Why Obama Courts Brazil and Latin America

March 22, 2011


The above-linked article reports on Obama’s trip to Latin America and his call for a strengthened partnership with that region.  Why the emphasis on Latin America?  Why was he in Brazil just as military operations were being launched against Libya?  Here’s why:

Brazil Trade

Our trade surplus with Brazil, driven by an even larger surplus in manufactured goods, is rising fast.  This chart would look virtually the same for every country in South America.  Obama correctly sees Brazil and Latin America as key to his objective of doubling exports in five years to rebuild the manufacturing sector of our economy. 

What Obama doesn’t understand is why.  Why are we so successful in trade with these countries and with others, like Canada and Australia,  and such an abysmal failure in places like China, Japan and Germany, just to name a few?  We are successful in South America for the very same reason that China, Japan and Germany have trade surpluses with us and for the very same reason that Japan has a trade surplus with China.  We’re more densely populated than South American countries (and Canada and Australia), just as China is more densely populated than us, and Japan is more densely populated that China. 

It’s all about population density and its role in suppressing per capita consumption.  When nations share labor forces and markets through free trade arrangements, the results become lopsided when one has an over-sized labor force and a market stunted by over-crowding and low per capita consumption.

I’ve recently begun my annual updating of trade results for 2010 between the U.S. and each trading partner.  2010 saw a rebound in trade volumes from the recession-affected trough of 2009.  And, in virtually every case, what I’m finding is that our balance of trade in manufactured goods improved with less densely populated nations while it worsened with those more densely populated.  And, I might add, this is in spite of the fact that the dollar fell relentlessly in 2010.  It also holds true regardless of whether the nation in question is wealthy or poor.  (In other words, low wages aren’t a factor.)  I’ll share some selected charts with you for some of the more significant trade partners as I compile the data.  (I’m doing it alphabetically, so Brazil was among the first.) 

Obama would be well-advised to return home and focus not on our trade relations with Latin America.  Nothing he says or does there can work to America’s advantage any more than the disparity in population density does automatically.  Rather, he should focus his efforts on revising trade policy to stem the tide of imports from the overpopulated, export-dependent economies of the world.

Tension Over Trade Imbalances Heating Up

November 5, 2010


As reported in the above-linked CNBC article, tensions over trade imbalances are heating up, not just in China, as head-lined in the article, but in Japan and Germany as well.  It seems that the U.S. has proposed that other nations “cap” their current account surpluses (trade surpluses) at 4% of GDP:

The United States proposed at the G20 finance ministers’ meeting last month that countries should cap current account surpluses or deficits at 4 percent of GDP as part of efforts to rebalance the global economy.

It was one thing for Obama to suggest at the height of the global economic crisis that nations voluntarily work together toward rebalancing the global economy.  All agreed, knowing full well that there would be no follow-through by the U.S. and they could return to business as usual.  But it’s an entirely different matter for the U.S. to begin insisting on quotas. 

China on Friday pushed back strongly against U.S. policies ahead of the G20 summit, ridiculing Washington’s plan to impose current account targets and warning of risks in the Fed’s monetary easing.

… The idea of numeric targeting met strong resistance from Japan and Germany …

U.S. patience with huge trade imbalances is wearing thin.  Now, even the Fed has joined the fight with its new round of quantitative easing.  If voluntary approaches and pressure on currency valuations don’t work, then the unavoidable question for the U.S. is “what do we do next?”  There are only a couple of options – the ones I’ve steadfastly maintained are the only viable options:  U.S.-imposed quotas and tariffs. 

Forget all the post-election banter about “Obamacare” and about government spending.  It’s all dwarfed in significance by this escalating global war for employment.  The global trade regime set up in the wake of World War II in the hopes of preventing the next war has back-fired and is crumbling, and may very well have provided the catalyst for the next one.

Obama Backs Down on China Currency

October 19, 2010


Just about the time you think the Obama administration may be growing a backbone in dealing with China ….. well, no.  Once again, they’ve chosen to duck and cover, leaving American workers to take the brunt.  The administration has decided to hold off on issuing a report that would brand China a “currency manipulator,” opening the door to corrective tariffs.  (See the above-linked Reuters article.)  It seems that Obama wants to hold off at least until after the next G20 meeting in November, giving a “multi-lateral” approach another chance.  Earth to Obama:  the U.S. trade deficit with China isn’t a multi-lateral issue.  Aside from the U.S. and China, none of the other 18 in the G20 gives a damn about our trade deficit. 

