Tag Archives: China

Late Breaking News From The White House: “The Economy Has Slowed”

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Mr. Magoo

Well, duh !

President Bush just might be the last person on the planet to have figured out that the U.S. economy is in trouble. He really needs to get out more often. Looking at the nation through rose-colored glasses while sitting in the Rose Garden, it’s hard to see what has been happening to the economy.

Last Friday, Mr. Bush announced with a straight face “it’s clear our economy has slowed”. That’s sort of like a physician standing over a corpse and announcing “it’s clear the patient’s condition is deteriorating”.

What’s next, a news flash from the Oval Office announcing that the Titanic has hit an iceberg? …or news of the Hindenburg disaster?

Not only is the President’s news flash embarrasingly late, but it also reeks of an administration in denial. We’re not in a depression. Not even in a recession. It’s just a wee bit of a slowdown. Nothing to worry yourself about, laddie.

Unless, of course, you home is being foreclosed, (foreclosures up 57% in the first month of this year) your job has been shipped to China, you can’t afford groceries or gasoline, you have no health insurance, your investments and retirement accounts have evaporated into thin air, and you won’t be able to retire until you’re 175 years old.

Mr. Bush’s also mentioned last Friday that “the long-term outlook is good”. That reminds us of nothing as much as it does “Mr. Magoo“.

By the way… You know all those shipping containers flooding our ports, laden with stuff made in China? Bet you thought all those containers are empty on their return trip to Asia. Wrong!!! We pack those containers with millions of high-paying American jobs before they are loaded onto ships for their journey home.

– RoutingByRumor

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What’s Next, Mr. Bernanke… Free Money?

The Federal Reserve surprised a lot of people today, including us, here at RoutingByRumor.

They announced another cut to the target federal funds rate, this time it was 50 basis points, or 1/2% (read the Fed’s announcement, here). That is on top of the 75 basis point or 3/4% emergency cut announced eight days ago. This brings the overnight bank rate down 125 basis points in the past week, to 3.00%. The only member of the Federal Reserve’s Open Market Committee to vote against the latest rate cut was Richard W. Fisher. There’s a black sheep in every herd.

The Fed must be very, very concerned about the economy. But they can’t repeat these tricks forever. Eventually, they will run out of string, and “eventually” is sooner than you may think. Just think about it… Another two cuts like those in the past week, and money will almost be free.

Have you ever come across a vending machine that was set up to dispense product without having to insert any money? You can find these machines in some company cafeterias. I can still remember the time that I accompanied my father on a trip to a company he did business with. I must have been seven or eight years old at the time. That company had such a soda machine. Like any young child, I would push the buttons on every machine I’d come across, trying to get free gumballs, candy, soda or whatever. And don’t forget to check the coin return for some free money. Of course, I had to press every button on this soda machine, too. Every time I’d hit a button, another can of soda would be dispensed. I thought I hit the jackpot. The man who had to put all those soda cans back into the machine was not as amused as I was.

Now, if the Fed keeps lowering the funds rate, we figure that pretty soon, the banks might set up their ATMs to dispense free cash. It would make the kid in me very happy. I could just stand there all day, pressing buttons.

What’s next, banks giving away free toasters, blenders and TV sets? I remember those days too. Actually, I could use a new television, since in February 2009, when broadcasters stop transmitting analog signals, my current televisions will no longer work (at least not without a digital-to-analog converter box). Gee, Mr. Bernanke, maybe this was a great idea after all.

Then again, maybe not.

In fact, maybe black isn’t such a bad color after all. I like black better than red. Black goes with everything.

Maybe following the herd just leads you to the butcher sometimes.

So, they’re making money cheap, which should encourage people to start buying homes again… and cars, and televisions, and computers, and everything else we don’t make here any more.

Who will be hurt the most by these aggressive rate cuts by the Fed?  People on fixed incomes and retirees.  You can’t depend on the stock market these days.  Putting your nestegg into stocks, even if diversified,  is just slightly less dangerous than playing Russian roulette.  Inflation was already outstripping anything you might hope to earn from a bank CD or insured money market account.

With the rate cuts in the past week, bank rates have fallen through the floorboards.  I just checked Bank of America’s website… Putting $10,000.00  into a 1-year CD or a money market account will currently get you an APR of slightly more than 2%.  To add insult to injury, if by some miracle you manage to earn a few dollars in interest, it’s taxable income.  That dismal rate of return is sure to go even lower over the next few weeks and months, especially if there’s another Fed rate cut.  Just a few months ago, 1-year CD rates of 5% were commonplace.

Make no mistake about it.  The faltering stock market and  plummeting interest rates on instruments such as certificates of deposit,  are very bad news indeed.  You will see increasing numbers of elderly Americans, who thought their golden years would be reasonably secure, now faced with loss of their homes, or worse.

