America’s Worst Trade Deficits in 2017

May 2, 2018

I’ve finished compiling and analyzing America’s trade data for 2017, which was released by the Bureau of Economic Analysis in late February.  Why the delay?  Tabulating the results for hundreds of 5-digit end use code products for 165 nations is no small feat.  What we’re looking at here are the deficits in manufactured goods as opposed to services and various categories of natural resources.  Why?  Because manufacturing is where the jobs are.  Yes, there are jobs associated with the harvesting and mining of natural resources but, pound for pound, those jobs pale in comparison to the number generated by manufacturing.

And it should be noted that there are more than 165 nations in the world.  The CIA World Factbook lists 229.  Nearly all of the 64 nations that I left out of this study are tiny island nations with whom combined trade represents only a tiny fraction of America’s total.  Also, their economies tend to be unique in that they rely heavily on tourism and their manufacturing sectors are virtually non-existent, if for no other reason than a lack of space to accommodate manufacturing facilities.

It should also be noted that I’ve “rolled” the results for tiny city-states into their larger surrounding nations – states like Hong Kong, Singapore, San Marino, Luxembourg, Liechtenstein, Monaco and others.  They too tend to have unique economies, heavily dependent on services like financial services, and mostly devoid of manufacturing for the same reason as small island nations – a lack of space.  There is no room for sprawling manufacturing complexes.

So, with that said, let’s begin with a look at America’s biggest trade deficits.  Here are the top twenty:  Top 20 Deficits, 2017

It comes as no surprise that China once again has topped the list with a whopping $384.7 billion deficit.  But there are many interesting observations that can be made about this list:

  1. There’s a lot of variety on this list – nations big and small, rich and poor, Asian, European and Middle Eastern nations.  But there’s one thing that all except one have in common – a high population density.  The average population density of this list is 734 people per square mile.  Compare that to the population density of the U.S. at 91 people per square mile.  On average, the nations on this list are eight times more densely populated than the U.S.
  2. With a few exceptions, these are not poor countries where wages are low.  Half of the top ten nations have a “purchasing power parity” (or “PPP,” a measure of wealth that is roughly analogous to wages) near or, in one case (Ireland), above that of the U.S. ($59,500).  Only one nation in the top ten – Vietnam – has a PPP of less than $10,000.  So, the claim that low wages cause trade deficits isn’t supported by this list.
  3. Two nations on this list – China and India – represent 40% of the world’s population.  On the other hand, there are others that, combined, make up less than 1% of the world’s total.  Naturally, if we have a trade deficit with a big nation, it tends to be really big.  In order to identify the factors that influence trade, we need to factor sheer size out of the equation.
  4. On average, the U.S. trade deficit in manufactured goods has risen by 81% with this group of nations over the past ten years.  Whatever it is that drives trade deficits has a very potent effect.  The fastest growing deficit is with Vietnam, rising by 335% in ten years.  Vietnam is the 2nd poorest nation on the list.  Perhaps low wages do play a role here?  On the other hand, the 2nd fastest growing deficit is with Switzerland, the 2nd wealthiest nation on the list – wealthier than the U.S. – debunking the low wage theory.
  5. It’s often said that America needs to be more productive in order to compete in the global economy.  Yet we see nations like France and Italy on this list – nations notorious for long vacations, short work weeks, etc. – not exactly bastions of productivity.
  6. In 2017, the U.S. had a total trade deficit of $724 billion in manufactured goods.  Of these 165 nations in this study, the top eight deficits on this list account for more than that entire total.  The U.S. actually has a small surplus of trade with the other 157 nations of the world.

In my next post, we’ll take a look at the other end of the spectrum – America’s top twenty trade surpluses in manufactured goods.  If population density is a factor, then we should see that list comprised of nations with low population densities.  And if low wages aren’t a factor, we shouldn’t see anything much different than what we saw on this list presented here.  So stay tuned.

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Trump’s “Shithole Countries” Remark

January 17, 2018

I’ve been torn about whether or not to comment on this controversy since, by its nature, the topic violates my own site rules about the use of profanity.  Since it has now become so central to the debate over immigration, however, it’s impossible for me to ignore, since immigration is one of a few topics that lies at the core of my campaign against destructive population growth.

