May 14, 2009

Electric cars from China


What year will 50% of new cars sold in America be:

1) Made in China

2) Electric

86 comments:

Anonymous said...

China 2020

Electric 2022

Anonymous said...

From Autobeat:

"GM TO IMPORT CARS FROM CHINA TO U.S. General Motors Corp. expects to sell about 17,000 small Chinese-built cars in the U.S. in 2011 and triple that volume by 2014, reports Automotive News. The plan would likely make GM the first automaker to import Chinese cars to the U.S.
AN cites a 12-page document GM has been sharing privately with lawmakers in Congress. The Washington Post previously reported that the document says GM plans to double the number of vehicles it builds in China, Mexico and South Korea to sell in the U.S."

Bukko_in_Australia said...

In the same year that annual American car sales equal the number sold in Australia, about 1 million. For an entire year. I'd estimate 2015. Half will be electrics -- made in China. The other half will be "up-armoured" SUVs to protect rich fuckers from murderous mobs. Those will be made in America. The SUVs AND the mobs.

Pissed in New York said...

Keith, I can't trust that a f*ucking lipstick made in China isn't toxic. And I won't eat fish imported from there if I were starving. You want me to even think about a f*ucking Chinese car? Bwahaha!

keith said...

It can't be stopped.

Cars will be made in China. India too.

Get used to it. Doesn't mean you have to drive one. But most other people will be. And the brands will be the ones you know - they'll just be made in China and not Germany, Japan or especially the US.

I'd be surprised if ANY cars are made in the US in 20 years.

keith said...

Point of comparison - when is the last time you watched TV on a TV made in the US? How about a computer made in the US?

Anonymous said...

Won't happen. World economic collapse comes before we start getting Chinese cars on the streets in big numbers.
We are still delusional. I read stories about the market bottoming out, Greenspan saying we are near the bottom, etc. These are the same people who got us into the mess and we are still listening?
News, especially ABC, is the worst. They are posting stories daily about the "recovery" of the housing market. There is no recovery and there never will be because not enough people coming up have even full time work, let alone property.

keith said...

I saw that car pictured on this thread in London yesterday.

Think about it - never having to go to a gas station again. Not having to pay tax on your car (waived for electrics). Not polluting.

If you only need a car for short distances, makes sense already. But the key is going to be long lasting batteries and a nationwide system for charging.

It will be done. And when the last gasoline car sold, we'll all wonder - what took so long?

Anonymous said...

"Not having to pay tax on your car (waived for electrics)."

that will go away when electric cars are common.

Wind Farmer said...

Keith,
What do you mean not polluting?
Do you think electricity is some kind of magic stuff that just charges up your car when you plug it in? 50% of electricity comes from coal. Oh right. We'll get all the energy we need from windmills. What about the toxic batteries...we don't really have a battery that will work...
http://www.hybridcars.com/plug-in-hybrids/battery-expert-doubt-plugin.html

By the way, China is all over the lithium thing:

Qaidam Basin to Become Major Lithium Base
The Qaidam Basin in northwest China 's Qinghai province, well-known for its salt lake resources, will become the country's major production base for lithium products, scientists have said.

A group of scientists from the Salt Lake Research Institute under the Chinese Academy of Sciences recently announced that they have successfully solved problems of separating lithium from halogen solution which contains large concentrations of magnesium.

keith said...

Good point on coal producing electricity in the US polluting the world before the energy gets to the car

But by 2025 we should be off the black stuff and into nuclear, solar and wind.

I like the French model - I believe their nuke % is like 80%. The US is teens.

If the cars are gonna be electric, the electricity needs to be nuke and green.

And the coal lobby can go f*ck itself.

Canada said...

Keefer,

This is why the coming commodity bull (high inflation) market,
will be on things other then Oil.

Momentum for alternative energy sources has just begun.

It is irreversible; demand for fossil fuel will not be going up in our lifetimes.

Look around you and you’ll see those pigs who stashed millions of barrels in tankers, posing as ‘experts’ selling us on the demand coming from the rice patties etc. they sound like the Realwhores telling us in 2006 that Housing will continue going up despite the fact that no one can afford one; because ‘foreigners’ are buying McMansions like hot cakes.

Next stop $10 a barrel.

Happy Snapper said...

Keith,

I agree with you 100% on this one!

Mammoth said...

Next stop:
Airliners made in China.
Don't think that will happen?

Give 'em 15-20 years and bye-bye Boeing and Airbus.

Anonymous said...

Buffett bought big into Chineese firm BYD. Saw two models at the BRK meeting this year.

Give it three years before Chineese electrics are available in volume in the US.

Buffett's bought large chunks of the trains and utilities to ship and charge the things, a high tech sheet metal company to make parts, the insurance company to insure it, the bank to finance it, etc etc.

Interiors will probably off-gas some hazardous chemicals, but the autos will be too cheap to pass up. Leave the windows and sun roofs open.

Anonymous said...

"But by 2025 we should be off the black stuff and into nuclear, solar and wind."

This falls into the 'no free lunch' category.

When France revved up its nuclear program, the uranium was a domestic resource. Since then they have peaked and depleted the domestic sources and now import nearly all the uranium they use.

See for example: http://en.wikipedia.org/wiki/Peak_uranium

If the US geared up to get 80%+ of its electricity from nuclear like France does, it would create a crushing shortage of Uranium and peak the world supply in a short time ... not to mention attempting to get most of our transportation energy from nuclear derived electricity.

If you depend entirely on the available electricity possible from solar and wind and increase in nuclear, you are looking at having very little personal transportation available to each person. If we only availed ourselves of just this much transportation now, there would be no oil problem.

Pay Lay Ale said...

"Point of comparison - when is the last time you watched TV on a TV made in the US? How about a computer made in the US?"

That's not so bad since americans are designing a lot of the hardware and software for TVs and computers. We have other countries do the grunt work.

Pay Lay Ale said...

"But by 2025 we should be off the black stuff and into nuclear, solar and wind."

But your hero, Obama and his ilk oppose nuclear power plants. If he started building nuclear power plants, the people in his party would go absolutely berserk.

Solar and wind will always be supplemental power sources and never primary sources.

Anonymous said...

How long before Americans realize they let another industry and hundreds of thousands of good jobs go over seas without a fight?

Heck we pretty much said "don't let the door hit you in the ass" to these excellent auto industry jobs.

We will be a beggar nation. We will beg China to buy our debt and eventually have to pay them what they ask for cars because we don't make 'em anymore.

Really people, is this a good plan to have other countries make EVERYTHING we consume?

On electric cars, great idea for cities except the whole coal thing. If Obama really wanted electric cars at least some of these stimulus Billion$ would have gone to building nuke plants.
Translation = Gov. just giving electric cars lip service.

GT Charlie

keith said...

And so it will be with cars - you'll see a lot of green car technology being developed in the US, and then built in China. You'll see design being done in Japan, Germany and Italy, and again built in China

And that's OK.

Anonymous said...

How long before Americans realize they let another industry and hundreds of thousands of good jobs go over seas without a fight?

Heck we pretty much said "don't let the door hit you in the ass" to these excellent auto industry jobs.

We will be a beggar nation. We will beg China to buy our debt and eventually have to pay them what they ask for cars because we don't make 'em anymore.

Really people, is this a good plan to have other countries make EVERYTHING we consume?

On electric cars, great idea for cities except the whole coal thing. If Obama really wanted electric cars at least some of these stimulus Billion$ would have gone to building nuke plants.
Translation = Gov. just giving electric cars lip service.

