The Economy, Oil prices, and Globalization

[Drew Dowdell]

This thread is for a lively debate on what is likely the biggest issue we face today.

I keep very up to date on the economy especially in the housing/mortgage market. Today I found this gem:

Has anyone figured out that higher crude oil prices could be a result of globalization’s horrendous inefficiency? Now there is a waste of oil. The effect on the US Economy has been a backfire, as many higher shipping and distribution costs are directly attributable to the globalization theme. If the US built what it needed in regions near where the products were delivered by people who used their own output, then less energy would be wasted in transport and prevalent wages would enable their purchase. That is logic too simple for total moron US economists, the stupidest breed of two-legged animals on the planet.

[siegen]

Transportation does use a lot of resources. We need to convert all the China barges to hydrogen power!

[CSpec]

If it was cheaper to build stuff closer to the source of the materials it would be done! People seem to really believe that markets are just grossly inefficient.

[Drew Dowdell]

If it was cheaper to build stuff closer to the source of the materials it would be done! People seem to really believe that markets are just grossly inefficient.

OOOOOOrrrr...... the cost in dollars did not previously match the cost in barrels of oil. Remember that China, India and a few others massively subsidized fuel.

Back when we were paying 2.00 per gallon the Chinese were paying 50 cents <aprox> per gallon with the government picking up the tab for the rest.

[CSpec]

OOOOOOrrrr...... the cost in dollars did not previously match the cost in barrels of oil. Remember that China, India and a few others massively subsidized fuel.

Back when we were paying 2.00 per gallon the Chinese were paying 50 cents <aprox> per gallon with the government picking up the tab for the rest.

Well they still do subsidise fuel to a large degree--but even still why would companies deliberately not minimize their costs?

[Drew Dowdell]

Well they still do subsidise fuel to a large degree--but even still why would companies deliberately not minimize their costs?

The subsidies are being phased out.

What I'm saying is the true costs were not there when the Chinese and Indian governments were picking up part of the tab.

When I worked at the textile company. We would source fabric from Vietnam, ship it to Pittsburgh for cutting, ship the cut pieces to El Salvador for sewing and packaging, and then shipped back to Pittsburgh for warehousing and distribution.

At $2.00 a gallon in the US and 50 cents a gallon in Asia and 75 cents per gallon in S. America, that trip might make sense. But now we're in the era of $4.00 a gallon gas in the US. Asia and S. America are easing back on their fuel subsidies. At what point does it no longer make sense???

[CSpec]

The subsidies are being phased out.

What I'm saying is the true costs were not there when the Chinese and Indian governments were picking up part of the tab.

When I worked at the textile company. We would source fabric from Vietnam, ship it to Pittsburgh for cutting, ship the cut pieces to El Salvador for sewing and packaging, and then shipped back to Pittsburgh for warehousing and distribution.

At $2.00 a gallon in the US and 50 cents a gallon in Asia and 75 cents per gallon in S. America, that trip might make sense. But now we're in the era of $4.00 a gallon gas in the US. Asia and S. America are easing back on their fuel subsidies. At what point does it no longer make sense???

The subsidies are being phased out? I thought China just increased the pegged price by 17% or something. OK I agree that costs are changing, but companies will respond. The piece you quoted sounded like the author wanted some sort of planned economy because corporations are inherently inefficient, which is not even remotely true.

[Drew Dowdell]

The subsidies are being phased out? I thought China just increased the pegged price by 17% or something. OK I agree that costs are changing, but companies will respond. The piece you quoted sounded like the author wanted some sort of planned economy because corporations are inherently inefficient, which is not even remotely true.

Globalized corporations are inefficient in terms of energy usage. The quote was referring to that rather than dollar efficiency. What has changed is the cost of the oil which was previously being artificially held down in the Asian countries.

It's a longer term phase out, but in some places the price doubled.

[balthazar]

Tho the cost of transportation is well up, take into the account the fuel cost per item; tens of thousands of item put in multiple shipping containers on a freighter, the per item cost of fuel may still be under a penny- where before it was hundreths of a penny.... or something along those lines, who has any figures??

There's a 'railroad' commercial running on radio that says considering payloads, a freight train gets something like 460 MPG (I forget the parameters of the figure, but the number is right there).

This 'surge' in transportation costs may well still be far below labor costs saved by shipping it around during manufacturing.

[loki]

economists rarely talk about what should be done, they typically talk about the status of the "environment" currently.

just remember that washington doesn't live in a supply demand idealism, west point doesn't teach econ as supply demand.

[CSpec]

economists rarely talk about what should be done, they typically talk about the status of the "environment" currently.

just remember that washington doesn't live in a supply demand idealism, west point doesn't teach econ as supply demand.

