Trump was right to pull out of the Paris Climate Agreement

June 3, 2017

Let me begin by making clear that I am an environmentalist.  It was my concern for the environment – especially my little piece of the environment that I enjoy in the north woods – that was the genesis of my discovery of the inverse relationship between population density and per capita consumption, which I presented and explained in Five Short Blasts.  It’s a clear-eyed look at just where unending population growth will take us.  Few have devoted as much of their time to trying to save the planet.

Let me also make clear that I’m neither a GOP conservative nor a Democrat.  As I stated in Five Short Blasts, the platforms of both parties – both of which embrace and promote population growth – produce nothing more than weaving left and right along a path to ruin.  So this post isn’t politically motivated.

“Climate change,” the now-politically correct term for global warming, is real.  The link to human activity is undeniable.  I’ve watched Al Gore’s “An Inconvenient Truth”  and agree with its premise.  Greenhouse gases like carbon dioxide (CO2) and methane are building up in the atmosphere and trapping solar heat.  The science is clear.  Kudos to the scientists.

But shame on environmentalists.  The environmental movement has been a colossal failure.  If it weren’t, we wouldn’t now find ourselves in the fix that we’re in.  We wouldn’t be in the midst of a mass extinction.  The dire consequences of global warming are now inevitable.  Environmentalists admit as much.  And who is to blame for all of this?  There’s plenty of blame to go around but it could be argued that no one is more to blame than the leaders of the environmental movement themselves.  There may be a special place in hell for these people for what they’ve done.

Why do I say such a thing?  A little history is in order.  Going back decades, to the ’80s, if my memory serves me correctly, the environmental movement was in trouble.  The Vietnam war was over and young, impatient activists seized upon the environment as a new cause.  Their approach was radical and intolerant.  Industry, the civilian half of the “military industrial complex” that was the object of so much scorn by young radicals during the Vietnam era, was demonized as the enemy of humanity by the environmental movement.  The environmental movement was anti-industry, anti-development anti-everything to the point where they were perceived as being anti-humanity.

At the same time, as a result of new trade policies ushered in by GATT (the Global Agreement on Tariffs and Trade, enacted in 1947), the de-industrialization of America was underway.  Factories were closing.  People were losing their jobs.  And the country was being flooded with imports from Japan.  Eager to find a scapegoat, industry successfully blamed the environmental movement for making it impossible to continue manufacturing in America.  People began to despise these young, impatient, intolerant and uncompromising environmentalist radicals.

Industry had its own image problems.  Both sides saw an opportunity and began to collaborate.   The environmental movement softened its approach to development and, in return for the environmentalists’ endorsement of new development projects, industry began to embrace some of their more reasonable demands and causes.  The environmental movement made a deal with the devil and the concept of “sustainable development” was born.

Soon after, the company I worked for served up an example.  They announced plans to build a new plant on a pristine “green field” site – a piece of undeveloped property they owned.  At the same time, they also announced that another such piece of property was being set aside as a sort of wildlife refuge, never to be developed.  This, they proudly proclaimed, was a prime example of “sustainable development.”  “How the hell is that sustainable?” I wondered.  Half of the property in question was now gone.  It didn’t take a genius to figure out where that will ultimately lead if such “development” is “sustained.”

The term is an oxymoron and there is no such thing as “sustainable development.”  It makes me bristle every time I hear it.  By it’s very definition, “development” means putting natural resources to work to enhance the lives of human-kind.  There’s nothing wrong with that, as long as you recognize that, in a finite world, the process has to stop at some point.  It can’t be sustained forever. A finite resource can only sustain a certain number of people at a high standard of living.  Even a child should be able to understand this.  Yet, that is exactly what corporate leaders and their environmentalist lackeys would have you believe – that we can continue growing our population and continue to consume more and more, and thus grow their profits – “sustainably.” Forever.

Of course, the leaders of the environmental movement responsible for this mess won’t find themselves alone.  If there’s a hotter place in hell, it’s occupied by economists – those people who, in the wake of their Malthusian black eye, proclaimed that there is no limit to man’s ability to overcome all obstacles to growth, and vowed never again to even consider that population growth could present challenges.  It is yet another claim unable to stand up to even the most rudimentary scrutiny, but is the foundation upon which the concept of “sustainable development” is built. Incredibly, the environmental movement has bought into this.

