The following is an excerpt from a Bill Gross article. Bill has a great understanding of economics and is the head of PIMCO funds, including the largest and probably the best bond fund in the world, PTTDX. He is a person that knows of what he speaks. The overriding question is how to level the playing field without substantially lowering our standard of living. This is an ugly picture.
Posted by Ken Dillenburg
The United States and its developed economy counterparts face an unfamiliar crisis of unrecognized dimensions and potentially endless proportions. Politicians and respective electorates focus on taxes or healthcare when the ultimate demon is a lack of global demand and the international competitiveness to thrive. The solution for more jobs is seen as a simple quick step of extending the Bush tax cuts or incenting small businesses to hire additional workers, or in the case of Euroland, shoring up government balance sheets with emergency funding. It is not. These policies only temporarily bolster consumption while failing to address the fundamental problem of developed economies: Job growth is moving inexorably to developing economies because they are more competitive. Free trade and open competition, like a stretched rubber band, have snapped the U.S. and many of its Euroland counterparts in the face. By many estimates, Chinese labor works for 10% or less than its American counterparts. In addition, and importantly, it is able to innovate as quickly or replicate what we do. Jobs, in other words, can never come back to the level or the prosperity reminiscent of 1960s’ Allentown, Pennsylvania until the playing field is leveled.