Alex Hutchins

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An economic perspective from a non economic educated person as to the future of the US in the global marketplace.

According to the author of The World is Flat, globalization started with the fall of the Berlin Wall. Why, you might ask? Because those living on the East Berlin side of the wall could finally see what the rest of the world had, and wanted it too.

The second point I would like to make is that as the population of China grows and participates more in the world economy, the more their middle class increases and the more their middle class wants what the American middle class has and takes for granted.

As other countries grow, like India for example, they will begin to naturally produce a middle class as well that will want what the American middle class has and takes for granted.

Since economics can be defined as: :the study of the allocation of scare resources that have multiple purposes," we can easily see that we might have a little bit of a problem globally in the years ahead with our scarce resources. That being said, the American middle class will have to start sharing its scarce resources with the rest of the world and in so doing, will inflate the cost of these scarce resources.

In other words, the supply and demand curve that nicely fit as an overlay over the US must now be used as an overlay over a map of the world, that will automatically shift our equilibrium outside of the continental boarders of the US. Consequently, as the middle class around the world comes up to this new global equilibrium, the US will have no choice but to come down.

I am not sure what the new look will be but I an tell you this, the middle class will not look like nor have the purchasing power that it has today or that it had 30 years ago.

And, in my economic novice opinion, it will start to be seen around 2025 and will gradually escalate and stabilize around 2050. About that same time, the demographics of the US will also be different. Asians/Hispanics will be fighting for the top spot with Blacks in third and Caucasians in fourth, changing our politics forever.

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    Jun 22 2013: One issue is for certain and cannot be disputed, although given what I've read on here some people simply will want to dispute their own intelligence, and that is OPINIONS are like REAR ENDS and everyone has one... However, sometimes I believe that what comes out the back simultaneously comes out the mouth.

    In my 27 years in education, those with PhDs that are put on a committee will take the entire year arguing about how to write a simple sentence, because that firmly believe that their PhD training is better than others. However, most of what I say comes from the business community like Ford, Chrysler, GM, Motorola, advisors to the Clinton administration, Healthcare, US Navy, $200 million manufacturing companies, Venture Capitalists, and Equity Investors with whom I have consulted over the years. From those, I have formed my own general opinion in a macro sense because the details of micro while fascinating but based on statistical data that could be skewed or manipulated. I also draw knowledge from Drudge, Politico, Huff Post, WSJ, The Economist but all these "talking heads" so to speak have a vested interest.

    I went to high school overseas in the middle east and know what it is like to have foreigners hate Americans and be in a minority and not speak the language. We live in a protected shell in the US and the rest of the world is attempting to take our position away - not fiction - but reality.

    Historically, all Democracies fail after 200+ years due to poor fiscal policy - again not fiction. When the voting general public realize they can vote themselves generous gifts out of the public treasury, they always do and the government cannot sustain that greed. Democracies are always replaced by a dictatorship.

    I would suggest the reader look around and see who takes responsibility for their actions by watching motorists fail to obey the traffic laws... because they can... you cannot force responsibility on anyone other than intimidation, real/not real?
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      Jun 22 2013: Paragraph 2, impressive resume despite this you do not know what you are talking about.

      Other parts of the world actually like the U.S., they were won over by Coca Cola, Levis, Elvis Presley, etc. But then again maybe when your country is relentlessly bombed by the U.S. you might take exception to this?

      Yup I agree this country is probably done.

      Force is the operative word if you have to use it, it is not cooperative exchange it is to greater or lesser degree coercion. The vast majority of the world uses cooperative exchange to accomplish what we have today. South Korea = cooperative exchange, North Korea = coercion
      • Jun 22 2013: I believe your thoughts are highly skewed as are your "factual figures" backing these opinions.
  • Jun 22 2013: Your superior attitude, condemnation of other's ipinions and judgements made based upon propaganda fiction are not only infuriating, they border on the psychotic.
  • Jun 22 2013: Just because the rest of the world is catching up with us, does not mean we are in decline. We will continue to be the largest economy on earth for a least 5 to 10 years. Currently our economy is larger than China and India's combined with 2.5 billion people and our little 310 million. It will be a generation or so before the larger countries (30 + million in population) catch up with is in per capita GDP.