With all of this said, I decided to do my own objective evaluation of the Paris Climate Agreement to decide for myself the wisdom of Trump’s move.  I started with Wikipedia’s take on the agreement, but then decided to go right to the United Nations’ web site that documents the whole thing.  I wanted to read the agreement for myself.  But, try as I might, I’ll be darned if I can find it.  There’s lots of explanation from the UN about the agreement, but I couldn’t find the agreement itself.  That kind of thing always makes me a little suspicious.

Anyway, here’s some key aspects of the agreement:

  • Certain few developed countries – most notably the U.S. – are targeted to generate all of the reduction in greenhouse gases.  Many undeveloped nations are actually allowed to increase their emissions in order to allow them to develop.  China, the world’s worst polluter, committed to only 25% of the reductions in greenhouse gas emissions, in per capita terms, that the U.S. committed to achieving.
  • Aid, beginning at a minimum of $100 billion per year above and beyond aid that nations are already receiving, must be provided by developed nations to help undeveloped nations develop faster and to help them deal with the effects of climate change.
  • Each nation sets its own goals, consistent with the overall goal to limit global temperature rise to 2 degrees Celsius or less, but then must report annually on their progress toward meeting their goals.

Already, I was beginning to have my doubts.  Forcing dramatic emissions cuts on the U.S. while allowing other nations to increase their emissions seems to preclude the U.S. from ever re-balancing trade and rebuilding the manufacturing sector of the economy, even if it meant producing products in plants that operated under strict environmental regulations as opposed to the filthy factories spewing smog in China.  This feels like some sort of “eco-trade barrier.”

Secondly, the requirement that wealthy nations boost their aid to developing nations by a minimum of another $100 billion per year to help them develop seems like a money grab.  We all know where the vast majority of funding would come from – the U.S. – just as the U.S. funds a disproportionate share of the U.N., the World Trade Organization, the World Bank, NATO, and virtually every other multi-national organization.

Finally, as I scanned through the many web pages that the UN serves up, I found the real goal of the agreement.  In the UN’s own words, here it is:

  • The ultimate objective of the Convention is to stabilize greenhouse gas concentrations “at a level that would prevent dangerous anthropogenic (human induced) interference with the climate system.” It states that “such a level should be achieved within a time-frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened, and to enable economic development to proceed in a sustainable manner.”

And there it is!  “… enable economic development to proceed in a sustainable manner.”  This agreement isn’t about saving the planet or the environment.  It’s about keeping environmental degradation just tolerable enough that we can continue to pack the planet with more corporate customers.

If climate change is the result of human activity, then isn’t it logical that any effort to combat it should begin with a focus on limiting the number of humans or their activity?  What is gained if we all cut our greenhouse gas emissions per capita by 50% but then double the population?  Absolutely nothing!

The U.S. has already made strides in reducing greenhouse gas emissions. But it isn’t even close to being enough.  To achieve the cuts that President Obama committed to in the Kyoto protocol – cuts of 80% or more – the plan relies heavily on “carbon capture.”  That is, CO2 would be extracted from exhaust stacks and stored in tanks or underground.  Essentially, it’s a process of creating a CO2 “landfill” which, if we all cross our fingers and toes and hope real hard, maybe it’ll never leak and create such a catastrophic jump in atmospheric CO2 levels that the planet is almost instantly cooked!

Any approach to the climate change problem that doesn’t begin with a plan to stabilize and gradually reduce the human population to a level where we can all enjoy a high standard of living without threatening the planet is a hoax.  Climate change is real, but this Paris agreement is just that – a hoax.  It has little to nothing to do with fighting climate change.  Instead, it’s globalization and “sustainable development” on steroids.  There is an old saying that goes something like this:  “If you can’t bewilder them with brilliance, then baffle them with bullshit.”  That’s exactly what “sustainable development” does.

Critics have mocked President Trump, saying that he is incapable of grasping the complexities of the Paris agreement.  It could be argued that perhaps it was President Obama who didn’t understand that the agreement he proclaimed to be such an accomplishment actually does nothing for the climate and simply suckered the U.S. into yet another self-destructive deal.  And it’s time for all people who are concerned about climate change and the environment to wake up to the fact that the environmental movement has been hijacked by those who profit from plundering the planet and that they, too, are being suckered by the concept of “sustainable development.”

