CDZ What Adversely Affects US Economic Quality Control?

[william the wie]

Another poster pointed out that trade deficits are a consequence of poor quality control. So why for the last 50 years has quality and to a lesser extent cost control been an endemic problem?

 

[DarkFury]

Companies pushed quantity over quality.
Consumers were taught its more important to be the latest over durable.
Consumers were also taught they NEEDED certain things like tires that sent air pressure to computers INSTEAD of drivers LOOKING at them.

I think cars are the greatest example where smart drivers are replaced by smart cars. The American consumer is being taught to accept computers over brains and ability.

 

[Onyx]

Another poster pointed out that trade deficits are a consequence of poor quality control.

No correlation.

 

[usmbguest5318]

Another poster pointed out that trade deficits are a consequence of poor quality control. So why for the last 50 years has quality and to a lesser extent cost control been an endemic problem?

You know, often enough, members on USMB say things that don't warrant being responded to. The notion that trade deficits are the consequence of poor quality control is one such thing. I don't even care if there's a correlation of some sort between the two. Correlation does not equal causality.

 

[william the wie]

Actually in this case LBJ and Nixon created the basic problem with Guns and butter budgets that were constrained by wage and price controls in order to set off the Great Inflation of 1968-1982. The question is why haven't we reverted to the mean?

 

[Toronado3800]

Another poster pointed out that trade deficits are a consequence of poor quality control. So why for the last 50 years has quality and to a lesser extent cost control been an endemic problem?

I will throw a bone to this other poster's point.

People all the time buy things online instead of seeing them and inspecting them for quality. On flea-bay and the other site all you really get to compare is price and seller reputation. The reputation is left almost immediately after purchase, not the next year, or five years in.

Is it the cause of the trade deficit? No. Does the advantage cheap imports have contribute, yes.

Do we blame the internet? No.

Consider the 2nd most expensive thing most of us ever want to purchase, cars. Folks were buying cheap imports well before their quality matched domestic automobiles.

 

[Picaro]

Actually in this case LBJ and Nixon created the basic problem with Guns and butter budgets that were constrained by wage and price controls in order to set off the Great Inflation of 1968-1982. The question is why haven't we reverted to the mean?

Inflation didn't take off until the global oil and food crisis began hitting in Ford's term as President and into the end of the housing bubble bust under Reagan. All that inflation is still with us, never went away, so we're basically at the new mean levels now, at least when using long term wholesale gold price averages as a reference for lack of a better one. I'm not sure what you mean; we're in a cycle that prudence would dictate deflation, but too many interests are desperate to keep the inflationary cycles rising, because of the havoc that real deflation would cause.

The Great Wave: Price Revolutions and the Rhythm of History: 9780195121216: Economics Books @ Amazon.com

Waves of Economic Development - Wikipedia

Much of the problem is easily fixed, but nobody wants to do it; take a cue from the ancient Jewish religious guidelines and do resets every few years where everyone adjusts their books and financial records back to more rational currency values. 'Jubilee Years' or something, I'll have to go look it up when I have time. Everybody rests their tallies to reflect real values again, and everybody stays on the same page relative to debts, equity, and inventory values. They did it every 50 years, but that was a much slower time; it can be speeded up for modern times to every 7 or 10 years.

It's outright ridiculous to have situations like 20 and 30 year home mortgages and 6 year auto loans. My grandparents thought 3 year mortgages were edgy and 7 year ones completely insane..

 

[Dragonlady]

Actually in this case LBJ and Nixon created the basic problem with Guns and butter budgets that were constrained by wage and price controls in order to set off the Great Inflation of 1968-1982. The question is why haven't we reverted to the mean?

Inflation didn't take off until the global oil and food crisis began hitting in Ford's term as President and into the end of the housing bubble bust under Reagan. All that inflation is still with us, never went away, so we're basically at the new mean levels now, at least when using long term wholesale gold price averages as a reference for lack of a better one. I'm not sure what you mean; we're in a cycle that prudence would dictate deflation, but too many interests are desperate to keep the inflationary cycles rising, because of the havoc that real deflation would cause.

The Great Wave: Price Revolutions and the Rhythm of History: 9780195121216: Economics Books @ Amazon.com

Waves of Economic Development - Wikipedia

Much of the problem is easily fixed, but nobody wants to do it; take a cue from the ancient Jewish religious guidelines and do resets every few years where everyone adjusts their books and financial records back to more rational currency values. 'Jubilee Years' or something, I'll have to go look it up when I have time. Everybody rests their tallies to reflect real values again, and everybody stays on the same page relative to debts, equity, and inventory values. They did it every 50 years, but that was a much slower time; it can be speeded up for modern times to every 7 or 10 years.

It's outright ridiculous to have situations like 20 and 30 year home mortgages and 6 year auto loans. My grandparents thought 3 year mortgages were edgy and 7 year ones completely insane..

You grandparents had 25 year mortgages where the interest rates never changed. Interest rates began changing in the 1970's to 5 year renewables.

 

[SyuzVR]

Hi everyone. I am a new member to this forum. Nice to meet you all.

 

[william the wie]

Actually in this case LBJ and Nixon created the basic problem with Guns and butter budgets that were constrained by wage and price controls in order to set off the Great Inflation of 1968-1982. The question is why haven't we reverted to the mean?

Inflation didn't take off until the global oil and food crisis began hitting in Ford's term as President and into the end of the housing bubble bust under Reagan. All that inflation is still with us, never went away, so we're basically at the new mean levels now, at least when using long term wholesale gold price averages as a reference for lack of a better one. I'm not sure what you mean; we're in a cycle that prudence would dictate deflation, but too many interests are desperate to keep the inflationary cycles rising, because of the havoc that real deflation would cause.