    Our declining standard of living is based on our "protectionism". By that I mean we do not want to lose what we have, but we are unwilling to take risk to grow. An example is in education, we all know we need better public education system, when some one tries something new vouchers, charter schools, home schooling, state-wide open enrollment- vested interests teacher unions, school districts feel that they are going to lose something rather than taking those changes as an opportunity to grow their influence.

    Our standard of living in this country is dependent on our ability to change with, no- in spite of, the world. To take advantage of those changes that can make us grow. We have killed the geese that laid the golden eggs by over regulating, micro-managing every aspect of our lives to insure equal outcomes. We cannot continue to do this.

    The rest of the world catching up with us is a good thing - they now can afford to buy more of our goods and services. Our under employed society can gear up to sell to the world versus just the first world. A funny thing with commerce, it is not a zero sum game, the more that participate in it the better off all parties are concerned as long as they stay competitive and do not take their customers for granted.

    Customers come in a wide variety- public school students, businesses in a county, employers, and consumers. Everyone has to step up their game and be competitive. If you want to sit on your laurels , you will be crushed.

    We are the masters of our own fate as country and as individuals.
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      • Jun 22 2013: We are competing in a world economy. Money moves over borders as fast as it does across the counter at McDonald's in any where in the world. It is not about keeping money static, it is about taking your piece of it as it passes through your hand or local economy. The rest of the world, mostly understands that, we as a country don't.

        Changes in education are necessary. On-line education, lowering college costs are fought just as hard as vouchers and open enrollment because somebodies losing their piece of the pie. As far as vouchers, who said they have to be used for religious schools, what about going to a better public school in the next district over. Public schools, all schools, need to treat parents and students as valued customers not as a cog in their local monopoly.

        Raising minimum wage only creates wage inflation. It is a short term, feel good panacea for politicians to beat their chests about. If you are not being paid what you are worth, go find an employer that will pay you that wage. If there are no employers that will meet that challenge, create your own business and earn it.

        Affordable healthcare? A misnomer. I have seen my health insurance go up by 30% over the last 2 years in the name of affordable healthcare.When I graduated college I had to buy my own health insurance because I was an independent contractor. My policy cost $75 a month with a $1000 deductible. If we asked all 22-26 year olds to buy their own policy, we would see underwriting and higher deductibles as their consumer sides of themselves kick in. Giving them a free ride on their parents policy is hurting everyone.

        The US has the highest corporate tax rate of the developed world. If you want to see their overseas profits repatriated don't double tax it. It is not patriotic to pay more taxes than you owe. The last I checked, tax law was created by legislators for the benefit of their constituents. It is up to each of us to push for the changes we want.
        • Jun 22 2013: I don't agree that our tax monies are being spent for our mutual benefit. taxes don't benefit me when they are being spent and wasted on unneeded armaments, wars, political "junkets", CEO's and greedy Wall-Streeters.
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      Jun 23 2013: I think you have made some good point and it is difficult for anyone to believe our country, as great as it is, is in decline... and, it may take several years to happen or it may not. I have read accounts where some (so called experts) believe China's economy will exceed ours in a couple of years. And, about the time Bush went after Sadam, the Euro Dollar was seriously being considered by the IMF as the international currency of exchange - however, the Euro Zone has followed our example and is now a weak economy. As more and more countries seriously participate in the marketplace, the richer these countries become. The richest man in the world in not an American but a Mexican. There are companies like Blackstone and Thomas Lee who are opening up offices globally due to deteriorating financial conditions in the US.

      What we focus in on in our education system is to help students pass tests which is not learning. I have talked with sales reps from publishers and the same textbooks that are used in small colleges are being used in the Ivy League schools, so the knowledge base is the same. The only real difference is retention, how that knowledge is used, and can the graduate add value to the company?

      Why aren't investors investing?
      Why aren't homes selling?
      Why aren't consumers spending?
      Why is Wall Street a gambling casino?
      Why has greed replaced common sense and responsibility?
      Why is our Congress unable to function?
      Why is our divorce rate at 50%?
      Why do we buy more porn and drug than any other country?
      Why are our jails full?

      These are not questions that need to be asked of a healthy country.