GT Charlie

Anonymous said...

Is that Angelo Mozilo's car?

Angry Leprechaun said...

Why don't you ask the new CEO (Obama) of GM (Government Motors)? He will be more than happy to tell you his plan for this.

And you will ask, "Why would he do that?" Why would he not? He knows this is already in the plan. Unless he is unaware of what is going on, just like he had no fucking clue about the AIG bonuses. He has every incentive to give the Chinese our portion of the worldwide car industry. China owns us and Obama has to give him something because we are devaluing the dollar at such an alarming rate.

Keith, how many pictures of Obama have you made out with?

Angry Leprechaun said...

"And so it will be with cars - you'll see a lot of green car technology being developed in the US, and then built in China. You'll see design being done in Japan, Germany and Italy, and again built in China

And that's OK."

WTF?

Angry Leprechaun said...

"And so it will be with cars - you'll see a lot of green car technology being developed in the US, and then built in China. You'll see design being done in Japan, Germany and Italy, and again built in China

And that's OK."

Keith, I will be the first one to admit that it is somewhat entertaining to see how low the Dow can go. But only because I want the markets to purge the shit so we can recover and be a great producing nation again. But as far as I am concerned you can fucking choke on what you said above. I think you really want to see the fall of the USA.

gutless and lazy said...

China 2018
Electric 2030

keith said...

I'm a realist folks. We lost the auto industry (thank you unions and shoddy workers who made shitty cars that didn't work) and most of it ain't ever coming back.

Deal.

That said, what's wrong with us designing the cars, designing the new green engine systems, designing the long-life batteries, and pretty much doing everything except putting the pieces together?

Answer me that?

I want the US to make things again. But cars ain't it.

Anonymous said...

.




I RATHER WALK UNDER 3 FT OF SNOW THAN SUBSIDIZING CHINA WITH MY HARD-EARNED MONEY.



.

Anonymous said...

GT Charlie said:
‘Really people, is this a good plan to have other countries make EVERYTHING we consume?’

Dear Chalrie, I am a patriotic American and would prefer to support my people, however; our brothers here in the US are not making:
A)Affordable cars = a plain old car for daily commute, like the Nano or the ones coming from Japan and China.
B)The gasoline factor = every time I fill up my tank I get that pain in my stomach, all the nasty taxes, the corrupt local mixing (ethanol etc.) rules, and of course funding those who plan and kill us daily.

GM Ford and Chrysler (same goes for European cars) have got to die for the health of our nation.

I am not a tree hugger, but if our generation only achieves one thing = getting us off of fossil fuel, then the rest does not matter much.

Angry Leprechaun said...

"That said, what's wrong with us designing the cars, designing the new green engine systems, designing the long-life batteries, and pretty much doing everything except putting the pieces together?"

Who says this scenario will happen, where we design and everyone else does the grunt work?

Is this a round about way of convincing us that it is a good thing that GM will be outsourcing manufacturing to China? So you can convice me that what Obama does with this is fine?

Newsflash Queef! It has been established that everthing Obama is doing interfering with the business of the private sector is unconstitutional and above his authority. Now it seems that you want to be manipulative to convince those of us that see right through this bullshit.

The answer to your question is is any way we can be productive, and create jobs in the US is a good thing. We don't give away the biggest source of jobs in the industry. It takes more people to build them than it does to design them. And the designers will probably be interns and young engineers from China and India. The point is we need to rebuild the industry with our own engineers, and labor, and make it competetive on the world market. Not give the whole thing away.

Nuff said and quit calling me a "folk" you fuck. That is the kind of verbage I would expect from some Arizona State grad who thinks heffers are hot.

You are really starting to piss me off Keith.

Anonymous said...

Buh buh buh I thought that automaker workers voted for the Messiah to save their jobs. And the Messiah promised them he would do it during the campaign. What happened?

Oh I got it, the democrats now have Mexicans voters as puppets. Buh bye African American vote, they don't need you anymore, you've been gamed, start learning Spanish to understand orders from your soon to be new masters.

Anonymous said...

That said, what's wrong with us designing the cars, designing the new green engine systems, designing the long-life batteries, and pretty much doing everything except putting the pieces together?

Answer me that?
Well, I answer that with your own contradictions, as usual:

I'm a realist folks. We lost the auto industry (thank you unions and shoddy workers who made shitty cars that didn't work)

Randy said...

Angry Leprechaun,

GM Ford and Chrysler are
UN-AMERICAN

Anonymous said...

Funny, Brazil has had cars that run on ethanol and natural gas for more than 40 years, and you guys get all excited with China's stolen electric car designs? Hell, Brazil has even FlexFuel cars, which is nothing but a $170 kit that allows your tank to get gasoline or ethanol at any ratio (no dual tank need it). Furthermore, Brazilian Embraer just launched the first ethanol airplane, ready to fly.

I really don't get this American love affair with communist China, while your close neighbor Brazil, always friendly and democratic, gets only the cheese from the hobo's d!ck.

wind solar and sugarsnaps said...

For the love of Pete, the outside styling has NOTHING to do with weather this thing is viable.

First question: Batteries. How long? How much?

Second question: What's the max voltage? Will mechanics be getting electrocuted by this thing?

Third: What's the life cycle of the batteries. How much do they cost to dispose of?


Don't get me wrong, I'm all in for an electric car. And of course it doesn't have to become universal. If a third of the cars on the road could use electricity that would change the whole game for the oil industry. But those three questions need to be answered up front.

Oh, and if this thing can happen, we better get started on the nuc power plants to provide the juice.

All just common sense.

Anonymous said...

Look on youtube for "Chinese car crash test". The utter EPIC FAIL of those cars in accidents is quite honestly, SHOCKING! I wouldn't EVER put a wife or child of mine in one. NEVER! They should sell life insurance with the car as a package deal because you are going to die in even a minor crash in a Chinese built car. NEVER NEVER NEVER BUYING A POS CHINESE CAR! I am betting they don't beat a Yugo on reliability and quality.

sunshine, lollipops and happy graphs said...

Wind and Solar, but particularly solar is a hoax.

It is a hoax folks, as in will never come within 1/10 of being cost competitive (except for satellites).

I mean, Greg Swann should be moving into this industry. It's a logical move for him since real estate has been exposed as the hoax it is.

Solar is a fairy tale. Those with the mental capacity of children believe in it.

sunshine, lollipops and happy graphs said...

> I'm a realist folks.

No, you're not, until you cut out this nonsense about wind and solar.

keith said...

Anyone remember back to the 70s when the first waves of Japanese cars were washing ashore? They WERE crap - they rusted, they were cheap, etc etc

Same will go with China - I bet the first wave will be crap. Cheap crap. Almost like disposable cars.

And then they'll get better. And better. And better. And then they'll dominate.

It is what it is.

And remember, they won't be Chinese brands, designed by Chinese. They'll be Aston Martins and BMW's and Jaguars and Mercedes and hell maybe even Hondas and Buicks. The technology and components will come from nations all over the world.

China will be our assembler.

Now, if you think you can pay Americans $80,000 a year to do assembly, when someone in China will do it for $800, then you're kidding yourself. And you're kidding yourself if any company could survive a business model where they pay an assembler $80,000 when their competitor pays theirs $800.

It is what it is.

Deal.

Anonymous said...

Fuck America.

Boycott anything and anyone made in USA.

Corrupt, piece-of-shit, lying cheating stealing Turd World Nation of Nothing and Nobodies.

Beginning at the TOP.

Anonymous said...

