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Well, now we join the ranks of the victimized. First, we learn that Target took such little care to check on its own credit card security that 40 MILLION customers, including us, may have had their credit cards hacked. Then we learn that the greedy banks in the US still use vulnerable magnetic strips on the cards they issue, while European banks have used highly unhackable microchips in their cards for a decade. Now, we have no MasterCard in the days before Christmas. Humbug, Target and American banks. Coal in all your stockings.
I’ve been reading on Jefferson and his interpretation of French political issues in the late 1700’s. I particular, I was struck with a few lines in Jon Meacham’s biography where Jon writes, “Debt ridden, France faced a supreme test. In the mid-1780s, partly because of its spending on the American revolution, the Bourbon government of Louis XVI was in a long-term financial crisis, exacerbated by widespread hunger and by anger over the concentration of wealth in the hands of the few. Jefferson was shocked…” Sounds something like a description of the USA of today — wracked with the debt of two unfunded wars, widespread unemployment and anger over growing disparity between the rich and poor.
Given the discredited U.S. Congress, a relatively ineffective executive branch and a Supreme Court barely hanging on to its credibility, I wonder how secure our own republic is today, and what will be written about our American political evolution — 200 years from now.
This morning, federal figures show U.S. unemployment at 7.7%, a slight improvement. And we are hearing new calls for a higher U.S. minimum wage.
Yet, as I picked up a warm-up jacket from the seamstress yesterday, I was again reminded of the vast gap between U.S. wages and those overseas. My new midnight blue warm-up jacket from Wal Mart cost me $16.88, plus tax, and seemed like a bargain for the quality and fit. The label says it was made in Indonesia.
Then I picked it up from the local seamstress, where I had taken it to have the sleeves shortened. Her charge for that simple sewing task was $20.00, plus tax — more than the entire cost to me for the new jacket! Most of the alteration cost was for her labor, plus a few cents for thread, and maybe some to offset the cost of her sewing machine and rent for the shop.
The warm-up jacket was nicely designed and carefully manufactured, made of a beautiful soft fabric, with a white stripe sewed on. It had been shipped thousands of miles, then inventoried and marketed in the U.S., and added a little more profit for Wal Mart.
While our workers deserve a living minimum wage most surely, the dichotomy of labor costs between the U.S. and Indonesia is staggering. Clearly, it will take not just a few years or a generation, but hundreds of years of social evolution to bring any semblence of justice to the relationship of labor costs in the economies of the world. Meanwhile, we must each take care of our own as best wee can, and hope for peace in our time. My fine new warm-up jacket will be a constant reminder to me.
In the New Yorker magazine. founded today in 1925, an article on French (or Belgium or Russian?) actor Gerard Depardieu, cites: “Politicians in France speak to “citizens,” not to “taxpayers.” It is a country where the politics of income inequality has run wild. There is a new, and perhaps illegal, 75% supertax on those who earn more than one million euros per year. Depardieu was described as “pathetic” by their Prime Minister for being one of thousands who have fled the country to avoid such confiscatory taxes. New York City was attacked on 9/11 by those who thought the American way of life is soft, corrupt and indulgent. There is only so much a democratic government can do to even out the social tensions brought about by ever-increasing income inequality. There must be a leavening between the rights of citizens and that of taxpayers. Economic change must accompany political action. But the France of the onetime French Revolution is an ever-looming warning over the consequences of excessive income inequality, in those times, and in these. And not just in France.
We returned from a grand tour of China nearly two years ago, and the one overwhelming economic perspective I’d gained was that China was experiencing a housing bubble that was near the bursting point. Today’s headlines indicate this is still true, and an explosion of the Chinese housing bubble could have economic repercussions for the U.S. every bit as great, or greater, than the risks of European economic meltdown. I’m not sure there is much we could do about it — the bricks and mortar in China are set in place, and the shelves at U.S. Walmarts are currently crammed with Chinese goods.
Here’s my first-hand observations upon returning from China in 2010, as reported in my blog then:
The Chinese Housing Bubble Could Burst
October 26, 2010 in China, housing bust | Tags: Beijing, China, housing bust,Milwaukee, purchasing power parity, Shanghai, Swiss franc | Leave a comment(Edit)
Just back from 2 weeks in China, I came away with one overwhelming impression: China is temporarily hyping its economy building millions of urban residences that won’t be filled, creating a housing bubble that will make the one in the U.S. pale into insignificance. This brand new city of high rises along the Yangtze River in central China, for example, is just 5 years old and has a population of 600,000, larger than Milwaukee. Everywhere we went, from Shanghai and Beijing to cities in the interior, construction cranes span the horizon and modern highrises crop up in clusters that could house another 20,000 here or 50,000 there. 80% of the Chinese are rural, and 15 million a year move into cities in search of jobs in new and growing industries. By 2004, China had 108 cities with populations over one million, and that will swell to 221 such cities by 2025, vs. 35 in all of Europe. My feeling is that jobs won’t grow fast enough to keep up with the housing boom, and I understand from a recent article (http://www.zerohedge.com/article/next-chinas-property-bubble-step-function-explosion-vacant-inland-cities) that there are already 65 million vacant new urban homes in China. Building all these homes employs a lot of people, generates a lot of investment in construction and artificially makes the economy seem more active and prosperous than it is. But how long can China get away with a currency with buying power 40% below the dollar, and nearly 70% below the Swiss franc? As purchasing power tries to balance out, the demand for cheap Chinese goods may falter, industrial growth may slow, and China will have a housing bust to end all busts. Then what will the central planners do — manage another people’s revolution? My sense is that China’s growth is going too fast, and is being forced beyond what markets will absorb. China’s urbanization is impressive, but in my book, excessive.
