Plasma Televisions are not
May 13, 2005
Last week, on my second appearance
on CNBC's Squawk Box, host Mark Haines mischaracterized my position
that the U.S. could not hope to pay for imports solely through
reliance on the service sector, as my advocating that the U.S.
return to the equivalent of a "Buggy Whip" economy.
(His analogy is a reference to the classic economic example of
"creative destruction," whereby the invention of a
new technology, in this case the automobile, results in the displacement
of a mature industry, in this case manufacturers of whips for
However, as Mark should have realized, this concept has no relevance
whatsoever to America's current abandonment of manufacturing.
When buggy whip companies went out of business, America did
not start importing foreign made buggy whips. America stopped
making buggy whips because people no longer needed them!
Today, the very same highly desirable, state-of-the-art, consumer
goods that were formerly produced in America are now being produced
abroad. That's a big difference between the creative destruction
of manufacturers of obsolete buggy whips being supplanted by
manufacturers of innovative automotive supplies. Today's example
is pure destruction, with nothing being created.
For all of the worship that many analysts like Haines shower
on the supremacy of the "information economy," the
fact remains that what Americans really want are cars, boats,
consumer electronics, clothing, furniture, appliances, toys,
etc. If we do not produce these products ourselves, and do not
produce enough exportable services to acquire them through trade,
soon we will have to live without them. Today we are able to
acquiring such goods through debt. We issue our trading partners
interest baring IOU's, which means that we are not really paying
for our imports. We are putting them on the equivalent of a national
credit card, with the final payment still due.
The position that we can pay for our imports with services alone
is completely contradicted by the facts. A $60 billion dollar
per month, rapidly growing, no end in sight, trade deficit, proves
that we are not producing enough exportable services to pay for
our growing imports.
Similarly, Haines' assertion that the U.S. manufacturing sector
can no longer compete with the low wages in China is equally
absurd. In the first place, during the 1940s though the 1970s,
the U.S. ran consistent trade surpluses in manufactured goods
despite paying the highest wages in the world. Today, despite
having a higher wage scale than the U.S., Japan enjoys a surplus
in manufactured goods, including a surplus with China.
This is because manufacturing is not a function of cheap labor.
If it were Africa would certainly be the manufacturing center
of the world. Manufacturing is a function of capital formation,
which requires savings, and freedom, which necessitates low taxes
and the absence of burdensome regulations. So the real reason
for America's lack of manufacturing competitive is not that Americans
are paid too much, but that we save too little, and are taxed
and regulated too much.
May 12, 2005
not wait for pull backs that may never come. Buy gold at current
prices and do not look back. I still believe the best way for
average investors to participate is though the Perth Mint in Australia.
For more information on their unique, safe, private, low-cost
program visit www.goldyoucanfold.com.
In addition, as the dollar's
value is likely to sink far faster than those of other fiat currencies,
investors can learn strategies to protect wealth and preserve
purchasing power by downloading my free research report on the
coming collapse of the U.S. dollar at www.researchreportone.com
and subscribing to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp.
C.E.O. and Chief Global Strategist
Euro Pacific Capital, Inc.
Mr. Schiff is one of
the few non-biased investment advisors (not committed solely to
the short side of the market) to have correctly called the current
bear market before it began and to have positioned his clients
accordingly. As a result of his accurate forecasts on the U.S.
stock market, commodities, gold and the dollar, he is becoming
increasingly more renowned. He has been quoted in many of the
nation's leading newspapers, including The Wall Street Journal,
Barron's, Investor's Business Daily, The Financial Times, The
New York Times, The Los Angeles Times, The Washington Post, The
Chicago Tribune, The Dallas Morning News, The Miami Herald, The
San Francisco Chronicle, The Atlanta Journal-Constitution, The
Arizona Republic, The Philadelphia Inquirer, and the Christian
Science Monitor, and has appeared on CNBC, CNNfn., and Bloomberg.
In addition, his views are frequently quoted locally in the Orange
Mr. Schiff began his investment career as a financial consultant
with Shearson Lehman Brothers, after having earned a degree in
finance and accounting from U.C. Berkley in 1987. A financial
professional for seventeen years he joined Euro Pacific
in 1996 and has served as its President since January 2000. An
expert on money, economic theory, and international investing,
he is a highly recommended broker by many of the nation's financial
newsletters and advisory services.
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