A thought to ponder Anyone?

I agree with most of this, but not the “stealing part.”

OPEC has been more successful at trying to frustrate the natural benefits (to the consumers) of competitive suppliers than most other cartels, but it at times fails (cheating on agreed quotas). Also some producers have much lower cost than others and they can (and do) use that advantage at times to punish the higher cost producers for political reasons, usually, as they too make less profit (if they drive price down) and more importantly punish all of mankind as extraction at excessive rate causes the porous oil bearing rocks to collapse and very significantly reduce the ultimate quantitiy of oil that can be extracted. (Saudi Arabia, as lowest cost producer, appears to have done a significant amount of this, but impossible to know as the necessary data is state's "top secret.")

For example, IMHO, the recent drop of oil from $70/B to less than $60/B was a not very subtile reminder from suni Saudi Arabia to sheii IRAN, that they should not hurt the suni of IRAQ significantly or they would suffer the results of much lower oil prices. - The Iranian economy could not stand that - it is a mismannaged mess.

As far as who is stealing, I do not agree. The natural wealth, if it is to belong to the owners of the land living there (instead of all mankind, as I would prefer) is being stolen from these people of the land by the very companies you call "victims of theft." The mechanism these corporations use is almost always to give a very few of these people a very small cut, but still enormous wealth per ruling person. (Saudi royal family - is best example, but less well know is Kuwait being cut out of Iraq and set up as a separate country. - A boatload of about 40 Mercedes cars was part of the deal for the select few chosen and imported mainly from London to rule that new country.)

Sometimes, especially recently, a true representative of the people comes to power. For example, last year in Bolivia Morales, a native leader, became president and immediately changed the profit division from the old 82% for the oil companies - I.e. 18% for the wealthy few rulers, which the oil companies, (& CIA as part of the anti-socialism, cold war effort, kept in power with military aid*)
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*These exploiters of the natives were not able to profit with the entire 18% of the "Bolivian share" as much of it went immediately back to the western world in the form of payments for mobile water cannons, tear gas and other arms the police used for the suppressing the people, etc. Probably less than 5% ended up in their Swiss bank accounts. The native population of Bolivia, pre-Morales, had no schools, hospitals, paved roads, etc and according an independent (UN? - I forget) study was very malnourished - Got only 2/3 of the daily caloric intake they had before Columbus discovered the new world! They developed the habit of chewing coca leaves all day long to ease the hunger pains. - Now this is so much a part of the native culture that Morales is making it legal to farm coca, (always was done anyway - he was a coca farmer, and is chewer of it leaves still.); however he is now giving very strong penalties for processing it into cocaine and that was part of the profits of the former rulers.)

Now all this is changing as the split of profits is 18% for the foreign oil companies and 82% for the native people of Bolivia, but of course, the former oligarch is protesting and still has control of congress, so is not without some political power. Morales has called for a national referendum to reduce the power of congress, change the election process so all can vote, (no literacy test to qualify etc.), but I do not know the details or how it is going.

SUMMARY: Your idea as to who was doing the stealing and whose wealth was being stolen is just backwards, in most cases. The foreign oil companies have recovered their investment at least 100 fold over - why their profits are so high.
(I note for the record that in Bolivia’s case the "natural wealth" is mainly natural gas and the Brazilian oil company Petrobras was one of the main gainers of the 82% share, is now getting much less but still more than 18% as Lula, left leaning president of Brazil, has worked out some “transition deal” with Morales - only the gas used for generation of electric power is costing much more** - That used in people’s stoves has not gone up much yet in price as that would hurt the people directly and both Lula and Morales see there role as one of redressing the wrongs that have been done to the many by the few. Lula has raised the minimum wage from approximately US$50/ month to about $180/ month but a large part of this is due to increased strength of the Brazilian currency, the Real. (Now only takes R$2.08 to buy a dollar, instead of approximately 4 Reals when Lula took office, five years ago. I also note that China gets more credit for the great improvement in Brazilian economy than Lula does, as their increased buying of soy beans etc is main reason for the Real’s strength. )
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**Gas here in Brazil, like all over the world, is used mainly for "peaking power" and Brazil has about 80% of its base load power from hydroelectric dams so the effect of higher gas cost to the producers is less than 10% increase in production cost I would guess. By some ways of measuring it, one of Brazil's dams is still larger than the three rivers generation dam in China that is usually considered to be the world's largest.

