We're sending all our money to China!! - But we aren't.

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  • Keith Wilson
    Trying to be reasonable
    • Oct 1999
    • 64123

    We're sending all our money to China!! - But we aren't.

    Very interesting analysis by the San Francisco Federal Reserve of what Americans actually spend their money on and where it comes from. This reinforces something I've been saying for years, that the conventional wisdom about the death of US manufacturing is dead wrong. No, everything we buy doesn't come from China, not by a very,very long shot. Source here.

    A partial quote (emphasis added):

    Table 1 shows that, of the 11.5% of U.S. consumer spending that goes for goods and services produced abroad, 7.3% reflects the cost of imports. The remaining 4.2% goes for U.S. transportation, wholesale, and retail activities. Thus, 36% of the price U.S. consumers pay for imported goods actually goes to U.S. companies and workers.

    This U.S. fraction is much higher for imports from China. Whereas goods labeled “Made in China” make up 2.7% of U.S. consumer spending, only 1.2% actually reflects the cost of the imported goods. Thus, on average, of every dollar spent on an item labeled “Made in China,” 55 cents go for services produced in the United States. In other words, the U.S. content of “Made in China” is about 55%. The fact that the U.S. content of Chinese goods is much higher than for imports as a whole is mainly due to higher retail and wholesale margins on consumer electronics and clothing than on most other goods and services.




    "For a successful technology, reality must take precedence over public relations,
    for nature cannot be fooled."

    Richard Feynman
  • PeterSibley
    Senior Member
    • Dec 2001
    • 70993

    #2
    Re: We're sending all our money to China!! - But we aren't.

    I don't think that is going to very well accepted Keith ,it's not the favourite story .
    '' You ain't gonna learn what you don't want to know. ''
    Grateful Dead

    Comment

    • Ross M
      Member #2814
      • Jan 2001
      • 2864

      #3
      Re: We're sending all our money to China!! - But we aren't.

      Fascinating read, thanks for posting it Keith.

      When the nattering nabobs are going at it, I find something like this refreshing:

      Comment

      • jack grebe
        Misunderstood
        • Feb 2001
        • 13530

        #4
        Re: We're sending all our money to China!! - But we aren't.

        Originally posted by PeterSibley
        I don't think that is going to very well accepted Keith ,it's not the favourite story .
        No it's not...........


        BUT, if this is the case, Why are so many Americans out of work, one finds more
        "made in China" labels than "made in the USA". and the quality of life is thriving in China,
        while the US economy is spiraling downward?????????


        Believe the BS if you want though.
        Originally posted by George Jung
        Don't under-estimate Jack. He's purty damned talented

        Comment

        • ramillett
          Senior Member
          • Oct 2007
          • 1623

          #5
          Re: We're sending all our money to China!! - But we aren't.

          In my companies case , a Chinese company came in and low balled prices to my customer . Two years later the Chinese own them , and all new projects are built in China at a higher price then we quoted . Now they are an American company importing from China .

          Comment

          • Lew Barrett
            Landlocked
            • Dec 2005
            • 30035

            #6
            Re: We're sending all our money to China!! - But we aren't.

            Although....a company here in the Northwest (Loud Corp) who were among the first major US pro audio manufacturers to shift production to China have recently announced they are bringing it back for their loudspeaker line among other things. In the grand scheme it won't be a huge deal, probably creating a few hundred skilled and semi-skilled factory jobs. But it is interesting to note. They believe it will give them better control over quality and will return a marketing edge. I suspect they are correct in that.

            It is an interesting story Keith, and something of a surprise to me. Thanks for posting.
            One of the most enduring qualities of an old wooden boat is the smell it imparts to your clothing.

            Comment

            • Keith Wilson
              Trying to be reasonable
              • Oct 1999
              • 64123

              #7
              Re: We're sending all our money to China!! - But we aren't.

              BUT, if this is the case, Why are so many Americans out of work . . .
              The immediate cause is not enough demand in the US, where we buy most of our stuff from. The larger cause is that we're slowly recovering from a financial panic caused by the bursting of an asset bubble, and the base cause was stupid and irresponsible policy plus a great deal of greed, and the manic-depressive nature of underregulated capitalism. Very little of that has to do with the Chinese.

              . . . one finds more "made in China" labels than "made in the USA" . . .
              It depends on where you look. In the Unnecessary Plastic Objects department of Wal-Mart, yes, it's mostly from China. But if one takes a larger view, the Fed's figures show otherwise; that's the whole point of the thread. Only 2.7% of all goods sold in the US are made in China, and less than half of that is the cost of the imported goods; the rest is transportation and US costs. (The US is running a large trade deficit with China; that's cause for concern.)

              . . . and the quality of life is thriving in China . . .
              Playing catch-up is far easier than moving into new territory.
              GDP per capita, (PPP): US: $47,200, China: $7500 (source)
              Average income per capita (PPP again) US: $23,400, China $3000 (source)
              I'd sure rather live here.

              while the US economy is spiraling downward?????????
              We have plenty of problems, but "spiraling downward" is nonsense.




