Trade

Winners And Losers

When you mention the word “globalism” to most people, they think of something that is going to happen someday in the future.  But the truth is that globalism is already here.  At this point we essentially already have a one world economy.  Goods and services flow across national borders more freely today than at any other point in human history.  A major economic event on one side of the world instantly affects financial markets on the other side of the world.  Labor has become a truly global commodity.  You can go to the exact same fast food restaurant or buy the exact same iPod on six different continents.  A whole host of international trade agreements are making national borders economically irrelevant.  Today our “big box” stores and shopping malls are jammed full with products that have been made overseas and it is becoming increasingly difficult to find American-made products.  The reality is that it has now become undeniable that globalism has arrived and we are now part of a world economy that is integrating at lightning speed.  Unfortunately, all of this globalism has created some very clear winners and losers.  But most middle class Americans are in such a deep sleep that they don’t even realize that they are the losers.

The sad truth is that as work has become a global commodity, middle class American workers have been placed in direct competition with the cheapest labor in the world.  For years the U.S. economy was so strong that nobody really noticed that it was bleeding thousands of jobs every single month.  But now that 14 million Americans are unemployed and the U.S. economy is literally hemorrhaging jobs people are starting to sit up and take notice.

Let’s take a look at one recent example.  Ford Motor Company has just announced the closure of a facility that produces the Ford Ranger in St. Paul, Minnesota.  Approximately 750 good paying jobs are going to be lost.

But isn’t Ford doing better these days?

Sure.

Don’t people still need Ford Rangers?

Of course they do.

Minnesota Governor Tim Pawlenty even offered Ford a multi-million dollar incentive package full of tax cuts and job creation incentives to keep the factory going.

Basically, Pawlenty did everything except get down on his hands and knees and beg Ford to keep the plant open.

But it wasn’t good enough for Ford.

So where is Ford going to make those Ford Rangers now?

Well, the statement issues by Ford did not say, but it did offer some clues….

“Ford continues to concentrate on implementing the plan we initiated four years ago to streamline our plant operations and better leverage our global platforms. At this time, the Twin Cities Assembly Plant does not fit into our global manufacturing strategy.”

Did you notice that the world “global” was used twice there?

In other words, Ford plans to move their factory some place where labor is cheaper.

But the truth is that this is happening in every industry.

Between 2004 to 2008, tire imports from China increased 215 percent by volume and 295 percent by value.

During that same time period, tire manufacturing in the United States fell by 25 percent.

It turns out that there are lots of people who are willing to make tires for near slave labor wages in China.

In our new “global economy”, American workers are just far too expensive.  So middle class manufacturing jobs are fleeing our shores at a staggering pace.

Since 1979, manufacturing employment in the United States has fallen by 40 percent.

Are you alarmed yet?

You should be.

The truth is that we did not have to merge our economy with nations like China.  China does not have the same minimum wage laws that we do.  China does not have the same environmental protection laws that we do.  In China, companies can treat their workers like crap.  As a result of open trade with the United States, scores of shiny new factories have opened all over China while once great manufacturing U.S. cities such as Detroit have degenerated into rotting war zones.  We continue to expand trade with China even though their communist government stands for things that are absolutely repulsive and has a list of human rights abuses that is seemingly endless.

But politicians from both parties swore up and down that globalism would be so good for us.  Now we have created a network of free trade agreements that would be virtually impossible to unwind.  The following are just some of the free trade agreements in force around the world right now….

The ASEAN Free Trade Area (AFTA)
The Central American Integration System (SICA)
The Central European Free Trade Agreement (CEFTA)
The Common Market for Eastern and Southern Africa (COMESA)
The Commonwealth of Independent States Free Trade Agreement (CISFTA)The G-3 Free Trade Agreement (G-3)
The Greater Arab Free Trade Area (GAFTA)
The Gulf Cooperation Council (GCC)
The North American Free Trade Agreement (NAFTA)
The Southern African Development Community (SADC)
The South Asia Free Trade Agreement (SAFTA)
The Trans-Pacific Strategic Economic Partnership (TPP)

Of course the most important trade organization of them all is the World Trade Organization (WTO) which is constantly working to expand world trade and further integrate the economies of the world.

But the American people don’t understand all this.  They just want the U.S. government to do something to create more jobs. 

But whenever the U.S. Congress tries to do something nice for U.S. workers like raising the minimum wage or requiring companies to give them more benefits it ends up backfiring.

Why?

Because those things make American workers even more expensive and it gives companies even more incentive to send our jobs overseas.

We have recklessly merged our economy with economies around the world that are far less developed than our own.  Unless this thing is reversed, it is inevitable that the standard of living of American workers will be forced down until it approximately matches workers in the rest of the world.

Already, millions of high-paying manufacturing jobs are being replaced by low-paying service jobs.

The U.S. Labor Department’s 2009 Occupational Employment and Wages report found that retail sales, cashiers, general office clerks, food preparation and service workers, and nurses were the occupations with the highest levels of employment in 2009.

