Another 20 Years of
Dead-End America By Jeff D. Opdyke, Editor of Profit Seeker Dear Sovereign Investor, If an economic collapse does befall America one day (soon), history will likely point to the demise of the American middle class as one of the precipitating factors.
And there's no better indication of that demise than the death of Retail America.
RadioShack is closing 1,100 stores. Family Dollar, 370. Coldwater Creek, 365. Game Stop, 250. Sears, 300. Staples, Barnes & Noble, Abercrombie & Fitch and Aeropostale, more than 800 combined. And that's but a partial — and very small — list off all the middle-class retailers and casual-dining eateries that are closing stores, filing for bankruptcy or going out of business.
That says something about America's place in the world today. And what it says is that our time has passed, that we've squandered our patrimony in an orgy of ill-advised spending decisions, that the time to invest in America is, sadly, over — and that for dispassionate investors who don't let emotion rule their investment decisions, the future is in emerging markets where new stores are opening, not closing, and where the middle class is expanding, not shrinking. Shockwave From "History's Greatest Crime" About to Hit!
What you're about to hear may rattle some of your belief systems. It involves the rise of the most powerful new economic union (a 54-nation bloc region rumored to become "the next USA!"). So threatening is this development to the American way of life, that the powers that be saw it fit to wage war on them … one an award-winning journalist recently dubbed: "History's greatest crime" … the blowback from which is about to hit our shores … impacting almost everything you own … to view this shocking video, click here. A huge part of our problem as a nation is the jobs market. It's a disaster.
Obama and his minions can pat themselves on the back all they want for bringing the employment rate down to the 6% range … but job quantity is not job quality. The jobs America has created in the aftermath of the Great Recession have been low-wage, low-skill, low-opportunity and dead-end jobs largely in the services sector. The great preponderance of jobs that have been created in America is part-time jobs. Seventy percent are in the service sector, and incomes at the high end amount to less than $14 an hour, barely above poverty wages for a family of four.
But as big a problem as the jobs market is, the story actually gets worse … because fundamental improvement is not in our future.
The reason is tied to something called the Law of Comparative Advantage. It's an old law, dating to the early 19th century. But it explains exactly why America is moving in reverse, and why that course will persist for many more years.
The law comes from the research of a British political economist, David Ricardo. At its core, the law states that "if each nation specializes in the production of [a] good in which it has a comparative cost advantage and then trades with other nations for the goods in which they specialize, there will be an overall gain in trade, and overall incomes levels should rise in each trading country."
Here's the problem: Much of the emerging world has a labor-cost advantage in just about everything we used to make in America. Taiwan, Korea and China can make electronic components far cheaper. Mexico can make autos cheaper than we can. Vietnam, Egypt, Bangladesh and Honduras make clothing cheaper than we can.
Technology has only exacerbated the problem because it's doing away not just with low-skill jobs like tollbooth collectors and store clerks, it's killing off even higher-paying jobs like paralegals, bank tellers, soldiers … even pharmacists. These are not realities that we can easily reverse. In fact, we're doing all that we can as a country to worsen the problem. Outside of a few emerging technologies, we will not be competitive on a labor-cost basis until salaries in rest of the world catch up with us. Yet, we're pushing that moment farther into the future with efforts at the federal and state level to raise the minimum wage. Such a move is not neatly confined to minimum-wage workers. Raising the minimum wage is a trickle-up phenomenon that pushes all wages higher across the lower half of the wage spectrum. After all, the Seattle manager earning $15 an hour to supervise several minimum-wage employees will demand greater pay, too, if Seattle successfully mandates a $15 minimum wage.
Of course, no politician has the courage to explain this to America because it implies we need a wage cut — not a wage hike — to regain our competitiveness and bring industry and jobs back to our shores. But given all the flap these days about income inequality, such a frank discussion would usher a politician right out of his cushy life in the Capitol. The Message to You: Look Past America's Shores The solution, of course, is to follow American business into overseas markets.
U.S. companies fully recognize the impacts of the Law of Comparative Advantage. They know that emerging-market economies have a cost advantage, which is why they've been relocating jobs and production plants and even customer-service centers overseas for many years now. In a globalized world, America isn't terribly competitive, and capitalism, as it rightly should, leads companies to pursue the lowest cost structure for the benefit of a business' survival.
That's why you must go overseas, too.
It's the middle class that propels an economy. So, to grow your wealth, your money has to be where the middle class is expanding rather than consolidating. That is assuredly not America. We can grow our welfare rolls. We can grow our low-wage jobs. But given the cost structure of American labor, we no longer have the capacity to grow our middle-income families … and we won't for probably another two decades as labor costs in the rest of the world try to catch up with us.
So next time you hear that Sears or RadioShack is closing yet another store in your town, realize that it's just another sign that prosperity in America is waning … even as prosperity overseas is exploding. It's a message to invest more wisely than you are. It's a message to invest in the emerging-market middle class. Until next time, stay Sovereign …
Jeff D. Opdyke
Editor, Profit Seeker P.S. Economic collapse is coming to America and you need to be able to not only protect your assets but have a plan for how you can grow your wealth as well. At the Total Wealth Symposium in September, there will be a number of experts addressing how you can best protect your wealth, where the greatest growth is occurring and how you can take advantage of it. But time is running out for you to get our special early-bird pricing. For full details and to reserve a seat, click here. | |
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