This New York Times article underscores why the remaining members of America's middle class should not take their middle class positions for granted.

Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

Read the full article and you will appreciate the scale of the change in America's standing in the world and the power of Chinese manufacturing, engineering, and government finance to make it all happen.

The elites of the United States have made a grave error for the last 40 years or so by importing a large low-skilled labor force. All those cheap illegal immigrant construction workers are useless for high tech manufacturing. The Chinese have a huge labor force advantage for manufacturing. That advantage is going to cost Americans dearly in the years to come.

I will repeat a familiar theme to regular readers: Raise your game! If you are old enough to have grown up in good times, well, that was then and this is now.

You've got a choice: go down or go up. Your odds of standing still are not good. In a world where more people are competing for a declining amount of remaining natural resources you've got to try harder to maintain your current slice.

Maybe cold fusion can save your future old age pension checks from your government. But it would be imprudent to count on LENR to save our bacon. Don't expect the cavalry to come riding over the hill. If you want to do well in the future you've got step it up yourself.

Update: A piece in The Atlantic by Adam Davidson about manufacturing in the United States (thanks TimG for the heads-up) includes a picture of a rather pretty 22 year old single mom, Maddie Parlier, in a Greenville South Carolina manufacturing plant. Her employers think she's a very good worker with lots of promise. Maddie would like to learn more but does not have the time.

At one point, she looked around the office and said she’d really like to work there one day, helping to design parts rather than stamping them out. She said she’s noticed that robotic arms and other machines seem to keep replacing people on the factory floor, and she’s worried that this could happen to her. She told me she wants to go back to school—as her parents and grandparents keep telling her to do—but she is a single mother, and she can’t leave her two kids alone at night while she takes classes.

I am struck by the need for education that comes in smaller bites. Want to raise the skills level of American workers? Provide them ways to learn in small slices of their time late in the evening or while on a work break or on a Saturday morning. The learning has got to be delivered digitally across the web with many automated tests tied to lots of mini lessons.

Our education system is so 19th century. Yet the world is so 21st century. If governments want to craft useful industrial policies my advice would be to make the learning of useful skills (not college humanities classes) easy to do. The technological infrastructure exists for delivering education in bite size pieces. What's needed is the political push to make it happen.

Open marriage fan Newt Gingrich has won the South Carolina Republican primary.

My take: Animosity toward Mormonism exceeds any opposition the Religious Right has against adultery. In fact, a sense of shared Christian identity was a major reason Gingrich won.

Strange new world indeed.

Yet not terribly conservative Newt pretends he's running against a relatively more liberal Romney.

“In the end, sooner or later, it’s going to become Romney versus Gingrich, and then the natural conservative Republican Party is going to repudiate a Massachusetts moderate whose actual record is, frankly, pretty liberal.”

Of course, Newt's sexual behavior is the natural result of different levels of male and female desire for sex.

Bond giant PIMCO CEO Mohamed El-Erian seeexcessive contractual liabilities as one of our big economic problems.

I worry that, absent a dramatic change in policies in America and Europe, things will get worse before they get better. I fear that, given this possibility, it would then take years, if not decades, to repair the underlying damage done to economies, jobs and people’s lives around the globe.

We are here because of the interactions of three distinct, yet inter-related forces: poor economic growth, excessive contractual liabilities, and disappointing policy responses. The result is that western economies are getting trapped by the lethal combination of an unemployment crisis, a debt crisis, and mounting fragilities in the banking sector.

Too many institutions owe too much in debts and entitlements. The poor economic growth is in part due to high oil prices and high prices for other commodities. Jeremy Grantham's Peak Everything argument suggests our slow growth period will be long lasting. So the size of needed debt defaulting is gigantic.

In Grantham's December 2011 newsletter he says the continued slow growth we are seeing is par for the course of what he's expecting.

Sadly, I feel increasingly vindicated by my “seven lean years” forecast of 2½ years ago. The U.S., and to some extent the world, will not easily recover from the current level of debt overhang, the loss of perceived asset values, and the gross financial incompetence on a scale hitherto undreamed of.

