The "Hole" in the notions of a "New Economy"

[Odin2005]

I often hear this idea that the US is part of the "New Knowledge Economy" that is based on information rather than manufacturing and manual work.

There is one glaring flaw with this idea, this "Information Economy" EXCLUDES the majority of people NOT because they need to be "retrained" as you hear from the pundits, but because most of these new jobs require people of above-average intellect. This "New Economy" condemns that kind, hard-working simpleton down the street with an IQ of 80 to working at Wal-Mart or McDonald's, because all the manufacturing jobs have gone to China.

A truly just, sustainable, and strong economy must ensure that good-paying jobs are available to people of ALL abilities, not just the brilliant. Why does that simple guy deserve to be paid crap just because he doesn't have the intellect to participate in the "New Knowledge Economy"?

[Hello_Kitty]

1. The Professional Class on both sides of the aisle

Have decreed that people who do manual work do not deserve living wages or decent treatment. I'll give the conservatives credit that they're at least honest and up front about it. The latte liberal snobs are for exploiting poor immigrants and think it makes them humanitarian heroes.

[Odin2005]

3. Exacty.

[Taverner]

2. Exactly - and "new economy" jobs lead to a two-tier form of resident

[glowing]

4. Look at Germany.. are they turning their economy into a "service" economy.. no

and they are trading to China.

[Odin2005]

5. Germany protects it's manufacturing sector.

If it's made in Germany it's certainly high-quality.

[glowing]

6. And if we had real politicians doing the people's business, our manufacturing

would be protected as well.. AND we would refuse to trade with any country that does not treat its people with the same worker/ OSHA protections we insist for ourselves.. This way we don't create slave wage around the world and have it wash back onto our shores the way that it has.

[truedelphi]

26. The WTO in 1999 in Seattle sealed our fate.

It has been decreed ON HIGH, from the many international organizations that are working together to bring us the "benefits" of NAFTA, GATT, WTO, IMF etc. As a result, The only thing the USA is exporting is our jobs.

We even gained a new low two or three years ago - we imported more food than we exported, as the contract with these various orgs means that we must do so.

[ixion]

7. They outsource IT jobs, too...

so the blue collar class is not alone.

It's not about intellect. It's about keeping wages down for anyone who works for a living, no matter what the field may be.

We had the start of something like an "Information Economy" in the short lived Age of Information, but that's all gone now.

The people who are making money are the guilded Wall St. folk who are simply defrauding and gaming the system.

[fasttense]

8. There are more people today working in manufacturing jobs then in the history of the world.

Those jobs are just not in the US.

If "the information Economy" were the way to prosperity and wealth, we would be seeing fewer people in manufacturing not more. China could not be growing their economy if manufacturing jobs were NOT how to grow an economy. Giving away our manufacturing capabilities to developing countries is a straight road to third world status.

[westerebus]

9. Get a clue.

We get people with BA's and BS's and MBA's applying for jobs. Simpletons? I don't think so.

I don't work for Wal mart or Micky D's either.

I work for a grocery chain. I got the job after I retired.

Last person hired has a BS in biology and is a certified wild life rehabilitation.

The one before that has a four year accounting degree and runs a cash register.

We are about to hire a layed off teacher with a master's in education.

There are about a dozen kids, young adults, with degrees living at home that work in the store.

There's another dozen in college working part time and plan on keeping this job when they graduate just in case.

[blue97keet]

21. Sounds like 1970 -1974 all over again

[westerebus]

24. Pretty dam close.

All that's left to do is dig up saint ronnie and push play.

[blue97keet]

10. To separate manufacturing from innovation is like separating

the head from the body. That's just not how the real physical world works, in spite of what the econ heads tell us.

[Kat45]

11. I have an "above-average intellect" and haven't been able to get a job in two years.

I did get some part-time and temporary work, but with the exception of the job as a Census enumerator, none of them paid enough to live on.

[Crazy Dave]

12. Since 2001 my wages have gone down $15k a year...

...and $5k of that was within the last two years.

And since 2001 my health insurance is $3.5k higher per year.

Being a "skilled" worker these days means $12 - $15 an hour. That's if you can find a job.