The Great Wave: Price Revolutions and the Rhythm of History: 9780195121216: Economics Books @ Amazon.com

Waves of Economic Development - Wikipedia

Much of the problem is easily fixed, but nobody wants to do it; take a cue from the ancient Jewish religious guidelines and do resets every few years where everyone adjusts their books and financial records back to more rational currency values. 'Jubilee Years' or something, I'll have to go look it up when I have time. Everybody rests their tallies to reflect real values again, and everybody stays on the same page relative to debts, equity, and inventory values. They did it every 50 years, but that was a much slower time; it can be speeded up for modern times to every 7 or 10 years.

It's outright ridiculous to have situations like 20 and 30 year home mortgages and 6 year auto loans. My grandparents thought 3 year mortgages were edgy and 7 year ones completely insane..

You grandparents had 25 year mortgages where the interest rates never changed. Interest rates began changing in the 1970's to 5 year renewables.

Actually in this case LBJ and Nixon created the basic problem with Guns and butter budgets that were constrained by wage and price controls in order to set off the Great Inflation of 1968-1982. The question is why haven't we reverted to the mean?

Definitely part of the problem.

 

[Picaro]

You grandparents had 25 year mortgages where the interest rates never changed. Interest rates began changing in the 1970's to 5 year renewables.

No, they didn't. The average person of my grandparents' era would never have seen such a thing as a 'home mortgage' of the types we see today, and most wouldn't have qualified for one, much less for one at anything like 25 years. They would live at home or in a crappy apartment or house of some type and saved for a lot and then built a small starter home, and added on to it over the years; if they needed to borrow they would borrow from relatives or take out a small building loan of maybe 3 years max, with what they already had as collateral. Home loans, essentially a consumer loan, are a fairly recent invention. The 'middle class' in my grandparent's day was very small, so most were getting by by saving and paying as they went.

Most of the loans available came from real estate developers themselves, not banks or mortgage companies. These weren't really loans, they were just payment plans for the lots and houses.

Check Out These Mortgage Rate Charts from the Early 1900s | The Truth About Mortgage.com

A Little Bit of Mortgage History

That brought me to several out-of-print volumes from the National Bureau of Economic Research, which seems to have the best records out there.

Unfortunately, the details are still quite murky at best. You see, back then there were different types of mortgages, not like the ones used today.

While I don’t know when the very first 30-year fixed mortgage was created and issued (someone please tell me), they were believed to become widespread in the 1950s, which is why media references that decade.

Before that time, it was common for entities like commercial banks and life insurance companies to issue short-term balloon mortgages, often with terms as short as three to five years, which would be continually refinanced and never paid off.

These loans were also underwritten at LTV ratios around 50%, meaning it was pretty difficult to get a home loan.

Later, once the Great Depression struck, home prices nosedived and scores of foreclosures flooded the housing market because no one could afford to make large payments on their mortgages, especially if they didn’t have jobs.

Then came FDR’s New Deal, which included the Home Owners’ Loan Corporation (HOLC) and the National Housing Act of 1934, both of which aimed to make housing more affordable.

The HOLC, established in 1933, could explain why long-term fixed-rate mortgages are in existence today.

The purpose of the HOLC was to refinance those old balloon mortgages into long-term, fully amortized loans, with terms typically ranging from 20 to 25 years.

Of course the catch is such long term loans double or triple the cost of the house. they were designed to lower the monthly payments, is all. And with jobs these days even for the employed requiring moving about every three years on average, only idiots will commit to such terms.

You can root around over at NBER for more info, maybe EHnet as well.

The National Bureau of Economic Research

 

[william the wie]

Balloon mortgages were also big 1900-30. Grandpa was a contractor and my other other grandfather was a cotton buyer. I've been in both their homes. They were originally about 500 sq. ft and were added onto by successive buyers. But the yards were measured in acres to help the kids build a house when they got married.

 

[Dekster]

Another poster pointed out that trade deficits are a consequence of poor quality control. So why for the last 50 years has quality and to a lesser extent cost control been an endemic problem?

I am not sure what you mean exactly. Are you talking about product quality control? If so, then it is because it is easier and cheaper to replace something than it is to have it fixed usually. Part of that has to do with the rising cost of labor, and part of it has to do with the expanse of competition keeping costs relative low on the goods people most often replace. Let's take my dishwasher. no doubt it is original to the house built in 1980. Still works fantastic. If I were to buy a new one, I would be lucky to get five-ten years of it. The new ones are too high tech and hi tech is not made to last because they want you coming back for a new one in 5-10 years.

 

[william the wie]

Another poster pointed out that trade deficits are a consequence of poor quality control. So why for the last 50 years has quality and to a lesser extent cost control been an endemic problem?

I am not sure what you mean exactly. Are you talking about product quality control? If so, then it is because it is easier and cheaper to replace something than it is to have it fixed usually. Part of that has to do with the rising cost of labor, and part of it has to do with the expanse of competition keeping costs relative low on the goods people most often replace. Let's take my dishwasher. no doubt it is original to the house built in 1980. Still works fantastic. If I were to buy a new one, I would be lucky to get five-ten years of it. The new ones are too high tech and hi tech is not made to last because they want you coming back for a new one in 5-10 years.

Paying higher prices for lower quality is becoming an ever bigger problem as in the defective California mandated toilets are worth much less than the old style toilets. I don't know how that works out long term but I suspect that 3-d printers will make assembly line, planned obsolete products a thing of the past.

 

[usmbguest5318]

Hi everyone. I am a new member to this forum. Nice to meet you all.

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