Bernanke Is Right Chinese Mercantilism, Not Fed Easy Money, Are Making a Mess
Guest post by Peter Morici
Ben Bernanke is right. Germany shouldn’t blame easy money in the United States for the world’s woes.
Currency mercantilism in China and elsewhere is causing a mess-especially in the United States.
Last week, Bernanke fingered China, Taiwan, Singapore, and Thailand for driving down the values of their currencies. Through massive government purchases of U.S. Treasuries securities, those mercantilists accomplish huge trade surpluses and jack up their GDP growth and employment. The flip side is a huge U.S. trade deficit that sentences Americans to slow growth and 10 percent unemployment.
Sadly, such mercantilism makes free trade an unworkable strategy for the United States.
Global demand for goods and services has become so distorted by subsidized Asian exports that workers in the United States face terribly high unemployment. Add in those stuck in part-time jobs that would prefer full time work, and the United States is losing the productivity of at least 10 million workers. At about $100,000 per worker, that adds another $1 trillion, bringing total lost productivity to about $1.3 trillion dollars.
Ben Bernanke estimates U.S. capacity underutilization at about 8 percent-that comes to the same $1.3 trillion. Amazing!
At the recent IMF meetings, Treasury Secretary Geithner asked European allies for help in persuading China to revalue the yuan. Led by Germany, the United States was told to pound salt and instructed to slash its budget deficit and tighten monetary policy.
No surprise. Germany enjoys huge trade surpluses with a euro that is undervalued for its economy, because it is lumped into Euroland with weak Portugal, Ireland, Greece, Spain and Italy. Germans live well and impose austerity and unemployment on those neighbors. Berlin doesn’t want any sacred mercantilist cows slayed, lest its own ruse get discovered.
If the United States cut its budget deficit in half and raised domestic interest rates two percentage points, U.S. consumption and imports would crash, unemployment would rocket to 15 percent, and a global depression would result whose horrors we all thought were long ago buried in history books.
If China and Germany won’t be reasonable, the United States is really left with no option but to take direct action to balance its trade.
China’s government purchases to suppress the yuan come to about 35 percent of GDP and provide a subsidy on exports of similar amount. Washington should even things up by imposing a comparable tax on purchases of yuan and euro for the purpose of importing from or investing in China and Germany, until their leaders agree to engineer an orderly revaluation of currencies and trade.
The Chinese and Germans shouldn’t care-after all, the Americans are nothing but whining spendthrifts whose problems are of no import. They would scream bloody murder anyway.
Beneath the howls, domestic demand and employment in the United States would fire up, manufacturing would flourish, GDP growth rise to about 5 percent, and unemployment would fall to a similar figure.
The extra growth would eventually balance the U.S. budget, as it did during the Clinton years.
Once China, Germany and others agreed to a realignment of exchange rates and the tax ended, all nations would benefit from trading with a more rapidly growing and stable U.S. economy.
Peter Morici is a professor at the Smith School of Business, University of Maryland School, and former Chief Economist at the U.S. International Trade Commission.
Author: Miles Free
Gotta love the entrepreneurial spirit of engineers vs. the bureaucratic regulators (aka Forces of Evil…)
To improve energy efficiency and reduce greenhouse gas emissions, the EU has banned the sale of incandescent light bulbs of over 60 watts.
Enter the engineers.
Engineer Siegfried Rotthaeuser studied the EU legislation and realised that because the inefficient old bulbs produce more warmth than light they could be sold legally as heaters.
Rotthaeuser is legally importing and distributing 75 and 100 watt light bulbs — by producing them in China, importing them as “small heating devices” and selling them as “heatballs”. Check out the heatball website here.
What is the Heatball Manifesto?
A heatball is electrical resistance, used as a heater.
Heatball is a campaign of opposition against regulations being passed that bluntly ignore the most basic democratic principles.
Heatball also resists unreasonable measures supposedly protecting our natural environment.
How can we be made to believe that using energy saving lamps will save our planet, while at the same time the rain forests have been waiting in vain for decades for effective sustainable protection?
Heatball is electrical (and political) resistance.
Viva la resistance!
Now if only they could buy them from us here in the US…
Lightbulb
Protest
PMPA’s Index of Sales of Precision Machined Products in October 2010 was 103, basically at the six month average of 103.66.
We see the lack of a clear trend as the index continues to hold within a band of 97 to 107 over the past six months as indicative of the “New Normal”- sales levels recovered to those of the beginning of the decade.
The MSCI data for October 2010 showed that distributor shipments of steel were up 15.8% more than October 2009.
The SAAR for light vehicle production reached 12.26 million, the best non-rebate fueled sales results since September 2008.
The current issues in the banking and housing sector are likely to keep our hopes of a home building recovery in check, and our industry’s shipments will continue to be dominated by Automotive, Armament, Aerospace and others.
We were encouraged to see that the 3 month moving average rose slightly in October. Our shop managements continue to show their savvy; October hours of first shift worked declined .4 to 43.1 from September 43.5. Only 2% of reporting companies are scheduling a first shift of less than 40 hours.
