U.S. Economy may be beyond repair.

March 29, 2022

On top of all of the other depressing developments in the world, this one was just too much for me, so I’ve been sitting on it all month. I’ve come to the conclusion that the only way to deal with it is to finally admit the obvious. America’s economy is broken beyond repair. There is no hope of fixing what’s wrong.

The January trade data, released earlier this month (February data will be released in early April), is the final straw. Here’s a chart of our total goods trade deficit. And here’s the deficit in manufactured goods alone. The records set in both categories in the previous month were bad enough, but they exploded further in January. It’s now abundantly clear that the U.S. has become totally dependent on foreign suppliers for our every need. They have a death grip on our economy.

I believe it’s reached the point where we can no longer fix this problem even if we wanted to which, sadly, no one seems to want to do, because no one cares. Even the basic things we’d need to even try would have to be imported. Even the tools we’d need to make the basic things would have to be imported.

Just this morning I came across this article about a senate bill to fund the rebuilding of the computer chip industry in the U.S.: https://www.foxbusiness.com/technology/us-senate-approves-52b-chips-bill-in-bid-to-reach-compromise. First of all, you need to understand that this is exactly the kind of thing that politicians do to create the illusion that they’re doing something to fix the problem. It’s exactly what the global corporate benefactors of the politicians pay them to do to avoid what they fear most – a turn away from free trade toward a return to tariffs that are so badly needed to provide real incentive to manufacture products domestically.

It’s nothing but extortion, in essence telling America that we won’t even make a show of fixing the problem we created unless you give us $52 billion. Even then, the problem would persist. Most of that $52 billion would be used to import the products needed to build the facilities. Beginning with the heavy equipment needed to develop the sites – the bulldozers, excavators, cranes, etc. – even many of those would be imported. (Caterpillar would get a small piece of the action.) Most of the steel would be imported. Virtually all of the machinery needed to build the chip-making process would be imported. And, once ready to run, virtually all of the raw materials would be imported. Throughout the building process, much of the labor involved would either be illegal or foreign workers here on work visas.

Then, guess what? Once this new chip manufacturing capacity is ready to start up, foreign-made chips will suddenly be in abundant supply again and the customers will shun the new, American-made chips in favor of the cheaper imports, the price of which will have been suddenly cut. The new plants will sit idle because there are no tariffs in place to protect them. The foreign chip-makers will come in, crate up the equipment, and ship it back to their overseas plants for pennies on the dollar. The global corporations will be $52 billion richer and American taxpayers will be stuck with the bill. We’ve seen this same scenario play out over and over.

Recently, President Biden warned the Chinese not to help Russia avoid the economic sanctions imposed when they invaded Ukraine, or there would be serious consequences. The Chinese must have been rolling in the aisles laughing after that meeting! Serious consequences? Oh, you mean like the ones for completely ignoring the Phase 1 trade deal? The tariffs that China agreed in writing would be fair consequences? The tariffs that not a penny’s worth has yet to be implemented? Don’t be ridiculous! China owns us lock, stock and barrel and they know it. They fear nothing that America says because America never follows through on anything.

America prevailed in World War II thanks to its industrial might. Its military at the beginning of the war was barely up to the task. However, thanks to its ability to convert its industrial capacity to war-time production, by the end of the war the Willow Run bomber plant in Michigan was cranking out a new B24 bomber every hour, while the shipyards on the west coast were building new destroyers at a rate of one every two days. Today, we have no such industrial capability. I doubt that we could sustain a military effort of any size for much more than a month before we ran out of imported supplies.

This morning, it was reported that Ukraine has asked to U.S. to continue to supply them with Javelin missiles at a rate of 1,000 per day. The reporter noted that our own military’s supply has been critically reduced by what we’ve provided to Ukraine already. Seriously, do you think the Pentagon has been paying the builder of the Javelins for spare capacity to make 1,000 per day when we probably haven’t even been using them in training exercises at a rate of ten per week? I doubt that we have the ability to produce even ten per day. They’d quickly run out of chips. GM just announced a 2-week closure of one of its most profitable pickup truck assembly plants for that very reason.

The federal budget deficit and the national debt are tied directly to the trade deficit, which is now contributing $1.25 trillion per year to each of them. (The federal government has to pour that much back into the economy to offset the drain of the trade deficit in order to avoid a deep recession or depression.) It’s a problem that they could ignore as long as interest rates were near zero, since that made the interest on the national debt close to zero too. But now interest rates are rising fast. Suddenly, the current level of federal spending is a major problem as the Federal Reserve finds itself far behind on inflation and is raising interest rates fast. Now, the economy is boxed in from all directions. We can’t spend our way out of the trade deficit to avoid an economic collapse. It’s right around the corner and coming fast.

