The 'Dollar Is Going to Crash' Crowd Are Oblivious...
- Thread starter ByLoSellHi
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Pretty good comments on this thread. I picked kxvid because his view is closest to mine. However I'm rethinking my position.
I agree with your first paragraph. Lack of consumerism will definitely act as a price brake on certain consumer items. The problem though-and we're already seeing it in autos-is lack of demand also curtails production levels. We ain't going to see GM pumping out 15mil vehicles ever again.
The same with housing. U.S. population growth can eat through supply in a couple of years. But what developer is going to build additional units at a production cost above re-sale market value?
The old model of stagflation is less relevant or comparable today vs. the 70's. Why? Because of Asia. So yes wages in the West may become stuck but that doesn't mean that a bushel of corn or a barrel of oil need reflect lessening American consumption or slack Western elasticity.
Global wages and access to global products will continue to converge. Whereas it once took one unit of American labor to buy a gallon of gas vs. 10 units of Chinese labor to do the same, that ratio may go from 2 U.S. to 8 China. Perhaps one day it will reach parity. Bottom line: A dollar of earnings is probably going to buy us less rather than more product going forward. No longer will a Boston bartender be able to purchase a plasma with a nights worth of wages while an Indian IT guy needs to work a month to buy the same.
The best tell? Look at how much more explosive the snap back rally has been in Asian indexes than in the West.
I agree with your first paragraph. Lack of consumerism will definitely act as a price brake on certain consumer items. The problem though-and we're already seeing it in autos-is lack of demand also curtails production levels. We ain't going to see GM pumping out 15mil vehicles ever again.
The same with housing. U.S. population growth can eat through supply in a couple of years. But what developer is going to build additional units at a production cost above re-sale market value?
The old model of stagflation is less relevant or comparable today vs. the 70's. Why? Because of Asia. So yes wages in the West may become stuck but that doesn't mean that a bushel of corn or a barrel of oil need reflect lessening American consumption or slack Western elasticity.
Global wages and access to global products will continue to converge. Whereas it once took one unit of American labor to buy a gallon of gas vs. 10 units of Chinese labor to do the same, that ratio may go from 2 U.S. to 8 China. Perhaps one day it will reach parity. Bottom line: A dollar of earnings is probably going to buy us less rather than more product going forward. No longer will a Boston bartender be able to purchase a plasma with a nights worth of wages while an Indian IT guy needs to work a month to buy the same.
The best tell? Look at how much more explosive the snap back rally has been in Asian indexes than in the West.
And about 85% of the Russian Billionaires (former) buying High End London Real Estate are now broke.
The competitive advantage that China and India have is low wage workers.
In fact, even with slave wages of roughly $260 USD per month in China for large company factory workers, they still are having extreme difficulty growing their job base commensurate with the population growth.
India fares slightly better, because of a focus on IT and because they speak English as a primary language, making their workers suitable for CS jobs dealing with U.S. customers.
However, again, their main competitive advantage is low wage structure.
Have wage inflation in China or India over the next decade of any significance, at a time when utilization is so slack, and watch how quickly both nations lose employment to upstart competitors such as Vietnam, Thailand and Singapore (they already are, in fact).
Couple this with Chinese Government's paranoia about maintaining absolute control in an era of dynamism among educated Chinese youth, India's terrible infrastructure that literally requires a total rebuild, and the road to 'parity' becomes extremely tenuous, at best.
Here's 50%, but it's debatable (the number), and mere millionaires were decimated, also.
http://tmi2.themalaysianinsider.com...-halved-as-financial-crisis-destroys-fortunes
There's already been huge wage inflation in Asia. Strikes etc.
And I never said every person in Asia will see living standards converge with the West-no more than every domestic worker has seen their own standard of living keep pace with the wealthiest Americans.
Also, while low wages historically abetted Asian export growth don't kid yourself that Asia is totally dependent upon selling product to the West. That's just another feel good American myth.
Case in point. U.S. auto sales are down 34% on the year. Chinese auto sales are UP 8% and in fact more Chinese will buy new cars this year than Americans!
Sure developed Asian economies will lose jobs to emerging Asian economies-nothing new. Japan was the New China four decades ago. Soon enough China will be fat and bourgeois too. Not yet though.
And I never said every person in Asia will see living standards converge with the West-no more than every domestic worker has seen their own standard of living keep pace with the wealthiest Americans.
Also, while low wages historically abetted Asian export growth don't kid yourself that Asia is totally dependent upon selling product to the West. That's just another feel good American myth.
Case in point. U.S. auto sales are down 34% on the year. Chinese auto sales are UP 8% and in fact more Chinese will buy new cars this year than Americans!
Sure developed Asian economies will lose jobs to emerging Asian economies-nothing new. Japan was the New China four decades ago. Soon enough China will be fat and bourgeois too. Not yet though.
Keep in mind the AK&M Composite Index has almost doubled off the lows since that article was written too.....