This data explains why we remain optimistic about the Precision Machining Industry Outlook for North America in the short term.
For more information, PMPA members can download the October 2010 report here.
Press contact Miles Free at PMPA
Post by James Pryor II American Safety And Health Management Consultants, Inc.
Your shops’s LOCKOUT /TAGOUT program is the “key” to safety on machinery and equipment repair and maintenance operations.
An effective and stringent LOCKOUT/ TAGOUT program provides critical protection for employees during repairs and maintenance.
Here are a few checklist items to evaluate your Lockout Tagout program.
1. Review OSHA 29CFR1910.147 the Federal Lockout/Tagout regulation.
2. Review Requirements for Lockout/ Tagout devices- they must be durable, standardized, substantial and identifiable.
3. Review all equipment requiring Lockout/Tagout- for example Locks, Blocks, Chains, Multi lock hasps and other devices. They must be durable, standardized, substantial and identifiable.
4. Review your procedures for equipment where Lockout/Tagout is required.
5. Insure AFFECTED and authorized employees are trained in Lockout / Tagout procedures initially and annually thereafter.
6. Insure training for both AFFECTED and AUTHORIZED employees is conducted whenever there is a change in equipment or procedures.
7. Keep employees informed when equipment is being repaired or serviced .
8. Stay alert and use common sense when Lockout/ Tagout procedures are in place.
9. Keep written records of all Lockout Tagout Hazardous Energy Control Training.
10. And of course, every time you are out in the shop make certain that your team is following your procedures.
Are they being followed ? Are they effective?
What is the best way that you have found to convince employees of the importance of hazardous energy control?
Kirlian Key Photo Credit
Aluminum is a critical ingredient of steel in our shops, not just as a stand alone material for machining.
Aluminum metal is used to make many parts produced by precision machining, and is finding increasing application in automotive because of its light weight and high strength to weight ratio.
But aluminum plays a key role in some steel applications that you should know about.
- Aluminum is used as a deoxidizer. Aluminum scavenges Oxygen from the melt reducing porosity in the solidiied steel.
- Aluminum is used to produce a fine austenitic grain size. (Aluminum is the most effective element to control grain growth in steel.)
- Aluminum is also used as an alloying addition in the amounts of 0.95- 1.30 weight 5 to make Nitriding steel. Nitriding increases the hardness of the steel by the formation of a hard, stable aluminum nitiride compound.
Aluminum’s ability to scavenge Oxygen results in tiny aluminum oxide particles dispersed throughout the steel. As aluminum oxide is hard and abrasive, Aluminum is not deliberately added to free machining steels where it would destroy tool life.
Aluminum is more effective at grain growth control than elements like vanadium, titainium and zirconium. These three elements adversley affect hardenability because they form carbides that are both quite stable and difficult to dissolve in austenite prior to quenching.
In the nitriding steel, this recipe is relatively distortion free at the temperatures up to the nitriding temperature.
| Nitralloy “N” | Nitralloy 135 | ||
| C | 0.22-0.27 | 0.38-0.43 | |
| Mn | 0.50-0.70 | 0.50-0.80 | |
| P | 0.035 | 0.025 | |
| S | 0.040 | 0.025 | |
| Si | 0.15-0.35 | 0.20-0.40 | |
| Ni | 3.25-3.75 | 0.25 | |
| Cr | 1.00-1.35 | 1.40-1.80 | |
| Mo | 0.20-0.30 | 0.30-0.40 | |
| V | – | – | |
| Cu | – | 0.35 | |
| Other | Al, 0.95-1.30 | Al, 0.95-1.30 | |
| Source | ASTM A355-89 | AMS 6470J |
So yes Virginia, you may have more Aluminum in your shop than the number of aluminum bars, soda cans and foil wrappers might lead you to believe. Hiding in your steel!
Nitride structure
Nitralloy Table
“Management by objectives works if you know the objectives . Ninety percent of the time, you don’t.” – Peter Drucker
Photocredit
Today, we live in a time of breathtaking rate of continuous change.
Yet we crave stability. Something solid to hang on to.
Despite the rapid pace of change, and its gut wrenching consequences, we can find that stability we crave.
Its called the mission.
The mission is the central, continuous thought that the changes (whatever they might turn out to be) that we implement are meant to preserve.
Our mission is our “fundamental purpose” for being; for doing what we do.
Mission statements answer the question “Why?”
Objectives are how our organizations achieve their mission.
Objectives are measureable, time delimited, and answer the question “How?”
Our mission here at PMPA is to “provide information resources and networking opportunities that advance and sustain our members.”
Mission answers “WHY?”
Objectives are measureable, time delimited and answer the question “HOW?”
“By getting this blog out for Thursday, I will have provided information and resources to sustain my members.”
When faced with change, the first thing that I would do have done is review the mission with my team.
Because…
The mission answers “Why?”