[Yo_Mama]

13. It's Not Even That

All the brilliant economists overlooked the reality that an economy that doesn't produce more than it consumes is slowly withering. There are a ton of very intelligent people in the world who can write the software just as well as we can.

Without production, it's not just the lower class but the middle and upper class that slowly slides down the hill.

As so often is the case, those who believed that they could be exempt from the common fate have been proved wrong once again. Next up, a wave of unemployment for college professors.

[DoctorK]

14. follow the logic

"All the brilliant economists overlooked the reality that an economy that doesn't produce more than it consumes is slowly withering."

Deficit spending, financed by overseas governments like China and Japan, are withering the American economy. When are we going to stop spending more than we make and sacrificing tomorrow for today?

[girl gone mad]

15. Deficits simply represent private sector savings.

Deficit spending is not the problem, it's the solution to the current problem of private sector deleveraging, as China and Germany seem to understand.

[DoctorK]

17. no they don't

when the Federal Reserve is loaning money to the banks at less than 1% interest so they can buy Treasuries and profit on the spread (using their 'toxic assets' as collateral).
It especially doesn't when the Fed commits itself to buying hundreds of billions of dollars in Federal debt.

Deficits financed by the public simply draw investment dollars away from private sector enterprises that can generate profits and create wealth.

What we have are Trillions in borrowing being funded by Ben Bernanke's printing press, and that is seriously disrupting the economy.

We don't have enough savings, and that is the root of the problem. We've been induced into enormous levels of debt, and the Fed and the government are working against the American people's efforts to deleverage and provide a sound basis for real economic expansion.

[girl gone mad]

19. Quantitative easing is not the equivalent of 'printing money'.

Bernanke is simply swappping one asset for another that's already on the books. No new "money" is being created in the process.

Of course, it's useless, because all it does is increase liquidity, which is not the problem in our economy.

"Deficits financed by the public simply draw investment dollars away from private sector enterprises that can generate profits and create wealth."

If this were true, we wouldn't be in the midst of a junk bond bubble right now.

I think what's confusing you is that you associate the government deficit with a view of personal debts. Government surpluses are not the equivalent of a personal savings account. A sovereign government does not save, instead the government spends money into existence. What sense does it make to say that the government is saving in the currency that it issues? Personal households save to increase their capacity to spend in the future. The same does not apply to the issuer of sovereign currency, which can spend at any time it chooses.

As a matter of national accounting, a government budget deficit adds net financial assets (adding to non government savings) available to the private sector and a budget surplus has the opposite effect.

This identity is at the heart of sovereign fiat currency accounting. The government deficit (surplus) equals the non-government surplus (deficit). The only entity that can provide the non-government sector with net financial assets (net savings denominated in the currency of issue) and thereby simultaneously accommodate any net desire to save (financial assets) and thus eliminate unemployment is the fiat currency monopolist – the government.

Over the last couple of decades, our private sector simply hasn't been investing in productive enterprise. Instead, they've been engaged in various speculative schemes and have shifted much of their capital offshore to squeeze American labor and bilk more profits for executive management. It's time for our government to step in and spend to replace the jobs that have been lost.

[DoctorK]

22. he's 'swapping' dollars he creates for whatever he decides

-- "Bernanke is simply swappping one asset for another that's already on the books. No new "money" is being created in the process."

When Bernanke 'increases the balance sheet' he isn't swapping an existing asset for mortgages (over one trillion dollars worth purchased so far) or treasuries (600+ billion planned), he is swapping dollars that were never saved or acquired by anyone, but that were 'printed'. This is exactly what he said he would do.

From the horse's mouth:

"Since the beginning of the financial market turmoil in August 2007, the Federal Reserve's balance sheet has grown in size and has changed in composition. Total assets of the Federal Reserve have increased significantly from $869 billion on August 8, 2007, to well over $2 trillion." - www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm


"Today an ounce of gold sells for $300, more or less. Now suppose that a modern alchemist solves his subject's oldest problem by finding a way to produce unlimited amounts of new gold at essentially no cost. Moreover, his invention is widely publicized and scientifically verified, and he announces his intention to begin massive production of gold within days. What would happen to the price of gold? Presumably, the potentially unlimited supply of cheap gold would cause the market price of gold to plummet. Indeed, if the market for gold is to any degree efficient, the price of gold would collapse immediately after the announcement of the invention, before the alchemist had produced and marketed a single ounce of yellow metal.