The issue here isn’t multi-lateralism vs. a go-it-alone approach.  The issue is that this administration hasn’t the courage to take even the simplest of measures in defense of our economy and American workers.  If it doesn’t have the guts to issue a report, what are the chances that they’d have the guts to actually impose tariffs on China and then make them stick? 

President Obama clearly places more importance on diplomacy, on maintaining an air of cooperation at G20 meetings, and on a legacy of being a world-respected statesman than on providing real leadership for the American people.  Maybe this shouldn’t be a surprise, since he vowed to take such an approach during the campaign two years ago.  But he also vowed to tackle the trade deficit and re-write the North American Free Trade Agreement.  Neither has happened, nor will they happen. 

There will be no improvement in America’s trade deficit under this administration.  The president’s plan to cut into the deficit by doubling exports is less of a plan than it is a dodge.  There’s no hope that American manufacturing jobs will be coming home under this administration.  It’s clear that our only hope for “change” will have to wait until the 2012 election.  Obama and his adminstration will have to go.

Dollar-Yuan Exchange Rate vs. Balance of Trade

July 7, 2010

I recently promised a new series of posts that will explore the relationship (or more accurately, the lack of a relationship) between currency exchange rates and balances of trade.  It’s my contention that there is no relationship of any significance; that trade imbalances are much more heavily influenced by disparities in population density between the two trading partners.  In proving that trade balances in manufactured goods are driven by population density disparities, it’s just as important to disprove the usual suspects – currency exchange rates and low wages. 

This is the first post in this series that addresses exchange rates.  We’ll take a look at the dollar-yuan exchange rate and whether or not any relationship is evident between the exchange rate and our balance of trade with China.  The sole focus of the Obama administration’s trade policy has been badgering the Chinese to stop its practice of “pegging” the yuan to the dollar, allowing it to float freely and be determined by market forces.  Congress has threatened to pass legislation branding China a currency manipulator, potentially opening the door (under World Trade Organization rules) to punitive tariffs.  Economists have all agreed – China’s currency is undervalued by as much as 40%, and they have blamed this for America’s enormous trade deficit with China.

So even I was surprised when I compiled the data.  The dollar has steadily fallen since 2004 by 17% vs. the yuan.  Granted, the decline has been slow and has been managed by China, but the impression created by the Obama administration that the yuan has remained pegged at a fixed value is simply wrong. 

So here’s a chart of the exchange rate vs. the balance of trade:

Dollar-Yuan Rate vs Balance of Trade

If economists are right when they say that a falling dollar will improve our balance of trade, then we should see the trade deficit with China improve as the dollar declines.  But that’s not what we see here.  Instead, the trade deficit with China has actually worsened dramatically as the decline in the dollar-yuan exchange rate has progressed, worsening in four of the last five years.  It improved only in 2009.

Regarding the 2009 improvement, one might say that it has simply taken time for the reduced value of the dollar to take hold – that the balance of trade can’t improve until manufacturing capacity is rebuilt in the U.S. – something that might indeed take several years.  Such an explanation might hold water except for one very important fact:  the U.S. trade deficit with the entire world declined by 46% in 2009, thanks to the recession and its corresponding impact on global trade.  But America’s trade deficit with China fell in 2009 by only 15%.  In other words, were it not for the recession, it’s likely that our trade deficit with China would have substantially worsened. 

Therefore, if there is any cause and effect at all between exchange rates and balances of trade, this chart seems to indicate that a falling dollar is probably the result of a rising trade deficit.  The change in exchange rate is caused by the deficit, instead of the opposite cause and effect. 

It seems clear from this chart that those who pin their hopes on a falling dollar to reverse our trade deficit with China are barking up the wrong tree. 

But this is just an 8-year track record with one currency.  In future posts we’ll examine more currencies over a longer period of time. 


Exchange rate data comes from the OANDA web site:


China’s Trade Surplus with U.S. is Secure

April 5, 2010


The above-linked USAToday article reports on the Obama administration’s decision to delay labeling China a “currency manipulator” which, under World Trade Organization rules, would leave the U.S. free to impose tariffs on Chinese imports.