Retail sales and food service workers?

Those are jobs for 17 year old kids.

But today apologists for this flawed system tell us that we just need to suck it up and take two or even three low paying jobs because things will never go back to how they used to be.

So has globalism created any winners?

Of course.

As I noted yesterday, the folks down on Wall Street are doing quite well.  New York state Comptroller Thomas DiNapoli says that Wall Street bonuses for 2009 were up 17 percent when compared with 2008.

The reality is that the exploitation of very cheap foreign labor has enabled many large global corporations to make insane amounts of money.  Things are very good if you are at the top of the food chain.  According to Harvard Magazine, 66% of the income growth between 2001 and 2007 went to the top 1% of all Americans.

In addition, our elected officials are doing quite nicely these days.  According to an analysis by The Hill, the 50 wealthiest members of the U.S. Congress saw their collective fortunes increase 85.1 million dollars to $1.4 billion in 2009.

Yes, it is very profitable to be part of America’s ruling class.

Meanwhile, tens of millions of average Americans continue to suffer.  Recently a user on Unemployed-Friends named Jim shared his tragic story….

My Name is Jim and I was laid off last June.

My whole department was outsourced.

There was talk of it and when I heard it from my boss (the CFO) when I went home I started to send out resumes.

Then the day came when the layoff came.

So in 1.3 years I have sent out 160K resumes, between blasting, send out from job boards and e-mailing my resume blindly to companies HR departments.

I was on 5 interviews.

I want to work badly.

Everyday I send out resumes but lately I have been getting depressed, I found out who my real friends and family are now.

I have been kicked down substantially in these 1.3 years.

I feel like I’m staring into an abyss of no jobs, will I ever work again? IDK.

When I used to talk to “Friends” and “Family” they all say “Things will get better” “Don’t worry”, Yeah right.

I feel so alone and worthless.

I wish I had at least 1 GOOD friend but it seems like no-a-days the dog eat dog world is worst than ever.

I’m NOT suicidal, not at all.

Then I found this site.

I have been saying we are in a depression for 2 years but nobody listened and people have dismissed what I have said.

The sad thing is it seems like we are on the verge of an economic collapse or worst.

So that is my story

Americans like Jim don’t understand why they can’t get jobs anymore.

They feel like failures, but it is actually the system that is failing.

Globalism is not good for middle class American workers.

Democrats can continue to pass law after law that attempts to help American workers, but unless something is done to protect American jobs they are going to continue to be shipped overseas.

Republicans can pass tax break after tax break, but unless those tax breaks are linked to jobs the ruling elite and the big global corporations will just pocket those tax breaks and will continue to ship jobs overseas in order to make bigger profits.

What both parties should be doing is trying to figure out ways to keep American jobs in America, but at this point both parties are completely sold out to globalism.

Globalism was the official policy of the Bush administration and it is the official policy of the Obama administration.

Unless something dramatic changes, the U.S. economy is going to continue to lose huge numbers of jobs and people like Jim are going to continue to wonder what in the world happened to their lives.

But in 2010, most Americans are so busy drinking beer, watching sports, keeping up with Lady Gaga and Justin Bieber, and obsessing over the new cast of Dancing With The Stars that they aren’t even aware that things are literally falling apart all around them.

It is really sad.

The Death Of Cash? All Over The World Governments Are Banning Large Cash Transactions

Are we witnessing the slow but certain death of cash in this generation?  Is a truly cashless society on the horizon?  Legislation currently pending in the Mexican legislature would ban a vast array of large cash transactions, but the truth is that Mexico is far from alone in trying to restrict cash. All over the world, governments are either placing stringent reporting requirements on large cash transactions or they are banning them altogether. We are being told that such measures are needed to battle illegal drug traffic, to catch tax evaders and to fight the war on terror. But are we rapidly getting to the point where we will have no financial privacy left whatsoever? Should we just accept that we have entered a time when the government will watch, track and trace all financial transactions? Is it inevitable that at some point in the near future ALL transactions will go through the banking system in one form or another (check, credit card, debit card, etc.)?

The truth is that we now live at a time when people who use large amounts of cash are looked upon with suspicion. In fact, authorities in many countries are taught that anyone involved in a large expenditure of cash is trying to hide something and is probably a criminal.

And yes, a lot of criminals do use cash, but millions upon millions of normal, law-abiding citizens simply prefer to use cash as well.  Should we take the freedom to use cash away from the rest of us just because a small minority abuses it?

Unfortunately, the freedom to use cash is being slowly stripped away from us in an increasingly large number of countries.

In fact, as countries like Mexico “tighten the noose” around big-ticket cash purchases, our freedom to use cash is going to erode rather rapidly.

The following is a summary of some of the very tight restrictions being placed on large cash transactions around the globe right now….

