JF on Americans and their SUVs
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– Hide quoted text — Show quoted text ->>China is too >>big for the marginal aspect to stay forever. In other words, the world >>can only accept so much junk.) > Remember when "made in Japan" meant junk? > Check out the US trade stats in dataweb.usitc.gov The top three > categories (based on 4 digit customs codes) are high tech. Computers > are the top category, about twice as big as the next one. > Most Chinese exports come from foreign invested companies and they > aren’t there to build junk. > In the industrial goods purchasing world, China gets all the > attention. Few people want to scatter their sourcing resources around > to a dozen other Asian economies that are tiny in comparison. > Sure. But the key point remains: the absorbtion capacity of the rest of > the world for goods manufactured in China is limited. Probably quite a > bit below what would be needed to sustain the current model for more than > a few, say ten/twenty years or so of growth at the current rate.
This is right. However, do not neglect the potential in the Chinese economy for internal consumption when the economy grows. This might well extend the timeframe for growth. However, I do not believe that China demographically need more than ten to twenty ears of extreme growth (if they indeed need that much) simply due to demographic reasons. The working part of the population is growing enormously now. Partly due to restructuring of state enterprises (where many people did not work that much) and due to the young people getting older. This is part of the picture. This situation will not last, however. One child policy or not – most Chinese are not getting many children these days. At some point – not so far down the line – the number of new workers entering the workforce who will need to get new jobs will decline very sharply indeed. Nik
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Wow, you picked up on the one generalisation he made in the post! It’s a shame you can’t logically dismiss the rest of it…
– Hide quoted text — Show quoted text ->> General Motors’ CIO states that 60% of their growth will come from >> underdeveloped countries such as India and Communist China: >Which is why car makers are scrambling to invest in China. Strategically >however, this is a VERY BAD move. Yes, the car maker may increase profit. But >the higher demand for cars in China will also result in higher demand for oil. >And when you have a few billion people wanting more oil, it will put a lot of >strain on the oil supply. So americans will have to pay more at the pump to >drive their beloved single occupant SUVs. >And when a billion people start burning oil, global warming will suddently >become an emergency and then all those countries who refused to acknowledge >the problem will have to pay the big bucks to not only start to adopt Kyoto >rules, but implement them at a far greater speed (and thus extreme cost to the >economy in short term) than those economies who adopted Kyoto and proceeded at >slower speed over long period with less impact on economy. >If americans want to continue to drive SUVs to the supermarket, they should >not be helping China become a car based society. > OMG!!! All those Americans driving their single occupancy SUVs to the > supermarket are out to get JF!!! > Oh the humanity!!!
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>Callously, I might write that at your age , it’s a little too late to worry >about a few extra dollars spent for gasoline, and to give more attention to >better enjoyment of your "twilight cruise"/terminal phase of journey >through life.
Well, here in the State of Denial, we’re about to take a floating retirement home down the Mexican coast and possibly the Panama Canal and Caribbean. And actually, I think gasoline prices are too low, but would like to see the increase in the form of taxes that go to mass transit. And I’ve been chewing on one of your statements: "It’s time for some to ask themselves to what price must gasoline rise to justify a few drilling platforms in the Catalina Channel? " I think it’s pretty close to infinity as long as I see that it’s socially acceptable, and possibly even a majority idea that it’s OK, to drive way overpowered vehicles and live in semirural areas that involve multimile round trips to get groceries, just because we can. I’ll defend the legal rights of people to do that but I would love to see a mentality change that reduces the number of people who actually choose that life. I’m sure that attitude won’t get me (or anyone else) elected for a while. I’m more concerned with the price of heating oil and natural gas for stationary applications such as home heating and industrial use.
