Tariff Hysteria

March 3, 2018


Unless you’ve been living under a rock somewhere, you already know about the tariffs on steel and aluminum imports that Trump announced on Wednesday.  The reaction has bordered on mass hysteria, especially among “economists.”  I put that word in quotation marks because those who present themselves as experts in the field, but either lack the curiosity required to examine the effects of population growth, the biggest factor driving the global economy today or purposely avoid it because the findings would destroy their credibility, aren’t worthy of being dignified with the label.  One such “economist,” representing a “think tank” whose purpose it is to advance the cause of globalization (that is, the fleecing of Americans to prop up the economies of grossly overpopulated nations), described Trump’s tariff plan as a “return to 18th century trade policy.”  Apparently he doesn’t understand that the use of tariffs dominated U.S. trade policy through the first half of the 20th century, transforming the U.S. into the world’s preeminent industrial power and the world’s only “super-power.”

The reaction on Wall Street was swift, with market indexes falling several percent.  But not the stocks of U.S. steel producers.  Those actually rose several percent.  So what does that tell you?  Unlike “economists,” investors are people who put their money where their mouth is.  Investors fear what this move could mean for inflation and the broader economy, but they know very well it’ll be a big boost to steel and aluminum producers.  If tariffs are good for that industry, doesn’t it stand to reason that they’d be good for others if applied to those products as well?  How about autos?  Electronics?  Appliances?  The fact is that every U.S. producer of every category of product where the U.S. has a trade deficit would benefit from tariffs.

Virtually every media outlet since Trump “tweeted” about the tariffs soon after announcing them has quoted him as saying “… trade wars are good and easy to win …” in an effort to make him sound like a buffoon.  At least the above-linked Reuters article does provide the full quote further down in the article:

“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump said on Twitter on Friday.

Put in the context of our massive trade deficit which, in terms of manufactured goods, isn’t just billions but is now approaching a trillion dollars a year, he is exactly right – a trade war would be a good thing and not only would it be “easy to win,” it’d be impossible to do anything but win and win big.  “Economists” and other countries don’t want you to know that.  They want to scare you with warnings of retailiation by other countries:

Europe has drawn up a list of U.S. products on which to apply tariffs if Trump follows through on his plan.

“We will put tariffs on Harley-Davidson, on bourbon and on blue jeans – Levi’s,” European Commission President Jean-Claude Juncker told German television.

Wow, that shows you how far down the list of products they had to go to find some that they actually import from the U.S.  And “blue jeans?”  Seriously?  Don’t they know that even Levis aren’t made in the U.S. any more?  Regardless, do you really want to go there, Europe?  Go ahead.  Slap tariffs on Harleys and bourbon.  We’ll retaliate with tariffs on cars.  See how you like that!  How long would Mercedes, BMW, Volkswagen, Porsche and all the others survive without access to the U.S. market?

Another popular warning among the globalist fear mongers is that higher prices will be passed along to U.S. consumers.  The cost of every product that uses steel and aluminum will soar.  That’s utter nonsense.  When foreign steel producers have to raise their prices by 25% to cover the tariffs, will their customers continue buying their steel or will they simply turn to American suppliers that weren’t that much more expensive in the first place?  That’s the whole purpose of a tariff – not to collect revenue and make American consumers pay more, but to force the buyers of those products to switch to American suppliers.

There is a legitimate fear among manufacturers that forcing them to pay more for steel and aluminum, even if it’s only slighly more when they switch to American suppliers, will make them less competitive with foreign imports.  Here’s one example quoted in the article:

But home appliance maker Electrolux (ELUXb.ST) said it was delaying a $250 million expansion of its plant in Tennessee as it was worried U.S. steel prices would rise and make manufacturing there less competitive.

OK, Electrolux, would you change your mind if Trump also levied a tariff on imported appliances?  Not only would you go forward with your planned expansion, you’d probably rush to develop plans for more and bigger expansions.  My point is that these tariffs on steel and aluminum are a good start, but to have a real impact on the economy, they need to be levied on virtually every imported product so that, in every case, American consumers will choose the less expensive U.S.-made products.  Will that stoke inflation?  Sure, but not as fast as the demand for labor would send wages up.

