Market Currents
Stick the part from Dow Theory about the Transports and the DJIA needing to confirm each other...
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Saturday, September 29, 2012, 8:55 AM ETStick the part from Dow Theory about the Transports and the DJIA needing to confirm each other in the same closet with your bell-bottoms, writes Jacqueline Doherty. Since the 1970s - as the U.S. has become a more service-oriented economy - the S&P 500 has gained an average 6.5% in the six months following a period (such as now) when the Transports have lagged. This handily beats the S&P's average 6-month gain of 4%.
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That should say, "Since the 1970's when we started our decline from participating in the normal wealth producing economy.
Folks there will be nobody to buy services tomorrow if no one is mining, growing, or manufacturing products today. That's Econ 101, if you did not go to the socialist propaganda school called U.S. higher eduction. So how smart is it to kill off mining and manufacturing? It's not, regardless of how many birds are saved.
Think of it as a wheel being propelled on level ground. Without some extra force being added it stops moving. The circle of economic activity is the same, without extra force (wealth being added) it stops. Wealth can only be created in three ways (and I know this is old fashioned).
1. Take something out of the ground and sell it for more that it costs to extract it (mining.)
2. Grow something and sell it for more than it costs to grow it (Agriculture.)
3. Convert something from something of lower value to something that will sell at a higher value (manufacturing.)
Well, there is a fourth; steal it. But that is left for governments these days.
You don't need services to live. They are a conveyance, but not necessary and that is why they don't add to economic wealth (not to be confused by individual wealth).
The economy cannot keep going on services alone, in-spite of what the politician's told you to justify sending jobs offshore. The economy won't and can't last. That is a dirty socialist secret and the reason why there has not been a need for a socialist party since the 1950's.
My reliance on spellcheckers is a result of my public school education and using computers at an early age.
You're correct, we dont need services to live. But without services like utilities, supermarkets, doctors, police, etc, everyone's quality of life would be much, much lower, and the amount of economic activity lost by people performing tasks they are not optimal at would send us back to the stone ages.
Mercantilism ignores the ability of people to invent new techniques or processes to add wealth, and ignores the value of intellectual property. Why can't a nation simply provide IT services, and create its wealth by selling its knowledge and expertise overseas, rather than selling its goods overseas? Its worked quite well for IBM.
And in your definition of wealth wouldn't raising livestock or harvesting wild animals be considered wealth creating? So killing birds mining or manufacturing would be destroying wealth.
Re: UPS driving down costs, creates wealth for UPS, but not economic wealth (meaning that it does not add to the total wealth available to the nation.) It is simply a better way to divide the existing economic activity. And I never indicated that new techniques or process did not have value, but you need to really think about where money come from and goes to in the national economic system. It is very complex and it is easy to be fooled by politicians that have for years told us we were a knowledge society (more about that later.)
The question is, "How does money get into the system"?
Let say we have 5 people and they are a doctor (Service), waste hauler (Service), milk delivery person (Producer), gardener (Producer), and data analyzer (Knowledge).
These 5 people trade with each other. The doctor buys from the gardener, as do all of the others. Sometimes the gardener has to buy from the doctor when they are sick, as do the others.
Since the gardener and milk person have to deliver goods in order for the others to survive they always have money (in our little system). In other words the other Service and Knowledge providers simply divide the money made by the producers. If all of the others go away the gardener and milk producer can live forever and trade with each other.
The Doctor has to charge a lot because the Doctor is not used very much. The same with the knowledge worker. But if the milk provider and the gardener leave or quit, then were does the money come from. The remaining people just keep dividing what's left, with a bunch removed every cycle by taxes. There is no wealth creation, just economic activity and wealth migration until its all gone.
This probably was not the best example, but consider any small town that once had a thriving community and ask why it ended. The same logic will apply to America only on a grander scale.
Now about the knowledge society, there is no intrinsic value in knowledge (and I am a knowledge worker) unless you can keep the knowledge from others. This is becoming increasingly difficult. For example, we are selling our knowledge and systems to Chinese and Korean companies, but guess what, these countries want to control their own destiny. So what are they doing, they are developing their own technology and system making our knowledge completely devoid of value. Even if we don't help them they can develop their own knowledge.
Where will our technology workers be then, we already outsource all knowledge about manufacturing to Asia. American companies are no longer the lead patent appliers, etc. Knowledge does not have value because in the end it is available to everyone.
This whole thing about the knowledge society is our future is a bunch of propaganda generated by politician's and companies that found a way to make money from outsourcing and wanted to assure the populous that they were not destroying our future. Consider yourself indoctrinated along with the majority of the educated in America.