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– Hide quoted text — Show quoted text -> You better take a look at the present balance of payment records of the US – > they beat all records last quarter. You even have a president who claims > that this is no problem. Even Regan was not THAT stupid. > No, the people who are stupid are the one who take a piece > of paper, not backed by anything but faith, and send us real > goods. Suppose the balance of payments get so far out of > wack that the Federal Reserve can’t handle it? What do you > think they will do? You don’t suppose they might just crank > up the old printing presses do you? I’d say monitor the > printing press industry. When yous see orders for new high > quality presses, hold on! It got sop bad in Germany in the > 20’s that they couldn’t print the money fast enough. > Ed
You are making a good point. However, I do not believe that the printing press is the biggest problem though. What might happen (and what has happened once before) is that the market looses faith in the US$. Now what will happen then? The US$ would enter into a free fall. Its a fee market. Many want to sell – few want to buy. This in turn will lead to huge inflation. Import prises will rise. Remember – contrary to popular belief – that trade is not in itself the reason for the deficit. Trade is only the way through which the economy deals with the underlying imbalance. Namely the imbalance between production and consumption. Well – the US administration might be far too populist to admit this and take the proper action to deal with this. They might blame the Chinese in stead as they have been blaming the Japanese before. The way that the US might deal with such a situation will be 1) huge increase in interest rates to try to stop people from selling their US$. This would cool the US economy down to the freezing point which in turn would bring down the imbalance 2) ask (again) their European and Asian allies to tell their central banks to buy US$. They might agree to do this IF the they getting paid politically by the US government. The Chinese might ask the US to remove their military from the Chinese Sea so that they can take care of the Taiwan problem they way they find fit. The Germans might demand the US submit to the Kyoto treaty unconditionally (you’ll have to pay European prices at the pump (1-2 US$$ a litter!) and the French might tell them to ask them before the US military is being used for anything. Whoever might demand that the US agree to the international court of law that would allow US military personnel to stand trial in an international court for any crimes they might have committed (hi hi Rumsfeldt so long. You’ll enjoy the company of the people from the Balkans. Many of them were – as many neocons. from the US – former Communists). The Japanese might – beside supporting the Europeans in some of their demands – demand that all street signs in the US as well as public announcements get written and spoken also in their language. All in all – the military spending might be hugely reduced (together with Medicare, pension payments, road works, education) and taxes will increase dramatically – in particular taxes on energy. This will bring down the government deficit (again created by yet another presidential lunatic who might even be more stupid than Reagan) which would reduce the amount of cash in the economy – hence bring down the imbalance between production and consumption. Don’t worry about the printing press. Worry about the level of economic activity, inflation and the level of political influence. Worry also about the level of taxes (in particular on energy) and the level of government services. These are the areas that most likely will be hit – and hit hard! One light note though. This might well make the US less interresting as a target of terror. Hence you will be more safe. Nik
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>China is too >big for the marginal aspect to stay forever. In other words, the world >can only accept so much junk.)
Remember when "made in Japan" meant junk? Check out the US trade stats in dataweb.usitc.gov The top three categories (based on 4 digit customs codes) are high tech. Computers are the top category, about twice as big as the next one. Most Chinese exports come from foreign invested companies and they aren’t there to build junk. In the industrial goods purchasing world, China gets all the attention. Few people want to scatter their sourcing resources around to a dozen other Asian economies that are tiny in comparison.
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- Hide quoted text — Show quoted text ->China is too >big for the marginal aspect to stay forever. In other words, the world >can only accept so much junk.) > Remember when "made in Japan" meant junk? > Check out the US trade stats in dataweb.usitc.gov The top three > categories (based on 4 digit customs codes) are high tech. Computers > are the top category, about twice as big as the next one. > Most Chinese exports come from foreign invested companies and they > aren’t there to build junk. > In the industrial goods purchasing world, China gets all the > attention. Few people want to scatter their sourcing resources around > to a dozen other Asian economies that are tiny in comparison.
Sure. But the key point remains: the absorbtion capacity of the rest of the world for goods manufactured in China is limited. Probably quite a bit below what would be needed to sustain the current model for more than a few, say ten/twenty years or so of growth at the current rate.
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>But the key point remains: the absorbtion capacity of the rest of >the world for goods manufactured in China is limited. Probably quite a >bit below what would be needed to sustain the current model for more than >a few, say ten/twenty years or so of growth at the current rate.
