US Economy (not political)

[vladtepes 1,060]

first of all not a political discussion in any way just trying to understand something.

 

My friend and I had a conversation yesterday and I really don't understand something. If you have a country like the US, that does not really produce that much, and spends most of its money buying items that are produced elsewhere in the world, how does the money not "run out".

 

like it seems like we have money

spend it on goods that are made abroad thus funneling money out of the country. Does it come back? How does it come back? I am sure this is a simple economic discussion for someone who understands, but I just don't get it.

[fliks 20]

I had wondered the same thing for a while now. as I understand it and I'm no economist: we're a "service economy" - we produce "knowledge" and technology and skills. but most importantly (and not to start a heated political discussion here) we just produce money - we print it or put into ones and zeroes and transfer virtual money back and forth. perhaps someone more knowledgeable can clarify....

[vladtepes 1,060]

I had wondered the same thing for a while now. as I understand it and I'm no economist: we're a "service economy" - we produce "knowledge" and technology and skills. but most importantly (and not to start a heated political discussion here) we just produce money - we print it or put into ones and zeroes and transfer virtual money back and forth. perhaps someone more knowledgeable can clarify....

 

 

right a lot of what you said is kind of what I was thinking as well. I mean I know that we develop technology but do we sell that to other nations? I it just confusing that at a glance it looks like we buy everything from everyone else, sending the money away. I was just curious how (if) it comes back to us in some way.

[bbk 188]

I had a Michael Charles Master (author of "Save America") come and speak to my class (which was interesting as my instructor at the time was a fierce liberal-- but he respected the dichotomy of introducing differing perspectives). He used Dr. Navin's business/life cycle to describe what he thought was happening with our country's economy: R&D/infancy, Operations/adolescence, Sales/young adult, Marketing/mature adult, Finance/elderly, Legal/dying.

Mr. Master emphasized that the US' emphasis on business was placed in the latter part of that cycle; describing different reasons/aspects/events. I'm not expert on it, nor would I take what he said for gospel, but its an interesting perspective.

My applied knowledge has nothing to do with economics, but the dangers of what could happen if they falter , so, I'm interested to see what our finance specialists have to say.

 

And I do think this is a good springboard conversation-- but as noted, lets keep politics out.

[tony357 386]

this will be an intresting thread to keep an eye on.. the big question is do the people controlling it understand it..and it may only be two letters but it is a big it...

[e80hydro 120]

The United States produces bullcrap and paperwork, and we borrow from the Chinease to pay for it.

[vladtepes 1,060]

Sitting back reading the responses, and very interested to see what those who actually have a financial background think.

 

also I appreciate allowing the thread to continue based on the clear request for it to not be political.

[kenw 293]

The United States produces bullcrap and paperwork, and we borrow from the Chinease to pay for it.

... and we're soon to stop producing bullcrap. The EPA says it contributes to global warming, and is subject to carbon taxation. We'll be sending all our bulls overseas, allowing them to happily crap in some third world country, and then paying exorbitant fees to re-import it so we can continue to spread it around.

[vladtepes 1,060]

... and we're soon to stop producing bullcrap. The EPA says it contributes to global warming, and is subject to carbon taxation. We'll be sending all our bulls overseas, allowing them to happily crap in some third world country, and then paying exorbitant fees to re-import it so we can continue to spread it around.

 

 

when that happens are we indirectly further draining the economy. like just to simplify it.

 

we build a factory anywhere in the world besides the US.

we are paying that nation in some capacity to produce there.

we are paying the workers who work there as well.

we then import the goods and US citizens pay for them and the American company makes money, but does that money they make and retain negate all that is spent outside the nation? I mean I understand I am looking at a university level concept with an elementary mind set, but it seems pretty simple?

 

Just to put it in the clearest perspective this is not something I am "panicked" over or anything, but it just seems like a slow trickling away of all of our money.

[NJ-Tom 4]

... and we're soon to stop producing bullcrap. The EPA says it contributes to global warming, and is subject to carbon taxation. We'll be sending all our bulls overseas, allowing them to happily crap in some third world country, and then paying exorbitant fees to re-import it so we can continue to spread it around.

 

Don't laugh the EPA is already working on a flatulence tax on cowsand other livestock.

 

http://www.njherald.com/story/news/02METHANE

A tax on what? Proposed livestock tax to combat methane

 

Dairy cows on the Byma Farm in Wantage — and all others in Sussex County and the nation — would be assessed a tax to combat the global warming effects of their flatulence, according to a plan being floated by the federal government.