China has nothing to fear from the Obama administration.  Its trade surplus with the U.S. is secure and likely to grow.  Obama has, time and again, in spite of his campaign promises to enforce trade deals and bring manufacturing jobs back home, proven himself unwilling to take action on trade policy.  He still has done nothing in response to large and wide-ranging tariffs raised by Mexico early in his administration.  He has never uttered a peep of protest about blatant dumping by Japanese automakers.  And, while his administration has done some timid peeping about Chinese currency manipulation, he has once again proven unwilling to act. 

Besides, even on the outside chance that he did slap the “currency manipulator” label on China, it would lead to nothing but years of more talk.  And even on the outside chance that China did agree to let its currency float and be determined by market forces, it would have no impact on the balance of trade.  

Still, Geithner said in a statement that China should adopt “a more market-oriented exchange rate” to balance the U.S. trade deficit with China, which totaled $226.8 billion last year — the largest imbalance with any country. U.S. manufacturers say China’s yuan is undervalued by as much as 40% and is a big reason for the massive trade deficit.

Wrong.  Currency valuations have nothing to do with this trade deficit with China nor with any trade deficit.   Trade imbalances are driven by imbalances in labor capacity.  Excess labor capacity in densely populated nations is driven by their low per capita consumption, eroded by overcrowding.  Thus, it is ultimately a disparity in population density that drives global trade imbalances. 

If “currency manipulation” is the cause of the U.S. trade deficit with China, then how does one explain an even larger U.S. trade deficit (in per capita terms) with the Euro zone, a region almost as densely populated as China?  How does one explain the far larger trade deficit with Japan (in per capita terms), a nation  ten times as densely populated as the U.S.?  And how does one explain the fact that, in spite of the dollar falling by over 300% vs. the yen in the past four decades, our trade deficit with Japan, instead of falling, actually exploded?  The reason is because currency valuations, if allowed to be determined by market forces, actually stabilize at a level where unemployment is evenly distributed, and not at a level where trade is balanced. 

A stronger yuan versus the dollar would make U.S. products less expensive in China, while making Chinese goods more expensive for American consumers.

Sure, but that doesn’t mean it will have any effect on trade.  China will maintain their market share by taking less profit and by finding other ways to subsidize their manufacturers, just as Japan and Europe have done for decades.   

The administration is hoping that China will again allow its currency to rise in value against the dollar as a way of narrowing the trade gap — as it did until mid-2008 when the global recession began to cut sharply into China’s exports abroad.

 And what was the result of China allowing the yuan to appreciate by 20% during that time frame?  The U.S. trade deficit with China worsened. 

The article goes on to present the pros and cons of tough trade action on China, weighing help for American workers against Chinese cooperation on the Iran nuclear issue, and so on.  It’s clear that there will always be a reason for the U.S. to be the world’s doormat when it comes to trade policy.  American jobs are always the first concession made for international cooperation on one thing or another. 

No, China has nothing to fear.

Time to Label China a Currency Manipulator

March 16, 2010


The U.S. Treasury Department is due to report to Congress by April 15th on whether or not it considers China to be a “currency manipulator.”  (See the above-linked Reuters article.)  Such a determination could be tantamount to an economic declaration of war.  Under World Trade Organization rules, a nation who determines that another is manipulating the exchange rate is then free to impose tariffs to rectify the situation.  Such a move by the U.S. to restore a balance of trade would threaten China with economic collapse. 

Nevertheless, the time has come.  With its policy of pegging the yuan to the dollar instead of allowing market forces to determine the exchange rate, China clearly is a currency manipulator.  Of course, so too is virtually every other nation, including Japan and the Euro zone.  The only difference is that they’re much more subtle about it, leaving their exchange rate to the whims of market forces, but then manipulating those market forces.  It’s not as effective as China’s policy, but they’re able to compensate for any erosion in exchange rate by using other tactics to maintain their trade surpluses with the U.S.  So the end result is the same with one exception.  It strips the U.S. of the ability to label them as currency manipulators. 

Will the Obama administration make such a move?  I doubt it.  They’ve yet to show any real backbone in international trade, failing to respond to huge, new Mexican tariffs on American exports or to blatant dumping by Japanese auto manufacturers.  However, as the economic stimulus plan winds down and as the Federal Reserve ends its programs to pump trillions of dollars into the economy, Obama faces the reality that it simply hasn’t worked.  Though they’ve been trumpeting the growth in GDP, they know very well that the effect is temporary and that the economy is likely to sink back into recession as the stimulus spending is exhausted.  And there’s no appetite for more deficit spending.  With credit dried up and without phony economic bubbles (the housing bubble being the most recent example) to create the illusion of prosperity, Obama knows that real improvement in the economy depends on a rebound in the manufacturing sector, which has had the life sucked out of it by the trade deficit. 

