7 months by cncdivi
Let’s face it: from the dot com bubble to the housing bubble, our economic booms in this nation have been filled with more bubble than actual substance. These booms have largely obliterated wealth and jobs for the 99%, while promptly amplifying them for the 1%. In essence, these patterns have not been typical and they’ve sapped the common American spirit of how we’ve historically conducted affairs. However, things could be on the verge of changing.
I recently read a great PBS article about the predictions of a man named Charles Morris. Lest you should think Morris is a crank, he correctly predicted the housing bubble crash in 2007 in his book “Two Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash.” He’s a former banker, lawyer, and author of a number of books on Wall Street and the markets. What’s really interesting for our audience is his current prediction:
It’s the best-kept secret in the economics media: The United States is on the brink of a period of solid, long-term growth rivaling that of the 1950s and 1960s. It is not a finance-driven, self-destructive boom, like the 2000s’ housing bubble. No, the new economy will be durably grounded in energy and heavy manufacturing, even though it will take several years to come to full fruition.
After being one of the few to properly analyze and predict the housing crash, I’m very interested in what he has to say about manufacturing, and I very much agree with him. His evidence makes a lot of sense:
– US companies are returning their manufacturing operations to our shores instead of overseas. Dow Chemical, for example, is building a new $4 billion plastics manufacturing plant in Texas.
– Companies are returning because the price advantage of the Chinese has been eroded considerably. I’ve written in the past about how advantages created through currency manipulation and lower wages have been shrinking in recent years. As the article mentions:
From 2000 to 2010, average wages in south China’s Yangtze delta, a manufacturing hotbed, jumped from $0.72 an hour to $8.62. American wages are still much higher, but so is American productivity, and the costs and time of long-distance shipping, along with the scarcity of Chinese land and that country’s endemic corruption, bring China and the U.S. to a rough competitive parity in all but the most labor-intensive industries.
– Companies are discovering that getting their design and manufacturing under the same roof again dramatically improves communication, and with it the pace of innovation. This is something Silicon Valley had to discover the hard way, but it has reached the same conclusion. GE, for example, was able to cut costs on home appliances by 20% as part of moving production back to the US.
– We’re already having an Energy Boom and it creates a lot of manufacturing related jobs all by itself. Even better, cheap natural gas makes manufacturing based on use of gas as energy that much more efficient. Nucor Steel, for example, is able to produce very high grade steels at competitive prices as a result. It’s been estimated that the Energy sector has created about 1.7 million jobs so far, and oil reserves have recently been upgraded twice. Indications are that we have decades of energy growth ahead and that we’ll exceed Saudi Arabia as one of the world’s oil producers by 2020.
– Manufacturing jobs in the US are up 500,000 since the recessionary low point in 2010, providing evidence that growth is underway. Unlike these prior booms, manufacturing affords blue collar workers a chance to make good incomes. Money in their pockets is money they can use to further stimulate the US economy.
Interestingly, Morris places the biggest risks to his prediction squarely on over regulation of the Energy and Manufacturing Industry and on the vagaries of International Trade.
Let’s give this boom a chance. We could use a prolonged growth period that benefits all Americans. It would be the healthiest thing that’s happened to our Economy in a long time.
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Bob is responsible for the development and implementation of the popular G-Wizard CNC Software. Bob is also the founder of CNCCookbook, the largest CNC-related blog on the Internet.
Bob, you have very good understanding of reality! About time we stood and revolted against the white shoe money cheaters and purveyors of nothing. The global financial crash was the work, regretably of an out of control corporate based in your country, but whose criminal actions could only have happened by deliberate collusion and double dealing within some areas of government. Had credible oversights been operative, it could not of happened.
Your comments about China and India etal, are joyous to read! The sooner that your country and mine come to the realisation, that these upstarts do not give a STUFF about our welfare or economic well being, and the deal hunger citizens realise that just buying something from China because it is CHEAP has some bad downsides for our own countries! Wake up [people, you have been ambushed by alien powers who have been working assiduosly at weakening and destroying our industrial bases. If that is not halted, then we are toast, and will be plundered in far worse ways than could have ever happened back in WW2. That fabulous photo of the LADY working on the build up of a radial engine says it all.
Bob, the population today has been deliberately Dumbed Down, Political Correctness is in command, to the extent that you endured that fateful day known as 9/11.
I hope your predictions are correct! Without a large industrial base and people actually using their hands and craft skills to make useful long lasting items, we are all doomed. The garbage spouted about everyone going to University is just that! Maybe 8 percent have the intellectual ability for that, and then, what canbe done with them? I love reading some of the industry magazines of WW2 and the incredible stories about how you Ameriucans got going and built huge facilities for freeing the world from tyranny.. The productivity of American Industry and the quality of what you produced, stands forever as the greatest testimony to your ability. Today we hear all this crap about six sigma and lean manufacturing, as if these paper shufflers have invrented something!! They would be truly amazed if they were transported back to those plants of the 1940’s!
I do have severe doubts though, as to the ability to show the bureaucracy where to get off, and get back to reality.
It is easy to see why your site is so popular! You have so many wide ranging interesting articles and worthwhile achievements; and then you write such interesting, and thought provoking articles. I for one am always delighted to receive your newest offering.
Keep up the commentary.
Regards to all
Stephen
[i]Let’s give this boom a chance[/i]
That will be decided in Washington.
T-Bone, not necessarily. Washington just needs to let it go without interfering too much. Can’t say their track record on that is especially good, except when they decide to help out “The White Shoed Money Cheaters” of Wall Street that Stephen mentions. They sure left those guys alone, and how!
Your article is good and in the red states this may happen. In places like California where businesses have to deal with tons of govt. agencies; the city, state, state board of equalization in addition to the federal govt. etc. and pay fees and taxes and percentages of income to all of those entities it is unlikely many new or start up manufacturing operations are going to happen unless they are very lean. China provides you with a building and an eager work force almost for free just for setting up shop there. In America the govt. taxes the heck out of land and capital assets providing ever more reason not to grow and invest in machinery. If I buy a new CNC and create a couple of jobs out of the work that it does why should I have to pay .X% property tax on the machine purchase price on top of taking the risk and cost of buying it in the first place? It doesn’t make sense to tax thing like machinery. What the US needs is a unified tax scheme just for manufacturing that allows small and medium sized businesses to deal exclusively with the federal govt’ for all tax and regulatory issues so young people get into it. Around here the word on the street is all the smart people are retiring before things get worse.