About usco3092

An aspiring writer as a young man, I was quickly drawn into the vortex of responsible adulthood since my marriage had quickly produced three beautiful children. My career of choice was in Finance and Accounting, then later Financial Services. I have an MBA in Finance from Seattle University. Upon my retirement in 2004, I returned to writing and have written three books. The first is a book of essays, the second is a novel and the third is another novel, still unpublished, which is a sequel to my first novel. I love this blog because it gives me an opportunity to give back to America, my adopted home which is the best thing that has ever happened to me. I have two children with my wife of twenty-three years. My first marriage was not as successful, but I'm involved in the lives of my three children from that union.

The Trade War with China

By Cesar Fernando Lumba

We Americans, especially our government officials, have our heads in the sand when it comes to the raging trade war with China. How could we be at war with China, we ask, when China is one of our biggest trading partners, if not already the biggest?

Yes, the trade war doesn’t seem to make sense on the surface. If we look deeper, however, we realize that the trade war is in fact ongoing and intensifying.

First, look at what happened to our manufacturing. Before China awoke from its deep 500-year slumber, the U.S. was the acknowledged premier manufacturing country in the world – the biggest since the beginning of time.

Now, with hundreds of thousands of our factories having closed down and our manufacturing transferred to China over the past two to three decades, we have slipped to second place. China is the premier manufacturing country.  What Japan and South Korea could not do, China has done.  China has managed to destroy our manufacturing base and rebuild its own – at our expense, and at the expense of Europe, Canada, Japan and Australia.

Strategically, the single most important sector of the American economy just happens to be manufacturing. Recall that in the Second World War, our superiority in manufacturing over Germany and Japan was decisive in winning that war. Now, because China has a bigger manufacturing base, it will have a distinct advantage over us should a military conflict break out between our two countries.

Second, China is dictating the terms of trade between them and us. They tell us what we can and cannot do in their country, and they tell us what they can do in our country.  That is because they have a hybrid economy. On the export side, China is a free economy.  On the import side, it is a managed economy, managed by a communist regime that is wily, cunning and focused on eventual world domination.  Sorry if my plain speak offends anyone, but that is the truth. Because of their hybrid nature, they have a huge advantage over us in the trade war.  And this shows every year and has shown every year for more than two decades now, in our balance of trade..

The balance of trade is the indicator of who is winning the trade war – the war that decides who exports more and who exports less.  And that balance of trade has been won by China for many, many years.

In 2012, the balance of trade was 315 billion dollars in favor of China; the following year it was up at 319 billion.  A trade imbalance as large as that is not trade, it is a war with a spectacular winner and a spectacular loser.  Just focus on the winner, friends, don’t even look at the loser.

Third, China has laid claim to 90% of the South China Sea, which on the face of it is a direct challenge to the United States’ ability to navigate the waters in that region of the world.  China is on pace to be able to declare no-fly zones over the South China Sea and demand that all foreign ships must get permission from China in order to sail in that sea, which is becoming the single, most important body of water in the world.  If China wins – and it’s winning – the U.S. will be on the outside looking in in that region of the world.

China is preparing to build a base in the Spratly islands by enlarging the islands that it controls through land reclamation. Pretty soon there will be an airbase that can be militarized. The Spratlys just happen to be close to the Philippines, Malaysia, Vietnam, Indonesia and Taiwan. The potential military threat against those countries is growing, threatening to pull the U.S. into a major confrontation with China in the near future, a confrontation that the U.S. can easily lose because of an overwhelming Chinese presence in the area.

With China dictating to the U.S. in trade, it is also seeking to dictate to us militarily in that part of the world.

We all know that the U.S. owes more than $1 trillion to China through China’s ownership of our treasuries. All that China has to do is call the treasuries and the U.S. economy would go into a tailspin.  China, therefore, has a sword of Damocles over our heads.

Is all lost?  Are we destined to be China’s punching bag in the future?  Are we destined to become the old punch-drunk has-been that China will beat up on?

We cannot and should not think that all is lost. We can fight back by reversing the process that has allowed China to surpass us in manufacturing and which has resulted in the U.S. losing the trade war, which in turn has caused us to lose the financial war, which in turn has caused us to be at a huge disadvantage in the looming military conflict in the Asian-Pacific region.

We must start by bringing some of our manufacturing back to America. Let us build things again.  So what if the products will be more expensive than the Chinese ones?  We know that the quality will be better than the quality of Chinese goods, which break down easily.  Remember the refrigerators, the stereos, the TVs in our bygone era, when those things were built in the U.S.?  Those things lasted a long time.  Nowadays, because they are built in China we have to buy extended warranty contracts because the Chinese products break down so easily.

Finally, let us not be afraid of higher prices.  With Americans working in factories again, more Americans will be making more money and they will be able to afford higher prices.  Recall that in the 1950s, 1960s and 1970s, most of our American-made products were expensive yet we were able to afford them.  Why?  Because we had good, solid manufacturing jobs, jobs that paid us decent wages, not WalMart and McDonalds type jobs.

 

 

The Coming Manufacturing Renaissance

By Cesar Fernando Lumba

A few years ago I came across a report that said the U.S. was sitting on oil deposits so huge we would someday dwarf even Saudi Arabia.

I did not give that report much credence, knowing that the U.S. is the number one land of the too-good-to-be-true stories.  Well, what do you know?  Today, the U.S. is on its way to becoming the number one producer of oil and gas in the world – if it is not as yet.  And we’re barely scratching the surface.

In Texas, Pennsylvania, North Dakota, in Louisiana and the common boundaries of Utah, Colorado and Wyoming, there are shale oil discoveries that dwarf even our most expansive imaginations.

