A Referendum on Globalism

November 7, 2016

As Tuesday draws near, there seems to be a collective sigh of relief that it will all soon be over – the nastiness, pettiness, the attack ads – all of it.  Just make it go away.

But such sentiments trivialize what this election is really all about.  I wonder how many really grasp why it’s been such a bitter fight and what’s really at stake.  Tuesday isn’t just another election, where we pick from a pair of cookie-cutter candidates who aspire to be the next bench-warmer president, the next stuffed shirt to make nice around the punch bowl at scripted G20 summits.  The very soul of America is at stake.

For the first time in seven decades, since the signing of the Global Agreement on Tariffs and Trade (GATT) in 1947 that ushered in the New World Order and relegated the U.S. to the role of host in a global host-parasite relationship, and perhaps for the last time, we have a chance to put America on a new track.

It’s impossible to understate the damage that’s been done.  This year will mark the 40th consecutive year that the U.S. has suffered a trade deficit.  During that time, our trade deficit has drained over $13 trillion from our economy and accounts for every single dollar of our national debt since 1975.  To put that into perspective – what the loss of $13 trillion has done to us – here’s what it means in terms that we can all understand:

  • Globalism has been directly responsible for dismantling the manufacturing sector of our economy, wiping out approximately 10 million manufacturing jobs and another 10 million jobs in supporting industries.
  • It has transformed the United States from the world’s preeminent industrial power into an economic skid row bum that literally has to beg the world for the funds to keep our economy afloat.
  • Climb to the top of the highest building and take a look around.  Almost everything you see – as far as you can see – is now owned by foreign entities.  Every single mortgage, small business loan, new car loan, the financing of everything you can imagine, has been bundled into securities and sold to foreign investors desperate to find profitable ways to plow their trade dollars back into the American economy.
  • Globalism has been directly responsible for the elimination of benefits like pensions and health care.
  • It is directly responsible for the bleak job prospects faced by our college graduates.
  • It is directly responsible for the crushing student debt that our kids now face.
  • It is directly responsible for our crumbling infrastructure.
  • It is directly responsible for the Great Recession of 2008 and for the countless foreclosures, bankruptcies and destroyed lives in its wake.
  • It is directly responsible for turning China into an existential threat to our country.
  • It is heavily responsible for the lion’s share of global warming, exporting manufacturing from the U.S. where environmental laws were strict to nations who scoff at such laws and pollute with reckless abandon, not to mention the burning of five billion barrels of oil each year to power container ships carrying goods that could otherwise be made locally.
  • Globalism has become a corrupt scheme of the elite – the top 1% – to enrich themselves at the expense of the rest of us.
  • Instead of raising the living standards of all as the starry-eyed economists of the 1940s envisioned, globalism instead has become a poverty-sharing program, draining the resources of the United States and fattening the coffers of corrupt regimes.

Like practically every other American, I have never lived in an America that wasn’t under the thumb of the corrupt World Trade Organization or its predecessor – GATT.  I’ve spent my entire life watching it erode America’s economy.  At least I can remember what it was like before the bulk of the damage was done.  Most Americans don’t even have that.

On Tuesday we have a chance to put an end to this crap.  If you have been affected by any of the things I’ve listed above, this is your chance to dramatically change your situation.  The difference in candidates couldn’t possibly be more stark.  On the one hand, Hillary Clinton is an unabashed globalism and open borders advocate who will accelerate our demise under the New World Order.  On the other hand, Donald Trump has promised to completely dismantle it, tearing up these stupid trade agreements and using tariffs to drive manufacturing back to the United States, restoring America as an industial powerhouse.  Sure, you’d have to hold your nose as you mark your ballot and accept him with his numerous warts, but we’ll have another chance to swap him out in a few years for a more palatable version.  But this may be your last chance at the changes that he’s promised.  America’s future hangs in the balance.  It’s in your hands on Tuesday.

Overpopulated Nations Sucking the Life out of American Manufacturing

May 11, 2016

I’ve finished my analysis of trade in manufactured goods for 2015 and the news isn’t good.  The effect of attempting to trade freely with nations that are much more densely populated than our own intensified yet again in 2015, dragging our deficit with those nations to a new record.

Check out this chart:  Deficits Above & Below Median Pop Density.  First, some explanation of the data is in order.  I studied our trade data for 166 nations and separated out those product codes that represent manufactured products.  Subtracting imports from exports, I was able to determine the balance of trade in manufactured goods for each.  I then sorted the data by the population density of each nation and divided these 166 nations evenly into two groups:  those 83 nations with a population density greater than the median (which, in 2015, was 184 people per square mile) and those 83 nations with a population density below the median.  I then totaled our balance of trade for each group.

