Think of the World’s Bubble Economy in Two Categories: Manufacturing and Resource Extraction
We can better understand why and how the world economy will suffer so badly if we analyze the economy in terms of two broad categories: manufacturing and resource extraction. Manufacturing can be further divided into two subgroups: (1) High-end manufacturers, primarily Germany and Japan, and (2) Low-end manufacturers, primarily China and other Asian Tiger nations. India is similar to low-end manufacturers because it provides low-end service exports.
Low-end manufacturers are directly affected by America’s multibubble economy, both on the way up and on the way down, for the simple reason that we are the world’s largest importer of low-end manufactured goods. So when the U.S. economy goes up, many other countries’ economies go up.
There is an additional multiplier effect in terms of job creation. For each job created to produce exports sold to the United States, roughly two more jobs are created in support of those jobs. This is true not only of nations, but of cities and regions, as well. Any job that produces a good or service that is exported from a region also produces secondary jobs to support those people in the export industry, such as jobs in medicine, government, and housing.
These multiplier effects are extremely important to the export-driven economies of China and the other Asian Tigers, like Korea, Taiwan, Hong Kong, and Singapore. Because of these multiplier effects, a large ...