Let’s back up a bit and examine what it was that elicited such an angry response from Trump.  In exchange for generously offering to not just change the temporary status of DACA immigrants (“deferred action childhood arrivals” – kids brought here by illegal aliens) to permanent status, but to even grant them a path to citizenship, Trump insisted on three additional things:

  • an end to “chain migration,” the visa program that allows immigrants to apply for visas for family members, who then are eligible to bring in more family members – creating an endless and exponentially expanding flow of immigration,
  • an end to the “diversity visa lottery” program, which brings in another 50,000 immigrants per year from countries who are “under-represented” in the general U.S. population,
  • funding for the border wall, currently estimated at $18 billion.

These are reasonable immigration reforms that most Americans agree with.  He had said that he was willing to sign any bill that met these criteria.

So here’s the bill that senators Dick Durbin (D) and Lindsey Graham (R) brought to him:

  • DACA immigrants would be barred from the chain migration process.  The 690,000 DACA “kids” would not be able to apply for re-entry for their parents.  Otherwise, chain migration continues as usual for other immigrants, probably numbering somewhere around 25-30 million.
  • The “diversity visa lottery” program would end, but the 50,000 immigrants would be reallocated to other visa programs.
  • Only about 10% of the border wall funding was included, plus a little more funding for other “non-wall” border security.
  • Extending “temporary protected status” to 437,000 immigrants from El Salvador, Honduras, Haiti, Nicaragua, Sudan, Somalia and Yemen.

In other words, Durbin and Graham tried to play Trump for a fool, offering him a bill that did absolutely nothing to rein in our out-of-control immigration, if anything making it worse.  It’s no wonder that he was incensed enough to lapse into the use of a vulgarity in a “behind the doors” meeting.  Most people would in that situation.

Durbin saw an opportunity to stir up hysteria, characterizing Trump’s remark as “racist.”  It was nothing of the sort.  While there is no formal definition of the word “shithole,” it’s clearly a vulgar term used to describe a foul place, not a person or people.  In terms of poverty, political corruption, violence, extremism, a failure to meet basic human needs and a denial of human rights, these are foul places.  Places like El Salvador, Honduras, Nicaragua, Sudan, Somalia, Yemen and others (unfortunately disproportionately represented by Africa) are, in fact, “shitholes.”  That’s not meant to demean the people of those countries, but their unfortunate circumstances.  If a country is so bad that no one – not even its own citizens – wants to live there, then it is a shithole.

Trump then reportedly went on to ask, “why don’t we bring in more people from places like Norway?”  (Trump had just visited with the prime minister of Norway and, reportedly, was highly impressed.)  It’s this contrasting of Norway with the aforementioned places that may have hinted at racism, a suspicion that has dogged Trump beginning with this comments about Mexican immigrants early in his campaign.  Is Trump a racist?  I don’t know.  What I do know for sure is that Trump is a “money-ist.”  He’s been all about money his whole life.  So while African countries are black and Norway is snow-white, it’s also true that African countries generally rank right at the bottom in terms of GDP (gross domestic product) per capita while Norway ranks at the very top – well above the U.S.  So was he really expressing a preference for wealthy, merit-based based immigrants or a preference for white immigrants over black immigrants?  He has said all along that he wants a more merit-based immigration system.  (By the way, just as an aside, Norway is one of many countries that does not have birthright citizenship, unlike the U.S.  Just being born there doesn’t make you a citizen.  Birthright citizenship is something else I’d like to see Trump address.)

Since the hysteria erupted over the “shithole” epithet, Lindsey Graham has characterized it as a “shithole show,” and has blamed Trump and his staff.  Baloney.  Graham and Durbin are to blame for pushing him over the edge when they tried to sucker him and play him for a fool.  They tried to play the American people for fools, like they always do.  They believe that if you polish a turd shiny enough to make it look like an apple, the American people will swallow anything.  The American people elected Trump to put an end to this crap.

