Planet of The Humans

April 23, 2020

https://www.reuters.com/article/us-earth-day-documentary/michael-moores-planet-of-the-humans-asks-what-if-green-energy-cannot-save-the-planet-idUSKCN2231U8

It’s the mission of this blog to raise awareness of the economic consequences of “overpopulation,” that is, what happens when we become so densely populated that we become incapable of gainfully employing everyone.  There are other consequences of overpopulation – environmental consequences among them.  There’s no shortage of people, however, devoted to that topic.  I’m the only one dedicated to raising alarm about the economic consequences, so I try to stick to that topic.

On the rare occasions when I’ve addressed the topic, I’ve been highly critical of environmentalists, like in this post.  The environmental movement struck a deal with the devil decades ago when it agreed to turn a blind eye to the problems of population growth and the notion of “sustainable development” (an oxymoron) in exchange for corporations’ embrace of simpler issues like air and water pollution controls.

The above-linked article is perhaps the first example I’ve seen of a life-long environmentalist who is finally opening his eyes to the fact that the environmental movement has been a colossal failure, and that reining in population growth and “sustainable development” is this planet’s only hope.  The documentary film that’s the subject of the article, directed and narrated by environmentalist Jeff Gibbs, can be watched for free on youtube.  Here’s the link:  https://www.youtube.com/watch?v=Zk11vI-7czE&feature=youtu.be.  It’s a great film and I encourage you to watch.


America’s Biggest Trade Surpluses in 2019

April 21, 2020

In my last post, we saw from the list of America’s worst trade deficits that every country but one was more densely populated than the U.S., suggesting a relationship between population density and balance of trade.  If that’s true, then we should see the opposite when we look at a list of our biggest trade surpluses.  We should see a list of countries with lower population density.  So here’s the list of our biggest trade surpluses in manufactured goods in 2019:  Top 20 Surpluses, 2019.

At first glance, this list doesn’t seem quite as supportive of a relationship between population density and balance of trade.  Exactly half of the nations on this list are less densely populated than the U.S., whose density is 93 people per square mile.  But look more closely at the list and some countries jump out at you:  United Arab Emirates, Saudi Arabia, Qatar, Kuwait and Nigeria.  Four of these five nations are far more densely-populated than the U.S.  What comes to mind when you look at this list?  Oil.  All are net exporters of oil to the U.S.  And without exception (including smaller oil exporters who didn’t make this list), the U.S. has a trade surplus with net oil exporters.  Why?  Because all oil sold world-wide is priced in U.S. dollars.  If you want to buy oil from Saudi Arabia, you pay for it with U.S. dollars.  If you want to buy oil from Nigeria, you pay with U.S. dollars.  The result is that net oil exporters are loaded with U.S. dollars and – you may not realize this – but the United States is ultimately the only place where U.S. dollars can be used as legal tender (with the one exception of oil in other countries), meaning that net oil exporters must buy something from the U.S. with those dollars.  It can be anything – products, government securities, real estate – anything that is sold in the United States.   A good share of those petro-dollars are used to buy American exports.

Two other very densely-populated, non-oil-producing nations on the list also need explanation.  The Netherlands and Belgium are both very densely populated.  But together they have the only deep-water ports on the Atlantic side of the European Union.  So many of the American exports that are destined for other nations in Europe are imported through those two countries.  Ships arrive full of American exports.  Somehow, however, only half as many imports from those countries head back to the U.S.  Obviously, those ships don’t return only half full.  So how do I explain it?  Frankly, I can’t, but what I suspect is happening is that imports from other European nations that depart from the Netherlands and Belgium ports are actually booked as exports from those originating nations and not from the port of departure.  We need to look at Europe as a whole (a continent nearly as densely populated as China) and, when we do, we find a massive trade deficit.

In spite of the presence of those nations that cloud the results from this list, the validity of the relationship between population density and the balance of trade is still evident.  The average population density on this list is 248 people/square mile vs. 617 people/square mile on the list of our biggest trade deficits.  And the combined population density (total people divided by total land mass) is only 46 people/square mile vs. 510 people/square mile on the list of deficits.  That’s a pretty powerful correlation!

There are other important takeaways from this list:

  1. The total of the trade surpluses on this list is $180.4 billion, vs the total of our top twenty trade deficits of $978.7 billion.  That’s a difference of almost $800 billion, which pretty accurately represents the amount of money drained from our economy each year through trade.
  2. Over the past ten years, the average growth in the trade surpluses with the nations on this list is only 7%, which is less than the rate of inflation, meaning that our actual trade surpluses are shrinking.  Compare that to the average rate of growth in the deficits of 298%.  It’s clear that the manufacturing sector of our economy is very rapidly being decimated by trade.
  3. The average “purchasing power parity” (“PPP”) of the nations on the list of our top twenty trade surpluses is $36,780.  That almost exactly matches the average PPP of the list of our top twenty trade deficits:  $35,445.  It seems clear from comparing these two lists that wages play absolutely no role in determining balance of trade.

These two lists that we’ve compared contain both very large countries and very small countries.  For example, the list of deficits includes China and India who together represent almost half of the world’s population, but also include Ireland and Denmark who together represent less than one tenth of one percent of the world’s population.  Is it possible that these results are skewed by the sheer size of countries?  Can we factor that out?  Yes, and that’s exactly what we’ll do in an upcoming post.

However, before we do that, and now that we’ve looked at both ends of the spectrum, we’ll take a look at the entire trade picture with the whole world to see whether the influence of population density is still evident.  That’ll be my next post.