Other fear mongers have raised the spectre of another scary scenario, where heavy buyers of U.S. debt, like China, would retaliate by dumping their bond holdings, driving up interest rates and inflation along with it.  Could they do that?  Sure, if they wanted to shoot themselves in the foot.  They’d be driving down the value of their biggest investments.  And let’s not forget that, as the U.S. trade deficit shrinks in response to the tariffs, the U.S. will be issuing less debt.  So the U.S. will be pulling bond issues off the table as fast as China and others try to sell theirs.  The end result is a wash and their “retaliation” will end up only hurting themselves.

The tariffs on steel and aluminum, on top of a few other small, targeted tariffs (like the recent tariffs on washers) are good, small steps.  But they’re nothing compared to what really needs to be done – the application of tariffs across the entire spectrum of manufactured goods.  To do that, the U.S. needs to withdraw from the World Trade Organization.  Or perhaps it doesn’t matter.  The only power the WTO has is to authorize other nations to retaliate – nothing more than they would do anyway, even if the WTO never existed.

A trade war?  We’ve been in a trade war ever since our country was founded.  The problem is that, with the signing of the Global Agreement on Tariffs and Trade in 1947 – the forerunner of the World Trade Organization – the U.S. gave up the fight.  The U.S. laid down and let others begin feeding on it like a swarm of parasites.  It’s high time we put up a fight again.


An example of how dumb we’ve gotten about trade

February 1, 2018


I came across the above-linked article a couple of days ago.  It reports on reaction by officials in Clarksville, TN to Trump’s newly-announced tariffs on washers and parts.  It seems that Clarksville is the site of a new washer manufacturing plant planned by LG Electronics.  It’s a good example of just how dumb Americans have become about trade and tariffs.  It seems that the mayor and others reacted with hand-wringing, fearful that LG would now cancel their plans to build the plant to retaliate against the Trump move.  Here’s what the mayor had to say:

“It’s like déjà vu for Clarksville, to say ‘how can this be happening twice to us,’” the city’s mayor, Kim McMillan, told Reuters.

She said that the city government was scrambling to help the South Korean manufacturer accelerate its production launch by ensuring that utilities and infrastructure are quickly put in place at the factory site and expediting approvals.

“We’ve got to do whatever we can to make sure that LG is able to still open their facility and hire people,” McMillan added.

What’s to stop LG from opening their plant?  The whole purpose of tariffs is to encourage foreign manufacturers to locate their production in the U.S.

Trump’s decision to impose 20 percent to 50 percent tariffs on washer imports and parts has local officials asking what his “America First” stands for: supporting all U.S. manufacturing jobs or just favoring traditional American brands over foreign rivals.

How dumb.  Tariffs favor domestic manufacturing over imports, and have nothing to do with favoring any one brand over another.

LG told U.S. retailers on Wednesday it would raise prices in response to the tariffs. That could dent its market share, reducing initial output and employment, said company spokesman John Taylor.

Of course they’d have to raise prices on imported washers!  That’s the whole point!  If they want to hang onto their market share, they have no choice but to move their manufacturing to the U.S.

It’s probably unfair of me to label the Clarksville mayor as “dumb.”  It’s not a matter of being dumb.  Rather, it’s an example of how effectively the globalists have brain-washed Americans about the supposed benefits of free trade and the supposed dangers of protectionist trade policies like tariffs.  Does no one ever wonder why protectionist policies work so well for the rest of the world but can’t be used just as effectively by the U.S.?

The effect of these tariffs will be to accelerate LG’s plans to move to the U.S., along with Samsung and any other foreign manufacturer.

Before I was able to finish writing this, a follow-up article appeared on Reuters the next day, and it drives home the point I’m trying to make.  Here’s the article:  https://www.reuters.com/article/us-usa-trade-samsung/u-s-washer-tariffs-put-samsung-lg-supply-chains-through-the-wringer-idUSKBN1FJ0LZ.  This time, the reporters interviewed officials from LG and Samsung about how they plan to react to these tariffs.  Not only do they plan to accelerate the construction of their washer assembly plants, but the fact that the tariffs also apply to parts has forced them into their “worst case scenario” for their supply chain – they’ll have to manufacture the parts here too.

After committing hundreds of millions of dollars to build the plants and bring jobs to South Carolina and Tennessee, the ruling caught the companies by surprise and was a “worst case” scenario, according to one executive.

Samsung says it will use imported parts until its factory runs at full capacity and becomes ready to produce key parts, expected to be by the end of the year.