Economists talk about what should be done when it is not currently done. Any issue of The Economist is full of commentary on stupid government policy, such as the worrying trends towards protectionism. I have no idea what they teach at West Point, but my Econometrics textbook was written by a civilian instructor there and it was easily the worst text I have ever used.

[loki]

Economists talk about what should be done when it is not currently done. Any issue of The Economist is full of commentary on stupid government policy, such as the worrying trends towards protectionism. I have no idea what they teach at West Point, but my Econometrics textbook was written by a civilian instructor there and it was easily the worst text I have ever used.

i don't know of "The economist"... I was commenting on a portion of bookTV I saw. I prolly should have said that, sorry.

[regfootball]

i dunno. you'd still think the profit margins that a hollister top they sell for 70 bucks at the mall would not be adversely affected by having some college kid here making them instead of shipping them all over high hell.

translation, they exploit cheap labor elsewhere and whore out our economy here so some few people at the top of whatever are the ones that benefit.

with cars if they could ever figure out flexible production plants, they could regionalize plants and easily swing supply and demand for models and capacity and labor and save all those transport costs.

California seems to think they are king sht on every public issue yet look at all the cars they buy and how many auto plants are there?

if they want electric cars, then they should get off their ass and design and build em.

American flags, something we should never have to outsource. i guess people enjoy outsourcing our standard of livin.....er....globalization.

[Drew Dowdell]

Globalization is a means of enriching the rich at the expense of the middle class, but a good part of the blame lies with the unions forcing higher wages for laborers. I hear about the money a lot of these GM workers are bringing down and I'm thinking to myself "why would anyone go to 4 years of college to be an I.T. worker and get saddled with that debt when I could make more as a production line worker?"

[loki]

Globalization is a means of enriching the rich at the expense of the middle class, but a good part of the blame lies with the unions forcing higher wages for laborers. I hear about the money a lot of these GM workers are bringing down and I'm thinking to myself "why would anyone go to 4 years of college to be an I.T. worker and get saddled with that debt when I could make more as a production line worker?"

yeah, the unions had a good cause....in the 20s-...60s? now a days it's more of a burden.

[Sixty8panther]

Globalization is a means of enriching the rich at the expense of the middle class, but a good part of the blame lies with the unions forcing higher wages for laborers. I hear about the money a lot of these GM workers are bringing down and I'm thinking to myself "why would anyone go to 4 years of college to be an I.T. worker and get saddled with that debt when I could make more as a production line worker?"

That's a big part of the problem... but the unions, while harmful, can never

do as much damage as the other, deeper problems with our fine country.

For starters, eliminating the gold standard was a bad move.

[Drew Dowdell]

Oh geeze... not you too??

We could have stuck with the gold standard and watched as Europe and Asia wooshed passed us in the global economy.

[loki]

Oh geeze... not you too??

We could have stuck with the gold standard and watched as Europe and Asia wooshed passed us in the global economy.

maybe. but the debt we have would not be causing inflation...or devaluing the dollar so much. you can't just print money if it has to be backed by actually having that amount of gold. sorry, but nationalizing our money back in 1913 and then eliminating the gold competition in 33 was the worst thing to do. would you nationalize anything else in our country? you're against nationalizing the oil companies right?... how is nationalizing currency any different?

[loki]

Oh geeze... not you too??

We could have stuck with the gold standard and watched as Europe and Asia wooshed passed us in the global economy.

maybe. but the debt we have would not be causing inflation...or devaluing the dollar so much. you can't just print money if it has to be backed by actually having that amount of gold. sorry, but nationalizing our money back in 1913 and then eliminating the gold competition in 33 was the worst thing to do. would you nationalize anything else in our country? you're against nationalizing the oil companies right?... how is nationalizing currency any different?

[Drew Dowdell]

maybe. but the debt we have would not be causing inflation...or devaluing the dollar so much. you can't just print money if it has to be backed by actually having that amount of gold. sorry, but nationalizing our money back in 1913 and then eliminating the gold competition in 33 was the worst thing to do. would you nationalize anything else in our country? you're against nationalizing the oil companies right?... how is nationalizing currency any different?

Gold standard has nothing to do with it. It's the incoherent fiscal policy of the last two generations that have done it to us.

[loki]

Gold standard has nothing to do with it. It's the incoherent fiscal policy of the last two generations that have done it to us.

i'm not denying that, but could they do that if they couldn't "just print more money". i just cashed $150 of bonds. WWII was basically funded by bonds. I don't hear of anyone talking about buying bonds to help our debt, in the short term. daniel boone gave a "it's not your money" speech to congress way back when. socialism has torn this country apart. Gold can be socialized too, but it's harder to do.

I think the root of FOG's old tirades point to socialism, from what i recall. there are people that see these problems and embrace them and the solutions. while lots and lots of people point the finger at government and want them to fix it, and like you said, the budget has been a mess 9 out of 10 times. the government needs fixing, and more only slows itself down, like a lazy runner that has gotten over weight and thinks food will help it run faster.

