Population Density Disparities Drive Global Trade Imbalances

July 14, 2018

In recent posts, we looked at lists of America’s best and worst trading partners in terms of the balance of trade in manufactured goods, and found strong evidence of a link to population density.  The lists of our biggest trade deficits, in both absolute and per capita terms, was dominated by densely populated nations like Germany, Japan and China.  The lists of our biggest trade surpluses was dominated by low population density nations, and by net oil exporters (caused by the fact that oil is traded in American dollars).

Now let’s include all nations*, dividing them equally around the global median population density (which is 194 people per square mile).  Look at this chart:  Balance of Trade Above & Below Median Pop Density.  With those half of nations below the median population density, the U.S. enjoyed a small surplus of trade in manufactured goods of $36 billion in 2017.  However, with those half of nations above the median population density, the U.S. suffered an enormous deficit of $761 billion.  Also, note how the disparity has dramatically worsened over the 14-year time period from 2005 to 2018.  The longer the U.S. attempts to engage in free trade indiscriminately, ignoring the role of population density, the worse the effects become.

One may argue that perhaps dividing the nations of the world around the median population density skews the results, since the more densely populated half of nations includes far more people than the less densely populated half.  Fine.  Let’s divide the world in a way that compares the half of people who live in more densely populated conditions vs. the half of people who live in less densely populated conditions.  If we do that, in 2017 the U.S. had a trade deficit in manufactured goods of $510 billion with the half of people living in more densely populated conditions, and a deficit of only $214 billion – less than half – with the half of people living in less densely populated conditions.  Still a strong correlation to population density.

But maybe that’s not the right way to look at it either.  Perhaps we should divide the world in half according to land mass – that is, the half of the world’s surface area that is less densely populated vs. the half that is more densely populated.  (No, Antarctica is not included in this analysis.)  If we do that, the results are even more dramatic.  With the half of the world’s surface that is more densely populated (accounting for 6.6 billion of the world’s 7.1 billion people), we had a trade deficit in manufactured goods in 2017 of $831 billion.  With the less densely populated half of the world, we had a trade surplus of $107 billion.  (It’s worth noting here that the split occurs at a population density of 56 people/square mile.  That is, the less densely populated half of the world has a population density of 56 or less.  The more densely populated half is greater than 56.  The population density of the U.S. is about 90.)

Think about that.  This means that the U.S. economy would fare much better if the population of the more densely populated half of the world were no greater than the less densely populated half – which would yield a world population of about 1 billion people instead of 7.1 billion.  Instead of a net trade deficit in manufactured goods of $724 billion, we’d have a trade surplus of $214 billion (double the trade surplus that we currently have with the less densely populated half of the world).  One can debate what would be an optimum population density in economic terms, but there’s no question that this is a powerful argument for factoring population density into our trade policy.  Beyond that, it also debunks in a strong way the contention of economists that an ever-growing population is essential to sustaining a healthy economy.  It does nothing of the sort.  Instead, the crowded conditions that characterize a dense population stifle consumption – and thus employment – making people dependent on manufacturing for export to escape poverty.


* Not all nations are included in the study.  Tiny island nations have been omitted since they don’t factor into the trade equation and, while such nations tend to be densely populated, they also enjoy unique economies, based primarily on tourism.


EU Scared to Death by Trump’s Tariff Threat

July 5, 2018

Precisely as I recommended he do in response to EU (European Union) tariffs on Harley-Davidson motorcycles, President Trump has threatened to impose stiff tariffs on European auto imports.  In return, the EU responded much like the cartoon cockroaches in the RAID insect killer commercials – full blown panic.  The end of the world is at hand!  Their world, for sure, but they want you to believe it’ll be the end of yours too.  Prices will rise, they say.  Sales will decline.  So too will GDP (gross domestic product), a measure of the overall U.S. economy.

Perhaps their most interesting warning was in regards to BMW production at their Spartanburg, SC plant that produces their SUV models.  (They call them “SAVs”, or “Sports Activity Vehicles.”)  They claim that most of the cars made there are exported, and it’s true.  As other nations respond with their own tariffs on American cars, they say, exports of those American-made BMW SUVs will decline and production will be cut, costing jobs.

Let’s look at the facts.  That Spartanburg BMW plant does export about 75% of the vehicles it builds, with those exports having a value of about $10 billion.  Is it really the loss of those BMW exports the EU is worried about, or is it something else?