Now they’re trying to back Trump into a corner, threatening a government shutdown if he doesn’t agree to this immigration sham.  I hope he doesn’t.  It’s time to stand firm and force a real change in our out-of-control immigration policy.  Let the government shut down.  If Congress doesn’t want to reform immigration in exchange for Trump’s generous offer to give the DACA kids a path to citizenship, then they don’t really care about the DACA kids.


Family immigration plunged in 2017

January 5, 2018

https://www.reuters.com/article/us-trump-effect-immigration/fewer-family-visas-approved-as-trump-toughens-vetting-of-immigrants-reuters-review-idUSKBN1ET15I

The above-linked article appeared on Reuters yesterday, reporting that in 2017, family-based immigration dropped dramatically.  But it’s not as though few visas are being approved.  The charts embedded in the article also paint a picture of just how out-of-control immigration had gotten since 2000.  Virtually all U.S. population growth is due to immigration, both legal and illegal, and family-based immigration accounts for at least half of that growth.  In 2015, over one million family, fiance and “other relative” visas were approved.  But in 2017:

  1. Family visas fell to 541,000 vs. 755,000 in 2015, a drop of 28%.
  2. “Other relative” visas fell to 62,000 in 2017 vs. 254,000 in 2015, a drop of 76%.
  3. Fiance visas fell to 33,000 in 2017 vs. 54,000 in 2015, a drop of 39%.

In addition, the Trump administration is seeking even more drastic cuts as a condition for allowing DACA immigrants (children brought here illegally by their parents) to remain permanently in the U.S.

And, based upon monthly border arrest data, illegal immigration declined in 2017 by about 40% – roughly equivalent to 400,000 people.

Add all this up and U.S. immigration in 2017 was cut almost in half, by over one million people.

It’s also important to note that, contrary to the dire predictions of economic decline by immigration advocates who claim that immigration is critical to providing needed skills and entrepreneurship, the decline in immigration in 2017 has been accompanied by a surging economy.

Trump should be applauded for doing a fantastic job of following through on his campaign promise to rein in out-of-control immigration.


America’s Worst Trade Partners in 2016

July 6, 2017

America’s trade policy is a disaster.  There’s just no other way to describe it.  In 2016, our trade deficit rose to almost $505 billion, beating the old record set in 2015.  We can’t continue on this path.  An economy that has that much money drained from it can only avoid a permanent state of recession through deficit spending, which is exactly what we’ve done for decades, and it’s bankrupting us.  Our infrastructure is crumbling.  The Social Security trust fund is on a path to bankruptcy.  Medicare is already there.  Household incomes and net worth are declining.  And the government can’t come up with a scheme that makes health care affordable.

But what to do?  How did “free trade,” the darling of economists, back-fire so badly for the U.S.?  A quick glance at the balance of trade data, which is broken into “services” and “goods,” reveals a nice surplus in services.  It was in this category that the U.S. economy was really expected to shine, and it has.  But the “goods” part of the equation has run completely off the rails, with the deficit in goods dwarfing the small surplus in services.

What’s the problem with “goods?”  Is it oil?  There was a time, decades ago, when the deficit in goods was due almost entirely to oil imports.  But no more.  It has shrunk dramatically and now accounts for less than 25% of the goods deficit.  The vast majority of our deficit in goods is due to manufactured products.  So let’s focus there.

Let’s begin with a look at which nations account for our biggest trade deficits in manufactured goods.  Here’s a list of the top twenty in 2016:  Top 20 Deficits, 2016.  China is at the top of the list, yielding a trade deficit that’s more than four times as large as the next nation on the list, Japan.  In fact, so large is the trade deficit with China that it is larger than all of the nations of the rest of the world combined.  It would seem that China must be doing something underhanded.  Some say that the problem is low wages in China.  Others claim that China manipulates its currency, keeping it artificially low, thus making its exports cheaper for American consumers and making American imports too expensive for Chinese consumers.  Or maybe it’s just the sheer size of China, a big country with one fifth of the world’s population.

What is it about this list of nations that they have in common?  The list includes nations from Asia, Europe, the Middle East and Central America.  It includes some of the wealthiest nations on earth – like Germany, Switzerland and Ireland – casting doubt on the “low wage” theory.

