How do i industry sign banking north carolina ppt now
okay in this presentation I'm just going to talk about the US trade deficit and you know this should be based and should come after you've looked at comparative advantage and feel comfortable with the theories of how it works but what I want to do is just look at the data and see what's actually been happening in trade over the past few years this is this is US exports and imports right in jillion dollars okay so this is from the Federal Reserve and what we see is kind of the history and you'll notice that we start seeing we start seeing trade deficits in the 70s and there were trade surpluses beforehand although on this scale they're hard to distinguish because the differences are thinner than the lines but um and then we started seeing more significant gaps opening up in the 80s from 84 you know really when we get in a recession in 83 to 84 in that range we see kind of a weakening of exports or imports continue because during the recession in the 80s you still have lots of demand even though our ability to supply stuff kind of tailed off and then things get a little better in 1990 as our economy continues on we actually get in a recession but our imports kind of level off a little bit our exports catch up with them and then you know it continues on and really you'll notice that the biggest gaps start appearing in 98 2 mm right mm we see this enormous gap open up enter in our imports over exports and that gap stays pretty wide although exports before the recession in 2008 were actually catching up a little bit with imports but one thing I think you should note is yes imports outstrip exports but exports have increased rather dramatically you know when you look at that scale and you just say even if you just go back from you know nineteen just before 1990 exports from the US break the 500 billion mark and uh you know now they're at 1.8 trillion and so they triple in that timeframe yes there's inflation but it's not that much and so really what we you know the gap has widened in the last decades but a key thing to keep in mind is exports do in fact increase along with imports now kind of scaling this to GDP right saying alright well you know we know that things were smaller there if we if we look at the US exports and imports as a percentage of GDP we're kind of scaling well how much are we shipping versus how much our total production in the country and how much are we bringing in versus the total and we see here that we've been steadily climbing of the climb uh is not perhaps as dramatic on when we have this scale um you do see that with when we have when we reflected this way we actually have downturns and these again are generally associated with recession and so we have the big downturn in the 80s as a result of our recession where our exports fell off and really what it is the economy kept growing but our exports were kind of going down we have and you can kind of tell that because the export line around 83 to 85 drops into a low point where as imports continue to march when we look at the beginning of the 90s we see a more classic recession where both imports and exports drop and so we see they're kind of moving together and then they both increase so uh this is a kind of important to look at one thing to note though is the scale even though our you know exports and imports are increasing as a percentage of GDP we're still only in the you know here this has got data for 2007 it actually you know and this calculates it out to be about 16% or 17% and in the end um I can tell you from looking at data at other countries that 17% of import imports or 17% of our GDP that's not a lot you know that when you look at all the other rich countries in the world you look at top 10 richest nations most of them are running about 30% imports 2 percentage of GDP there they also if they export a lot their exports spend them a larger percentage of GDP as well when you look at Japan you know Japan is the only country that's got about the same level of imports which is interesting now the Japanese United States economy is both import about the same as a percentage of their GDP you know the US imports more than the Japanese in absolute terms because we're bigger you know when you divide by the GDP it comes out about the same and you know this is kind of plays false the idea the Japanese of this great exporting power and they're very insular and the United States is all open and we buy everything from everyone well you know we're there with the Japanese and all of our other rich richer nations are importing more the only member of the top ten club that imports a smaller percentage of their GDP than the United States in Japan is Brazil right which is kind of the weird member of the top ten Club in some ways right that they're the new entry into it and so you know all the other rich nations are importing more than we are is the bottom line but we still have this big gap you know we do have this big gap between our imports and exports even though exports have been increasing you know after the recession in 2001 and to 2002 we see our exports are steadily increasing as a percentage of our GDP so we're exporting more and more all the time and what drives the trade deficit right this is the question what's driving this trade deficit and a lot of people like to blame foreign trade and the fact that you know and other people's trading practices the better explanation for this is essentially from something you know I've talked about this in other places that your trade deficit is always balanced by a capital account surplus right dollars go overseas to as a result of purchasing imports they have to come back to us somehow right because dollars in the end so they may be passed around uh overseas in the end they're only worth something in the United States and [Music] they are worth either our exports what you can buy from us and and you