What will this do for American business in general and manufacturing in particular?  Manufacturing will return to the U.S.  No doubt about it now.

Energy is one of the major costs in any manufacturing operation, and with the cost of energy in the U.S. headed for their near-historic nadir in real dollars, the U.S. suddenly finds itself with a huge advantage over manufacturing competitors such as China, South Korea, Taiwan, Japan, Germany, Italy, etc.

The major manufacturers that fled the U.S. at the turn of the century and well into the Bush, Jr. presidency have cast a fond gaze at the land they abandoned only a few years ago.  While it’s not as yet a stampede, there’s no question that the U.S. government can help the formation of one by providing financial incentives to come back to America.

Here’s my proposal.  Those companies sitting on huge profits overseas and are reluctant to bring the profits home to America because of our high corporate tax rates should be allowed to bring those profits into the country at a reduced flat rate of 15% provided that the money is used to build or renovate their abandoned factories in the U.S.

This simple, straightforward quid pro quo between the U.S. Congress and American multinational businesses will put America on track to become the most muscular manufacturing power once again.

The benefits are huge.  Americans will once again have jobs that pay decent wages, not the McDonald’s and Walmart type jobs.  The American middle class will be revived and strengthened. Those who immigrate to the U.S. will find good jobs and contribute to the Social Security and Medicare systems.

There will be more money available for the repair and maintenance of the crumbling U.S. roads and bridges, ports and airports.

There will be more money for research and development.  Currently there are companies that are set to manufacture vehicles that double as cars and airplanes. Of them all I like Gilo Industries’ Parajet SkyRunner the best.  Don’t ask me why, I just like the way it looks.

It’s a British company, but there are American companies also on the forefront of the revolution.

A major American manufacturing renaissance will lead directly to innovations that existed at one time only in science fiction.

That’s our brave new world.  And in this brave new world, we are under severe stress to change our concept of free trade. No country, no manufacturer has a right to dismantle our manufacturing base and ship it to other countries.

What happens to our proposal to require major manufacturers to make 51% of products intended for the U.S. market within the boundaries of the United States?  It will gain an even stronger headwind. There will be less economic reasons to oppose such a requirement

We will protect our manufacturing because it is not only the industries that we shall be protecting, it is the future of our children and the future of Americans yet to be born.

And this takes us back to what we have been suggesting in this blog all along: a revolution in economic thought, specifically in the way at we look at manufacturing.

Footnote:  Historically, according to Tyler Duden in What Pickety Didn’t Say…about Economics:  “Britain had the most protected economy in the capitalist world in the late 18th and the early 19th century. Much of this protection was provided in order to promote British manufacturers against superior foreign competitors in Europe, the Low Countries (what are Belgium and the Netherlands today) in particular.

“The US went even further. Taking inspiration from British protectionist policy, Alexander Hamilton, the first Treasury Secretary of the US (that’s the guy on the ten-dollar bill) developed a theory called the ‘infant industry argument’ – the view that the government of an economically backward nation should protect and nurture its young industries until they ‘grow up’ and can compete in the world market. Hamilton died in 1804 in a pistol duel, but the US adopted protectionism in the 1820s and remained the most protected economy in the world for most of the next century.”

Protectionism was the correct American trade posture in those days, it is the correct posture once again.  But with a very, very important twist.  Today we will encourage all nations in the world to protect their manufacturing sectors.  America will not preach free trade outside the U.S. but practice protectionism at home. We will not be the world’s number one hypocrite.

If nearly all countries protect their manufacturers by requiring that most products sold in their countries are made within their territories, the result will be a world-wide boom in manufacturing and construction the world has never seen – ever.

(You may contact the author by email at lumbacesar@gmail.com and by Twitter at @morningcall11.)

 

 

 

Employnomics – The Antidote to Globalization

By Cesar Fernando Lumba

The English Industrial Revolution commenced in late 18th century, some say earlier, and by the end of the 19th century it was well spent. America had become a muscular superpower and had taken over. But America’s reign has not been without any challengers. The Japanese threatened to overtake us at the end of the last century, and now the Chinese are being predicted to overtake us at some point in this, the 21st century. And after China, there’s India waiting in the wings.

And who knows what comes after that?

Let me introduce you to the concept of Entropy (From Google).

en·tro·py
ˈentrəpē/Submit
noun
1.
PHYSICS
a thermodynamic quantity representing the unavailability of a system’s thermal energy for conversion into mechanical work, often interpreted as the degree of disorder or randomness in the system.
2.
lack of order or predictability; gradual decline into disorder.
“a marketplace where entropy reigns supreme”
synonyms: deterioration, degeneration, crumbling, decline, degradation, decomposition, breaking down, collapse;

Entropy is a concept found in thermodynamics. Yes, I know. I was terrified of the term thermodynamics while in college. Thermodynamics, however, is a very simple concept. It is the science of heat. And this science says that energy or heat tends to dissipate into its surroundings, or environment.

Thus, if you boil water in a casserole and leave the casserole alone, the heat will dissipate into its immediate surroundings and eventually the air in the room and the casserole and the water will all have the same temperature.

The second rule in thermodynamics is that once energy or heat is lost, it is gone forever.

How does this relate to our discussion of Economics, or more appropriately, Employnomics?

It is exactly the reason why economic superpowers rise and fall.

At the beginning of its industrial revolution, a great country reaches the critical mass of energy or heat. Just as some ladies are hot, a great country becomes superhot. Its heat radiates, its economic engines are working full time and in full throttle. It is the envy of the whole world. Once the heat slows down, the heat is transferred to its surroundings and both its surroundings and the once-great country cool off.

