Reference no: EM13151985 , Length: 2384 words

Should the FED be independent?

1.  The Federal Reserve System has a large measure of political independence. The Board of Governors are appointed by the U.S. president and confirmed by the U.S. Senate. They serve 14-year terms. In addition, the Federal Open Market Committee includes representatives of private banks in the Federal Reserve System.

Proposed: The public should directly elect some of the representatives who make monetary policy (as the public elects representatives who make fiscal policy)

Identify two strong arguments in favor this proposal.

Identify two strong arguments against this proposal.

There are many theories about the American Manufacturing problem but the truth is on-shoring, or returning of manufacturing to North America, is one positive indication that a return, albeit not all, is a continuing trend. Ironically, many of the factors that resulted in manufacturing jobs being lost are now starting to drive jobs back to the U.S. Additionally, other cost factors are also leading manufacturers to bring production capabilities, including the auto manufacturers to U.S. soil.

I found the Cars.Com data pretty interesting but also found several flaws in the information as well. I had the opportunity to work with the VW plant outside of Chattanooga and, although it created jobs for the local population, I observed a significant German Engineer and Management footprint; many on temporary rotations. I dug into some other reports:

I found this study by a known supply chain expert to be more representative of what I observed at VW and my interactions with Ford Engineers and Managers (I don't work for Ford or the Auto industry):

https://www.american.edu/kogod/autoindex/index.cfm

https://www.american.edu/kogod/autoindex/loader.cfm?csModule=security/getfile&pageid=3752852

I have no doubt the Detroit auto manufacturers need to change their ways but they have been greatly impacted by a reportedly corrupt, heavily backed union system that cripples manufacturing and ability to adjust to trends in manufacturing and consumer needs. If you look at where the majority of foreign car makers are placing their factories, the majority of them are in business friendly Southern States (right to work states) with stable power, ease of transportation, reduced weather impacts, and great supply of skilled labor. Note, Michigan just became a right to work state, perhaps that will start to reduce the union stranglehold on the big 3.

Just some thoughts, Ford appears to be doing pretty well overseas as well, they are approaching almost a 50/50 split with revenues. I think it makes sense to manufacture the product close to the largest customer market that meets the needs of the organization, especially with the rapidly rising transportation costs.

3.  Free, fair and open trade is essential to fostering a thriving global economy. In the past, when economic conditions have deteriorated, we've seen governments in developed and emerging economies alike engage in protectionist policies. World trade has slowed this year in tandem with a global economic slowdown. According to the World Trade Organization's (WTO) April report, trade expanded 5% in 2011, less than the 13.8% in 2010. The WTO projected a further slowdown in to 3.7% in 2012. The WTO attributed this possible slowdown to loss of global economic momentum from a variety of shocks, including the European debt crisis.

As an economist, I am in favor of privatization and against protectionism in general, however, certain limited policies can be reasonable if they allow domestic industry to thrive without harming global trade or investment. In some cases these policies can serve positive ends; for example, when used to limit environmental damage from over-production of scarce resources.

For some Americans, protectionism might look beneficial. In many cases, countries would hide [their protectionism] in terms of [slogans such as] "Buy made in country X." And they might even say that by so doing, you're being patriotic, if you buy what is made in your own country or manufactured in your own country. But the truth of the matter is that when you allow competition, what happens is that the quality of the products goes up and also their availability goes up.

4.  The right idea is to have the right people doing the right job, at the right location, and paid the right salary.

It is sad that the Obama administration simply points to China in order to assign blame for the failing economy (I wonder if they are running out of "it's Bush's fault excuses). The problem with the current administration is that they are unable to mitigate the failing economy, and their fatal mistake is that they are unable to accept that it is okay...

The reason why I said it is alright for them not being able to fix the economy is because the problem has been seeping deep in our way of doing business for decades, and I will explain using one of the most American product I can think. Henry Ford revolutionized the automobile industry, and became the staple of American ingenuity that revolutionized the entire global industry. What happened since then?

Doing my quick research on https://www.carsdirect.com, first we will see the 3 biggest American automobile brands: Ford, Chevrolet, and Dodge. I found it very curious that these companies outsourced their US cars manufacturing to Mexico and Canada, possibly other countries as well. These are American cars and American brands. Why are these American companies unable to resolve their production issues in order to produce their products within the US? On the other hand, Toyota and Honda (both Japanese companies) fought tooth and nail to have their factories within the US territory, while KIA and Hyundai (both South Korean companies) are following their Japanese counterparts' footsteps in order to be profitable.

The real issue with US companies is that we are unwilling to admit that we are the issue.

As far as economic isolationism, that would be the worst move to make. It is true that I am a supporter of bringing jobs and productions back on american soil, but at the same time we need to be able to push our products out there. On the other hand, if we need to do certain productions on different countries because it is simply cheaper due to the abundance of resources, we should do so, but with our control. Ultimately we need to be the country where all other international companies want to use our own US companies to be the 3rd party solutions critical for their businesses.

The idea is simple, "Economic Superiority" by rerouting vital international business activities through US territories, and thus we would have the upper hand and the control of the global economy. China and India are doing exactly this right now by taking over IT, Customer Service, shipping, and more. If they can do that why can't US do so?

In fact, if we look at our history, the US has always been the center of the global economy since it was still colony states. The colony had the lands, the resources, the productions, the goods, the labor, the skilled workers, and thus the global economy shifted from Europe to the North American colonies, and that is how the United States of America was born, through economic superiority by rerouting all the vital international business activities through our territories and controlled by our interest. Later, we had the inventions and the technologies. All these aspects combined allowed us to prevail and thrive until today. The real question is, should our nation and our companies forget this and let other countries control our vital business activities, how long before we become obsolete like the grand ancient nations of great economic prowess such as Venice, Egypt, Spain, Rome, Persia, and more.

5.  Unfortunately, we have an administration that continues to place the blame for it's own failures on others. The truth is we are in a global marketplace and need to learn how to compete. We will not be able to if US companies continue business as usual and the administration promotes this. I can remember when buying foreign made products was looked down on since they were inferior to that of products made in the US. That begin to change when Americans realized that the Japanese produced autos were not only less expensive than US autos, but better quality. However, this did not change the way the "Big 3" did business and continues today. Other than technological improvements, US companies continue to do business as they did back then.

I think the blaming China is just another move by the administration to take the country in the wrong direction, possibly with tariffs or restrictions on imports for countries such as China. Someone needs to remind the administration that all smart phones and tablets are produced in these countries, even for Apple - a US company. Since the president and members of Congress are attorneys, and with most attorneys I know unable to read a balance sheet or income statement let alone understand economics, they need to listen to actual experts and not the "poll of public opinion" on this matter.

Interesting that neither Geithner nor the president mentioned the inequality between taxes of US companies and those in China. US corporations are the highest taxed in the world and yet the talking point is that tax loopholes for corporations need to be tightened. US corporations have billions of dollars offshore in profits made outside the US that they are unwilling to bring into the US due to the tax burden. These funds could be used for capital investment which would lead to jobs - something that would strengthen the US economy in the long run. Nor did they mention the financial burden of government regulations have on US companies which are not found in China. If those in Washington want the country to become competitive in the global market, we need to change the current thought process. We need to have lower taxes for corporations and less government regulation for the US to become successful in the global economy.