Separate from the “seven lean years” syndrome, the U.S. and the developed world have permanently slowed in their GDP growth. This is mostly the result of slowing population growth, an aging profile, and an overcommitment to the old, which leaves inadequate resources for growth. Also contributing to the slowdown, particularly in the U.S. and the U.K., is inadequate long-term savings. As I write, the U.S. personal savings rate has fallen once again below 4%.

Grantham and El-Erian are ahead of the curve in understanding the depth of our problems and the poorer long term prospects we face. The party's over. Most people need to raise their game (more skills, try for better jobs, be willing to move for career opportunities, work harder) to keep their current living standards. Think about your options. How can you better equip yourself for hard times?

Bond giant PIMCO CEO Mohamed El-Erian explains why the World Economic Forum at Davos Switzerland accomplishes little.

But most of the Davos devotees I talk to say the problem is more fundamental. They say that many of the attendees who truly matter are not interested in the organizers’ higher ambitions, and some are even suspicious of them. In either case, these key players do not want to give up control of their narratives, and they certainly do not wish to delegate any meaningful part of their personal agenda to Davos.

He makes suggestions in that blog post on how Davos could become more productive for elites so that the elites can work together better to run the world. Excited by that?

Will world institutions rise as regulatory agencies created by treaties? Or will central banks create the structures that enable more world regulation? Or might competition within the elites keep world government from fully developing? How's it going to go?

Can you say "cognitive sorting"?

For some, that trust has a common source: three of the six banks are led by economists who studied or taught at the Massachusetts Institute of Technology in the late 1970s and early 1980s. Then, as now, the emphasis was on what former MIT professor and now Bank of Israel Governor Stanley Fischer describes as “economics about the real world.”

Maybe the schools will specialize. Want a Secretary of State or Foreign Minister? Better make sure your country sent enough people to Harvard. Want a Treasury Secretary? Probably Dartmouth grads who spent time on Wall Street. Our last 2 Treasury Secretaries (Hank Paulson and Timothy Geithner) follow this mold. Though Geithner also has the chops to be Secretary of State with his time at Johns Hopkins and in China learning Mandarin and Chinese culture and history.

The full article gives more examples than I'm excerpting here. Its not just the central bank heads who studied together. Other officials on both sides of the Atlantic met in grad school.

At MIT, King, 63, and then-professor Ben S. Bernanke, 58, had adjoining offices in 1983, spending the early days of their academic careers in an environment where economics was viewed as a tool to set policy. Earlier, Bernanke and European Central Bank President Mario Draghi, 64, earned their doctorates from the university in the late 1970s, Draghi with a thesis entitled “Essays on Economic Theory and Applications.”

With the Ivy League, MIT, and Stanford pulling in even more students from abroad than was the case in the 1970s and 1980s you can imagine what the next generation of elite officials will be like. They'll be able to do Harvard and MIT alumni reunions at G-8 meetings and other gatherings of elected and appointed high officials. They'll have to have Yale and Dartmouth dinners too. If only all this elite selection actually resulted in central bank officials who were less than totally clueless when in the middle of a huge real estate bubble about to burst. If only elite education translated into high competence.

So which schools should graduate social welfare cabinet secretaries? Can we just use Nobel Laureates to run Energy departments for now on? Should their alma mater figure in? Or just the Nobel?

You might think the United States is junk food center of the world and that Europeans have more sophisticated tastes. Yet McDonalds only gets 34% of its revenues from the United States and 40% from Europe.

Maybe the other US fast food giants aren't as big over in Europe and so McDonalds faces less face food competition over there. Still, I did not expect Mickey D's to be bigger in Europe. Do the least educated (using a euphemism here kiddies) in Europe have more money to spend on junk food than the least educated in America?

Back in 2010 Steve Randy Waldman gave an interview (which I've only just found) on consumer lending that makes some interesting points: consumer behavior toward lenders should change because lender behavior toward consumers has changed.

