Manufactured Exports Fall to 5-1/2 Year Low

December 7, 2016

Almost seven years ago, in the wake of his disastrous visit to Mexico to address our trade deficit – which resulted in a sharp rebuke from the Mexican president and even higher tariffs on American goods – President Obama decided to turn his focus on exports.  “Why can’t we have an export-driven economy like Germany,” he challenged his economic team.  Evidently, none of them responded that there is no other United States out there to serve as our trade patsy as we’ve done for Germany.  So, in January of 2010, the president proclaimed that, within five years, the United States would double its exports.  This would be the centerpiece of his economic agenda.

Yesterday the Bureau of Economic Analysis released its monthly report of International Trade in Goods and Services.  The overall trade deficit came in at $42.4 billion in October, right in the range where it has been throughout the Obama administration.  There isn’t another economic report that chronicles America’s economic demise as clearly as this one does, yet the reaction was the same as it’s always been:  ho-hum.  Unbelievable.

To get to the real heart of the problem – the siphoning of jobs out of our economy – you have to strip away the “noise” – the trade in services, oil and food.  What’s left is trade in manufactured products, and the picture there grows worse with each passing month.  The deficit in manufactured products was $57.9 billion in October, not far from the record of $62.5 billion set in March of last year.  Check out this chart:  manfd-goods-balance-of-trade.

Especially pathetic is the contribution of declining exports to the increase in the deficit.  In October, manufactured exports fell to $104.3 billion, the lowest level in over 5-1/2 years.  (Exports of manufactured goods were $104.9 billion in March, 2011.)  Manufactured exports have fallen by $10.3 billion since peaking at $114.6 billion exactly two years ago.  To reach Obama’s goal, exports would have had to rise to $171.7 billion.  They never even came close.  Here’s a chart showing both manufactured exports and imports since Obama made his vow to double exports:  manfd-exports-vs-goal.  A complete failure, and no surprise.  The U.S. has no control over exports.  But at least deflecting attention away from the steady growth in imports – and the corresponding steady decline in manufacturing jobs – made things more pleasant for Obama around the punch bowl at G20 meetings.

Frankly, I’m sick of tracking this statistic under the Obama administration, watching it get predictably worse.  Only two full months of data remain – November and December.  Then things get interesting again.  This deep hole that’s been dug under the (lack of) leadership by Obama becomes Trump’s baseline.  How far and how fast can he whittle down this deficit?  Could he even turn it into a surplus, like we used to enjoy forty years ago?  Time will tell.  A deficit of $60 billion in manufactured goods represents a loss of ten million manufacturing jobs, and probably an equal number of jobs in ancillary industries.  Such a demand for labor would mop up every last unemployed person in the country and send wages soaring.  If Trump accomplishes even half of this, people will be stunned at the effect on the economy.

 


Some Observations about Trump’s Transition

November 25, 2016

The following are some random thoughts and observations about the unfolding transition of Donald Trump’s presidency.  (I still can’t believe I’m writing those words.)