Fortune Magazine has just announced their 2012 Most-Admired Companies list, and McDonald’s ranked in the top 20 (#11), between Southwest Airlines and J&J, and above Disney, GE, American Express and Microsoft. McDonald’s ranked #1 in use of corporate assets, and #2 in management quality, financial soundness and global competitiveness. Of course, they ranked #1 in the food service industry.
Back in the mid-90s, I worked with the editors of Fortune to get McDonald’s considered for these annual rankings of corporate reputation and success..
I saw on a Morning Joe crawl this AM that Toyota reported a nearly 7% sales decline in the U.S. for last year, attributing it to a parts shortages out of Japan and Thailand due to the earthquake and tsunami and flooding. Could it be that the real catastrophe for Toyota was the combination of erosion of their own quality reputation due to the U.S. recalls earlier in the year, together with a resurgence of competitiveness by the U.S. auto industry, which reported double-digit gains for the year? Toyota is still a great auto company, but they are now playing on a much more level field in the U.S. than for many years. It’s not so much that their reputation has been eroded, at least not permanently, just as they will recover from the weather troubles in Asia. But the reputation of the U.S. auto industry for style, engineering and quality has been restored. My personal cars for almost 50 years were foreign built — now we drive two GM vehicles, and we love these cars.
Here’s the sales story: http://mdn.mainichi.jp/mdnnews/business/news/20120105p2g00m0bu075000c.html
When censuses and surveys today ask people how often they “dine out,” I don’t think people know what is being asked. While the intent may be to determine how often and where people eat away from home, I think the “dining out” question suggests to many people a white tablecloth “dining” experience. Many Americans, I believe, seldom go to “white tablecloth” restaurants, yet I find it hard, no, impossible to believe, that if you include fast food and all the kinds of eating experiences other than home, even if you exclude food brought from home, that no-one but an invalid does not participate in “dining out” experiences. Statistics should always be suspect, but fallible humans write the surveys. See this article for some good example of what I mean: http://blogs.seattleweekly.com/voracious/2011/10/majority_of_americans_havent_d.php
Even after Congress acts, one way or the other, the U.S. will still have a national debt on the order of $20 trillion.
How much is that? Try 100 times the supposed $200 billion in gold bars hidden away at Fort Knox, Kentucky. Of course, there hasn’t been an independent audit of the remaining gold at Fort Knox for 50 years, thanks to Congress, and we went off the gold standard many years ago.
There’s nothing behind our national debt now but us. Anyone want to pass the hat?
July 1 is a big day. It is not only the beginning of the U.S. Federal fiscal year, and my own birthday, but it is the 90th birthday, this year, of the Chinese Communist Party, founded in Shanghai in 1921. We spent two weeks touring China 8 months ago, and couldn’t help but note the urban explosion of housing, industry and private business, yet within a context of central state planning. Millions were pouring into the cities from rural China, and construction cranes blacked out the urban horizons. How long could China hype its economy, we wondered. This weeks Economist Magazine (June 21-July 1) attempts to explore what comes next for China in a brilliant 14-page special report. The big question: will the newly empowered Chinese middle-class and the Communist Party find common ground to move forward together, or will a new era of repression result?
Founding place of Chinese Communist Party, 7/1/1921
I wrote a blog on what we saw as the Chinese housing bubble, on Oct. 28, last year, shortly after we returned from our visit to Shanghai, Beijing and points between. Here it is: The Chinese Housing Bubble Could Burst
October 26, 2010 in China, housing bust | Tags: Beijing, China, housing bust, Milwaukee, purchasing power parity, Shanghai, Swiss franc (Edit)
Just back from 2 weeks in China, I came away with one overwhelming impression: China is temporarily hyping its economy building millions of urban residences that won’t be filled, creating a housing bubble that will make the one in the U.S. pale into insignificance. This brand new city of high rises along the Yangtze River in central China, for example, is just 5 years old and has a population of 600,000, larger than Milwaukee. Everywhere we went, from Shanghai and Beijing to cities in the interior, construction cranes span the horizon and modern highrises crop up in clusters that could house another 20,000 here or 50,000 there. 80% of the Chinese are rural, and 15 million a year move into cities in search of jobs in new and growing industries. By 2004, China had 108 cities with populations over one million, and that will swell to 221 such cities by 2025, vs. 35 in all of Europe. My feeling is that jobs won’t grow fast enough to keep up with the housing boom, and I understand from a recent article (http://www.zerohedge.com/article/next-chinas-property-bubble-step-function-explosion-vacant-inland-cities) that there are already 65 million vacant new urban homes in China. Building all these homes employs a lot of people, generates a lot of investment in construction and artificially makes the economy seem more active and prosperous than it is. But how long can China get away with a currency with buying power 40% below the dollar, and nearly 70% below the Swiss franc? As purchasing power tries to balance out, the demand for cheap Chinese goods may falter, industrial growth may slow, and China will have a housing bust to end all busts. Then what will the central planners do — manage another people’s revolution? My sense is that China’s growth is going too fast, and being forced beyond what markets will absorb. China’s urbanization is impressive, but in my book, excessive.
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