Mexico

In Mexico, a bill before the legislature would completely ban the purchase of real estate in cash.  In addition, the new law would ban anyone from spending more than MXN 100,000 (about $7,700) in cash on vehicles, boats, airplanes and luxury goods.

$7,700 is not a very high limit, and this legislation has some real teeth to it.  Anyone violating this law would face up to 15 years in prison.

Greece

In Europe, some of the “austerity packages” being introduced in various European nations include very severe restrictions on the use of cash.

In Greece, all cash transactions above 1,500 euros are being banned starting next year.  The following is a comment by Greek Finance Minister George Papaconstantinou at a press conference discussing the new austerity measures as reported by Reuters….

“From 1. Jan. 2011, every transaction above 1,500 euros between natural persons and businesses, or between businesses, will not be considered legal if it is done in cash. Transactions will have to be done through debit or credit cards”

Italy

Even Italy has gotten into the act.  As part of Italy’s new “austerity measures”, all cash transactions over 5,000 euros will be banned.  It is said this is being done to crack down on tax evasion, but even if this is being done to take down the mafia this is still quite severe.

The United States

The U.S. government has not banned any large cash transactions, and hopefully it will not do so any time soon, but it sure has burdened large cash transactions with some heavy-duty reporting requirements.

For example, your bank is required to file a currency transaction report with the government for every deposit, withdrawal or exchange over $10,000 in cash.

Not only that, but if a bank “knows, suspects, or has reason to suspect” that a transaction involving at least $5,000 is “suspicious”, then another report must be filled out.   This second type of report is known as a suspicious activity report, and it is also filed with the government.

But the reporting does not stop there.  As Jeff Schnepper explained in an article for MSN Money, if you are in business and you receive over $10,000 in cash in a single transaction you must report it to the IRS or you will go to prison…..

If you’re in a business and receive more than $10,000 in cash from a single transaction, or from related transactions within a 12-month period, you have to file Form 8300 and report the buyer to the IRS. Don’t file, and you go to jail.

The IRS isnt kidding. I had a client who was a dealer in Corvette sports cars. He told me he didnt have time to file the forms. I told him several times to file. He thought he knew better. He went to jail. So did his children who were involved in the business.

This is very, very serious.

Just because someone forgets to file a certain form with the IRS, that person can go do serious jail time?

Yes.

According to Schnepper, quite a few Americans have already received very substantial sentences for this kind of thing….

In fiscal 2004, the Internal Revenue Service initiated 1,789 criminal investigations. There were 1,304 indictments and 687 convictions — and an 89.1% incarceration rate. The average sentence: 63 months.

In fiscal 2005, the IRS started 4,269 investigations, winning 2,406 indictments and 2,151 convictions and an 83% incarceration rate. Average sentence: 42 months.

The reality is that governments around the world are getting very, very sensitive about large amounts of cash and they are not messing around.

They don’t want all of us running around with big piles of cash.  They want our money in the banks where they can track it, trace it and keep a close eye on it.

On the one hand, it is a good thing to catch criminals and terrorists, but on the other hand how much privacy and freedom are we willing to lose just so that we can feel a little safer?

And as cash becomes criminalized, are all of us going to be forced into the banking system whether we like it or not?  If we cannot pay for things in cash, what other choices are we going to have?

The truth is that the more you think about this issue, the more disturbing it becomes. 

So what do you think about all of this?  Feel free to leave a comment below.

The Trade Deficit Nightmare

When they hear the word deficit, most Americans immediately think of the U.S. government budget deficit which is rapidly spiralling out of control.  But that is not the only deficit which is ripping the U.S. economy to shreds.  In fact, many economists commonly speak of the “twin deficits” that are destroying the U.S. financial system.  So what is the “other deficit” that they are referring to?  It is the trade deficit.  Every single month, we buy much more stuff from the rest of the world than they buy from us.  That means that every single month there is a massive outflow of wealth from the United States.  Every single day, America becomes just a little bit poorer as Americans continue to run out and fill up their shopping carts with cheap plastic crap from China and dozens of other emerging economies.  Not that trade is a bad thing.  Trade can actually be a very good thing.  But the gigantic trade imbalances that the United States has been running for years are absolutely bleeding us dry.  Unfortunately, our politicians have just stood idly by as each month we continue to transfer massive amounts of wealth out of the United States.

The U.S. Commerce Department recently announced that the U.S. trade deficit increased by 18.8 percent in June to $49.9 billion.  Most analysts had expected the figure to be somewhere around 41 to 43 billion dollars.

In the month of June, imports rose to approximately $200 billion while exports fell to about $150 billion.

So can we afford to have a net outflow of 50 billion dollars each and every month?

Of course not.

We had so much wealth as a nation that we could afford to do this for a while, but the reality is that if this keeps up the rest of the world will eventually drain us dry.

So just how dangerous is the trade deficit?  Well, world famous investor Warren Buffett once put it this way….