I mentioned China’s size.  But geographic size can’t be much of a factor.  Without any people, we wouldn’t even have trade with any particular country or region.  Take Antarctica.  It’s bigger than China, but we have no trade with that continent at all.  People are what’s important.  It’s their consumption of products that drives trade.  So maybe that’s where we should start looking.  Perhaps the number of people in a country – or their population density – is a factor.  So let’s take a look.  Let’s express the trade deficit with each one of those countries in per capita terms.  Now look at the list:  Top 20 Per Capita Deficits, 2016.

The median population density of the 165 nations* included in this study is 184 people per square mile.  The population density of the U.S. is apprximately 90 people per square mile.  Seventeen of the twenty nations on this list have population densities above the median.  The odds against that happening are 128:1.  Conversely, the chances of that happening are only 0.7%.  Clearly, population density is a factor.  The average population density of these nations is 522 people per square mile – almost three times the world median and more than five times the density of the U.S.

In per capita terms, China barely even makes the list, ranking 19th out of these twenty nations. Eleven of the twenty nations are European Union nations.

And what about the claim that low wages are to blame for trade deficits?  That’s clearly nonsense.  The average “purchasing power parity” (roughly analogous to wages) is just over $46,000 – on a par with the U.S.

On average, the per capita trade deficit with these nations has risen by 88% in the past ten years.

The fact that America’s deficit with Ireland, with a population density close to the world median, is almost three times that of Switzerland, the number two nation on the list, is an indication that something else is going on that tilts trade in favor of Ireland, and indeed there is.  Ireland is a tax haven and America is a fool to tolerate it.

Why is population density such a dominant factor in determining the balance of trade?  It’s because of the inverse relationship between population density and per capita consumption.  It’s because people living in crowded conditions consume less but are just as productive.  The result is that they come to the trade table with a bloated labor force and an emaciated market.  To understand more about why this happens, read Five Short Blasts.  It’s also the theme of this blog.

Any trade policy that fails to account for the role of population density in driving trade imbalances and fails to employ tariffs to maintain a balance of trade with overpopulated nations is doomed to failure.  America’s free trade policy is blind to this factor.  The resulting trade deficit is inevitable.

Next we’ll take a look at the list of America’s twenty best trade partners.  If population density is a factor, we should see the opposite results on that list.  It should be dominated by nations with low population densities.  Stay tuned.

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  *  There are 229 nations in the world.  Tiny island nations and city-states have been excluded from the study.  Trade with these nations is minuscule, accounting for less than 1% of U.S. trade.  The U.S. tends to have a surplus with such nations, regardless of their population density, since their economies are primarily based on tourism and not manufacturing.


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.

 

 


Per Capita U.S. Auto Sales Declining

January 9, 2016

New vehicle sales were released a couple of days ago.  The headline of the story is that sales set a new record in 2015 – 17.47 million, beating the previous record set in 2000.  It got me wondering.  2000 was fifteen years ago.  Since then, the U.S. population has grown by about 13%.  So the new record should have easily topped the 15-year-old record, right?  Wrong.  It barely beat the 2000 record by only about 100,000 vehicles, or by about 0.6%.

So I couldn’t help but wonder:  is it possible that we’re already beginning to see a decline in the per capita consumption of vehicles in the U.S., which is what the inverse relationship between population density and per capita consumption that I presented in Five Short Blasts would predict?  In Chapter 10 of the book I theorized that the U.S., though much less densely populated than many other nations, had already crossed the threshold where a growing population density begins to erode per capita consumption and, with it, the economy, and that this happened sometime perhaps in the ’50s or ’60s when our population was half of what it is today.