      Maybe my economic knowledge is not the best, nor is my ability to argue intelligently, but I do have legitimate concerns that are being shared by more and more people in respected positions... But, I also fear that we are like Nero who fiddled while Rome burned.
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    Jun 21 2013: There were 3 highly educated people on a deserted island - a mathematician, a physicist, and an economist. Out of nowhere a can of something washed up on the beach and the math guy took a shell and started writing a formula in the sand as did the scientist but the economist simply did nothing. When the other two asked why, the economist said, all we have to do is assume we have a can opener.

    The Fed can manipulate the flow of money and businesses can whine about all the taxes and regs that they have to follow, but if a company want to continue to play the game, it must innovate. Innovation does replace jobs lost providing those people get retooled - but, businesses no long have to wait for Americans to get retrained, so can hire people outside the US who already have those skills.

    The global marketplace has enabled people from all over the world to compete with Americans who take their positions for granted...

    What you say is true but it is true for the world not for Americans. In the next few years China's economy will be larger than the US... Will that impact our standard of living, our cost of living, or will it do nothing at all? Are you willing to take a chance on what others say will happen?

    What manufacturing does the US still control? It used to lead the world in steel, electronics, automobiles, etc but today it does not.

    An American car uses American seats for cars and all the other parts are being supplied by foreign companies.

    We are gradually being kicked off the mountain because we listen to our leaders who listen to their advisors, who think they know all the answers...

    People don't change until the pain of not changing is greater than the pain of changing... What has to happen before we see what we are doing is not working?
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      Jun 21 2013: Actually the U.S. is the 2nd largest manufacturer in the world, 1st if you divine the facts from the Chinese cooked statistics.

      The way innovation registers on the radar screen is through investment. No investment = no jobs

      You can chatter about all sorts of things endlessly they are irrelevant.
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        Jun 22 2013: The fact that you do no realize that trade deficits are irrelevant indicates your ignorance on this subject. It is called comparative advantage and is to the benefit of both parties otherwise the exchange would not occur.

        I will not debate you on this it is just a fact, if you insist on willful ignorance that is your prerogative.
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    Jun 21 2013: Thank you kind sir...

    You are a true gentleman and a scholar...

    I have learned much from your perspective...
  • Jun 21 2013: how do u define'Middle class'?Probably due to'proverty' they own?People should be aware of it isn't our 'better life' direction we are pursuing:big house,luxious cars....big brands?I would like to see more and more people can understand life like'Bill Gates couple' quality:they are the most rich people in the world:not because how much money they have,but how deep understanding of life it is:contribute to the society,appreciate every hard work people in the world...
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      Jun 21 2013: There is nothing wrong with wealth - and, it would be difficult to achieve any substantial economic growth without greed.

      Bill Gates is living a dream and I like what he is doing now and wish him well. My brother is also a billionaire and made his money by buying and selling companies and/or taking the company to a new level with an infusion of venture capital. On paper no one got hurt but there were several families that lost their jobs and several communities that dried up because big employers left town.

      I personally have lived the wealthy lifestyle and have found myself happier by living simply. I have no debt and live within my means, buying only what I need and if there is something that I would like to have I pay cash. I have a much greater awareness of life and how precious life is about having a heart attack and surviving two battles with cancer.

      One does not have to be wealthy to value or appreciate life - but, I would like to know how many wealthy people had to violate their morals, ethics, values, and integrity along the way... or, were they able to achieve wealth differently?

      It does not take money to have a deep understanding of life...
      • Jun 22 2013: Yes,it is nothing more about money to have a deep understanding of life.But I have to say:understand be contribute but greed is one of very important dimentions for a deep understanding of life.
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    Jun 21 2013: In the next 10-15 years, 75 out of 100 of the largest cities will be located in and around Asia. The US will have two cities, NYC and LA, in that list.

    It makes logical sense that the demand generated by those concentrations will put a burden on the normal flow of goods and services as they will be willing to pay higher fees for what they want.

    New technology does in fact generate new jobs for a community/country but only if the people but only if those unemployed people return to school to get that knowledge. Americans do not seem to be willing to do that especially in the area of STEM.

    India's back office innovation is providing services at a faster rate than Americans are willing to change...

    America and her companies will survive as they always have. The wealthy will get wealthier just as they always have. If tax laws begin to undermine these companies, they will hide their monies in off shore accounts or move their operations outside the US or both.