Time to start stuffing the mattresses.

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President Bush delivering his final State of the Union Address on 1/28/2008

In his State of the Union Address two nights ago (read the full text here), President Bush touched on the need to increase exports. Funny, but I didn’t catch him mentioning the need to limit imports. In fact, President Bush never mentioned the phrases “trade deficit” or “imports” even once during his State of the Union Address. Rather, he said “we are pursuing opportunities to open up new markets by passing free trade agreements“. That’s wonderful. Just what America needs. More jobs going overseas. More cheap imports flooding the U.S. More unemployed American workers. The imbalance between U.S. salaries and those in most foreign countries is so great that we will never be on the winning side of any free trade agreements. Have any free trade agreements we’ve signed in the past resulted in a trade surplus (I think that’s what you’d call the opposite of a trade deficit, but since we never hear the term, I’m not sure that’s correct). Have they ever even resulted in balanced trade?

Thank God for term limits. Could you imagine four more years of this? Our trade deficit is already so lopsided, that unless we put limits on imports, we can never hope to make a dent in the trade deficit.

Cheap money will allow very few people who are at risk to avoid foreclosure on their homes.  For the few it might benefit, our advice is to postpone the celebration, because  cheap money won’t last forever. Maybe until the next election. Then what? Americans who can’t find decent paying jobs will use cheap credit to increase their spending and their debt. Then, when interest rates inevitably rise again, look out. If you think things are bad now, you ain’t seen nothing yet. Pity all those families who are convinced that lower interest rates mean that this is now the perfect time to buy a home. If you think there have been a lot of foreclosures recently, just wait a while and see what happens.

We’ve said this before, and we’ll say it again… If America continues to be flooded with cheap imports that are sucking good paying jobs out of this country, our economy will continue to get worse, no matter how many interest rate cuts the Fed delivers. Can you say “quick fix”?

Wal-Mart might be the biggest employer in America, but they can’t employ all of us. And even if they did, we couldn’t afford to shop there. Minimum wage doesn’t go very far. Especially when you need medical care, and your employer doesn’t provide health coverage.

So thank you, Mr. Bernanke. It was very gracious of you and the Federal Open Market Committee to give America this latest gift. We don’t want to seem ungrateful, but could we exchange the gift for something we really need? Perhaps the creation of good jobs that pay decent wages. Imagine being able to go shopping and actually finding products that say “Made In USA” once again, not to mention having the money to buy those products without going into debt. How quaint.

Thank You.

– Sincerely,

RoutingByRumor

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Stimulus, Schmimulus ! Why The U.S. Economic Stimulus Plan Won’t Have Much Effect

They are saying that the President’s economic stimulus package might be agreed upon today. Woo Hoo. Happy days are here again.

But wait a minute… I can still hear that “giant sucking sound”,  and it’s getting louder (oh, how I wish I could have found a clip on youtube of Ross Perot coining that wonderful phrase). What will the U.S. economic stimulus plan actually accomplish? Will it lower the U.S. trade deficit or increase it? Will it lower the unemployment rate? Will it have any effect on the crumbling real estate market? We believe that the proposed U.S. economic stimulus plan will not work. It is an attempt at a quick fix. It is an ill-conceived band-aid approach to what ails the U.S. economy, proposed by an administration that does not seem to grasp the root causes responsible for the American economy being in deep, deep trouble.

What the United States needs now is something along the lines of the Works Progress Administration (WPA), which put Americans to work and helped pull the country out of the Great Depression. The WPA existed between 1935 and 1943. A chicken in every pot, and two hybrid (or electric) cars in every garage wouldn’t be a bad idea either. (We’ve copyrighted that new twist on an old campaign phrase, so if Rudy, Hillary, Barack or John want to talk, you know how to reach us.) It’s quite likely that many of the government buildings and infrastructure projects in the American city or town where you live today were constructed by the WPA during that period. The WPA was one of President Franklin D. Roosevelt‘s New Deal programs.

Taking the money the U.S. government is proposing to distribute as tax rebates, and putting it into a massive infrastructure improvement program would have several benefits, both immediate and long-lasting. It would…

– Provide long-term employment for millions of Americans

– Stimulate spending by reducing the unemployment rate, and giving the currently-employed higher incomes

– Repair or replace our crumbling infrastructure, particularly bridges

– Provide an infrastructure that will facilitate future economic growth

– Keep the money in America rather than giving the recipients of the rebate checks the ability to buy even more imported goods, a major reason we’re in this mess to begin with

Let’s say, for argument’s sake, that every taxpayer in the United States gets a check for $1,000 (although it looks like many, if not most Americans will receive far less). Let’s say that Americans will spend every one of those checks rather than putting the money in the bank. Where will that money go?