If you follow Kunstler and the long emergency, cars are done, electric, fossil whatever.

Think Amish...

Anonymous said...

keith said...
I'm a realist folks. We lost the auto industry (thank you unions and shoddy workers who made shitty cars that didn't work) and most of it ain't ever coming back.

Deal.

Keith you seem like a sensible person. I own 2 American vehicles. I drive them to work everyday. For 135k on my Buick and 165k on my Dodge they have ALWAYS started everyday and never left me stranded. Neither has ever needed anything other than maintenence. The Dodge gets class appropriate mileage and the Buick ranks in the top three for MPG in its class.

My Ford before this this was similar in reliability.

Maybe you have been gone too long....Do you envision this country's roads lined with broken down American cars as Japanese drivers motor to work avoiding them like a shitty built shicane?

GT Charlie

Anonymous said...

"Now, if you think you can pay Americans $80,000 a year to do assembly, when someone in China will do it for $800, then you're kidding yourself. And you're kidding yourself if any company could survive a business model where they pay an assembler $80,000 when their competitor pays theirs $800."

Keith, in your vision of the furture we get paid to develop the cars and China builds them.

Why will that work? Because they feel they owe us for giving them all our manufacturing jobs?

Why won't the cars be designed in India by engineers getting $20k a year instead of in the US by engineers pulling down $100k?

Where does it stop?

Gt Charlie

keith said...

GT you hit the nail on the head.

The ONLY way America survives and thrives, anywhere near the living standards they've enjoyed for decades, is if they can compete in a global marketplace. So with cars, knowing that they cannot and will not compete assembling things, the only way to win will be to have the best designers and engineers.

And then I see that ASU video and I'm reminded how crappy the American diploma mill/education system is getting.

I think America still has the best and brightest. Go stop by TED talks for inspiration. But past performance does not dictate future success.

Markus Arelius said...

If these cars are indeed made by the Chinese, then I assume that they have the following featurs:

- no rear or sideview mirrors
- only go 50 mph in the passing and carpool lanes and
- the turn signal indicator lights are locked in the "on" position all the time.

Anonymous said...

News.net article on the growing electric consumption of gadgets.

http://tinyurl.com/p7mcgu

in that light, adding a couple of hundred million cars will just make things worse.

keith said...

I know it's a long way off, but just try to remember this post for 2025.

It hath been foretold.

Now that we've got cars out of the way, what WILL America make? What ARE we good at doing?

Almost everything I can think of is intangible. Movies. Software. Advertisements. We make money buying and selling things from each other. We build lots of strip malls. A good percent of society makes money pouring drinks, waiting tables and cutting hair.

Seriously, what can we make?

Arts and crafts?

Anonymous said...

Now, if you think you can pay Americans $80,000 a year to do assembly, when someone in China will do it for $800, then you're kidding yourself. And you're kidding yourself if any company could survive a business model where they pay an assembler $80,000 when their competitor pays theirs $800.Contradicting yourself again. On that note, if you think that American consumers who had their jobs outsourced to China, and now find themselves unemployed, will buy Chinese cars with their ZERO income, you're kidding yourself.

Get out of biosphere London, come to America to take a good look on reality. Your hero messiah speeches and promises and the phony AAPL value aren't the reality we live in. This country is in deep deep deep trouble, especially with your messiah directives.

Anonymous said...

We make really great weapons.

Anonymous said...

Movies and Software are tangible, as in they are real products.

Markus Arelius said...

How about food?

Wheat.

Corn.

Oats.

Barley.

And how about a cool glass of clean water to wash it all down?

Sure, China has lots of workers and soldiers. But who's going to feed them? Rice isn't for breakfast anymore. Now the Chinese and Indians want meat (you need lots of water for 1lbs of flesh), Buicks and the finer things in life.

And the US has some of the largest and most fertile farmland in the entire world. And water is within easy reach from either above or below ground.

Got Kansas?

yoski said...

What can we make to trade China for electirc cars?
How about BS, hot air, IOUs, reality shows, Rap, marketing strategies, proactive synergies, human rights, etc.
But seriously, sooner or later they can design their own crap. Don't believe me? Go to some major university and take a look who sits in the science and engineering classes. Not too many Americans. They're studying English, sociology, business, speech/communications or basket weaving.
We are still relatively well equipped when it comes to water and farmland, but I doubt that will be sufficient to maintain today's standard of living.

Anonymous said...

.


Just more Cheap Chinese SHIT dumped on us,

Like the toys I use to get in the sixties, play for ten minutes then their forever irrepairable!


.

Anonymous said...

2013.
The US companies build and sell cars in Europe right now, same brands, but the cars are different and better in my opinion. Many deisels, better mileage.
I can easily see this happening - why not?
BTW, France is the size of Texas and has about 19 nuclear plants that supply about 75 percent of their electric needs. But things are different there. Most buildings have no air conditioning, markets have very little frozen food - no ice, every village turns the lights out -EVERY light- from about midnight to 5 AM...
I was told they could not get the max energy out of the nuclear because the "cooling water is too warm". (Not really sure what they meant by that.) If the US does as France does there would have to be about 400 nuclear plants in the US in my opinion. I am not against nuclear as a concept, but 400 plants increases the need for cooling water and the potential for accidents and terrorist attacks. Maybe new nuclear technology? (There's always a tradeoff!)I am very interested in the new/old battery technologies.

Pay Lay Ale said...

Another competitive advantage that the US has is the military. We have the best trained, best equipped military in the world.

Why don't we make money off that?

Why don't we charge japan, south korea, and germany for protecting them?

Why don't we sell "defense services" to other countries? For $xxx,xxx,xxx, we'll protect you from foreign invaders...But we never start an offensive war on anyone's behalf. It'd make the world safer and more peaceful.

Most of the time, you wouldn't even need to put boots on the ground or planes in the air. Just the threat of the US military coming in and annihilating your invading forces would enough.

Anonymous said...

america can innovate lots of nice things that people want ... like cold fusion

Anonymous said...

chinese cars get terrible gas mileage because of all the lead in them.

Anonymous said...

"Don't believe me? Go to some major university and take a look who sits in the science and engineering classes. Not too many Americans."

The only "science", which is popular among Americans, is medical school (MD program a.k.a advanced masters in human physiology w/ clinicals). And the reason for the abundance of American applicants is that it pays the bills with near 100% job placement plus six figure income.

Many Intl students in the graduate schools of engineering and applied sciences will probably have to go back to their home countries to find good R&D work, once those industrial labs move abroad.

gutless and lazy said...

http://www.cnbc.com/id/30751378/

Americans riding bikes to work.
Get it yet?

This is globalism:
Americans use to all afford to drive to work. Now they bike like the Chinese USE TO.

Chinese will make the CARS (like the Americans USE TO) and will drive to work. And they will forget about biking to work.

See where the globalist are taking us???

hp fan said...

Seriously, what can we make?Everything

What can we make cheaper than the Chinese?Nothing

American technology stopped changing the world years ago.

Today $500 Chinese mopeds are changing the world.

gutless and lazy said...

And I'm a realist also.

A team of 310 million Americans can't compete against a team of 1 billion Indians and 1 billion Chinese. (Not to mention the rest of the world population.) Because that's what it's become, the world competing (and winning) taking a slices out of the American economy, piece by piece.

I guess if you believe 310 million Americans can successfully compete economically against the entire world, then I guess you'd believe that 4 million Massachusetts residents and successfully compete against 40 million Californians economically. Yeah, right.

No way, no how. The numbers just don't add up.

