United States having an economical crisis? What?
So a lot of people are talking about the United States being in the dump as far as the economy goes. Um. I don’t get it.
Tech goods are cheaper in the U.S. Even those manufactured in the European Union. Case in point: the Sennheiser MKE 400 microphone costs $199 or about 130 euros there. Here in Europe it’s over 160 euros. How is stuff cheaper in a crisis zone than in a stable region?
Gasoline is cheaper there than it is here. The record-breaking $3.62 per gallon is about $0.9 per liter or about 9 Estonian kroons per liter. We pay 16-17 kroons per liter here. Almost twice as much as in USA. Yet we’re not having a crisis because of it.
Cars made in the United States are far cheaper, far more stylish, and bigger than European or Japanese cars. Looking for a cheapskate fancy racing car, you’ll find that the Ford Mustang starts at $20,000 while the Honda Civic Type-R starts at a whopping $34,000. The new Civic looks downright silly compared to the aggressively-styled Mustang and both have famously shitty rear suspension. One would expect that in a crisis the prices would go up, not down.
I don’t know much about tax, but it seems that we pay far more of it than the citizens of the United States. If you look at things from an employer’s perspective, then way more than half of total salary cost per employee actually goes to taxes here. So the people in the U.S. actually make more money than we do. And have access to cheaper stuff.
I’m not an economist and the stuff above is just a bunch of baffling observations, nothing more. But I’d like to know how it’s possible that stuff is cheaper there and taxes are smaller and they’re still having some sort of a crisis.
I wish I could answer your question definitively, but I was never one to understand the economy. At all.
But I was also never one to not take a stab in the dark either.
I think the crisis occurs when the prices of these goods and services increase at a rate more rapidly than the amount of money people make.
Our collective income isn’t increasing enough to offset the increasing prices, therefore it’s being called a crisis.
All I know is that it cost me nearly $70 to fill up my tank with gas today. This is unfathomable to me (though sounds like it would be a price cut for you). Only five years ago, it cost me $30 to fill up my tank. And believe me, my salary hasn’t even come close to doubling in that time.
It is actually not always good that everything is “cheap” in a country. Because that can mean that in terms of international trade there is no sufficient demand for US goods or services.
On the contrary, US consumes a lot from the outside world, hence a US citizen must pay a lot if he comes to Europe. In other words: if your country exports less than it imports, it will be a “cheap” country, and it is not necessarily good for you. There can be other reasons for being cheap (i.e. supply too much, see China), but I feel that the US case is exactly the negative one.
As a result, the US economy is now living in the conditions of a serious budget deficit, mainly being “sponsored” by “free” petroleum. This is all nice for as long as this “sponsorship” continues. But then there might come a point where the creditors say, “cmon, stop it, look, you owe us trillions already, we won’t give you our stuff for free (i.e. lend) anymore”. And that’s when the prices start rising and all hell breaks loose. This point might be close now.
No, I’m not an economist, these are just some seemingly rational thoughts.
@Christina: I wonder if the salaries in USA are comparable to ours. Because if you make as much as us and everything is cheaper there, then I’d have to ask: where is the money going that a price increase is such a huge problem?
@K: I’ve always wondered about that. I remember reading in some high school textbook that 2nd world countries manufacture more while 1st world countries tend to be specialized in providing services.
It’s much, much harder to export services than goods. Therefore as a country becomes more advanced, it will import more and more while focusing on domestic services, essentially bringing the value of its currency down, no? That would mean that all countries are pretty much doomed to fail at the end.
is the current economic and financial situation the US and the world are facing too complex to be grasped?
not being a certified economist, I think there are some important factors and trends:
- the US, as also Estonian economy, is mainly credit lending and consume driven
- assuming free economic interactions between “countries” “countries” will specialize in providing certain products / services which will lead to a dynamic equilibrium of offer and demand. Characteristic of that equilibrium will be that there is a frontier of technology - the higher the % of products / services of that category (from the frontier of technology) of all output of that country is the higher the country will be in the “league”. From that perspective I disagree with Elver’s schoolbook - it is not a question of whether offering services or product, that distinguishes 1st from 2nd world countries…
- the tax system in most western countries originates from the time of building up productions, while consumption capability was low. My guess for a stimulating taxation system for the west is:
– Don’t tax productive and innovative forces.
– Tax consumption.
States can now use monetary policy to fuel a short term growth in fields that would not develop similarily if not supported by an oversupply of money.
Often such fields are real estate and consumption of imported goods.
The special situation of the US compared to other countries that use the same policy to stimulate their economies, is:
- the US is control of oil (interestingly the gold standard for the $ was abandoned while the saud family was installed as ruling party in Saudi Arabia. That a gold standard would not be necessary to have a stable currency is another fact).
- the US is leading in many technological fields.
- some countries are “lending” money to consumptive countries. By financing a short good time for the consumer, in the long run they may make the better bargain…
let’s have a rough look at the dependencies between the US, Germany and China
- During the Vietnam war the US stepped back from the gold standard, at the same time it increased the money volume, backed up the $ somewhat by controlling oil resources and made Germany buy US bonds in greate amounts.
- Looking at the past years the US encountered an amazing boom in real estae, fuelled by easily available credit - used for real estate and consumption.
- A huge deal of consumption went to the import of cheap Chinese goods and expensive German goods.
- The Chinese government - as also the Japanese as far as I know - have been buying US state bonds.
- German state banks (backed up with German tax money) have been buying financial products based on the loans from US banks. There losses due to such investments in 2008 are around 50 Bio Euros
- Germany has faced a very low real estate market until 2006. U could buy an apartment in Berlin of 50 sqm for 10.000 Euros and less.
- US insurance companies bought up German real estate in big deals. Example: The city of Dreseden has relinquished its debits buy selling all state owned real estate to a US investor.
Burnt down - the answer to your question could be:
- Life in the US is cheaper because others are paying for it.
From a broader perspective:
- In the end someone has to do the work: to innovate and to produce.
- If politics made a real good policy for there own state, they would secure energy supply and technological superiority.
From that perspective Mr. Putin is doing a pretty good job for Russa.
From this article:
Those numbers should be a pretty good indicator of the nation’s average salary.
Which in Estonia is about $12,000.
So… Americans earn 4-5 times more. Their cars are half the price. Their tech goods are considerably cheaper. Their gasoline is half the price of ours. Their weed is $5 compared to our $20-$25. And they’re having some sort of a crisis?
Where the hell is your money going?
Mortgage payments? Health insurance? Still, those probably wouldn’t account for all of it.
US taxes on fuel are lower, for one thing. That is why you see such things as the ire of the British truck drivers directed specifiically at the government. Taxes. Octane ratings are also lower in the US, you can buy 87 and 91 instead of 93 and 95.. Eurodiesel is a very different beast than the stuff sold in the US.
The dollar is, of course, low. US tech exports are thus cheap, even though Chinese labour costs more. The EU puts punitive tariffs on US tech, and the US just filed suit with the WTO.
I don’t see that the US is in a crisis. Past its peak, sure, but it’ll be a long sunset.
Weed — I don’t dabble and I haven’t been in the market for over 10 years, but I’m sure it’s approaching $10 per gram, or, as Americans measure it, $70/quarter oz. Economy of scale — instead of bricks of commercial Mexican, people grow small quantities at home under expensive lights.
Nederwiet and Nederprices.