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Wal Mart shoppers are running out of money.

Discussion in 'Business & Economics' started by PLC1, May 2, 2011.

  1. PLC1

    PLC1 Moderator Staff Member

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    Wal-Mart: Our shoppers are 'running out of money'


    Just because of gas prices, or are there other factors as well?


    Ever look at how many things sold at Walmart (and elsewhere, no need to pick out just one retailer) are made abroad? It doesn't take a financial genius to figure out what that does to jobs in America, and to the wages of people who still have jobs.

    If the lower middle class, and the poor have money, then businesses like Wal Mart have a market. If they don't, then there is no market.

    Henry Ford figured that out a hundred years ago. If the people on the assembly lines can't afford what they are making, where is the market?
  2. GenSeneca

    GenSeneca Well-Known Member

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    Sounds like you believe trade deficits have a detrimental impact... Feel free to participate in Supposn's thread where I have asked people to make the case.
  3. BigRob

    BigRob Moderator Staff Member

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    So specialization of resources is a bad thing in your opinion?

    So, are you arguing that specialization of resources is the cause for high unemployment?
  4. Dr.Who

    Dr.Who Well-Known Member

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    Rising prices and less jobs are a double wammy. But if the american people stop buying inexpensive goods from "China they they will have to buy the more expensive ones from the US. Which will create more jobs and more money to spend. But the question is which way are they better off? Is it better to have a smaller paycheck and less expensive goods or a larger paycheck and more expensive goods. I say it does not matter philosphically. One needs to do the math to know which is better and as of a few years ago we were better off with much cheaper products even though the paychecks were slightly smaller. We dont need to fix the trade deficits they will fix themselves.

    What is important is that the world economy is connected and there will be an equalibrium reached. Prices will go up as long as people in China are willing to work for less. (a situation that is rapidly changing)

    But what we do not need is for prices to go up and jobs to be lost for reasons that are not related to the world economy reaching an equalibrium. Printing money causes prices to go up but there is no benefit to the world economy (healthy economies float all boats) and artifical government intrusions into the market stifle growth and cost jobs.

    We do need lower prices and more jobs but boycotting chinese products is not only not the answer but struggling people just won't do it. We need to let the economy find its balance and most of all we need to get out of the way while it does it. Then we will have a healthy economy that actualy grows and creates jobs.
  5. TruthSeeker

    TruthSeeker New Member

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    Perfectly stated, Doc!
  6. PLC1

    PLC1 Moderator Staff Member

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    specialization of resources?

    I'm saying that importing everything from soup to nuts is causing high unemployment.
  7. Dr.Who

    Dr.Who Well-Known Member

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    It is a factor in unemployment. It will be a factor as long as workers overseas are willing to work for less wages. As a result of our buying all their products they are now demanding higher wages and working conditions and getting them at a very rapid pace.

    We could slap tarrifs on their products but since the US still exports and ton of stuff and they would just slap a tarrif back on us that would not work. (we are after all the world's third or fourth largest exporter and tarrifs on those exports would hurt us a lot)
    http://en.wikipedia.org/wiki/List_of_countries_by_exports

    We could ask people to buy American but given the choice to by a $4 pair of gloves from China or a $26 pair of gloves made in the USA few will.

    We couild find some presently unstated method of forcing Americans to buy American but that would leave China to continute to capture the world market for exports. Or we could encourage the Chinese to increase the wages and working conditions their workers get while the wages and working conditions of our own workers decreases (I don't think there is any other option). When the wages their is eqaul to the wages here the process will stop. But at least we can continue to enjoy a share of the world markets for exports. In the meantime while our wages fall if the cost of products falls more then it does not matter. If we stop printing money and stop punishing business then we stand a chance that the cost of products will fall faster than wages.
  8. GenSeneca

    GenSeneca Well-Known Member

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    Correlation does not imply causation (cum hoc ergo propter hoc): a faulty assumption that correlation between two variables implies that one causes the other.

    Fallacy of the single cause (causal oversimplification): it is assumed that there is one, simple cause of an outcome when in reality it may have been caused by a number of only jointly sufficient causes.

    Post hoc ergo propter hoc (false cause, coincidental correlation, correlation not causation): X happened then Y happened; therefore X caused Y

    Take your pick...
  9. GenSeneca

    GenSeneca Well-Known Member

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    Trade deficits play a factor in Employment as well. Consider how many retail jobs exist because the owner(s) can afford to hire additional people due to the lower costs of importing products. If forced to purchase American products at a cost increase of 400%-600%, those businesses would have to lay off workers to make up the difference in order to stay in business.