That is what happened to England and what is happening to America, and what is happening to Japan.

There is another law in the universe, however, and that is, nothing that is lost in one area is completely lost. It shows up in another area. That’s because the universe is a closed system.

So the heat that is lost in America is enough to light a fire in China and China itself is now generating its own super heat. Japan’s lost heat, or energy has also dissipated into China, making the Chinese energy really, really super hot.

And how is this heat, this energy lost from the U.S. and transferred to China? This has been accomplished through the price mechanism.

Cheap goods. Yes, the Chinese can make goods of a quality similar to America’s and Japan’s at much cheaper prices.

It’s all about the price.

It’s the way the cookie crumbles.

Nobody has questioned this process through the centuries. Until now.

Based on the reaction of thousands of readers of this blog, there are a lot of Americans and many in foreign countries, who are rebelling against the idea that through economic entropy, economic energy must be transferred from the advanced countries such as the U.S., Europe, Japan, Canada and Australia to China and the developing world.

Why must development of the developing world be at the expense of the advanced albeit aging economies?

Why can’t economic development take place with the developing and advanced economies marching in lockstep?

It can be. And the way to accomplish this is to change the focus of economic planning.

Today, economists see cheap goods as the way to spread the wealth and the good life around. The cheaper the goods, the more people can afford to buy the things that they need to live a good, comfortable life.

This may be good in theory. But in practice, we have seen what happens when the world’s eyes are trained only on cheap prices. Countries such as China have booming economies while Europe, the United States, Australia go into recession.

The fallout from such recessions are serious drawbacks from which many in the U.S. and in Europe can never recover without dramatic intervention. And without that intervention the human cost is too steep.

Enter Employnomics, or Employment Economics. This economic theory posits that employment stability is the single most important factor in economic planning. The theory posits that countries have a right to manage their economies in a way that protects their citizens from wholesale job losses that destabilize their societies. And this right includes the right to insist that products intended for sale in their markets must be made inside their territories so that their citizens can keep their good-paying manufacturing jobs.

We have proposed a new American doctrine: 51% of all products made by major manufacturers intended for sale in the United States and its territories must be made in the United States. The other 49% can be made anywhere else for all we care; they can in fact be made in Timbuktu.

And if every advanced country adopts the same or a similar policy, the economic entropy of advanced countries in Europe, in the Americas and in Australia will be halted and eventually reversed.

China and other developing countries will still be able to grow, but their growth will be tempered and be less dislocating for the countries that they are currently driving out of business.

Would such a system not lead to a global recession, a depression even? Well it would if the proposed new American doctrine is adopted overnight. We are not recommending such a course. We feel that there must be a transition period of 5, 7 or 10 years, depending on the complexity of the manufacturing processes involved.

We will give multinational companies such as Apple, GE, etc. enough time to reopen the U.S. plants that they abandoned in America during the mass exodus of manufacturing to China and other countries. Chinese, Japanese, Korean, etc. companies will have the same amount of time to transition some of their manufacturing operations to the U.S.

Will this not lead to higher prices? Of course it will, but it is not such a bad thing. The greatest threat to the world economy, according to Nobel prize-winning economist Paul Krugman is deflation, not inflation. So some inflation is not necessarily a bad outcome.

Besides, with an anticipated more widespread use of robotics, the impact of higher U.S. labor costs will be minimized.

Finally, because of competition companies that manufacture in the U.S. will not be able to raise their prices too significantly and will likely absorb their higher costs, which means that their profits will be reduced.

And that’s not a bad thing. Currently, because of cheap products from China and other countries, the Wall Street darlings are reporting unbelievably huge profits and the CEOs and other plutocrats are getting a bonanza through high salaries and huge stock options. While the middle class ranks are thinning because they are being pile-driven below the poverty line.

This country must stop producing super-rich individuals and families and concentrate instead on bolstering the middle class by raising people out of poverty.

And the only proven way to do this is by giving Americans a chance to earn high-paying manufacturing jobs. And, may I add, construction jobs that will surely be created because of the factory building and renovation boom that will occur all over this land.

(The author may be reached at lumbacesar@gmail.com. He occasionally tweets as @morningcall11.)

There’s gold in dem dar hills

By Cesar Fernando Lumba

SCOOP

The latest good news about Nevada: Tesla Motors, which builds all-electric fast cars in California, has decided on Nevada as the site of its gigafactory that will build the next generation of lithium batteries for cars.

In line with its desire to build cars that will retail for under $30,000, Tesla has broken ground in Silver Peak, Nevada, a tiny community of about 100 residents, and by far the biggest source of the chemical lithium in the United States.

Silver Peak is equidistant from both Reno and Las Vegas. It is 200+ miles south of Reno and 200+ miles northwest of Las Vegas. Thus, the two major cities of Nevada stand to benefit almost equally from the expected growth explosion of Silver Peak over the next few years.

The Tesla gigafactory, when completed, will have cost $5 billion and at its operational zenith will employ up to 6500 workers mainly in the Reno, Nevada area. It promises to usher in a new era of green energy and transform the global energy industry into renewable and clean energy and away from the polluting global fossil fuels based industry.

What does this mean for you and me? If you can, find a way to invest in Nevada.

Whether it’s real estate, or autos, or Wall Street stocks, or clean energy resources, if you can find a way, get in on the action NOW.

Already, a company in Vancouver, B.C. is hastening its plan to build its own lithium battery manufacturing in the Silver Peak area. An echo of Silicon Valley appears to be in the works, but instead of high-tech communication, computing, software manufacturing and social media companies proliferating in and near Silver Peak, a slew of green energy companies are expected to congregate there in the future.