 

 

 

By CHRISTINA TATU

 

[email protected]

 

It may evoke a smile or even a laugh, but the possibility of a flatulence tax for cows and other livestock has local farmers raising a stink.

 

"Cows have been crapping on God's green earth since he created them. I don't think it's going to ruin the ozone layer," said Jeff Vander Groef, owner of Vander Groef Farm in Wantage.

 

Farmer Phil Brodhecker of Brodhecker Farm in Hampton thinks a gas tax is equally ridiculous.

 

"Why don't they tax people, elephants, giraffe and deer? It's not like we can produce a lower emission cow," Brodhecker said.

 

According to the Environmental Protection Agency, all the hot air surrounding the issue is premature.

 

"The EPA is not proposing a cow tax," said EPA spokesman Dale Kemery.

 

In July, the agency started soliciting public comments on a number of options to be considered for greenhouse gas regulations under the Clean Air Act, he said. The comment session ended on Nov. 28.

 

"The EPA is currently reviewing the public comments and does not yet have a time frame for next steps," Kemery said.

 

If the EPA did decide to move forward with the new regulations, they would also impact other sectors, like the building and automobile industries.

 

A methane tax, however, could be detrimental to the dairy industry.

 

According to Liz Thompson, a research associate with the New Jersey Farm Bureau, farmers would be required to get permits for their animals, which could cost up to $175 per dairy cow, $87.50 a head for beef cattle and $20 per hog.

 

For Brodhecker, who keeps between 70 and 150 beef cattle at a time, that could mean a cost of up to $13,125.

 

"It would be horrendous," Brodhecker said. "Some of the animals are only on our property for a short term, so how are they going to regulate it?"

 

Former State Secretary of Agriculture Charles Kuperus said he was also alarmed by the possible tax.

 

"If we are going to keep agriculture going, it needs to be economically viable, and once it's undermined, you'll have farmers throw up their hands," Kuperus said.

 

Roger DeGroat of Plumbsock Farm in Sussex is one of those farmers.

 

"If they do that, I'll just sell the cows and find a job," he said.

 

In the business for 22 years, DeGroat said he usually keeps about 54 cows at a time.

 

"Are they going to come in and count your cows? I really don't know. It's ridiculous because the number fluctuates a lot."

 

All the methane and carbon dioxide that cows belch and toot during the day only accounts for about three percent of total U.S. greenhouse gas emissions, said American Farm Bureau Senior Director of Congressional Relations, Richard Krause.

 

He estimates the EPA will make a decision on whether to move forward with the proposal by spring.

 

"The next administration has said they want to regulate green house gasses under the clean air act and this is one of the things that would result," Krause said. "I don't think they really thought about this. I'm hoping they will think twice before moving forward because there are so many implications with this."

 

Created: 1/1/2009 | Updated: 1/23/2009

[LorenzoS 100]

...If you have a country like the US, that does not really produce that much, and spends most of its money buying items that are produced elsewhere in the world, how does the money not "run out".

The money did run out. That's what the 2008 financial apocalypse was. Of course instead of dealing with the problem, we just used more credit to keep the party going a while longer.

 

The idea of ending the party, working to pay off old debts, and reducing our fun in any way is no longer the American way. Republicans and Democrats can piss on each other exchanging blame, but the real problem is our fellow Americans have become immature, spoiled, lazy brats with credit cards.

[e80hydro 120]

The money did run out. That's what the 2008 financial apocalypse was. Of course instead of dealing with the problem, we just used more credit to keep the party going a while longer.

 

The idea of ending the party, working to pay off old debts, and reducing our fun in any way is no longer the American way. Republicans and Democrats can piss on each other exchanging blame, but the real problem is our fellow Americans have become immature, spoiled, lazy brats with credit cards.

 

+1

[tsafa 2]

first of all not a political discussion in any way just trying to understand something.

 

My friend and I had a conversation yesterday and I really don't understand something. If you have a country like the US, that does not really produce that much, and spends most of its money buying items that are produced elsewhere in the world, how does the money not "run out".

 

like it seems like we have money

spend it on goods that are made abroad thus funneling money out of the country. Does it come back? How does it come back? I am sure this is a simple economic discussion for someone who understands, but I just don't get it.