I’m not terribly concerned.  I believe that if the world doesn’t wake up to the inverse relationship between population density and per capita consumption, then the unemployment, poverty and rising death rate that it fosters are going to do more to put a lid on greenhouse gas emissions than the Paris agreement could have ever hoped to achieve.

In the meantime, other world leaders have rushed to the defense of the Paris agreement.  No surprise.  They can kiss goodbye the $100 billion (per year!) they were counting on.  Plus, championing the Paris agreement is all upside for politicians with no downside.  Everyone loves them for their concern for the planet and they can never be held accountable, since it’s impossible to gauge success under the agreement.  It’s like a campaign promise that never has to be kept because no one can tell whether or not you’ve delivered.

Americans have been fleeced far too much in the name of globalization.  Clearly, Trump wasn’t baffled by this BS.  I applaud him for having the guts to walk away from this deal and for being willing to take the political heat for doing so.

 

 


Anti-border tax coalition

April 20, 2017

http://www.reuters.com/article/us-usa-tax-lobbying-idUSKBN17C2HQ

I’ve been predisposed for a week or so and it’s now time to get caught up on some things.  There’s been a lot in the news lately regarding Trump administration policies on immigration and trade.  I’m extremely pleased with what’s happening on immigration, less so with what I hear about Trump waffling on the idea of a “border tax” (another name for tariffs).

But I’ll start with the above-linked story that came out last week because this is a perfect example of the divergence of interests that takes place when a nation becomes “economically over-populated” or takes on the characteristics of such an economy through free trade with a badly overpopulated nation.  For the benefit of those unfamiliar with this concept, this divergence of interests is one of the consequences of the inverse relationship between population density and per capita consumption.  As a society becomes more densely populated, the need to crowd together and economize space begins to erode per capita consumption.  As per capita consumption declines, so too does per capita employment.  The result is rising unemployment and poverty.   It’s in individuals’ best interest – in the best interest of the common good – that this situation be avoided.  (To better understand this concept, I encourage you to read Five ShortBlasts.)

However, while per capita consumption may begin to decline as a population density reaches a certain level, total consumption continues to rise with a growing population.  Who benefits from that?  Anyone in the business of selling products.  Not only do they benefit from the increase in sales volume, but they benefit further as the labor force grows faster than demand, putting downward pressure on wages.  Thus, it’s in corporations’ best interest to see population growth continue forever, and to pursue more markets through free trade.

So it’s in the best interest of the common good that we avoid meshing our economy through free trade with nations whose markets are emaciated by overcrowding and who come to the trading table with nothing but bloated labor forces hungry for work.  But it’s in corporations’ best interests to grow the overall customer base through free trade with those same nations.  So it comes as no surprise that a big-business coalition is eager to steer lawmakers away from any tax plan that would include a “border tax” (a tariff) that might shut them out of their foreign markets.

They call themselves “Americans for Affordable Products,” making it sound as though it is individual Americans who make up this coalition and not global corporations.  They want us to believe that products will become less affordable.  While prices for imports may rise, they want you to forget that those increases would be more than offset by rising incomes and falling tax rates.  They don’t care if the border tax benefits you.  All they care about is that it may not necessarily benefit them.

So which of these competing interests will lawmakers heed – their wealthy corporate benefactors or the angry Americans who swept the Trump administration into power on his promise to enact a border tax and bring our manufacturing jobs back home?  Money talks and I fear that groups like this coalition are having an effect.  Trump and Republicans would be wise to ignore them.  Democrats paid the price for ignoring the plight of middle-class Americans when Obama betrayed his promise of “hope and change.”  Those same middle-class Americans will pull the trigger on Trump too if he doesn’t come through.

 


Weak Headline Number Masks Strong March Employment Report

April 8, 2017

The Bureau of Labor Statistics yesterday released its employment report for the month of March.  The headline jobs number was weak.  “Only” 98,000 jobs were added in March – about half of what was expected.  But unemployment dropped by two tenths (a fairly big drop) to 4.5%.  The data underlying the unemployment figure was quite strong.  The “employment level” (the number of people reporting being employed in the household survey portion of the report) rose by 472,000 in March.  (It rose by 447,000 in February.)  And the labor force grew by 145,000 – outpacing the growth in the general population for the fourth month in a row.

