Krugman: Not So Global
Barry Ritholtz sends us to a San Francisco Fed paper from last summer that makes a point on which many people seem confused: despite globalization and all that, the bulk of a consumer dollar spent in America falls on American-produced goods and services.
The reason this matters or at least one reason it matters is for discussion of austerity, stimulus, and all that. I often get comments along the lines of Well, maybe stimulus worked back in the old days, but now it just means spending more on stuff from China. In reality, thats nowhere near true.
Why? For one thing, most consumer spending is on services, few of which are really tradable. For another, even if the thing you buy in WalMart says Made in China, the price includes a lot of US value-added in the form of transportation and retailing costs...
So were still a country where about 85 cents of your consumer dollar is spent at home, one way or another. And this means, among other things, that the rules of macroeconomics havent changed nearly as much as people imagine.
http://krugman.blogs.nytimes.com/2012/01/16/not-so-global/