The jobs temporarily salvaged by the stimulus plan have only carried him so far, and its effects are waning.  So with a 2nd term now hinging on a restoration of private sector manufacturing jobs, we may yet see the administration grow a spine in international trade.  Why not label China a currency manipulator?  There’s really nothing to fear.  Will China dump its U.S. treasury holdings, which some fear may drive interest rates sky-high in the U.S.?  Perhaps, but the threat of higher interest rates is way over-blown.

  First of all, the rest of the world will see any move by the U.S. to restore a balance of trade as a huge boost to the U.S. economy, driving strong demand by other countries for U.S. treasuries.  Those sold by the Chinese will be quickly snapped up.  If anything, interest rates may even fall.  Secondly, in the past year, the Federal Reserve has purchased more U.S. treasuries than the total of Chinese holdings.  Whatever slack there might be in demand for the U.S. treasuries sold off by China can easily be made up by the Federal Reserve.   And finally, since China will still be dependent on exports to the U.S. to prop up their economy, they will still be left with a lot of dollars looking for a home.  What else can they do except use them to purchase treasuries?  I suppose they could also use them to buy oil, but then the oil exporters will have to purchase treasuries.  In the final analysis, the demand for U.S. treasuries will remain strong regardless of what China does. 

There is the possibility of an unintended consequence.  A move by the U.S. to restore a balance of trade with China may be perceived as such a positive for the U.S. economy and such a negative for China’s that, once unpegged from the dollar, the yuan may actually rise very little  or could even fall against the dollar.  Imagine the laughter and gloating that would be coming from China then!

I do find it a little awkward supporting the branding of China as a currency manipulator because exchange rates really aren’t the problem.  Currency exchange rates tend to stabilize not at a level that restores a balance of trade but at a level where unemployment equalizes, leaving a permanent trade imbalance between nations grossly disparate in population density.  When has a change in exchange rate ever reversed a trade imbalance?  Never.  Since the 1970s, the dollar has fallen by over 300% vs. the Japanese yen.  Yet, during that time, our trade deficit with Japan has actually exploded.  More recently, when the yuan was allowed by the Chinese to rise by 20% a couple of years ago, our trade deficit with China only grew worse.  And, as the dollar has fallen in the past year vs. the yen and euro, the prices for imports from those regions at the retail level have actually declined.  Japanese automakers have aggressively cut prices in spite of the falling dollar. 

The problem is that badly overpopuated nations will never let something so trivial as currency exchange rates erode their share of the U.S. market.  They know very well that their economies are utterly dependent on manufacturing for export and that subsidizing their manufacturers in order to maintain U.S. market share is a very, very small price to pay.

So, while there’s no hope that an end to the blatant currency manipulation by China can reverse our trade deficit, labeling China as a currency manipulator will place into our hands the one weapon that can – tariffs.  And, once successfully employed against China, resulting in an economic renaissance in the U.S., the advocates of unfettered free trade and protectionism bashers will be exposed as liars and fools.  And it will beg the question:  if it’s successful with China, why not Japan and Germany and Mexico and others?  How much sense would it make to remain a member of the World Trade Organization at all? 

So, in the end, we may owe a big thanks to China for their clumsiness with the currency issue if it turns out to be the first crack in America’s golden idol of free trade.  Perhaps this will be the first nudge in a turn away from the far left end and back toward a more centrist trade policy that makes sensible use of both free trade and protectionism as necessary to maintain a balance of trade.  I’m skeptical, but we’ll soon see.

Trade Policy Stupidity on Parade

December 12, 2009


Friday we were treated to a rare display of trade policy stupidity from both sides of the aisle in Congress, with each party opting for different but equally flawed approaches.  As reported in the first Reuters article (link provided above), Senator Reid has sent a letter to Chinese president Hu Jintao, begging him to un-peg the yuan from the dollar in the hope that such a move will correct the trade imbalance between the U.S. and China. 