If you DO believe then maybe it's because you believe in the fantasy that only Americans have creativity. Here's a wake up call for ya then so you can join the realists ....there is NOTHING we can design, engineer or build that Asians (or anyone else for that matter... well maybe except Africans) can't do like wise. IF they can't do it first, then they can quickly copy it and clone it in 2 years. (Heck, the Chinese already broke into the pentagon computer systems and stole the F-35 design plans. Terabytes full of design stuff on the airframe AND avionics. It was in the Wall St. journal a few weeks ago.) So the old game of the USA working like mad, inventing new industries like TVs, computers or whatever, and just keeping that industry for pathetic 15-20 years and then losing THAT is over. We can't even do that now. Innovating our way out is not an option either.

We've lost our mfg base. We lost agriculture base. We lost autos. We've EVEN lost high tech. Check it out. We have a trade DEFICIT with the rest of the world in agriculture and high tech equipement and services.

Bottom line, the world has equal skills with the U.S. now. And the only thing that differeniates is COST. And the U.S. competing on cost is killing us, every - single - day.

This latest economic downturn is just a warmup for the next bigger one coming. Count on it. Invest accordingly.

Anonymous said...

Probably all those BO commies in SF and LA are going to buy that Chinese POS car.

Do you know how the Chinese checks the value of their cars? Through Mao's Red Book. *badun-tish*

Thank you ladies & gentlemen, we'll be here all night.

Reality said...

I agree with Keith. Folks/fellow posters/friends, let's take a breathe, and take a look at the computer on which we have been typing on: almost everything there, from the monitor, keyboard, mouse, to the motherboard, hard drive, DVD drive, etc. are all made in China . . . except for a couple items: the CPU/microprocessor, and the operating system. The last two just happen to be the most expensive and highest profit margin items!

Sure, the Chinese mfr could have attached that monitor, keyboard, mouse, DVD drive, hard drive, motherboard material etc. etc. to some slow processor of their own design . . . then the whole computer would be selling for much less. The last time I checked, a couple years ago, the Chinese Academy of Science was proud of domestic design of a microprocessor comparable in processing power to i486! How much would a desktop i486 (pre-Pentium) be worth nowadays?

Car making will be the same . . . electronics and computer/network accessory industries are already like that. We will keep coming up with innovations, and the Chinese manufacturers will specialise in churning out what we invent cheaply. IMHO, the car industry will actually become vibrant again like it was back in the 1920's, instead of the oligopolistic nonsense that we have had over the past half century. New technologies and designs may actually show up among new cars much quicker.

Why China, intead of say Brazil, make a good match for the US? Because they lack farm land, especially mass industrial-farming suitable farm land. American farmers are far more productive than Chinese farmers. That means, hundreds of millions of Chinese born on farms are out-competed on the international commodities market. They are ready and eager to sign up for a manufacturing job for very little pay. There is no intrinsic reason why manufacturing job should pay more than farming jobs, when farming is highly automated like in the US. IMHO, food prices will go up significant, to balance the trade between the US and China.

As for "subsidizing China," nah, manufacturing is a very polluting industry: they are the ones sucking up the air pollution, water pollution, etc. If anythihng, it's the Chinese who are subsidising our life style. Put it this way, when New Yorkers and California design studios have manufacturing done in the middle of the country, who is subsidizing who? who has a better living standard? The holders of high premium jobs! Not the commodidized jobs.

As for shoddy products from China . . . that's one of the big reasons why American design and quality control engineers will enjoy high pay instead of line workers! Sure, 300 million Americans do not like shoddy products; do you think the 1.2 billion Chinese prefer shoddy products and poison themselves? Of course not. The Chinese manufacturers and their American affiliates will pay big for superior American designs and the work of quality control engineers to make their own products competitive against other Chinese manufacturers, both for the US market and for the Chinese market.

What will sustain high standards of living in the US? Competition and a market place relatively free from government red tapes continue to push Americans to come up with superior designs and innovations. That is the fundamental advantage the US has over China. They have much more red tapes than we do. Comes to think of it, innovation (due to relative freedom and lack of government enforced monopoly) is what made the West a step or two ahead of the East (Oriental Despotism) for the past 1000+ years!

Reality said...

Gutless and Lazy,

The US has never been the most populous country in the world, ever. So, why did the US have the highest standards of living in the world? People in Europe were emigrating to the US for better lives as early as the 1700's. Why?

Economic competition is not about every country doing exactly the same thing. Real economy is about finding niche, where one can excel and prosper. Americans enjoyed higher standards of living than most of the rest of the world in the 1700's, 1800's and 1900's because lower taxation and less regulations from a relatively small government compared to its contemporaries for most of those 300 years (until the last 40 years or so).

Trade deficit is the result of government deficit. It has very little to do with intrinsic relative productivity. The moment the government is shut down, people will be forced to be productive, or the slackers won't be able to eat without the government guns helping them coercing food from the producers.

Also, trade balance and wealth accummulation are two different issues as well. It would not surprise me at all if the Chinese and Indian capitalists who have been successfully exporting goods are engaged in capital-flight (i.e. moving money out clandestinely) because of the red tapes (ironicly) against capital-flight in their countries . . . just like Russians were in the 1990's.

Reality said...

Pay Lay Ale,

The protection racket business has already run its course. Why else do you think other industrialized nations (UK, Germany, Japan, even China and India) all use the US Dollar? It's a way of subsidizing our military industrial complex, to fight the so-called cold war.

The problem with the protection racket is two fold:

(1) You get greedy operators like the neocons who want to raise the protection premium by waging wars of intimidation; sometimes the scheme might be successful, like the Gulf War of 1991, for which Japanese, Saudis and Kuwaitis paid . . . eventually one of those gambles do not pay off, like our recent/current Iraq debacle . . . then the reputation capital of the firm is at risk.

(2) Empires eventually rouse nativist sentiment and "freedom fighters."

Sometimes the two can even become interwined, like the Taliban/Al Queda in Afghanistan. It becomes hard to tell if the local resistance is genuinely populist and therefore costly to suppress or it's funded by the military industrial complex itself to justify further public funding of the complex.

The international protetion racket business is a state-owned and operated business. Just like any state-run business, the ownership interest and the management's interest are not always the same. The nominal owners (us) may want peace, but the managers may not.

patrat said...

I see wages coming down in the US until we CAN compete with the rest of the world. Now THAT's deflation! And worse.

Anonymous said...

"Why China, intead of say Brazil, make a good match for the US? Because they lack farm land, especially mass industrial-farming suitable farm land. American farmers are far more productive than Chinese farmers."

The problem is that Brazil is becoming China's major trade partner. The US is losing market share very fast in Brazil. To give you an idea, you couldn't find Koreans and Chinese in Brazil until the 90's. Now they're everywhere. You see them in every corner, opening stores and import/export companies, doing crooked stuff, supplying counterfeit goods to street vendors and shops, doing tourism, coming for trade shows, buying companies, you name it.

Brazil already manufacturers Honda, Nissan, Mitsubishi, Mercedes, Audi, Kia, Fiat, Peugeot, Citroen. Chinese cars next.

There's a major tourism trade show going on in Brazil this week, the first of its kind in Latin America. Guess who sent the highest number of delegates? You got it, China. The US was too busy with Pelosi dancing around her lies and BO making speeches about unicorns.