Last month, Trump hailed the strong February employment report as “real,” as opposed to the “fake” reports produced by the Obama administration.  (The Obama administration did lean heavily on claims of a shrinking labor force to prop up its unemployment figures.)  Was that claim just bluster or has the reporting methodology actually changed for the better?  It’s two early to tell but, at least for the second month in a row, the BLS claims that the labor force grew (as it actually does, of course) and the numbers seem plausible.  Time will tell.

Per capita employment (the employment level divided by the population) climbed above 47% for the first time since November, 2008.  (Here’s the chart:  Per Capita Employment.)  The “detachment from reality index” – my measure of how much the unemployment figures were distorted by the “mysteriously vanishing labor force” tactic used by the Obama administration – fell to its lowest level since January, 2013.  (Here’s the chart:  Detachment from Reality Index.)

This is great news, but it has more to do with a burst of confidence among consumers (likely driven by a burst of confidence among investors which has driven the stock market higher) in the wake of Trump’s election.  The fundamentals of the economy haven’t changed.  The trade deficit is as bad as ever.  And interest rates are on the rise which will pull the economy down if Trump isn’t able to make headway with tax and trade reforms.  And the jump in stocks that have propelled the economy has already stalled, now waiting to see if expectations of Trump policies actually materialize.

I hope that what appears to be honesty with the factors that make up the employment report (based on a scant two months’ of data) continues.  But without the “border tax” that Trump promised, the good numbers won’t.

By the way, for some time now, the Federal Reserve and others have been proclaiming the economy to be at full employment.  If that were true, then how does the economy continue to add jobs at a faster rate than the growth in the labor force, and how does the unemployment rate continue to fall?  It’s because they were all sucked in by the “detached from reality” employment reports produced by the Obama administration.  The fact is that an honest reading of unemployment (one that grew the labor force in proportion to population growth) has unemployment at 7.3% – nowhere even remotely close to “full employment.”


Trump to Confront China’s Xi This Week

April 3, 2017

http://www.reuters.com/article/us-global-markets-idUSKBN175025

In the wake of the Obama administration, it still makes me nervous any time the president sits down for talks with a foreign leader.  For Obama, there were no concessions too big for him to make.  Foreign leaders played him like a fiddle.  Americans came out the losers every time.  I say this as one who had big hopes for Obama and voted for him in 2008.

As reported in the above-linked Reuters article, Chinese President Xi Jinping travels to Florida this week to meet President Trump at his Mar-a-Lago resort.  The media will be focused on dealings aimed at reining in North Korea’s nuclear ambitions.  But the real story will be their talks on trade.  America’s failed trade policy is far and away the biggest contributor to our economic decline.  All of our economic problems and virtually every other problem that is impacted by monetary resources allocated to deal with it can be blamed on our trade deficit.  The budget deficit, nearly all of our national debt, our crumbling infrastructure, our health care crisis, homelessness, poverty …. you name it, they’re all directly linked to the drain of our financial resources wrought by the trade deficit.  And no country is more responsible for that drain than China, who accounts for nearly one half of the entire deficit.

On Friday, the U.S. president sought to push his crusade for fair trade and more manufacturing jobs back to the top of his agenda by ordering a study into the causes of U.S. trade deficits and a clamp down on import duty evasion.

If the President is truly interested in the cause of U.S. trade deficits, he need look no further than this blog and can learn all he needs to know by reading Five Short Blasts.   Nations who come to the trading table with nothing to offer but bloated labor forces and markets emaciated by gross overcrowding are the cause of trade deficits.  By this criteria, China is the worst of the worst.  Only tariffs (or a “border tax,” if that term is less onerous) can maintain a balance of trade when dealing with such countries.  Negotiations are pointless since the only possible outcome is to trust the other side to take actions to rein in their appetite for our market.  Decades of experience since the beginning of the failed experiment with “free” trade has proven that they won’t.

So far, President Trump has proven that, for the most part, he can be trusted to follow through on his campaign promises.  No promise was bigger than getting tough with China on trade.  It seems that Germany’s Angela Merkel found him to be a very different president from Obama in her recent meeting with Trump.  Hopefully, he’ll be just as tough on Xi.  It seems that Trump’s “border tax” idea is now becoming more accepted as a crucial element of his upcoming tax reform plan.  Let’s hope he doesn’t negotiate away any of it this week.