“I know China is committed to moving to a free floating currency eventually. But China’s currency policy has been causing major distortions in the world economy for too many years already, and is continuing to do so now,” Reid, a Democrat, said in a December 9 letter released on Friday.

“In the mean time, I hope you would consider a significant revaluation to bring the value of the RMB in line with economic fundamentals, and after that, to return to a more robust version of the ‘managed float’ that your government previously maintained,” Reid said.

But, as is always the case in U.S. trade negotiations, we’re all bark and no bite:

Reid stopped short of threatening U.S. legislative action, but warned that “the one-way nature of the imbalances in our economic relationship is a major factor causing Americans to question the efficacy of our trade policy.”

This focus on currency valuation as the root cause of our trade deficit with China is just dumb.  First of all, if currency valuations are the problem, why are we not also demanding that Japan revalue the yen?  After all, in per capita terms (that is, relative to the size of the country), our trade deficit with Japan is four times as large as the deficit with China.  Why are we not criticizing the EU (European Union)?  Our per capita deficit with the EU is almost exactly the same as our deficit with China!  If we’re going to blame our problems on currency valuations, shouldn’t we at least be consistent?

But, secondly, currency valuations aren’t the problem.  The evidence doesn’t support a relationship between currency valuations and trade imbalances.  Two years ago, China did revalue the yuan by 20% vs. the dollar and, instead of falling, our trade deficit with China actually widened.  Since the 1970s, the dollar has fallen by over 300% vs. the Japanese yen.  Yet, instead of falling, our trade deficit with Japan exploded.  More recently, in the past year, the dollar has fallen dramatically vs. both the yen and the euro.  But there’s been no change in price for products imported from these regions.  If anything, Japanese automakers have actually been cutting prices. 

While it seems logical that trade imbalances should ultimately be resolved by currency revaluation, it doesn’t happen because badly overpopulated nations, utterly dependent on exports to sustain their excess labor capacity, overcome the effects of a strengthening currency by cutting costs, by subsidizing their manufacturers … doing anything and everything to maintain their trade surplus. 

Not to be outdone, on the same day, along come the Republicans, oblivious to what the blind application of free trade has done to us, pushing a trio of free trade deals, two of them benign while one is sure to be another disaster. 


Republican U.S. congressional leaders urged President Barack Obama to work with them to win approval of long-stalled free trade pacts with Colombia, Panama and South Korea as early as possible in 2010.”We agree with you that these trade agreements provide important new commercial opportunities that will benefit our economy and create jobs without adding to our nation’s staggering budget deficit,” House of Representatives Republican leader John Boehner and three other top Republicans said in a letter to Obama sent late on Thursday.

“We ask that you jump-start the implementation process through your leadership, particularly by promoting all three of these pending trade agreements when you speak to the nation in your State of the Union address,” they said, referring to an annual speech to Congress usually in late January.

Colombia and Panama?  No problem.  We have a nice per capita trade surplus in manufactured goods with both countries.  Why?  Not because of a favorable currency valuation, but because the population density of both countries is about the same as our own. 

South Korea is an entirely different matter.  With a population density fifteen times that of the U.S., it’s no wonder that we have a per capita trade deficit in manufactured goods with South Korea that’s almost double that of China.  Why in the world would we want to repeat the same mistake with South Korea that we’ve made with so many other badly overpopulated nations?  Will we start complaining about South Korea’s currency valuation as soon as such a deal is signed?

Such inconsistent trade policy that’s rooted in theories not supported by the facts is just stupid, and the application of such stupid trade policy for the past several decades has driven us to the brink of economic collapse.  We may yet arrive at the point where Congress begins imposing tariffs to restore a balance of trade but, without an understanding of the role of population density and the accompanying rationale for the use of tariffs, it will be perceived as random, arbitrary and vengeful, and will likely make a complete mess of global trade.  But, then again, from the perspective of the U.S. economy, it couldn’t really be any worse.

The March Trade Deficit: Don’t Believe the Hype

May 10, 2008


The Commerce Department reported on Friday that the trade gap dropped slightly in March to $58.2 billion from $61.7 billion in February.  This Reuters article is loaded with hyperbole about the supposed significance of this drop when, in fact, there’s absolutely nothing statistically significant about it.  The trade deficit continues to hover in the $57-63 billion range.  Here’s an example of the “hype” I’m talking about:

The trade gap shrank 5.7 percent in March to $58.2 billion, the Commerce Department reported on Friday, much smaller than expected. The decline reflected another strong month of U.S. exports and a record $6.1 billion drop in imports to $206.7 billion, which showed the U.S. slowdown has taken a toll on consumer and business demand for foreign goods.