 

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Has anyone seen the preliminary numbers in the Chinese geological survey of Tibet?

In half of the Qinghai-Tibet Plateau (13 million square kilometers or about 5 million square miles), there are an estimated 40 million tons of copper, 40 million tons of lead and zinc, and 1 billion tons of iron. And notice I said "half" of the Qinghai-Tibet Plateau. They have yet to explore another 5 million square miles. This doesn't even include other minerals and metals either, like uranium and gold.

Plus, the extreme western region of Tibet has large reserves of petroleum, gas, and coal (large enough that the Chinese are willing to exploit them).

Train to Lhasa to take out Tibet’s mineral riches

This could really help China, which I support wholeheartedly.

I want to see China and the US prosper together peacefully, as well as competing in terms of technology and innovation (in the long run, because the US >>> China in terms of tech. and innovation currently).

 

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Yes, Forbes (I think) had very similar article about 6 months back, shortly after first run of the new "high altitude train." Your source is new to me so looked at it a little and found somthing related to my often stated suggestion that it is probably false to assume that US (and western world in general) will lead scientific research "for at least 100 years"- (My concern about this was described some years ago at the home page of my book's web page and here, in post 40, why it prompted me to write the book.)-

“ …Schwaag Serger, science counsellor at Sweden's embassy in Beijing, said it was clear that “knowledge resources are increasing more rapidly in Asia, particularly in China, than in Europe or the US.” Beijing has increased its investments by 20% each year since 1999 and is expected to up its spending from the current 1.3% of GDP to 2.5% by 2020, outstripping the USA.
Apart from Japan, India, South Korea and Singapore also invest plenty in R&D, bringing Asia to the forefront of a sector which so far has been dominated by western states. South Korea invests 3% of its GDP in R&D. The Indian Premier, Manmohan Singh, announced in October that spending would increase from 0.8% of the GDP to 2% by 2012.
Meanwhile, western universities are seeing a drop in the number of students studying science subjects. In Great Britain alone, at least 26 chemistry departments and nine physics departments have shut down over the past decade. Charles Leadbeater, an expert in the sector, told the South China Morning Post that many Asian scientists who had moved abroad were returning home. He concluded that the "US and European pre-eminence in science-based innovation cannot be taken for granted” and that “the center of gravity for innovation is starting to shift from west to east.”
Centers of world-class research are emerging in cities like Shanghai, Bangalore in India, and Hsinchu in Taiwan. In Beijing, engineers at Ericsson's research center are developing innovative systems for mobile phone systems at a third of the cost of those in Europe. In Delhi, the Indian drug firm Ranbaxy has set up an R&D center with 2,000 scientists. In Daejeon, South Korea, researchers have become leaders of stomach cancer research after just three years.
In a recent survey of more than 200 multinational companies conducted by the US National Academy of Sciences, more than 38% said they planned to move their research activities eastwards or to increase initiatives already under way there. …”

Above from: http://www.asianews.it/index.php?l=en&art=8617&theme=6&size=A

 

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Sections below are from: http://www.businessweek.com/magazine/content/07_10/b4024037.htm?chan=search

“…net inflows of foreign capital into long-term U.S. securities fell to only $15.6 billion in December. It was the skimpiest monthly total in almost five years. Consider that during all of 2006 the U.S. needed, on average, more than $70 billion a month in foreign funds to finance its current account deficit, made up mainly of the trade deficit …”

“…U.S. indebtedness is a key reason why the dollar has already declined 27% against a basket of major currencies since early 2002. …”