Here are some more facts.  In 2017, Germany exported approximately $30 billion worth of cars and parts to the U.S., while importing only about $10 billion from the U.S., resulting in a $20 billion surplus for Germany.  The EU as a whole enjoyed a surplus of $44.1 billion in cars and parts with the U.S.

So what is the EU worried about most?  The American economy and BMW’s $10 billion in exports, or their $44.1 billion surplus?  The answer is obvious.  They’re making a killing in the U.S. market, and Trump’s tariffs threaten to put an end to it,

And it’s not just the EU.  Other globalist organizations have used similar scare tactics.  General Motors made similar warnings, but are they more worried about domestic auto sales or their China operations?

Every day, the news is filled with stories about how trade war fears are weighing on global markets.

Will car prices go up?  Probably.  But they didn’t mention to you that your wages will rise faster.  Will car sales decline?  No, the opposite will happen.  Sales of American-made models will rise faster than the decline in sales of EU cars as Americans grow more prosperous and opt for the less expensive American cars over the tariff-laden EU imports.

So don’t fall for the Chicken Little scare tactics.  It’s impossible for the U.S. to do anything but win a trade war, since a trade deficit is what defines a loser in global trade and the U.S. has the biggest deficit by far.  Anything that reduces that deficit makes America the winner.

If raising tariffs on imports were going to hurt the U.S. economy, then how do you explain that the economy is on a tear, putting up the best numbers in a long time – especially in the manufacturing sector of the economy?  Investors seem to understand.  While foreign markets – especially in Asia – have been taking a beating in the past few months, American markets are holding just below their record highs.  Like the saying goes – money talks and BS walks.  The big money knows that Trump’s tariff plan is good news for the American economy.



America’s Best Trading Partners in 2017

June 22, 2018

In my last post, we looked at a list of America’s biggest trade surpluses in 2017 and found the list populated primarily with two groups of nations – primarily those with low population densities and those who are net oil exporters.  It also included nations both large and small.  What we’re studying here is the effect of population density on per capita consumption and its effect on trade.  Does a low population density facilitate high per capita consumption (and a high standard of living), making the people who live in less densely populated conditions better trading partners?  The only way to know is to factor the sheer size of nations out of the equation and look at our trade surpluses expressed in per capita terms.  On that basis, here is a list of the top twenty nations whose people import the most American-manufactured products:  Top 20 Per Capita Surpluses, 2017.

Again, the list is dominated by two groups of countries – those with low population densities and net oil exporters.  Twelve of the twenty nations have population densities less than that of the U.S.  Eight are net oil exporters.  (Canada and Norway share both characteristics.)  That leaves only two nations with high population densities – the Netherlands and Belgium.  As I noted in my previous post, both of those tiny nations share the only deep water sea port on the Atlantic coast of Europe, which they use to their advantage as a distribution hub for American imports.

The average population density of these twenty nations is 210 people per square mile (compared to 551 for the nations with whom we have the worst per capita trade deficits).  The population density of these twenty nations taken as a whole – the total population divided by the total land mass – is only 21 people per square mile.  (The average was skewed by tiny oil exporters with high population densities.)  Compare that to 375 people per square mile for our worst trade partners.

Note too that the average purchasing power parity (PPP, roughly analogous to wages) of the nations on the list of our best trade partners is $46,000 – which is actually slightly less than the PPP of our worst trading partners at $50,700 per person.  Clearly, low wages play absolutely no role in driving trade imbalances.  That’s not to say that low wages don’t attract business to locate in such nations.  But when they do, wages quickly rise where there is a low population density and any trade imbalance soon vanishes.  But where there is a high population density, labor is in such gross over-supply that wages rise little and a trade deficit persists.  It’s the high population density that causes a long-term trade deficit, not the low wages.

Now that we’ve examined the two ends of the spectrum of trade imbalances – our twenty worst per capita trade deficits in manufactured goods vs. our twenty best surpluses – we’ve found a very compelling relationship between trade imbalance and population density.  Next we’ll look at all 165 nations included in my study and see if the relationship still holds.

2018 Predictions Posted

January 3, 2018

I just posted my annual predictions for 2018.  Check them out:  https://petemurphy.wordpress.com/more-good-stuff/predictions/2018-predictions/.