  • Wow, for a guy pushing 70, this guy has a motor!  I stayed up the night of the election until it was clear he had won, which happened about 3 AM on the morning of the 9th.  I was exhausted for the next several days.  Not Trump.  Two days after the election he was at the White House to meet with President Obama and then on to Capitol Hill for a series of meetings.  The next day he launched into an endless stream of meetings with potential staff members – up to twenty meetings a day – and still had the energy to be “tweeting” at 3 o’clock in the morning.  Yesterday – Thanksgiving Day – he was even on the phone with the CEO of the Carrier Corporation trying to convince them that moving their manufacturing operations to Mexico was a bad idea.  The guy is clearly a workaholic.
  • In order to push forward his agenda, he needs a cabinet staffed with like-minded individuals, not a “team of rivals” as some have suggested.  I’ve been pretty pleased with his picks thus far, but I really hope he doesn’t pick Romney for Secretary of State.  Romney might soothe ruffled feathers among traditional Republicans and calm nerves among foreign leaders with his polished style and globalist outlook, but that’s not what Trump needs.  He needs someone who can look China in the eye and tell them “tough s___” when they complain about Trump’s trade policy.  That’s definitely not Romney.  Giuliani would be a much better choice.
  • Trump has softened his stand on illegal immigrants somewhat, vowing to deport or incarcerate 2-3 million of the worst among them, but expressing a willingness to “consider” the rest.  I’m OK with that as long as he “builds a wall” or takes whatever other actions are necessary to put a halt to illegal border crossings and to immediately deport those who still do make it across.  A pleasant surprise has been his vow to also crack down on some legal immigration, like the H1B visa program which is designed purely to hold down wages.  The program, and others like it, should be completely eliminated.
  • Early on, Obama began assembling a team of economic advisors, mostly academics, largely from Harvard.  No wonder his vow to tackle the trade deficit was quickly abandoned.  So far I’ve heard none of this about Trump’s transition team.  Unless I’ve missed something, there hasn’t been a single mention of an “economic advisor.”  Good.  He doesn’t need any.  His economic plans are right on target and he would be hard pressed to find any economists who wouldn’t steer him in the wrong direction.
  • So far, his plans to impose tariffs on Mexico and China, though a huge step in the right direction, are too timid.  Tariffs on auto parts from Mexico will only make U.S. auto manufacturers less competitive with imports from Japan, South Korea and Germany.  Tariffs on Chinese imports will only move manufacturers to India, Vietnam, Indonesia and other countries with huge labor forces.  To be successful, he needs to extend his tariff plans to include all products from all such countries.
  • I’ve heard some pundits proclaim that some manufacturing jobs won’t come back to the U.S. no matter what he does with trade policy.  That’s absolute nonsense.  If tariffs raise prices to the point where products can be made profitably in the U.S., then someone will seize the opportunity and do exactly that.  For example, if Apple doesn’t move its i-phone manufacturing back to the U.S., then someone else will soon undercut them with cheaper and better phones made right here in the states.
  • Manufacturers who have moved to China might be wise to not even wait for tariffs to be implemented.  They’d be smart to move their equipment back to the U.S. before China prevents such moves.
  • Despite all the fear-mongering by free trade and globalization cheerleaders about the dangers of “protectionism,” investors seem to be betting on the opposite.  In fact, we see the same thing happening in Britain in the wake of “Brexit.”  I’m reminded of an old saying:  “Money talks and BS walks.”
  • The media has been wringing their hands over potential conflicts of interest with Trump’s vast and far-flung business empire.  It’s a potential concern, but everyone knew it when they voted for him and it’s not something he can divest overnight.  Let’s give it time to play out.
  • Trump’s not an inspirational orator like Obama has been.  That’s OK.  I’ll happily trade that trait for someone who can get things done to fix our immigration mess and our idiotic trade policy.

There should be no misconceptions that this will be anything but a wild ride.  It’s going to be absolutely fascinating to watch it play out and, if he follows through on his campaign promises on immigration and trade, we’re going to witness a transformation in the U.S. economy that no one even thought possible.


How the Global Elite Sewed the Seeds of Trump’s Victory and Their Own Demise

November 23, 2016

With each passing day since the election I am more amazed than the day before at what I see happening as the Trump administration begins to take shape and at the reaction from world leaders, the business world and political pundits.  I have a lot of thoughts I want to share about what this all means but, before getting into all that, I thought I’d share another take on just what happened with this election – a “take” that I haven’t heard from anyone else yet.

As global corporations began the process of implementing the New World Order that had its genesis in the signing of the Global Agreement on Tariffs and Trade in 1947 – especially as the process accelerated first with the signing of the North American Free Trade Agreement, followed closely by the admission of China to the World Trade Organization, both events occurring during the Clinton administration – the painful process of passing out pink slips to American manufacturing workers got underway in earnest.

With nothing more than a small severance check and, perhaps, some “job re-training” (to do exactly what was never clear), millions of people were suddenly faced with the question, “now what do I do?”  They began with the obvious – look for another job.  When that didn’t work, more and more people tried their hands at starting their own businesses. It stimulated an interest in entrepreneurism like we hadn’t seen before.  People sought out the advice of successful entrepreneurs and began to revere the most successful among them.