“… First, there is increasing evidence that foreigners are diversifying their assets away from dollar-denominated securities toward other currencies. China, for example, recently announced it is forming a new agency to diversify $200 billion of its $1 trillion in foreign exchange reserves. Emerging-market economies are beginning to discover that U.S. investments, while relatively low risk, are also relatively low return …”

{second about reactions to the $764 billion trade deficit in 2006}“… The House of Representatives leadership has already given the White House 90 days to present Congress with a plan to address several trade issues involving China, Japan, and the European Union. The implication is that after 90 days, it will come up with its own plan. Any U.S. action that reduces Chinese imports, however, also will result in less foreign exchange for the Chinese to invest. That could make the Chinese less interested in the auctions of U.S. Treasury securities. …”

“… Households actually spent $111.7 billion more than they earned in the third quarter, and the personal savings rate for all of 2006 was negative for the second year in a row, something that hasn't happened since the Depression years of the 1930s. Plus, the federal government's outlays in the third quarter exceeded its receipts by $165.6 billion. …”

“… The day of reckoning will be at the point when foreigners demand more for their money, either through a weaker dollar, higher interest rates, or both. On the way there, any more reports of waning interest in U.S. securities are likely to attract much more attention in the currency markets, to the detriment of the greenback. …”

Foreign holders of US treasury bonds have received negative return for many months now as the interest paid on these bonds has not compensated for the loss of purchasing power of the principle. This is why I have been predicting interest rates will go up, depressing US growth. - As US economy slows under the weight of higher interest and less inflow of capital for investment,* foreign applications of capital will be ever increasing more attractive. Already even US capital is fleeing the US. For example, closing US plants and building new ones in China and India.

*Article also notes that ¾ of US capital investment already is from foreigners, only ¼ from US business profits- the only domestic source and one that will be burdened soon by still higher interest rates, and more expensive imports. (An effect of the weakening dollar, even if the price of oil and other of raw materials prices were not being drive up by Asia‘s growing demands.).

Summary: The US is already beyond the point of no return -can not pay its debts, except by printing press dollars. US is bound for “stagflation,” at best and without some economic miracle, the western world, which is not selling raw materials to China and India, is bound for global depression.

 

How is the "Western world" bound for "global depression"? Wouldn't it be a Western depression? And won't this affect non-Western nations, making it an issue not for Western nations at all, but for all nations?

You really don't think the collapse of the American economy will lead to the ascendancy of any other economy, do you? We grow together and we will shrink together. There is no competition between nations, as you like to portray these events. There is just the arbitrary lumping together of statistics from individual trades based on whatever borders you choose.

Besides, since the United States is so fertile for crops, what is the worst that can happen? Do you think the world will become a worse place than it was in the 15th century? Will we forget our medical advances? Will our mathematics and scientific progress vanish?

The only people that will get hurt are those of you that try to make an easy buck by gambling on the collapse of economies. Those of you that profit from corruption and misery will see your paper-worth crumble, and that is about it. 100 million people starved in the 20th century due to the waste and mismanagement of communist Russia. Is our low savings rate going to be a worse tragedy than this?

 

Absolutely.

Contrary to what many believe, a collapse in America will trigger a global collapse too, including China. It's in China's interest for America to still be powerful. But in the long run (in our lifetime definitely, if present trends continue), America won't have the bragging rights of being number one in the world though. The economic, technological, and military gap will be reduced or equalized.

America will definitely be a top 3 country for a long time, but I think China will definitely be number 1 soon (soon as in a four decades from now).

Don't listen to people who think that America will absolutely collapse and will be living a pre-Industrial Revolution era. That will NOT happen, barring a nuclear war.

As before, don't listen to those who say America will collapse. America will NOT collapse. I can guarantee it. But to think that America will always be number 1 is absolute foolishness, and many Americans are tricked into believing it (probably because of patriotism or something?). America won't be #1 forever. But don't worry. Number 2 or 3 isn't bad. It just means we won't have the largest economy in the world. Nothing to be ashamed about.