“Trade continues to be a huge support for the U.S. economy. Export demand is holding up well,” said Nigel Gault, chief U.S. economist at Global Insight. “Meanwhile, much of the slowdown in U.S. domestic spending is being passed on to the rest of the world through lower imports.”

Compared with first quarter 2007, U.S. exports are up 17.6 percent, while imports have increased 12 percent, he said.

“… trade gap … much smaller than expected.”  “… another strong month …”  “… a huge support for the U.S. economy …”  To hear them talk, you’d think that the U.S. is coming out the big winner in global trade!  What part of “deficit” don’t they get?  How can these kinds of trade results be characterized as a “huge support” for the U.S. economy when, in fact, the deficit is subtracted in the calculation of GDP (gross domestic product)?  This is nothing more than hype designed to obfuscate the fact that our trade results are nothing less than an economic disaster. 

So, up to this point, you’ve been led to believe that things are really improving.  Now comes the bad news, buried much deeper in the article:

U.S. exports retreated slightly in March, but were still the second highest on record at $148.5 billion. Although exports of U.S. aircraft, autos, and consumer goods all fell in March …”

So exports were actually down in March, not up!  And they remain at a high level only because of soaring prices for grain exports and because these figures aren’t adjusted for inflation.  Otherwise, as noted above, exports of manufactured goods are all down, meaning that, in spite of forecasts for a rebound in manufacturing driven by the decline in the value of the dollar, the dismantling of the manufacturing base of our economy goes on and on. 

The closely-watched U.S. trade deficit with China narrowed to $16.1 billion in March, the lowest in two years. U.S. exports to China jumped 10 percent to their second highest on record, while imports from that country fell 7 percent.

Don’t get excited.  Not mentioned here is, once again, that the rise in exports is due to soaring grain prices and that the drop in imports was due to the harsh winter weather in China, putting a damper on their ability to ship products.  (Remember those pictures of millions of Chinese huddling at train stations while their whole transportation system was at a standstill?)  Just watch, this will completely reverse in the April report when American importers replenish their depleted inventories. 

This trade deficit, now stuck at three-quarters of a trillion dollars per year, is the root cause of all of our financial ills – rising unemployment, declining wages and benefits, the credit crisis, soaring debt, the bankrupting of the Federal Reserve, the bankrupting of the Social Security and Medicare trust funds, the shortfalls in state and local revenues, etc.  The list goes on and on.  It’s driven by two factors:

  1. The idiotic pursuit of free trade with grossly overpopulated nations like Japan, Germany, Korea, China and many others that establishes a host-parasite relationship between us and these trading “partners.”  Because of the gross disparity in population density and, consequently, per capita consumption between us and such countries, they get free access to our healthy market while all we get in return is access to stunted markets, if we are given access at all.  This contributes $500 billion per year to the trade defict.
  2. Overpopulation of the United States forces us to import the natural resources we need  to sustain our bloated population – especially oil but including every category of resources, even food.  This contributes about $250 billion per year to the trade deficit.

This can’t go on much longer.  We’ve been financing this deficit, now totaling $9 trillion since 1976, through a sell-off of American assets.  We’re flooding the world with dollars that are consequently becoming ever more worthless.  We try to solve the credit crisis by propping up bad loans and making it even easier to build more debt.  There’s not a peep from our leaders about boosting incomes by bringing manufacturing jobs back home.  Their solution?  Borrow from the taxpayers and then give them the money back in the form of an “economic stimulus.” 

Every American’s share of the national debt (which doesn’t even include foreign holdings of private bonds and equities) now exceeds his net worth.  In other words, folks, we’re bankrupt!  It’s only a matter of time before the schemes to hide this debt collapse and, when that happens, the financial crisis will make today’s pale in comparison.  There’s another depression on the way.  Get ready. 

The only way to avoid it is a complete overhaul of our trade policies.  It’s time to walk away from the World Trade Organization and revisit every single trade deal.  While maintaining free trade in natural resources and in manufactured goods with nations no more densely populated than our own, we need to begin imposing stiff tariffs on countries whose markets are emaciated by over-crowding and low per capita consumption.  It’s time to take the blinders off and conduct trade with our eyes wide open.