Nevada is fast becoming the country’s center of solar energy production, if it is not as yet, and is also attracting massive interest in wind and thermal energy production. With the expected start of the Tesla lithium factory operation in 2017, made technologically possible through a partnership with Panasonic Company, Nevada is expected to become the biggest player in clean and renewable energy in the U.S.

Nevada, as you know, is the biggest producer of silver in the U.S., which is why it is known as the Silver State. Unbeknownst to most people, Nevada is also one of the biggest if not the biggest producer of gold in the country.

Now, lithium – the new gold – will be mined and converted to the most powerful and biggest batteries in the world.

For a state that is known for gambling and prostitution, how big is this coup?

Again, if you have money that you need to park somewhere, invest it in Nevada.

I am already thinking of repositioning some of my assets in Nevada.

(Cesar Fernando Lumba tweets as @morningcall11. He also has a facebook account under the name Cesar F. Lumba.  He is grateful for all the attention that this blog is generating. If you plan on having in-depth conversations with Mr. Lumba over the Internet, he can be reached at lumbacesar@gmail.com.)

 

Modern Fairy Tales

By Cesar Fernando Lumba

There was a time, when only the true scholars were being published, we could trust the books we read were actually giving us the right information. Today, with the explosion of print media and the virtual flooding of the cloud – cyberspace – with opinions and so-called “facts” from the unschooled, uncouth and unorthodox, it is often difficult to discern who is telling the truth and who is giving us BS.  No, I don’t mean Bachelor of Science.

Because of the Internet, and because of the explosion of print media, we are now being hammered and blindsided by everything from philosophical treatises to fairy tales.

Let me tell you, today, about the fairy tales.

Fairy tale number one: There is a free market on the global stage. Many of our leaders tell us that there is such a thing as an international free market.  The truth? It’s an unfair and merciless jungle out there.  Countries such as China are restraining trade through currency manipulation, through banning of competitive businesses, through the ban on exports of rare earth metals, through price undercutting, through the theft of trade secrets, etc.

Many U.S. politicians believe the dictum, “let the markets decide,” and this has led to the theft of our manufacturing and its transfer to China and some other countries.  China and those countries restrict our movement in their markets while we let them into the American market to do as they please, under the excuse of “letting the markets decide and not letting the U.S. government interfere with the process.”

The result is that the U.S. government is handcuffed from interfering with the process of closing factories in the U.S. and opening up factories in China and other countries, even as those foreign manufacturers  turn around and sell their products in the lucrative American market.

It’s not right, it’s not fair to our children, yet the U.S. government is powerless because the strong lobby for a “free international market” has U.S. legislators and even U.S. presidents in their pockets.

The sooner we as a country realize that the free international market is a mirage, the sooner we will be able to address the number one economic problem of the U.S. – the loss of manufacturing jobs to foreign countries.

Fairy tale number 2:  Countries that tax their people heavily discourage innovation, investments and industry. Well, what do we know?  Canada has just surpassed us in terms of standard of living and per capita income.

The Canadians are heavily taxed because their country is a quasi-welfare state. But instead of being discouraged by high taxes, the Canadians are happily doing their part in making their country a model of good and effective governance and responsible citizenry.  Canadians, far from being discouraged by higher taxes, have one of the highest productivity levels in the world.

Higher taxes would also mean that the U.S. will be able to modernize its infrastructure.  We will have modern roads and bridges and bullet trains and modern, renovated airports.  We will be competitive with China, our number one rival currently, and which is poised to surpass us economically.

Fairy tale number three: Welfare states are doomed from the start because of the high burden imposed on their citizens.  This fairy tale has a celebrated modern-day philosopher, Ayn Rand, who claims that the movers and shakers of this country – the top 1% – are carrying a tremendous load and if that top 1% simply moves, or shrugs, the world would fall with a loud thud.

Well, what do you know?  The Scandinavian countries tax their people to the hilt in order to finance a welfare state that gives their people security from birth to retirement and yet the Scandinavians are some of the happiest people in the world and have per capita incomes that are significantly higher than the American per capita income.

People in the United States are struggling in the midst of record GNP levels. Why?  Because nearly all the record-level income increments are going to the top !%, while the middle class is feeling the downward pull of insecurity in their lives, and the poor are getting poorer.

We have to tax the top 1% – top 5% – more heavily to bring the national budget closer to balance.  Those people don’t create jobs in the U.S. – they create jobs in China – and those whose income comes primarily from investments are not contributing to American productivity.

The stock markets are at record levels, the ultra-rich are getting richer, yet they are avoiding paying taxes in the U.S. by locating their companies and operations outside the country.

Fairy tale number 4:  If we let the principle of comparative advantage work on the international stage, it will be better for everybody because products will be manufactured efficiently and each country will produce only the products that it has an advantage in producing.

This is a fairy tale because there is a country – China – that has a huge, insurmountable advantage in labor costs, and this advantage trumps all other advantages and every country that competes with China loses its shirt.  Next, there’s India that is ready to fill in if the Chinese start losing their labor cost advantage.

The U.S. must reduce China’s absolute advantage by requiring that companies that manufacture in China must manufacture some of their products intended for the U.S. market in the U.S.

We should make this a condition for those companies to continue marketing in the U.S.  If those companies fail to do so within a reasonable amount of time – five, seven or ten years – those companies’ products will be slapped huge tariffs that will render such products un-competitive in the American market.