I mean, we couldn't successfully invade Canada in the War of 1812, but we still survived. We lost in Vietnam, we still survived. We (and many others) went through the Great Depression, and we still survived. We're fighting a stalement in Iraq right now, but we'll still survive. We went through the oil crisis of the 70s and 80s, but we survived. No problem. We'll be #2 or #3, but we'll still survive. We just have to take a hit on our ego though, but it's cool. I'm prepared.

 

Only a few minutes available now:
I have been predicting all along that US Midwest’s fertile land will be feeding China - calling US an "agricultural colony" of China in about 3 decades.

It will be global depression as most parts of the globe will suffer badly from it - especially the US, which has built "suburban infrastructure" to the greatest extreme. Countries like Brazil, Australia and other suppliers of raw material to China and India will suffer less than others who sold high-value finished-goods as China and India will be making their own. (I have several times mentioned the joint Embraer Chinese new airplane factory etc.) China already makes most of the world's electronics and the IC design will be coming from them (and Japan) in a decade, not the US.

In some ways, world will again have an economy on the 1800s model with China and India playing the world domination role of Britain and rest of the world supplying their factories with the required raw materials and food stocks.

 

Brilliant post. I agree 100%

The reason China (and even India) could one day surpass the United States (~100 years from now) is simple: People are getting better off per capita the world over. As capitalism spreads its magic around the globe, it will close the awful gaps in living conditions and productivity. The more people you have, the more you will produce.

So China and India will eventually surpass the United States, because they will have maybe 5-8 times the population by then (~100 years), but what is the accomplishment in this? Borders will keep becoming more arbitrary. These people could compare the economic wealth of North America and Africa. Or Europe and Asia, and be making just as vapid a point.

Right now, 5% of the world's population is producing 43% of the goods. In order for China or India to catch up, they need to get as much production per capita as Americans. One day, this may happen, but there is a LOT of catching up to do, and it will not be in any of our lifetimes.

And I agree with you, it won't be a big deal when it happens. It will still be individuals trading in a global market, and not the fairytales about "countries" trading with each other. Countries don't trade with each other. As soon as a pseudo-economist starts telling you that they do, walk away slowly. Backwards.


Edit: I love how Billy T foresees China becoming the "Richest country in the world" and still wanting to have nothing but manufacturing jobs. Brilliant. The day that China becomes richer, per capita than the United States, is the day that they send US raw materials, and we send them shoes and TV's. They will be working white-collar jobs, expanding their service industry, and farming out cheap labor that nobody wants to perform to Africa or South America.

You can't have it both ways Billy T. There will never be a society where the factory workers drive around in sports cars. Step back, take a deep breath, and try to think things all the way through.

 

Notably, the US is pretty much the only developed economy that still experiences population growth. In particular, America's population is growing significantly faster than China's (1% vs. 0.6% per year). India's growth rate has been declining, and will soon drop to Chinese levels, reflecting the fact that those countries really can't support many more people. While it will obviously be a long time before the population of America catches up with either China or India, the point is that America can continue to expand its economy both through increasing productivity and increasing population. Meanwhile, China has only the second option to pursue. This is okay when a country is underdeveloped, as you can simply import various technologies and practices from higher-productivity nations and end up with huge growth rates. But it presents a long-term problem for China because it implies a big slump in the workforce a few decades down the road, probably right around the time they run out of productivity boosting Western inventions to import. If the CCP is still around at that time, watch out!

If you want to get depressed, spend some time thinking about the effects of shrinking populations on Europe's welfare states...

 

Never thought about that. Great point. I've driven across the United States several times, and I can tell you, we have plenty of room for more babies.

Also, developed countries have lower birth-rates because women gain economic freedoms that allow them to choose to not have as many children. Couple this with the infanticide of females in China, and they are going to have a serious population contraction in the future that will have deleterious effects on the economy.

Another poster recently put up an article about the severe "brain drain" that China is experiencing. The Economist just had a troubling article about the signs of an investment bubble in the Chinese markets. If you have the mentality of a conspiracy theorists, you can pick and choose these tidbits and support your prejudice.