As you can see, in 2015, our balance of trade in manufactured goods with the less densely populated half of nations was once again a surplus, but a smaller surplus of $74 billion.  This is down from $132 billion in 2014 and is less than half of the record high of $153 billion in 2011.

Conversely, our balance of trade in manufactured goods with the more densely populated half of nations was a huge deficit, plunging to a new record deficit of $722 billion, beating last year’s record by $53 billion.

Some observations about these two groups of nations are in order.  Though these nations are divided evenly around the median population density, the division is quite uneven with respect to population and land surface area.  The more densely populated nations represent almost 77% of the world’s population (not including the U.S.), but only about 24% of the world’s land mass (again, not including the U.S.).

Think about that.  With the people living in 76% of the world’s land mass, the U.S. enjoyed a surplus of trade of $74 billion in manufactured products.  But with the rest of the world – an area less than a third in size – the U.S. was clobbered with a $722 billion deficit!  Population density is the determining factor.  Not wages or wealth.  Wealthy nations were just as likely to appear among the deficit nations as among the surplus nations.  Not currency valuations.  Virtually ever currency in the world weakened against the dollar in 2015.  Population density is the key factor that drove these trade imbalances.

Some may point to the increase in the trade deficit as proof that currency values and manipulation are driving the imbalance.  But the data from previous years has shown that no such relationship exists.  A much more likely explanation is that American exports are declining and imports are rising because as more and more manufacturers lose ground to foreign competition, there are fewer and fewer products available for export or for purchase by domestic consumers.  Like a horde of mosquitoes, the overpopulated nations of the world are literally sucking the life out of American manufacturing and, with it, the American economy in general.

So what’s to be done?  “Give free trade enough time to work,” free trade advocates say, “and these imbalances will even themselves out.”  Wrong.  Free trade policy has had decades to work, beginning with the signing of the Global Agreement on Tariffs and Trade (GATT) in 1947 and the result has been that the trade deficit with densely populated nations just gets worse and worse.  This happens because free trade theory doesn’t account for the inverse relationship between population density and per capita consumption.

The only remedy that would restore a balance of trade is the same trade policy that the U.S. employed until 1947 to maintain such a balance – tariffs.  The use of tariffs to compensate the U.S. for nations’ inability to provide us access to equivalent markets – markets that have been emaciated by overcrowding – would restore a balance of trade and breathe life back into the American economy.


“Fiscal Cliff” or The Bottom of The Canyon?

November 12, 2012

The looming economic crisis that we face on January 1st, when tax cuts expire and big spending cuts kick in, has been popularly dubbed the “fiscal cliff.”  I think the cliff analogy is a poor one, implying that if we stop short of the cliff, we’ll be resting on a level plateau where everything is fine. 

Everything won’t be fine.  Even if we extend all the tax cuts and cancel the spending cuts, we’ll then be faced with exploding the national debt at a rate that’s unsustainable and sure to prompt credit downgrades from every ratings agency.  (By the way, even if all of the tax cuts are allowed to expire and the spending cuts take hold, we still won’t even be close to balancing the budget.)  Pulling back from this situation only delays the inevitable. 

It’s not a “fiscal cliff” that approaches on January 1st.  We drove off that cliff in 1947 with the signing of the Global Agreement on Tariffs and Trade (“GATT”), heralding the dawn of “globalization” and its massive global trade imbalances that have now completely bankrupted the nation.  When we drove off that cliff, no one noticed what was happening.  Like the passengers in a car that suddenly encounters a dip in the road, everyone shouted “wheeee” as we sailed along.  No one looked down to see that the road had suddenly vanished beneath us.  The descent began slowly at first, as our trade surplus was slowly whittled away, replaced by – at first – seemingly small and harmless trade deficits. 

Rather, what we’re approaching on January 1st is the bottom of the canyon.  Now the passengers’ collective “wheeeee” has been replaced by “holy s___t!” as the canyon floor has come into view.  The decision Congress and the President face on January 1st is not whether to drive over a cliff but whether to re-energize the team of excavators that has been digging a deep hole at the bottom of the canyon to delay the inevitable “splat.”