know our exports or someone else's imports and as as I've said elsewhere you know in 2008 when you look at when you look at the ratio of the our exports - imports our exports are about 78% of our imports so 78 excuse me 72% there's 72 percent of our imports so you know 72 percent of the money that goes out to buy imports comes back to us from the purchase of exports the 28 percent about 700 billion in 2008 where tobeco they're largely that comes to us in the form of investments right so you know what's driving what's going on there well there are a couple things that folks look to to explain this one is the US as a low savings rate right we don't save a lot in the United States in other nations they save more so in the u.s. we have a fairly tight supply of domestic savings for investment which means that as opposed to other nations that have a fairly abundant supply and so you get kind of distill over in that was our relatively lower savings rate this money that these other people are putting away comes to the United States kind of spilled in right simply because we don't have our own domestically driven savings to fund us and there's all sorts of cool things to invest in in the United States and so there's a demand for investment capital and so when it goes to be met a lot of it comes in from overseas and now sometimes people complain about that ole American radio the fact you know part of it is we have a very stable society we also have a lot of we have things like Social Security and we have a lot of these we have a lot of insurance and we have a lot of credit you know the other one actually that's probably the biggest thing and all that um and what I'm alluding to here is the things that people in other countries save for you know they save up to buy things because they don't have access to ready credit the United States we don't have to save to buy things we go into debt for them oh it's right there whole source of savings that that's what is that we just don't have in other countries they have a less insurance you know we have insurance for everything and I got a home warranty my refrigerator breaks somebody comes out to fix it or they give me money to buying you know sort of buying a new one I don't need to save up have money available for a rainy day because of that and same with my car and you know a lot of other things that you can get insurance for and so again it's another reason we don't have to save so these are not all bad things okay um and it's kind of it's in some ways a mark of having a more developed economy with all these different you know we're big economy were developed so you can say you can sell American home warranties and you can you know have credit and that sort of thing is good we have a good system for getting it back right so no US savings rate another thing high government debt we have a big government that and it's been growing and we issued t-bills and a lot of a lot of foreign investors like our key bills and by foreign investors I mean banks central banks love our t-bills people have been selling gold central banks over the last couple decades have been getting at having their their preserves held in precious metals and a lot of countries they've been getting out of that is salt they've been selling off their gold and buying t-bills mainly because he built a interest Gold does not and so that you've been seeing a lot of that but also just investors if they want a quality investment right with a decent rate of return but more importantly in the security a t-bill is a very great thing you buy it and when you buy it you lock in the interest rate whatever that is at the time you know through the market and you you know what the interest rates going to be so there's no variation that you know me to get four percent three percent whatever it is whatever it's selling for um and you know that you know you don't have to worry about that the only thing you run the only risk you run is default risk and as I like to sometimes jokingly say you know key bills are just if the government the u.s. defaults on T bills losing your investment is probably the least year concerns at that point right because probably something very seriously wrong has happened and so it's a considered to be a very secure investment so it naturally attracts a lot of folks and so as we add to our government debt we are creating you know with especially the low savings rate we're creating this system and you know this work was demanding currency and people are more than willing to give us their money and lend it to us um the other thing too is the United States just in general is very attractive for investment we have a lot of global globalised banks and investment firms and you know if you're overseas and you want to invest where do you invest you might invest in Hong Kong you might invest in Japan but a lot of people are investing Wall Street and they're going to investing in US corporations and other things so US investments are very attractive and therefore we tend to get a net inflow when you look at the recent financial crisis you know a lot of what went on in that was people were bundling the more that they were selling these these high-risk margin mortgages bundling them up into my bundles and and then selling that debt overseas right and so we actually globalized our housing loans and you know the result of that was all we were drawing in money from overseas uh offering a great rate of interest although not a very secure investment as it turned out but nevertheless we were pulling that money in and you know where did those foreign investors get that money right well somehow you know somebody sold us something right we gave it to him he gave the dollars to them and we generally we give them the people in exchange for the imports and so you know that's another thing just the private sector is is creating all these investment opportunities and they're sucking