U.S. Trade: A Tale of Two Worlds

January 21, 2016

Divide the world in half by population density and the results couldn’t be more different.  In 2014, it grew worse again.  The half of nations with a population density above the world’s median – 184 people per square mile – left the U.S. with a trade deficit in manufactured goods of $669 billion in 2014.  That’s up by $35 billion from the record set in 2013.  It has worsened every year since 2009.

The other half of nations – those with a population density less than the median – yielded starkly different results.  The U.S. enjoyed a trade surplus in manufactured goods of $132 billion with those nations.  That’s down from $147 billion in 2013 and down from the record of $153 billion set in 2011.

Here’s the chart:  Deficits Above and Below Median Pop Density.  If this isn’t proof of the relationship between population density and trade imbalances, I don’t know what is.  The number of nations is the same, but the less densely populated nations give us a $132 billion surplus, while the more densely populated nations leave us with a $669 billion deficit.  Still the U.S. applies the same free trade policy to all nations without any consideration to population density.  Doesn’t make much sense, does it?

One may counter that the results are skewed by the fact that the more densely populated half of nations includes more people than the other half, and that it includes China, which accounts for more than half of the above deficit.  Fine, so let’s analyze the data in some other ways:

  • Dividing the world in half by population is a little awkward, because China falls right in the middle.  It requires including some of China’s people in the more densely populated half, and some in the less densely populated half, and dividing our deficit with China proportionately.  If we do that, we find that the U.S. has a trade deficit in manufactured goods of $464 billion with the half of people living in more densely populated conditions.  By contrast, we have a trade deficit of $72.8 billion with the half of people living in less densely populated conditions.  The trade deficit with the more densely populated half of people is more than six times worse than our deficit with the half of people in less crowded conditions.
  • Let’s look at it another way.  Let’s divide the world’s land mass (not including Antarctica) exactly in half and compare the more densely populated half to the less densely populated half.  Then we have a trade deficit in manufactured goods of $666.8 billion with the people living in the more crowded half of the world, and a trade surplus of $130 billion with the less crowded half of the world.
  • Instead of dividing the world in half, let’s divide it around the U.S. population density – those nations more densely populated vs. those less densely populated.  Of the 165 nations studied, 112 are more densely populated than the U.S. and 53 nations are less densely populated.  The U.S. has a trade deficit in manufactured goods of $701.2 billion with nations that are more densely populated, and a surplus of $164.5 billion with those that are less densely populated.  That’s a difference of $865.7 billion.
  • The U.S. has a trade deficit in manufactured goods with 56 nations.  Of these 56 nations, only four are less densely populated than the U.S.:  Sweden, Finland, Estonia and Laos.

Any way that you look at it, the relationship between population density and trade imbalance just absolutely screams out at you.  But economists don’t see it.  They don’t see it because they won’t look.  They won’t look because of their adamant refusal to give any credence to the notion that population growth has any economic consequences.

Trade deficits, they say, are the result of other factors:  low wages, currency manipulation, lax environmental and labor standards, etc.  Or they say that trade imbalances are merely transitory, that such imbalances will correct themselves as the economies of underdeveloped nations grow.

Proving that trade imbalances are caused by disparities in population density also requires disproving the above pet theories of economists.  We’ll tackle that in my next posts.

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Per Capita U.S. Auto Sales Declining

January 9, 2016

New vehicle sales were released a couple of days ago.  The headline of the story is that sales set a new record in 2015 – 17.47 million, beating the previous record set in 2000.  It got me wondering.  2000 was fifteen years ago.  Since then, the U.S. population has grown by about 13%.  So the new record should have easily topped the 15-year-old record, right?  Wrong.  It barely beat the 2000 record by only about 100,000 vehicles, or by about 0.6%.

So I couldn’t help but wonder:  is it possible that we’re already beginning to see a decline in the per capita consumption of vehicles in the U.S., which is what the inverse relationship between population density and per capita consumption that I presented in Five Short Blasts would predict?  In Chapter 10 of the book I theorized that the U.S., though much less densely populated than many other nations, had already crossed the threshold where a growing population density begins to erode per capita consumption and, with it, the economy, and that this happened sometime perhaps in the ’50s or ’60s when our population was half of what it is today.

