There was a mad scientist (a mad SOCIAL scientist) who kidnapped three colleagues, an engineer, a physicist, and a mathematician, and locked each of them in separate cells with plenty of canned food and water but no can opener. A month later, returning, the mad scientist went to the engineer’s cell and found it long empty. The engineer had constructed a can opener from pocket trash, used aluminum shavings and dried sugar to make an explosive, and escaped. The physicist had worked out the angle necessary to knock the lids off the tin cans by throwing them against the wall. She was developing a good pitching arm and a new quantum theory. The mathematician had stacked the unopened cans into a surprising solution to the kissing problem; his dessicated corpse was propped calmly against a wall, and this was inscribed on the floor in blood: THEOREM: If I can’t open these cans, I’ll die. PROOF: Assume the opposite…
Consider this graph (pictured above) of manufacturing output for five manufacturing countries that in aggregate comprise a hefty proportion of total world manufacturing. Assume (as seems to be the case these days) that consumer spending for China, Japan, Germany, and Italy are constrained, growth in those economies is export-driven, and all new spending is by the U. S. consumer. Now assume the opposite, i.e. no new spending by the U. S. consumer.
Extra credit question: is it a coincidence that China’s manufacturing output crossed U. S. manufacturing output in 2007?
Not only do I ask the questions, I answer them.
Here are a variety of answers, some contradictory, to the extra credit question:
- You can’t tell anything from that graph. The Chinese component is mostly hooey. It certainly isn’t supported by more empirical measures like container traffic, for example.
- It’s mostly a coincidence. Note that manufacturing output is being measured in current dollars. The graph actually depicts two things: the yen, the euro and, particularly, the dollar are inflating rapidly while Chinese manufacturing output is increasing.
- It’s not a coincidence. The U. S., Japanese, and Eurozone economies are all stalling because of Chinese manufacturing growth without corresponding Chinese consumer spending.
- How ’bout dem Bears?
I think that you either believe the graph is mostly hooey or we’re on the cusp of some very significant social changes all over the world but particularly in China. The flywheel is about to come off.