money in so these are the things I think that really are driving our trade deficit um much more than any inequity in in trade policies around the world because these are huge you know our savings rate that's huge right when you look at the American economy 1% difference big difference our government debt freaking enormous right that's in u.s. investments also huge so these are the things that are really producing these persistent trade deficits when I say huge you know call it probably should click clicked it in this this thing doesn't move exactly that fast and I got a pause in the talking to let it go so um here we go foreign assets in the US this is from the Federal Reserve and what you're looking at is the net capital inflow this is net in that you know this is the flow of capital of foreign investors right it's net because sometimes they take things out right if a foreign investor sells a US stock and takes the money they are that SEC goes out right when they send money into the US and buy the stock that comes in and generally what you see here is the net of all that is positive it's always positive and it's positive in a big way look at that I mean look at this line it through 1990 it's kind of mad and out of data you know a few hundred billion yeah in 1995 it crosses the 400 billion mark and it kind of but then you know it's really starting to go up you know very quickly goes out you know we have some downturns right in when you're looking to late 90s IBD Asian financial crisis right that first big downturn then it goes up then we have our recession and by the way when you have to goes in recession people stop investing enough right where they slow down notice it stays positive right in that recession and by the way recessions are indicated by those so thick columns they're a Federal Reserve always indicates recessions in their graphs because well so happens during recession um but that one there that one downturn in you know 97 or so that's somebody else's recession hitting us but you look at it and you say oh my god you know this is a huge increase it goes up to over two trillion dollars coming in to the US now we're sending money now alright but I mean just look at that graph that's an enormous increase all of that promotes a trade deficit right all of that is going to very much promote a gap in our tray and notice by the way the thing nosedives when we go into our recession right 2008 a time in a.m. it goes down to 2009 level but it's still very positive right it's still of the money for foreign investors or it's still coming in right still coming into it and so what you're seeing there is a very what I think is the huge part of the story I mean I am offering you a graph that goes up over two trillion dollars a year remember our hole we only active we only import about two trillion dollars here right so uh you know this is this is the big thing right if we have these kinds of capital flows now again like I say these are balanced by us investing in other countries too so it's not come to this complete thing but you know this is a either those those are big increases that coincide with the widening trade gap and the story I'm telling you is this is where the action is more than in trade policy and I hope you can see that that's the case in effect now we saw this dropping off of our trade deficits of shrunk right as we went to recession because we've had a lot less money coming in so or there's been a lot less demand for our exports so um this is a big part of the story that is underappreciated and when people talk about trade now the question comes up people do talk about foreign investors and there's often concerned about well you know for these foreign investors in China especially you know China is holding billions of dollars in t-bills and they have the temerity to worry about their investment unlike well of course they do but people get nationalistic about it uh what happens if foreign investor stop investing in the US and this is you know going to result in a couple things and I say it's kind of combination of these things one is increased interest rates okay if people suddenly stopped being interested investing to it and it's in the United States from overseas that means there's a smaller supply of capital and you know what you're going to have to do is if you want to get now if you want to get that money and you're going to have to offer a higher interest rate alright so i
terest really interest rates on t-bills would go up um you know stocks would have to you know there they'd have to pay higher higher dividends versus their value and so what we're going to see though in general is interest rates would go up and that would make it harder to finance things it would slow down economic growth because it's harder to finance things that makes it certainly harder to finance our government debt however when you increase the interest rates guess what you you kind of reignite the interest amongst 400 testers and investing in the US and also you increase your domestic savings rate because when interest rates go up guess what people save more right and so that's an important safety tip at the same time though if interest rates couldn't go up enough to because they can only go up so on if they don't go up enough but what we would see is a devaluation of the dollar right as people are less interested investing in the United States they're less willing to take our dollars for nothing and since the value of the dollar is now at a balance where that you know it's kind of propped up by the interest in people investing in it um what's going to happen is the dollar would devalue and the result of this that would be our exports would increase and our imports would decrease right so we'd get back to a trade balance perhaps even trade surpluses foreign investors were for some unknown reason and when people talked about this I was like why would you do that alright why