New vehicle sales is one piece of consumer data that’s readily available and not a closely-guarded secret of some market research company.  So it was time to find out how new vehicle sales have changed over time as our population has grown.  I plotted such sales going back to 1968 versus the U.S. population and here’s the result:  auto sales 1968-2015.  The following are some observations about this chart:

  1. New vehicle sales tend to swing up and down pretty wildly, dropping precipitously during recessions and shooting back up during recoveries.
  2. I don’t know what  happened prior to 1968, but it’s clear that between 1968 and 1978, the per capita consumption of new vehicles was rising quickly, jumping 44% to .067 vehicles per person, which is about one vehicle for ever 15 people.
  3. That figure of .067 vehicles per person in 1978, when our population was about a third lower than today, still stands as the record level.  The next peak of per capita consumption of new vehicles in 1986 didn’t quite rise to the same level, reaching 0.66.  The next peak in 2000 – the record that was just broken this year – reached only 0.62 new vehicles per person, well short of the 1978 peak.
  4. This total vehicle sales record set in 2015, when expressed in per capita terms, even misses the 2000 mark by quite a large margin.

Clearly, per capita consumption of new vehicles is in decline, and has been declining since as far back as 1978.  One could argue that 2015 may not be a peak, that vehicle sales have been climbing steadily since 2009 when they reached their lowest level of the entire 1968-2015 period.   The auto industry projects that sales could go higher in 2016.  I think that’s unlikely.  First of all, though 2015 was a record year, the sales rate in December fell to its lowest level since June, and December is typically one of the strongest sales months of the year.  Secondly, 2015 was the sixth consecutive year of sales volume increases, the longest of the 1968-2015 period.  Previously, the longest period of annual sales volume increases was four years, from 1983-1986.  Finally, look at what’s happening in the economy in general beginning in December.  Many economic indicators are now turning negative.  Most would agree that the auto industry’s expectations of a stronger 2016 are a pipe dream.

So just how fast is per capita consumption of new vehicles declining?  To find out, I re-plotted the data beginning with 1978 and had the computer generate a trend line with an equation to describe it.  Here’s the new chart:  auto sales 1978-2015.  Now you can see the clear downward trend.  Of the four different mathematical formulas that could be used to describe the trend – linear, logarithmic, exponential and power – the best fit was a linear equation.  The formula is included in the chart:  f(x) = -.0003x + .06.  (I’ve rounded off the two constants for clarity.)  This means that as our population continues to grow at the same rate – about 1% per year – per capita new vehicle sales will decline by .0003, which is about a 0.5% decline.

Why is this happening?  It’s pretty simple, really.  Most of our population growth is in urban areas where there’s been strong demand for apartment-style housing.  We examined in a recent post how renters are increasingly paying a greater percentage of their incomes on rent.  And people who live in apartments in metropolitan areas face big obstacles when it comes to car ownership – especially the lack and high cost of parking, both at home and at work, not to mention the traffic issues in the cities.  It’s just cost prohibitive to own a car, so many opt for public transportation.  The root cause of this situation, though, is ever-worsening crowding driven by the increase in population density.

Sure, there are many factors that may be at play here but, for each one you can name, I can name another offsetting factor.  Cars are built better and last longer?  Everything about our society pushes people to buy new cars more often – not less.  Cars are less affordable?  Dealers now practically give cars away, with loan durations of six or seven years, when three years was the norm back in ’78.

This decline in the per capita consumption of vehicles is yet another example of the conflict of interest that’s created once a population breaches that critical level and begins to drive down per capita consumption.  If you’re a consumer, it’s in your best interest that the population stabilize or even shrink a bit, increasing your quality of life and enabling you to live in uncrowded conditions where you can enjoy all that life has to offer, including the freedom to own a car and travel at will.  But if you’re General Motors, it’s in your best interest that the population continue to grow because if the population grows by 1% and per capita consumption declines by 0.5%, your total sales volume still increases.  And we saw this happen in 2015.  Sales set a new record in spite of a significant decline in per capita sales.  And so it’s also in the best interests of General Motors to fund candidates who support high rates of immigration.

