Exports on the rise: It's a load of garbage

[Ivan Seeking]

...The Port of Long Beach's Don Snyder.

DON SNYDER, Director of Trade Relations, Port of Long Beach: At one point, it was three import containers for every loaded export container.

PAUL SOLMAN: That means two-thirds of the cans used to take the slow boat to China vacant.

The weaker dollar, however, has spurred exports to the point that 80 percent of these Denada cans were stuffed to gills, symbolic of U.S. exports in general in 2007, as the dollar has dropped against currencies as varied as the Brazilian real, the Australian dollar, the Canadian loonie, and, of course, the euro.

DON SNYDER: It's making our goods quite a bit more competitive on the world markets. Exports are up over 20 percent this year and whereas the imports have tailed off just a little bit. It's the first slight decrease we've had in a number of years.

PAUL SOLMAN: But if it's not Tummy Tucks, what is in the cans? This. Lots of this.

The cars come in. We scrunch them up, and then send them back out, is that what's going on?

DON SNYDER: That's an accurate description.

PAUL SOLMAN: And then, topping U.S. exports in volume, there's this. Clark Hahne, on the right, buys trash from places like this.

CLARK HAHNE, Waste Paper Trader: You have the blue bin and the black bin. This is the blue bin, where the recyclables are in. The trucks go around. They dump it off here.

PAUL SOLMAN: His partner, Jimmy Yang, sells it overseas.

JIMMY YANG, Waste Paper Trader: Most of this material goes to Asia. It gets sorted out as different grades of paper, and it ends up in a paper mill in Asia.[continued]

But here's the catch

PAUL SOLMAN: In other words, just what a weaker currency is supposed to do: encourage exports, discourage imports, and thereby help trade back into balance.

Marvin Jacobs
Fabric Distributer

I was there years, for 30 years, I never had any issues. Now they don't want the dollar. So you tell me where your cheap dollar is taking us. It's killing us.

Imports are more and more expensive
PAUL SOLMAN: So then, with U.S. exports taking off, is the weak dollar the answer to our economic prayers? Well, not necessarily. Everything from abroad now costs more dollars. It's even true at Tummy Tuck.

GEORGE RUDES: It hurts us, the weak dollar, because everything that we buy is imported. There's nothing manufactured in the United States anymore, not fabric, not zippers, not buttons, not thread.

PAUL SOLMAN: And so how much are your costs up?

GEORGE RUDES: I would say they're up about, oh, maybe close to 10 percent. Instead of selling the jean for a $50 bill, you now have to sell it for $53. And the retailer has to turn around and make his margin on the fact that he's paying $3 more.

PAUL SOLMAN: So the price goes up here in America. That, in a word, is inflation: more expensive blue jeans, more expensive lots of things, just what the workers at Not Your Daughter's Jeans are noticing.

Cost of living for you, has it been going up?[continued]

...PAUL SOLMAN: The converse, of course, is that, with every dip of the dollar, Americans overall feel less like rich people. That's what fewer imports mean.

And then, eventually, if we keep importing less and exporting more of our now-cheaper goods to foreigners, both our balance of trade and the dollar -- all else equal -- would finally turn positive as the global economic system re-adjusts.

http://www.pbs.org/newshour/bb/business/jan-june08/dollarsworth_03-04.html
streaming video optional

So, where will the long-term balance of trade leave the US standard of living?

 

[russ_watters]

Relative or absolute?

From the quote:

Americans overall feel less like rich people.

I have a nice air conditioned townhouse, nice car, nice telescope, and I golf whenever I feel like it. Why would I care if people overseas start to approach that level of prosperity? Am I that vain that I have to feel like the richest person on the block?

No, I really don't care whether it "feels" like Europeans and Chinese are getting richer than me. Good for them. All I care about is my absolute level of prosperity. If I lose my house, that would be bad.

 

[Ivan Seeking]

How about if you lose your job and can only get one that provides half the income? People don't worry about how rich the Chinese are getting, they worry about things like their homes and not getting overextended on credit because they can't keep up with the bills. Welcome to the real world.

 

[russ_watters]

How about if you lose your job and can only get one that provides half the income?

Then my absolute level of prosperity goes down.

People don't worry about how rich the Chinese are getting, they worry about things like their homes and not getting overextended on credit because they can't keep up with the bills.

Yes, I know - that's what I said. But that isn't what is implied by the quote. To answer your question before though:

So, where will the long-term balance of trade leave the US standard of living?

It will continue to increase. The "feeling" many people have that they aren't doing as well isn't the overall reality for the country. The reality is that over time, the US economy grows and the absolute prosperity of Americans rises. Welcome to reality.

