By David L. Brown
The worldwide recession (economists are still too frightened to use the “D” word) is hitting hard in Asia and it seems there may be no bottom. Even Japan, the only First World economy in Asia, is being hit hard. Japanese exports have plummeted and they are teetering on the brink of economic chaos.
The latest news from Toyota is that that they have raised their projected losses for the year just ended. In fact, they have tripled them and are describing their results as the worst in 70 years. Here are excerpts from the BBC with details:
In December, Toyota predicted it would make a full year operating loss of [$1.65 billion].
The Japanese car giant has now tripled that figure and expects to make a [$4.9 billion] operating loss, the first annual loss at the firm in 70 years.
In December, Toyota boss Katsuaki Watanabe said the current downturn was of a size that comes only: “once in a hundred years”.
That is a startling change in projections just from December. As it turned out, the world’s largest car company lost as much just in the last quarter of 2008 as they were expecting for the entire year. Their business literally fell off a cliff, and one can imagine that it is still in free fall. “First loss in 70 years” would make it that wonderful year 1938 when Toyota was busy making military vehicles for the conquest of China and Korea and America was still in the depths of the Depression.
This is more evidence that Asia is getting hit harder than we are here in the U.S., at least so far, and there doesn’t seem to be anything under them to stop the decline. Japan’s exports are down 40% and they ain’t seen nothin’ yet. Other Asian economies are in even worst shape. China is falling so fast and hard that the seismic waves will rattle dishes around the world.
The 64 Trillion Dollar Question is: What will be the effect on America of the collapse of emerging nations that have bet their wads on exports? Surprisingly, it probably will not really be as bad as might be expected.
First, we made the extremely excellent move of offshoring huge numbers of our manufacturing jobs. At the time that looked like a mistake to many. But now that the new worldwide Depression has arrived (yes, I’m bold enough to use the “D” word) the laborers and middle managers that are losing their jobs are not Americans, but Chinese, Koreans, Taiwanese and Vietnamese. Those would have been American jobs and our yellow brothers are taking the hit for us.
Those busy export generating nations that cashed in their cheap labor in return for the chance to supply foreign consumers with a flow of cheap goods expected that America would continue to be a vast black hole, willing and able to absorb an endless stream of neat consumer items. We were viewed as insatiable shopoholics, unable to resist the siren call of “new, better, cheap”. They failed to realize that all good scams must come to an end. How many big TV sets do we need here? How many new computers every 18 months? How many more cell phones, gee-gaws, kitchen accessories, rugs, items of furniture, digital cameras, stereos, VCRs and DVD players, etc. ad vomitum do we actually need?
Well, as it turns out, not too many more. The bucket is pretty full. Here is my personal example. I have a neat 53-inch high-def projection TV that I have owned for about eight years. It’s not a flashy flat-screen version, but I will nonetheless keep it for much longer because it serves me perfectly well. I have VCR and DVD players of about the same vintage and they work just fine. I don’t plan to buy a Blu-ray player. I have a pair of high-end stereo speakers that are 30 years old, and another pair that are actually a couple of years older than that. They are wired to stereo receivers that are at least 20 years old. I will keep them for the rest of my life. I have all the furniture, gee-gaws, rugs and furniture I will ever need.
I also have several Apple computers, none of which is less than about 3 years old (G5 towers, a G4 laptop, all pre-Intel) and although there are newer, faster, better computers, it turns out that I am not actually doing major cosmological or nuclear computations or intensive data processing so those computers are just fine and will be used for many more years. My first generation iPhone works great and I have no inclination to buy the newer, better, faster, shinier one.
I have a five year old car that is paid for and will be driven until the wheels fall off, which could be for as long as I need a car.
Finally, I am a photographer and I have a Canon 5D SLR camera that has recently been replaced by an improved model with about twice the number of pixels. No thanks, the 13 MP model I bought a couple of years ago is perfectly satisfactory for anything I will ever need to do, including prints up to 20 by 24 inches or larger.
Many if not most Americans are in a similar situation. We have been needlessly replacing our “stuff” in reaction to glitzy marketing and a spend-spend mentality. That mentality has died with the arrival of Peak Oil and the subsequent economic chaos. We have stopped spending—but the wonderful thing is that it doesn’t make any real difference because most of us already HAVE perfectly good “stuff” and there is a lot of good used “stuff” available for those that need it.
One of the things that is absolutely killing the auto business is the tsunami of late-model used (and unsold new) vehicles that are glutting the market. And in case you’re concerned that we are losing the overseas sources of new “stuff” as foreign suppliers sink into bankruptcy and doom, there is no hurry to rebuild domestic manufacturing because we are already awash in “stuff.” We’ll be fine with our old “stuff” for years to come.
China is now blithely pinning its future on the idea of developing domestic consumer markets. Most Chinese people do NOT have “stuff” but want it. unfortunately, since China’s export business was the major underpinning of their economy and that is dead as a dinosaur, Chinese people aren’t going to ever get the “stuff” that we already have, and which their criminal leaders have promised them. Instead, tens of millions of them are out of work with countless more soon to follow.
Meanwhile, the Chinese government is going to be spending the dollar reserves it earned from all that exporting and the savings of its poor citizens just to buy food from the only remaining nation on Earth capable of producing foodstuffs in sufficient quantities to be a major exporter. That would be us.
Bottom line: No matter how bad things become here in the USA, they’re going to be worse “over there” and we will have the last laugh (although an admittedly hollow one).