America’s Worst Trade Deficits in 2019

April 19, 2020

I’ve just finished the long, tedious process of analyzing the international trade data for 2019, which was posted by the Commerce Department in late February this year, instead of the mid-summer release caused by the government shutdown last year.  We’re going to look at this data in a lot of different ways in this and upcoming posts, so let’s begin with the basics.  The biggest problem with international trade is that the U.S. has been running a massive, ever-growing trade deficit for the past forty-five years.  All of the deficit is due to imports – and very weak exports – of manufactured products, and this category of products is where it hurts the most.  A deficit in manufactured products hurts the most because that’s where the most – and the highest-paying jobs – are lost.

So let’s begin this analysis with a list of our worst trade deficits in manufactured goods:  Top 20 Deficits, 2019.  The deficit with these 20 nations is almost $1 trillion!  It’s no great surprise that our deficit with China leads the list, by a wide margin.  And it would be worse by $20 billion if I hadn’t included Hong Kong with China.  (The Commerce Department tracks them separately, but we’re kidding ourselves to think that Hong Kong is an independent city-state.)  What’s new and interesting however is that the deficit with China is actually down substantially – by $73 billion – from 2018.  This is thanks to the Trump administration’s program of imposing tariffs on Chinese imports.  Look at how much the deficit with China has changed over the past ten years.  Though it grew rapidly for the first nine years of this period, it fell enough last year to yield only a 24% growth in the last ten.  That’s the 2nd slowest growth among the twenty nations on this list.

The deficit with Mexico has grown rapidly – 154% over the past ten years – to become our 2nd worst trade deficit.  However, if we are to believe the President, this should begin to change as the new USMCA agreement with Mexico and Canada – which replaces the now-defunct NAFTA agreement – begins to take effect this summer.  We’ll see.

Note that, contrary to the belief that low wages cause trade deficits, this list of our worst trade deficits is actually dominated by wealthy, developed nations, including many European nations.  In fact, if we add up the EU nations on this list, the combined deficit is $187 billion.  (The UK and Switzerland are not in the EU.)  By the way, the growth in the deficit with the U.K. – 3,125% in ten years – isn’t a typo.  When I first wrote Five Short Blasts in 2007, the U.K. was one of a few anomalies where, in spite of the high population density, we actually enjoyed a trade surplus with them.  But that trade surplus evaporated and, in 2010, the U.S. actually had a very small trade deficit with the U.K.  The deficit of $9.6 billion in 2019 is more than thirty times larger than the small deficit in 2010.  It’s growing rapidly.

As we’ve seen every year, it’s not low wages that cause our trade deficit.  So what does cause it?  I just gave you a hint.  Look at the population density of the nations on this list and compare it to the population density of the U.S. – 93 people/square mile.  The average population density of the nations on this list is almost seven times greater.  The combined population density of the nations on this list – the total number of people divided by the total land mass – is more than five times greater.  Only Sweden, near the bottom of the list, is less densely populated.  Nineteen of these twenty nations are more densely populated than the U.S.  Most are more than four times as densely populated.  Now that’s a powerful correlation to our balance of trade!

But why?  Why does something so seemingly unrelated have such a powerful effect on the balance of trade?  It’s because people who live in over-crowded conditions are incapable of using as many products as people who enjoy living in more wide open spaces.  They have no place to store them and no place to use them.  (Think cars.  the average Japanese person doesn’t have a garage and the roads are too crowded to drive anyway.)  Yet, they are every bit as productive.  The inescapable consequence is that, in order to be gainfully employed, they must produce far more than they consume, and there’s ony one thing that can be done with their excess production:  export it.  Unless the nation that those excess products are exported to takes some kind of action to keep those products out, their own citizens are now doomed to be put out of work by the market share they’ve lost.  Trading freely with badly overpopulated nations causes a massive shift of manufacturing jobs to the more densely populated nation.

But I’m getting ahead of myself.  Trade deficits are just one end of the trade spectrum.  What about surpluses?  Will we find that those nations are less densely populated, which the population density theory would predict?  Stay tuned.


Month 2 Results of “Phase 1” China Trade Deal – Not Good!

April 6, 2020

China got off to a weak start during the first month of the “Phase 1” trade deal that it signed with Trump in early January.  What is the “Phase 1” trade deal?  In exchange for China’s promise to dramatically increase its purchase of a wide range of American goods, Trump delayed the implementation of the next large round of tariffs on Chinese imports.  The agreement uses China’s purchases in 2017 as a baseline.  Here’s the goals that were established:  Phase 1 China Trade Deal Goals.

In January, China didn’t even come close to matching the 2017 baseline in any of the four categories of products, much less the goals to boost their imports.  In February, instead of increasing their imports to begin to catch up, their imports in three of the four categories fell even further.  (Their imports of manufactured goods increased slightly, but was still well below the 2017 baseline.)  Here’s the February results:  Phase 1 China Trade Deal 2020 YTD.

Of course, China was dealing with the Covid-19 outbreak at this time, so some might say we should cut them some slack.  Yes, they were dealing with that crisis, but only in Hubei province, in which the city of Wuhan is located.  And crisis or no crisis, people still have to eat.  Yet their imports of agriculture products fell in February from the already-low January figure.

Only two months in, it’s becoming clear that the Chinese are ignoring the terms of this trade deal.  They’ve already gotten what they wanted – a halt to the increase in tariffs, they are back in control of the trade  situation, and they can hope once again that America will take its eye off the ball as it has always done with trade deals.

If I were Trump, I’d wait until the March results are posted in early June.  Then I’d give them a stern warning that if they don’t improve their performance within the next three months, the deal will be off and I’d raise the tariffs beyond those that were delayed by the January signing of this ill-conceived deal.  And I would cease any further pointless trade negotiations with China.