Are you saying that you predict there will be a long-term economic contraction accompanied by a reduced average standard of living in the US? That the dollar will go down faster in the future than it has the past few years (which will be necessary to stem the tide of our economic growth)?

 

[ShawnD]

The illusion of poverty, from my experience, is caused by the lack of disposable income. Standard of living has little to do with it.

People of today are still incapable of saving money in some cases, even though the standard of living goes up. You can't buy a small 1950s house, save money, and feel wealthy; you need to buy the huge houses that are on the market. Yeah it's a bigger house, but you're still not saving any money. My dad offered to give me his old beater car, for free, if I wanted it. I ended up buying a brand new car because it was literally the same price. I would either pay $500 per month for gasoline for the beater, or $200 for gas and $300 for the car payment of a new car. In either case, I'm paying a huge amount of money for a car that I need in order to hold a real job. Money is not being saved.

I may have a really good standard of living, but I don't have any money. I can't go see a movie for the hell of it, I can't afford to go on a weekend ski trip, I can't afford to go camping. Basically I'm poor, but my living conditions are much better than someone living in the 70s or whatever.

 

[drankin]

The sky is falling...

 

[Astronuc]

Fed reports household net worth down 3.6% in fourth quarter

WASHINGTON (MarketWatch) -- Considering the impact of higher prices, a bigger debt burden and sagging home prices, Americans were poorer at the end of 2007 than they were the year before, the Federal Reserve reported Thursday.

The net worth of U.S. households fell by $533 billion, or a 3.6% annual rate, in the fourth quarter of 2007, the first time total wealth has fallen since late 2002, the Fed said.

For all of 2007, household net worth rose 3.4% to $57.7 trillion, the slowest growth in five years. After the effects of 4.1% inflation are included, real net worth fell for the year.

Housing prices have certainly fallen in our area, and it's anecdotal, but job opportunities are slim. Of course, if one accepts mimimum wage without health insurance and retirement, there are plenty of jobs.

 

[Art]

I wonder how they measured the 20% increase in exports, in dollars or volume or what? If in dollars then it seems a little meaningless with it falling so heavily. In essence you could halve the value of the dollar and thus double exports without shipping an extra single unit. On the other hand if it is measured by volume then the title of this thread may be very apt. To fill empty containers returning to China many countries are exporting their waste for processing in China.

Most raw materials have international commodity pricing and so in general the only production cost reduced by a falling currency is labour and as labour typically accounts for only 10% of total costs it's not a major factor. Even this small gain is offset by the higher cost of imports and the medium to long term threat of higher wage demands to pay for the inflated price of imports leading to inflation.

I guess this is why most countries see the maintenance of a strong currency as an important economic policy goal.

 

[wildman]

Then my absolute level of prosperity goes down. Yes, I know - that's what I said. But that isn't what is implied by the quote. To answer your question before though: It will continue to increase. The "feeling" many people have that they aren't doing as well isn't the overall reality for the country. The reality is that over time, the US economy grows and the absolute prosperity of Americans rises. Welcome to reality.

I hope you are right. The last time this happened (inflation/recession) in the 1970's everyone's prosperity took a tumble. Of course we recovered eventually...

 

[Ivan Seeking]

It will continue to increase. The "feeling" many people have that they aren't doing as well isn't the overall reality for the country. The reality is that over time, the US economy grows and the absolute prosperity of Americans rises. Welcome to reality.

Oh really, what is the average debt to income ratio? What is the percentage of ownership of homes? What is the average household disposable income?

Living on credit does not count as prosperity - eventually someone has to pay. And we have how many baby boomers about to retire with nothing but SS to live on. Do you know what SS pays each month?

Show me proof that the standard of living must increase.

Why do most households now require two incomes when for decades we only had one?

 

[Ivan Seeking]

I may have a really good standard of living, but I don't have any money. I can't go see a movie for the hell of it, I can't afford to go on a weekend ski trip, I can't afford to go camping. Basically I'm poor, but my living conditions are much better than someone living in the 70s or whatever.

So how do you define the standard of living, and why do you think you're better off than someone in the 70's?

 

[Poop-Loops]

From the quote: I have a nice air conditioned townhouse, nice car, nice telescope, and I golf whenever I feel like it. Why would I care if people overseas start to approach that level of prosperity? Am I that vain that I have to feel like the richest person on the block?

No, I really don't care whether it "feels" like Europeans and Chinese are getting richer than me. Good for them. All I care about is my absolute level of prosperity. If I lose my house, that would be bad.

Russ, from your past posts, I haven't seen much in common between us, and even kind of polar opposites, but this is just spot on.

 

[DrClapeyron]

As you save money you decrease your expenses and therefore lower imports, right? And if we spend less, save more and import less our standard of living will increase? NO. People spend money to maintain a high living standard.