Trump on Trade with China: Media Misses the Point

November 10, 2017


As was widely reported yesterday morning, Trump emerged from two hours of a meeting with Chinese premier Xi Jinping and had this to say:

I don’t blame China. “After all, who can blame a country for being able to take advantage of another country for benefit of their citizens? I give China great credit.”
The above-linked article goes on:
Instead of pointing the finger at Beijing for exacerbating trade disputes, Trump blamed past US administrations “for allowing this trade deficit to take place and to grow.”  It was a notable shift in tone from a President who was elected to office partly for his tough talk on holding other countries accountable for practices that disadvantage US workers.
Trump went on:
We want a vibrant trade relationship with China.  We also want a fair and reciprocal one. Today, I discussed with President Xi the chronic imbalance in our relationship as it pertains to trade and the concrete steps it will take to solve the problem of massive trade distortion.
A “notable shift in tone?”  Maybe a shift in tone, but the media is completely missing the not-so-subtle and huge shift in U.S. trade policy that this represents.  Previous presidents have chided China for unfair trade practices like currency manipulation, theft of intellectual property, subsidizing their exports, and manufacturing in sweat shops that also pollute with reckless abandon.  They used to put all of the onus on China for helping to correct our enormous trade imbalance.  The Chinese must have been rolling in the aisles with laughter when our trade negotiators left.
Not this time.  What Trump is saying is that the time has come for the U.S. to take the matter of restoring a balance of trade with China into our own hands.  Trump has been itching to begin levying tariffs on imports from countries that have large trade surpluses with the U.S. and, though he made no mention of tariffs in this speech, his vow to take matters into our own hands should send chills down the spine of Xi.  Restoring balance with China by slowing their exports with the use of tariffs would practically collapse the Chinese economy.
But so far it’s just talk.  What is Trump waiting for?  It seems clear that he’s biding his time with China in the hope that their help with reining in “Little Rocket Man” in North Korea will lead to his demise.  Probably a smart move but, if it doesn’t work by the time North Korea has the ability to put a nuke on an ICBM, the U.S. will have to act and the Chinese will lose whatever leverage holding the North Korean attack dog at bay has afforded them.
In the meantime, our trade deficit in manufactured goods grows worse.  Here’s the latest chart, gleaned from the trade data for September that was released on last Friday:  Manf’d Goods Balance of Trade.  Nothing has changed since Trump took office, and nothing will until he stops dithering with pointless negotiations and begins applying tariffs to these countries with bloated labor forces and emaciated markets.  My sense is that that time is growing nearer, but time will tell.

America’s Best Trading Partners in 2016

July 12, 2017

In my previous post we found that the list of America’s worst trade partners in 2016 – those with whom the U.S. has the biggest trade deficit in manufactured goods – in terms of both total dollars and in per capita terms – was dominated by nations whose population densities were far above the world median.  Only two of the twenty worst nations had population densities below the world median.

So what about the other end of the spectrum – the nations with whom the U.S. enjoyed trade surpluses in manufactured goods in 2016?  If there is a relationship between population density and trade imbalance, we should see the opposite effect – that the list is dominated by nations with low population densities.  Here’s the list of America’s twenty biggest trade surpluses in manufactured goods in 2016:  Top 20 Surpluses, 2016

It isn’t as clear as you might expect, and here’s why.  The fact that all oil around the globe is priced in U.S. dollars makes oil exporters float to the top of the list, regardless of population density.  Those nations with whom the U.S. has a trade deficit in oil are high-lighted in yellow.  Of these twenty nations, eleven were net exporters of oil to the U.S.  Why does this matter?  Because American dollars, aside from being legal tender for purchasing oil anywhere in the world, can only be used as legal tender in the U.S.  That means that all those “petro-dollars” have to be used to buy something from the U.S. – primarily two things:  U.S. government bonds and products made in the U.S.  While eleven net oil exporters appear on this list, only one appeared on the list of our top twenty worst trade deficits – Mexico.

Still, the population density effect is in play, even among these net oil exporters.  Believe it or not, Canada (not Saudi Arabia or some other Middle Eastern country) is our biggest source of imported oil.  With Canada, our trade surplus in manufactured goods is bigger than our deficit in oil by about $6 billion per year.  With Saudia Arabia, trade in oil and manufactured goods was almost perfectly balanced.  The same with New Zealand.  With Norway, our surplus in manufactured goods exceeded the deficit in oil by over $3 billion.