Of course the absorption capacity for every country is limited, but to date Chinese products have substituted for products that other countries used to build. Probably lower costs from China have increased the market for those products at the same time. The population of China is about 30% more than that of North America and Western Europe combined. Only a minority of Chinese are to date well enough educated to participate in modern manufacturing but they seem to have a good recognition of the need to spread their education system. There is a tremendous production capacity there. Recent legal changes now guarantee the property rights of Chinese business owners and I think that will lead to an explosion of entrepreneurship as people build confidence that the rights are really guaranteed. Overseas Chinese will start to return to China. At some point, as in Japan, we’ll see "designed in China" products start to emerge. To me none of this is bad. Economics isn’t a zero-some game. It does throw a strain on previously industrialized countries who have had a higher level of income than China but in a global economy if one country’s people want a higher income than another’s, they either have to do things the other country’s people can’t do, or do the same thing more efficiently.
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- Hide quoted text — Show quoted text ->But the key point remains: the absorbtion capacity of the rest of >the world for goods manufactured in China is limited. Probably quite a >bit below what would be needed to sustain the current model for more than >a few, say ten/twenty years or so of growth at the current rate. > Of course the absorption capacity for every country is limited, but to > date Chinese products have substituted for products that other > countries used to build. Probably lower costs from China have > increased the market for those products at the same time. > The population of China is about 30% more than that of North America > and Western Europe combined. Only a minority of Chinese are to date > well enough educated to participate in modern manufacturing but they > seem to have a good recognition of the need to spread their education > system. There is a tremendous production capacity there. > Recent legal changes now guarantee the property rights of Chinese > business owners and I think that will lead to an explosion of > entrepreneurship as people build confidence that the rights are really > guaranteed. Overseas Chinese will start to return to China. At some > point, as in Japan, we’ll see "designed in China" products start to > emerge. > To me none of this is bad. Economics isn’t a zero-some game.
No argument there. The current model or actually any export model is unavoidably limited by the capacity of the rest of the world to absorb them. Whether designed abroad or quality designed in China. China is just big. I expect at some point they will have to switch to a growth model based upon domestic demand. Which is much slower and harder. The other issue is politics. Will the current repressive regime manage to retain control long enough, in a country that becomes wealthier? If not, how much turmoil? At which point rampant corruption leads to implosion? At which point the growing inequality, especially between rural and urnban areas, leads to one more peasant revolt (AKA as Mandate of Heavens, or "Chinese democracy")? > It does throw a strain on previously industrialized countries who have > had a higher level of income than China but in a global economy if one > country’s people want a higher income than another’s, they either have > to do things the other country’s people can’t do, or do the same thing > more efficiently.
Sure. But that was not my point.
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Dick Locke extrapolated from data available… >At 64, I’ll drive >gas guzzlers until I’m bedridden or gone, hastening the day when your >generation > You’re only three years older than I am, sir.
Callously, I might write that at your age , it’s a little too late to worry about a few extra dollars spent for gasoline, and to give more attention to better enjoyment of your "twilight cruise"/terminal phase of journey through life. Having spent the last decade attempting to curtail my professional/occupational efforts, only to find that fewer clients or "phase down" have not reduced my workload, I wish that I had projected earlier that while some really bad investments of the late 70s/early 80s have proved to be worse than worthless, a couple of cheap deals have begun to make up the difference. I spent too long at sea to find any but momentary and fleeting pleasure in "vacation cruises", am happy with a couple of weeks in Europe every other year, no longer require a biennial transfusion of NYC’s elixir, have almost 40 years ago "been to see the elephant" as the expression goes (and is understood by the conoscenti) and therefore need no exposure to the raw and untamed, receive absolutely no additional comfort or exhilaration from heated seats or the fooferaw which makes vehicles with names like Denali and Navigator cost 10 or 20 grand more than their basic counterparts, yet am positively stimulated and thrilled by walking out on a cool dawn to climb into a hulking, guzzling SUV, ice chest loaded, tucker box filled, plenty of whisky stowed, enough and suitable clothing for various occasions on board, to drive across and experience North America. At my 64 there are moments to be savored, twilight across the slopes above the Greasy Grass, a morning wade fishing on the flats of Matagorda Bay, the smell of a mug of good coffee at dawn in the high desert (or the bouquet that rushes behind the cork of a good red at sunset), the sight of a really good buck – one that I may shoot, photograph or even better now simply sit there – moving out of the brush and across the far slope, and the basic comforts for arriving and departing those moments, which make the price of gas or its future availability to my grandchildren almost entirely inconsequential. I’m into savoring and am only looking for more time to do it. As old Harley used to say…. "Bubs, I reckon the fishing ain’t worth a shit out to the cemetery, so what say we slip on out and wet a plug now." TMO
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Dick Locke extrapolated from data available… > Recent legal changes now guarantee the property rights of Chinese > business owners and I think that will lead to an explosion of > entrepreneurship as people build confidence that the rights are really > guaranteed. Overseas Chinese will start to return to China. At some > point, as in Japan, we’ll see "designed in China" products start to > emerge.