It was almost amusing to listen to the banter on the political talk shows yesterday morning.  Much of the discussion focused on tax policy – whether additional revenue should be generated by raising tax rates on the wealthy or by eliminating their deductions.  If you’re wealthy, does it really matter if, in the final analysis, you’re going to be paying more taxes?  And what difference does that make to the economy?  Either way, the deficit is reduced only marginally and the economy is just a little worse off.  As I’ve said before, it makes absolutely no difference what kind of scheme is employed to collect revenue.  Regardless of whether it’s done with income taxes, property taxes, sales taxes, excise taxes, gasoline taxes – you name it – the end result is the same.  You have less money in your pocket to spend on other things.  Among the fifty states, some have no income tax at all, relying instead on property taxes and sales taxes.  Other states do the opposite.  As one who has lived in states on both ends of the spectrum, I can tell you that it doesn’t matter. 

None of this matters as long as the real driving force behind the deficit spending – the trade deficit – goes unaddressed.  I watched every political talk show on Sunday morning and not once in all of the discussions did the subject of the trade deficit ever come up.  As long as there’s a trade deficit, deficit spending is essential to return to the economy those dollars that the trade deficit sucked out of it.  Here’s a chart that tracks our cumulative trade deficit together with the growth in our national debt since our last trade surplus in 1975:  Cumulative Trade Deficit vs Growth in National Debt.  Note that every time that the growth in the national debt has slowed to a rate less than the growth in the cumulative trade deficit, it’s resulted in a recession. 

Without addressing the trade deficit, the real choice that lawmakers will be making in the approach to the bottom of the canyon on January 1st is between two bad outcomes – an exploding national debt or recession.  The choice they’ll make is not whether to put our fiscal house in order but whether we should crack the whip harder across the backs of the excavators digging the hole.  The problem is that we’re now beating a dead horse.  The excavators are exhausted.  The “splat” is inevitable.

U.S. Trade Deficit in May Soars to Worst Level of Obama’s Administration

July 12, 2011


As reported by the Bureau of Economic Analysis (BEA) this morning (link provided above), America’s trade deficit jumped in May to $50.2 billion, easily beating the previous worst level of the Obama administration, $47.9 billion in January of this year.  Since President Obama took office in January, 2009, the overall trade deficit has risen by 35%.  The goods deficit soared to $64.9 billion in May (an annual rate of $779 billion), and is up by 39% since President Obama took office.  Since January of 2010, when President Obama pledged to double exports, America’s overall trade deficit, the deficit in goods and the deficit in manufactured goods are up by 34%, 33% and 26% respectively.  The following is a chart of the overall trade deficit since the president made his pledge in January, 2010.  As you can see, I actually had to increase the scale of the y-axis this month (from -$50 billion to -$55 billion) in order for May’s deficit to register on the chart:

Balance of Trade

However, the president can legitimately claim that he is meeting his goal.  Here’s a chart of exports and the trajectory they must take to meet his goal of doubling exports in five years:

Obamas Goal to Double Exports

But what does that matter?  The problem here is that, like so many others, the president has made the classic mistake of focusing on only one half of the trade equation.  Yes, increasing exports boosts jobs, but rising imports destroys them just as quickly.  And, given the lack of focus on imports, it’s no surprise that they’re rising more quickly than exports, just as they have for decades.  The president puts all of his focus on exports, where we have virtually no control, and completely ignores imports, over which we have total control (if we would simply return to the use of tariffs to manage the overall balance of trade).  Such trade policy, which is nothing more than the continuation of the same trade policy we’ve followed since the signing of the Global Agreement on Tariffs and Trade (GATT) in 1947, makes absolutely no sense whatsoever.  It’s negligent and irresponsible. 

Today the president will meet with congressional leaders  for the umpteenth time in the nearly year-long battle to raise the debt ceiling as they struggle mightily to identify spending cuts and revenue increases to cut the projected budget deficit by $2 trillion over the next ten years.  Compare that to the cumulative goods trade deficit of nearly $8 trillion during the same time frame, and that’s if the trade deficit freezes at today’s level.  Is it any wonder that we have fiscal problems?  If trade in goods were balanced, the increase in revenue from the increase in GDP alone would cut the budget deficit more than $2 trillion. 

With the exception of overall exports, by every other measure the president’s trade policy has been an abysmal failure.  And it’s likely that even that one measure will begin to lag as the global debt crisis begins to erode the rest of the world’s ability to absorb American exports.  But let’s put the blame where it really lies, at the feet of the economists who guide his economic  policy.  After all, Obama is just a politician, like every president before him, and takes his guidance on economic policy from a team of economists.  Until the field of economics crawls out from under the rock of their early-1800s trade theories, until they uncurl themselves from the fetal position adopted in response to their beat-down by the other sciences in response to Malthus’ theory, and once again consider the full ramifications of the parameter that, by far, most dominates today’s economy – overpopulation – nothing will change, regardless of whether we leave Obama in office or replace him with someone else who takes their guidance on the economy from another team of economists.