[Drew Dowdell]

To those of you who thing globalization is a good thing....

It takes about 7,000 tons of bunker-fuel to fill the tanks of a 5,000-container cargo ship for a trip from Shanghai to Los Angeles. Over the last year and half, the cost of that fuel has jumped 87% to $552 a ton, according to the World Shipping Council, boosting the cost of a fill-up to more than $3.8 million.

"To put things in perspective, today's extra shipping cost from East Asia is the equivalent of imposing a 9% tariff on East Asian goods entering North America," said Rubin of CIBC World Markets. "At $200 per barrel, the tariff equivalent rate will rise to 15%."

[loki]

To those of you who thing globalization is a good thing....

globalized trade is fine, if it's free and fair....not like what we complain about japan for doing. political globalization is horrible.

"Gold standard has nothing to do with it. It's the incoherent fiscal policy of the last two generations that have done it to us."

well... there were several court cases involving paper money, or "bills of credit" before the fed and they all were dealt with seemingly correctly, and the constitution says the gov. shall not emit bills of credit.

[Drew Dowdell]

"Gold standard has nothing to do with it. It's the incoherent fiscal policy of the last two generations that have done it to us."

well... there were several court cases involving paper money, or "bills of credit" before the fed and they all were dealt with seemingly correctly, and the constitution says the gov. shall not emit bills of credit.

Federal Reserve Bank is a private institution made up of member banks.

[Drew Dowdell]

globalized trade is fine, if it's free and fair....not like what we complain about japan for doing. political globalization is horrible.

What I'm pointing out is that transportation fuel costs are wiping out the advantage of overseas manufacturing.

[Drew Dowdell]

You guys are worried about the death of the V8.... what about the death of the small town?

[A Horse With No Name]

Transportation does use a lot of resources. We need to convert all the China barges to hydrogen power!

We need to build things here. Another big waste is that everything we get from China is crap. China is only efficient at filling U.S. landfills.

Chris

[Robert Hall]

You guys are worried about the death of the V8.... what about the death of the small town?

Good article... this has been going on for a long time, though...20 years ago when I went off to college I could see there was no future for me in Podunk, Ohio... large metro areas are where the good jobs are.

[A Horse With No Name]

Good article... this has been going on for a long time, though...20 years ago when I went off to college I could see there was no future for me in Podunk, Ohio... large metro areas are where the good jobs are.

...as a guy who would like to live in podunk, Ohio...I sadly agree.

Chris

[Robert Hall]

...as a guy who would like to live in podunk, Ohio...I sadly agree.

Chris

Yeah, I go back there a few times a year to visit my Mom and brother, my Mom still has the family property (150 acres in the woods on a lake in the coal country of Eastern Ohio), but there is not much within 50-100 miles (Canton/Akron 50 miles, Pittsburgh, 75 miles, Cleveland, 100 miles, Columbus, 100 miles). Pretty, quiet place to visit, but nothing going on... I could see myself living in Pittsburgh or Columbus when I get bored with the desert, though.

Edited August 4, 2008 by moltar

[A Horse With No Name]

It's nice and green here, but the economy sucks. I am right now debating the merits of relocating, although I love where I live.

Where are you from? My Wife has family in Holmes County, near the Amish.

Chris

[A Horse With No Name]

...and I'd love to live out west if I could afford it. Housing is high, and I have 5 children sooo...

Chris

[Robert Hall]

It's nice and green here, but the economy sucks. I am right now debating the merits of relocating, although I love where I live.

Where are you from? My Wife has family in Holmes County, near the Amish.

Chris

Close by...I'm originally from the New Philadelphia area in Tuscarawas County. Also lived in Steubenville on the Ohio River for 10 years as a kid...my folks split their time between Steubenville, the family farm outside New Philadelphia, and later Marathon, Florida where I went to high school.

[mustang84]

You guys are worried about the death of the V8.... what about the death of the small town?

That story is a little sensationalistic, IMO. There are ways to work around this.

My uncle recently started a job at a new Menard's distribution center, even though it is about 20 miles further than his old job (previously an 8 mile trip). He makes do by carpooling with four of his co-workers and has actually spends about the same on gas even with the higher prices and longer drive. A lot of highway intersections have gravel lots where people will park their cars during the day and then just carpool in one car to work...it's not like it's a new thing either, this has been going on since the last gas crisis.

You see more guys leaving the F-150 or Silverado at home and taking the wife's Focus or Cavalier to work.

Also, Des Moines has started a RideShare bus program, where volunteers switch off driving shuttle buses that stop in small towns. It has expanded the last couple years as its popularity has grown. You just call and ask them to stop in your town, then pay a small fee to ride.

Edited August 5, 2008 by mustang84