…..But that doesn’t avoid the inevitable (for China and its people) harsh confrontation with economic reality, the moment or moments when foreign markets have absorbed all the Chinese products (good or junk – and here deveil makes a pretty good point) for which demand or funds to buy exist. For years, China has held its currency exchange rate well below projections of "real" value, acting to delay the point at which price resistance or cheaper competitive suppliers (in even less developed producing countries) makes the purchase of Chinese goods unattractive. China’s need for foreign POL actually serves to hasten the inevitable, for China must use growing amounts of other national "currencies" gained through expanded trade to buy oil, thus reducing her flexibility, those big reserves of furrin’ cash which have allowed her to deflate her own currency. > To me none of this is bad. Economics isn’t a zero-some game. > It does throw a strain on previously industrialized countries who have > had a higher level of income than China but in a global economy if one > country’s people want a higher income than another’s, they either have > to do things the other country’s people can’t do, or do the same thing > more efficiently.
The theory’s both sound and long-standing, but ignores all these petty dislocations, political jimmy-rigging, conflicts, occasional genocides and outright perversions of the testbook approaches which go on around us. Dictators, oligarchs and possessors of substantial political majorities have traditionally claimed personal and national immunity – from temporary to millenial – to even the best tested of economic theories. TMO
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> I don’t think I quite agree on reserves. What has happened is not so much > an increase in known reserves, but mostly technology improvements which > have allowed to recover more from known fields. Sure, there is potential > for more of the same, but at increasing costs. Given that, plus as you > say, China, and other countries which will appear on the map (what about > Russia?), I suspect the price of oil has only one way to go.
I can foresee the day when us Yanks invade Canada and seize control of the Athabasca tar sands in Alberta 
— Best Greg
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>> I don’t think I quite agree on reserves. What has happened is not so much > an increase in known reserves, but mostly technology improvements which > have allowed to recover more from known fields. Sure, there is potential > for more of the same, but at increasing costs. Given that, plus as you > say, China, and other countries which will appear on the map (what about > Russia?), I suspect the price of oil has only one way to go. > I can foresee the day when us Yanks invade Canada and seize control of the > Athabasca tar sands in Alberta
I thought you had already? Anyway, that’s not the issue. The oil sands thing may contain quite a bit, but it’s not cheap. Furethermore, the day they open their eye with the water and associated environmental problems which people try hard not to talk about, cost will go up big time. Ever flown over Northern Alberta? Ever seen all they dirty water reservoirs? Apparently they have no idea of what to do with it except just storing in in ponds.
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>At 64, I’ll drive >gas guzzlers until I’m bedridden or gone, hastening the day when your >generation
You’re only three years older than I am, sir.
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- Hide quoted text — Show quoted text -> General Motors’ CIO states that 60% of their growth will come from > underdeveloped countries such as India and Communist China: >Which is why car makers are scrambling to invest in China. Strategically >however, this is a VERY BAD move. Yes, the car maker may increase profit. But >the higher demand for cars in China will also result in higher demand for oil. >And when you have a few billion people wanting more oil, it will put a lot of >strain on the oil supply. So americans will have to pay more at the pump to >drive their beloved single occupant SUVs. >And when a billion people start burning oil, global warming will suddently >become an emergency and then all those countries who refused to acknowledge >the problem will have to pay the big bucks to not only start to adopt Kyoto >rules, but implement them at a far greater speed (and thus extreme cost to the >economy in short term) than those economies who adopted Kyoto and proceeded at >slower speed over long period with less impact on economy. >If americans want to continue to drive SUVs to the supermarket, they should >not be helping China become a car based society.