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Of course, the U.S. government is not going to print money and distribute it willy-nilly (although as we will see later, there are practical policies that approximate this behavior).8 Normally, money is injected into the economy through asset purchases by the Federal Reserve. To stimulate aggregate spending when short-term interest rates have reached zero, the Fed must expand the scale of its asset purchases or, possibly, expand the menu of assets that it buys. Alternatively, the Fed could find other ways of injecting money into the system--for example, by making low-interest-rate loans to banks or cooperating with the fiscal authorities. Each method of adding money to the economy has advantages and drawbacks, both technical and economic. One important concern in practice is that calibrating the economic effects of nonstandard means of injecting money may be difficult, given our relative lack of experience with such policies. Thus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation." - Remarks by Governor Ben S. Bernanke before the National Economists Club, Washington, D.C. November 21, 2002
www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm

[fasttense]

16. It's not the deficit that's the problem. It's the jobs.

When no one has any money to spend or to pay their taxes, then the spiral of federal budget debt continues. Spend now to directly employ people, expanding the tax base, and tomorrow those people will pay the taxes for the deficit.


But if we continue to allow this spiral of unemployment with no government intervention, then tomorrow no one will have any money to pay their taxes and the debt will get larger.

[DoctorK]

18. try it yourself sometime

Give someone $50,000 so they can pay you back $10,000 in 'taxes' and see how deep your hole gets...

We need the Federal Reserve and Fed Govt. to respond to this crisis the way it did under Harding to the 1920 crash and double digit unemployment. Raise interest rates and reduce public spending.

"To be sure, the 1920–1921 depression was painful. The unemployment rate peaked at 11.7 percent in 1921. But it had dropped to 6.7 percent by the following year, and was down to 2.4 percent by 1923."

We've followed the Hoover path instead of the Harding path, and instead of recovering in two years as under Harding, we're languishing as under Hoover.

If we follow Japan's course of artificially low rates and massive government debt we'll enjoy our own 'lost decade'. One major difference is that the Japanese save, we're depending on China and Japan to buy our debt, and the Fed to print enough to buy the rest. We might be able to keep this up for even a decade.

[girl gone mad]

20. Once again, you're comparing personal finances to government finances.

What's true for a person and for a business, or even for state and local governments, is absolutely not true for our federal government.

[DoctorK]

23. you're right

a person or business who printed money to fund their expenditures wouldn't be congratulated for 'increasing aggregate demand', they'd be slapped in cuffs and jailed for counterfeiting value and robbing their fellow citizens.

Increasing the money supply has several affects. It confers upon the recipient of newly printed money spending power (consumptive power) for which a corresponding amount of production did not take place. This has the ultimate effect of increasing prices (over what they would have been otherwise) as the pool of the unit of account is increased without a corresponding increase in goods or services.

There is no difference with regard to ultimate dislocation in the real economy if you handed out 1 million printing presses and let everyone who received one print 1 million dollars, or if you let 1 guy print 1 trillion dollars.

[westerebus]

25. The answer is not in your life time.

We (royal) live as a nation on borrowed money in current time. In order to change the how we do it, we would need to re-set the economy. Not just ours either.

So far all the pump from the FED has done is to raise the cost of commodities, fuel and food, and scare the holder's of our debt who happen to be our biggest trading partner's.

All the banks are interconnected. They know what they were doing. So did the governments and the political parties. Not just here. Yen carry trade ring a bell. Russian currency crisis.

It all about the manipulation of money. Printing or purchasing US debt by the FED is the same thing.

The Powers That Be will decide when and where and how it goes up or down.

They are no more American then they are Republican then they are Chinese Communists.

The test was can American's live with four dollar a gallon gas?

Second test, can the American economy's enforcement arm (US Military) keep the oil flowing?

Third test, can the world economy sustain the collapse of the American banking system?

Fourth test, can the FED monetize the debt?

These aren't options. This isn't someone's wish list. Not a fat finger. Or an election choice.

Pax Americana?

" I can not who governs, so long as I control the banks." the red shield CEO.