…  LG was set to start production at its new plant in the third quarter at the earliest and is now working to accelerate its launch with officials in Clarksville, Tennessee who are eager for the jobs the new factory will bring.

“We had several scenarios… this safeguard measure turned out to be the worst case one,” Kim Gun-tai, head of LG’s home appliance division told a conference call last week.

LG, which announced a plan to raise prices on its washing machines sold in the United States last week, said in a separate statement to Reuters it was absorbing a significant portion of the tariff on parts. Once its U.S. plant’s operation began it would produce key parts on site, it added.

So there you have it.  Both LG Electronics and Samsung are now working feverishly to not only finish their assembly plants but to also ramp up production of the washer components in the U.S., something they hadn’t planned to do until they learned that the tariffs would apply to parts as well as assembled washers.

Tariffs work.  They force companies – both domestic and foreign – to manufacture in the U.S. in order to remain profitable.  Just imagine if similar tariffs were applied to every product.  Our economy would absolutely explode in a way that few ever dreamed possible.


How’s Trump Doing?

October 3, 2017

With some slack time on a rainy day in the north woods, I thought I’d take a few moments to share some thoughts about Trump and his policies to date, as they relate to the economic problems wrought by worsening overpopulation: falling per capita consumption and the inevitable trade deficits caused by attempting to trade freely with badly overpopulated nations. So here goes:

Still no border wall. Other than that, I’ve been quite pleased with his other actions – the travel ban, the dramatic slowdown in visa processing, going after sanctuary cities, deporting illegal aliens, and so on. I also applaud him for his stance on the “dreamers,” those brought here as young children by their illegal alien parents. It may surprise you to learn that I’m actually in favor of allowing them to stay, even providing them a path to full citizenship. By all accounts, we’re talking about 800,000 people here. But it needs to be a one-time program. And it needs to be part of a bigger immigration reform that includes dramatic cuts in legal immigration – at least 50% (including student visas), and an end to the pyramid scheme of “family preferences” that, within a few generations, would make virtually every person on earth a candidate to become a permanent legal resident in the U.S. Trump is right to kick this issue back to congress and to demand action, but I don’t understand why he’s “selling it” so cheap. By demanding the above reforms, he could put an end to our out-of-control immigration. No senator or congressman would dare vote against it because all anyone would ever remember is that they voted against the “dreamer act” and in favor of deporting the dreamers.

Here I have to say that I’m “hugely” disappointed in Trump’s failure to deliver on his promise to raise tariffs and/or border taxes in order to rebalance trade. But perhaps I’m impatient for action on this issue. His administration has taken some tough stances and is in the process of renegotiating NAFTA while also trying to reform the World Trade Organization. Last week it was revealed that the U.S. has been quietly blocking the filling of vacancies on the panel of appeals judges at the WTO and is now trying to assume a veto power if judges aren’t available. Reportedly, Trump told John Kelly, his new chief-of-staff, that he wants someone to bring him some tariffs. And most recently, when Boeing complained of Bombardier “dumping” planes on the U.S. market, the Trump administration promptly levied a 216% tariff on Bombardier planes. So there’s still reason for optimism.

Tax Reform:
Though this is the issue that excites the business community, the media and maybe even average Americans the most, for me it’s a non-issue unless a border tax is included as part of the reform. Dramatic cuts to corporate taxes, combined with some minimal cuts for average taxpayers, will blow a huge hole in the budget, just like it did when Reagan did the same thing back in the ‘80s. Sure, it’ll stimulate economic growth just a little, but no more than the amount of tax reductions that are plowed back into the economy. To expect a trillion dollar tax cut to generate economic growth of $4 trillion (the amount of growth it’d take to make it revenue-neutral) is a hocus-pocus fairy tale. And cutting corporate taxes that much will simply leave corporations with more money to invest in more job-killing manufacturing overseas. But all of that would change if a border tax were part of the package. Then it would truly be revenue-neutral and would fuel an explosion in economic growth. Trump is missing a huge opportunity by not insisting that a border tax be part of the package.