If you’re about to loose your home to foreclosure, chances are good that that rebate check wouldn’t even allow you to make a single mortgage payment. Even if it does, that’s just postponing the inevitable for a few more weeks.

Perhaps you will take that rebate check and go on a shopping spree at Wal-Mart, K-Mart or Target. Wal-Mart is already America’s largest retailer and largest employer, but bigger is always better. If Wal-Mart grows, that means more low wage jobs for Americans. It means more Americans with little or no healthcare coverage. It means paving over more open land for new parking lots and big-box stores. It means more tough times for the few American manufacturers left, who are already being squeezed by the way Wal-Mart deals with their vendors.

About the only place you can spend that rebate check where the majority of the products are made in USA is at the grocery store. Unfortunately, for most Americans, eating is not a discretionary activity, and the amount of money you spend at the grocery checkout is unlikely to be influenced to any measurable extent by your rebate check.

Ben Bernanke will probably tell you that buying goods is exactly what you should do with your new found windfall. But wait a minute. As I’ve pointed out in this blog, and what you already know, unless you’ve been in a coma for the past few years, is that the vast majority of consumer goods you’ll find on retailer’s shelves are imported, overwhelmingly from China. In fact, we think that China will be the real winner if Americans go on a shopping spree. If you doubt this, just wait a few months and look at how our trade deficit with China increases as a result of this plan. Go to the mall and try to find clothing, shoes, toys, hardware or housewares made in USA. You won’t.

How is buying foreign goods supposed to help the U.S. economy? The U.S. national debt is being increased substantially by the stimulus plan in the first place. Buying foreign goods will only increase the trade deficit. Few American jobs will be created by this plan. That’s because we manufacture few products here any more, with the notable exception of food products, and even those are increasingly being imported.

With the cost of heating your home and filling your gas tank becoming an unaffordable luxury for many Americans, perhaps all of us should use our rebate checks to buy fuel oil or gasoline. The oil producing countries would love that more than oil itself. The American oil companies would support that too. Despite the fact that the oil companies have been raking in record profits, you can never be too rich, or too thin. On second thought, I think we will just cash our rebate check and ask the teller to give it to us in one dollar bills only. Then we’ll take the cash home, and use it as kindling in our fireplace. That’s one way to stay warm this winter, and it should reduce our heating bill slightly. Is it illegal to burn money?

About the smartest use we think you could put that rebate check to would be as a down payment on a hybrid or other low-emission or zero-emission vehicle. That would reduce America’s dependency on foreign oil, while helping the environment at the same time. The only problem is that very few low-emission vehicles, and almost no zero-emission vehicles are being manufactured today. And chances are good that your next car will be a foreign make that might not even be assembled in America anyway. So much for stimulating employment.

The biggest reason that the economic stimulus plan will not have any significant or long-lasting effect on the U.S. economy, is that it does nothing to address the two underlying causes of our economic problems; loss of jobs (particularly loss of good paying jobs) and the U.S. trade deficit. Until those issues are addressed, the administration can throw all the money they want at the problem, but it won’t go away. The deepening economic recession will turn into a depression, as sure as Winter will be followed by Spring.

I just came across a posting on the AFL-CIO’s website outlining their views regarding what a U.S. economic stimulus plan should include. Unfortunately, it looks like a couple of their suggestions which were originally announced by the President as being part of the package, have been eliminated in the final draft. Although I have never belonged to a labor union, I was struck by how many of their ideas match my thinking on the subject.

Maybe those rebate checks should come with the stipulation that they are not to be spent on food, imported goods or foreign oil, gas-guzzling vehicles, and may not be burned.

– RoutingByRumor

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Filed under Automobile Manufacturers, Business, Cars, China, Consumerism, Employment, Energy Conservation, Environment, Jobs, Labor, Money, Politics, Retail, Retailers, Shopping, Stock Markets, The Economy, Walmart, Your Money

Dear President Bush…

Dear President Bush,

Thank you for finally waking up and smelling the coffee regarding the dire condition of the American economy. We were beginning to wonder if you’d ever notice.

Your fellow Americans have certainly noticed. We notice it when we find it increasingly difficult to pay our bills. We notice it when we can’t afford health insurance. We notice it when we can’t find a decent paying job, or any job at all. We notice it when we can’t afford to heat our homes or fill our gas tanks. We notice it when we are laid off. We notice it when food keeps getting more and more expensive. We notice it when more and more of the wealth in America is being concentrated at the very top of the economic ladder, while things are getting worse and worse for the poorest Americans. See our recent blog post entitled “Need Proof That The US Economy Is In Trouble?