I think both sets of stories have merit, and should be looked at together. China is going to have good and bad news as it develops its economy. What will the overall trend be? Rapid rise to moderate levels of living standards, with a more gradual increase over time after that. Just what we see with every developed country. Will it take over the US with its universities, technology, and economy? Maybe. 100 years from now. 1,000 years from now. There is no indicator either way.

 

There are a number of effects besides women's lib that drive the lower birth rates. One is longer life expectancy: people wait till a later age to have kids, so there are fewer kids being born each year for a given population. Another is lowered infant mortality: if you're 99% sure that your child will survive, you don't have the incentive to hedge your bets by having extra children. In both of these cases, the lower birth rate shows up as an older population, rather than a smaller one. Perhaps the most fundamental factor, however, is the difference between a manual-labor economy and an advanced economy (which requires workers with a relatively high level of education). In a menial labor scenario, each additional child is another set of hands that can earn income for the family. In an advanced economy, however, each additional child is simply another mouth to feed and brain to educate. A parent in an advanced economy will not receive any income from his children for decades after their births, if then. A parent in a subsistence agriculture economy, on the other hand, may depend on income/labor from his children just to eat.

Yeah, female infanticide and selective abortions have resulted in both China and India having huge excesses of young males. The numbers are in the tens of millions, if I recall correctly. Unless they can import vast multitudes of brides from some other countries (which seems unlikely), this imbalance will result in a huge hit to population growth over the next decades. This is not entirely unwelcome, as the alternative (massive overpopulation) is even more costly to both countries. Note that the effect is likely to fall well short of what a perfect one-child policy would produce, which is to say a halving of the population after one generation. Nevertheless, the demographics issue is a tough long-term problem, and one that afflicts many countries around the world. Japan is facing the same kinds of issues Europe is, and Russia is likewise experiencing population contraction. It is truly rare to find countries with average-or-better levels of development and positive demographic positions. America and Brazil are about the only ones I can think of...

 

On the other hand, China and India actually do NEED a population decrease. China and India combined probably have 1.8 billion people at or below the poverty line. They do not want them to reproduce more children living at or below the poverty line.

Yet, America actually NEEDS a population increase. Once the baby boomers start to retire and bankrupt the medicare and pension system, the US government will need a HUGE HUGE HUGE influx of tax revenue and the only people who can provide that is the next generation of US citizens. And I can't emphasize "HUGE" enough.

 

It is fortuitous for all parties, then, that so many Chinese and Indians are moving to America. This alleviates overpopulation in the former countries, and boosts the workforce of the latter. India and China are the second and third largest sources of immigrants to America (after Mexico, of course):

http://en.wikipedia.org/wiki/Immigration_to_the_United_States#Origin

America's entitlement funding issues aren't that bad, compared to other countries. Europe has a much more generous entitlement system and a much worse demographic position (negative population growth, disfunctional immigration system). All America really needs to do is take some steps to get healthcare costs under control. Europe has already done that, foregone significant military spending and imposed relatively high taxes.

http://www.economist.com/debate/freeexchange/2006/11/in_america_arguments_about_the.cfm

 

Again just a few minutes will be bqck in two days;

I said China will be designing the IC as well as making the comnputers in a decade. yes, they will still be with the world's most modern factorys etc.
I.e. needing only raw materials

 

Indeed.

And that's the big problem we are facing on the eve of the storm. January 2008 is when the first of the baby boomers become eligible for Social Security. Three years later is when they become eligible for Medicare. It's easy enough to say that we need to take steps to control costs, but tell that to the politicians. Messing around with pension and medicare is basically political suicide, as a bit less than a third of Americans are of the baby boom generation. No politicians want to do anything to "control" it. They prefer to push the burden further and further to the next Administration. That's why I fear that whoever wins the 2008 elections, Democrat or Republican, is screwed once (s)he takes oath.

And if nothing is done about it, the next couple of decades are going to be very very interesting for the United States.