More “Free” Trade-Induced Job Losses

May 2, 2008


The Labor Department this morning announced the loss of another 20,000 jobs in April, which should come as a surprise to no one.  At the same time, in spite of the fact that our population grows by nearly 300,000 per month (thus yielding a growth in the labor force of about 150,000 per month), somehow this loss of jobs translated into a reduction in unemployment from 5.1% to 5.0%, yet one more distortion of the economic facts by the Bush administration.  Look for both numbers – the jobs losses and the unemployment rate – to be revised upward once next month’s data pushes this month’s data out of the headlines.

Here’s some excerpts, followed by my commentary: 

“April’s job reductions followed upwardly revised losses of 81,000 jobs in March and 83,000 in February. Employers also cut 76,000 jobs in January.”

Thus proving my point about the administration’s penchant for issuing phoney numbers and then revising them later, after they’re out of the headlines and won’t have as much effect on the stock market and consumer psyches.  Also, continuing the statistic that I’ve been tracking each month with the release of this data, the tally for the shortfall of jobs (job losses added to growth in the labor force), we have now fallen behind by 859,000 jobs since the beginning of the year.  If the adminstration was honest, this should have raised the unemployment level by 0.6% to a level of 5.3% or 5.4%.  But, apparently, honesty isn’t the best policy when it comes to managing the national economic psyche. 

“‘It looks like the economy is in better shape than we thought,’ said Owen Fitzpatrick, head of the U.S. equity group for Deutsche Bank Private Wealth Management in New York. ‘I think a lot of people were expecting it to be a lot worse.’”

Wrong, Mr. Fitzpatrick.  The economy is not “in better shape than we thought.”  It’s in less worse shape than we thought, and only because the government isn’t being honest with the data.  How can unemployment be running at 5% when weekly filings for unemployment are running at an annual rate of about 13%? 

“Goods-producing businesses cut 110,000 jobs in April, the largest number of job reductions since January 2002, after trimming 88,000 in March.”

Where are the economists now who were telling us that the decline in the dollar was good news for manufacturing and that exports would be rising while imports declined?  Not a peep from them lately.  Undoubtedly, they’re busy concocting a new explanation and yet another list of intangible benefits of free trade (intangible because they don’t exist).  Manufacturing jobs continue to decline because the value of the dollar vs. other currencies never had anything to do with the trade deficit. The trade deficit is caused by the gross disparity in population density and per capita consumption between the U.S. and some of its grossly overpopulated parasitic trade welfare recipients.  The only thing that can be done about this factor is a return to tariffs – a tariff structure on manufactured goods that is indexed to population density.  Anything short of this will keep our country on the path to economic ruin. 


Bush: “It’s a sign that we’re losing confidence.”

April 29, 2008

Perhaps the most noteworthy comment from Bush’s typically-painful news conference today was one that the pundits completely missed in their post-conference wrap-ups.  The President was commenting on the rising tide of protectionist sentiment in the country.  “It’s a sign that we’re losing confidence,” he said. 

It was probably a Freudian slip, but one that came very close to Jimmy Carter’s “malaise” speech, in which Carter made a similar observation, although never using the word “malaise” himself.  That word was used by pundits in describing Carter’s tone, but it came to define the overall failure of his policies.  In this case, it’s an admission by Bush that the country has lost confidence in his policies. 

You bet we’re losing confidence!  We’re losing confidence in the same way that people lose confidence in any approach (in this case, “free” (blind) trade policies) that, after decades of experience, have proven to be a complete and utter failure.  How else can you describe a trade policy that has produced a cumulative deficit of $9 trillion since 1976, one that has destroyed the value of the dollar and transformed America’s credit rating in the global community to “junk” status?  Perhaps we’re not so much losing confidence as we are wising up. 

One final comment on the news conference:  it was another opportunity lost for the journalists.  In spite of all the discussion of soaring oil and food prices and whether or not supplies are adequate or even in decline, the thought never occurred to any of the journalists to ask Bush why we then continue to pour fuel on the fire by maintaining an extremely high rate of immigration.  How I’d love to hear him try to answer that one.  He might set a new Bush record for hemming, hawing and “uhhhhhs!”

The end of this dismal chapter in America’s history can’t some soon enough.