I heard from a businessman that while he was opening another factory in China, to expand his business, the Chinese was building an exact copy of his factory a few blocks over. He said that even the paint job was the same. All they changed was the name in front. That's what the Chinese has been doing to Americans for decades. Imagine that; they have the know how of everything that was ever invented by Americans. When the Americans open a factory in China, an exact copy is built somewhere else in town at the same time, with the same layout, with the same machines. The savings on R&D is just a bonus for them.

The Chinese has invaded Brazil in the last six years. In my view, the US is totally f*cked because China is covering all angles, advancing partnerships with major players and securing natural resources, while the US is busy with wars, outsourcing jobs, making bankers richer, and pumping illiterate illegals in so politicians can get their votes. When was the last time you saw a Mexican getting a Nobel prize in Science or inventing anything revolutionary? Mexico just begged the IMF for a loan to get by, AGAIN! I mean, c'mon, Mexico borders the US and close to Canada, two of the biggest economies. Yet Mexico could never get its sh!t together. And the US keeps pumping them in, as well as from Haiti, Jamaica, Guatemala, etc. Do you see China, Japan, Korea, or Europe doing the same?

This country is doomed.

Reality said...

Anon,

Thank you for supplying further evidence to why Brazil shares more commonality with the US, hence is less complementary as a trade partner. Brazil has natural resources just like the US, whereas China lacks natural resources compared to its population size.

As for opening a duplicate factory down the street, that is actually a problem for the Chinese, not a blessing. They are relatively new to boom-and-bust cycles (having previously banished market economy for a couple generations). Many of their operations show classic signs of capital waste through linear duplication without innovation. For example, there was a massive explosion of Chinese brands selling DVD players in the late 1990's and early 2000's, filling the shelves at Walmart, displacing the venerable Japanese brands like Sony, Panasonic, etc. Where is "Apex" now? The company is long bankrupt. Excessive duplication leads to "overcapacity"/market-saturation, driving prices down the supply/demand curve, and in essence pushing capital destruction along the obsolescence curve much quicker. Chinese obsession with mass duplication actually makes innovation even more important in a sea of clones.

As for Mexican alleged being dumb, guess what, your much feared Chinese haven't got many Nobel Prize either (Chinese Americans are Americans). I seriously doubt the Mexican drug kingpins are that much dumber than the rocket scientists at JPL on this side of the border. Raw human intelligence just gets applied to different pursuits due to political/economic circumstances. There are smart people among Americans, Chinese and Mexicans (and Brazillions too, among others). On the other hand, central planners in all three countries have no hope of getting things right. No, the Chinese "master plan" is not going to work any better than the American "master plan." It suffers from the same problem of all central planning: lacking the market price signal that is essential in transmitting localized, specific and ever changing knowledge.

Whichever country lets the market work relatively unfettered, without bureacrats pretending they know it all, is going to have a vibrant economy. The US has a leg up on the other two because the American culture is more skeptical of the pretencious mandarins . . . so I hope.

Reality said...

BTW,

Japan does import labor from Korea and China. China has its own "Mexico": the interior. Without the massive importation of labor force from the interior of China, the coastal economic boom is quite impossible. China has an internal passport system, just like Europe had in the dark ages, when de jure serf system attached people to the land. That has been a major cause for social injustice and discontent in recent years. Much human labor and effort is wasted on the enforcement/bribing/cirumventing of that antiquated. There is a reason why the passport system was more or less abolished in Western Europe in the 19th century, preserved only in the "oriental despotic" countries like Russia, Turkey and China . . . until of course nationalism cooked up World War One, reviving passports in Western Europe shortly before the continent went to the dogs.

Anonymous said...

To Realist... what you're describing, in your ode to Yankee ingenuity, is that of the design of new paradigms starting with the Cotton Gin to that of the PDP-11, two centuries of rapid industrial innovation in research and development.

Today, even R&D from places like MIT and the nearby Kendall Sq innovative startups, already have offshoring and partnerships with Singapore, Russia, and the rest of world. In essence, instead of starting the next generation of DEC and other high volume of development work, it's small number of breeders w/ a majority of the meat being sent abroad. That's not the recipe for long term success.

Reality said...

Anon,

The very fact that both Sigapore and Russia, plus Japan, China, Germany, India, etc. etc. are all counter parties to MIT/Kendall Sq. firms means that the meat of the profit stays with MIT/Kendall, as all the Sigaporeans, Russians, Japanese, Chinese, Germans, Indians, etc. etc. bid away each other's profit margin. If you want a concrete example, look at the Media Lab at MIT: how much money has those supposed foreigners have poured into that sink hole? Yet, innovasions keep cropping up right around that area, by successful new American new startups in that neighborhood, just outside the reach of those foreign investors. LOL.

Anonymous said...

@Reality

Meanwhile, Lula is in Saudi Arabia this week to close major deals in biotechnology (i.e., production of insulin, etc), construction, exploration of oil, etc. Next week he's in China to arrange more business partnerships, invited by that country. China already beat the US to become a major trading partner to Brazil, in April, for the first time in history.

And BO keeps making speeches...

As an American working in trade for the last 20 years, I'm describing what I've been seeing on my businesses trips to Asia and South America. The US is sleeping at the helm, too concerned with socialism and political power, while he rest of major players are closing deals every week.

Hey, but what Bo, the White House dog is doing today? Or What Michelle is wearing?

Reality said...

Anon,

Agree with your general distaste for the socialist tendencies in BO's speeches. However, it would be a mistake to assume that Lula, or the heads of Saudi Arabia or China, would meet any more success in their central planning than our glorious leaders ;-)

All those deals signed by government officials only serve to promote the interest of incumbent big firms at the expense of their would-be competitors. To the extent that national leaders fly around, meet, shake hands and sign paper, they are just wasting fuel and tax money.

So long as Michele stick to her garden, and Obama does nothing besides talking (and keep the left-leaning statists in check with empty rhetorics), we'd be okay.

Anonymous said...

"If you want a concrete example, look at the Media Lab at MIT: how much money has those supposed foreigners have poured into that sink hole? Yet, innovations keep cropping up right around that area"

I'm the Anon May 17, 2009 10:25 PM and while I'd first hand witnessed and experienced what you're talking about (I'm from Boston BTW), the tone of the area has changed since 2000. Before, when let's say a Whitehead Institute would invent a new detection assay, there would be a series of development stage enterprises, in and around the Boston area, to recruit and hire Americans and PRs to do work on it and re-ignite other US based enterprises. The collateral effect of this was unprecedented and on various American cities, not just Boston or the northeast corridor. This was the American century which I guess you could earmark with Boston's Polaroid Corp and finishing with a Boston Scientific a/o Akamai.

What's happened is that the key results are already being harnessed between established MIT academics and their foreign collaborators. There's not even enough time for nascent US industries to take advantage of the pace of change. So what you see more of, in today's Kendall, is highly financed biotech (sales/finance types) but with a lot of actual work, going on elsewhere. The USA-based IP owners of the goods might still be MIT (or like place) but the real income generated is becoming more and more internationalized 'cause realize, abroad, those royalties need to be cross-licensed w/ XYZ of Singapore or Korea. And likewise, even MIT and Harvard have more contacts with the Natl Univ in Singapore and Beijing/Tsinghua U's in China then ever before in history. In a sense, the American top schools are in themselves, becoming clearinghouses for worldwide research. This is a huge break, from the 80s, when everyone would leave their home country to be a postdoc or visiting scholar at MIT since that work wasn't being looked at near home. If you look at the normal outplacement of MIT grads, in the past decade, you'll see that more engineering graduates have headed into banking and management consulting (some ~40%) over let's say hi-tech which just to be the landing spot for the vast majority of MITers.