Or as we learned in Mrs Ponte’s Latin Class SO many years ago…
“Our plans miscarry because they have no aim. When a man does not know what harbor he is making for, no wind is the right wind.”-Seneca the Younger
What is your mission? More importantly what does your team think your mission is?
Counting parts with scales is not rocket science.
But getting the accuracy in the count done efficiently is a challenge akin to a moonshot if you are the person that has to resolve the piece count discrepancy paperwork…
The first webinar is called Best Practice in Piece Counting.
It covers
- Principle and benefits of piece counting with a scale
- Application areas of piece counting solutions
- Challenges associated with counting
- Solutions and best practices
The second webinar Smart Weighing Solutions for Lean Production will show you how to minimize waste using accurate scale based counting systems and Statistical Quality Control.
The first half is a nice review of Mettler’s own lean journey in manufacturing.
The second half has a number of case studies regarding parts, shops, and customers like ours.
We see on time delivery and significant reduction in stock inventories as the primary advantages of using such systems.
Plus you will save time and money.
We relied on Mettler technology in the labs that I worked in.
I’m forwarding you these links to maybe help you
Find a better weigh…
Mettler Toledo offers two free, on demand webinars that will help you understand (and resolve) the issues of using scales to accurately count component parts.
Lead is NOT banned by the European Union’s End of Life Vehicles Regulations for machining purposes in steel, aluminum and brass.
PDF HERE
Lead is NOT banned by the European Unions Restriction of Hazardous Substances (RoHS) Directive.
The exemption for “Lead as an alloying element in Steel containing up to 0.35% lead by weight, aluminum containing up to 0.4% lead by weight, and as a copper alloy containing up to 4% by weight.” This exemption is located in article 4.2 and Annex, line 6.
UK link to RoHS exemptions
If even the European Union recognizes that additions of Lead in materials for machining is worthy of exemption, Lead must provide some significant benefits…
- “Boosts machinability 25% at lower cost”- Pat Wannell, La Salle Steel April 1994, quoted in Modern Metals Magazine
- “Cutting Speeds can normally be increased from 15-25% above those employed for the standard grade”- Monarch Turning Manual
- “Lead, found mainly enveloping manganese sulfide inclusions, promotes machinability in two ways, possibly three. By forming a layer of liquid lubricant at the tool chip interface, it reduces the stress required to overcome friction. By acting as an initiator of microcracks and, possibly, by causing some liquid metal embrittlement, it reduces the deformation stress.” American Machinist Special Report 790.
- In our experience we have found leaded steels to lower cutting temperatures and reduce wear rates on tools, resulting in greater up time. Surface finish on leaded materials is superior to those on non leaded equivalents.
Increasing speeds and production, reducing power needed (and thus greenhouse gas emissions), and improving surface finish are some powerful advantages that are provided by the addition of lead to materials for precision machining.
What’s the down side?
1) Lead is not soluble in iron. It is therefore a separate phase in the steel, usually visible enveloping the manganese sulfides as tails, though sometimes appearing as small particles.
2) Lead has a greater density than iron. This means that it will tend to segregate given enough time while the metal is liquid.
3) Lead has a relatively low melting point (liquidus) compared to steel. This can mean that at processing temperatures for heat treatment, leaded steel parts can ‘exude’ lead
These three factors mean that if you ABSOLUTELY MUST HAVE parts that are free from possible segregation, parts that will not have potential hollows or porosity after being exposed to high temperatures, and absolutely no visible indications of a separate phase in the steel (ie. what the shop guys call “lead stringers,” you probably ought to forego the leaded grade.
And forego the 25-30 % savings that it gives you on the piece part machining cost…
Take your pick.
Periodic
Photo of Lead on Manganese sulfides from L.E. Samuels Optical Microscopy of Steels.
Coin Flip
The networking that matters is helping people achieve their goals.
Its not the number of superficial friends or followers.
But inside, you already knew that.
Watch this short video.
Are you counting friends, or are you helping your friends?
And Precision Machining is likely to show a similar pickup when we compile our numbers later this month.
Precision machined components are critical to many manufactured goods in many markets including automotive, off road, aerospace, medical, appliance and many, many, more.
The Institute of Supply Management (ISM) said its survey of purchasing managers nationwide revealed strong gains in new orders and production; its index rose to to 56.9%, from 54.5% in September. you can read their survey here.
Of the 18 manufacturing industries, 14 are reporting growth in October, in the following order: Apparel, Leather & Allied Products; Primary Metals; Petroleum & Coal Products; Machinery; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Fabricated Metal Products; Paper Products; Printing & Related Support Activities; Transportation Equipment; Computer & Electronic Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; and Chemical Products.
The two industries reporting contraction in October are: Nonmetallic Mineral Products; and Furniture & Related Products.
Manufacturing activity has expanded for 15 consecutive months but the rate of growth has been slowing since April. This latest strong showing provides hope for continued growth for the balance through the end of the year.
“This month’s report signals a continuation of the recovery that began 15 months ago, and its strength raises expectations for growth in the balance of the quarter,” said Norbert Ore, head of the ISM’s manufacturing business survey committee.
Photocredit.