Immigration-fueled population growth is steadily ruining our quality of life.  Though few really understand why, more and more Americans seem to sense this and it at least partly explains the popularity of the few candidates who at least oppose illegal immigration.

 


Europe’s Migrant Crisis

October 28, 2015

http://www.citylab.com/housing/2015/10/mapping-the-frenzy-of-the-europes-migrant-crisis/412396/

Much has been made of the migration of asylum-seekers and economic refugees to Europe from conflicts and poverty in the Middle East and Africa.  The above link takes you to a site that maps the flow of people.  It’s pretty interesting and certainly looks alarming, especially to Europeans.  The media has virtually run out of superlatives to describe the scale of this crisis.  “Historic.”  “Unprecedented.”  “Staggering.”  This linked article says that “… it’s hard to grasp the magnitude …”  It’s a serious situation, to be sure, but I thought some perspective might be interesting.

Europe is a continent of approximately 585 million people, not counting Russia.  (After all, none of these people are seeking to migrate to Russia.)  It has a surface area of about 2.3 million square miles – about 2/3 the size of the U.S.  This gives it a population density of about 255 people per square mile, about three times as densely populated as the U.S.

As the article points out, approximately 680,000 people have arrived in Europe so far this year.  That’s an annualized rate of about 750,000.  So that rate would grow Europe’s population by about 0.13%.  Now, let’s compare that to the United States, which admits approximately one million legal immigrants per year and is also invaded by a roughly equal number of illegal immigrants, many of whom are deported, but roughly half remain and are eventually granted amnesty.  That’s an annual influx of approximately 1.5 million migrants each year, growing the U.S. population by 0.5% (more than three times the rate being experienced by Europe).

Put in that perspective, Europe’s migrant crisis pales in comparison to what the U.S. has been experiencing year-in and year-out for many decades.  The scenes of border crossings in Europe are no different than the situation at our own southern border.  Yet somehow it’s a crisis of historical proportions in Europe, worthy of constant global media attention, while America’s migrant crisis is completely shrugged off.  It’s become routine.  It’s become our duty to suck it up and take them all in.

Still, this is a serious situation, cause for major concern for Europeans and even for Americans.  Consider:

  • Europe is already very densely populated.  Take away Russia and the Scandinavian countries, and the rest of Europe is as densely populated as China.  Many European nations, especially Germany, are already heavily dependent on manufacturing for export to sustain their economies and avoid high unemployment.  The very last thing Europe needs is more population growth.
  • Americans should also be concerned by a surge in population growth in Europe.  It will exacerbate our large trade deficit with Europe as its market is further eroded by over-crowding and as its exporters become more desperate to increase foreign market share.
  • The days when the western world could serve as a relief valve for overpopulation are long since past.  Our ability to absorb immigrants without doing economic harm to our own people has been exhausted.  The inability of western economies to sustain economic growth or even maintain their present levels of consumption is becoming more evident every day.

The sad fact is that as long as the world’s population continues to grow exponentially, driven primarily by explosive growth among third world nations, we are rapidly reaching the point where all we can do is stand by helplessly and watch as more and more crises unfold.

 


Americans Growing Poorer

September 19, 2015

http://www.census.gov/content/dam/Census/library/publications/2015/demo/p60-252.pdf

The above-linked report – “Income and Poverty in the United States:  2014” – was published by the Census Bureau a couple of days ago.  The news isn’t good.  In spite of the supposed decline in unemployment and all the talk of economic recovery, the median household income fell once again and the poverty rate remained at or near the highest level in fifty years.

There’s tons of data to sift through in the report, so I’ll simply quote a few of the key findings of the report:

“Median household income was $53,657 in 2014, not statistically different in real terms from the 2013 median of $54,462 (Figure 1 and Table 1). This is the third consecutive year that the annual change was not statistically significant, following two consecutive years of annual declines in median household income.”

“Median household income … in 2014 … 6.5 percent lower than the 2007 (the year before the most recent recession) median ($57,357), and 7.2 percent lower than the median household income peak ($57,843) that occurred in 1999.”