OMG!!! All those Americans driving their single occupancy SUVs to the supermarket are out to get JF!!! Oh the humanity!!!
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Montreal, took the time to enviously write about Americans: >The american dream of owning a home with white picket fence, 2.5 children, 3 >SUVs, 4 TVs was possible when you had skills nobody else had and when your >employer had unique products not made anywhere else.
Poor Canadians, nothing to do but spend their entire lives staring jealously across the border.
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> Montreal, took the time to enviously write about Americans: >The american dream of owning a home with white picket fence, 2.5 children, 3 >SUVs, 4 TVs was possible when you had skills nobody else had and when your >employer had unique products not made anywhere else. > Poor Canadians, nothing to do but spend their entire lives staring > jealously across the border.
You better take a look at the present balance of payment records of the US – they beat all records last quarter. You even have a president who claims that this is no problem. Even Regan was not THAT stupid. Nik
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> Montreal, took the time to enviously write about Americans: >The american dream of owning a home with white picket fence, 2.5 children, 3 >SUVs, 4 TVs was possible when you had skills nobody else had and when your >employer had unique products not made anywhere else. > Poor Canadians, nothing to do but spend their entire lives staring > jealously across the border.
Has JF found a job yet? — Best Greg "I think I know the answer to that one…."
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> You better take a look at the present balance of payment records of the US – > they beat all records last quarter. You even have a president who claims > that this is no problem. Even Regan was not THAT stupid.
No, the people who are stupid are the one who take a piece of paper, not backed by anything but faith, and send us real goods. Suppose the balance of payments get so far out of wack that the Federal Reserve can’t handle it? What do you think they will do? You don’t suppose they might just crank up the old printing presses do you? I’d say monitor the printing press industry. When yous see orders for new high quality presses, hold on! It got sop bad in Germany in the 20’s that they couldn’t print the money fast enough. Ed
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Poor JF extrapolated from data available… > Montreal, took the time to enviously write about Americans: >The american dream of owning a home with white picket fence, 2.5 >children, 3 SUVs, 4 TVs was possible when you had skills nobody else >had and when your employer had unique products not made anywhere else. > Poor Canadians, nothing to do but spend their entire lives staring > jealously across the border.
He’s close… I only have two Expeditions and an F150, 2 children, 200 ft of tall cedar fence in the back, and 3 TVs (but several PCs), my skills are comparably modest and I employ myself. My yougest, a daughter, works for a company recently purchased by a cagy investor, at 31 makes a salary nudging 6 figures (not counting the bonus), drives a Mercedes and helps sell shit to Canadians unable to figure out how to do it themselves…. TMO
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>I only have two Expeditions and an F150
Let’s put this in an envelope and in about 20 years when we are further into our dotage pull it out and look at it. I believe that this attitude is the biggest strategic problem the US faces. It makes us dependent on doing what a bunch of dodgy characters (foreign and domestic) want us to do. We will be forced to face up to this issue in the fairly near future.
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Dick Locke extrapolated from data available… >I only have two Expeditions and an F150 > Let’s put this in an envelope and in about 20 years when we are > further into our dotage pull it out and look at it. I believe that > this attitude is the biggest strategic problem the US faces. It makes > us dependent on doing what a bunch of dodgy characters (foreign and > domestic) want us to do. We will be forced to face up to this issue > in the fairly near future.
