Thank you for that superb insight and lucid analysis. I do suspect a large amount of auto industry has moved away such as cable manufacture and loom assembly, moulded acrylics for lighting and then imported in that vast ocean of containers.
But I do agree on the elemental function of work as both conveying dignity and social cohesion. The usa has been hard at it for two centuries pushing back against socialist economy and trade unions that is seems to have pushed the baby out with the bathtub. Todays shared stories are no longer factory floor yarns but twittered imaginings and abrasive responses.
The transfer of the workforce from farming to manufacturing had its transition to the services economy and as automation replaced labour we're at the transition with AI systems of a similar process of winnowing humans from the system, and not just the routine administrative roles, but on through the professions. The drive for shareholder value is relentless.
Asimov in his Foundation tried to convey the empty shell Warwick describes. IMO, societal strength is much lower in the Empire than in nations like Russia and China with very powerful manufacturing and institutions that marry the state, worker and business into one entity--a marriage that was never to be within the Empire because of its long period of anti-labor government policies, almost from the outset of its manufacturing industry. The outcome is a national malaise that seeks a fresh start, new pastures and someone to make it happen for them when that's no longer feasible; thus, Trump. China's humanoid robots are the very thing the humans in Asimov's books were freaked out about despite their societies providing a basic income, food and shelter. Being relegated to having no productive purpose was portrayed as existential and is for many--look at the rates of drug and alcohol abuse, homelessness and the overwhelming sense that the top 10% don't give a damn about anyone but themselves as proven by government policy.
Now having read the financial psychosis sequel that doesn't allow for comments, I'll put mine here. For many decades now, the US Public has experienced being shafted by financial bubbles where the loser gets bailed out by the government at the public's expense. The 2008 Bankers Fraud is the latest incarnation of that, but IMO so is the quantitative easing that began BEFORE the Covid disruption of normal business and life. The schemes Warwick describes are all made for speculation addicts of the sort that inhabit Congress, the federal government including Trump's Team, and of course the Wall Street Rent Seekers. So, beware what Congress does as this sort of "crime" is right up its alley.
Yes, it is a myth that the American economy is vaporware. If it were then it would not be a financial collapse, it'd be a real collapse. The service sector in the USA is massive, and it is a huge benefit to consumers. Who does not want good service? I want baristas, not coffee bean growers, right? (Call me selfish! But I much appreciate the coffee farmers, more than my barista.)
The problem (or one big problem) is all the fintech overhead. This is anti-capitalistic! (In the Adam Smith sense.) The US rentier financial sector is a parasite. It needs to be destroyed in order to restore some greater semblance of a democracy, but still it is only a fraction of the US economy. The financial sector does not create the currency, and NET does not create jobs. The government alone creates the currency by fiat, not banks. Banks can only issue credit (so net negative money, if the interest rate floor is positive).
Moreover, the USA is not a capitalist economy. Capitalists get huge government subsidies. And the USA has most of the worlds worker cooperatives (I believe, you can fact check me).
You do realize government debt is the accounting opposite of household debt? So the problem is not government debt too large, it is too small (the evidence is mass unemployment and even worse levels of under-employment), and it is grossly mal-distributed (all with the top Ten percent). Governments "pay off the debt" every moth without the blink of an eye, when a bond matures. There is never any debt default, it is an inapplicable concept for a monopoly currency issuer.
A government may be forced to default in a foreign currency. But never had any need to borrow a foreign currency in the first place, it'd be a policy mistake (e.g., pointless fixed exchange rate policy or commodity peg), driven by the baleful influence of austerity ghouls at the IMF and World Bank, who are monetarists, hence retarded in their comprehension of real monetary systems. They do not know the source of the price level, hence live with insane irrational fear of the inflation boogeyman.
If the Chinese export oligarchs did not want to ship to the USA then the US importers would really feel the bite, and would be forced back to factories if they still wanted those real goods. The point is China does not need the foreign revenues. It has a sovereign fiat currency, as do the USA. They cannot ever run out of renminbi. They have infinite renminbi spending capacity. Their policy question is where to spend without depleting real resources, not "finding the renminbi" (an inapplicable notion). So they can always guarantee Chinese domestic full employment, without question. Neither government is funding the other in nominal (currency) terms. They can't. It'd be counterfeit otherwise. It'd violate international law and likely cause a real war.