“The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil… Right now, the rest of the world owns $3 trillion more of us than we own of them.”

But very few Americans talk about the trade deficit.

Why?

Number one, it is because our education system has become so dumbed down that most Americans (especially among the younger generations) do not even know what the trade deficit is.

Number two, most Americans are so obsessed with frivolous things such as American Idol, Dancing With The Stars, Lady Gaga and their favorite sports teams that they couldn’t care less about thinking about real issues.

But they should be thinking about foreign trade, because it is literally destroying the nation.

What we have done is we have allowed the monolithic predator corporations that dominate our economy to slowly but surely move their operations to countries such as China and India where labor costs less than a tenth of what it does here.  In the process, executives at those predator corporations are earning huge “performance bonuses” while millions of hard working middle class Americans are losing their jobs.

It is time to wake up.  Have you ever wondered why it is so hard to find a decent job out there right now?  Well, there is a good reason.  The giant predator corporations have decided that they don’t really need us anymore.

Once upon a time, great American companies provided great American jobs for great American workers.  We created the biggest middle class in the history of the world and great industrial cities like Detroit, Michigan were the envy of the world.

But have you been to Detroit lately?

One of the greatest cities in the United States has become a hellhole.  The mayor says that nearly half the people there are out of work.

So what happened?

Did the giant corporations who used to make stuff in Detroit stop making stuff?

No, they are still making lots of stuff.

They just aren’t making their stuff in Detroit anymore.

Now, the truth is that it is really easy to jump on Detroit.  It is a city that has been mismanaged for decades.  But Detroit is far from alone.

All throughout the “rust belt” you can find other Detroits.

At this point many of you may be thinking that people living in places like that should just move.

That may be good advice, but the truth is that what has happened to Detroit is going to be happening everywhere.  It is going to come to your own neighborhood soon enough.  The giant predator corporations are going to continue to try to outsource and offshore every job they can.

Your job may be next.

Perhaps you should start learning about the trade deficit.

Perhaps you should start asking your representatives about it.

Just look at what all of this “free trade” and “globalism” did to our trade deficit between 1991 and 2005…..

Are you troubled by that chart?

You should be.

The U.S. economy is bleeding and the top politicians from both political parties act as if they could really care less.

What do you think is going to happen if tens of billions of dollars continue to pour out of the United States month after month after month?

The economic prosperity that we have all been enjoying is not guaranteed to last forever.

The system of world trade that has developed over the past few decades has provided us with gigantic mountains of cheap plastic crap, but it is not a good system for America or for middle class American workers.

Someday we will look back in horror at how incredibly stupid it was to ship our manufacturing base, our jobs and our prosperity to China.   

But the American people have made their choices.  They allowed the politicians to convince them that NAFTA, GATT and the WTO would be wonderful things for Americans.

They didn’t listen to the warnings about what would ultimately happen to our jobs and our economy.

They didn’t take the time to get educated about foreign trade and the exploding trade deficit.

So now we all get to pay the price.

Rare Earth Elements: The World Is Rapidly Running Out And China Has Most Of The Remaining Supply

Most people have no idea what rare earth elements are, but a wide array of the technologies that we use every single day are dependent on them.  Without rare earth elements, we would have no hybrid car batteries, flat screen televisions, cell phones or iPods.  Without rare earth elements, the entire “green economy” would not be able to function, because almost all emerging green technologies use them.  Not only that, but rare earth elements are used by the U.S. military in radar systems, missile-guidance systems, satellites and aircraft electronics.  Without rare earth elements, the U.S. military (and militaries all over the globe) would not be able to function.  There are 17 key rare earth elements that we rely on every day.  But there is a huge problem.  China owns more than 85 percent of the known global reserves of rare earth elements.  Right now, the rest of the world is absolutely dependent on China’s exports of these metals.  Without these Chinese exports, the western world would quickly run out of these precious resources.  But in just a few years, the rapidly expanding Chinese economy will gobble up the entire domestic production of Chinese rare earth elements.  So what will the rest of the world do at that point?

This is a major problem that you aren’t hearing a lot about in the mainstream news.

But analysts are now predicting that by 2012 this could be a tremendous crisis.

So exactly what are rare earth elements?

Well, rare earth elements are a group of 17 relatively rare chemical elements that you can find on the periodic table.  These rare metals have names you may not be familiar with such as lanthanum, cerium, tantalum, neodymium and europium.  As mentioned above, they are used in products that we use every day such as laptop computers, iPhones, magnets, catalytic converters, night vision goggles and wind turbines.  These metals are not well known, but they are absolutely crucial to our way of life.

So what is going to happen when we start running out of them?

According to The Independent, the move towards “green technology” will cause a dramatic increase in demand for rare earth metals in the years ahead.  In fact, it is being projected that the world will need 200,000 tons of rare earth elements by the year 2014.

But analysts fear that China may drop exports of rare earth elements to exactly zero tons by 2012.

