end of usa?

It has been said that the hegemony of the US within the international financial system amounts to an arrangement in which the US makes the dollars while the rest of the world makes the things they can buy. The
comment is an exaggeration of course, but given the increasing indebtedness of the US as its balance of payments deficit climbs to over $500 billion per year it does contain more than an element of truth.
The US rose to global pre-eminence in the twentieth century on the basis of the vast growth of its manufacturing industries. Today, however, major US corporations are becoming increasingly dependent on profits derived from the provision of financial services.
Recent results from General Motors-the world's largest manufacturing company-are a case in point. In the second quarter of this year, despite a weak economy and falling car sales, the company is losing money.
BusinessWeek recently commented: "These days, GM looks more like a financial institution that happens to sell cars and trucks than a successful automaker."
It does not seem likely that profits from car and truck making are going to increase in the near future. Faced with over-capacity and with inventories running 21 percent above normal, GM will cut production in the third quarter and expects to lose heavily million on its auto business.
The GM result raises questions about how secure are profit figures from other major corporations. As a recent Reuters report noted, despite the predictions of an economic rebound, "revenue growth remains elusive" and there are concerns that companies are "cutting corners" to reach profit forecasts.
Besides the GM result, the report noted that much of Coca-Cola's jump in profit was due to the impact of a lower tax rate and a weaker US dollar. IBM matched Wall Street forecasts but relied on acquisitions and foreign exchange gains to generate a increase in revenue. Microsoft reported a gain in its investments of which most came from interest income. United Technologies, which makes elevators, jet engines and helicopters, reported an increased profit due to cost-cutting and increased global sales. But it later disclosed that half of the profit growth came as a result of changes in foreign exchange operations.
The increasing dependence of US corporations on financial operations to boost profits and the continued decline of US manufacturing industry-more than two million manufacturing jobs have been lost in the past two years-have drawn attention to comments by US Federal Reserve Board chairman Alan Greenspan. Speaking at the House Financial Services Committee last month, Greenspan questioned whether the US needed a manufacturing industry at all.
"Is it important for an economy to have manufacturing?" he asked. "There is a big dispute on this issue. What is important is that economies create value, and whether value is created by taking raw materials and fabricating them into something consumers want, or value is created by various different services which consumers want, presumably should not make any significant difference so far as standards of living are concerned because the income, the capability to purchase the goods is there."
In other words, so long as it is possible to "make the dollars" through financial operations, it does not matter how the commodities and services they are used to purchase are created.

standpoint of the economy as a whole. Here the crucial question is whether a particular type of economic activity involves the extraction of additional surplus value from the workforce or whether its profits come from the appropriation of a share of surplus value that has been created elsewhere in the economy.
If, for example, a bank lends money to a corporation to manufacture commodities or to a high-tech firm to provide computer software, the bank will make a profit from the interest it charges on its loans. But that interest does not represent additional wealth. It is a portion of the surplus value obtained by the corporation from the employment of its workforce but which it is forced to hand over to the bank.
While financial institutions play a crucial role in the functioning of the modern capitalist economy the profits they obtain for their "services" do not represent an addition to the overall mass of surplus value but are an appropriation of already created surplus value.
In other words, the profits obtained by these institutions are the result of essentially parasitic activity. As can sometimes occur in Nature, this parasitism performs a necessary function-no modern economy, and certainly not manufacturing industry, would be able to operate without the provision of financial services. But when the profits derived from what are essentially parasitic financial operations start to assume ever increasing importance-even to the extent that manufacturing corporations such as General Motors become dependent on them-it is a sure sign of a crisis in the very heart of the capitalist economy itself.
The major manufacturing companies are bound to go under and be gone in a few months or years if they continue on this route. As it looks now the management in these companies do not seem to be in touch with reality and think that because they have been big in the past and always been able to borrow money that this is just a bubble that will pass. The reality will catch them by surprise soon and even if the debt is huge and it will rock the foundation of the USA someone will be coming to point at the naked men and wonder why they think they have everything in order.
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Is that a deficit of payments or a deficit or trade?
There's a huge difference. A deficit of payments is essentially credit, but a deficit of trade only means that you buy more stuff overseas than you sell. If you pay for the stuff you buy, there is no credit with the selling country(ies), and no deficit of payments.

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of"?
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Vehicle sales were down by about 1,500,000 in 2005 vis a v 2004, which was a record year. It is light truck and SUV sales that are down, not cars sales, in general. More importantly US manufactured vehicle retail selling prices are down, as much as $5,000 on some light trucks. Lower prices, fewer sales and growing costs are having an effect on the manufactures.
As the economy, it is certainly not weak. It is the largest economy in the history of the country and the federal treasury is taking in more money than at any time in our history as a result, particular since the recent tax RATE cuts were enacted. The problem is with increased domestic spending in time of war. Unlike WWII American are not willing to sacrifice to protect their own freedom, they still expect the government to provide even more freebees every year, like free prescription drugs.
Unlike my generation, individual responsibility is no longer something many Americans care about. It some body else's fault or somebody else should pay my bills. The Dims in Congress, for six years, have been preventing most every cost cutting bill coming from the Houses, from getting through the Senate. The Dims support any bill that spends more money so they can take credit on election day for 'supporting the troops and helping the working man' knowing they can blame the Republicans for deficit spending because many of the uninformed in this country THINK the Republicans 'control all three branches.' You hear the Dims doing it every day, all the while voting for every spending bill, even for the war in Iraq they say they do not support. In the end we all loose.
mike hunt