Fairy tale number 5: Illegal immigrants are a drain on the U.S. economy. Most serious studies show that illegal immigrants enrich our culture. They contribute to Social Security while not receiving benefits from the system.  They pay their taxes religiously.  They are keeping the farms in business, for without the migrant farm workers many American farms will either go out of business or curtail their operations substantially.

Motels, restaurants, markets and other businesses cannot make ends meet without low-cost illegal immigrant labor.

In addition, immigrants supply the U.S. with new young Americans and this delays if not reverses the aging of the American population.  You want to know who will prop up the retiring American seniors, the baby boomers who are retiring by the millions as we speak?  Look no further than the millions of young immigrants who have come to this country as children but are now of college-age and are ready to snap up the jobs that are being created but not being filled because Americans are not having enough children anymore.

Bottom line:  we need the immigrants to work the floors of the new factories that are sure to be set up as American manufacturing comes back in droves because of American sentiment for returning manufacturing to their rightful home:  in the industrial rust belt, in the suburbs of Pennsylvania and New York, in the resurgent southeast, in California, Oregon and Washington.

All over this land.

It is important that we disabuse ourselves of all these fairy tales.  We have to, if we are to move forward as a country, as a people, as leaders of the world.

(I welcome all comments, even ones that are meant privately only for my own eyes.  If you have comments that are meant only for me, shoot me an email at lumbacesar@gmail.com.)

 

Global Economy Concept Collapses

By Cesar F. Lumba

(Many of you have asked how you may contact our writers. Cesar Lumba’s email address is lumbacesar@gmail.com.  His facebook page is Cesar F. Lumba and his twitter hashtag is #morningcall11.  Jules Lombard’s email address is jlombard0306@gmail.com.)

A recent post in this blog, titled “There is No Global Economy” has not received as much notice as the more popular posts:  ”A Proposed New American Doctrine,” “The Giant Sucking Sound and the Rise of Employnomics” and “Was President Obama Taken for a Ride…”

But the evidence that there is no global economy has become more convincing, and it is time we revisit the concept of a global economy.

If there were a world economy, we would now be seeing – after nearly six years removed from the collapse of most economies in 2008 – an accelerated convergence of the world’s economies and most economies would be marching in lockstep or near-lockstep.  This is because of the equilibrium effect that an economy experiences when its sectors retool and recalibrate.

But the U.S. economy remains strong and resilient despite its high unemployment and Germany’s, France’s, Switzerland’s, China’s, Brazil’s, the Philippines’, Indonesia’s, India’s etc. economies are apparently insulated from the continuing turmoil in most economies of the world.

If there were a global economy, most economies (sub-economies?) would now have adjusted, but that is far from the case.

We don’t have a global economy as long as western economies can inflict great harm on their target economies.  Look at what’s happening to Russia. The western economies have placed sanctions on Russia and Russia’s economy has gone into a tailspin.  If there were a global economy, this would not be possible because sanctions on Russia would adversely affect the western economies also.

From David M. Herszenhorn’s article published in the New York Times, April 16, 2014:  ”While the annexation of Crimea has rocketed President Vladimir V. Putin’s approval rating to more than 80 percent, it has also contributed to a sobering downturn in Russia’s economy, which was in trouble even before the West imposed sanctions. With inflation rising, growth stagnating, the ruble and stock market plunging, and billions in capital fleeing the country for safety, the economy is teetering on the edge of recession, as the country’s minister of economic development acknowledged on Wednesday.

“Mr. Putin, who just lavished $50 billion on the Sochi Olympics, also must now absorb the costs of integrating Crimea, which economists and other experts say has its own sickly economy and expensive infrastructure needs. The economic costs have been masked by recent patriotic fervor but could soon haunt the Kremlin, as prices rise, wages stall and consumer confidence erodes.”

Mr. Putin got Crimea, but the Russian economy lost its ability to tackle its myriad economic woes.

Why do the pundits keep telling us there is a global economy?  Because the lords of industry have chosen to abandon the western economies’ workers in favor of low-cost, low-wage countries like China, India, Brazil and Mexico and have successfully justified the wholesale transfer of jobs as a natural consequence of a globalized economy.

“Hey, it’s the economy, stupid,” they seemingly tell us.

We blame the so-called global economy when the blame actually belongs to the lords of industry who manufacture in China at Chinese prices and sell in the U.S. and Europe at American and European prices.  It is greed masquerading as the profit motive that is responsible for the massive layoffs in the U.S. and European manufacturing sectors, but we are being led to believe that the culprit is the global economy.

Our sons and daughters are being told, “because of the global economy, you must learn to compete with the Chinese, the Indians, the South Koreans, etc. and therefore must do very, very well in school.”

Our kids have to do better in school, of course, but that is not the reason they no longer can find jobs in their home country.  The main culprits are outsourcing and offshoring.

At FoxConn, the world’s biggest electronics manufacturer, Chinese workers as young as 16 are employed and forced to work eighteen hours a day welding electronic parts together.  Many are contemplating suicide, some have in fact succeeded, because of the horrible working conditions. And they are grossly underpaid.

American, European and Australian industries do their manufacturing in China and some third-world countries because the cost of labor there is very low and there are no labor unions that protect the workers from exploitation.

It’s not and never was because of the boogeyman known as the “global economy.”

If American industry is pressured by Americans to bring manufacturing back to the U.S., it can be done overnight.  We have the factories here, albeit somewhat rusting from disuse, and it will be easy to retrofit the factories and even modernize many of them.

The U.S.-manufactured products will of course tend to cost more, but that’s OK because Americans will have jobs and will be able to absorb the additional costs.