Paris Climate Accord:
Trump was 100% right to pull out of this agreement. Ask anyone and everyone the purpose of that agreement and every single person will tell you that its goal is to stop climate change. And every one of them would be wrong, because they haven’t read the stated mission of the accord, which is to merely slow climate change to a pace that would allow “sustainable development” to continue and, by the way, would essentially “tax” Americans to help fund that development in the rest of the world. “Sustainable development” is the very reason the world now finds itself in this global warming fix – because what world leaders thought was “sustainable” has proven not to be. So if global warming is slowed so that “sustainable development” can continue unabated, then every other problem associated with our exploding population – environmental and otherwise – will worsen, including mass extinction as habitat loss accelerates, more landfills, more trash in the ocean, more underground disposal of various hazardous wastes (including nuclear), and now a new one – the underground disposal of CO2 removed from exhaust streams. Where does it end? It needs to end now, and just maybe mother nature is doing us a favor by using climate change to wake us up. With all of that said, it disturbs me to hear that Trump may consider re-entering a renegotiated climate accord.

Repeal and replace “Obamacare”:
For me, this is another non-issue. The unaffordability of health care is a symptom of a deeper underlying problem, namely that every year the U.S. economy is drained of about $800 billion through the trade deficit, making everyone poorer and more dependent on deficit spending by the federal government to maintain an illusion of prosperity. Fix the trade deficit and the whole health care issue will go away.

So that’s it. Although I never really liked Donald Trump very much, and cringe at a lot of his “tweets” and some of the things he says, overall I’ve been pretty pleased with where the country is headed under his direction. But the trade/tariff/border tax issue is critical. If we don’t see action on reducing the trade deficit in manufactured goods, I fear that all will be lost. Like you told John Kelly, Mr. Trump, “we want tariffs and we want them now!”


Trump: “I want tariffs. ….bring me some tariffs.”

September 1, 2017


With trade negotiations with both China and Mexico bogged down in trivial minutae, it was beginning to appear that Trump’s campaign promise to impose tariffs on both was nothing more than a ploy to win votes.  After all, we’ve seen this movie dozens of times over the past decades:  endless talk about intellectual property rights, labor laws, unfair government subsidies.  The list goes on and on and, in the end, our trade deficit gets bigger and bigger while our manufacturing sector withers.

Then, a few days ago, the above-linked report appeared.  Perhaps Trump has just been giving the “globalists” one last shot at negotiating something meaningful so that, at least, they can’t say he didn’t try.  But it seems that he’s getting fed up with the lack of progress.

Reportedly, in the presence of the “globalists” on his economic team – U.S. Trade Representative Robert Lighthizer and Economic Council director Gary Cohn, among others (which perhaps included daughter Ivanka and her husband Jared Kushner?) – Trump told chief of staff John Kelly:

So, John, I want you to know, this is my view. I want tariffs. And I want someone to bring me some tariffs … I know there are some people in the room right now that are upset. I know there are some globalists in the room right now. And they don’t want them, John, they don’t want the tariffs. But I’m telling you, I want tariffs.

Do it, John!  Draw up a tariff plan.  Help President Trump implement it and our long, long nightmare of trade policy idiocy will finally be over!  Then, instead of debt ceiling and budget negotiations getting deadlocked over how to pay for everything, our congressmen will have a new problem – what to do with all the additional revenue.

Let’s not give up hope yet.


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.




Economic Data Still Stuck in “New Normal” of Globalization

May 6, 2017

Three major economic reports were released in the past week, each of which I usually write about separately.  But there was nothing particularly noteworthy about any of them.  Taken together, however, they paint a picture of a U.S. economy that’s still stuck in the “new normal” that characterizes globalization (trading freely with all nations, regardless of whether it makes any sense) – stagnation, an imbalance in the supply vs. demand for labor that puts downward pressure on wages, and a host-parasite relationship between the U.S. and the overpopulated nations of the world.

First quarter GDP was announced last Friday, and it came in at a measly 0.7%.  Expressed in per capita terms, it rose only 0.09%.  Over the past ten years, per capita GDP has risen at an annual rate of only 0.6%.  That’s very close to no growth at all and explains a lot about Americans’ sense that the country is headed in the wrong direction.  Population growth and free trade with much more densely populated nations has become a significant drag on the economy.

Speaking of trade, that data was released Thursday.  Here’s a chart showing the monthly balance of trade in manufactured goods:  Manf’d Goods Balance of Trade.  The deficit in manufactured goods continues to hover near its record worst level.  In fact, it was the second worst quarterly figure ever, down by only $1 billion from the record level of $177.1 billion set in the previous quarter.