The appetite for entrepreneurial advice didn’t escape television executives.  Never one to miss an opportunity, enter Donald Trump and his reality show “The Apprentice,”  which first aired in January of 2004 and has run continuously since then in various formats.  Viewers were awed by his business instincts, his ability to see through phoniness and identify those with real ambition, and his ability to win at business.  For people who had been exposed to the lies and BS that were standard fare used by corporations to justify the sacrifice of their jobs on the altar of globalism, this was refreshing.  This was someone they could admire.

What the global elite didn’t anticipate was that they were making a hero of a fabulously successful entrepreneur who didn’t need their money, one with political ambitions and one who, for whatever reason, seemed to have an affinity for the working class.  I’m reminded of the natural world where imbalances have a way of correcting themselves.  If a population of some species grows out-of-control, other forces have a way of reining it in.  In the same way, when the global elite concocted a system that helped some at the expense of others, they unwittingly sewed the seeds of that system’s own demise.

 


Are Americans really ready for what’s to come?

November 16, 2016

Some have described the election of Donald Trump as a “political earthquake.”  That doesn’t begin to describe it.  A more fitting analogy would be the asteroid that struck the earth millions of years ago, wiping out the dinosaurs and most other living species.  The world was forever changed.

Sure, the sun came up the morning after Trump’s election and normal life resumed.  People living off the grid would never know that anything had happened. But fasten your seat belts, folks.  You haven’t felt it yet, but the blast wave from that asteroid strike is on its way.  If Trump implements the trade policy he promised during the campaign, we’re in for a very rough ride.  I’m afraid that few people really comprehend what’s coming.

Don’t get me wrong.  It needs to be done.  If Trump doesn’t do it, America will continue to be sucked into the vortex of the poverty-sharing scheme of globalization until we have nothing left.  Incomes will continue to decline.  Health care and college educations will become even less affordable.  Forget any dreams of a secure retirement.  Infrastructure will crumble further while the national debt soars.

So it has to be done, but entire economies – big ones – have been built on manufacturing for export to the U.S.  Globalization won’t go down without a fight.  It’ll begin with sniping from every corner of a vast network of globalization cheer-leaders that support their special interests, including the World Bank, the International Monetary Fund, the World Trade Organization, national leaders, CEOs of global corporations, the U.S. Chamber of Commerce and its local chapters, and economists who can’t come to grips with the notion that everything they’ve learned, taught and fought for was wrong.  Based on past experience with presidents over the past several decades, it’s hard to imagine one that could withstand such withering criticism.

But that’s nothing compared to what will follow.  It seems that Mexico is the first one that Trump has in his cross-hairs.  They may try retaliatory trade sanctions, like big tariffs on food exports.  But they don’t have the wherewithal to present real problems.  China, however – who the Trump administration will turn its sights on next – is another story.  They’ll try retaliatory trade sanctions first but, when you’re the nation with the huge trade surplus, it’s impossible for China to win a trade war.  The thing that Chinese leaders fear the most is not the U.S., but civil unrest among its own people.  Big tariffs on Chinese exports to the U.S. would shift the now-booming Chinese economy into reverse.  Conceivably, it could collapse their economy.

The Chinese people have become conditioned to feel entitled to a booming economy and to preying on the U.S. market.  They’ll be angry as hell and will demand action from their government.  Rioting may break out.  In its death throes and desperate to placate their demands, the Chinese regime may turn to military action.  It’s impossible to predict how something like that might unfold.

There are those already saying that tariffs against Mexico can’t work – that forcing the manufacturing of American cars and parts back into the U.S. will only make them uncompetitive with other auto imports.  And they are right.  In order to succeed, Trump will need to expand the use of tariffs to include other countries like Japan, South Korea, Germany and others.  Now we’ll have more unhappy campers who may be willing to form a new alliance against the U.S.  Are Americans prepared for this?

And are they prepared for some gut-wrenching changes in our own economy?  It’s true that tariffs will drive up prices for U.S. consumers and, in many cases, there are no American manufacturers ready to fill the void.  It’s going to take some time to design, build and start up new plants.  Will Americans have the patience to endure a burst of inflation and very likely a recession until wages catch up and offset the higher cost of goods, or have we become too spoiled for that?

