Urban Survival Secrets

A Rising Tide Raises All Ships

We have all heard this colloquialism at least once in the last year or so. Heck, even the President has said it.

But what does it mean when used in the terms of the world economy?

After thinking about this, I believe that it does not mean that if we get a few people moving up, the rest will follow. Not one bit. What it means in terms of the World Economy is this, when the US economy is doing well, we are the tide. When the US economy is doing well, then other nations prosper since we are a net importer of stuff.

How did China get so wealthy? It was US consumers who lead the charge for less expensive stuff, which in turn created the demand. And then China filled the void. They took it from other third world countries since they have three things most other countries do not: Cheap labor, communism and habits. Since there are so many people over in China, the can throw bodies at problems for cheap (kind of like what occurred here not very long ago.)

But how does communism fit in? Think repressed wages for the masses. Let me ask you a question: Why does China not want to have a fluid currency value? Reason is, and then they would have to deal with increasing wages as inflation crept up. This in turn would increased prices on stuff produced in China, which would eventually lead to production moving to somewhere else – India? Africa?

Now what is the habit that was previously mentioned that is different in China over the US? Because of repression, the Chinese have always been forced to save due to incessant shortages. A typical communist issue In America, we buy stuff to flaunt our wealth and do not reinvest our money in companies/stocks/precious metals. So while the Chinese has an emerging middle class, ours is declining.

Then to top it off, you should see what the tax rate is for the Chinese

http://en.wikipedia.org/wiki/Taxation_in_the_People’s_Republic_of_China

Which is pretty reasonable when you have billions of people?

The fact is, low taxes, coupled with high productivity, you have wealth.

This takes me back to the original premise. Even with the Chinese doing well, it will not help the world economy except in a few areas of natural resources. When the US does well, the rest of the world does well. We are the tide.
So what can you do? Buy American (or local) and keep Americans employed. When you do, then Americans buy stuff that is manufactured worldwide. When we Americans are consuming, the rest of the world is producing, which keeps them employed.