And as for American schools, the Univ of Chicago has already opened a campus in Singapore which tells me that it has less to do with the "of Chicago" location than a classic academia brand name moniker. All and all, one can't look at the 70s and 80s as the model of the years ahead. The US will have a tough time competing when the best and brightest either go into finance/consulting/medicine/law locally or hi-tech (but abroad & normally not US citizens).

Anonymous said...

@ Reality

The fact that China took over the position from the US, in April, as major trading partner with Brazil must mean something. The US held that position for 80 years straight. Now it's gone...forever!

Of course, you can always dismiss this important fact as something unimportant. I wouldn't, as a professional who has worked in trade for more than twenty years.

Lula (and a delegation of Brazilian businessman) are having dinner with Hu Jintao as I type this, to expand trade between the two countries beyond commodities. Also on the agenda, partnership with China to explore the deep oil reserves just discovered by Petrobras.

Meanwhile, BO is meeting with Israel tonight to bicker about Palestinians and Iran.

Who'd have thunk it, eighty years of American leadership as trade partner with Brazil beaten by China in April.

Furthermore, Lula's speech in Saudi Arabia asked for all other countries to start investing between themselves, instead of using their reserves to buy US Treasuries, because focusing in the American market took them nowhere. The same speech given to Hu Jintao tonight.

Reality said...

Anon from Boston,

Thank you for the thoughtful response. Here are my thoughts:

1. There is no rational reason why all the hangers-on doing all the janitorial work and paper pushing around Kendall Square should automaticly deserve to make more money than workers in other parts of the country (or other parts of the world). To the extent that all the hangers-on did have higher income, and the city fathers of the People's Republic of Cambridge could afford to run one of the most left-leaning municipalities in the country, it was a form of tax on innovations . . . a tax that the entire rest of the world had to pay before the fruits of those innovations reach the worldwide public at large.

2. "Government investors" are not smart investors. The bureacrats running those programs, including technology partnerships with American universities, have all the wrong incentives: there is no competitive pressure to drive them out of business, nor is there outsized pay-off's when the bureacrats bet right. Bureacrats may count their career/CV in terms of the number of transactions/tech-transfers taking place on their watch . . . therefore they will have the dumbest and most useless tech transferred to them. There is a sidebar incentives though: the officials might get priority consideration for their own kids' application to the colledge! In other words, the bureacratic investors are guaranteed to overpay, at above-market price for whatever they end up getting.

There is nothing new about those foreign governments forming partnerships with American universities . . . it's just central planning in yet another disguise. Those partnerships will just be even more wasteful than NASA and DOD.

3. Ben Franklin once said, those who would give up liberty in order to get security shall deserve neither. IMHO, this insght applies eminently to technology and innovaiton. It is the freemarket's interaction with innovative minds that bring us prosperity. Protectionism in this regard would only retard innovation and misdirect resources. Our competitive advantage is in the fact that we have a tradition of being free; let the other countries hurt themselves with their own central planning. As William Gladstone observed: free trade is its own reward. Imperial tendencies and the master plan to hold the rest of the world by the balls were what ironicly destroyed the British Empire.

Anonymous said...

"IMHO, this insght applies eminently to technology and innovaiton. It is the freemarket's interaction with innovative minds that bring us prosperity."

Boston Anon again:

A lot of brilliant young minds don't have access to capital. This is why the premed a/o pharmacist route is so attractive to 'A/A-' students from less than well of parents. It's a path where high grades equal economic success. And no, not all new technologies can be put on cheap DVDs like the MS-Dos of yesteryear. If anything, the concentration of wealth, among the financiers, is what's killing the USA.

All and all, if American universities and stateside VCs don't at least give local startups, a smidgen of a time slot to recruit/hire locally and expound upon home grown innovations, then really, it's just a battle of who's got the bigger guns at the patent/trademark office. And given the general costs of R&D in general, the monied types (including management consulting/law firms) will have its way in the end.

I'd say, what America needs is a new century Digital Equipment Corp, a new paradigm microprocessing/PDP-1 which with $70K seed money (albeit 1960 dollars), created an American industry in the billions with numerous spin offs and hundreds of thousands of jobs. My gut feeling tells me that there'll never be another DEC and here's why... from breeder innovation to the development stage enterprise, the knowledgebase is shifted abroad and soon, innovators across the seas are coming up with variations on the same idea. So in the end, the industry, if it's not in the DoD cradle, doesn't blossom in America, it becomes this rag/tag series of suppliers, labs, QA firms, etc, but scattered worldwide with only the sales jobs in the USA.

I think what destroyed the British Empire was actually a lack of control. It was really an archipelago of 18th and 19th century corporations: Hudson Bay Co, East India Co, etc, using the nation's soldiers as their hired guns. Now, due to WWI, the muscle power (total no of troops) was significantly reduced and then, the Empire needed to hire/conscript soldiers from the Commonwealth and at the same time, it pursued its own finance-based economy by pooling their capital to invest in America (see present day global equity/housing bubbles for a more modern day analogy). Well, between the depression, the various colonies putting up resistance, and the biggie of World War II, we all know how that ended, starting with Suez in '56 and ending with Bahrain in '71. BTW, I don't really consider the loss of India to be a traditional Econometric/Imperial loss because in a sense, the govt never had enough troops nor executive power to control an entire, densely populated subcontinent, especially once they'd started to modernize it and locals could assemble freely whereas shipping (Suez incident), oil (Bahrain & mideast), etc, were clear economic vantage points for an economically based empire. Britain was always on marked time, as for granting home rule to India. It just took longer than expected. Really, from '55 to '72, the British Empire had collapsed, losing all territories from Asia (sans HK) to Africa.

Reality said...

Boston Anon,

College kids go into pre-med for the exact same reason as they went into high tech, pre-law and finance: the expected pay-off matrix. Specificly, medicine and financial industries are state-sponsored monopolies: the state medicine board keep supply voume down, the central bank prints up money both to pay for the over-priced doctors and to pay for the losses in the financial industry after the gamblers take home the winnings.

Empires, or any other forms of governments, can never have real control. High Officials at the center of an empire can only pretend to have control. The real control is always in the hands of the individuals, and imperially appointed local officials who use/abuse monopolistic power given by an empire to engage in local exploitation and corruption. What's called "imperial control" is really perversion of market price mechanism, and eventually chaos. That's why the British Empire that prospered more or less on free trade for two centuries collapsed when it tried to assert more "control" with war making efforts. Other empires that were based on ruthless (pretense of) control, like the soviet empire and Nazi empire, collapsed much quicker.

It's silly to think that Indian kids would get better education if their indian professors are moved half a world away, and both parties can speak broken American English with heavy accents instead of their native tongue. Both parties are coming to the US, say to MIT, because there are more opportunities in the US, thanks to relative less government red tapes on the industries that can use their ideas compared to India. There was never a lack of brilliant minds around the world; the ruling class' propensity to loot the economy was what deprived those brilliant minds' the opportunity to have their ideas capitalized upon. Grad students do not get real educations. They are the ones doing the research, as the professors spend all their time on fund raising. It's silly to think that Singapore government is getting anything for its money buying a UChicago brand. It's a complete waste of money, just like Mitsubishi buying Rockefeller building, and Lenovo buying IBM brand. The key to letting brilliant minds meeting capital is cutting back government redtapes. That includes cutting back NASA, DoD, and whatever other burearatic technology initiative like Japan's MITS did for computer technology in the 1990's. Government bureacrats are incapable of making the right bets and changing bets according to technology changes. It's like evolution vs. design by committee. The committee is hopeless.