So the export oligarchs are your enemies of the state. No one seems to understand this, they have the trade story all backwards. When AUS is net importing, then NET you get real goods, the Chinese firm gets a bank statement at the RBA. Who is wining here?
"Economics is the opposite of religion, it is better to receive than to give." — wbmosler.
The majority of Chinese exports to the US are actually managed by US companies such as Apple. The US benefits from the "exorbitant privilege" of being able to pay for imports with US dollars and have the US dollar as a means of general exchange in the international economy. Its fiscal profligacy is matched by its trade deficit and together with Trump's incoherence and volatility and profligate gifts to his rich buddies is threatening that privilege.
The US may not default, but the US dollar can certainly collapse in value w.r.t. other currencies. It can also "default" through high inflation that is above the offered interest rates while the US dollar falls.
China does not have oligarchs because it is rules by a Party-State that very explicitly limits the power of individual rich people and corporations.
Apple Inc in Cupertino is a US importer, not a Chinese exporter. They are an exporter to other nations buying iThings. Yes, they export from China, for sure, as well. So *they are Chinese oligarchs*. It does not matter what the nationality or "skin colour" or DNA or whathaveyou is, of who owns the company, but Apple Inc are paying taxes in both USD and renminbi, since they have operations in both nations, so from a monetary systems account they are US manufacturers who are exploiting Chinese labour in China.
That'd my story, and I am sticking to it!🤣
But yeah, I can agree with your take. So that makes Apple Inc Chinese exporters as I say. They export away the fruits of Chinese workers from China. That makes them nominal enemies of the Chinese state, and the burden is on them to prove otherwise — that the Chinese goods shipped to foreigners is paying for Chinese worker's import goods in real terms of trade. I'm not saying the real terms of trade are unbalanced, just that these export oligarchs (whatever their residency) are typically not nice people.
“the measurable overtakes the meaningful” — indeed. It is the sign of our times since the beginning of modern science, since Galileo saw nature not as a creation but a geometrical world co posed of triangles and circles.
Measures of the US share of global manufacturing using US$ at exchange rates suffer from two issues (i) a correction for purchasing power parity in foreign countries, for China that would be in the region of plus 80% w.r.t. Western nations and (ii) Western global supply chains that count pure rentier profit as "value added" which allocates much of the value added produced by such countries as China to the US. Apple is a great example of this. As Chinese brands grow in prominence much of this "US value added" will disappear into air. There have even been issues identified with PPP which underestimate Chinese manufacturing capabilities.
The reality is that US manufacturing has a much smaller share of global manufacturing than is stated here, probably less than 10%, and Chinese manufacturing is more likely to be about half of global manufacturing, and five times that of the US. One also has to correct for the atrocious quality and productivity of the US Military Industrial Complex and the general shitification of many US products.
This does not take away from the general message about how manufacturing and industrial production in general tended to give people a sense of meaning and place, as well as relatively well paid jobs to semi-skilled workers. Those jobs are not coming back for many reasons. Instead, we are left with a rootlessness with respect to career paths, place and meaning.
Your point is an important one which is based in fact and is related to the anomalous calculation of GDP in western economies (growth in consumer debt is added to US numbers — it is not in China).
A further concern is that, were manufacturing to be rebased on quality parameters, US numbers are overvalued. In particular, in construction, quality levels have fallen enormously over the past two to three decades, so the “velocity” of repair projects must increase to relieve ongoing poor quality.
An example is road repairs — in my small but comparatively wealthy town in California, road repairs begin disintegrating very rapidly, so remedial surface repairs are required in three years or so despite the absence of frost damage. As for traffic control (ie traffic lights), there is not a day without malfunction, as I learned with chagrin when I moved here from Los Angeles. Infrastructure (classified under “manufacturing”) is costly and inferior — overstating its true value.
We still manufacture a vast amount of products in the US. Now that the disastrous zero import tariff has been removed, more products will slowly move to be manufactured locally. That will reduce the carbon footprint of shipping, create more local jobs and better bargaining environment for workers.
The next change should be for the 2% inflation target to go back to 0%. The debtors might like inflation, but not the savers or workers.
Such beautiful writing and expressive of such fascinating reflection! I lingered over many sentences. Thank you.
Yes, simply brilliant!
Thank you for that superb insight and lucid analysis. I do suspect a large amount of auto industry has moved away such as cable manufacture and loom assembly, moulded acrylics for lighting and then imported in that vast ocean of containers.