The U.S. multinationals will see their U.S. profits plummet, but they will remain hugely profitable outside the U.S. because their products that are intended for international distribution will still be manufactured in China, India and other low-cost, low-wage countries.

Over the years, the same U.S. multinationals will learn to adjust their operations to allow for a greatly disparate mix of production costs in the U.S. and other countries.

This brings us back to the proposed new American doctrine.  We must insist that 51% of all products sold by multinationals in the U.S. are manufactured in the U.S.  The other 49% and products intended for international distribution can in fact continue to be manufactured outside the U.S.

If Europe, Australia, Canada, Japan and South Korea adopt a similar policy, manufacturing will head back to the fully industrialized countries and the youth in those countries will have good jobs once again.

The growth of developing countries will slow down, especially China’s and India’s, but that’s a good outcome, because the growth of those countries has come at the expense of the young people in the fully industrialized countries and the net result is a destabilization of the industrialized countries’ societies.

Here’s what we should all do.  Let’s create more noise out there.  Tell everyone you talk to that we are not going to take it anymore.  Nobody has a right to sell in the American market products that are made outside the U.S. if those products used to be made in America.  Free trade is no excuse for the wholesale abandonment of America by American multinationals.

If they want to continue selling in the lucrative American market, they must bring back some of the manufacturing we lost during the last few decades.

51% of products sold in the U.S. must be made in America

By C. Fernando Lumba

Based on the tens of thousands of comments this blog has received over the past 18 months, the blog post that has really struck a chord in most readers’ hearts is post number 3 out of 18:  ”A Proposed New American Doctrine.”

Most of the readers can’t seem to get enough of the ideas advanced in the post. Many have commented that it’s about time someone starts to speak for Americans who have seen their jobs shipped to China and other countries, who would fight for them and not be swept by the vortex of the intellectual current that assumes that the loss of manufacturing to China principally is predestined in American history.

The greedy among us claim that the flight of manufacturing to China and third-world countries is necessary because of the inevitability of a globalized economy.

We say that’s a lot of hot air!  What we mean to say is that it’s a lot of the stuff that accompanies hot air.  What we mean to say is that it’s baloney!

Nobody has the right to destroy manufacturing industries in the name of profit.  And the American multinationals have done just that.  Partly in pursuit of profit, and partly because they wanted to “punish” unionized labor in America, American multinationals packed up their gear and headed for China, Bangladesh, Mexico and other underdeveloped and developing countries.

To hell with American workers, they seemed to say, let them eat cake.  Yes, the American multinationals sounded very much like Marie Antoinette, who said that the dirt-poor and starving French people should just eat cake because there was a shortage of wheat in the years and months leading up to the French Revolution.  You know what happened to Marie Antoinette.

We do not advocate another French-style revolution or the beheading of America’s Marie Antoinettes.  What we advocate is a revolution in the minds and hearts of Americans.

These jobs that we are shipping to China and overseas are the jobs that our children and grandchildren would otherwise have.  And the multinationals don’t see anything wrong in that?

Obviously not.  In Steve Jobs autobiography, “Jobs,” he justified his choice of China as the country where Apple products would be made.  He wrote that China has many more engineers than the U.S.  That may be so.  We are not arguing with him on this point.  But why make everything in China?

Why can’t Apple make some of the products that hit the American market inside America?  We’re not asking for every single Apple product to hit the American market be made in America.  We’re only asking for 51%.

The effect will be more expensive Apple products in America.  So be it. Americans will be able to pay for the more expensive products because Americans will have better-paying manufacturing jobs, not jobs at McDonald’s and Walmart.

Not consistent with economic theories of most efficient use of capital? Maybe.  But who made those economic theories anyway?  Were they handed to us by an economic Moses who got the commandments in economic theory from someone up in the mountain?

The fact is, all these economic theories are man-made, which means they can be wrong.  The most efficient use of capital and resources is not achieved through the manufacture of the cheapest products.  For who would buy those cheap products if the markets have no buying power? They may be cheap, but if our young people have no jobs or have jobs that pay less than $10 an hour, they cannot afford to buy those products.

We need good jobs in America to maintain the buying power that we have. Currently Americans can buy up to 5 trillion dollars worth of goods and services each year.  If our young people do not find good jobs or become permanently or long-term unemployed or can find only McDonald’s and Walmart jobs, Americans will not be able to buy the super gadgets: the flying cars, the robots that do housework, etc. and the pace of economic activity will eventually slow down.

Americans, Europeans, Australians, Canadians, etc. must be protected and not endangered because they are the ones who will buy the high-tech products that are surely to be built in China and other Asian countries.

The first salvo in this battle to save the American economy and its workers is our proposal to adopt a new American doctrine.  And that doctrine states that all major manufacturers who wish to continue selling in America or to start selling here must make 51% of such products right here in America.

We will give those companies (foreign and multinational) five, seven or ten years, depending on the complexity of their manufacturing operations, to set up factories here.

We expect that the Europeans, as well as Australians and Canadians will follow our lead and install their own version of the American 51% doctrine. Even the smaller countries in Asia and South America and the progressive countries in Africa, will follow America’s lead and formulate a doctrine similar to America’s.

The result will be the return of some manufacturing to the industrialized world and the location of factories all over the globe, including in Africa.

This will lead to an equitable distribution of wealth all over the world, away from the Chinese and Indians and Koreans and into the coffers of countries like Uganda, Paraguay, Greece, Portugal, etc.

China will still likely emerge as the biggest economy in the world, but its ascent will be gradual and not sudden and destabilizing, which is what is happening now.

The U.S. will continue to be a strong country with a robust economy and whose people – the young people of today – will have good careers and fulfilling lives.

