"Mr.T" MrT@home wrote in message
u...

"Robert Morein" wrote in message
...
The Chinese have too large a potential labor pool. This will keep labor
costs low for a much longer period of time than the American economy can
tolerate.

What do you mean tolerate? Like Australia, the USA has already given up on
most low skill manufacturing AFAIK. All the growth is in service
industries.
Meanwhile we enjoy very low cost clothes, electronics etc.

MrT.

We have a huge balance of payments deficit. Eventually, American currency
will fall. Henry Kaufman, a well known authority on interest rates, has
written an essay on why American currency valuation remains high. The one
precarious reason is that the dollar remains the dominant reserve currency.
Eventually, it will be replaced by other currencies. Then, inflow of money
into American economic interests will reverse.

Over the long term, floating currencies seek values that are stable.
Stability is possible only if the amount of the currency in circulation is
stable, or increases at a sufficiently slow rate as to represent an
acceptable rate of inflation. The current model of the American economy,
which is very weak in the value of manufactured exports, does not allow
this.

The fallacy of the "service economy" is the assumption that it represents
something indispensable to the global economy. All spheres of an economy are
subject to international competitive pressures. Domestic employment in high
tech sectors of the service economy is already eroding to India. This is not
going to stop.

The weakness of our ability to support the value of the dollar is masked by
two things: the status of the dollar as the primary reserve currency, and
the willingness of the Asian rim to fuel their own prosperity with
manufactured exports that buy them dollars. By 2020, however, China's
domestic bank deposits will exceed ours. At that point, fifteen years from
now, the shadow of the eclipse will begin to cover America. The realization
that China has acceeded to global economic dominance will cause the
attraction of the dollar as a reserve currency to rapidly fade. But there
will be a huge dollar denominated debt that must be repaid. The traditional
manner to deal with such debt is to repay it in cheaper money. Cheaper money
is achieved by massive inflation.

Sadly, our politicians are willing to mortage our future in return for the
privilege of driving fancy, gas guzzling SUVs. There is also the further
issue, more difficult to deal with, of job export. Within a few years, the
numbers of the dispossessed may grow to a significant political movement.