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From An Industrial Economy To A Paper Economy – The Stunning Decline Of Manufacturing In America

by Tyler Durden

Sep 6, 2016 6:30 PM

Submitted by Michael Snyder via The Economic Collapse blog,

Why does it seem like almost everything is made in China these days? Yesterday I was looking at some pencils that we had laying around the house and I noticed that they had been manufactured in China.  I remarked to my wife that it was such a shame that they don’t make pencils in the United States anymore.  At another point during the day, I turned over my television remote and I noticed that it also had “Made In China” engraved on it.  With Labor Day just hours in the past, I think that it is quite appropriate to write about our transition from an industrial economy to a paper economy today. Since the year 2000, the United States has lost five million manufacturing jobs even though our population has grown substantially since that time.  Manufacturing in America is in a state of stunning decline, our economic infrastructure is being absolutely gutted, and our formerly great manufacturing cities are in an advanced state of decay.  We consume far more wealth than we produce, and the only way that we are able to do this is by taking on massive amounts of debt.  But is our debt-based paper economy sustainable in the long run?

Back in 1960, 24 percent of all American workers worked in manufacturing. Today, that number has shriveled all the way down to just 8 percent.  CNN is calling it “the Great Shift”

In 1960, about one in four American workers had a job in manufacturing. Today fewer than one in 10 are employed in the sector, according to government data.

Call it the Great Shift. Workers transitioned from the fields to the factories. Now they are moving from factories to service counters and health care centers. The fastest growing jobs in America now are nurses, personal care aides, cooks, waiters, retail salespersons and operations managers.

No wonder the middle class is shrinking so rapidly. There aren’t too many cooks, waiters or retail salespersons that can support a middle class family.

Since the turn of the century, we have lost more than 50,000 manufacturing facilities.  Meanwhile, tens of thousands of gleaming new factories have been erected in places like China.

Does anyone else see something wrong with this picture?

At this point, the total number of government employees in the United States exceeds the total number of manufacturing employees by almost 10 million

Government employees in the United States outnumber manufacturing employees by 9,932,000, according to data released today by the Bureau of Labor Statistics.

Federal, state and local government employed 22,213,000 people in August, while the manufacturing sector employed 12,281,000.

The BLS has published seasonally-adjusted month-by-month employment data for both government and manufacturing going back to 1939. For half a century—from January 1939 through July 1989—manufacturing employment always exceeded government employment in the United States, according to these numbers.

You might be thinking that government jobs are “good jobs”, but the truth is that they don’t produce wealth.


Government employees are really good at pushing paper around and telling other people what to do, but in most instances they don’t actually make anything.

In order to have a sustainable economy, you have got to have people creating and producing things of value.  A debt-based paper economy may seem to work for a while, but eventually the whole thing inevitably comes crashing down when faith in the paper is lost.

Right now, the rest of the world is willing to send us massive amounts of stuff that they produce for our paper.  So we keep producing more and more paper and we keep going into more and more debt, but at some point the gig will be up.

If we want to be a wealthy nation in the long-term, we have got to produce stuff.  That is why the latest news from Caterpillar is so depressing.  In addition to the thousands of layoffs that had been previously announced by the industrial machinery giant, it appears that a fresh wave of layoffs has arrived

Hundreds of mostly office employees received layoff notices at one of the largest Caterpillar Inc. facilities in the Peoria area this week, just as the company announced plans to close overseas production plants and eliminate thousands more positions.

A total of 300 support and management employees at Building AC and the Tech Center in Mossville this week received job loss notifications that included severance packages, 60 days notice and mandated Illinois Worker Adjustment and Retraining Notification Act letters.

During this election season, you will hear many of our politicians talk about how good “free trade” is for the global economy. But that is only true if the trade is balanced.  Unfortunately, we have been running a yearly trade deficit of between 400 billion dollars and 600 billion dollars for many years…

When you have got about half a trillion dollars more going out than you have coming in year after year that has severe consequences.

Let me try to break it down very simply.

Imagine that I am the United States and you are China.  I take one dollar out of my wallet and I give it to you and then you send me some stuff.

After a while, I want more stuff, so I take another dollar out of my wallet and send it to you in exchange for more products.

But that stuff only lasts for so long, and so pretty soon I find myself taking another dollar out of my wallet and giving it to you for even more stuff.

Ultimately, who is going to end up with all the money?

It isn’t a big mystery as to how China ended up with so much money. And when we can’t pay our bills we have to go and beg them to let us borrow some of the money that we sent to them in the first place.  Since we pay interest on that borrowed money, that makes China even richer.

This is why I am so obsessed with these trade issues.  They truly are at the very heart of our long-term economic problems.

But most Americans don’t understand these things, and they seem to think that our debt-based paper economy can just keep rolling along indefinitely.

In the end, history will be the judge as to who was right and who was wrong.


Importing Brazil’s oil policy

Bill Costello

In 1980, Brazil imported 77 percent of its oil. Now it imports 0 percent. During that same time period, America increased its oil imports from roughly 30 percent to 70 percent. If Brazil can become completely self-sufficient in oil, why can’t America start becoming more self-sufficient?