“In 2014, the official poverty rate was 14.8 percent. There were 46.7 million people in poverty.”

“The 2014 poverty rate was 2.3 percentage points higher than in 2007, the year before the most recent recession (Figure 4).”

Median household income has declined every year since 2007, and even the median income in 2007 was less than the median income in 1999.  This is the longest period of decline since the Census Bureau began tracking the data in 1967.  From 1967 to 1999, the median household income (for all races) rose from approximately $42,000 to $57,843 – a increase of 38%.  Since 1999, however, it has declined by 7.2%.

This is exactly what the inverse relationship between population density and per capita consumption would predict – that as our population density (including our “effective” population density) rises beyond a critical level, worsening unemployment and poverty is inescapable.

So what was it that happened after 1999 that threw median incomes into what increasingly appears to be a permanent state of decline?  Our population density has been rising by about 1% a year for decades but our “effective” population density – the population density that we take upon ourselves when we combine with another nation through “free” trade – skyrocketed in 2000.  That was the year that the Clinton administration granted China “permanent normal trade relations” satus, opening the door to “free” trade with China.

Look back at Chapter 7 of Five Short Blasts (especially Figure 7-5 on page 130), where we examined what happened to our effective population density as we combined our economy with other nations through “free” trade.  The effect of trading with Ireland – the nation with whom we have the largest per capita trade deficit in the world – is negligible.  They’re so small that it makes no change to our effective (combined) population density.  Add Mexico to the list, and our density rises from 85 people per square mile to 118.  Add Germany and it rises to 132.  But, when China, with one fifth of the world’s population, is added to the mix, our effective population density rockets to 242!  The downward pressure on our labor market and incomes suddenly becomes overwhelming.

As long as we continue to blindly apply “free” trade policy to all nations with no consideration of the effect of population density, the resulting downward spiral in our economy is inescapable.  With each passing year, the data on incomes and poverty in America bears this out.

 

 

 

 

 


Mr. President, how can we take you seriously on climate change?

September 2, 2015

http://www.nbcnews.com/news/us-news/obama-climate-change-act-now-or-condemn-world-nightmare-n419071

President Obama yesterday opened the “GLACIER” climate change conference in Anchorage, Alaska, chastising world leaders to do more.  He said that the U.S. “recognizes our role in creating this problem and embraces our role in solving it.”

Really?  How can we take you seriously, Mr. President, when you encourage rampant illegal immigration, adding millions of carbon emitters to our population?  Do you seriously believe that there is any solution to the climate change problem that doesn’t begin with stabilizing our population?

How can an environmentalist not be dismayed by what’s going on?  In spite of all of our efforts – recycling, improving the efficiency of our homes, cars and every product we use – the environment has never been more threatened.  There is only one logical conclusion:  all of our environmental efforts are not intended to protect the environment.  Rather, they are meant to simply make more room for more people, fattening corporate bottom lines with more consumers.

Environmental leaders share as much blame as our political leaders.  They know very well that worsening overpopulation is ruining the environment, but have chosen to remain silent to avoid alienating donors.  They should all be ashamed.

Mr. President, do you want us to take you seriously on climate change?  Then prove it by taking action to stem illegal immigration and move toward stabilizing our population.


Global Unemployment Drops Slightly in 2014, Still Higher than 2012

July 29, 2015

The main implication of the inverse relationship between population density and per capita consumption is that, as the world’s population continues to rise, so too will unemployment.  I’ve now begun tracking a rough measure of global unemployment, using the data posted on the CIA’s World Factbook web site for each nation, beginning with 2012.  Knowing the unemployment rate and the population, I can calculate how many people are unemployed in each nation, and then tally the sum for the entire world.  The CIA provides the data for most nations, but not all.  Also, the data has to be somewhat suspect, given that there is much disagreement over the official unemployment rate even in the United States.  You can imagine that the data for third world countries is probably not all that reliable.

Nevertheless, it’s all we have to go by.  Also, I’m making an assumption that the labor force in each country is made up of exactly 50% of the population (relatively close to the figure for the U.S.), since the CIA provides no data on the size of the labor force.  Using the CIA’s data and this assumption, in 2012 the global unemployment rate was 7.9%, and 26 million people were unemployed.  In 2013, the unemployment rate rose to 8.6% and 28.8 million people were unemployed.