Anonymous said...

"It's silly to think that Singapore government is getting anything for its money buying a UChicago brand. It's a complete waste of money, just like Mitsubishi buying Rockefeller building, and Lenovo buying IBM brand. The key to letting brilliant minds meeting capital is cutting back government redtapes."

Ok, but Univ of Chicago is providing the service to Singaporean nationals, not to the govt of Singapore. So it's not the same as buying Rockfeller Ctr, that's a status symbol for Mitsubishi/Japan Inc, a trophy piece of Manhattan. There's no intrinsic value in it. I'd even argue that even JD Rockefeller Jr, himself, wasted his family's savings building it for a show of "Rockefeller influence" in the city which never sleeps.

American universities, like any other established institute, are seeking resources, whether it be students or joint-collaborations abroad. They don't want to be bound by simply, the USA-centric pool and whoever can the right loan package or corporate package to attend.

Your mind seems to be very digital, it's either all govt or all free persons. Not true, the really free person (& not necessarily born rich) is an independent proprietary trader who can invest his own money into some tech venture. Others are independently wealthy, like wildcatter Pickens and his vision of the wind farms. For the most part, however, the nation is controlled by oligopolies [ *note, not exactly monopolies ] of management consultants, law firms, and the financial institutes they either directly or indirectly serve and therefore, you'll always see really bright young Americans selling out and joining them for a steady paycheck. I'd argue that half the MITers, I'd known, are wasting their talents at useless MC/IB places like McKinsey, Carlyle, or JPM or seeing patients (MD doctors) or filing patents (Patent attorney/agent). The ones who'd started the big enterprises of the pasts, i.e. Akamai, are dwindling in numbers.

Here's last year's survey at MIT career center:

http://web.mit.edu/career/www/infostats/graduation08.pdf

The survey, esp around the employer section, indicates that half of the placement, of a top engineering school, is in finance or management consulting. Realize, this is MIT, not Dartmouth or Brown. And even the 50% who didn't go that way, only about half of them (25% of the total) went for a technology company, as if really Google vis-a-vis Oracle, were the be-all of tech; the others went for academic or govt/military jobs. For me, this is not encouraging.

Realize, I'd spent a year at Columbia U (then transferred out) and I was annoyed to realize that a quarter of my classmates would one day become lawyers. In fact, my two engineering friends there both became traders, one is actually a self-made millionaire in GLOBEX futures scalping. I'd hardly argue that he was contributing to anything other than his wallet but of all the persons I'd known, he was the most capable of starting his own enterprise and thriving in it. I guess the easy money killed his motivation.

Reality said...

Anon from Boston,

To me, there is no such thing as "selling out" . . . "selling out" implies someone is compromising a value system; i.e. someone is doing things inferior as judged in your own value system. Value is inherently subjective, so while people engage in "buy" and "sell" in everything they undertake, trading their time/effort for one thing or another, "selling out" is a value judgement on your part on someone else' decision regarding their own lives, as judged against your own template of merit. That makes it a farce.

There is nothing wrong with what your GLOBEX trader friend is doing. He is providing a vital service to the economy called "liquidity." Liquidity is a precious commodity in the market pricing process. Look at it this way: would you consider the orange juice distributor, who stores orange juice underground and periodicly sends refrigerated trucks to Boston, so that orange juice can be available everyday in Boston despite the fact that oranges are only havested in Florida and only once a year . . . would you consider that distributor not doing the society any good besides fattening his own wallet? After all, he is not producing any new orange or juice; perhaps even losing some juice to spoilage. Traders provide a vital service to the economy: they help transmit price signals, which change according to changes in production, demand and transportation/distribution technology and circumstances.

I agree with you that there is a problem when an enormous per centage of engineering school graduates get incentivized into financial engineering. To push the orange juice analogy further, it would be as if the government stepping in and guaranteeing juice price in Boston (FNM, PPIP and other goernment buyers of last resort) or setting juice price in Florida at which the farmers are forced to sell to distributors or giving distributors the right to stop any car/truck on the road and force the driver to deliver juice to Boston at a low fixed government capped fee (analogous to FED's keeping interest rate artificially low). Such a set of goernment policies may well attract more people into the OJ distribution business as profit is becoming "guaranteed" . . . however, at the same time, there is guaranteed to be more rotten OJ and other forms of waste on the way to Boston as a result of the intervention. Transportation resources along the entire east coast will be forcibly wasted on transporting OJ, and the new distributors would have little incentive to prevent spoilage as the government buyer is ready to buy everything. That is an apt analogy on how government loan guarantees and interest caps have misdirected economic resources towards waste in the mortgage finance industrial comples . . . and how consistent central bank bailouts over the decades have artificially created an oversized financial industry. Resources in the economy gets misdirected when the government makes a hash of the market price mechanism.

Far from being "digital"/binary, I'm keenly aware of the wide continuum between various degrees of free market vs. central planning. Any referece to "free market" vs. "central planning" in my writings should be understook as such because pure free market and pure central planning in their ideal forms do not exist. Pure central planning does not exist because people have free will. I just don't see how monopolistic central planning as practiced in some of the foreign countries is any better than our alleged oligopolistic system.

Anonymous said...

"There is nothing wrong with what your GLOBEX trader friend is doing. He is providing a vital service to the economy called "liquidity." Liquidity is a precious commodity in the market pricing process."

Clearly, there's nothing wrong with being a trader, however, consider this, when he was a teenager, he was interested in designing robots and medical instruments. In fact, I believe it were those h.s. science projects which got him into Columbia in the first place, however, his first job out of CU, as a tech support assistant to a dealing desk, started him at $50K+ (mid-90s salary) with P/L sharing, whereas at an R&D project, his starting pkg would be less than that with less chance of making some serious mint. Now, granted you can talk about Jesse Livermore and other box/scalpers and say that my friend is just like 'em but I beg to differ a bit, none of them could really innovate and come out with new inventions in technology but like Livermore, Lipshutz, and other traders, he discovered that he had an eye for roundtrips and scalping off the volatilities. In the end, he saw that he'd be rich, staying in trading than in trying his hand in R&D.

"I just don't see how monopolistic central planning as practiced in some of the foreign countries is any better than our alleged oligopolistic system."

I concur, however, consider this, when this society had a culture of R&D, starting from the Edisons/Teslas of the early 1900s, no one had thought of science and engineering, as a profession of downward mobility. In fact, traders like Livermore and/or Gann were thought of as money scalpers, albeit they were popular as a result of their winnings, but they didn't carry the same panache as let's say the `Wizard of Menlo Park`. As the century progressed, tech became more complex so that larger and more intricate facilities needed to be created, (see the Natl Labs system, as an example). Now, granted central planning of technology simply moves innovation into the hands of politicians, see the whole "Green Movement" of today, and thus, eliminates the real breakthroughs which a more freer system permits but on the flipside, there is a chance that one of them could leave the Govt umbrella and start his own enterprise. Isn't that what happened to Ken Olsen, who'd left the DoD-Lincoln Lab facility to start Digital Equipment Corp but with the knowledge he'd gained there?

Reality said...

Boston Anon,

It's impossible to plan out a person's life according to his or her manifest talent during teenage. Aside from musicians and professional/olympic athletes, most people's forte also change as they age. Innovative minds are not rare at all; people figure out ways to take short cuts all the time; which "short cut" becomes systemized and get capital funding to the benefit of the economy is the key. Most innovations must have been thought of numerous times in human history. For example, the steam engine was something that was tinkered with since ancient Greek time . . . it wasn't until the 1700's when the capital and circumstances finally converged to catapult it into the driving force behind industrial revolution.

