Link to NumbersUSA Added

November 30, 2007

I have added a link on the right side of the page that will take you to NumbersUSA, a web site dedicated to immigration reform, but reform that goes far beyond the debate about illegal immigration.  Here you’ll find a very thorough, rational, non-xenophobic treatise on the need to dramatically reduce immigration in order to stem our growing problem with over-population, one of the key recommendations of my book.  Check it out and tell your friends about the site!


New Link to the Economic Policy Institute

November 30, 2007

I have added a new link on the right hand side of this page which will take you to the Economic Policy Institute, a “… nonprofit, nonpartisan think tank that seeks to broaden the public debate about strategies to achieve a prosperous and fair economy.” 

I especially recommend their latest briefing paper, titled Globalization and American Wages.

It’s refreshing to find a think tank that is nonpartisan and is not paid by corporate interests to be a free trade cheerleader.  Check it out and become a subscriber!

China Ends Subsidies. Will It Help?

November 30, 2007

In Five Short Blasts, I made the point that it’s imperative that the U.S. take actions that are within our control to make a difference in the trade deficit, and not rely on the promises of other countries.  Here’s a perfect example:

It’s reliance on these kinds of promises that has kept our trade deficit soaring for over three decades.  Everyone gets excited that a major concession has been made and that now we’ll be able to restore some balance to the trade picture.  It won’t happen!  Such concessions don’t address the root cause of the trade imbalance – the huge disparity in population density between the U.S. and China.  I’ve seen this happen at least a hundred times in the last thirty years and our deficit only gets worse.  The Chinese are probably rolling in the aisles with laughter at the naivete of our trade negotiators.


Sell-Off of American Assets to Finance the Trade Deficit

November 28, 2007

Here’s just one small example of how American assets are sold off to finance the trade deficit:

Abu Dhabi’s state investment fund has come to Citigroup’s “rescue” with an infusion of $7.5 billion for which, in return, Abu Dhabi acquires 4.9% ownership of Citigroup (on top of whatever ownership they already have).  Everyone is happy that another rug has been found under which the trade deficit problem can be swept.  No one questions what will happen when there are no more American assets to sell off.  

The relationship between this deal and the trade deficit may not be apparent, but it works like this.  (1) Americans spend money on foreign goods.  (2) The flow of dollars into and out of the U.S. has to balance.  Therefore, there must be a corresponding inflow of cash from foreign countries to finance the trade deficit.  (3)  Those countries then invest the dollars they’ve received for their exports in stocks and bonds in the U.S.  In this case, Abu Dhabi chose to buy part of Citigroup.

The relationship can be viewed from another more subtle perspective.  (1) With the loss of manufacturing jobs, worker compensation and household finances have been in a 3-decades-long decline.  (2) The average American family now finds that it must resort to loan terms it can’t really afford in order to purchase an average home.  (3)  Such families then default on the loans.  The banks then run short on cash and have to raise money.  (4) Foreign entities then step in with money and obtain partial ownership in return. 

No one asks the question “What happens when America has nothing left to sell?”  No one knows, but it’s conceivable that, at that point, the global economy will grind to a halt.  Certainly, as that point is approached, it will become ever more difficult for institutions to find financing because American assets will become more worthless and foreign investors will want higher returns.  It kind of sounds like the “credit crunch” and the falling dollar situation that we find ourselves in right now, doesn’t it?

The only long-term solution to this situation is that America must find a way to balance trade.  A tariff structure indexed to population density is the only way to accomplish that.


Trade Deficit Blamed for Sinking Dollar

November 13, 2007

Here’s a link to a great article by a senior editor at Fortune magazine:

He correctly blames our enormous trade deficit for the sinking dollar.  Unfortunately, he offers no solutions other than to suggest that “we’ve been living beyond our means.”  He implies that we should just save our money and stop buying things.  Unfortunately, that doesn’t target the real problem because we stop buying American-made products as well as imports, doing even more damage to the economy. 

Eventually people will come to understand that tariffs are the only way to restore a balance of trade and that a tariff structure indexed to population density provides the rationale for doing it and the means to do it without adverse consequences from our beneficial trade partners. 


September Trade Deficit – lots of bad news, little good news

November 11, 2007

The September trade deficit was released Friday.  Another $56.5 billion given away in the form of trade welfare, to be financed by a further sell-off of American assets.  That’s an annual rate of $678 billion.  Imagine what could be done with that money here in the U.S.!  That’s an extra $2,260 for every man, woman and child in the U.S. – an extra $9,040 for every family of four.! 

The only good news in Friday’s report was that the deficit shrank very slightly from August’s level, due to higher exports and lower imports.  But  improving our trade balance by letting our currency steadily devalue isn’t the right approach.  We need trade policies (a tariff structure indexed to population density, specifically) to restore a balance of trade while simultaneously strengthening the dollar. 

Expect more slight improvement in the trade deficit in the coming months, but nothing much – not enough to slow the problems eating away at Americans’ finances.  Our trade “partners” simply won’t tolerate falling exports.  They’ll cut prices to maintain their market share. 


An Economist Who “Gets It” (Partly, at least)

November 9, 2007

Last night on “The Newshour with Jim Lehrer” on PBS, they did a piece about the effects that the falling dollar and the credit squeeze are having on the economy.  Included in the discussion panel was economist Kenneth Rogoff of Harvard University.  He commented about our $800 billion dollar trade deficit and observed that “… we need to export more and import less.”  It’s refreshing to hear an economist acknowledge this truth, as opposed to those who try to paper over the problems with the U.S.’ approach to globalization and trade in their free trade cheer-leading campaign.  However, I believe he’s a bit off the mark in also asserting that “… Americans have been living beyond their means for too long.”  His solution is that Americans need to save more and spend less.  While there’s some element of truth to that, this “solution” would hurt the American economy just as much as it would slow imports, by also slowing the purchase of American goods. 

What we really need is an understanding that free trade with over-populated nations is a sure-fire loser because, in return for access to our market, they can only offer us a market stunted by over-crowding.  What’s needed is a tariff structure indexed to population density.