Can anyone else see a problem forming?

Last summer, one leaked report indicated that Chinese authorities were already considering a complete export ban of the most critical of the rare earth elements.

But while we may speculate when the complete ban is coming, the truth is that China has already moved to dramatically cut back exports of the metals.

China recently announced that they have cut export quotas for rare earth elements by 72 percent for the second half of 2010.  The U.S. government reacted quite angrily to this news and warned that this could potentially cause a trade war. 

TechNewsDaily recently quoted W. David Menzie, chief of the international minerals section at the U.S. Geological Survey, regarding the coming shortage of rare earth elements….

“Countries and companies that have or plan to develop industries that need rare earth minerals to make products are concerned about China’s growing consumption, which they fear will eliminate China’s exports of rare earths.”

So what needs to be done?

Well, nations and corporations that use rare earth elements need to start weaning themselves off the supply coming from China.

But there is a huge problem.

That cannot be done overnight.

According to a recent report by the U.S. Government Accountability Office, building an independent U.S. supply chain for rare earth elements could take up to 15 years.

So what in the world will we do until then?

That is a very good question.

The truth is that those running the U.S. government are just not very good at thinking strategically.

The U.S. Government Accountability Office report mentioned above lists Mountain Pass, California as perhaps the largest non-Chinese rare earth deposit in the world. 

But it almost fell into Chinese hands unnoticed.

You see, the mine in Mountain Pass is owned by Unocal, and in 2005 a Chinese bid for Unocal almost succeeded.

Yes, the Chinese were trying to strengthen their monopoly on rare earth elements and it almost worked.

Not that they don’t have the rest of the world in a very difficult situation already.

The truth is that if China cut off the export of all rare earth elements to the rest of the world tomorrow, it would throw the global economy into absolute chaos.

That is a lot of power for China to have.

Let’s just hope they don’t use it any time soon.

The Russian Bear Awakens

Today most Americans consider the United States to be “the sole remaining superpower” – absolutely unparalleled economically and militarily.  But the truth is not anything close to that.  As we detailed in a previous article, China has become a very dominant economic and military superpower.  But there is another world superpower that the American people and the American media are not taking seriously.  The Russian Bear has awakened, and yet most people in the U.S. think of Russia as a Cold War opponent that we “defeated” and which is now a shell of its former self.  The recent Russian spy case is a perfect example of the tremendous lack of respect which the American public has for Russia these days.  It is almost as if the media is saying: “Oh look, isn’t it so cute that these little Russians are spying on us as if the Cold War was still going on?”  But the truth is that it is a massive error to underestimate Russia.  Today it is a fact that Russia is stronger both economically and militarily than it ever has been before.     

You doubt this?

Quick – name the number one oil producer in the world.

Here’s a hint – it is not Saudi Arabia.

It is Russia.

Russia has also recently become the number one oil exporter in the world.

Not only that, but Russia is also the number one exporter of natural gas in the world.

In a world starving for oil and natural resources, that puts Russia in a very strong position.

Back on December 28th, Russian Prime Minister Vladimir Putin was on hand to celebrate the opening of Russia’s first modern Pacific-based oil export facilities.  The Pacific port of Kozmino now allows Russia to export huge amounts of oil to growing economies throughout Asia.

And to the United States.

Did you know that Russia is rapidly becoming one of the top suppliers of oil to the United States?

It’s true.

So is it smart for the U.S. to start becoming dependent on oil from Russia?

No, probably not.

But that is what is happening.

And the Russian economy is booming.

Russia experienced very high economic growth during the early part of the past decade, and analysts project Russia’s GDP will grow by more than 5% in 2010.

And most people think of Russian cities as crumbling, broken down cities where people stand in line for bread.

Not anymore.

According to Forbes, Moscow is now the third most expensive cities in the world in which to live.  In fact, the cost of living is higher in Moscow than in any U.S. city.

Who would have thought that it costs more money to live in Moscow than in New York City?

But Russia has not just become an economic superpower once again.

Russia has also been using all of this new economic power to rapidly update and modernize both its conventional and strategic military forces….

*Over the last several years, Russia has been very busy updating and modernizing their strategic nuclear forces.  U.S. officials still claim that America has a technological edge in this area, but everyone agrees that the gap is rapidly narrowing.

*On June 15th, Russia introduced their new “fourth generation” nuclear submarine to the world, which is apparently quieter than any other submarine in existence.

*Not only that, but a couple weeks ago Russian Prime Minister Vladimir Putin climbed into the cockpit of Russia’s new “fifth generation” fighter jet and announced that it was far superior to the F-22 Raptor.

And Russia is once again projecting their strength throughout the world.  We all saw what they were able to achieve in Georgia.  But they have been very busy elsewhere as well….

*Iran announced on Wednesday that the Bushehr nuclear power plant, a joint project with Russia, would be ready for operation in two months.

*Russia has signed major arms deals with Syria under which it will sell Syria warplanes, anti-tank weapons and air defense systems.