Hey, I’m one of those "dodgy characters" (domestic version thereof) who makes some of my living from oil & gas production payments (and would make a lot more if the domestic drilling business had not been put into an almost terminal decline by policies beginning some 30 years ago). It’s time for some to ask themselves to what price must gasoline rise to justify a few drilling platforms in the Catalina Channel? I can hazard a guess (and my monthly checks will rise substantially in the interim)…. Meanwhile, gasoline has dropped locally from a high of $1.91 for 87UL down to $1.66 at the supermercado yesterday, less in inflation adjusted dollars than the price I paid while driving my first car back in 1953 (a vehicle which was much less efficient than either of my s big SUVs or my pickup). As for those foreign versions of "dodgy characters", with the alternatives of retreating to the Stone Age without oil revenues while our ex-Soviet, now Russian friends ramp up (with our technical help) to address rising demand, even the worst bad actors in the Islamic world have always managed to keep their pipelines open – and the evidence of European profiteering from Iraqi "UN-approved oil for food" program ought to make you quite aware of a cynical tide in the affairs of men, especially the politically connected…. Meanwhile, I’m not going to use my oil profits to buy stock in sadly unrealistic auto manufacturers producing overpriced, under-performing hybrids already obsolete before they hit the streets. At 64, I’ll drive gas guzzlers until I’m bedridden or gone, hastening the day when your generation will have to force science to adapt and adopt far more cutting edge new technology than is currently being bandied about. Even the magic of "fuel cells" is likely to remain undelivered without substantial compromise and cost benefit and risk benefit equations potentially unacceptable to many. You might be surprised at how oil reserves seem to spring forth from the fertile efforts of those who can afford to explore for them, although I do fear that the gaping and inefficient maw of China will gobble up at lot of POL in the next few years (until its inevitable confrontation with the grim economic realities of that sort of artificialized economy so dependent on continued inflow of foreign capital). TMO
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> Hey, I’m one of those "dodgy characters" (domestic version thereof) who > makes some of my living from oil & gas production payments (and would make > a lot more if the domestic drilling business had not been put into an > almost terminal decline by policies beginning some 30 years ago). It’s > time for some to ask themselves to what price must gasoline rise to justify > a few drilling platforms in the Catalina Channel? I can hazard a guess > (and my monthly checks will rise substantially in the interim)…. > Meanwhile, gasoline has dropped locally from a high of $1.91 for 87UL down > to $1.66 at the supermercado yesterday, less in inflation adjusted dollars > than the price I paid while driving my first car back in 1953 (a vehicle > which was much less efficient than either of my s big SUVs or my pickup).
Agreed. Way too cheap if you ask me. Your revenue would probably way more than offset the increase if gas prices were to double. Which they may incidentally. > Meanwhile, I’m not going to use my oil profits to buy stock in sadly > unrealistic auto manufacturers producing overpriced, under-performing > hybrids already obsolete before they hit the streets. At 64, I’ll drive > gas guzzlers until I’m bedridden or gone, hastening the day when your > generation will have to force science to adapt and adopt far more > cutting edge new technology than is currently being bandied about. Even > the magic of "fuel cells" is likely to remain undelivered without > substantial compromise and cost benefit and risk benefit equations > potentially unacceptable to many.
Not really playing the party line here, but I would not be surprised if you were right wrt fuel cells. OTOH, you should not dismiss hybrids too quickly. They are neither necessarily overpriced or underpowered. On the first aspect, given that, especially for urban driving, they potentially double your fuel efficiency, it’s only fair that they should cost a bit more. On the performance issue, I think the difference will disappear sooner rather than later. Bottom line is that technology exists today to make cars about twice as effcient, at a cost of maybe a couple thousand dollars/vehicle, with very little side effects on the way you drive etc. Only issue left is, how much higher does the price of oil have to go until both industry and consumers start looking at this seriously. > You might be surprised at how oil reserves seem to spring forth from the > fertile efforts of those who can afford to explore for them, although I > do fear that the gaping and inefficient maw of China will gobble up at > lot of POL in the next few years (until its inevitable confrontation > with the grim economic realities of that sort of artificialized economy > so dependent on continued inflow of foreign capital).
I don’t think I quite agree on reserves. What has happened is not so much an increase in known reserves, but mostly technology improvements which have allowed to recover more from known fields. Sure, there is potential for more of the same, but at increasing costs. Given that, plus as you say, China, and other countries which will appear on the map (what about Russia?), I suspect the price of oil has only one way to go. (I am inclined to agree on the limits of growth for China, but for different reasons, some political, but also because the current model depends on exports nece3ssarily marginal in theire markets. China is too big for the marginal aspect to stay forever. In other words, the world can only accept so much junk.)
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