Closing the Book on Obama’s Trade Policy

March 8, 2017

The U.S. trade deficit for the month of January was posted yesterday by the Bureau of Economic Analysis.  It was horrible.  President Trump took office on January 20th, but he can hardly be held responsible for any of the January results.  This is all on former President Obama.

How bad was it?  The overall trade deficit rose to its worst level in nearly five years – $48.5 billion.  At $62.1 billion, the deficit in manufactured goods just missed its all-time worst reading of $62.5 billion set in March of 2015.  As you can see from this chart, if the trend in manufactured goods continues, we’ll have a new record very soon and, without the change in trade policy promised by President Trump, it will likely get worse from there:  Manf’d Goods Balance of Trade.

Then there’s the export numbers.  In January of 2010, lacking the courage to take on the problem with imports, President Obama vowed to double exports in five years in an effort to turn the U.S. into more of an export-driven, Germany-like economy.  It never happened and never even came close.  In January of 2017 – seven years after Obama made that promise – total exports, at $192 billion – remained below the October, 2013 level.  Worse yet, exports of manufactured goods were below the level reached in September, 2011 – up only 26% from when Obama made that promise.  And that increase was due entirely to global economic recovery from the 2009 recession and had nothing to do with any real improvement in America’s export position.

So that closes the book on Obama’s trade policy, which was a total failure.  Actually, if President Trump follows through on his promise of tariffs (or border tax, or whatever you want to call it), this closes the book on a seven-decade-long experiment with free trade and globalization, begun in 1947 with the signing of the Global Agreement on Tariffs and Trade that, by any measure of its effect on the American economy, has been a complete disaster.

  • America’s trade surplus dwindled until we ran our last trade surplus in 1976.
  • 41 consecutive years of trade deficits has yielded a cumulative deficit of $14.4 trillion.  During that time, the national debt, which is closely linked to the trade deficit, grew by $19.4 trillion.  In 1976, the national debt was only $0.5 trillion.  Virtually all of our national debt is due to the cumulative trade deficit since 1976.
  • During this period, family incomes and net worth have declined, our infrastructure has crumbled, and our nation has been bankrupted.  The manufacturing sector of the economy has been gutted.  More than ten million manufacturing jobs have been lost.  The United States, once the world’s preeminent industrial power, has been reduced to a skid-row bum, begging the rest of the world to loan us money to keep us afloat.

This is all on you now, President Trump.  You own it.  You’ve promised to straighten out this mess.  America is watching and waiting.


Labor Market Sputtering

September 9, 2016

Following two months of impressive gains, the employment report released a week ago by the Bureau of Labor Statistics was rather unremarkable.  According the the establishment survey, private payrolls added only 126,000 jobs in August, while government employment rose by 25,000 to bring the total job gains to 151,000.  According to the household survey, the employment level rose by 97,000.  These figures are just enough to keep pace with the growth in population.  So unemployment held steady at 4.9% for the third month in a row – a figure held artificially low by the “vanishing work force” trick used throughout the Obama administration.  Otherwise, the figure would be 8.0%.

It wasn’t a bad report, but there are some causes for concern:

  • The average work week fell by 0.1 hours.  For manufacturing workers, it fell by 0.2 hours.
  • Average hourly earnings rose by only 3 cents.  That’s an annual rate of gain of just over 1%.  It had been running at 2.4%.  It lagged the rate of inflation in August, meaning that American workers grew slightly poorer.
  • Hiring gains were led by restaurants and bars, a segment of the economy that may be built to over-capacity and is ripe for some contraction, especially as the economy begins to slow.
  • Manufacturing employment was flat again and is down by 37,000 compared to a year earlier.
  • Health care employment rose by only 14,000 – well below the average monthly gain of 39,000 for the prior twelve months.

That last item could be an early indication that the economic boost from Obamacare has just about run its course.  Obama has avoided the economic funk that typically plagues administrations as they near their end.  Typically, an administration begins to rein in the deficit spending that was driven by stimulus programs enacted early on, as pressure builds to cut the deficit.  But “Obamacare” was a whopper of a stimulus program, continuing to pour trillions of dollars into the economy.  But the process of scaling up the health care industry to meet the new demand fueled by that program may now be nearly complete.  We’ve even heard of insurers exiting the program, citing unexpected losses.

