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Thread: weekend commentary - selling our cows to buy milk !

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    Banned Melonie's Avatar
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    Default weekend commentary - selling our cows to buy milk !

    (snip)"On Tuesday of this week we learned that in 2006 Americans racked up a record $763.6 Billion trade deficit, and that two Australian mining firms, Rio Tinto and BHP Billiton, were each contemplating $40 billion bids for U.S. aluminum giant Alcoa. Not only did Wall Street and the media fail to grasp the negative significance of each story, but they also failed to see the strong connection between the two.

    By running huge trade deficits, Americans are literally selling cows to buy milk. Alcoa is just the latest heifer headed for the auction block. In other words, because we do not trade enough domestically manufactured consumer goods for those we import, we are making up the difference with our assets instead. To the extent that foreigners are tiring of buying more Treasuries and mortgage-backed securities, they are casting their eyes on industrial assets. Last year’s trade deficit alone provided foreigners with enough dollars to buy twenty Alcoa’s.

    Many Americas do not see the downside of such a transfer. In fact, they might even see it as a benefit, as shares of Alcoa would likely rise sharply. However, in exchange for losing one of the world’s preeminent mining companies to Australia, Americans would only be compensated by the return of their paper dollars. Future profits that would have been earned by Americans will now be earned by Australians instead.

    Founded in Pittsburg in 1886, Alcoa is now the world's leading producer and manager of aluminum, employing more than 120,000 employees in 44 countries. Every day Alcoa mines 86,300 tons of bauxite and 27,300 tons of coal, refines 41,000 tons of alumina, smelts 9,575 tons of aluminum, recycles 2,300 tons of aluminum, manufactures 8,810 tons of aluminum products, produces 166 million closures for beverage and food containers, assembles wire harnesses for 20,400 vehicles, generates 96,000 MWH of electricity, and purchases $27 million in goods and services. The sale of Alcoa would be a great loss to the American industrial landscape.

    It is astounding that so many fail to see the sale as further proof of America’s economic decline. In his testimony yesterday before the Senate Banking Committee, Fed Chairman Ben Bernanke showed little concern for the trade deficit and its implications for the American economy. If our economy really was as strong as Mr. Bernanke believes, Alcoa would be buying foreign companies, not the reverse. Nations with strong economies use their trade surpluses to acquire choice foreign assets. Nations with weak economies are forced by their trade deficits to surrender those assets.

    In the end, when foreign central banks finally allow the dollar to collapse, it’s not just Alcoa, but many other Dow Jones companies that will ultimately fall into foreign hands. After all, a sharp decline in the dollar will make those companies dirt cheap for foreign buyers, who will have little else to buy with the trillions of dollars burning holes in their very deep pockets. America will be reduced to the role of a secondary economic power. Our citizens will work primarily for foreign-owned companies while the profits are sent back to their far wealthier foreign bosses. "(snip)

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    Default Re: weekend commentary - selling our cows to buy milk !

    Kinda sad ain't it.

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    Default Re: weekend commentary - selling our cows to buy milk !

    Very sad ... but the majority of Americans really still don't realize how the continuing loss of private sector corporate profits, corporate tax revenue, the loss of 'central' function white collar jobs in R&D + head office accounting + customer service etc will eventually effect this country. Basically, when a company this large is sold to foreign owners, thousands of highly paid white collar jobs wind up being consolidated. Even though the blue collar jobs may remain, they usually just don't generate the same magnitude of tax revenue and 'consumption' of other items from the US economy as the lost white collar jobs usually did.

    Also when a US company is sold to foreign owners, the foreign owners are then in a position to mandate / recommend subsuppliers. This typically causes even more US business to be lost in favor of imported components and/or services being provided by other companies that the foreign owners are familiar with (i.e. the services company is also foreign owned !).

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    Default Re: weekend commentary - selling our cows to buy milk !

    Alcoa has been dieing since WW2.

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    Default Re: weekend commentary - selling our cows to buy milk !

    I guess what happened to blue-collar workers is starting to creep towards while-collar ones, now...

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    Default Re: weekend commentary - selling our cows to buy milk !

    Melonie, everytime you make a post like this, I realize that you are just WAY WAY smarter than me
    Sexy Jasmine after getting fucked over at work:

    God loves strippers and when guys do things like that its an automatic ticket to HELL!


    Quote Originally Posted by anomar View Post
    Perhaps you stopped spending money on her. Strippers need money to operate. They are like coin operated juke-boxes of love.

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    Default Re: weekend commentary - selling our cows to buy milk !

    There's nothing 'smart' about it ... you just have to read between the lines a bit and not rely on 'mainstream' financial media as your only source of information !

    I guess what happened to blue-collar workers is starting to creep towards while-collar ones, now...
    Actually, job losses in the white collar sector have been underway for quite some time. They began in the IT sector several years back, and have spread to corporate research, professional services like x-ray interpretation / legal / engineering, etc. However one big difference between white collar and blue collar displaced workers is that the housing boom provided an alternate line of employment for quite a few white collar workers in housing related finance, housing related / durable goods manufacturing etc. which somewhat disguised the effect of the original white collar job losses. But with the bursting of the housing bubble, this time there isn't any 'new' boom in progress in any sector that can absorb the 1 million + jobs that will soon be lost in the housing sector.

    Also, at the same time the housing boom was in full swing, some portion of white collar workers who lost jobs in IT, auto etc. were able to shift into new public sector jobs which went hand in hand with the housing boom. The classic example is additional teachers for new schools built to service new housing developments. These public sector jobs of course depend on people living in these new housing developments and paying property taxes to cover those public sector paychecks. As more and more homeowners go into bankruptcy, they are forced to move out and the property tax payments stop. Thus public sector job losses which are indirectly related to a housing bust will provide a double whammy.

    Back to the central point of this thread, when a US company is sold to foreign owners it almost always means that upper management is replaced by new management from the foreign owners - i.e. very white collar US job losses. It also usually means that central functions like accounting, legal, market research, product research etc. are consolidated within the foreign owner's organization - meaning more white collar US job losses. Indirectly, when a portion of the profits of a former US company wind up being shipped overseas to foreign owners, this also means a reduction in profit money which would have formerly stayed within the USA, with downstream effects in the US investment / financial industry potentially causing even more white collar US job losses.

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    Default Re: weekend commentary - selling our cows to buy milk !

    Sellin' our souls to the devil.

    Quote Originally Posted by pheno View Post
    When you lead a nontraditional life don't try to measure it with traditional milestones.

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    Default Re: weekend commentary - selling our cows to buy milk !

    well, basically, when you have borrowed more money than you can possibly pay back out of current / future profits, what other choices are there besides bankruptcy or gov't protection of your market ?

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