    If a majority of Americans actually went along with the "Buy American" propaganda, the US would suffer a massive decline in our standard of living and unemployment would skyrocket.... but our trade deficit would disappear. :rolleyes:

    Free Markets work best and they must be free of both force and fraud to function. The solution is to stop trying to micromanage economic behavior and allow individuals to make their own choices free of government interference. Reduce government involvement in the economy to protecting the public from force and fraud and the economy will boom like never before.

    That's the Progressives objective... equalize all the nations of the world to the same economic level; raise the third world up while dragging down first world economies and all the nations can meet somewhere in the middle. Of course it's a recipe for disaster on a global scale but what the hell...

    Stop printing money?!? Stop punishing business!?! Them's fighin' words! :D
  10. PLC1

    PLC1 Moderator Staff Member

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    Sounds like a correlation vs causation sort of fallacy to me.
  11. BigRob

    BigRob Moderator Staff Member

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    Consider:

    Imagine there are two countries in the world.

    Country A is capable of making 100 lightbulbs for $100.
    County B is capable of making 200 lightbulbs for $100.

    Worldwide demand for lightbulbs is 200.

    Does it not make sense (in a very simplistic form of course) for country B to just produce all the lightbulbs and for country A to specialize in what they can do best...for example maybe they can make light switches far more efficiently.

    The global economy is better off when countries specialize their resources and don't try to produce everything.

    You seem to be lamenting the fact that country A's lightbulb production capacity has been diminished, but the global market is better off because it has been, and that economy can focus on making something else.
  12. PLC1

    PLC1 Moderator Staff Member

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    Ok, that makes sense. What we'd better do is find some sort of lightbulb that we can make better than someone else.

    And then not build the plants to make it in a third world country where workers can be had for $5 a day and the waste dumped into the nearest river.
  13. GenSeneca

    GenSeneca Well-Known Member

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    It all comes down to an efficient use of capital. If America builds widgets at a higher cost than they can be produced in another country, then our capital is being spent inefficiently and would be better served in another sector of the economy. Using government to force people and business into supporting inefficient uses of capital, as would be the case with protectionist policies, actually weakens our economy for what should be obvious reasons.

    Consider this inefficient use of capital in other terms. The typical efficiency of a liquid fuel turbine is 30%, that means only 30% of the fuel's BTU's are converted to usable energy, the other 70% is wasted. A high efficiency turbine runs at 60% efficiency, leaving only 40% of the fuel's BTU's as going to waste. So we have two turbines with the same capacity, lets say generating 50MW of power, one uses twice as much fuel as the other to accomplish the exact same amount of production. Which one makes more sense to use? Well, if you listen to the protectionists, we should burn twice as much fuel (capital) to get the same amount of production because it's "patriotic" to waste our energy on inefficient allocations of capital.

    By the way, GE builds those turbines with efficiency ratings from 28% up to and exceeding 60%, and they are one of only 3 companies in the world capable of building a turbine reaching, or exceeding, 60% efficiency, the other two being Siemens of Germany and Mitsubishi of Japan.

    I don't offer that analogy just because it's a good one, it's also happens to coincide with my next point. Capital Goods are the strongest exports in America. The Capital Goods sector is primarily made up of farming and construction equipment, along with the more high tech equipment such as GE's turbines and US made military hardware.

    So when we import goods from developing countries, the ones accused of using slave labor, they tend to use our import dollars to purchase our capital goods to - develop - out of their third world stature. They need modern farming technology to feed their populations, construction equipment to build their infrastructure, turbines to provide electrical generation, and military hardware to protect all of it from jealous neighbors. These improvements lead to better living standards, better benefits and pay, greater environmental awareness, and even increased demand for America's non-capital exports.

    Barriers to free trade, such as tarrifs, subsidies, and other protectionist measures, only impede that process, hurting both the developing country and our own.
  14. PLC1

    PLC1 Moderator Staff Member

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    That's all well and good, so long as we can produce a turbine that is more efficient than someone elses, farm equipment that is better than that produced elsewhere, or perhaps farm produce that is better and/or cheaper than what is available domestically. I generally agree with what you are saying.

    The problem remains that if those third world factory workers aren't able to buy what they produce, then the market is severely limited.

    and there are those WalMart shoppers who can't even afford the cost of shopping for inexpensive goods there. If they have no money, then there is no market. Why produce goods if no one can buy them?
  15. Gipper

    Gipper Well-Known Member

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    I can agree with most of that.

    The REAL problem is how can American business be competitive when our government imposes heavy taxation and all sorts of costly regulations on our businesses while competing nations have none?

    You would think those intelligent politicians in DC would have figured this out before our manufacturing base is completely destroyed and our middle class eliminated. I guess its more important to fund ever growing government and entitlements for the poor, elderly, unions, teachers, etc...

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