In addition, there are two very densely populated nations that appear on this list who are not oil exporters – the Netherlands and Belgium.  There’s a reason for this also.  Both are tiny European nations who happen to share the only deep water port on the Atlantic coast of Europe.  They use this to their advantage, buying American exports and then re-selling them to the rest of Europe.  Taken as a whole, the trade deficit with the European Union in 2016 was $138 billion, which would rank it 2nd on the list of our worst trade deficits, just after China.  The population density of the EU is 310 people per square mile – a little less than China.  And, in per capita terms, our trade deficit in manufactured goods with the EU was $274, a little worse than China.

Now let’s look at a list of our top twenty trade surpluses in per capita terms in 2016:  Top 20 Per Capita Surpluses, 2016.  This results in some small nations floating up onto the list:  Brunei (an oil exporter), Iceland, Belize, Guyana (an oil exporter), the Falkland Islands, Suriname, Oman and Equatorial Guinea (the latter two also being net oil exporters).  But in terms of population density, both lists are pretty similar.  The average population density of the nations on both lists are 213 people per square mile and 197, respectively.  Compare that to the lists of nations with whom we have the largest trade deficits where the population densities were 729 (our largest deficits in dollar terms) and 522 (our largest deficits in per capita terms).  But let’s look at those lists another way.  Let’s calculate the overall population density (the total population divided by the total land area) for the nations with whom we had the twenty largest per capita trade deficits vs. the nations with whom we had the twenty largest per capita surpluses.  Those figures are 372 people per square mile vs. 20 people per square mile.

Oh, and by the way, look at the purchasing power parity of both lists.  They’re remarkably the same.  Clearly, wealth (or wages) play no role in determining the balance of trade whatsoever.

The data couldn’t be more clear.  While other factors may come into play in trade, their effects are dwarfed by the role of population density in determining the balance of trade.  Free trade with densely populated nations is almost assured to yield terrible results for the U.S. – a huge trade deficit in manufactured goods, the loss of manufacturing jobs, and the ruination of the manufacturing sector of our economy.  Because of the role of over-crowding in eroding per capita consumption, those nations consume little but are very bit as productive.  So they come to the trade table with a bloated labor force hungry for work, and a wilted market, unable to consume our exports in equal measure.  Free trade with more sparsely populated nations, on the other hand, is likely to yield the opposite result.  Any trade policy that doesn’t use tariffs to maintain a balance of trade with densely populated nations is doomed to failure, as decades of America’s free trade policy has proven.

We’ll look at even more data from 2016 in upcoming posts.  Stay tuned.


Student Visas

February 24, 2017

The subject of student visas aggravates me as much as illegal immigration (although we’re finally getting some great news on that front).

Why?  “What’s the problem with student visas?” you might ask.  For most, the topic probably conjures up images of foreign exchange students coming to the U.S. to experience life here and return home to spread the news about what a great place the U.S. is and to help spread our value system around the world.  Or maybe you envision students coming here for an education that can be put to work back home in some underdeveloped country, helping to raise living standards there.  But the reality of the situation is nothing like this.  The student visa program boils down to money.  It’s a system designed to suck trade dollars back into the U.S. economy and to prop up inflated tuitions.

Let’s begin with some data.  Here are the statistics for non-immigrant visas issued from 2011 through 2015.  (The data for 2016 is not yet available.)  Student visas are primarily “F” visas.  “M” visas are for vocational students.  Taken together, they totaled nearly 700,000 in 2015.  These are “non-immigrant” visas, but don’t be fooled.  A large percentage of these students receive immigrant visas (leading to permanent status) almost automatically upon graduation.

Where do these students come from?  About 280,000 came from mainland China.  75,000 came from India.  28,000 came from Saudi Arabia.  27,000 came from South Korea.  17,600 came from Vietnam.  An equal number came from Mexico.  17,000 came from Japan.  The rest are spread across the remaining nations of the world.  The significance of this list will be discussed later.

To get an idea of what the student visa program is really about, take a look at this web site, which provides information for foreign students for how to apply:


What it boils down to is this:  you have to explain why you want to study in the U.S. and, more importantly, you have to prove that you can pay for it.  There’s no student loan program here, at least not through U.S. agencies.  If you can get scholarship money from your native country, fine, but regardless of how you get the cash, you have to be able to pay your way.  You must also declare your intent to return to your home country when you’re finished with your studies.  But that’s a formality, one easily skirted when you actually get your degree.

In 2015, over 677,000 “F” visas were issued.  223,000 applicants were refused.  In other words, about three quarters of all applicants are accepted.

