Ch. 2: Finance: The New Real Economy?

[Grim]

This poses an interesting question of logistics. Especially considering China's and similar low labor cost position in the world. I some ways I think that American industry has suffered just as greatly by outsourcing of work as it has from financial sector favoritism. While many discourage the positive idea of an auto sector bailout the hope is that it can become an important future American export, and there is Obama's idea for a green collar economy, the latter of which will be undoubtedly needed soon in the future. Can the American standard be cost competitive in a globalized world that encourages low production costs?

[seespotrun2008]

Grim says:

This is the best explanation in his book thus far to explain public ineptitude when it comes to America's most important sector. They don't understand because they simply don't want to not because they lack the resources. I can relate, and the sector encourages it. It is one thing to read about derivatives or fiat currency it is another to read about it in a way that you could comment on it. What better way to keep the meddling masses out of your institution than to tell them they do not understand what they are talking about?

I have never really thought about this before. While individuals do have a responsibility to educate themselves, it may also be that there is a degree of trying to keep the public out of the financial sector. I have never really understood finance and even reading this book have been telling myself that I do not really understand this. Maybe that is not entirely true. Maybe it becomes more complicated because I believe that it is too complicated for me. I like your train of thought, Grim. Very interesting to think about.

[bobby408]

Can the American standard be cost competitive in a globalized world that encourages low production costs?

Grim,

You are correct that our economy must transition more into manufacturing and concentrate less on finance, which produces no real product, just profits for the already rich who simply move money around and SUCK these fees from the middle-class wannabee-rich people. You are also right that if this transition to manufacturing happens, we must be cost-competitive in doing so, especially with low-cost producers in Asia. Therefore, if you continue your line of reasoning, one realized that there MUST be a decrease in real wages for Americans because, typically, the most efficient way to cut costs is to cut direct-labor costs (wages) and manufacture overhead (mostly salaries and wages). This is because direct-labor and manufacture overhead costs not only comprise a high percentage of total cost of manufactured goods, but are the easiest to eliminate. With this logic in mind, the result is some much needed sacrifice on behalf of the American people in the short run. The million-dollar question is if this sacrifice is politically expedient. It is definitely not. The American public will be outraged by a government telling them they have to sacrifice for the common good after this same government has instilled in them greedy individualism. Basically, Americans need to depart from their traditions of materialism and individualism to be competitive in this new globalized world. Can this be done? Only time will tell...

[karen hudson]

"The separation between the finance economy and the real economy is real. This is not some fake idea. You can’t call that class warfare. That’s a fact."

[bobby408]

Karen,

What do you mean you can't call that class warfare? I dont understand. Please elaborate. I mean it is pretty clear that there is class conflict among Americans, this meaning that the interests of the rich upper class are completely divergent from the interests of the middle-class and poor. Furthermore, you say that the finance economy is not the real economy? That is absurd because finance is the largest sector of our economy! The finance economy IS such a large part of our real economy. This is not some fake idea. This is the truth whether you like it or not. Also about class warfare and the really real finance economy, did you read "Bad Money" by Kevin Philips? Neoliberalism by David Harvey? Neoliberalism and global order by Noam Chomsky? The Global Class War by Jeff Faux? Do you read the news? Haven't you been reading that the banking sector now, about a year after the economic crisis, are making humongous profits while regular Americans are hurting more than ever? Don't you see the biggest concentration of wealth now evident according to countless sources? I really don't understand what your statement means but, based on reality, your statement is really far-fetched.

[jamie-stock]

there seems to be so conspiracy around and truth unknown

[Chris OConnor]

Jamie, that wasn't even a sentence.

[jad420]

It's too bad, then, that Canada and most of the world is sucked into the vortex of our financial flushing.

if bankers were less greedy they may be able to come out from the vortex of financial flushing.