 

 

I have been an accountant for over 15 years. I have had the benefit of having come into contact with hundreds of companies and their owners. I have also owned an two businesses in that time. Currently I am a Chief Financial Officer for an import/export company. I can give you an understanding of US economics in a way that few people you meet in your everyday routine can. I will not give you a text book answers or idealistic answers. My answers have nothing to do with the way things are suppose to work, but the way they really work.

 

Lets address the Foreign Trade Deficit. Officially the stats show that their is more value going out of this country then going in. As the CFO of an import/export company, do you seriously think we don't make a profit on every single trade that we make? Do you seriously think that the owners of any company are going to submit to the ridiculously high taxes that the US Govt demands? Companies have an incentive to under-report profits, hence the illusion of a trade deficit.

 

The fact is that at once you get above the point were you are working for a salary, taxes are voluntary. People objectively consider how much they have to pay in taxes and how much it costs to beat he system. As long as it cost less to beat the tax system, people will take that option. The way it works is simple. Hypothetically, If I buy a product from China that costs $1, I will have my agent in China record the cost as $8 on the invoice. I then sell it for $10 in the US and show a profit of $2 to the IRS. Meanwhile my agent in China wires $6 to my bank account in Germany or some other country and keeps $1 for himself for his assistance. The fact is that there is more US dollars outside the US then inside the US.

 

The issue of lower manufacturing inside the US is of little consequence. It is no different then no agriculture inside cities. The cities import their food from the surrounding rural areas and still prosper by providing services. Services are valued more then manual labor. The value of labor is bases on how long it takes to learn to do a job. Assembly work is designed to be easy to learn. Each person on the assembly line does the same thing over and over again.

 

The issue of job creation is another issue. There is a "hiring protest" against the current administration that wants to raise taxes on anybody making over 200K. Most of the people who are in a position to hire people all make over 200k. Most small shop owners make over 200K. Even if they don't report it they still feel threatened by the current administrations attitude. There position is that if the government will not look out for their interests, they will not help the govt.

 

The current president has never worked in private business and does not understand all these things because they are not in a text book. He fails to understand that if he wants new jobs, he has to gain the support of the people who create those jobs. I am not being political... I am just stating a fact when I tell you that the people who do the hiring feel that Obama is a socialist and do not trust him. They will not help him. Hiring people is helping him and they will not hire if at all possible. They can afford to wait him out until the next election or even the one after that.

[Maksim 1,504]

Not touching this thread with a 10th ft pole as in order to explain it, it would take too long.

 

In short... turn off the conservative talk radio. They are only there to get a rise out of people. The world is not going to end. We produce and export many things. Fear mongering doesn't solve anything.

[vladtepes 1,060]

Thanks for the responses, so to give the simplest answer.. even though more "US" money is out of the country it won't really ever matter in the long run? I don't really think the world is going to end or anything like that. More trying to understand how we can "borrow" from other countries indefinitely. Trying to understand how the flow of money between nations works, and why "running out" isn't really a concern. This is not some urgent thing I have lost any sleep over, but more so a curious thing that came up in a discussion.

[Malsua 1,422]

Everyone seems to think nothing is manufactured in this country.

 

We are STILL the largest manufacturer in the world.

 

We just don't have rubber dogshit factories like we did in the 1950s.

[vladtepes 1,060]

The way it works is simple. If I buy a product from China that costs $1, I will have my agent in China record the cost as $8 on the invoice. I then sell it for $10 in the US and show a profit of $2 to the IRS. Meanwhile my agent in China wires $6 to my bank account in Germany or some other country and keeps $1 for himself for his assistance. The fact is that there is more US dollars outside the US then inside the US.

 

The issue of lower manufacturing inside the US is of little consequence. It is no different then no agriculture inside cities. The cities import their food from the surrounding rural areas and still prosper by providing services. Services are valued more then manual labor. The value of labor is bases on how long it takes to learn to do a job. Assembly work is designed to be easy to learn. Each person on the assembly line does the same thing over and over again.

 

 

thanks that explains a lot of what I didn't get in regards to foreign manufacturing. I guess as long as people based in the US are making and spending money the other nations involved doesnt really matter as much as I thought.

 

Everyone seems to think nothing is manufactured in this country.

 

We are STILL the largest manufacturer in the world.

 

We just don't have rubber dogshit factories like we did in the 1950s.

 

 

lol

[fliks 20]

thanks guys, it's been educational for me as well. and just for the record, I don't think anyone in this tread was fearmongering or trying to say that the money will run out. we were just trying to understand...

