China-Wall Street Gambit is still operative.
China continues the gambit by keeping Yuans cheap. They do this by buying dollars from Chinese manufacturers. The new Yuans used to buy said dollars then enter Chinese economy thus altering exchange rate.
Dollars are recycled to the U.S. to buy TBills. This holds the dollar price high, thus keeping the Gambit alive. The MIC and Government like this as they can recycle the dollars into the economy and spend as they like. Keeping TBills high also made interest rates low, thus compounding the housing bubble.
Let me put it this way: When you can buy wood furniture in North Carolina for cheaper than local furniture, then you know there is false economics.
China doesn’t have wood. They have to import the wood, make furniture, then ship it back to North Carolina…and they can do this at a lower price than native North Carolina workers who have a forest nearby?
The brain of America is fully parasitized by its Jewish designed private credit system.
All countries should be sovereign. China has prospered well under the gambit.
www.sovereignmoney.eu