*After Russian President Medvedev’s historic visit to Damascus, Russia’s energy minister announced that his country is “studying the question” of building a nuclear power plant in Syria.

*Russian President Dmitry Medvedev recently announced that Russia and Turkey are becoming key strategic partners.

*The Russian government has agreed to a raft of new accords with the new, much more pro-Russian, government in Ukraine.

But still the United States is not taking Russia seriously.

According to Admiral James A. Winnefeld, the commander of the U.S. Northern Command, Russia is continuing to fly strategic nuclear bombers close to U.S. and Canadian airspace because the Russian military is seeking to maintain “the illusion of power”.

The illusion of power?

Is he kidding?

It is this dramatic underestimation of Russia power that could end up seriously burning us in the end.

The truth is this lack of understanding of the world situation goes all the way to the top.

Barack Obama is pushing for a plan which would reduce the size of the U.S. strategic nuclear arsenal to about 10 percent of what it was at the height of the Cold War.

Most Americans (and most people who will read this article) simply dismiss Russia as not being a significant threat, but that just shows how misinformed most people are.

And in many ways Russia is in a much better position right now than the United States is. 

The Russian government actually ran large budget surpluses from 2001 to 2007 and has a very small national debt.

Meanwhile, the U.S. government has accumulated the biggest debt in the history of the world.

In fact, Russia owns about 100 billion dollars of that debt.

My how the tables have turned.

The frightening thing is that Russia and China are cooperating on a host of economic and military projects as they seek to “counterbalance” U.S. power in the world.

The truth is that the U.S. cannot just “do whatever it wants” in the world anymore.

Russia and China are both more powerful than they have ever been before and they aren’t going anywhere any time soon.

The world has changed.  If the United States does not wake up and recognize this fact there are going to be some very serious consequences.

Shipping Our Economy, Our Jobs And Our Prosperity To China

As the U.S. economy continues to implode, large American corporations are investing billions upon billions of dollars in China.  But all of this investment comes at a price.  Over the past several decades, hundreds of factories and manufacturing facilities that would have been constructed in the United States, along with millions of decent paying jobs, have ended up going to China instead where labor is so much cheaper.  In the process, China has become a massive economic powerhouse, while once thriving manufacturing cities in the United States such as Detroit are now rusted-out corpses.  In fact, China’s economy has grown so rapidly that it is being projected that in 2010 China will replace Japan as the world’s second-largest economy.  Not only that, but China has already overtaken Germany and is now the biggest exporter of goods in the entire world.  But none of this growth in communist China would have been possible without all of the globalism and free trade that U.S. politicians from both parties have been pushing on us for the last 40 years.  When they were selling us on the benefits of “free trade” they didn’t tell us that we would end up shipping our economy, our jobs and our prosperity over to China. 

American consumers never seemed to be able to put two and two together.  As we were busy running out and filling up our shopping carts with cheap plastic crap made in China, we didn’t seem to realize that a “global economy” meant that we would be competing for jobs and wages with workers on the other side of the world.

So now the U.S. economy, with its high wages and repressive government regulations, is suffering while China’s economy is thriving.

So just how much money are U.S. corporations pouring into China?

Well, according to the U.S.-China Business Council, U.S. corporations combined for $3.6 billion in direct foreign investment in China in 2009.  That was substantially up from $2.9 billion in 2008.

As U.S. companies pour increasingly large amounts of money into China, the economies of the U.S. and China are becoming inextricably linked.

In fact, some of the biggest “American” success stories are now manufactured in China.

For example, have you purchased an Apple iPhone?  Well, if you have, there is a really good chance that it was made in China.  Of course what Apple doesn’t tell you is that ten workers at the facility in China where the iPhone is manufactured have committed suicide in the past year by jumping off buildings at the factory.  Perhaps they were depressed over their low pay – the workers at the factory work very long hours but make less than 300 hundred dollars a month.

How would you like to work for 300 dollars a month?

But things could be even worse.

Reuters recently described the ordeal of one Chinese worker who spends at least eight hours a day standing on an assembly line putting together locks for Honda cars….

“Each year is the same. It makes me sick in the stomach. There’s no freshness to things anymore,” he said of his job which pays around 30 yuan (US$5) per day.

How in the world can American workers be expected to compete with someone who makes 5 dollars a day?

But some Chinese workers toil in even more difficult conditions.  According to the Toronto Star, employees at the Pingdingshan Cotton Textile Company work grueling two day shifts and yet only make 65 cents an hour.

These low wages have enabled big global corporations to make huge profits, and they have helped provide lots of low price products for American consumers, but in the process they are cannibalizing U.S. jobs, factories and businesses.

In fact, it is getting quite hard to find things that are made in the United States anymore.  Even many of the “organic foods” that you are buying at organic food stores are now actually made in China.