[LorenzoS 100]

We just don't have rubber dogshit factories like we did in the 1950s.

That might not seem like a big deal, but consider the long term implications. Once China has acquired rubber dogshit technology and expertise it's only a few more steps to apply that ability to fake vomit and ice cubes with rubber flies in them. Eventually they will develop high tech strategic joke capability like snakes popping out of peanut brittle cans and, yes the big one, whoopie cushions.

 

Then what are we going to do, smart guy? We'll be helpless in any future practical joke war. And then my friend, the terrorists win.

[tsafa 2]

thanks guys, it's been educational for me as well. and just for the record, I don't think anyone in this tread was fearmongering or trying to say that the money will run out. we were just trying to understand...

 

 

I certainly was not "fearmongering". I was doing the exact opposite and making a point that in a capitalist system people figure out a way to work around any governement obstructs to do what is in their own self-interest.

 

All the small business owners I have come into contact with in the last two years are doing OK through the recession. They may not be running at 110% capacity, but running at 80% is plenty good enough.

 

They way the capitalist system works best is that you work as an employee only long enough to gain the experience and finance necessary to go into business for yourself. That is suppose to be every person's goal.

[mikeyboyeee 66]

Has no one ever heard of GROSS DOMESTIC PRODUCT=GDP?

[tsafa 2]

Has no one ever heard of GROSS DOMESTIC PRODUCT=GDP?

 

 

The number is completely skewed by the false reporting I indicated in my earlier post. The US GDP really is a lot higher then it appears to be.

 

Regardless of how well China appears to be doing on paper... the people there are miserable. You are better off being poor in the US then rich in China. I have no doubt that China will implode on itself one way or another. Most likely with a popular uprising followed by a hard govt crack down. In the long run they are also likely to have boarder disputes with their neighbors, Russia, India and Pakistan who are also heavily armed.

[hopper 36]

Not touching this thread with a 10th ft pole as in order to explain it, it would take too long.

 

In short... turn off the conservative talk radio. They are only there to get a rise out of people. The world is not going to end. We produce and export many things. Fear mongering doesn't solve anything.

Didnt take long to go Political !!!

[tsafa 2]

That might not seem like a big deal, but consider the long term implications. Once China has acquired rubber dogshit technology and expertise it's only a few more steps to apply that ability to fake vomit and ice cubes with rubber flies in them. Eventually they will develop high tech strategic joke capability like snakes popping out of peanut brittle cans and, yes the big one, whoopie cushions.

 

Then what are we going to do, smart guy? We'll be helpless in any future practical joke war. And then my friend, the terrorists win.

 

 

I forgot to say how brilliant I think this post was

 

That aside... the average businessman is more concerned about his potential tax liability then he is about his competition. That is contrary to free market ideology where government is not suppose to interfere. Taxes are way to high when peoples actions are influenced by the tax consequences.

 

Take a look at the Form 1040 from 1913: http://www.irs.gov/pub/irs-utl/1913.pdf

 

The first tier was 1% (20k to 50K) First 3k is exempt.

The second.........2% (50k to 75K)

The third..........3% (75k to 100k)

The fourth..........4% (100k to 250K)

The fifth..........5% (250k to 500k)

The sixth and final 6% (500k plus)

 

The average income in 1913 was only 15k. So the vast majority of people were exempt. Do you know how rich you were in 1913 to be making 500k a year. These are tax rates at which the the govt would have the people support and cooperation. This is how they got the 16th Amendment passed. The American people would have never had allowed an Income Tax Amendment to the Constitution if they knew how far the congress would have gone with it. The people have responded in kind by working around it.

[Pizza Bob 1,488]

Let me get this straight, we have a CFO admitting to tax evasion on a public forum, and rationalizes it by saying everyone does it? Kind of a broad brush, isn't it? IRS are you listening???

[tsafa 2]

Let me get this straight, we have a CFO admitting to tax evasion on a public forum, and rationalizes it by saying everyone does it? Kind of a broad brush, isn't it? IRS are you listening???