Brazil is one of the BRICs, an acronym that refers to the nations of Brazil, Russia, India, and China—the rising powers. The BRICs have been increasing their global economic power at such a fast pace that Goldman Sachs predicts they will become the four most dominant economies by the year 2050.

It’s no surprise that Brazil is among the nations with the biggest and fastest growing emerging markets. They have been making smart economic decisions.

Among those decisions was to stop depending on foreign energy sources. Since 1980, Brazil has increased its oil production by 876 percent. Now it actually has a surplus.

U.S. President Barack Obama has expressed his eagerness for Brazil to expand offshore oil drilling and export more oil. He recently said: “With the new oil finds off Brazil, President (Dilma) Rousseff has said that Brazil wants to be a major supplier of new stable sources of energy, and I’ve told her that the United States wants to be a major customer, which would be a win-win for both our countries.”

However, Obama does not share the same eagerness for America’s oil exploration. He would rather borrow more billions to purchase oil from Brazil.

Why would a president help a foreign nation while hindering his own? Some argue that it’s deliberate sabotage.

A “Human Events” editorial observes: “This dependence is the predictable result of deliberate policies, from locking private industry out of Alaskan oil fields, to hounding oil rigs away from the Gulf of Mexico…The Obama Administration is intentionally choking the life out of America’s dynamic, highly mobile economy… Everything becomes more valuable when its supply is limited. Rationing a limited supply of motion would bring great power to the masters of Big Government. Increasing the price of everything limits the consumption of everything.”

Columnist Victor Davis Hanson explains: “Apparently the common denominator here is a deductive view that high energy prices will force Americans to emulate European centrally planned and state-run transportation. That conclusion is not wild conspiracy theory, but simply the logical manifestation of many of the Obama administration’s earlier campaign promises.”

Already, gasoline prices have doubled under Obama. When Obama took office, the national average price of a gallon of regular gas was $1.79. Now it’s $3.58.

Under increasing pressure, Obama recently announced that he wanted a one-third reduction of oil imports within a decade. But what Obama says and what he actually does have historically differed.

Energy policies that fail to put America first did not begin with the Obama administration. They have been around for decades.

For example, environmental concerns have made it nearly impossible to expand drilling, extraction, and refining of oil in America. Ironically, these restraints have caused more harm to the environment than if they had never been put into place. Over the last four decades, roughly 60 percent of all oil spilled in American waters came from tankers and barges, while only 2 percent came from pipelines. There would have been much less spillage had we been allowed to get our oil by drilling domestically and transporting it via pipeline instead of having it delivered from other nations via tankers and barges.

And because America has increased its oil imports, other nations have increased their drilling. Included among the top ten sources of U.S. crude oil imports are Saudi Arabia, Venezuela, and Iraq. Human rights in these nations are not very good. So how much concern do you think they have for the environment when drilling for oil? Is it more or less concern than America would have?

Not only have environmentalists suffered from these policies, but so have consumers. Drilling for our own oil is cheaper than importing it.

Environmentalists and consumers have also suffered from ethanol policies. Making corn ethanol requires more energy than other fuels, which defeats the environmentalists’ goal of getting away from fossil fuels. And the consumer has to pay more for food when crops are used for ethanol production instead of food production.

Despite corn ethanol’s shortcomings, the federal government has been subsidizing its production in response to the lobbying efforts of environmental groups and agricultural corporations. That it has to be subsidized is evidence that market forces have not responded positively to it. If corn ethanol were economical and efficient, consumers would demand it and producers would supply it.

U.S. President Ronald Reagan best summed up the government’s view of economics: “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

Subsidies to promote uneconomical and inefficient sources of energy waste taxpayer dollars. The free market will embrace any viable energy alternatives to fossil fuels that are clean, economical, and efficient. But until those alternatives are developed, fossil fuels are the lifeblood of our economy.

Despite failed energy policies, those in government still blame the oil industry for high prices. There have been federal investigations to denounce and indict “greedy” oil executives. But the investigations consistently clear the defendants of any wrongdoing.

Blaming the oil industry is an easier sell to the public than reality.

First, global demand for oil has been increasing, especially in China and India. When demand rises, prices increase.

Second, Obama’s anti-drilling policies have driven down the production of domestic crude oil and gasoline. When supply decreases, prices increase.

Third, the government has been taxing oil companies at every level of production. When oil companies have higher costs, prices increase.

Taxes contribute more to the price of gasoline than oil company profits. The government profits more from oil than the oil industry. So who is the “greedy” one?

Oil companies have made record profits in the last few years because of the record amount of oil they have been selling, not because of how much they have been charging for it. Oil companies have a profit margin of about 9 percent on gasoline. So they make about 9¢ in profit for every dollar of revenue. That’s lower than the 13¢ average of companies in the S&P 500 index.

America needs to make a change. What we should be importing from Brazil is its oil policy, not its oil.

( Original Article )

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