As tens of millions of American workers sit at home collecting unemployment checks, U.S. companies are busy making plans to invest billions more in China.

According to Pacific Epoch, a China-focused research firm based in Shanghai, Pepsi “has committed $1 billion over the next four years to build 14 new beverage production plants, in a move that will almost double its production capacity in the country.”

Couldn’t we use a few of those beverage production plants in the United States?

But who wants to pay U.S. workers 12 dollars an hour when they can pay Chinese workers 2 dollars an hour?

But Pepsi is far from alone.  Forbes recently detailed the massive investments that some of the major car companies are making in China….

General Motors and Volkswagen have invested billions in China, starting more than a decade ago. Ford is rushing to catch up by adding production capacity and expanding its dealer network in China. Ford and its joint-venture partner, Chang’an Ford Mazda Automobile, plan to start producing next-generation Ford Focus models at a new, $490 million plant in Chongqing in 2012.

Meanwhile, once thriving American manufacturing cities such as Detroit and Flint, Michigan are so dilapidated and run down that they literally look like war zones.

But it is not just U.S. companies that are investing in China.  According to China’s Ministry of Commerce, overall direct foreign investment in China rose 14 percent to approximately $39 billion in the first five months of 2010.  Nearly half of that money was spent on building or expanding factories.

The implications of all this are staggering.

First of all, nobody can deny any longer that China has become a superpower.  China now has one of the largest economies in the world, their military has been dramatically upgraded and modernized and they have developed a network of economic and diplomatic contacts around the globe that would have been unthinkable 20 or 30 years ago.

Meanwhile, the United States has an economy that is imploding, a reputation that has been deeply tarnished and a debt that is the largest in the history of the world. 

In fact, China owns about a trillion dollars of U.S. government debt.

Yes, the United States is falling and China is rising.

So now that China’s economy and manufacturing base has been built up so dramatically, what happens when someday the communist Chinese government decides that it doesn’t want to be such great friends with the United States anymore?

If relations between the two nations really go south someday, could U.S. corporations suddenly lose the billions upon billions that they have poured into China? 

Also, many Chinese military strategists believe that it is inevitable that there will be a war between the United States and China someday.  So could China end up using all of the technology and manufacturing capacity that they have gained at our expense against us someday?    

The truth is that all of the money and technology that we have poured into China could end up being one of the greatest national security blunders of all time. 

China is not a democracy.  The Communist Party runs China, and most of their leaders still believe in the ultimate worldwide triumph of communism.

So in the end the United States may look back and realize how incredibly stupid it was to build up communist China at the expense of our own economy.

But this is the world our leaders have built for us.  A world where globalism and “free trade” force us to compete for jobs against sweatshop laborers around the globe.

The reality is that this “new world” is not very good at all for the American middle class.  The economic realities of the 21st century are very cruel for Americans who are seeking to live a middle class lifestyle. 

Gradually, everyone in the world is being pushed into two economic groups.  The massive global corporations that dominate everyone and everything, and the worldwide mass of expendable labor that serves those global corporations.

It is this kind of “neo-feudalism” that we must avoid at all costs.  If the American people would just wake up this trend towards increasing globalism could be reversed.

But will they wake up?

7 Potential Economic Effects Of A War With Iran

As each day passes, war in the Middle East seems increasingly likely.  The truth is that Israel will never allow Iran to develop nuclear weapons, and Iran is absolutely determined to continue developing a nuclear program.  So right now Israel and Iran are engaged in a really bizarre game of “nuclear chicken” and neither side is showing any sign of blinking.  In fact, even prominent world leaders are now openly stating that it is basically inevitable that Israel is going to strike Iran.  For example, Italian Prime Minister Silvio Berlusconi recently made the stunning admission that the G8 nations “absolutely believe” that Israel will attack Iran.  But a conflict between Israel and Iran would not just affect the Middle East – it would have staggering implications for the rest of the globe.

So just what would a war between Israel and Iran mean for the world economy?

The following are 7 potential economic effects of a conflict between Israel and Iran….

#1) The Price Of Oil Would Skyrocket – One of the very first things a war with Iran would do is that it would severely constrict or even shut down oil shipments through the Strait of Hormuz.  Considering the fact that approximately 20% of the world’s oil flows through the Strait of Hormuz, world oil markets would instantly be plunged into a frenzy.  In fact, some analysts believe that oil prices would rise to $250 per barrel.

So are you ready to pay 8 or 10 dollars for a gallon of gasoline?  What do you think that would do to the U.S. economy?

The truth is that every single transaction that we make every single day is influenced by the price of oil.  If the price of oil suddenly doubles or triples that would absolutely devastate the already very fragile U.S. economic system.

#2) Fear Would Explode In World Financial Markets – Even without a war, the dominant force in world financial markets in 2010 is fear.  We are already seeing unprecedented volatility in financial markets around the globe, and there is nothing like a war to turn fear into a full-fledged panic.  And what happens when panic grips financial markets?  What happens is that they crash. 