The April employment report was released yesterday.  The headline numbers were that the economy added 211,000 jobs and unemployment fell to 4.4%.  No one noted that the employment level rose by a more modest 156,000 and unemployment fell because, once again, the growth in the labor force was understated at only 12,000 (while the U.S. population grew by 171,000).  Each month, as the unemployment rate ticks downward, economists proclaim the economy to be at “full employment.”  And each succeeding month, the economy adds more jobs and the unemployment rate drops more.  How can that be?  Here’s a chart of the “labor force backlog,” the cumulative amount that the government has under-reported growth in the labor force in order to make unemployment look better than it really is:  Labor Backlog.  (It’s the yellow line on the chart.)  Note that the “backlog” remains near its highest level at about 5-1/2 million workers.  Were it not for this “backlog,” an honest reading on unemployment would have the figure at 7.2% – a far cry from “full employment.”  It’s no wonder that, in spite of all of this supposed strength in labor market, there’s been no corresponding upward pressure on wages.

What does it mean when you put all of this together?  It means that the approach taken by President Trump to date – jawboning foreign leaders on trade and CEOs about manufacturing in the U.S., and making idle threats about tearing up trade deals and implementing “border taxes” – has done absolutely nothing to improve the economy.  No surprise.  These are exactly the same results that the same tactics employed by past presidents for decades has produced, which are no results at all.

Trump has seemed to be backing away from his promises on trade.  He’d better not, or he’ll find himself dealing with a recession before his first term is up.  His voters tolerate his less appealing aspects on the hope that he’ll follow through on his promise to “Make America Great Again” by fixing our trade mess.  Failure to do so won’t be tolerated.


Apple’s “Advanced Manufacturing Fund” a PR Gimmick

May 4, 2017


Today Apple’s CEO, Tim Cook, announced plans to set up a $1 billion “advanced manufacturing” fund, making it sound as though it’s going to create manufacturing jobs in the U.S.  (See the above-linked article.)  It’s actually nothing more than a clever public relations ploy – a gimmick designed to polish Apple’s tarnished image.

Ever since Trump’s message about bringing back manufacturing jobs began to resonate with voters, free trade advocates like Cook have begun waging a campaign on two fronts designed to blunt any efforts aimed at reversing globalization.  On the one hand, there has suddenly emerged a lot of talk about how most manufacturing jobs have actually been lost to automation and not trade policy which is, of course, a lie.  If the plant you worked in has just closed, you merely need to ask yourself where that product is now being made.  Is it being made by robots in a new factory, or is it now being made in a sweat shop in China or Mexico?  The answer is obvious.

The other tactic is to make themselves appear to be gung-ho for American manufacturing, lest they risk alienating the growing majority of Americans who now see free trade as a drag on the American economy.  As part of this effort, they’ve advanced the notion of “advanced manufacturing” – something that will somehow create jobs by developing factories so automated that human workers aren’t required.  Sounds like double-talk?  Of course it is.  But they believe you’re too dumb to see through it.

Apple is a perfect case in point.  Their products are considered the epitome of “high tech.”   Such a “high tech” company must be on the cutting edge of “advanced manufacturing,” right?  Nothing could be further from the truth.  The manufacture of Apple’s electronic gizmos is about as low-tech as you can get.  Contracted out to companies like China’s Foxconn, Apple’s products are pieced together by hand, utilizing thousands of workers in sweat shop conditions to insert tiny components into circuit boards.  Truth be told, the manufacture of cars in Detroit assembly plants which utilize robots for hundreds of assembly tasks is far more advanced than anything that Apple does.  The manufacturing jobs in those assembly plants are well-paid, high-skilled jobs.  Interfacing with all of that automation is no job for dummies.

Apple could move their manufacturing back to the U.S. today, but they resist for two reasons.  One is the investment that would be required to build proper manufacturing facilities that comply with environmental and labor laws.  More importantly, however, they resist because they need to maintain their manufacturing presence in China in order to have access to the Chinese market.  China’s leaders are smart enough to insist that products sold in China be made in China.

Cook wants you to think of Apple as a good corporate citizen of the United States, interested in creating jobs for Americans.  Give me a break.  They want to sell you an iPhone.  They want you to pay as much as possible (regardless of whether or not you can actually afford it) for something that’s made as cheaply as it can be, and they want you to pay for it with money earned anywhere except at Apple.

Gimmicks like these won’t bring manufacturing jobs back.  Only tariffs (or “border taxes” or whatever you want to call them) will force companies like Apple to manufacture in the U.S. and actually create real jobs for American workers.