The world wide economic crisis and Globalization

The recent world wide economic crisis was globalization coming to accumulation. By 1900 the US was dominating world trade. Ever since the world has been adjusting. Each country trying to find a place at the table while trying to improve their economic condition.

After WWII the pace picked up, The United Sates and every other country needed more of everything to rebuild their economies and improve the living standard of their citizens. The socialistic experiments had failed and capitalism dominated. America was the economic powerhouse and they have dominated the world economy ever since. America then flooded the world with money, living beyond their means.

Other countries with massive quantities of people to house and feed begin to implement their own improvement programs. The Middle East charged more for oil, sucking in huge reserves of dollars. China created a manufacturing based economy and sucked in huge reserves of dollars while they circulated their own currency domestically. China and the Middle east lent the USA back it's own currency to cover the USA's overspending. These two major influential players changed the economic playing field a little at a time until the US became a debtor nation.

Everyone now trades with everyone else. All nations have had to adjust to the new realities and then re-adjust when conditions changed again. Technology increased the speed with which change now occurred. Laws of all the various countries where not able to keep up with all the economic changes.

Anytime you have a situation where capitalism (or any other economic system) is unregulated you get turmoil as greed sets in. People, businesses and countries all act in their own economic interest. Regulations and laws help keep everyone's individual interest from hurting someone else's economic interest. Rapid change allows these checks and balances to lag behind current events and ciaos prevails.

The current world wide economic crises was an accumulation of the lack of coordinated controls on world trade and globalization. Each country was doing their own monitary thing, and each company was blazing new financial territory, it all came crashing in on them in 2007-2008.

For the past fifteen years we have heard how globalization was changing the world. Change is good, but change can be disruptive until standards are set. We have now had the disruption, it is time for the standards. Here after globalization will be come the norm, and just a new fact of man's life.

All social and economic movements through out history have come to a point, a climax if you will, where there is a major event or series of events after which the movement becomes the new norm. Woman's liberalization started in the late 1800's and climaxed in the mid 1970's with the Woman's Lib movement. The woman's movement did not start in the 70's, it merely reached a momentum where everything was right to bring it to a close, there after equality of women became the norm. Civil rights was a similar situations. It started in the early 1800's and climaxed with Dr Martin Luther King in the 1960's There after civil rights was accepted as the new norm. You could say, It is no longer “In the news”.

The new shift has begun. We have globalization and it is here to stay. New laws are being passed to control the over exuberance of its players. From now on trade between countries will be the norm, no different then trading between towns or states.

Because of the massive increases in money supply floating around in the world and the number of people world wide wanting, even demanding a better standard of living, new battles are brewing. Natural resources will become the new battle field.

How China froze your pay check

 About forty years ago China had a problem, how to feed and care for hundreds of millions of people. The nice thing about owning a country and a closed one at that is you can print money. But printing money also causes devaluation and thus inflation. What China did was to create an export based economy. They had an abundant supply of low cost labor. By making products for export they could sell products in dollars and pay the labor and local suppliers in Renminbi. China's state owned banks piled up the dollars and invested them back into the economies they took them from and made even more foreign currencies.

Other countries soon followed China's example, Korea, and the rest of Asia, then India

China puts their people to work thus staving off discontent, they accumulate foreign currency to invest to make even more money. They do this by selling products cheaper then anyone else can produce them. This is because of the abundant cheap labor, lack of pollution laws, lack of work place rules, lack of pension obligation, low expectations of the workers, and large subsidies from the government to the factories.

The rest of the world could not compete with China's low cost manufacturing model. Slowly over time China came to dominate the manufacturing of products and the processing of materials. The rest of the world adjusted over the last forty years to the loss of domestic manufacturing jobs. The standard of living of workers in the the so called “West” kept going up because we where getting cheap consumer goods. A 30” color television that cost $500 in 1970 cost $100 in 2010, to use just one example.

As the products pored in wages in other sectors stagnated even as living standards increased. To illustrate take a furniture retail store; Typically a store in 1970 would buy a product for $25.00 and sell it for $50.00 a 50% mark up. Today that store would buy that same item for $15.00 and sell it for $19.00 a 26% mark up. The store must sell 2.5 times more items, deliver or bag and check out 2.5 times more items, service and warranty 2.5 times more items, warehouse 2.5 times more items to have the same dollar amount of sales. To make the same gross profit dollars as they did on that one $50 item the store would need to sell 5 times more of that same item. The stores cost to operate the store went out of site, they needed more employees to move 5 times the goods, more selling space which meant more rent money (the big box store was born). More of everything a store uses was needed to sell more quantities just to stay even. Giving employees a increase in real wages was not in the cards. Thus real wages stagnated, your wages froze.

 The changes China set in motion with their plan caused massive economic changes world wide. It led to what is called globalization or world trade. We have always had some trade between nations and China has produced products for export for hundreds of years. What was different after world WWII was China's need to feed more then 600 million people.

 This is not a new game. What China did too the west in the 1900's (and they are still at it). America did to Europe in the 1800's, very similar.