The financial industry has changed the economic and legal landscape surrounding consumer lending so that it simply bears no resemblance at all to interpersonal loans among people of good will in continuing relationships. But those are the norms they ask borrowers to adopt with respect to repayment. That act, demanding others act in accordance with standards from which one exempts oneself, is morally offensive. In a society which, despite economic difference, accepts no social class, ones moral obligation is to behave towards others as others must behave towards you. It is clear that, in general, banks and the special purpose entities that increasingly replace them treat their transactions with borrowers as hard-nosed business arrangements which they are willing to pursue on adversarial terms when doing so is in their interest. Borrowers should do the same. To do otherwise is to reward the cynical immorality of others, which serves no social good.

I see a growing bias toward favoring lenders basically because the lenders are powerful. For example, the Irish government was induced to bail out Irish bank bondholders at the expense of Irish taxpayers. The bail-out wasn't just for checking account depositors. It was for German and other European banks which had lent the Irish banks lots of money. The whole European debt crisis has basically played out as an attempt to prevent imprudent lenders (buyers of sovereign debt and bank debt as well as banks that lent for real estate bubbles) from having to take a bath due to their imprudence

Student debt in the US is another example where the political deck has been stacked in favor of lender. US student debt is near impossible to reduce in bankruptcy. To my knowledge it is unique in this respect. Effectively students are entering into debt peonage due to the power and corruption of both lenders and universities. They are like cigarette companies that tempt successive generations of youth into harmful addiction.

My problem with the lenders: If profligate irresponsible spenders act in ways harmful to the the commonwealth (and I think they do) then their enablers also harm society as a whole. Why should we protect these enablers by forcing others (and not just the borrowers) to bail them out? Lenders are morally culpable for creating financial bubbles and enabling irresponsible borrowing.

You don't even have to make a million dollars or even a half million a year to hit the top 1%. If you can hit $380k per year people will camp out in parks to protest your existence. Is that cool or what?

The range of wealth in the 1 percent is vast — from households that bring in $380,000 a year, according to census data, up to billionaires like Warren E. Buffett and Bill Gates.

Surgeons can reach the top 1%. So can, say, owners of big car dealerships. The top 1% is just not that exclusive. How disappointing.

On the other hand, most people don't know that the top 1% starts at $380k. So if you can reach the $380k threshold you can brag to people that you make enough to be in the top 1% and then decline to state just how much you make.

Of course, earning in the top 1% isn't the same as owning in the top 1%. But most people excited about Occupy Wall Street are going to miss that distinction too. If you want to signal to the OWS crowd you are above them then make $380k a year and then brag to OWS supporters.

Getting into the top 1% by income is a lot easier than getting into the top 1% by net worth. Just to make it into the top 5% you had to have over $1.5 million in assets in 2009. That's not the top 1%. That's the top 5%.

In 2009, the median net worth of the top 10% of wealth in the United States was $1,569,000. That is, if you had exactly that amount, half of the top 10% would be poorer than you and half of the top 10% would be richer than you. You would be standing exactly in the middle. By definition, we know that this must be the cut-off for the top 5% of net worth.

The people making $380k from a high salary are at much greater risk of falling out of the income top 1% than those who make their $380k from interest and dividends. The people with extensive assets are the real elite.

If you think the top 1% is out of reach how about the top 5%? Based in adjusted gross income the IRS says in 2010 about $160k was the threshold for reaching the top 5%. That's after tax deductions, including 401k contributions and HSA contributions. So realistically you've probably got to earn about $190k to make it into the top 5%.

In that last link note that the top 50% only requires $33k of income. So it is pretty easy to feel like you've surpassed half the US population. The US government spending per household (at nearly $36k) has now surpassed the level of earnings of the average American wage earner.

What's tragic about all this: It has become expensive to live in a nice neighborhood. Your ranking by looking at your income might seem high at first glance. But what are you paying for? I'm reminded of a tweet from Steve Randy Waldman: "the most expensive amenity in real estate is well-behaved neighbors." Later in the exchange tells a non-American "...you'd be surprised how expensive a nice life in America is even for those who care little for the trappings of success." Too true.