How on God’s green Earth could you have missed the signs up until now? Here are just a few of the clearest indications of trouble we think you might have missed…

– Record high energy prices

– Americans unable to heat their homes

– Americans unable to afford health care

– Record numbers of Americans losing their homes

– A depressed real estate market

– The highest inflation rate in decades

– A very troubled job market

– Thousands of mass layoff actions by employers

– America’s almost total inability to enforce it’s borders, and the resultant illegal immigrant and undocumented worker problems

– The loss of most American manufacturing jobs

– America becoming almost totally dependent on China for consumer goods

– A minimum wage that guarantees poverty for millions of American families

– Rampant corporate scandals, from Adelphia, to Brocade, to Enron, to Tyco to Worldcom

– Spending more than $1 TRILLION on the Iraq war (see Washington Post article), with no end in sight

– Americans unable to afford retirement, and worried about a bankrupt Social Security system

Need more proof? The U.S. Bureau of Labor Statistics reports that there were 1,800 mass layoff actions of American workers in November, 2007 alone ! They define a layoff action as an event involving 50 or more (thousands, in many cases) employees at a single employer. That’s a minimum 0f 90,000 workers (probably more like several hundred thousand) losing their jobs in mass layoffs, in November alone. And that’s only counting MASS layoffs, which are the tip of the unemployment iceberg. For instance, the BLS says that almost a half-million more Americans joined the ranks of the unemployed in December 2007 alone !  That’s so hard to believe, we’ll repeat it again…  almost a half-million more Americans joined the ranks of the unemployed in December 2007 alone !

So, Mr.President, I was wondering what finally caught your attention. All of a sudden, your administration is talking about an economic emergency. Plans are being floated to provide assistance to Americans, among them, huge tax rebates and increased unemployment benefits. Your administration is using terms like “immediate” and “robust” to describe the economic stimulus plan you are now formulating. Better late then never.

Could it be that you finally noticed because some of America’s largest financial institutions are now feeling the pinch? Within the last few days financial giants including Citibank and JP Morgan have reported huge losses and impending (or continued) layoffs. It sounds like you may have not been taking the economy seriously until the big boys started hurting. Now, finally, your administration has shifted into crisis mode.

Would you like this American’s two cents worth of advice?

It’s really quite simple. The U.S. economy will not recover unless the hemorrhaging of American manufacturing jobs is halted and reversed. The “service economy” is overrated. The American economy will continue to deteriorate if our dependence on imported goods continues to accelerate.

I’ve already mentioned this in this blog… See if you could get out of 1600 Pennsylvania Avenue now and then, and walk the aisles of the stores. Look at the labels and the packaging. Almost everything we’re buying is made somewhere else, usually in China. That’s our biggest problem. Pass legislation (tariffs, tax breaks, whetever) that will encourage manufacturers to produce their products in the USA.

– Sincerely,

RoutingByRumor

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Filed under Business, China, Consumerism, Employment, Energy, Energy costs, Iraq, Jobs, Labor, Life, Military, Money, News, Politics, Retail, Shopping, Terrorism, The Economy, War

Need Proof That The U.S. Economy Is In Trouble?

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Great Depression era soup kitchen in Chicago

Call it what you will

Whether you want to call it an economic slump, a downturn, a correction or a recession, the American economy is in trouble. If you want proof that the economy is in trouble, just take off your rose-colored glasses, and turn on the radio or open your local newspaper.

Advertising

I’ve noticed this trend for the last few years… Very few of the advertisements on radio are for what I consider legitimate products or services. It seems that the vast majority of radio ads are aimed at people in some sort of trouble, be it financial, legal, criminal, medical or personal. Advertising for real, honest-to-goodness consumer products are few and far between.

Every type of snake oil imaginable is being hawked on the radio. Whatever medical condition you have, there’s some miracle pill or device being advertised, and they’re all free! FREE! FREE! FREE! …that is, if you don’t count the “shipping and handling charge”. Give me a break.

Are you in debt? No problem. There are radio advertisements offering a solution to every possible financial problem. Have you ruined your credit rating? Owe money to the IRS? Have to declare bankruptcy? Creditors calling and harrasing you? Owe child support? Can’t get a credit card? Home being foreclosed? Car being repossessed? Charged with DWI? Want to sue your doctor? Want to “name a star after someone“, and waste more than $50 on absolute nonsense? No problem. Just call the 800 number, and a friendly and curteous professional is there to help. 24 hours a day. Operators are standing by. No obligation …and it’s FREE !!! …but you have to call within the next 30 minutes. Quantities are limited. Only one per household. You need to call now! Oh… and have your credit card ready.

Have your credit card ready? I thought it was free.