Who says the decline and fall of the U.S. is inevitable?  Only those who are willing to sacrifice the American economy in their pursuit of even greater wealth.

(To my readers: If you wish to send me a note, you may do so by emailing me at lumbacesar@gmail.com.)

 

 

 

Merry Christmas, Happy Holidays and Prosperity for All

By C. Fernando Lumba

In this season of goodwill and peace and light-heartedness, I wish you all a very merry Christmas, Hanaka, Kwanzaa, etc. and a prosperous New Year.

I also wish success for the two books written by my colleague, Jules Lombard. Jules has written two novels, the first two of a trilogy.

Sons, Daughters and Wine Tasters, published by Xlibris, is available on amazon.com, barnesandnoble.com, xlibris.com in both paperback and hardcover.  It’s also available in kindle format.

…And Soldiers, the second of the trilogy, published by Outskirts Press, is available on amazon.com, barnesandnoble.com and outskirtspress.com.  It’s available in paperback.

The two books are a great read for the holidays.  Check them out.

(If you wish to contact me for any reason, please email me at lumbacesar@gmail.com.  Thank you.)

 

 

 

There is no Global Economy

By C. Fernando Lumba


The leaders of business, of academia and of government are all telling us that we now have a global economy. Boy, are they all wrong.  If indeed there is such an animal as a global economy, these four pillars of an economy must be present:
1. Free movement of goods and services within the global economy.
2. Free movement of labor within the global economy.
3. Free movement of financial instruments.
4. Free movement of technology and raw materials.

I think you will agree with me that goods and services can now be produced all over the world and transferred almost anywhere without impediment. Score one for the “global economy.”

And I think you all know, as well as I do, that the financial instruments, such as stocks, bonds, mortgage notes, etc. can in fact move from one part of the world to other parts with ease. Score two.

In short, goods and services can and are being outsourced or offshored and therefore globalization applies in the case of manufactured products as well as services. Applies to financial instruments too. Investors in China can and do purchase U.S. government treasuries, U.S. bonds, stocks, etc.

Globalization exists for two of the pillars of the so-called global economy. But what about the other two pillars?

In an economy, labor can move from one place to another without impediment because labor tends to move where jobs are available. Does this condition exist in today’s so-called global economy? Not by a long shot. Americans, Europeans, Australians, etc., whose jobs have been shipped to China, cannot move to China to follow the jobs there.

And even if it were legal for them to move to China, would they do so? If you’re an American would you want to work in China for ten bucks a day? If you’re an Indonesian willing to work for ten bucks a day, would the Chinese allow you to move to their country? Of course not.

There is no economy, my friends, if there is no freedom of movement of labor. Movement of labor is co-equal to movement of goods and services in importance in any economy.

The fourth pillar, movement of raw materials and technology is not free within the so-called global economy. The Chinese have cornered rare earth metals and other important metals and are controlling their movement. The oil cartels can, on a whim, stop the flow of oil and gas.

Technology is closely guarded and is not normally shipped from country to country. A manufacturer in China, in other words, cannot just go up and buy technology from an American company and start manufacturing. Technology transfers occur only under strict licensing agreements.

In fact, technology transfers are frowned upon by governments.

So what is the bottom line? The bottom line is we are being deceived. The leaders of industry, government and academia are telling us that there is a global economy and we all have to live by the new rules when the reality is there is no such thing as a global economy.

What we have are national economies that must fend for themselves because two of the four pillars of their economies have been globalized: the sourcing of goods and services, and the sourcing of financial instruments.

Why have the leaders of U.S. industry, commerce and government sold us on the concept of the global economy? Because they want us to accept the new world order. They want us to accept the fact that they ship our jobs to China and elsewhere and there’s nothing we can do about it. They have, in a nice way, flipped a finger at us.

They want us to accept the fact that at age 50 we must go back to school and learn new trades so we can get jobs in industries that do not even exist in America. In other words, they want us to waste our time and money learning new technology and other academic courses in night school so that we can prepare for jobs that do not yet exist in America because such jobs are all in China, India, Mexico, South Korea, etc. and those countries are not about to ship them to America.

In the 1970’s, there were loud noises coming from the leaders of industry that heavily criticized the American labor movement for being an overpaid, underworked bunch.Some of that criticism was well deserved. American unionized labor was indeed pampered to the extent that they rendered U.S. manufactures uncompetitive.

But that was not entirely the fault of labor. The American experiment required the strengthening and bolstering of the American middle class. That was a part of the deal. And the middle class would not be attainable for most Americans if the unionized American labor were not allowed to thrive.

What American industry should have done was to accelerate the use of robotics in combination with unionized labor to make American-made products more price-competitive. Instead, American industry abandoned American labor and shipped everything they could possibly ship to other countries.

To hell with American workers, the CEOs of the large, medium-sized and small manufacturers seemed to have hollered in unison.

This, dear readers, is why our young people today can only get jobs at Walmart, Target and McDonalds. It is why people in mid-careers are selling real estate and insurance to each other part time. It is why multi-level marketing organizations are mushrooming all over this great land, with armies of underpaid and underappreciated workers hawking vitamins to each other and getting $4.37 checks from time to time.

The CEOs have abandoned American manufacturing workers. It is time we convince them that if they want to continue selling in the American market, by far the most important market in the universe, they have to play by our new rules.

And this is rule number 1: The CEOs must find a way to make things in America again, but this time cheaper with the use of robotics combined with human labor.

The CEOs must realize that there is a strong sentiment for what I call “The Proposed New American Doctrine.” This is the Doctrine that states: All major manufacturers that sell in the American market must make 51% of their products sold in the U.S. within the boundaries of the United States of America and its territories.