In article about Greek parents abandoning children they can no longer afford a couple of sentences show that the Greek government is demonstrating the ability to make a bad situation even worse. If the majority of Greeks support this they deserve to go without drugs.

Pharmacists are struggling to stock their shelves as the Greek government, which sets the prices for drugs, keeps them artificially low.

This means that firms are turning to sell the drugs outside of the country for a higher price - leading to stock depletion for Greeks.

There's no excuse for such blatantly destructive policies.

One wonders: Do Greeks end up buying drugs from web sites to get shipped in from other European Union nations?

What I wish: that I could get a government as good as I deserve and better than the ignorant majority deserve.

An article about some serial killer who is stabbing street people in Orange County California has a rather poingnant comment from a woman whose father became a street person after his wife dumped him.

Paulus Cornelius “Dutch” Smit, 57, was described as “kind” and “sunny,” an “honest and sincere soul” who “seemed excited to be alive.” His bloody corpse was found at the bottom of a library stairwell in Yorba Linda, CA, on December 30. He reportedly had visited the library “almost daily” for a year, which a newspaper account noted was “a rarity for the homeless in the area.” Smit had spent time in Juvenile Hall during his teens for theft. Smit’s daughter Julia recalls that after her mother left him, he preferred living full-time on the streets to working a full-time job and found more “nobility” in referring to himself as a “wanderer” rather than a transient. Julia said it wasn’t until her teens that she accepted her father was what many people would call a bum: “Then I’d see him digging through Dumpsters and say, ‘That’s my father! That’s Papa!’” As with McGillivray, a small candleit memorial has been constructed at Smit’s murder scene.

Imagine being that daughter and seeing your dad digging thru dumpsters. He made life harder on her. Did he know that? Did he care?

So how many people become street people because they just give up on a normal life? Some are alcoholics, other schizophrenics. Okay, I can understand damaged brains and addictions turning people into street bums. But how many choose it? Why? Low motivation? It seems a hard life. I like a soft bed, nice chair, warm shower, and stocked kitchen.

The status fall: What do street people think of status? Who do they compare themselves to?

One small parasitic agency bites the dust.

Brownback defied even the GOP-led state legislature in cutting funding for the arts, which left Kansas as the only state without a state-funded arts commission.

Really, governments should not be funding arts commissions. Arts commissions along with many other little parasites grow on governments. Agencies. Advisory boards. Commissions. Since we are now in an era of slow growth (at best) we need frugality.

What would help: A web site which lists a large assortment of things some governments do with columns by federal, state, and local government. Checks on each cell could indicate which governments fund various things. Hover over or click thru on a cell to find out how much gets spent for each purpose.

What has amazed and educated me about the long-running California budget crisis is just how long the crisis has had to run to get some forms of waste cut. In a period of deep crisis the money funneled to subsidize developers doing stuff like refurbishing arts centers and theaters and other public works projects has been hard to cut back. The forces for waste are quite powerful.

Plus, even with staffing on core functions (prisons, police, teachers - all with bloated cost per employee due to public sector unions) getting cut new forms of waste are popping up. Notable case in point: The costs of a dubious California high speed rail project started at around $25 billion to to more than $40 billion to more than double to nearly $100 billion. The numbers are now close to other high speed rail projects per kilometer but could go higher. Only 2 high speed rail lines in the whole world turn a profit. Yet this doesn't dissuade either Governor Jerry Brown or the California legislature. Government has a strong bias toward wasting money.

French Interior Minister Claude Guéant is requiring applicants for French citizenship to show support for French values as a condition for French citizenship. Good for him. Good for France.

Candidates will be tested on French culture and history, and will have to prove their French language skills are equivalent to those of a 15-year-old mother tongue speaker. They will also be required to sign a new charter establishing their rights and responsibilities.

Why import millions of people who are fundamentally illiberal into a liberal polity?