Quote Originally Posted by Dayuhan View Post
How can you have an industrial recovery while consumption falls? What do you propose to do with that increasing industrial output?

You can't look realistically at the US trade deficit without looking at artificially inflated value of the dollar that prevailed during the half century or so after WW2. These distortions tend to have an impact.

In any event it is easy to issue declarations about what the US needs or does not need to do. Developing policies to move a nation in such a direction is a good deal more difficult. Economies don't move by executive fiat.
Investment in industrial capital stock. Paying back debt with trade balance deficit.

The deficit stands, excuses don't help. A weaker dollar would make imports more expensive (thus less) and exports cheaper (thus more).
The end effect is a move towards balance and sustainability, but it also means LESS CONSUMPTION (less goods flow in, more goods leave = less to be consumed inside). Again, no cure for the illness can be built primarily on higher domestic consumption.


The problem is huge and structural. It would probably take two decades of determined policy to defeat the problem.
A necessary ingredient of any such policy is to destroy the myths that contributed to the problem; such as the "more consumption solves our economic problems" nonsense.
Equally important is to understand the role of actual investment (not what the business elite thinks is investment; financial deals, mergers & acquisitions...). You need a higher savings rate (=less consumption) to afford more investment in additional or improved industrial capacity (and infrastructure). That will lead to the production capacity that's necessary to actually justify and sustain the actual goods consumption.

A proper understanding of the importance of macroeconomic investment includes a proper understanding of the role of for example the military expenditures as unproductive state consumption. The large military doesn't help the economy; it bleeds it dry and corrupts some industries. Have a look at the extremely crappy shipyard sector. It's a joke.

The same applies to the cancerous financial sector, the overly expensive intelligence community and many, many other significant distractions from industrial performance.


Modern Western societies are rip-off societies. Groups attempt to rip off all other groups, some succeed spectacularly and others don't. The rich people and the financial sector as well as certain lobby groups (such as farmers) tend to do spectacularly well.

This ripping off is a deviation from an optimal, functioning society. It pushes our societies into unsustainability (erodes the middle class and industry) and needs to be countered.
The U.S. and UK were especially lax on the financial sector and cultivated it as a giant leech instead, misunderstanding its size for a sign of prosperity.

Germany is different; our financial industry leadership is by comparison not very powerful despite the questionable behaviour of the current government with Deutsche Bank CEO Ackermann.
Our industry - especially the middle-sized companies (SME) - is very influential, and the share of industry at the GDP is by half greater than in the U.S.. The result is a huge trade balance surplus instead of deficit (this imbalance was roughly doubled by the Euro currency which is undervalued for us).