What made the capital and circumstances to converge and lionize worthwhile innovations? The free market place discovery process.

I have no problem with traders making more money so long as they risk their own money and have no lopsided guarantees from the the government that leads to heads they win tail the rest of us lose. I find it troubling that Wall Street firms were able to pay substantially more for new recruits than any other industry, because the central banking system made the IB business model into a heads you win and tail other people lose scenario (the FED standing ready to inflate, debasing other people's money to bail out your bad bets). So long as your friend trades his own money and receives no support from the government in his trades, I'm perfectly fine with what he does.

I doubt Livermore or Gann were great traders by the time they wrote their books. Just like innovators and top engineers in industries, when you are at the top of your game, you don't have time to write books or teach. Warrent Buffet is pontificating a lot lately, because he is no longer a good investor in terms of stock/asset picking.

The damage of central planning is far beyond moving innovation into the hands of the government. Central planning stifles the most important step in the process of technological advance: which of the myriads of new ideas get funding . . . because bureacrats do not have the proper set of profit/loss incentives that entreprenuers in the market place do. The steam engine was shown to monarchs of one stripe or another for nearly two thousand years! None of them funded further R&D on the idea. It was the free market place that privded the multiple steps of funding in rapid succession that brought forth a commercially viable steam engine, and consequently the industrial revolution.

National labs and the Ken Olsen citation show the classic logical problem with "the seen vs the unseen," as observed by Fredrick Bastiat almost two centuries ago. I'm sure the North Korean leaders teach their peons that it is the government that is giving out food to the starving population. What is not said in that paradigm is that much more food would have been produced by the free market place to begin with if the government were not engaged in central planning telling farmers what to grow what not to grow with each family's farming resources. Far more innovation would have taken place and get funded by the free market place if resources had not been taxed away by the government to fund the myriads of government sponsored ivory towers and the committee review process to begin with.

Anonymous said...

I don't think we're in disagreement on anything here.

The whole idea of a bureaucracy controlling all of R&D is the reason why there are hundred of thousands of postdocs/visiting scholars roaming the land in search of part-time stints at universities, instead of having real full time jobs.

I think the issue is more that not all scientists and engineers are independently wealthy like let's say a Lavoisier or Maxwell. For the most part, they need a backer like George Westinghouse to Tesla's AC.

At the same time, when let's say a development department is formed stateside, a critical mass of residents need to be American nationals (plus PRs) so that this experience then gets circulated within the country, even if the original company goes bust. That's how subsequent industries can evolve out of an originating carcass. This is kinda the evolution of the parallel processing systems when Thinking Machines went under but the subsequent knowledge generated, ended up at Sun, Torrent, Oracle, Ab Initio, and eventually even IBM. The net result was greater than the originating company.

The problem with the present day corporate M.O. is that instead of the half a dozen spinoffs, as the aforementioned example had indicated could occur, the knowledge is in east Asia or eastern Europe even before that first development organization reaches critical mass. What that does is instigate the spin offs to occur elsewhere, instead of the USA. So what's happened is that it's not just the mature industries, like software support, bulk plastics, etc, which get offshored but pretty much everything except for sales/marketing.

Now, this brings me back to my CU trader friend. When he'd graduated, the tech assistant dealing desk job covered his living expenses in NYC and gave him some spending money for his first year out of school. On the other hand, that R&D stint would have forced him to share a pad and have enough to eat at the food stalls (or vending trucks) and then, as everyone around him said... "one needs an MBA to stay marketable" or risk being another layoff stat during years 3 to 5. Well... for him, the choice was obvious, the trading firm had a wide open door for those who could improve scalping percentages. The end result was him becoming rich doing exactly that and unlike some others at R&D lab ABC, he's not having to see his team's work get sent to Russia.

Now, think about the collateral effect of this type of thinking. In the future, when he goes back to give a talk at Pupin Hall, will he be telling everyone of a great career in R&D or will he be telling the physics honors students about the possibilities of a huge bank roll and having a retirement pad in Tahiti while trading with a satellite dish? And then, knowing a bit about how ivy students tend to think, many will throw up their hands and say... 'I can't trade, that's not me. I'll just apply to medical school or patent law. I need to pay back my loans.'

Reality said...

Boston Anon,

I don't think our views are very far apart either. There is potentially a subtle point regarding cause and solution that I would like to emphasize:

1. Companies ship backend jobs overseas, be they manufacturing or R&D, not because they are unpatriotic or selfish, but because they can not get comparable productivity here for their money: when the government is subsidizing people to do no work (welfare), to push paper (government bureacracy), to work for government sponsored monopolies (lawyers and medicine), and to gamble (the financial industry), the labor pool gets tighter and more expensive. The manufacturing and R&D employers simply can not afford to pay for the expensive labor, especially because they also have to be taxed to pay for the subsidizing of all the aforementioned industries.

2. Operations here emphasize marketing for a simple reason: NY FED is the source of global money supply. People raise animals in Iowa, and run hot-dog stands in NYC; not the other way around. LOL. Just like during the gold rush of 1849, a single egg cost more money in San Francisco than a dozen eggs cost in the midwest, where eggs were produced. That's how goods and labor flow, towards the source of money production.

3. To the extent that the US military has control over the entire world, not only the cost of military has to be supported by tax on domestic producers while the military itself siphoning off even more productive workers from the labor pool, but more importantly: the "control" makes it less expensive for businesses to coordinate their overseas operations as they have less to worry about foreign dictators seizing their business overseas. ergo, the mightier the empire, the higher effective long run jobless rate becomes at its administrative core.

4. Government mandate and/or subsidy of manufacturing/R&D would not solve the problem at all, but only make things worse. What constitute productive manufacturing and R&D invole details that are far beyond the statistics that typical bureacrats and policy makers are capable of handling. For example, when horseless carriage came along a century ago, if there had been large scale government subsidy on manufacturing and R&D, it's guaranteed that the few tinkerers of the automobiles would be taxed heavily to support the established manufacturers of horse-drawn carriages. Perhaps R&D on better eye covers and sh*t bags for horses. In fact, the horse drawn carriage industry did try to get the government involved to ban automobiles on safety and environmental (noise) concerns. Luckily for Americans, the fine art of using goernmental regulatory power to stifle competition was not as advanced as it is nowadays.

Anonymous said...

"Government mandate and/or subsidy of manufacturing/R&D would not solve the problem at all, but only make things worse. What constitute productive manufacturing and R&D invole details that are far beyond the statistics that typical bureacrats and policy makers are capable of handling."

The present-day scams known as Nano* or Green Tech* have exactly the above in mind and unfortunately, the entire postdoc/academic/govt complex is in cahoots with it all, to increase their funding pools.

Really, we're in a greater need for people like my trader pal to use his money and start his own research enterprise, instead of partying it up, and without playing into the hands of bureaucrats who want to compartmentalize the work along their so-called initiatives for a *progressive society*.

Reality said...

Boston Anon,

Exactly! We need more resource allocators who bet more with their own money and get rewarded or penalized on the merit of their own risk taking. The competition among those independent "speculators," catering to the whims of equally independent end users, is what makes market efficient. A tax reduction will go a long way towards increasing the opportunity cost of "partying up." It is no coincidence that when tax rates (including inflation) were jacked up in the 70's, the society partied it up as opporutnity cost of partying (after tax income derived from hard work instead of partying) dropped.