Cumulative U.S. Trade Deficit Surpasses $10 Trillion

September 14, 2010
Today, September 15th, 2010, America’s economy has reached a very sad milestone.  Our cumulative trade deficit, since our last trade surplus in 1975, expressed in current dollars, has now eclipsed $10 trillion.

America experienced its last surplus of trade in 1975. Since then, through July, the most recent month for which trade data has been released by the U.S. Bureau of Economic Analysis, when adjusted for inflation using the Consumer Price Index published by the Bureau of Labor Statistics, the cumulative trade deficit was $9.93 trillion. Assuming a continuing monthly trade deficit of $45 billion (the current 3-month moving average), it is estimated that the trade deficit has now reached $10 trillion as of September 15th.

The U.S. is on track for its 35th consecutive annual trade deficit in 2010 since its last trade surplus in 1975. The U.S. trade deficit of $759 billion set a record in 2006. With the onset of the global recession in 2007, it fell steadily to $375 billion in 2009, but is expected to rise again to over $500 billion in 2010.  Almost half of all Americans alive today have never known an America with a trade surplus.

Through July, 2010, America’s largest trade deficit is with China, at $145.3 billion. The trade deficit with Mexico is second at $38.4 billion. The trade deficit with Japan is third at $31.6 billion. The trade deficit with Germany is fourth at $18.7 billion.

America is $10 trillion poorer today as a result of bone-headed trade policy based on failed 18th century economic theories.  That’s $32,250 for every man, woman and child in America – almost $130,000 for every family of four.  It’s enough money to solve virtually every financial challenge facing America, including putting the social security fund back on sound footing.  It’s enough money to nearly wipe out our national debt.

In 1947, when America signed the Global Agreement on Tariffs and Trade, it was so easy for our leaders to come together and hold hands with the rest of the world, like the old “I’d like to teach the world to sing in perfect harmony” Coke commercial.  Now we see what their sappy good intentions and simple-minded economists have wrought – an America in serious decline and a global economy collapsed by enormous trade imbalances.  Nowhere is a leader to be found with the courage to undo what our 1947 predecessors stumbled into so blindly.  If our founding fathers ever thought it conceivable that our trade policy would be abandoned to a global trade organization bent on pillaging America, they would surely have included in the constitution a requirement for a balance of trade that also made it illegal to join such a global organization.

Never has America been so threatened by neglect of its economy and by a complete failure of leadership.  Never has it so badly needed an amendment to its constitution to mandate the inclusion of common sense in its trade policy.  (See https://petemurphy.wordpress.com/more-good-stuff/28th-amendment-to-the-constitution-of-the-united-states/ )

Toyota Fires American Workers, None in Japan

January 24, 2009


Earlier this month, Toyota announced their first-ever annual loss in their 70-year history.  (See “Toyota Dumping Cars on U.S. Market.”)  The strenghtening of the yen is one of the major factors.  In response to this, Toyota announced a couple of days ago that they would be laying off 1,000 workers in North America and Europe.  Then today comes this announcement – that they will be cutting production in their Japan plants by 60%. 

Toyota Motor Corp (7203.T) plans to reduce vehicle production in Japan by nearly 60 percent in April, a level that could force it to cut its domestic workforce amid slumping car sales, Tokyo Shimbun newspaper reported on Saturday.

Yet, in spite of this huge cut in production in Japan, not a single Toyota employee will lose their job.

Toyota, the world’s biggest automaker, is whittling down its non-permanent workforce by letting contracts expire, but executives have said they intend to leave full-time staff untouched despite unprecedented factory suspensions in Japan.

Toyota has announced plans to close all its domestic factories for a combined 14 days between January and March, reducing work to a single shift at 17 assembly lines, out of 75 globally, at different times from January and February.

What I find interesting is that, if the currency exchange rate is now a major factor in Toyota losing money, it would make sense to shift operations and production to North America and Europe, where the currency is weak, and cut operations in Japan.  Yet, they are doing just the opposite. 

This is a good example of what I’ve been saying about currency exchange rates – that a falling dollar will do nothing to reduce the trade deficit.  Japan and other nations who are utterly dependent on sustaining a huge trade surplus with the U.S. in order to avoid high unemployment will do anything to keep production in their home country, even if it seems to make no business sense.  They’ll do anything to hold onto their domestic production, including dumping, subsidizing their automakers, etc.  They do this because they know that it’s a relatively cheap way to keep jobs, much cheaper than government programs and unemployment insurance.  They voice support for the concepts of “free” trade and market forces but, when a global recession takes hold and it becomes every man for himself, see how quickly they retreat into taking care of their own. 