would you suddenly you know why would it be this some instant decision um you know it would be it could happen but you know would it be a temporary thing with it and if this were to happen though what would happen is our exports winning you know the dollar with the value our exports would increase our imports would decrease for imported goods we would have inflation right anything that was imported in the US would now cost more to us most notably oil right would be more expensive because what always traded you know whenever the price whenever the dollar falls the price of oil goes up because oil traded in dollars and foreigners then take those dollars and trade them for other things so and also like if the dollar goes down Europeans are bidding with euros and they're able to buy more oil and they Jack the price force the key thing though is that expression would be limited to the things that are reported remember we only import about 16 percent of our GDP okay by contrast Germany imports over 30 percent Mexico imports 70 percent so you know imports and exports actually and but you know we have a lot of we have a lot of production you know our our economy is very sensitive very insulated from the international system in comparison other people watch because we have a big economy you know when people in California buy something from New York State it's not international but in any other place in the world it would be so that's a that's one of the things that insulates us because everything is if there's if it's dollar devalues everything made in America stays the same in price except for the portion of it that is influenced by imported goods and energy becomes a problem um but that's right you know my thing is the trade deficit would disappear and then we would always be added back and so it's not this disorient you know some people think that foreigners through their investments are going to have some kind of control over the US and I'm like you know if you try to use that control the market gets in your way and it's going to change things and it'll create some create problems for everyone else by the way and so that's something that you know the pain will be shared by everybody moving on here and looking at manufacturing right because a lot of times people lament the changes in the American economy and they often lament the rise of the service sector visa via the manufacturing sector and you have a lot of talk about trying to promote jobs that are in the manufacturing sector because they tend to pay better and the thing about this and also there's there's often this feeling of the American you know you'll hear that that trade has destroyed the American manufacturing base we import everything nothing is made here and etc etc um well let's look at the manufacturing sector what you got here is a graph that graphs two things the red line which is associated with the left scale tells you manufacturing jobs right it's the employment in the manufacturing sector in thousands right so why they don't have is 20 19 18 and having millions I don't know but it's it's in thousands therefore 18,000 thousands of 18 million and what you see is over time you know manufacturing it starts a little over 17 million goes over 18 million in terms of jobs it drops down in the 70s then it Peaks in 80 at over 19 million workers then it knows dies in the recession after 1982 under 17 million and then it recovers a bit and now it stays it doesn't really get much above you know that 19 million was a high point and now 18 million it drops down and it gets back to 18 million around 1989 and then it drops down in the 90s it you know 89 to 93 it drops back down below 17 million again for the third time then in the 90s it recovers and it's kind of an a middling pace and notably I would note that NAFTA goes into effect January 1st 1994 so the immediate post nafta period sees a slight recovery in manufacturing jobs manufacturing jobs did not leave em mats in the aftermath of NAFTA they will continue to increase until about nineteen ninety seven or eight uh but then we start a little bit of downturn kind of off a peak but really when you get to 2001 the nosedive big gains we have this enormous drop in manufacturing from 2001 long and we follow that red line down to where it goes from over 17 million to just over 14 million it stabilizes for a while then we hit our recession okay and it's nosedives to under 12 million now that recession number that will come back but you know that that period there you know that that drop during good times is very interested okay now what explains that the thing is though that's jobs those are people working in the manufacturing sector when you look at the blue line right the blue line is the output in billions of dollars it's controls for inflation those are two thousand dollars so control it you know it's controlling for inflation in that and expressing the value of the outputs in 2000 year 2000 dollars and so what you see is manufacturing output has you know really been caught steadily climbing right all the way up until 2008 now there's a couple little drops but you know it goes from in 75 when it's just a little bit above 1.2 trillion cuz we hear we have to read the right-hand side it's just a little above 1.2 trillion dollars and it expands to over three trillion dollars in output okay in 2008 now it's down as a result of the recession but it's still over 2.4 you know it's actually looks likes to me about two point six trillion so uh what we've seen is manufacturing has by increasing productivity they have managed to consistently produce more and more stuff so the idea that the US manufacturing sector has cease to exist even that period when the two million jobs right we go actually more than that three million jobs disappear output continues to increase output in that same period goes from you know just under twenty two point eight trillion to over three trillion