View Full Version : weekend commentary - the collapse of America's 'service economy'
Deogol
04-28-2008, 07:39 PM
This reasoning is as stupid as saying you shouldn't invest in USA because someone in Kansas didn't use his indicator while making a right turn.
Not exactly good logic, Xan.
eagle2
04-28-2008, 08:36 PM
no matter how important of a service one provides, when he/she is a part of a 70% (at least) service based economy, the rest 30% have to come from somewhere esle outside of the economy. Meaning dependance of foreign supply of manufactured goods and grown food. If this supply is ever cut off for whatever reason, no amount of service will put food on the table if there is no food to buy!
The United States is still the leading producer of food and I don't see that changing any time soon.
eagle2
04-28-2008, 08:42 PM
Then add on the fact that presidential candidates and the US congress are talking about instituting a 'carbon tax' or a 'windfall profits' tax on oil companies that will raise energy costs for every US business and thus reduce profitability / future stock share values. How's that for a start ?
If we had put a big enough tax on gasoline when it was cheap, to encourage conservation, we would be using a lot less gasoline today and most of the money we spend at the pump would be put to use in this country instead of going into the pockets of Arab sheiks.
eagle2
04-28-2008, 08:45 PM
From that standpoint, India has the same potential problem that America has with a domestic economy that is heavily skewed toward 'service' industries. India like America cannot sustain a domestic economy with existing 'service workers' providing services to each other, because all of these service workers need to 'consume' and they are not providing added value to pay for that consumption thus an economic gap is created. In India's case the economic gap is currently filled by foreign exchange dollars i.e. US companies de-facto paying the salaries of 'service workers'. However this could quickly dry up as the US economy worsens.
The United States also "exports" a lot of services or at least provides a significant amount of services for foreigners. There are many foreign tourists who come here and also many foreign students. There are also American companies that export services, such as providing insurance.
miabella
04-28-2008, 10:05 PM
america has an export deficit. we import more than we export as a country.
Melonie
04-29-2008, 03:55 AM
^^^ the main 'service' that the US has been exporting is investment banking ... and we all know what's happening in the investment banking world ! True that more foreign tourist dollars are now being spent in America, but that is a drop in the bucket compared to the foreign investment dollars flowing out of Wall Street.
When you say that America is a leading producer of food, you also have to condition that statement to segregate the 30% of American agricultural production that is now being directed towards biofuels, and the amount of US domestic consumption of the remaining 70% versus the amount for export. Only the latter counts towards trade balance, and there ain't much human food exports left over these days. In fact, America is now importing far more human food from Asia for domestic consumption than we are exporting.