    In 1992, I worked for a company that moved its operation to Mexico and paid those workers $1/day which increased in a couple of years to $1/hr, then $5/hr and then the company moved its operation to another location. In the meantime, these workers were able to increase their purchasing power and were able to have more than they had before we got there.

    Our auto industry was being hit hard by the Japanese quality back in the early 80's. The US was producing more than 2600 out of spec parts per million on average and the Japanese were producing 1-3 out of spec part per million. The auto industry began to improve with Ford leading the way, but we still do not have the level of quality that other companies have because the concept of making continuous improvement in processes and products and the worker is simply too expensive and cuts into the dividend checks that are sent out each quarter.

    There is an inherent battle between management and labor in this country that is being ignored...
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      Jun 21 2013: "An economic perspective from a non economic educated person"

      this comment is very apt
  • Jun 21 2013: There are many different ways to model what is happening. There are so many articles from different perspectives telling us that so many American business decisions are crazy and not the least concerned about us. We are now having more, more, even more problems.
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    Jun 21 2013: I wouldn't put too much stock in Thomas Friedman, the world is flat is an interesting article but the rest of his ideas are best hidden in the NY Times.

    A non economically educated person making predictions, never heard that before. You have failed to learn the first lesson of economics. Which is knowing that you don't know.

    The countries that advance will be the ones with the least government meddling.

    Review this index for who is most likely to do well:
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      Jun 21 2013: No stock was put into Friedman's comments other than to start off why people from around the world are climbing up the economic mountain to knock America off the top. America is doing this to herself just as much as the rest of the world is doing it to her. It does not take a PhD in economics to see that the purchasing power of the dollar ain't what it used to be... And, many respected economists that I have read the Economist are worried about China owning so much of our debt. More and more businesses are hiring foreign college graduates because their retention of knowledge and their ability to add value to the company is far superior than Americans.

      I have been teaching management courses in Colleges since 1986 and the quality of my juniors and seniors has been seriously declining for years.

      My daughter lives in China and works for a multinational company as a VP of Asian Marketing and sees what is happening to the middle class in that area of the world and she sees the growth of the middle class all over that area are growing and has a sideline business to capture that growth.

      There is a huge vacancy in jobs in the area of STEM (which did not come from Friedman either) that are being filled by foreigners...

      America is the largest consumer, according to DEA statistics, of illegal drugs in the world and is the largest consumer of porn in the world as well. Our divorce rate of 50% has been at that level for years which is an indication to some that the American family is beginning to deteriorate.

      I do not have to be an educated economist to see the unemployment rate or to see how important it is to receive quarterly dividends than it is invest in the long term growth of the company.

      I do not have to be an educated economist to see how Wall Street and the greed of Bankers have ruined the economy that many of us retired Americans helped to build.

      But, I appreciate you pointing out that my thoughts are flawed because I lack economic education...

      Take care,
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        Jun 21 2013: For now anyway since the dollar is the reserve currency of the world it has more value than it should.

        Foreign students adding more value is nothing new. In the past they wanted to live in the U.S. because they liked living here, but I read where that is changing.

        Dropping education levels in this country are not news especially in STEM

        The unemployment rate has nothing to do with making quarters.

        Wall street and the greed of bankers is the poplar meme amongst the economically uneducated.

        I do not understand much about economics beyond the basics. The one thing I do know and what you don't know is that I don't know more than I do about economics, you on the other hand think that you do know, but you don't.

        And you are welcome
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          Jun 21 2013: Part of our problem is arrogance and you display that very well. This is not a battle about who has more knowledge of economics as you seem to think it is.

          I was not saying STEM was new news and I was not saying that the unemployment rate had anything to do with making quarters. And, there is nothing new either in Wall Street Bankers other than being caught and that has nothing to do with being economically uneducated.

          If you always do what you always did then you will always get what you always got and you my friend seem to be stuck in that intellectual mindset, patting yourself on the back every time you can "put down" someone else by making yourself appear to be intellectually superior.

          Since you have a superior intellect my friend, explain to me as if I am a 3rd grader, why is our economic situation getting worse? And, what would you propose in improving the economic situation in this country and overseas. How long will it be before the US dollar no longer is the international currency of choice? How would you keep China at bay with our economic might? And, why are you not advising our political leaders will your economic insights.