You may point to the big drop in the trade deficit in November as evidence that the weakening dollar is having  an effect on the trade deficit, but that’s not true.  The trade deficit fell in November due to an over-all slowdown in consumer spending, and not due to any shift in consumer spending away from imported products to domestically made products. 

I bring all of this up to emphasize the point that it is absolutely futile to count on outside forces – things like currency valuation and trade negotiations – to rein in our trade deficit.  Decades of experience with this approach have only yielded a trade deficit that has exploded completely out of control.  The only way to get the deficit under control is to take positive action in the form of tariffs to assure a balance of trade.  It worked for the first 171 years of our history – from 1776 to 1947, when we signed the Global Agreement on Tariffs and Trade – and it would work again.  Our trade policy for the last six decades has been an abysmal failure.  It’s time to go back to what has been proven to work.

A Better Economic Stimulus Plan

January 9, 2009
The airwaves are filled with talk of the President-Elect’s economic stimulus plan – its magnitude, its cost and whether or not it will really work. The Congressional Budget Office announced that, not even counting such a plan, the budget deficit this year is expected to soar to $1.2 trillion. Include Mr. Obama’s plan and the annual deficit could approach $2 trillion. And Mr. Obama readily admits that trillion dollar deficits could be with us for years to come. For a nation already drowning in debt, that’s a bitter pill to swallow. In the long run, it could do more harm than good, perhaps leading to hyperinflation, the very last thing that income-challenged Americans need.

There’s a much better way to do this. Restoring a balance of trade with a return to the tariff policies successfully employed by this nation for the first 171 years of our history, prior to the signing of the Global Agreement on Tariffs and Trade in 1947, would grow our GDP (Gross Domestic Product) by $700 billion, not just for one year or two but every year from now on. And the program wouldn’t cost a dime. In fact, instead of adding trillions in debt, between the tariffs collected on imports and the tax revenue collected on the higher GDP, federal tax revenues would easily swell by $500 billion per year. Second and third shifts would be added at auto and parts plants across the country. Idled plants would be restarted. At the same time, the profit potential needed to justify domestic production of other products would be restored. Instead of creating a mere three million jobs under Mr. Obama’s plan, many of which would be temporary, six million permanent, high-paying manufacturing jobs would come home and millions of additional construction jobs would be created to rebuild America’s manufacturing infrastructure.

Sure, it’d be a tough sell with the global community. But if we are on the brink of “an economic catastrophe from which we may not be able to recover” as Mr. Obama claims, then this is no time for timidity. Over the past three decades, our trade deficit has poured $9 trillion into the global economy. We’ve done our part and we’re tapped out. It’s time for the rest of the world to stand on their own two feet. Mr. Obama has said that only the government can pull us out of this rapidly deepening recession, and he’s right. But fixing our broken trade policy is a far more effective way to do it than with any deficit spending programs. It’s time to stop pretending that we can have a vibrant economy with an emaciated manufacturing base. We need long-term solutions that fix our economy and our balance sheet permanently, not short-term gimmicks that make us feel better now at the expense of future generations.


WTO Supports Protectionism, but Not for the U.S.

July 12, 2008


If you’ve read Five Short Blasts or have been following this blog, you’ve heard me claim that the World Trade Organization (WTO), in a stunning repudiation of its basic free trade tenets, actually enforces protectionism for two thirds of its member states. You may have been skeptical. I offer this article as proof.

Just read through the list of provisions currently under consideration in the latest round of WTO negotiations. Especially pay attention to the last one:

* New members. The new text drops the proposed grace period for the implementation of tariff cuts for recent members such as China, and changes the extra time proposed for implementation of new members to 3-4 years from 2-5 years. Thus China would have up to 14 years to implement tariff cuts, compared with 10 for other developing countries and 5 for developed members. The text retains a footnote that such new members may be able to seek further favourable treatment than that available to other developing countries.

If the WTO truly believes that everyone benefits from free trade, why are they allowing so many countries to maintain tariffs, while insisting that the U.S. eliminate all trade barriers? The answer is that the WTO doesn’t give a rat’s behind about free trade. The WTO is simply the referee of parasites lining up to feed on the U.S. economy, sucking away its life blood. It’s an organization that was set up to manage the redistribution of America’s wealth to the rest of the world.

The U.S. had better wise up soon, show the WTO the door and return to the pre-GATT (Global Agreement on Tariffs and Trade, signed in 1947, forerunner of the WTO) trade policies that built the U.S. into the world’s greatest industrial power, before we signed that asinine treaty and gave it all away.