I wrote Five Short Blasts and began this blog in 2007 in the hope that my warning of the effects of the relationship I had discovered between worsening overpopulation and unemployment could lend some urgency to the need to protect ourselves from badly overpopulated nations who were preying on our market, and the need to avoid their same fate.

Now, it’s too late. The foreign globalists have achieved their goal. America has been brought to its knees without firing a shot. What’s going to happen next is just a matter of time. It was foolish to think I could make a difference. My time and efforts have been wasted. Maybe something will happen yet to change my mind. At this point, it’s hard to see it. I may continue this blog, but the nature of it may change. The economic collision that I hoped my Five Short Blasts could avert has finally happened. Now, all that’s left is to say “I told you so” as the rest of the world begins to scavenge the wreckage.


U.S. needs to accept its fair share of Ukrainian refugees.

March 24, 2022

Those of you who follow this blog, the purpose of which is to warn of the consequences of the inverse relationship between population growth (beyond a critical point) and per capita consumption – specifically, worsening unemployment and poverty, know that I am opposed to high rates of immigration. Immigration accounts for the lion’s share of population growth in the U.S., half of which is illegal immigration. It’s estimated that as many as 25% of all residents in America are foreign-born.

There are many categories of immigrants, including family-sponsored preferences, employment preferences, diversity immigrants, relatives of U.S. citizens, students, temporary workers, asylum seekers and refugees. The last two categories are similar, except that asylum seekers are already in the U.S. (often as a result of illegal immigration), while refugees are people who have already escaped their home country to another, but now seek to immigrate to the U.S.

Ukrainian refugees fall under this last category. They have already fled the war in Ukraine, arriving in bordering countries which are now overwhelmed by the sheer number, now approaching four million and climbing daily, expected to reach as many as ten million.

The refugee category has been abused for decades. Most who have been granted refugee status are merely economic refugees, fleeing poverty and/or high crime rates in their home country, and not an actual war. However, the Ukrainian refugees are different. They’re peaceful people who must now flee bombs and missiles that fall all about them, and some don’t survive the journey. Horrible atrocities have been committed against them.

President Biden announced today that up to 100,000 of these refugees will be admitted to the U.S. That isn’t nearly enough. Poland, a nation 1/25th the size of the U.S., has taken in 25 times that number. Even tiny Moldova has taken in more that that. To do its fair share, the U.S. should be willing to admit at least 500,000. Given the timidity of our response to Ukraine’s pleas for help, it seems the least we can do. That number could easily be offset in less than a year by cutting illegal immigration. These are people who despise Putin and see him and Russia as their mortal enemies. Frankly, we need more people like that in the U.S. as opposed to those willing to accommodate Putin just to make a few bucks.


Russian Invasion of Ukraine Exposes Failed Premise of Globalization

March 23, 2022

Globalization was implemented in the wake of World War II, beginning with the signing of the Global Agreement on Tariffs and Trade in 1947, in an effort to prevent any more such wars in the future. Free trade, it was believed, would make all countries more interdependent on one another and would level out living standards by elevating them in poor countries. The world would become one big, happy country where no one nation could derive any benefit from attacking another. Clearly, at least in the form that has been practiced up to this point, it hasn’t worked. War has once again broken out, a war that could easily turn into World War III.

Trade between Ukraine and Russia isn’t the issue. The issue is the notion that rewarding your enemies with lucrative trade deals will make them your friends, and not just wealthier, more powerful enemies. It’s truly no different than businesses paying “protection” money to a local crime syndicate that’s running a protection racket. When has that not ended badly? You pay until they bleed you out of business.

That’s especially true of trade between the U.S. and China. Experts have been warning for years that China is no friend, and that our trade dollars – nearly $6 trillion paid to China since they were granted “Most Favored Nation” status in 2000 – have built them into a superpower that now threatens our very existence.

Now China and Russia – two superpowers made rich and powerful by our naive embrace of the globalist trade protection racket – have aligned themselves against us. Experts have for years been raising the alarm over what we were doing – surrendering the manufacturing sector of our economy to enrich our enemies and fund their military build-ups. Now the two of them are a match made in heaven, or in hell, to use a more appropriate metaphor: Russia has the resources and China has the manufacturing might. Who can stand against that?