right so we still have these increases in output so you know this of US manufacturing demise are greatly exaggerated however the demise of the US manufacturing workgroup must be acknowledged I think from 2001 to 2004 ish uh we have it this massive drop-off in manufacturing employment the culprit is productivity all right US manufacturing has steadily increased their productivity and that's what you're looking at from 1972 to 2009 and again this is in two thousand dollars of controls for inflation what we've seen what we have here is the output per worker in the manufacturing sector and it's gone from under eighty thousand dollars a year and again these are controlling for inflation so it's eighty thousand dollars a year in nineteen set under eighty thousand nineteen seventy five to a peak at two hundred and twenty three thousand nine hundred fifteen dollars per worker so we're producing more per worker and the thing is you know much I mean a lot more per worker we go from under eighty to toot you know it's a you know three-fold increase they're just about and so the thing is there hasn't been a three-fold demand for products and kind of the the thing about it is that as these industries have gotten more personal more competitive and they've gotten more productive largely by mechanizing the manufacturing processes in the US are increasingly mechanized and you know you go we are constantly cutting the number of hours that people that are involved in making a product through mechanization through the investment of capital and use of technology and so we've gotten very good at making stuff with very little labor that's good that's a good thing the thing is though that you know the demand for manufactured goods hasn't necessarily increased along with that and that's something that you know how much do you need that's manufactured what we've seen is demand for services has grown much more than the demand for manufactured goods and we just don't need that much stopped in life and so that's something that you know is part of the problem is productivity is expanded faster than demand for the products and therefore we need less people to make if we keep making more stuff but we need less people to make them more stuff and that is what's driving things and that's you know is that foreign trade that's not that other people are manufacturing it's just that we're employing a lot less people to do these things and so again this is why I often say it's not the trade that's necessarily driving like economies are very dynamic things they're constantly changing they're constantly evolving and changes is a natural part of a market economy it's not necessarily something that's visited on you through either globe Asian in of itself or through trade policies of other people and those are two distinct things right there yeah and it's not all bad here we have an industry you know the the textile industry is often something I relate to because I live in North Carolina where the industry has shrunk dramatically and they're you know hundreds of thousands of textile jobs went away and textiles are something that have been very sensitive to global competition in the United States uh you know we make things that require capital right and our manufacturers have stayed competitive by increasing productivity and this is why wages in the manufacturing sector are higher because wages go up as productivity goes up and they don't go up dollar-for-dollar with productivity but they do go up and so what drives the wage differential between the manufacturing sector and other sectors is that productivity so you know you can't floor meant the grains and productivity because it's like well that's why everyone likes those jobs is because they are productive the problem the apparel industry is that it hasn't really been revolutionized they have they can't mechanize it quite as much it's still you know a sewing machine and a seamstress are still pretty much the level of technology they haven't really been able to mechanize that process much more so it hasn't gained in productivity as a result because all the other you know in a lot of ways many the apparel manufacturing has been squeezed out of the American economy largely because it's just not not there it's not something you want to use an American worker for wages are kind of driven by the other sectors the other industries that are employing people and you know you hear Americans won't work for this wage why won't we work for a lower wage because there's somebody else out there willing to pay us more right and that's what's driving that market wage and driving the expectation of getting it and so you can't have an industry that's not for not increasing its product if you can't have a manufacturing industry not increasing its productivity state because they simply you know the wages are being driven by the all the gains in productivity elsewhere right and so you get that pressure a pair was like this so Carol goes overseas apparel goes overseas because it seeks out the place where workers are at the right productivity you know in their economies drive the right wage and so it seeks at its natural place and um you one of the things though that as a result of global competition what you've been staring at is into talking them all the soap perhaps you've read it this is a Consumer Price Index for apparel and it gauges the increase in a you know they have a way of measuring this they have a a bundle of clothing items that they extract a price on and over time the Department of Labor the Bureau of Labor Statistics tracks the increase the price for these this common bundle of goods and what you'll notice is until around 1993 which is that when you have two comes in um we see that the price of clothing continually increases in the United States it's just like all other things CPI see if you guys go up then around 93 it levels off and it kind of stays flat and