But I do agree on the elemental function of work as both conveying dignity and social cohesion. The usa has been hard at it for two centuries pushing back against socialist economy and trade unions that is seems to have pushed the baby out with the bathtub. Todays shared stories are no longer factory floor yarns but twittered imaginings and abrasive responses.
The transfer of the workforce from farming to manufacturing had its transition to the services economy and as automation replaced labour we're at the transition with AI systems of a similar process of winnowing humans from the system, and not just the routine administrative roles, but on through the professions. The drive for shareholder value is relentless.
Asimov in his Foundation tried to convey the empty shell Warwick describes. IMO, societal strength is much lower in the Empire than in nations like Russia and China with very powerful manufacturing and institutions that marry the state, worker and business into one entity--a marriage that was never to be within the Empire because of its long period of anti-labor government policies, almost from the outset of its manufacturing industry. The outcome is a national malaise that seeks a fresh start, new pastures and someone to make it happen for them when that's no longer feasible; thus, Trump. China's humanoid robots are the very thing the humans in Asimov's books were freaked out about despite their societies providing a basic income, food and shelter. Being relegated to having no productive purpose was portrayed as existential and is for many--look at the rates of drug and alcohol abuse, homelessness and the overwhelming sense that the top 10% don't give a damn about anyone but themselves as proven by government policy.
Now having read the financial psychosis sequel that doesn't allow for comments, I'll put mine here. For many decades now, the US Public has experienced being shafted by financial bubbles where the loser gets bailed out by the government at the public's expense. The 2008 Bankers Fraud is the latest incarnation of that, but IMO so is the quantitative easing that began BEFORE the Covid disruption of normal business and life. The schemes Warwick describes are all made for speculation addicts of the sort that inhabit Congress, the federal government including Trump's Team, and of course the Wall Street Rent Seekers. So, beware what Congress does as this sort of "crime" is right up its alley.
🤔 I’ll check the settings. I thought I had a default for comments. Odd … 🙏
Substack acts oddly at times. Thanks for making the effort to read the commentary; I know it can be time consuming.
Yes, it is a myth that the American economy is vaporware. If it were then it would not be a financial collapse, it'd be a real collapse. The service sector in the USA is massive, and it is a huge benefit to consumers. Who does not want good service? I want baristas, not coffee bean growers, right? (Call me selfish! But I much appreciate the coffee farmers, more than my barista.)
The problem (or one big problem) is all the fintech overhead. This is anti-capitalistic! (In the Adam Smith sense.) The US rentier financial sector is a parasite. It needs to be destroyed in order to restore some greater semblance of a democracy, but still it is only a fraction of the US economy. The financial sector does not create the currency, and NET does not create jobs. The government alone creates the currency by fiat, not banks. Banks can only issue credit (so net negative money, if the interest rate floor is positive).
Moreover, the USA is not a capitalist economy. Capitalists get huge government subsidies. And the USA has most of the worlds worker cooperatives (I believe, you can fact check me).
You do realize government debt is the accounting opposite of household debt? So the problem is not government debt too large, it is too small (the evidence is mass unemployment and even worse levels of under-employment), and it is grossly mal-distributed (all with the top Ten percent). Governments "pay off the debt" every moth without the blink of an eye, when a bond matures. There is never any debt default, it is an inapplicable concept for a monopoly currency issuer.
A government may be forced to default in a foreign currency. But never had any need to borrow a foreign currency in the first place, it'd be a policy mistake (e.g., pointless fixed exchange rate policy or commodity peg), driven by the baleful influence of austerity ghouls at the IMF and World Bank, who are monetarists, hence retarded in their comprehension of real monetary systems. They do not know the source of the price level, hence live with insane irrational fear of the inflation boogeyman.
If the Chinese export oligarchs did not want to ship to the USA then the US importers would really feel the bite, and would be forced back to factories if they still wanted those real goods. The point is China does not need the foreign revenues. It has a sovereign fiat currency, as do the USA. They cannot ever run out of renminbi. They have infinite renminbi spending capacity. Their policy question is where to spend without depleting real resources, not "finding the renminbi" (an inapplicable notion). So they can always guarantee Chinese domestic full employment, without question. Neither government is funding the other in nominal (currency) terms. They can't. It'd be counterfeit otherwise. It'd violate international law and likely cause a real war.
So the export oligarchs are your enemies of the state. No one seems to understand this, they have the trade story all backwards. When AUS is net importing, then NET you get real goods, the Chinese firm gets a bank statement at the RBA. Who is wining here?
