

America is about to undertake "its biggest transformation in decades" - cwan
http://www.economist.com/specialreports/displayStory.cfm?story_id=15793036&source=hptextfeature

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emanuer
Having a trade deficit to a developing country is like giving them a loan. (My
economics teacher)

The Relation the US had with China in the last years, reminds me a lot of the
Japanese-Korean situation in the 1980s. Japan outsourced labor intensive work
to South-Korea because it was cheaper there. Over time South-Korea became very
wealthy and the labor costs were to high to continue to outsource. But this
was great news, because the South-Korean now had demand for Japanese products.

The same story happens to US/China, once Chinese reach a certain wealth, they
will be able to afford US products.

The other reason why I do believe this will happen rather quickly is this
chart:[http://www.businessinsider.com/scariest-jobs-chart-ever-
febr...](http://www.businessinsider.com/scariest-jobs-chart-ever-
february-2010) If this chart is true, all the laid off consumers will drive
the domestic demand down. So clearly the only possible growth is in other
countries.

~~~
Goronmon
_The same story happens to US/China, once Chinese reach a certain wealth, they
will be able to afford US products._

And which products would those be?

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JeffJenkins
Ask and wikipedia answers:
[http://en.wikipedia.org/wiki/Economy_of_the_United_States#Ma...](http://en.wikipedia.org/wiki/Economy_of_the_United_States#Manufacturing)

And that's not counting agriculture or services. Here's a full breakdown of
the economy (not all of which is applicable to exporting):

[http://en.wikipedia.org/wiki/Economy_of_the_United_States_by...](http://en.wikipedia.org/wiki/Economy_of_the_United_States_by_sector)

~~~
jeromec
As that first link notes under Manufacturing:

 _A total of 3.2 million -- one in six U.S. factory jobs -- have disappeared
since the start of 2000._

So, I think this trend would need to reverse. This recession alone has
displaced 8 million.

~~~
potatolicious
If Chinese income rises to the point where its middle class can afford to buy
American products, I fully expect a lot of manufacturing to be coming back
onto this side of the ocean.

~~~
jeromec
I could see that happening, namely with cars, which is why I think it's
important to have a strong car manufacturing industry (and another reason to
save GM). However, one caveat I think is we need to place higher importance on
quality, not just with cars but American products in general. If China has
gotten good at the role of producer after these years, and the U.S. as
consumer, and that suddenly flips... I'm not sure how smoothly that would play
out. A lot of people could potentially eat our lunch.

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daniel-cussen
There is still the catharsis to go through.

What I'm referring to is a J-curve <http://en.wikipedia.org/wiki/J_curve>
where the currency gets smacked hard -- say 2-1 -- and the trade deficit gets
worse because terms of trade changed and you can't get rid of oil dependence
overnight. Exports recover because the American worker is closer to par, in
terms of costs, with the Latin American and Chinese workers. But it won't be
pretty, and it'll really, really hurt. Just as things are darkest just before
the dawn, things'll get bleaker for a while before Americans see this through.

~~~
c4urself
I agree that this is a possibility. In the end how quickly America pulls
through depends on how well it makes the 'transformation' to more sound
consumer spending.

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ippisl
While this article seems pretty strong on economics(can't really judge , not
an economist) , it fails to mention technology's impact , and the fact that
today we have many industries being disrupted which was never the situation
before the internet.

They give as an example the fact that intel is growing. but what happen if ARM
wins in the processor battle in the next few years ? won't it change who is
importing and who is exporting ? and at what price? The same can be said about
Hollywood. they are under immense pressure from free/ad-based online video.
this kinds of pressure gives an advantage to content that's cheaper to
produce. this isn't very good for the u.s. industry.

So while this article is very optimistic about the exporting more, it would be
a major challenge.

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thewileyone
I don't think I'm smart enough to understand. The companies in this article
are proud to have shed jobs to become leaner and focused ... on what customers
that have jobs to buy their products and services?

The basic conundrum, to me, is that there is no such thing as an economic
recovery with no job growth. If people can't earn money, how do they spend it?
If they can't spend money, how does the profits get reentered into the
company's balanced sheet so that the company can invest in new products and
services to grow? If a company can't grow, how does it employ new workers to
buy things?

It's not that simple, but really, is it really that difficult to comprehend?

~~~
jerf
If your mental model of the country is that it currently contains zero
employed people, it should not be surprising that your mental model produces
nonsense results. GIGO holds on mental models too.

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joe_the_user
If the US is going to become export-oriented, who will we be exporting to?

The world economy has been polarized between export-oriented developing
countries and the import-oriented United Stated. If No country is import
oriented, what then? Japan and non-China Asia are suffering as much as US
through the recession and they are ultra-export oriented.

The US became THE importer over the last twenty year. Even the other export
oriented nations will have a hard-time without the US.

What's the answer here?

~~~
lispm
The answer is to create some kind of a balance. Currently the US has a large
trade deficit. If the US imports goods and resources, but doesn't have
goods/services/whatever to export in the same range, then the US will have the
trade deficit for many years to come and the numbers add up. If it isn't
possible to export more, than the US might want to reduce imports and
generally build a more sustainable economy.

~~~
Estragon
The balance is going to be at a different point than it has been for most of
the last forty or fifty years, though. Americans will likely not be as rich
relative to the rest of the world as they have been.

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netcan
Does this mean that investments going into the US will decline?