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Mike,
I agree to a certain extent with what you say, but there is one thing that I have to put in my two cents about. The Medicare Prescription Drug Benefit is a sham and the government did it to themselves for no other reason than stupidity and greed. By law, Medicare is prevented from negotiating with the drug companies for bulk discount rates and must pay retail price for the medications. This is insanity. Ever since the Drug Benefit was enacted, the pharmaceutical companies raised the prices on the top 20 medications prescribed to seniors by as much as 3 times the previous amount, and by law Medicare must pay the price.
Whatever drug company lobbiest got that provision put into the bill when it was being passed certainly earned his bonus that day. The Drug Benefit had the potential for producing possibly billions of dollars in savings but not for the stupidity and greed of our elected officials in DC. Now it's going to cost us more than it will ever save.
Cheers - Jonathan

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On Mon, 26 Jun 2006 16:50:59 GMT, "Jonathan"

If what you say is true....
What have you done about it?
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I find that not to be the fact, competition for people to buy a from a particular insurer for their drug coverage has LOWERED the price. I never applied for SS benefits, nor do I use Medicare but for me to be able to BUY the kind of medical coverage that I want, from any insurer I must buy part 'B.' Since I have part 'B' I must receive drug coverage from my insurer. The coverage has result in a saving of nearly $2,400 a year in premiums, drugs, co-pays and all with no deductibles. The government does NOT pay for the drugs when one has an HMO, PPO, or private insurance. Those companies receive a set amount of money from the government for each person over 65 in their area, that signs with that company, whether you use any service or not. Capitalism at work. These insurers negotiate with the drug companies, just as they do with the doctors and hospitals for rates for services for their members. If you don't have an HMO, PPO or private carrier you should look into them, in Florida the coverage is FREE to their members since there are so many elderly people.
mike hunt
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WWII medical treatment is primitive by comparison to todays expensive procedures.
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Why do you believe it is the governments responsibility to provide your healthcare or prescription drugs? The government does nothing to produce income, it can only take money from those that do.
mike hunt
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The problem with this analysis is that GM and Ford's troubles have nothing to do the fact that they manufacture cars in the US versus overseas. Toyota, Honda, Nissan, Hyundai and others have significant manufacturing capability in the US and are investing billions in more capacity.
The real problem with GM and Ford is the labor unions and the huge benefit packages that they pay out (in excess of $20 per hour just in benefits). No company can survive paying $20 per hour in benefits on top of $20 per hour laborer jobs.
It is true that the US dollar has been traditionally overvalued, primarily for political reasons in that it is the most stable government in the world, backed by a strong economy and strong military. But as oil prices rise (world oil prices are tied to the US dollar) and the dollar decreases in value, that makes manufacturing in the US much more attractive, which is why foreign auto companies are investing heavily in the US.
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If the underpaid American workers, in the Japanese US assemble plants, were smart they would be joining a Union as well. As it is Americans are paying a 20% to 30% premium to buy a Japanese car and they and the worker in the plant are subsidizing the Japanese corporation, just as does the Japanese government with huge incentives to bring back foreign capital to Japan. Toyota corporation and the Japanese government are making billions on the hard work of the American workers, and short sighted American consumers, just as did the Japanese Emperor and the futile Lords before WWII.
Perhaps it is time for the US federal government to level the playing field for Japanese corporation operating in the US, much as the way it is in Europe for foreign corporations like Ford and GM of Europe. Japanese companies are not doing nearly as well in Europe where the tax laws do not allow the Japanese corporations to benefit from the subsidies provide by the Japanese government in Japan and the US. Either that or the US government must subsidize the US auto industry, to the tune of 1,000,000,000,000, as does the Japanese.
mike hunt

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It makes one wonder why Americans continue to buy from foreign companies and foreign manufactures to save a few dollars, that is the cause of all that. They are simply exporting their own jobs and those of their children and grand children. Individual consumer greed is a terrible thing for any economy. Americans should be more like the Japanese consumer who only buy imported products when a similar product, made by a Japanese company, is not available. The education system in this county no longer teaches basic economics nor does it promote patriotism and it is sad. Hell half of the people in the US do not even want to fight for their own freedom. Americans are not willing to protect their own economy but they want those that do produce wealth in this county to pay higher taxes so the government will give them their basic needs for free. Where do people think the government gets the money, certainly not from foreign corporations. If we lose those willing to volunteer to fight and die for this county then we will all be wearing beards and berkas and it WILL be the end of the US
mike hunt

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labeled as to country of manufacture or non USA content in %. Of course GM would lobby against such a move. Those foreign made cars GM sells would be a very poor image for good old USA GM. http://www.indystar.com/apps/pbcs.dll/article?AID=/20060219/BUSINESS/6021 90335/1003
http://autos.msn.com/advice/article.aspx?contentid@23659

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My reference was to ALL products not only cars.
mike hunt
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