I mean, how many people do you know who don't have indoor plumbing? How many in your circle of friends don't have a car or a TV? We are rich, I tell ya. Even the folks whose incomes hover around the poverty level all this stuff.
In the developing nations of the world, folks don't have all this booty yet.
In the formerly-third-world places--India, Brazil, South Africa, and even in China, the streets and malls and markets are teeming with millions of people who have yet to acquire the wealth-multiplying trappings of middle-class comfort. These are great, teeming markets yearning to be full. They're the next wave of aspiring consumers, like your kids in the supermarket with miniature shopping carts and little flags that read "shopper in training." So many of these minions have yet to buy that first washing machine, that first microwave, that first automobile.
But they will eventually, as their collective economic tides swell and their proverbial boats rise. Then the enterprisers among them will form companies and employ neighbors and friends to manufacture goods to meet the escalating demands of prosperity. But it's not likely their new acquisitions will originate in Dayton or Birmingham or Oxnard where the costs of affluent American labor render finished prices prohibitive.
We've got a high standard of living in this country that has propelled us, for lo these many decades, ahead of the the thundering herd. But now our opulent baggage has landed us in the dust as the pack passes by. We've priced ourselves out of the world market. But don't go blaming our politicians or our business leaders. This is just the way things work in a world where energetic workers and smart managers are free to make a better affordable mousetrap. It had to happen sooner or later; it's been a long time coming. We had an incredibly long ride on that post-wwtwo wave while it lasted; now it's time for us to paddle out and catch the next set.
Here's what needs to happen: find a way to pump some of the hot air out of our expansive, expensive American standard of living. Position us, once again, as lean and mean, efficiently productive contenders in the world marketplace. We've already, you know, burst one bubble. Can't we puncture another one? Dean Baker opined yesterday that economists should have identified our "over-valued dollar as a main cause of imbalances in the US economy."
As it turns out though, the reserved Fed has issued a prescription for our economic obesity. They have found a way to trim the fat real quick. And it just might work. It's called: the devalued dollar.
If Joe Sixpack and Jane Doe found, rather suddenly, their wallets full of greenbacks that had the purchasing power of, say, 60% of last year's dollar--the effect would be just like knocking our standard of living down by 40%. That might be enough of an overhead reduction to get us back in the game of competitive manufacturing. Then maybe we can again crank out washing machines or widgets or memory chips or hula hoops or solar collectors as inexpensively as they will in Manila or Mumbai or Mombasa.
Devalued Federal Reserve Notes will be a mixed blessing. On the down side, they'll mean less buying power for us yankee producers. But hey, we've got plenty enough stuff to last us for awhile anyway.
Folks would have an abundance of dollars again; everybody could get back in the game, pay off some debts, maybe take the kids out to eat.
Now, if that "over-valued dollar" could be knocked down a notch or two so that it is no longer so uppity, what would it take to accomplish such a feat? Everybody take a 40% pay cut?
No way. It'll never happen. Too complicated, and politically impossible. But there is a fix. It might hurt a little bit, but it would work pretty quickly, though not quite as fast as instant breakfast or drive-up food.
Make dollars. Print so many of them that Uncle Tim can push a big stack of chips out on the table to stay in the game. The bluff might just work if he keeps a poker face, although it's Uncle Hu's face that the world will be watching.
Carey Rowland, author Glass half-Full