 

 

Like I said... I was going to give it to you guys straight. IRS knows what is going on. It would cost them many more times to audit and prove tax evasion then the money they would collect in the end. The IRS estimates a 100% error rate on the tax returns of Sub S corporations. They only audit 1 to 2 % of all tax returns. The IRS functions as a business. They only go after cases that are almost certain to be profitable to them. The IRS usually attacks non reported w2 and 1099 income, home business deductions, business car deductions, insurance deductions, travel and entertainment deductions, executive perk deductions. The reason they go after this stuff is because it is easy work for them. They also go after a few high profile cases just to get publicity and keep everyone scared. That is how they work.

 

I never said the business that I work for does anything of this nature I was just talking hypothetically

[tsafa 2]

I thought I made a post detailing the Current Debt... I don't see it... I must have accidentally deleted it.

 

Well here goes. The national debt is some ridicules number in the area of 3 Trillion. Does anyone know that this number actually represents? To put it into perspective, 1 billion seconds is about 30 years. 1 Trillion seconds is about 31 thousand years. Who on this planet has that much money to lend to the US Government? No One.

 

The govt borrows a little money where it can to keep up appearances but what the number really represents is how much money the US govt Prints. When they print money they back it up with a treasury note. That is how they balance their books and make it seem like there are not really "just printing money"... or rather in this electronic age giving themselves electronic credits.

 

You will notice a clear patten. Both Clinton and Bush had 7 strong years of economic growth, followed by a recession in their last year. That is because in their last year they had to "reset" the dollar. It becomes plainly obvious if you look at commodities charts that the US experienced a steady pace of inflation in the first seven years of both Clinton's and Bush's terms followed by deflation in their last year. The fact of the matter is that recession don't just "happen" they are engineered. A recession is like letting the air out before the balloon over inflates and pops into a depression. Depression were quite common in the 1800's in the US before we learned to control them with engineered recessions.

 

If you recall Bush SR lost reelection to Clinton because of a recession in his 4th year caused by the Fed tightening up because of inflation fears. The Federal Reserve's main job is to stay independent and fight inflation. However, by acting as they did in the 3rd term of Bush Sr, they ignited a recession that changed the outcome of the election. This is a big NO-NO. It stands to reason that the Fed has since made it policy not to do any recession fighting prior to any elections... Hence, the Clinton and Bush pattern of 8th year recessions where the fed would have the least impact on the outcome of an election.

 

Both Clinton and Bush Jr, inherited recessions and were out within one year. So the question to ask is why is Obama not out within one year. He did his fair share of money printing through the stimulus package. So why is this economy not booming? I hinted at the answer earlier in that he has failed to gain the support of the business community earlier. One thing is for sure. If Obama is reelected, you can expect another recession in his 8th year as the Fed takes back some of the money they have been printing. If he looses the election, the Fed will move to take it back immediately and create another recession in the first year of the next president.

 

I am not taking political sides here. I am just explaining facts as they are seen by businessmen. The motto of any good businessman is that "we can make money in any economy". The only difference is that in a recession economy there is less trickling down of the profits.

 

I usually get paid for giving out this sort of Info B)

Enjoy the weekend.

[GRIZ 3,369]

Hypothetically, If I buy a product from China that costs $1, I will have my agent in China record the cost as $8 on the invoice. I then sell it for $10 in the US and show a profit of $2 to the IRS. Meanwhile my agent in China wires $6 to my bank account in Germany or some other country and keeps $1 for himself for his assistance.

 

As CFO of an import/export firm you know there are several felonies being committed here starting with overvaluation on the Customs declaration to money laundering. To suggest that all companies operate like this is very misleading to insinuate this is how US business works.

 

The average income in 1913 was only 15k.

 

15k a year in 1913 made you pretty rich. The Vice President of the US only made 12K in 1913. Most people were lucky if they made 2K in 1913. Your basic information is very incorrect.

[tsafa 2]

I provided a link to the actual 1040 tax form of 1913 that shows the tiers. The average income I posted is text book. It is an avg of all incomes. It will be skewed higher by the JP Mogan's and Rockefeller's of the day. The important point I was making is that the first tax tier starts at 20K per the tax return I posted. Regardless if you use my income average or your median the middle class and upper middle class was entirely exempt.

[tsafa 2]

Sorry for the separate post, I am away all weekend ad typing on the phone.

 

With regard to false documentation...etc. I don't think you have been to China. To start... nothing moves in or out of port until the right person at the port has been bribed. They can delay a container for weeks and then lose it. The port bribes are just the tip of the iceberg but it sets the pace for everything else. China is the dirtiest, filthiest and most corrupt place on earth. If you want to do business there you do it there way or stay home.