 

First of all, ICs are designed in a multitude of countries, including China. It's a huge industry, with products ranging from the extremely simple and cheap (generic logic chips and op-amps) to the cutting edge (Intel processors, RF/microwave components, power electronics). The question is who is designing what, and who is inventing new processes for next-generation components. In this respect, China is well behind not only the US and Japan, but also Europe and Israel. All of these countries have been throwing more money at it, for longer, than China and are continuing to do so. Even India is ahead of China in chip design, despite the fact that there are fewer chip plants in India. So the idea that China will leap into the lead while current leaders disappear from the game, and within 10 years no less, is pretty far-fetched. They recently blew a bunch of money on a crash program to produce Chinese-designed components for cell phones (medium-grade embedded processors and radio chipset stuff), only to scrap the program when it was revealed that the professor in charge was simply importing American chips and repackaging them.

I would point out that while China has had great success importing various foreign technologies and practices (which, combined with their demographics, has resulted in huge growth), China has yet to make any waves as an innovator. I can't think of a single significant technological/financial/organizational innovation to come out of modern China. The list of innovations to come out of America in the past couple decades, on the other hand, is staggering. Multiple orders of improvement in computer power. The internet. Genomics. Stealth technology. Satellite imagery. MEMS. Nanotechnology. Medical imaging. A proliferation of pharmaceuticals, financial instruments and logistics solutions. The iPod. Surround Sound. The list goes on and on. China hasn't even entered the race yet, so it's rather premature to suggest that their victory is imminent.

 

Well, to be fair, the problem isn't THAT immediate. The issues with entitlement spending are structural, which is to say long-term. They have to do with the growth rate of healthcare costs, the aging of the population, and trends in workforce participation. It's not the case that next year a gigantic surge of people is going to retire and suddenly sink the entire system. The system currently takes in over $100 Billion a year more than it pays out, and is not expected to go into deficit until sometime between 2015 and 2020. Even at that point, it has almost $2 Trillion in reserve (because it's been in surplus for decades), so it will still be able to pay all promised benefits until sometime between 2040 and 2050. Even then, social security tax receipts will still cover 3/4 of the promised benefits. The situation is somewhat worse with Medicare, although we're still talking decades.

It is certainly true that politicians have incentives against seeking long-term solutions. Why tell people things they don't want to hear when you won't be around to reap the rewards? Likewise, most people won't get motivated to light a fire under the politicians' butts until the problem directly manifests itself. Only when the problem is apparent enough for motivate voters will it get tackled. This is the sort of approach you have to put up with in a democracy.

 

quadraphonics' reply was dead-on. I would just like to add, again, that you aren't going to see per-capita wealth greater than the United States without also converting your economy away from manufacturing and towards service. You think you are seeing a backwards move in the United States economy. It is no such thing. This is a forward move that all developed countries will go through.

Manufacturing jobs are bad. They are not something any economy should want, if they can help it. If China ever surpasses the United States, that means that they will have off-shored and out-sourced even more efficiently than we did.

I feel like I have to remind you, every time we have this discussion, that manufacturing has not dropped in the United States by percentage of world production. We have gotten rid of a net number of manufacturing jobs, but our production percentage (~42%) has been pretty fixed since the early 80's.

 

So far I agree with you.

I never said that.

I did say that the first of the baby boomers will be eligible for Social Security, and health care 3 years later. I didn't say all baby boomers.

Well, I might not be able to argue with you in terms of numbers, but I'll let David Walker (US Comptroller General, the highest US government accountant in the land) do the talking for me:

First, notice he says we have zip to deal with any of this.

Next he says health care is already underfunded by 15 to 20 trillion dollars. We all know the US can't just "come up" with 15 to 20 trillion dollars.

Also note that he says we need 8 trillion dollars invested in treasuries to meet just that prescription bill. America is running a budget deficit year after year. It doesn't have 8 trillion dollars, and it won't in the short term future.

source: U.S. Heading For Financial Trouble?

You can watch the video of the article on the same page (60 Minutes piece).


I don't know. It all sounds too overwhelming to me.

 

Again, these are long-term numbers. That $15-20 trillion is over decades. It's hard to tell what exactly he's referring to without the accompanying projections and time scales.