The manufacturers will be given five, seven or ten years – depending on the complexity of their manufacturing processes – to set up plants and operate those plants in the U.S. or face huge tariffs that will render their products uncompetitive.

The GE’s, Nikes, Apples, etc. of this world are now on notice that because their products are made in China and other countries, they are in reality foreign-made products and can be tariffed out of competitiveness in America.

We are Americans and we own the American market. We can set any rules at will when dealing with foreign-made products.

Rule No. 2: We will disabuse ourselves of the concept of a global economy.There is no such thing. Not yet. If there ever is, it will not be in this century.

When the rest of the world’s standard of living catches up with the U.S. and Europe’s, and national governments agree to being a part of a world government, a true global economy will be within reach.

Until then, for us Americans there is only one economy that matters: the American economy. The Europeans, Australians and Canadians must also think this way about their own economies.

If they don’t the future will be bleak for their young citizens and future generations of citizens.

The patience of today’s youth in the industrialized world that consists of the U.S., Europe, Australia and Canada, is being tried. It is being pushed to the limit.

That part of society that consists of young people can and will explode.  I can almost see a time when young people in the industrialized world are marching in the streets, Egyptian-style.

(If you wish to email the author, send it to lumbacesar@gmail.com.  He will be glad to have a conversation with you.)

 

Fed Up! The American Consumer is fed up

By Jules Lombard

I never once thought that we can complete our journey in my lifetime.

I thought that we would plant seeds now and years later the seeds will germinate. And much, much later we will see our ideas flowering.

Instead, it’s happening fast, it’s accelerating. The idea that we have been hammering on for more than a year – that we must manufacture all kinds of products here in America for our own consumption – is fast gaining traction.

I was watching TV, just regular TV, relaxing in front of what was once described as the boob tube, when the screen showed the ad for Moto X, a smart phone manufactured by Motorola, which according to the ad is now owned by Google.

The ad said: “Moto X, assembled in the U.S.”

Do I see and hear a standing ovation? Moto X is making smart cell phones in the U.S. because there is a growing demand for cell phones assembled in America.  All over the Internet, on radio, in newspapers, Americans are demanding that products must be manufactured in America once again.

And it’s profitable to make things in America again.  Google stock recently hit $1000 per share.  The first time any U.S. stock ever hit that milestone. Do you think that had something to do with Google’s moves being met with approval by Wall Street?  Of course it does.  I can see Moto X smart phones selling so briskly the product will be back-ordered.  If it doesn’t happen this Christmas shopping season, it will happen shortly thereafter.

From Minnesota comes this news item: “Sep 29, 2013 – U.S. Textile Plants Return, With Floors Largely Empty of People … from China because customers had been asking for more American-made goods. … The American textile and apparel industries, like manufacturing as a whole, …. would buy newly mass-produced Singer sewing machines and often set up …”

For those willing to relocate to Minnesota and learn how to use sewing machines, there are lots of jobs waiting for them.

Americans are the new awakened giant. We knew all along that losing jobs to China would mean our children and their children would no longer find good jobs in America. What is different now is that we are mad as hell and screaming from the rooftops. We are not going to take it anymore.

People from all over the world steal our jobs away, and then turn around and sell their cheap products to us. All with the help of CEO’s whose only interest is in burnishing their credentials by making things cheap in China and selling things in the U.S. at U.S. prices. Of course, their companies would make money hand over fist. Of course, the CEOs would look like geniuses. Of course they would get their multi-million bonuses at the end of the year, year after year after year.

The only sad sack in the process is the American worker, who after losing his manufacturing job is now told that he has to go back to school because the only jobs that are available are high-tech jobs that he will never qualify for because at 42 he is looking at another eight years in college, after which he will be 50 and considered too old by headhunters and human resources people.

The gig is up, boys and girls. Not for us but for the exploiters in our midst.

They must manufacture here in America again, or there will be consequences. Such as high tariffs. Such as the rejection of products imported from other countries in favor of products made (assembled) in the U.S.

It’s not just in textiles or cellphones, or PC’s – Macintosh computers made in Reno, Nevada are coming. It’s also in cars. Chrysler advertises cars imported from Detroit. A smart bait-and-switch, capitalizing on Americans’ fondness for imported cars.

The pressure is on all sorts of manufacturers to resume manufacturing in the U.S. again. And it’s not just because of economic nationalism. It’s about quality too.

Recently, the poisoned dog food that killed a lot of dogs in the U.S. were traced to China. Toys, garments, furniture, processed foods from China have been shown to have large concentrations of lead and bacteria and, many suspect, fecal matter.

I bought a notebook computer from Tiger Direct.com two months ago. The product was made in China and carried a 90-day warranty. The Chinese company, which has an office in the U.S., is making me jump through hoops for them to honor the warranty. After using the product for a month, I had noticed that the A-S-D-F keys and surrounding keys on the keyboard were no longer working.

I have jumped through hoops. So far no luck. If the company does not honor the warranty I will send a complaint letter to the Nevada Consumer Affairs office.

At Best Buy, at Office Depot, at Staples, at Fry’s, at Wal-Mart, the sales clerks will always try to sell you an extended warranty because they point out, correctly, that the Chinese electronic products do break down. If you have a PC or laptop that is made in China, you must have another laptop on standby. Because your main laptop will break down, often at the worst possible time.

We must make things in America again. We have to do it so our children and their children will have good jobs again – not McDonald’s and Wal-Mart jobs – but also because we now know that making things in China means we have to put up with all sorts of quality control problems.