“A system is corrupt when it is strictly profit-driven, not driven to serve the best interests of its people.” ― Suzy Kassem
Yesterday I wrote a letter to President Trump asking a number of questions about his Inaugural speech. One of the points that stood out for me was his goal of bringing back “made in America, by Americans” and while I love the ‘idea’ of this… really, I do – think of the jobs!! I can’t see it as more than just a pipe dream and I don’t think some people realize the immensity – the complexity of such a statement. They want to believe it and so they do – no questions asked. Well… I am asking.
I believe there are towns across America filled with people who want to go back to work … I understand the reality of having lost a job and having no idea how you will continue to feed a family or the weight of shame as you stand in line to pay for groceries with food stamps. I empathize with people whose home values have fallen so low that they can’t possibly sell to move where jobs are more plentiful. I don’t have an answer, but I also know that the simple statement of making a decision to buy American isn’t the answer either. Let’s think about this for a minute…
Last November Dana Varinsky wrote a piece for Business Insider that looked at production of five products many of us buy and asked the question of whether or not we can make it here in the USA. Of course, we can but the iPhone for example would cost upwards of 15 – 20% more than it does now and that’s IF (a big if?) the said companies didn’t add ANY additional tariffs or profits. A standard pair of jeans would cost $25 more than they currently do. While some televisions sold here are assembled here – the components are currently produced in Asia and/or Mexico… if we had to manufacture the components here the cost would escalate. Currently, you can purchase a pair of New Balance shoes made in the USA but they start at $165 and go as high as $399. Reebok’s are similar.
So… let’s say we suddenly require expensive tariffs on companies who import products and/or components to make their products.
First… The things you buy cost more money. Now you don’t have as much money as you would have… perhaps you only buy one pair of jeans – not two. And… you don’t have as much cash flow so no dinner out that night. Less money goes into your savings account.
The company who sells your jeans made profit on only one pair of jeans – not two… multiply that by a 100,000 pairs and their profit is significantly reduced. They now must lay off a couple of people in the stores – perhaps they close a couple of stores – leaving empty storefronts in the mall – reducing the rent that is collected – causing the mall profits to subside – generating lower maintenance – creating a less pleasing environment – causing less people to visit – reducing sales, etc…
Because you didn’t go out to dinner, the restaurant where you would have eaten isn’t as busy and it lays off wait staff. If enough people don’t go out to dinner, the restaurant closes, the owner files bankruptcy because he has a big loan on the building and/or the franchise.
Because you didn’t put money into your savings account, you don’t have enough money to put new tires on your car when it needs them – which are more expensive now, by the way… and you have to use a credit card – adding to your debt load.
Imagine this scenario for everything you buy – every day. Now imagine that it’s not just you… it’s all of us. What happens when spending slows down?
Inflation. Prices go up across the board because companies are trying to compensate for the loss of revenue. When inflation happens – interest rates go up.
When interest rates go up, housing sales go down.
Real estate agents make less money.
Home Depot and Lowes have fewer customers as do carpet installers, window manufacturers, and lumber companies.
The economy comes to a slow and screeching halt.
There is a really good chance that your retirement money – if you have any – is invested in the stock market. If you have mutual funds that invest in a company who sells jeans that are now twice as expensive and not selling as many… their profit is down which means their dividends are lower and their share price is probably sinking.
Additionally… all those European and Asian companies that your mutual funds invested in are now losing money because they can’t ship to the USA and their share prices are falling…. What is your 401K worth now? Do you own Apple stock? GE? How much of their share prices are dependent on trade between countries?
We do NOT live in isolation from the rest of the world anymore and frankly… we can’t go back! Not without a massive – drastic price to pay and that’s only the POV from my limited economic knowledge base – although I did get good grades in my econ classes.
Are you thinking about this??
As if this was all not enough… according to IHS Markit Technology’s Outsourced Manufacturing Intelligence Service there is an even bigger problem – at least where iPhones are concerned. The number of people it takes to manufacture iPhones constitutes a small city so while it may be great for a town or city to get an influx of citizens to work in a new factory – a hundred thousand people coming to town puts massive stress on infrastructure…. Roads, schools, sewage, water lines, etc…. I wonder how many towns are prepared for that to happen? How long would it take to amass the facilities to make that happen – is it even realistically possible?
Keep in mind that if it takes 100,000 workers – maybe ½ of them are married and have the 1.5 average children so it’s really 300,000 additional people!!! If you’ve ever played SIMs – the computer game of building cities – you know this is impossible to impose overnight (meaning a short time frame). I can’t imagine that President Trump can see this happen in his first term.
I’ve touched only on one aspect of the President’s speech. I will keep asking questions and ask you to think with me. If you have ideas or proposals… I encourage you to voice them! Let’s be part of the solution!!
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