Regardless of the particular brand of snake oil that these commercials are offering, here’s RoutingByRumor’s Rule Of Thumb #1… The more often they repeat their toll-free phone number during the commercial, the more of a scam, or more worthless of a product it is. Another telltale sign that you’d be better off turning the dial to a different station is what I like to refer to as the “speedtalker”. The announcer, usually at the end of the commercial, that reads the fine print at about 1,000 words per minute. Some of this fine print, especially the ones done electronically, are truly hysterical. You couldn’t comprehend most of what they are saying if your life depended on it. But that’s probably their intent. So RoutingByRumor’s Rule Of Thumb #2… If they have to resort to speed-talking to give you all the legal disclaimers and other crap, turn off the radio. A legitimate advertiser will never have to resort to this nonsense. The undecipherable gibberish they attach to these ads make their entire message suspect, at least in my mind. I find it hard to believe that any advertising agency would recommend this tactic to an advertiser.

Tired of your job? Want to quit the rat race? Had it with your boss? Want to make “real” money? Only want to work part-time? Looking for financial freedom? Tired of the commute? No problem. This is a once-in-a-lifetime opportunity. You’ll make $10,000 in the first week. Then they give you the testimonials. Every one of these people are raking in the bucks. Some of them are only working a few hours a week. They can’t count all the money. They’re making money while they sleep. It’s insane how much cash you’ll make. All without investing a penny. All from the comfort of your home. While you’re in your pajamas! All without a college degree. As one of their success stories tells you, “I was skeptical, but I called the 800 number. Now, I’m earning a six-figure income”. The sky’s the limit. But you have to call now. Oh, did I mention… Operators are standing by. Then they repeat the 800 number another half-dozen times.

Just one small problem. They never actually tell you what it is they’re selling. Visit their website, and you still don’t have a clue. Call to request more info? They will send you a packet of material that doesn’t tell you what it is that will allow you to earn all that money. Chances are, these get-rich-quick offers are some form of multi-level-marketing (MLM) scam. Routing-By-Rumor’s Rule Of Thumb #3… If they don’t tell you what they’re selling, run, don’t walk, in the opposite direction.

Have an old car sitting in the driveway that you’re trying to get rid of? What’s that? It won’t start? No problemo. No keys? No title? No registration? No wheels? No engine? No problem. They will arrange a pick-up within the hour, and you’ll get a tax-deductible receipt for the full value of the vehicle. They’ll drag away that old heap regardless of the condition, running or not.

The full value of the vehicle? Exactly what does that mean? The IRS wants to know. They have been cracking down on these scams recently. Our guess is that few if any of the charities that stoop to this type of advertising are worth considering donating to. Many of the radio commercials or newspaper ads for these “charities” don’t actually tell you what type of work your “donation” will support. What we find amazing is that the word has only four letters, yet there seems to be an infinite number of ways to spell SCAM.

Now, we realize that ever since man has roamed the the planet, there have been hucksters, scammers, snake oil salesmen, crooks and get-rich-quick artists. What I’ve noticed in the last few years, particularly with radio advertising, is that ads for legitimate products and services has been largely replaced by ads for every conceivable scam and every type of snake oil imaginable. I guess broadcasters are desperate for ad revenue, so they aren’t too choosy about which ads they will accept. As long as the advertisers pay their bills, broadcasters will run the ads.

Yes, the Internet has a lot to do with it. Legitimate advertisers have many more places to spend their advertising bucks these days. However, I don’t think that accounts for most of whats going on. I think that the disappearance of what I consider legitimate advertising, as well as the proliferation of scams and snake oil, are good indicators of how much trouble the American economy is in. These types of ads, which appeal to desperate and gullible people, proliferate when the economy is in trouble. Guglielmo Marconi must be spinning in his grave.

A widening gap

We’re not economists at RoutingByRumor, but we will point out some of the indices we use when formulating our doom and gloom forecast. The gap between the wealthiest and poorest in America has never been greater (see NY Times article, MSNBC article, another NY Times article, yet another NY Times article). We doubt that the disparity between wage increases and cost-of-living increases has ever been greater. And we don’t trust the government’s unemployment figures as far as we could throw them. Spiraling energy prices are increasing the cost of goods and services across the board. If you’re lucky enough to be working, is your salary keeping pace with the cost of living? We doubt it.

Banks

The average bank savings account pays around 3.5% interest annually, interest-bearing checking accounts much, much less. Many credit card companies charge cardholders up to 36% interest on their outstanding balances, with fees that seem to continue rising without limit. Has the spread between the interest Americans earn on their bank accounts (or even Certificates of Deposit) and what they pay in credit card interest and fees ever been greater?

Investing

In RoutingByRumor’s opinion, Wall Street is a cesspool of insider trading, stock manipulation and corruption. It seems that jail time and public disgrace provide little deterrence. We think that few Americans still trust the stock market, yet Wall Street firms are earning record profits, and traders are earning record incomes. Corporations try to outdo one another when it comes to executive compensation. No compensation package, it seems, is too excessive. Even when salaries are capped, total compensation often reaches obscene levels.