"Economics is the opposite of religion, it is better to receive than to give." — wbmosler.
The majority of Chinese exports to the US are actually managed by US companies such as Apple. The US benefits from the "exorbitant privilege" of being able to pay for imports with US dollars and have the US dollar as a means of general exchange in the international economy. Its fiscal profligacy is matched by its trade deficit and together with Trump's incoherence and volatility and profligate gifts to his rich buddies is threatening that privilege.
The US may not default, but the US dollar can certainly collapse in value w.r.t. other currencies. It can also "default" through high inflation that is above the offered interest rates while the US dollar falls.
China does not have oligarchs because it is rules by a Party-State that very explicitly limits the power of individual rich people and corporations.
Apple Inc in Cupertino is a US importer, not a Chinese exporter. They are an exporter to other nations buying iThings. Yes, they export from China, for sure, as well. So *they are Chinese oligarchs*. It does not matter what the nationality or "skin colour" or DNA or whathaveyou is, of who owns the company, but Apple Inc are paying taxes in both USD and renminbi, since they have operations in both nations, so from a monetary systems account they are US manufacturers who are exploiting Chinese labour in China.
That'd my story, and I am sticking to it!🤣
But yeah, I can agree with your take. So that makes Apple Inc Chinese exporters as I say. They export away the fruits of Chinese workers from China. That makes them nominal enemies of the Chinese state, and the burden is on them to prove otherwise — that the Chinese goods shipped to foreigners is paying for Chinese worker's import goods in real terms of trade. I'm not saying the real terms of trade are unbalanced, just that these export oligarchs (whatever their residency) are typically not nice people.
"Chinese export oligarchs"?
“the measurable overtakes the meaningful” — indeed. It is the sign of our times since the beginning of modern science, since Galileo saw nature not as a creation but a geometrical world co posed of triangles and circles.
And Descartes had an automaton child.....
Measures of the US share of global manufacturing using US$ at exchange rates suffer from two issues (i) a correction for purchasing power parity in foreign countries, for China that would be in the region of plus 80% w.r.t. Western nations and (ii) Western global supply chains that count pure rentier profit as "value added" which allocates much of the value added produced by such countries as China to the US. Apple is a great example of this. As Chinese brands grow in prominence much of this "US value added" will disappear into air. There have even been issues identified with PPP which underestimate Chinese manufacturing capabilities.
The reality is that US manufacturing has a much smaller share of global manufacturing than is stated here, probably less than 10%, and Chinese manufacturing is more likely to be about half of global manufacturing, and five times that of the US. One also has to correct for the atrocious quality and productivity of the US Military Industrial Complex and the general shitification of many US products.
This does not take away from the general message about how manufacturing and industrial production in general tended to give people a sense of meaning and place, as well as relatively well paid jobs to semi-skilled workers. Those jobs are not coming back for many reasons. Instead, we are left with a rootlessness with respect to career paths, place and meaning.
Your point is an important one which is based in fact and is related to the anomalous calculation of GDP in western economies (growth in consumer debt is added to US numbers — it is not in China).
A further concern is that, were manufacturing to be rebased on quality parameters, US numbers are overvalued. In particular, in construction, quality levels have fallen enormously over the past two to three decades, so the “velocity” of repair projects must increase to relieve ongoing poor quality.
An example is road repairs — in my small but comparatively wealthy town in California, road repairs begin disintegrating very rapidly, so remedial surface repairs are required in three years or so despite the absence of frost damage. As for traffic control (ie traffic lights), there is not a day without malfunction, as I learned with chagrin when I moved here from Los Angeles. Infrastructure (classified under “manufacturing”) is costly and inferior — overstating its true value.
Profound. Exquisite writing. Deeply resonated. Bolt of lightning striking deep into a collective psyche. Bravo!
Following nicely in the footsteps of its predecessor - Angla-Britainia's (the not-so-great's) sunset days! It is over.
Here's to an equitable new world, led by the BRICS+ Global Majority.
No clumsy tariff wars, kinetic wars, biological wars, threats and intimidations against the Global Majority will cut it.
We still manufacture a vast amount of products in the US. Now that the disastrous zero import tariff has been removed, more products will slowly move to be manufactured locally. That will reduce the carbon footprint of shipping, create more local jobs and better bargaining environment for workers.
The next change should be for the 2% inflation target to go back to 0%. The debtors might like inflation, but not the savers or workers.
Excellent piece. Thank you.