I wonder if even the most strident Trump supporters have anticipated these ramifications and whether they’re willing to endure the pain.  It’s easy to say “make American great again” but making it happen is going to be a long and very difficult process.    It’s going to take a virtual war-footing mentality among Americans.

And what about Trump?  Will he be a strong enough leader to maintain the support of the people through all of this?  Based on what we’ve seen from Trump, we can expect that, when foreign leaders lash out at him, he’ll hit back just as hard.  No one should doubt his ability to win.  It’s the American people I’m more worried about.  Will they be ready to jump ship at the first sign of adversity, or are they tough enough to stand by Trump and see this through?

 


More Thoughts on Trump Victory

November 10, 2016

I’ll preface this by reminding readers that, in various posts in the past, I have described Donald Trump as a buffoon and as a “foul SOB.”  In spite of that, I encouraged you to vote for him as I did for one reason:  his stands on illegal immigration and trade align well with the conclusions of my book, Five Short Blasts.  To very briefly summarize, there is an unrecognized (by economists) inverse relationship between population density and per capita consumption which has two major implications – that population growth beyond a certain level becomes a cancerous growth that eats away the economy, and that free trade with badly overpopulated nations accelerates this effect dramatically.  The effect of these on our economy is so over-riding that these issues dwarf all others.  I would vote for any candidate – Republican, Democrat or Independent – whose positions address these issues.

With that said, the following are some random thoughts on what happened in this election:

  1. Any party that focuses only on minorities and ignores the majority is doomed to fail.  The Democratic Party did exactly that, taking its historical support from working-class Americans for granted and ignoring them and polling data that consistently showed their deep concern about the direction of the country.
  2. The Republican Party has also blundered in its strategy of making itself indistinguishable from Democrats, particularly when it comes to the key issues of trade and immigration, contenting itself with splitting the vote while hoping to sway a small 0.5% toward their side.  Were it not for the fact that Trump – not a true Republican – chose to identify himself as one and to fight tooth and nail to prevail against their slate of traditional Republicans – the Republican party would have lost this election.
  3. This election was all about a rejection of the globalism and open borders that both parties embraced.  I don’t think either party, even now, fully understands this.  Whichever party embraces a new strategy and platform based on our nation’s right of self-determination will succeed going forward.
  4. Though it pains me to quote him, Bill Clinton said it best in the ’91 election:  “It’s the economy, stupid.”  Indeed it is, and not necessarily the macro-economy but each individual’s own share of the economy.  Only when the vast majority of Americans are enjoying the fruits of a healthy economy can other issues like the environment take center stage.  Both parties ignored the polling data that showed the country was headed in the wrong direction and that voters were fed up with their politicians.  The Obama administration chose to fool itself with gimmicked economic data.  Few voters were fooled.
  5. Clinton erred when she tried to portray Trump’s position on illegal immigration as racist and xenophobic.  Illegal immigration is a concern for all Americans and it’s a mistake to believe that Hispanic Americans would uniformly embrace it just because most illegal immigrants are Hispanic.  Many have been here a long time now and identify themselves as Americans first, just as I identify myself as American and not Irish.  As I said in Five Short Blasts, I wouldn’t care if it was Ireland that we shared a border with instead of Mexico.  Illegal immigration has to be stopped.  The Democrats were shocked to learn that nearly 30% of Hispanics voted for Trump.  Many were insulted by the assumption that they favor illegal immigration over the interests of their own country just because of their ancestry.  The Clinton campaign was no less guilty of stereotyping Hispanics than Trump was perceived to be.
  6. The Democrats are almost as guilty of taking the black vote for granted as they were of taking white working-class voters for granted.  Trump made a play for the black vote.  It was criticized as a clumsy attempt, but he made a very valid point, that the inner cities seem to be little better off and have little to show for their support for the Democratic party.  Trump correctly pointed out that his trade policies aimed at rebuilding the manufacturing sector of the economy would, if anything, benefit the black community even more than the white community.  Well, it didn’t seem to resonate that much, though Clinton got a little less of the black vote than Obama did.  But Trump has laid down a marker for the black community.  They may have been skeptical of what he said, but they’ll likely remember if, in fact, a manufacturing turn-around produces a renaissance in the inner cities.  Democrats, beware.
  7. The Clinton campaign’s mantra was that “when they go low, we go high!”  Yet, in the final days of the campaign, they did just the opposite.  They took the worst, most crude elements of the campaign and bundled them into commercials.  The commercials criticized Trump for things not fit for our children to hear, yet the Clinton campaign had no problem with bombarding our children with those things incessantly on prime time television – even during the World Series.  It came across as very two-faced and, if anything, made Clinton  seem more of a sleeze-bag than Trump.
  8. Meanwhile, the commercials aired by the Trump campaign in the last couple of weeks were very positive.  There was one commercial  that took on globalism and the globalist elites who profited at the expense of everyone else.  It was a dynamite, highly-effective commercial that should have begun airing sooner and should have aired far more often. But I saw it only once (and I watch a fair amount of television in the evenings).  What happened to it?
  9. Along those same lines, the Clinton campaign held a concert that head-lined Beyonce and Jay Z.  While some fawn over this couple, many people are offended by the lewd “twerking” of Beyonce and the filthy and racist (the “n” word) lyrics of Jay Z.  This isn’t a racist observation.  I personally find Miley Cyrus to be just as offensive.  Clinton’s condoning of these lyrics destroyed her credibility when criticizing Trump.  The concert was a dumb move.  What purpose did it serve?  Did she really think that Beyonce and Jay Z would swing undecided voters to their camp?
  10. The spending by the Clinton campaign dwarfed that of the Trump campaign, to no avail.  It’s not the first time we’ve seen such an outcome.  It demonstrates once again that it only takes a lot of money to sell lousy products, and good products sell themselves.  For all the concern about big money in politics, maybe it doesn’t really have that much of an effect.  So, hey big donors, if you want to waste your money, you’re perfectly welcome to plow it back into our economy through the ad agencies.  Either way, the money is now out of your accounts and into the hands of people who need it more.  Thanks!