Wages

Yet at the opposite end of the spectrum, many companies are paying little more to hourly workers today than they did 20 or 30 years ago, and many rely heavily on part-time workers who receive few, if any benefits. The current U.S. federal minimum wage of $5.85 an hour is a farce. The percentage gap between poverty-level income and minimum wage income is about four times greater today than it was in 1968 !!! (see statistics) Forty years ago, a single-income family of four, dependent on the minimum wage, was nearly at the poverty line. Today, that same family is nearly at half of poverty line income. Families at the low end of the economic ladder are in much worse shape today than ever. The gap between the poorest and wealthiest Americans has never been greater. The concentration of wealth has never been greater.

People are hurting

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Bread line, circa 1937

Read the newspapers. Food pantries and soup kitchens across America report a greater need than ever, even as the donations they need to operate are decreasing. At the same time, the demand for luxury goods by the wealthiest Americans has never been stronger.

Today, labor unions have little clout in America. Look no further than the American auto industry, once a bastion of labor unions. Look at how little we manufacture here anymore. Look at the trade deficit. Look at the illegal immigration problem. By the way, don’t believe them when they tell you that making it more difficult to get a driver’s license will solve the illegal immigration problem, or the terrorism threat. Don’t believe them when they tell you that making it harder to smuggle people or drugs, or anything else across the border will solve anything. Did it ever solve the drug problem in the United States? If you sent every single illegal Mexican home tomorrow, it would make little difference to our economy. Virtually everything sold in this country is being imported. That’s where all the jobs have gone. To China and every other low cost producer in the world. Not to Mexico. People feared NAFTA. I think it has had little impact on the American economy compared to the flood gates that have been opened to imports from Asia.

Wal-Mart advertised they were hiring workers for their new store Avondale Estates, Georgia. Walmart wages and benefits are widely considered among the worst in America, yet this week, 10,000 people showed up hoping to get one of the 400 jobs available at this Wal-Mart (see this Atlanta Journal-Constitution Article). Was it this bad during the great depression?

But don’t take our word for it

Think we’re all wrong about this stuff?

Just turn on the radio, and count the number of “real” products or services you hear commercials for.

Open the newspaper, and try to find a decent paying job (or any job at all).

Try to sell your home (or try buying a home). Good Luck !!!

Ask yourself if you’re in as good financial shape as you were a year, five years, or ten years ago.

Worried about being able to afford health care?

Worried that you’ll never be able to retire?

Worried about pulling into the gas station and saying “fill-er-up”?

Worried about the cost of heating the house this winter?

Worried about layoffs?

Worried about the war?

Still think the economy is doing well?

– RoutingByRumor

( 1/18/2008 update: See our related article, entitled “Dear President Bush…“)

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Filed under Automobile Manufacturers, China, Consumerism, Employment, Energy, Energy costs, Jobs, Labor, Life, Money, News, Politics, Scams, Shopping, Terrorism, The Economy, Uncategorized, War, Your Money

New Balance Athletic Shoes – Made In USA? Yeah, Right!

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New Balance CM473KO

OK, I’ll admit it again… I’m a skeptic.

This is a continuation of my discussion about the disappearance of American manufacturing jobs, and the lengths that companies will go to in an effort to sugar-coat the fact that they have shipped their manufacturing overseas. See my previous post, Made In USA? Yeah, Right! Today, I’ll look at The New Balance Athletic Shoe Company, of Boston, Massachusetts. According to their Internet domain name registration, they are located at 61 North Beacon Street, Boston, MA 02134. Could someone explain where they came up with a name like “New Balance”? Is that a place (like “New Mexico”)?, a state of mind?, an allusion to better posture?, a reference to a new corporate reincarnation (as opposed to the (old) Balance Shoe Company? All of the above? None of the above?

Where does the name Nike come from? In Greek mythology, Nike was the goddess of victory. Where does the name Adidas come from? That one is a bit more obscure. Adidas is a contraction of “ADI (Adolph) DASsler“, that company’s founder’s name. Bet ya didn’t know that one! But remember, long before people were wearing Nike and Adidas, there were Keds! And although a bit off-topic, what do Adidas, Pepsi and the defunct chain of department stores called E.J. Korvette’s have in common? Find the answer here.