Now, let’s take a look at some interesting findings about the student visa program published in a study by the Brookings Institution in 2012.  Here’s the link:


“From 2008 to 2012, 85 percent of foreign students pursuing a bachelor’s degree or above attended colleges and universities in 118 metro areas that collectively accounted for 73 percent of U.S. higher education students. They contributed approximately $21.8 billion in tuition and $12.8 billion in other spending—representing a major services export—to those metropolitan economies over the five-year period.”

Got that?  They paid full tuition and living expenses, bringing over $33 billion into the economy.  And that was through 2012.  In 2015, when 25% more visas were issued than in 2012, that figure rises to over $42 billion.

Two-thirds of foreign students pursuing a bachelor’s or higher degree are in science, technology, engineering, mathematics (STEM) or business, management and marketing fields, versus 48 percent of students in the United States.

Remember how tech companies claim that they depend heavily on immigrants to provide the advanced skills that they need?

Forty-five (45) percent of foreign student graduates extend their visas to work in the same metropolitan area as their college or university.

In other words, these students then go on to become the H1-B visa workers that the tech industry (and many others) claim that they need.  So the “non-immigrant” nature of student visas, and the declaration of intent to return to their home country, is truly a joke.  Here’s further evidence that student visas are used as the pipeline for H1-B visas:


These companies who claim that they’re dependent on immigrants for the skills they need are trying to pull the wool over your eyes.  What they need are STEM graduates and they get them from American universities.  They like the fact that foreign students contribute to a glut of labor that helps to keep their payroll costs suppressed.  When Apple claims that, if immigrants aren’t allowed to travel freely to work in the U.S., then they might need to relocate to where they can have easier access to immigrant labor, that’s a “crock” and they know it.  Go ahead, Apple, move to Yemen or  Iran or Libya or one of those other countries, and let’s see how successful you can be there.  What you really need are the STEM graduates of American universities.  You won’t find them in those other places.  But what you will find are poverty, illiteracy and oppressive governments.  But you say you can do better there.  So prove it.  Just leave.  Go ahead.  Go.

There’s a mind-numbing amount of information in these links.  Let’s boil it all down:

  • Immigrants currently fill 1.2 million of the seats available in American universities.  That’s a significant percentage of the seats available.
  • Approximately three quarters of foreign students who apply are accepted.  Compare that to the acceptance rate for American students at most prominent universities, where only 10% or fewer attain admission.
  • Why the preference for foreign students?  Because they pay full tuition, propping up the ridiculous rate of tuition increases.
  • Foreign students are given preference over American students because of their ability to pay.  This effectively shuts American students out, especially from STEM curricula.
  • The influx of foreign students actually counts as an export of services.  Can you believe that?  It’s one of the tricks used by the government to draw trade dollars back into the U.S. economy and to keep our trade data from looking even worse than it does.
  • University sports teams have also gotten in on the act, now recruiting foreign students through the “student” visa program, denying athletic scholarships to deserving American athletes.  When it comes time for the Olympics, those athletes, trained in America, compete for their home countries, leaving the American teams thin.
  • Almost half of foreign students then go on to work in America, shutting American students out of those jobs as well.
  • The student visa program feeds into the H1-B visa program, which then begins to feed many of the other immigrant categories such as immediate relatives and family-sponsored preferences.

OK, remember the above list of countries that send the most students?  Did you notice anything about that list?  Did you notice that it includes the countries with whom America has the biggest trade deficits?  That should give you a clue as to where these foreign students are getting the money they need for tuition.  Their parents are getting rich on manufacturing for export to the United States.  What this means is that, in addition to taking your job, they then use your money to pay for their kids to come over here and take your kids’ jobs too!  Can this scheme possibly get any more outrageous?

If you’re an American student who hasn’t been able to get accepted into the school or program of your choice, the student visa program is probably the main reason.  If you’re a recent graduate and find yourself now saddled with crushing student loan debt, you can blame the student visa program for propping up ridiculous tuition rates.  And if you now find yourself struggling to find a job, you can once again blame the student visa program.

The student visa program is an outrage perpetrated on unsuspecting parents and students, depriving them of opportunities to help America out of its trade-created cash crisis, to help greedy universities prop up inflated tuition rates and to help corporations suppress wages with a labor glut.  It has to stop.  No foreign student should be admitted until every last American kid who wants a college education has gotten a seat in a university.  President Trump … please … take a close look at the student visa program and rein it in.