So far this year, job gains have averaged 181,000 per month, down from 229,000 in 2015, which was down from 251,000 in 2014.  August gains lagged the average for 2016.  The labor market is clearly slowing.  Obama’s adminstration may catch the late-term economic flu yet.

 


Deficit Spending Holding Recession at Bay

August 26, 2016

It’s been a long time since I posted on this subject – about a year and a half.  Some discussion about the national debt jogged my memory, and I was curious to see how my chart would look now.

The following chart tracks the growth in the national debt vs. the “cumulative trade deficit.”  It’s an important metric because the trade deficit siphons money from the economy – money that is subsequently pumped back into the economy by federal deficit spending.  Countries who run a trade surplus with the U.S. repatriate those dollars primarily through the purchase of U.S. government bonds – bonds that are used to finance deficit spending.

Over the years, these two metrics have tracked very closely together, but not perfectly.  Sometimes deficit spending outpaces the trade deficit.  Sometimes it lags.  But any time that deficit spending lags the trade deficit, a recession is always right around the corner, since the net effect is a drain of money from the economy.

Typically, toward the end of a president’s administration – especially if it’s been a 2-term administration, deficit spending begins to decline as stimulus programs implemented at the beginning of a new administration expire and as pressure builds to rein in the deficit.  It happened at the end of the Clinton administration and at the end of the George W. Bush administration.  For this reason, I’ve been predicting that the Obama administration would end the same way.

It doesn’t look like it will.  Take a look at the chart:  growth in nat’l debt vs cumulative trade deficit.   Clearly, the Obama administration has felt no compulsion to rein in deficit spending like his predecessors.  When it comes to deficit spending, President Obama has kept his foot on the throttle like no other before him, pouring money into the economy.  In light of this, it’s not surprising that the economy has managed to hang on by its fingernails to avoid another plunge into recession.

Where has all the concern about fiscal restraint gone?  In the early ’90s, during the George H.W. Bush administration, deficit spending raced ahead of the trade deficit.  By the time Clinton took office, there was a lot of concern about the exploding national debt, so Clinton worked with Republicans to rein in the spending and actually balance the budget (on paper, at least).  He could afford to do it.  Thanks to the explosion in personal computer and cell phone technology and manufacturing, the economy hummed along at a brisk pace.  But by the end of his administration, the tech bubble burst, the trade deficit began to explode (thanks to NAFTA and China’s admission to the WTO – both of which were Clinton’s progeny), and there was little deficit spending to pick up the slack.  His administration ended in a bad recession.

So what’s different now that makes Obama immune to the exploding deficit?

  • Interest rates have fallen to near zero.  So interest payments on the national debt have actually declined in spite of a growing debt.  Zero percent of any amount, no matter how large or small, is still zero.  In fact, there’s even some talk of the possibility of interest rates going negative, as they have in Japan.
  • Perhaps because of the above or, for whatever reason, all political pressure for fiscal restraint has vanished.  No one – not even Republicans – even mention it any more.  No one seems to care.
  • Central banks around the world – and that includes the U.S. – are getting very skittish about the potential for another recession at a time when their recession-fighting ammo is all spent.  They’re pressuring governments to actually step up deficit spending.

In light of this, it’s not surprising that the recession I’ve been predicting hasn’t yet taken hold.  What is surprising is that the economy isn’t doing better than it is.  Twenty years ago, if you had told economists that the federal government would be running a $1 trillion/year deficit, that interest rates were near zero, that the Federal Reserve would have a $4.5 trillion balance sheet, and that the result of all of this was GDP growth of only 1%, they’d have told you that you were crazy – that it was impossible.  Yet here we are.

It’s surprising to many, perhaps, but not to those of us who understand the inverse relationship between population density and per capita consumption, and that all of our efforts to prop up the economy with rampant immigration-fueled population growth are actually eating away at consumption as fast as we can add new “capitas.”  The end of growth is at hand.  It has often been said in the corporate world that “if you aren’t growing, you’re dying.”  The day may be coming when even a “no growth” economy might look good.