I’ve been wearing New Balance shoes since back when they really were making them in the USA. But today, it seems, most of their shoes say “Made In China”. The New Balance shoes that do say “Made In USA” say so on stickers affixed to the tags inside the shoes, but not on the shoes per se, and not on the box the shoes come in. I’m highly suspicious that their shoes labeled “Made In USA” are being made “lock, stock and barrel” in China, and that little manufacturing, other than perhaps inspecting them and placing a “Made in USA” sticker on them is actually being done in an American factory, by American workers.  According to this article in Fortune Magazine, 75% of New Balance shoes are made in China and Vietnam.  Perhaps an even more interesting aspect of the Fortune article are the shoes that many of those Asian factories produce on their “Third Shift” or “Ghost Shift”.   These shoes, produced in New Balance’s  foreign factories, aren’t exactly counterfeits, but they aren’t exactly genuine New Balance shoes either.  It’s an intriguing problem that companies such as New Balance face when moving their production offshore.  It also makes you wonder whether moving their production offshore might not be costing New Balance more than they are saving in labor costs.  Then there’s New Balance’s other problem, the  “Henkee”.

nb-1.jpgLet’s start with the box the shoes come in. It appears to be made in China. On the bottom of the box there is a logo and a few characters next to it, printed in (Mandarin?) Chinese. Well, let’s give New Balance the benefit of the doubt. Perhaps only the box is made in China.

Upon opening the box, I find a hang tag attached to one of the shoes that proclaims that New Balance is “Committed to American Workers”. Really? Almost hilariously, it also says “Solidaire des Travailleurs Americains”. I thought we speak English in America. Mon Dieu! (Je parle tres, tres peu Francais, mon ami.)

The back of the tag enigmatically states “New Balance has proven that high quality, width-sized athletic footwear can be made by Americans for discriminating consumers. We are proud of this fact“. Now, I know this is probably just paranoia on my part, but it only says that they’ve proven it. It doesn’t actually say that THIS pair of shoes was made by Americans. Perhaps I’m taking their wording too literally. I’m sure that a closer inspection will prove that I’m all wrong about this.

The inside of the hang tag has the following message in both English and French. I guess that’s because, as we all know, the official language of the United States is French…

These shoes have been produced by the New Balance team in one of our five U.S. factories. Unfortunately, we are not able to obtain all materials and components for these shoes in the U.S. either because they are not available, or because economic or quality considerations dictate foreign sourcing. The Federal Trade Commission has attempted to determine what it means to say a product is “made in” the U.S. We believe most consumers think “Made in U.S.A.” means that real manufacturing jobs were provided to U.S. workers in order to make the product. These shoes were made by U.S. workers using U.S. and imported materials. Where the domestic value is at least 70%, we have labeled the shoes “Made in U.S.A.”. Where it falls below 70%, we have qualified the label referencing domestic and imported materials. This determination is based in part on the FTC’s survey of consumers. The FTC’s analysis of the “Made in U.S.A.” issue can be found at FTC.gov or for a copy, write to New Balance Athletic Shoe, Inc., 20 Guest Street, Boston, Massachusetts 02135. Attn.: Communications”

Since this pair of shoes does say “MADE IN USA OF IMPORTED MATERIALS”, I think we can safely say (based on New Balance’s own statements) that the domestic value is below 70%. How far below 70%? Could the “domestic value”, meaning the percentage of it’s value produced in the United States be .00001% ??? Could it mean that little was done in the United States other than attaching the tag I quoted from, above? Call me skeptical. Call me a disbeliever. Accuse me of being too logical. The fact is that New Balance doesn’t actually tell you how much of their product is made in America. Their explanation of the Federal Trade Commission’s guidelines are very educational, but I think that New Balance is trying to mince words. It’s probably just skeptical me. I’m sure once I take a look at the shoes themselves, I’ll be convinced they were “made by Americans”.

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The label affixed to the inside of the shoes has a lot of information printed on it. There’s the shoe’s size, width, model number, a barcode and some other numeric data, which probably indicates to New Balance where and when the shoes were manufactured. Interestingly, the label does not say where the shoes were made. That information is contained on a sticker, which is affixed to the label, which is affixed to the shoes. That sticker says…

“MADE IN USA OF IMPORTED MATERIALS

FABRIQUE AUX E.-U.

A PARTIR DE MATIERES IMPORTEES”

I wish I was more fluent in French. It would come in handy when reading the labels inside shoes that are “Made in USA”.

Now, what kind of an idiot do I look like? I may not be the sharpest tool in the shed, but there are at least a few neurons firing. Why would New Balance print a label that does not state the country of origin, only to add a sticker that says “Made in USA”? My guess (and probably yours) is that they can’t legally import a product into the United States that says “Made in USA”, even if they add the qualifier about imported materials. In my opinion, New Balance is taking advantage of the FTC’s ambiguous guidelines regarding what can be identified as being made in the United States. Call it fine print, mouse print, weasel words, or whatever you wish. This loophole is used by many companies, although some will actually break down which components of their product are foreign made, and which are produced in the USA. I wish New Balance went at least that far, stating, for example, “Uppers and insoles made in USA, all other components made in China”, but they do not break down which components are imported, leading me to believe that the shoes are pretty much manufactured entirely in China. Actually, they don’t even say where the components were imported from.