Up next:  some thoughts about the challenges facing Trump and what it means for the world going forward.


A Trump Victory. Here’s how it happened.

November 9, 2016

 

In the next few posts I’ll be sharing many thoughts about this election.  I’ll begin with the question that is foremost in everyone’s mind.  What the hell happened?  How could every single poll have been so wrong?  All predicted a virtual Clinton landslide.

But there was some tightening of the polls in the final two weeks.  Almost everyone seems to believe that the announcement by the FBI of the discovery of new E-mails on a computer used by Clinton’s top aide swung the election, regardless of whether the FBI announced a week later that it had found nothing new.  That seems to be the conventional wisdom.  But it’s wrong.

Psychologists will tell you that it takes a significant event to change people’s attitudes.  In the run-up to World War II, most Americans wanted to stay out of the mess in Europe.  Then came Pearl Harbor and, overnight, Americans lined up to join in the fight.  They were angry as hell.

Were the E-mails discovered on Abedin’s computer such an event?  Hardly.  It shouldn’t have come as much of a surprise, and there was a lot of skepticism (ultimately proven to be justified) that there was really nothing of much significance there.  But there were three events that took place in the immediate wake of the FBI’s announcement that angered Americans in a big, big way – much more than the media realized:

  1. The government announced that social security checks would rise by only 0.3% next year, after no rise at all in 2016, citing a lack of inflation in the cost of living.  Everyone 62 years and older was absolutely outraged.  How in the world the Obama administration was dumb enough to let this happen only days before the election is mystifying.
  2. Immediately on the heels of that came an announcement that those who were buying health insurance through Obamacare would face enormous premium increases.  Bam!  Another few million Americans were seething.  Hey, they assured the rest of us, if you’re not on Obamacare, don’t worry.  You’re not affected.
  3. Oh, yeah?  Then, only one week ahead of the election, open enrollment in company-sponsored benefit plans began, and the rest of us discovered that the folks on Obamacare may have been the lucky ones compared to what we were now facing.  To cite my own case as an example, since I retired in 2004, the cost of my wife’s health insurance has risen at an annual rate of 43% but I just learned before the election that it would jump by 123% next year!  Every American was seeing the same thing.  So now every American, just one week before the election, was pissed off in a way that, if they didn’t already believe that America was on the wrong track, they sure believed it now.    And it was enough to make a lot of them change their minds and cast a protest vote.

