The Neiman Marcus economy powers on …

Luxury retailers are doing better than retailers that sell to poor folks ... that probably reflects the difference between those who are trying to get by on stagnant wage income in the face of higher gas prices and those sitting on big capital gains from rising home prices -- if not the profits from curve flattening trades (see the comments section of my previous post on the thirty year bond).

One possible explanation for the Federal Government’s higher than expected April tax revenues: "Income growth was more concentrated than expected among high-tax rate taxpayers."

There is an argument that if China wants to give away its products, the US should happily take the gift. My problem: while the current US debt for Chinese goods trade helps some, it also hurts others. Those who work in the service sector get cheap goods and cheap mortgages. The result = a boon for the construction industry (Kash over at Angry Bear has nicely illustrated this point), real-estate brokers and those who work in the ports of Los Angeles and Long Beach .

But those who work in US manufacturing do not not gain. And to the extent that Chinese demand is putting upward pressure on the price of oil and other commodities, that takes away some of the gains from cheap Chinese goods.

Listen to Chris Dialynas of PIMCO:

It really comes down to a distribution issue. Shareholders benefit, at least in the short run, from the low cost of labor in other countries and the whole globalization process, the availability of low cost, quality goods benefits the U.S. consumers, but U.S. workers lose in this arrangement. ... As our debts get larger and larger, the need to dedicate resources toward repayment of that debt becomes greater. It also becomes more difficult because the industrial base, which can be relied upon to produce goods to sell abroad, is diminished.

China is not responsible for GM’s woes. GM is. Health care costs are. And with oil at 50, the big bets GM and Ford placed on big SUVs certainly have not helped their competitive position. But at the current exchange rate and with surplus capacity in China’s domestic auto sector, China certainly is a competitive threat to US parts suppliers. I bet the real estate market in small Ohio manufacturing towns looks a bit different than the real estate market in San Diego.

Protectionist pressure in this case is not coming out of the ether -- it reflects growing imbalances inside the US economy. If Fred Bergsten of the pro-globalization IIE says that you have to "threaten protectionism to avoid protectionism," it is time to take notice.

The US does not particularly need an American-owned car industry. But like any external debtor, its life will be a bit easier if it has at least a few thriving export industries.