#3) World Trade Would Instantly Seize Up – Once upon a time the economies of the world were relatively self-contained, so a war in one area would not necessarily wreck economies all over the globe.  But all of that has changed now.  Today, the economies of virtually every nation are highly interdependent.  That has some advantages, but it also has a lot of disadvantages.

If a war with Iran did break out, nations all over the globe would start taking sides and world trade would seize up.  The global flow of goods and services would be severely interrupted.  That would be enough to push many nations around the world into a full-blown depression.

#4) Military Spending Would Escalate – Even if the United States was not pulled directly into a conflict between Israel and Iran, there is little doubt that the U.S. would be spending a lot of money and resources to support Israel and to build up military assets in the region in case a wider war broke out.  The U.S. has already spent somewhere in the neighborhood of a trillion dollars on the wars in Iraq and Afghanistan.  If war does break out with Iran the amount of money the U.S. government could be forced to spend could be absolutely staggering.   

The truth is that the U.S. is already drowning in debt.  At this point the U.S. government is over 13 trillion dollars in debt, and another Middle East war is certainly not going to help things.    

#5) Russia Would Greatly Benefit – Russia and other major oil producers outside of the Middle East would greatly benefit if a war with Iran erupts.  Russia is already the number one oil producer in the world, and if supplies out of the Middle East were disrupted for any period of time it would mean an unprecedented windfall for the Russian Bear. 

#6) Massive Inflation – A huge jump in the price of oil and dramatically increased military spending by the U.S. government would most definitely lead to price inflation.  We would probably see a dramatic rise in interest rates as well.  In fact, it is quite likely that if a war with Iran does break out we would see a return of “stagflation” – a situation where prices are rapidly escalating but economic growth as a whole is either flat or declining.

#7) The Price Of Gold Would Go Through The Roof – When there is a high degree of uncertainty in world financial markets, where do investors turn?  As we have seen very clearly recently, they turn to gold.  As high as the price of gold is now, the truth is that it is nothing compared to what would happen if a war with Iran breaks out.  When times get tough, we almost always see a flight to safety.  Right now none of the major currencies around the globe provide much safety, so investors are increasingly viewing precious metals such as gold and silver as a wealth preservation tool. 

War is never pleasant.  If war with Iran does break out it could potentially set off a chain of cascading events that would permanently alter the world economy for the rest of our lifetimes. 

So let us hope that war does not erupt.  It wouldn’t be good for anyone.  But the reality is that at this point it almost seems like a foregone conclusion.  Tensions in the Middle East are rising by the day, and all sides are certainly preparing as if they fully expect a war to happen.

Even without a war with Iran, incredibly hard economic times are on the way, so if a war does happen it could mean a complete and total economic disaster. 

So what do you think?  Will a war with Iran devastate the world economy?  Feel free to leave a comment with your opinion….

The Chair Of The European Commission Calls For A European Economic Government

The recent economic collapse in Greece has caused a significant weakening of the Euro and has created a measure of financial panic all over Europe.  So what solutions are being put forward by the governments of Europe?  More centralization, more globalization and more power for the EU.  For example, the German and French finance ministers have formulated a draft plan that would significantly strengthen “financial policy cooperation” within the EU.  In essence, the plan would create the framework for a “European economic government” that would have substantial power over the economic decisions of member nations.  But if Brussles continues to swallow more and more economic power, where does that do to the governments of individual member nations?

The chair of the European Commission, Jean-Claude Juncker, who received the new proposal from German Finance Minister Wolfgang Schäuble and French Finance Minister Christine Lagarde is quoted as saying that some form of “European economic government” is needed to ensure that a crisis such as the one that has happened in Greece does not happen in the future….

“We need a European economic government in the sense of strengthened coordination of economic policy within the euro zone.”

It certainly seems as though almost every issue that comes up in Europe these days is an excuse for the EU to grab even more authority.  Is Brussels destined to become a blackhole that ultimately sucks in all power and authority in Europe whether anyone likes it or not?

Not that this kind of thing isn’t happening on a global level as well.

These days the IMF is constantly pushing for more power and authority over world financial affairs.

In fact, IMF chief Dominique Strauss-Kahn said on Friday that the International Monetary Fund wants new authority to supervise the global financial system.  In addition, Strauss-Kahn has been openly advocating the creation of a global reserve currency that would compete with (and ultimately replace) the U.S. dollar in global trade.

So is all of this centralization and globalization a good thing?  Is it right that the economic decisions for the planet are increasingly being made by a handful of very powerful men that we never even elected?

If we continue to hand authority to unelected bodies outside of our home countries, what will that do to our own political power?  If we do not even have the power to vote out those who are controlling our economic destinies, then how could we ever possibly hope to change things?

Those are some very important questions.  But the truth is that the powers that be are going to continue to push globalization and centralization on all of us.  It is up to you and I to tell them what we think about it.

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