As these events unfolded, I told my wife that Trump didn’t need to say anything.  He barely needed to continue campaigning.  All he had to do was let the daily news cycle play itself out.  The daily drumbeat of bad news about the prospects for our future was just piling on proof that a change was needed in a big way.

More analysis will follow.

 


A Referendum on Globalism

November 7, 2016

As Tuesday draws near, there seems to be a collective sigh of relief that it will all soon be over – the nastiness, pettiness, the attack ads – all of it.  Just make it go away.

But such sentiments trivialize what this election is really all about.  I wonder how many really grasp why it’s been such a bitter fight and what’s really at stake.  Tuesday isn’t just another election, where we pick from a pair of cookie-cutter candidates who aspire to be the next bench-warmer president, the next stuffed shirt to make nice around the punch bowl at scripted G20 summits.  The very soul of America is at stake.

For the first time in seven decades, since the signing of the Global Agreement on Tariffs and Trade (GATT) in 1947 that ushered in the New World Order and relegated the U.S. to the role of host in a global host-parasite relationship, and perhaps for the last time, we have a chance to put America on a new track.

It’s impossible to understate the damage that’s been done.  This year will mark the 40th consecutive year that the U.S. has suffered a trade deficit.  During that time, our trade deficit has drained over $13 trillion from our economy and accounts for every single dollar of our national debt since 1975.  To put that into perspective – what the loss of $13 trillion has done to us – here’s what it means in terms that we can all understand:

  • Globalism has been directly responsible for dismantling the manufacturing sector of our economy, wiping out approximately 10 million manufacturing jobs and another 10 million jobs in supporting industries.
  • It has transformed the United States from the world’s preeminent industrial power into an economic skid row bum that literally has to beg the world for the funds to keep our economy afloat.
  • Climb to the top of the highest building and take a look around.  Almost everything you see – as far as you can see – is now owned by foreign entities.  Every single mortgage, small business loan, new car loan, the financing of everything you can imagine, has been bundled into securities and sold to foreign investors desperate to find profitable ways to plow their trade dollars back into the American economy.
  • Globalism has been directly responsible for the elimination of benefits like pensions and health care.
  • It is directly responsible for the bleak job prospects faced by our college graduates.
  • It is directly responsible for the crushing student debt that our kids now face.
  • It is directly responsible for our crumbling infrastructure.
  • It is directly responsible for the Great Recession of 2008 and for the countless foreclosures, bankruptcies and destroyed lives in its wake.
  • It is directly responsible for turning China into an existential threat to our country.
  • It is heavily responsible for the lion’s share of global warming, exporting manufacturing from the U.S. where environmental laws were strict to nations who scoff at such laws and pollute with reckless abandon, not to mention the burning of five billion barrels of oil each year to power container ships carrying goods that could otherwise be made locally.
  • Globalism has become a corrupt scheme of the elite – the top 1% – to enrich themselves at the expense of the rest of us.
  • Instead of raising the living standards of all as the starry-eyed economists of the 1940s envisioned, globalism instead has become a poverty-sharing program, draining the resources of the United States and fattening the coffers of corrupt regimes.

Like practically every other American, I have never lived in an America that wasn’t under the thumb of the corrupt World Trade Organization or its predecessor – GATT.  I’ve spent my entire life watching it erode America’s economy.  At least I can remember what it was like before the bulk of the damage was done.  Most Americans don’t even have that.

On Tuesday we have a chance to put an end to this crap.  If you have been affected by any of the things I’ve listed above, this is your chance to dramatically change your situation.  The difference in candidates couldn’t possibly be more stark.  On the one hand, Hillary Clinton is an unabashed globalism and open borders advocate who will accelerate our demise under the New World Order.  On the other hand, Donald Trump has promised to completely dismantle it, tearing up these stupid trade agreements and using tariffs to drive manufacturing back to the United States, restoring America as an industial powerhouse.  Sure, you’d have to hold your nose as you mark your ballot and accept him with his numerous warts, but we’ll have another chance to swap him out in a few years for a more palatable version.  But this may be your last chance at the changes that he’s promised.  America’s future hangs in the balance.  It’s in your hands on Tuesday.