then holy moly it drops around 99 and into that period of you know of in 2000 when we see so many things changing and in 2000 and I would say you know it's seven years after NAFTA it's more about globalization I think at this point but there is around that that period of NAFTA being passed and it's a you know a lot of textile manufacturing moves to Mexico and what you see is that move leveled the price off and then further global competition has dropped it and so what we see is the price of clothing has actually decreased and it decreases in in 2000 and now it's stayed down and so you know it stayed down at levels you know it's just kind of leveled off and we don't see inflation right and you know this is this is a very interesting thing this doesn't happen for all the all the goods that are produced in globally but it does happen here for apparel and so when people talking about it you know this is a very interesting thing look here's here's what global competitions up it is stopped the increase of the essential item Americans have are paying eight and a half percent less for clothes and they used to while other things are going up in price and so this is what can happen as a result of global competition opening up these things and I think it's a very positive thing and especially the textile industry which complains about protection is like hey look when we were making this up here kept going up in price you know now we trade and every consumer in the United States is paying less less money for clothing so why would we protect you know we've protected the jobs the CPI would have kept going up right and you know food is a benefit right and again when you look at North Carolina yes we've lost hundreds of thousands of jobs and textile industry we gained hundreds of that you know North Carolina's employment has steadily been increasing and um there was certainly a lot of turmoil a lot of towns that's impacted but there were gains in other industries especially in Charlotte where the banking industry developed as a result of the globalization now they took a hit and the in the crisis well you know that's that's life in the fast lane but nevertheless you know who do you think was making more money with these jobs banking industry or seamstresses you know um so the jobs are not all burger for thing is the point point here though is years and years as good an example of the gains from competition from globalization and that's I think an important point why don't we see this pattern in other products on clothing something that really doesn't change in value and when you look at you know one that's manufactured and it's traded right and it but it hasn't really it's not very dependent on energy which is a big thing right this prevented it from going up in pricing in 2009 very energy it's dependent there's not a real quality change to it and you know it's clothing there ma
be fads and trends but really the the thing there and you know when you compare other products that people buy I mean you look at the price of TVs right keep going up in price and more expensive but you know my how do you compare my widescreen like 42 inch LCD that I paid $600 for with what I paid $500 for a decade earlier which was a very different product the lack of change you know how I compare an iPod to a Sony Walkman right I mean an iPod is probably more expensive than whopping but by gosh it does a lot more an iPod shuffle I don't know you know um this is what I'm saying is that a lot of manufactured goods have quality and technology in them that isn't isn't in the apparel industry so if we're really comparing apples to apples and we see that there's been this decrease in prices result of global competition looking at another industry that's taken a head shot heal a steel industry now this is actually the primary metals which includes the steel industry because that's they've got it I've gone and looked at Bureau of Labor Statistics and here's just another example of what happens in the world on what you're looking at our indexes they all converge at 100 in 2002 because to the 2002 level of all of these things has been normalized to 100 so the fact that they converge means nothing that's just it just took 2002 is the 100 and everything else is a percentage okay what we have the Green Line is productivity right so it's the output per worker or for work or our in the industry which is how they measure there and so in in whatever it was in 2002 that's 100 the red wine is flavor right the amount of hours worked and that is normalized to 100 there and the blue line that kind of runs in the middle of these two is the output right now um and it's all percentages right so it's 100 in 2002 and so it just kind of compares levels here the output of the steel industry um you know well what's the story we see you know it really takes place you know from from the as you go over this starts in in the 80s I think this data starts around 83 84 and yeah it's kind of we kind of see probably Labor's up there it stays it fluctuates it a little bit on output kind of increases a bit but then you know productivity is slowly increasing when we hit 97 98 1.98 it looks like we see some big changes what we're going to see is at first there's a huge drop in output right we have a nosedive in output of the blue line right before the convergence point right we see a big drop and along with that at the same time that that drop occurs productivity actually drops a little bit and we see a massive drop in labor at the same time labor starts its freefall right and so less and less people are employed in the steel industry then around 2000 what we see is the industry fights back and we see productivity increasing and labor is still decreasing labor is going to continue to decrease the 2000 2003 it looks like and so but we see the productivity start rising we have kind of a low point of production there from looks like 2001 to 2003 