In 2014, the situation improved slightly, with unemployment falling to 8.3% and 28.1 million unemployed.  It should be remembered that the period of 2012 through 2014 supposedly represents a time of global “economic recovery.”  While three years isn’t really enough data to begin drawing conclusions, so far the data seems to bear out the theory that unemployment will worsen as the world grows more crowded – even during a period of “recovery.”

This is data that I’ll continue to track and will report on again when 2015 data is available – probably early next year.


America’s Worst Trade Partners in 2013

May 26, 2015

Top 20 Deficits, 2013

In a recent previous post, I reported that the U.S. suffered a record trade deficit in manufactured goods with those half of nations above the median population density, and a healthy surplus with the other half of nations. The relationship between population density and trade imbalance is clear.

To make it even more clear, let’s take a look at the opposite ends of the spectrum of trade imbalances – those nations with whom we have the worst trade deficits in manufactured goods and those nations with whom we enjoy the biggest surpluses. This post will look at the top twenty deficits. In order to factor out the geographic size of nations as a factor, these trade imbalances are expressed in per capita terms – dollars per person.

Above is a link to a spreadsheet showing the top twenty per capita trade deficits in manufactured goods in 2013. The following are some observations about this list:

  • Of these top twenty nations, eighteen are more densely populated than the U.S. Most are much more densely populated. The average population density of the nations on this list is 504 people per square mile. This is almost six times the population density of the U.S.
  • The thing that may surprise people the most is that China, the nation everyone thinks of first when the subject of our trade deficit comes up, barely makes the list of the top 20 deficits, coming in at number 17. In per capita terms, our deficit with other nations including Israel, Taiwan, Japan, South Korea and a number of European nations, is much worse.
  • Low wages are often blamed for our trade deficit in manufactured goods. Manufacturing jobs, it is said, are shipped overseas to take advantage of cheap labor. So I’ve included the “purchasing power parity” (or “PPP”) – essentially the gross domestic product of each nation per person – to see whether this claim holds water. PPP is a measure of the purchasing power of the citizens of each nations, and is a good indication of the average wages paid. As you can see, our worst deficit are with rather wealthy nations. (By comparison, the PPP of the United States in 2013 was $49,000.) The average of PPP of these twenty nations is $35,330. Only two nations are below $10,000: China and Nicaragua. It should be noted that China’s PPP has more than doubled in the last eight years. If “low wages” were the cause of trade deficits, then we should begin to see our deficit with China decline as PPP rises. Instead, our trade deficit with China set a record in 2013. Our trade deficit with Switzerland, the wealthiest nation on this list, also worsened in 2013 to $1,859 per person from $1,680 in 2012, moving Switzerland from 3rd to 2nd place on this list.
  • South Korea moved from 12th place in 2012 to 11th place in 2013 as our trade deficit with them worsened from $426 to $496 per person. Our deficit with South Korea continues to worsen dramatically in the wake of the 2012 trade deal which the Obama administration hailed as a “big win for American workers.”
  • In the most dramatic move on the list, Malaysia went from 13th place in 2012 to 21st place – vanishing from the list – as our trade deficit with them was cut in half in 2013. This allowed Mexico to move up to 13th place in spite of a 20% decline in our deficit.

There are a couple of key take-aways from this list. First is that population density plays the major role in determining trade imbalances. If it did not, one would expect the ratio of more densely populated nations to less densely populated nations to be somewhere around 1:1. Instead, the ratio here is 9:1. Secondly, low wages clearly have absolutely nothing to do with these trade deficits. This list is heavily skewed toward wealthy, high-wage nations like Ireland, Switzerland, Germany, Japan, Israel, Taiwan, Denmark and others.

The problem with attempting to trade freely with these badly overpopulated nations is not that their wages are too low. The problem is that they buy too little from the U.S., thanks to a level of per capita consumption that has been decimated by their extreme population densities. People who live in such crowded conditions simply can’t consume products at the same level as people who live in more reasonably populated conditions like we enjoy in the U.S.