Are you wearing a pair of New Balance shoes that say “Made in USA” on the tags inside? Go ahead… Take off your shoes and closely inspect the tag. Go ahead. No, really… I’ll wait. Go ahead. (RoutingByRumor taps their feet and whistles a few notes while waiting for you.)

Nice socks. You must be a very religious person, considering those holey socks. ROFL. Now look closely at those tags in your shoes. Does the tag actually say “Made in USA”, or is there a sticker that says “Made in USA” that is stuck to the tag? See! Exactly as I suspected. Whew. Eeeeeeeeewwwwww. Better put those shoes back on now. Thanks.

Perhaps I have this all wrong. Maybe I’m jumping to conclusions about where New Balance shoes are actually made. If New Balance wishes to provide specific details about exactly how much of their product is made in the United States, I’d love to add that information to this article. Are all the components sewed and glued into a finished product in the USA? I’d hope so, but I sincerely doubt it.

If my suspicions about New Balance’s labeling practices regarding their “Made in USA” products are correct, they would certainly qualify for induction into RoutingByRumor’s Hall of Shame.

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Filed under Adidas, China, Consumerism, E.J. Korvette, Employment, Greek Mythology, Keds, Labor, Life, Money, New Balance, News, Nike, Pepsi, Personal, Personal Tidbits, Retail, Routing by Rumor, Scams, Shopping, Your Money

eBay – A Buyer’s Market or a Seller’s Market?

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I love eBay. I hate eBay. I’ve used eBay since 1999.

If you are looking for a hard to find, vintage, used, discontinued or rare item, eBay is the first place to look. If you want to find the latest tech gadget at less than retail, check eBay first. A lot of people won’t even consider buying something online or at a “brick-and-mortar” local retailer without checking the price on eBay first.

With all those “Get Rich Selling On eBay” books and seminars out there, you would think everybody could quit their day job and watch the money pour in when they become an eBay seller. Don’t bet on it. Most eBay sellers hardly make enough to make it worthwhile. When you factor in the amount of time you have to invest to set up an auction, respond to buyer’s questions, deal with deadbeat bidders, and pack & ship the item, and the cost of eBay’s and PayPal’s fees, it’s hard to make a profit. Meg Whitman, eBay’s CEO, and eBay’s stockholders have made fortunes on eBay. If you want to make money on eBay, buy some eBay stock rather than trying to sell on eBay.

eBay has incrementally introduced new features over time that makes it a more secure and useful platform, but eBay has also devolved into an uneven playing field that benefits few but eBay itself. In category after category, you have sellers selling items for pennies, but charging outrageous amounts for “shipping”. Even the majority of sellers who aren’t selling through “Buy-It-Now” auctions for $0.01 are still inflating their shipping charges to try and make some money. This is especially true with sellers from countries like Chins, which have become a larger and larger presence on eBay.

I’ve seen it over and over again… For example, very small items selling for a few pennies, but with a $29.00 shipping fee. Shipping that will cost the seller anywhere from a first-class postage stamp to perhaps a dollar or two. Few buyers or sellers seem to care much about the practice, and eBay is certainly not complaining. There is so much competition between sellers that they all have to resort to this tactic. eBay actually helps sellers inflate their shipping fees by allowing them to build their margin into eBay’s auction shipping charge calculator.

Why is this happening? eBay does not charge a commission (final-value fee) for shipping charges assessed by a seller, so sellers shift all or most of an item’s cost to the shipping fee. eBay appears to have made no serious attempt to curb this practice. Why? I think it’s because eBay also owns PayPal, the bank thru which the vast majority of eBay transactions are paid for. If eBay doesn’t get their cut thru auction fees, it will still earn it’s money through PayPal fees.

If you’re looking for a bargain on the latest high-tech gadget, I doubt you’ll find a bargain on eBay. Items that are in demand usually sell for prices close to retail, especially when you add in the “shipping” charge. Most eBay sellers will not accept returns or issue refunds. Many manufacturers will not honor rebates or warranties on items purchased thru online auctions. While most sellers do a good job of describing an item and it’s condition, some do not. Some are deceptive.

For items like used or out-of-print books or DVDs, eBay is great, and there are many bargains available. I think eBay has done more for the environment by keeping stuff out of landfills than any recycling program has ever done. If you want to get rid of it, don’t throw it out. Put it on eBay.

One of eBay’s strengths is it’s feedback system. I like the very democratic rating system, where buyers get to rate and comment on sellers and vice versa. It encourages people to treat other eBayers they deal with fairly. It also holds you hostage to some extent. You have to avoid giving negative feedback to someone you’ve dealt with, even if it is justified, for fear of receiving retaliatory negative feedback. The feedback system is a double-edged sword.

…When I continue, I’ll discuss some of the issues I’ve touched on in greater detail.

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