and then the productivity continues to gain in output recovers but labor doesn't recover right so the labor continues it stabilizes and then is actually going to start kind of edging its way downward again but you know this is the story that we see all through the manufacturing sector and it's not just a manufacturing sector in the United States it's manual you know all around the world every developed nation is you know the manufacturing sectors are getting more productive they're employing less and less people less and less of the workforce is working in the manufacturing sector more and more people are working in service related fields and you know manufacturing is just not that you know manufacturing is 18% of the global economy right that's that's what it is right everything in the world because people spend a lot more on food which is part of the agricultural sector they also spend in developed nations which are a huge part of the global economy because we add it up in dollars it's disproportionate part they're spending more and more on service related things and you know you made a fashion how much you need and it's much more the services right that go into it and if you think about you know think about what you spend your money on a lot of people go and they say oh you know everything I buy everything in my home is made overseas so we don't make anything here anymore and it gives the sense of this list loss of you know everything my money goes overseas mining is like well don't look at the labels look at what you've got in your checkbook or because we're advanced go online look at your bank statement and you know try to figure out how much money you spend on things that are either you know one manufactured of you know a manufactured good versus a service and think of how much stuff you spend on services and things that are only produced because services don't tend to be traded as much and things that are produced locally you know biggest expense in your budgets probably your house I and whether you own it or you rent it that's probably your biggest expense that's a non-traded goods we don't import houses and by the way if you own your house most of what you're spent is spending your money on his interest and that interest is probably to an American bank right because that's a huge service sector for the United States so right there that's a big chunk your car's your next big extent yes you might have bought a foreign car hello it's hard to tell I have a Mazda Tribute my daughter has a Ford Escape they're that same thing I don't know is it a foreign car not but even if it is sure yeah is it but how much money do you are you spending you know how much of it is going to pay off your capital you know look at your bank statement how much you're paying an interest for it versus how much you're paying in capital because the interest is probably is going to the miracle bank okay most likely and your assurance how much you spend an insurance each month right again probably in American service company and just you just go through the rest of the expenses and you guys for dinner when you know um and even when you buy things right you know when you buy things how much of the purchase when you buy the iPod you know how much is going overseas the production of it versus going to you know it's it's made overseas but how much does Apple get out of the Apple scene you get pretty rich okay so they're keeping a good chunk of that money we've seen and then how much is going to the Best Buy or or Walmart or wherever you buy the thing all right and so when you get down to it Oh your money as long as we stay in here and again not that that's a good thing but I'm the saying is that this idea that there's nothing in the American economy is actually there's a lot to it um and increasingly it's less about the product making the thing than it is about the technology developing the technology the services you know I spent $600 on my TV but I got to tell you what Time Warner Cable is going to have much more than that for me every year for the internet you know all these other things so again you'll think of it that way right how much do you spend on your blu-ray player versus buying the movies for it right and I think the point is that manufacturing is less and less as our economies grow when you get more information on we get for you know the things we need are less and less about the physical production of the product and they are about the other services and other design things and and that's why the service sector in these other sectors have grown much more than manufacturing has okay so that's Dave's take on the world try to talk about US trade a segue perhaps abruptly into talking about manufacturing the point is trade yes we have trade deficit but we are exporting exports and imports both increase they tend to increase you know at the same time in the same direction they're very highly correlated we do have a persistent trade deficit I've argued that that has a lot to do with financial issues the flow of capital savings rates government debt investments net investment in u.s. um I've also labored on to talk about to manufacturing sectors and the point being that they've been gaining greatly in productivity shedding workers and that is a combination of those gains and productivity that are why we like the manufacturing sector in the first place and they're also just the fact that the economy the world we just need less of that stuff okay and it's that's just a trend and it's a transit to every country around the world therefore it can't necessarily be blamed on globalization or trade policies it's just the trend the secular trend of the development of these economies hopefully have muddied the water up a bit and hopefully I've given you a way to sift through the insisting mud but you know to kind of say where where the eddies are in the water and hopefully that's been useful you