Layer this failure – the misguided hope that cozying up to our enemies will make them our friends – on top of the other failures of globalist trade policy. Foremost is its failure to account for the role of population density in driving massive trade imbalances (see “note” below), turning loose badly overpopulated nations to prey on the markets and manufacturing jobs of those more reasonably populated and, in addition, enabling further population growth beyond sustainable levels.

Globalist free trade policies have created huge economic distortions and destabilizing imbalances around the world and, instead of turning enemies into friends, have enriched despotic dictatorships like Russia and China, building them into superpowers that now threaten the rest of the world. Globalism has back-fired, ensuring that this next world war will be far more lethal instead of preventing it.

Note: I’ve been sitting on the latest U.S. trade data since it was released earlier this month. The explosion in our trade deficit is accelerating at an astonishing pace. I found the data to be so disheartening that I’ve struggled to even post about it. I fear that there may be no hope for the U.S. to avoid economic ruin. Nevertheless, I’ll provide the data soon in one of my next posts. Also, look for posts about admitting refugees from Ukraine and the trade sanctions imposed on Russia.


BUY AMERICAN!!, says Biden

March 2, 2022

During his State of the Union address last night, Biden loudly and emphatically proclaimed that we shoud all “buy American” in support of the mythical resurgence of American manufacturing. It begs the question: American what?

What companies who were importing their products are now manufacturing them in the U.S.? I’ll be damned if I can find them. About the only American-made products you can find are cars and trucks, and that’s only if you do your homework to figure out which ones are actually made here. Few are, and the ones that are contain a lot of foreign content. How about a new Ford Mustang EV? Surely that’s made here, since Biden also praised the work of Ford and GM to build their new electric future in the U.S.. Nope – made in Mexico. How about a Chevy Bolt EV? Nope – made in South Korea. How about a Ram truck? Surely that’s made here? Nope. Unless you’re buying a high end model, most are made in Mexico. My next door neighbor tried to “buy American.” He assumed that if he bought a Buick he was buying American. He was mortified to learn that his new Buick Envision was built in China.

Biden highlighted Intel’s plans to build a new semiconductor plant east of Columbus, Ohio, and introduced Intel’s president who sat in the gallery. They’re not actually building it yet, mind you. That’s waiting on legislation that would essentially pay them to build it with taxpayer dollars. The same is true of the auto industry’s grand plans to go all-electric in the U.S. The plans are there, but will only be executed if and when the government passes legislation to pay them to to it.

If there was any real resurgence in American manufacturing, it would show up in our trade results. Imports would be down and exports would be up, resulting in a declining trade deficit in manufactured goods. Look at this chart: https://petemurphy.files.wordpress.com/2022/01/manfd-goods-balance-of-trade.pdf. Our deficit in manufactured goods is exploding. Clearly, American manufacturing remains in rapid decline. People aren’t buying American because they can’t find any American-made products to buy.

If I need a tool, for example, I can get cheap ones at Harbor Freight. Everything at Harbor Freight is made in China. But I want to buy American. So I go to another tool store that carries high-quality brands that used to still be made in America. I pick up the box and, sure enough, find that it’s made in China. It’s definitely a better-made tool, but still made in China – just to more stringent specifications.

Regarding the economic sanctions being imposed on Russia in retaliation for their invasion of Ukraine, one that Biden mentioned is that he has cut off their access to high technology products. What a laugh! Hardly any such products are made in the U.S. any more. Computers, cell phones, semiconductors – you name it – everything is made in China, and the U.S. has no control over Russia buying them from China.

Biden rattled off his long list of initiatives to support American manufacturing. All of them are trivial and ineffective, designed only to create the illusion of supporting American workers. The one initiative that he could take that would be effective is to slap tariffs on imports of all manufactured goods, not just from China but from any over-populated country in the world who preys on the American market to support their bloated labor forces by stealing manufacturing jobs from Americans. But has he? He doesn’t even have the guts to impose tariffs on China – tariffs that even the Chinese agreed would be fair – in the wake of China’s abject failure to meet a single goal of the Phase 1 trade agreement.

Biden also took credit for creating six million jobs during his first year, linking this to the mythical resurgence in manufacturing. The truth is that the economy recovered that many jobs from the pandemic-caused depression a year earlier. However, through November of last year, the U.S. employment level still remained 3-1/2 million jobs below the level of February of 2020. By that measure, we remain mired in a deep recession, thanks in no small part to the decline in American manufacturing.

It makes me sick to hear these politicians playing the American people for fools. We sure got another heavy round of it last night.