              Believe the BS if you want though.
              Complex things like the economy are best understood when described by numbers. Accurate numbers are essential if you want to know what's really going on. To the best of my knowledge, the Fed is as reliable a source of economic data as one can find anywhere. In this case, the conventional wisdom appears to be the BS.
              Last edited by Keith Wilson; 08-11-2011, 08:13 PM.
              "For a successful technology, reality must take precedence over public relations,
              for nature cannot be fooled."

              Richard Feynman

              Comment

              • stevebla
                Senior Member
                • Apr 2011
                • 382

                #8
                Re: We're sending all our money to China!! - But we aren't.

                Originally posted by jack grebe
                No it's not...........


                BUT, if this is the case, Why are so many Americans out of work, one finds more
                "made in China" labels than "made in the USA". and the quality of life is thriving in China,
                while the US economy is spiraling downward?????????


                Believe the BS if you want though.
                Quality of life sucks in China.

                Comment

                • Bruce Hooke
                  Senior Member
                  • Mar 2000
                  • 14297

                  #9
                  Re: We're sending all our money to China!! - But we aren't.

                  Very interesting. Thanks.

                  Two thoughts do occur to me:

                  1. If housing is included in "goods" then a significant chunk of the "goods" that are made in the US might be homes, something we have not yet figured out a way to manufacture overseas on any sort of large scale. That is great for all the people who work in construction but does not do that much to provide jobs for the people who used to work in factories.

                  2. The US component of the goods made in China would appear to be largely in transportation and retail. I think you can earn a halfway decent income in the transportation sector but the quality of life tends to be pretty bad and for the most part the income is not as much as most good factory jobs, at least I don't think so. Retail jobs are, of course, notoriously low-paying.

                  Comment

                  • hanleyclifford
                    low information voter
                    • Jun 2010
                    • 9272

                    #10
                    Re: We're sending all our money to China!! - But we aren't.

                    Excellent red herring, Keith. Focusing on US expenditures for Chinese products and the data in that report would make us believe all is well and we just need to be patient, spend more money, trust our Fed, and we are still in the economic catbird seat. Actually, those who are involved in the China trade are doing better than most (the add-on costs the report speaks of). As a former accountant I continue to be impressed by your scholarship abilities.
                    Conferences at the top level are always courteous. Name calling is left to the foreign ministers. (Averell Harriman)

                    Comment

                    • Keith Wilson
                      Trying to be reasonable
                      • Oct 1999
                      • 64123

                      #11
                      Re: We're sending all our money to China!! - But we aren't.

                      I didn't say all was well; quite the opposite, in fact, nor that we were in the "economic catbird seat". I was making a very narrow point: the common idea, often expressed here by both left and right, that we don't make anything here anymore, we buy it all from China- does not correspond to the real world. It's just dead wrong.


                      A little more data:


                      "For a successful technology, reality must take precedence over public relations,
                      for nature cannot be fooled."

                      Richard Feynman

                      Comment

                      • B_B
                        Banned
                        • Sep 2001
                        • 6506

                        #12
                        Re: We're sending all our money to China!! - But we aren't.

                        Originally posted by Keith Wilson
                        The immediate cause is not enough demand in the US, where we buy most of our stuff from. The larger cause is that we're slowly recovering from a financial panic caused by the bursting of an asset bubble, and the base cause was stupid and irresponsible policy plus a great deal of greed....
                        I suspect that a larger part of it is due to increased efficiency in manufacturing - i.e. (I'm making these numbers up) it used to take 50 man hours to build a widget, now it takes 5. While our market has increased from 100 widgets to 200, we still had to lay off a significant portion of our workforce.

                        Comment

                        • Keith Wilson
                          Trying to be reasonable
                          • Oct 1999
                          • 64123

                          #13
                          Re: We're sending all our money to China!! - But we aren't.

                          I suspect that a larger part of it is due to increased efficiency in manufacturing
                          I was speaking of the causes of current high unemployment. Efficiency in manufacturing (more stuff less labor) has been increasing rapidly for the past 200 years. I've done my bit.
                          "For a successful technology, reality must take precedence over public relations,
                          for nature cannot be fooled."

                          Richard Feynman

                          Comment

                          • PeterSibley
                            Senior Member
                            • Dec 2001
                            • 70993

                            #14
                            Re: We're sending all our money to China!! - But we aren't.

                            Originally posted by Braam Berrub
                            I suspect that a larger part of it is due to increased efficiency in manufacturing - i.e. (I'm making these numbers up) it used to take 50 man hours to build a widget, now it takes 5. While our market has increased from 100 widgets to 200, we still had to lay off a significant portion of our workforce.
                            That is certainly a major cause of unemployment in semi skilled manufacturing . Check out you nearest fully computerised 2 man sawmill with output of more than a 100 man mill in 1970.
                            '' You ain't gonna learn what you don't want to know. ''
                            Grateful Dead

                            Comment

                            • hanleyclifford
                              low information voter
                              • Jun 2010
                              • 9272

                              #15
                              Re: We're sending all our money to China!! - But we aren't.

                              Yes, Keith, the "narrow point" is very well made, and well taken. But if we may continue the "widget" metaphor, the fact that the widget's value is doubled or even tripled in the US does not undo the fact that it was "made" in China. Remember when Ross Perot spoke of "the great sucking sound of US jobs going overseas"?
                              Conferences at the top level are always courteous. Name calling is left to the foreign ministers. (Averell Harriman)

                              Comment

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