by Karl Denninger, Market Ticker:
Forget it folks.
America is done.
This week I heard the CNBS folks lauding Vietnam. They let slip that the people there in those much-vaunted factories are making a whole…… $50 a week, which, they noted, was “well above” minimum wage.
Why is the labor there? Because the value of labor is $50/week, that’s why.
Can you compete with that in the US? Of course not. You can’t even get to work and back home on $50/week, say much less pay for housing, food and everything else.
Think it’s just clothing manufacturers? Nope.
Increasingly, the iconic American planemaker and its subcontractors have relied on temporary workers making as little as $9 an hour to develop and test software, often from countries lacking a deep background in aerospace — notably India.
For “software engineers” writing and testing code for airplanes at Boeing.
Which is why I have told teens in the last 10 or so years that computer programming and software design is no longer a lucrative place to put their effort in the US. Unless, of course, they can live on $9/hour after paying $20,000/year to go to college.
Which they can’t.
This has been very lucrative for these firm’s stock prices.
It has “hidden” inflation too, which has enabled The Fed and Federal Government to run loose monetary policy and big deficits, forcing both governments and individuals to take on more and more debt to simply meet the daily requirements of life.
But, in point of fact, neither of those policies had anything to do with “financial conditions.” They were nothing more than exploitation and a scam. Proof of this is found in the fact that the government believes every citizen will pay $68,000. No, they won’t — because they can’t — and the minute that’s recognized in the markets it all comes apart. Fully half of the nation’s citizens today receive government handouts; they have no possible way to pay as they’re in perpetual deficit now; they literally have nothing.
There’s no fix for this that doesn’t involve, as I’ve said for a long time, wage and environmental parity tariffs. Nothing else will do a damn thing to stop it, but the destruction of quality, if it’s not stopped, will ultimately collapse all of these firms and our government.
Witness the so-called “G-20 truce” that just occurred. It’ll spike the stock market higher Monday, provided that it didn’t already get that move (which it might have; the closing bell featured a huge futures spike northbound.) At its core, however, surrender is the only “resolution” for the US, since China has built its entire economy on intellectual property theft and improper subsidy. Without both their economy and political system collapse; they can’t concede on these matters and stop it, and while they can “promise” they also can’t put into law those promises, because any meaningful enforcement and their over-levered, fraudulent game comes apart at the seams.
Note that there was no hard commitment as to what they were going to buy from us in agricultural products either, but they did allegedly get a concession on sales to Huawei — the dumbest thing we could have ever done. That “company” is nothing less than a literal arm of the Chinese Communist Party and allowing it anywhere near anything sensitive in another nation is flat-out suicidal to the point that we may as well start shooting right here and now.
But while China has built a fraudulent edifice in this regard for the last three decades so have we. Moving production somewhere for the purpose of exploiting what amount to virtual slavery is not much less-evil than government repression to the point of harvesting your organs while you’re still alive if you speak ill of a “supreme leader for life.” Then again the check and balance on both is supposed to be what happened in 1776, yet we as Americans have had our balls literally bribed out of us, severing them on our own and refusing to uphold the most-basic requirements of citizenship: The Constitution is a contract between the government and the people, and if the government side breaches it they get exactly one opportunity to correct that by polite request and if said correction is not made in a prompt and contrite manner the necessary corrective force comes fast, hard and without apology exactly as does the government going the other way if YOU breach it by, for example, holding up a liquor store.
As has been said “failing in business isn’t a crime.” True, that.