New vehicle sales is one piece of consumer data that’s readily available and not a closely-guarded secret of some market research company.  So it was time to find out how new vehicle sales have changed over time as our population has grown.  I plotted such sales going back to 1968 versus the U.S. population and here’s the result:  auto sales 1968-2015.  The following are some observations about this chart:

  1. New vehicle sales tend to swing up and down pretty wildly, dropping precipitously during recessions and shooting back up during recoveries.
  2. I don’t know what  happened prior to 1968, but it’s clear that between 1968 and 1978, the per capita consumption of new vehicles was rising quickly, jumping 44% to .067 vehicles per person, which is about one vehicle for ever 15 people.
  3. That figure of .067 vehicles per person in 1978, when our population was about a third lower than today, still stands as the record level.  The next peak of per capita consumption of new vehicles in 1986 didn’t quite rise to the same level, reaching 0.66.  The next peak in 2000 – the record that was just broken this year – reached only 0.62 new vehicles per person, well short of the 1978 peak.
  4. This total vehicle sales record set in 2015, when expressed in per capita terms, even misses the 2000 mark by quite a large margin.

Clearly, per capita consumption of new vehicles is in decline, and has been declining since as far back as 1978.  One could argue that 2015 may not be a peak, that vehicle sales have been climbing steadily since 2009 when they reached their lowest level of the entire 1968-2015 period.   The auto industry projects that sales could go higher in 2016.  I think that’s unlikely.  First of all, though 2015 was a record year, the sales rate in December fell to its lowest level since June, and December is typically one of the strongest sales months of the year.  Secondly, 2015 was the sixth consecutive year of sales volume increases, the longest of the 1968-2015 period.  Previously, the longest period of annual sales volume increases was four years, from 1983-1986.  Finally, look at what’s happening in the economy in general beginning in December.  Many economic indicators are now turning negative.  Most would agree that the auto industry’s expectations of a stronger 2016 are a pipe dream.

So just how fast is per capita consumption of new vehicles declining?  To find out, I re-plotted the data beginning with 1978 and had the computer generate a trend line with an equation to describe it.  Here’s the new chart:  auto sales 1978-2015.  Now you can see the clear downward trend.  Of the four different mathematical formulas that could be used to describe the trend – linear, logarithmic, exponential and power – the best fit was a linear equation.  The formula is included in the chart:  f(x) = -.0003x + .06.  (I’ve rounded off the two constants for clarity.)  This means that as our population continues to grow at the same rate – about 1% per year – per capita new vehicle sales will decline by .0003, which is about a 0.5% decline.

Why is this happening?  It’s pretty simple, really.  Most of our population growth is in urban areas where there’s been strong demand for apartment-style housing.  We examined in a recent post how renters are increasingly paying a greater percentage of their incomes on rent.  And people who live in apartments in metropolitan areas face big obstacles when it comes to car ownership – especially the lack and high cost of parking, both at home and at work, not to mention the traffic issues in the cities.  It’s just cost prohibitive to own a car, so many opt for public transportation.  The root cause of this situation, though, is ever-worsening crowding driven by the increase in population density.

Sure, there are many factors that may be at play here but, for each one you can name, I can name another offsetting factor.  Cars are built better and last longer?  Everything about our society pushes people to buy new cars more often – not less.  Cars are less affordable?  Dealers now practically give cars away, with loan durations of six or seven years, when three years was the norm back in ’78.

This decline in the per capita consumption of vehicles is yet another example of the conflict of interest that’s created once a population breaches that critical level and begins to drive down per capita consumption.  If you’re a consumer, it’s in your best interest that the population stabilize or even shrink a bit, increasing your quality of life and enabling you to live in uncrowded conditions where you can enjoy all that life has to offer, including the freedom to own a car and travel at will.  But if you’re General Motors, it’s in your best interest that the population continue to grow because if the population grows by 1% and per capita consumption declines by 0.5%, your total sales volume still increases.  And we saw this happen in 2015.  Sales set a new record in spite of a significant decline in per capita sales.  And so it’s also in the best interests of General Motors to fund candidates who support high rates of immigration.

Immigration-fueled population growth is steadily ruining our quality of life.  Though few really understand why, more and more Americans seem to sense this and it at least partly explains the popularity of the few candidates who at least oppose illegal immigration.

 


Renters financially stressed

December 29, 2015

http://www.cnbc.com/2015/12/09/housings-new-crisis-half-your-income-for-rent.html

I’m finally getting caught up on some things.  One of them is this above-linked article that appeared on CNBC three weeks ago.  It illustrates the fact that, in America, home ownership is declining and housing is becoming less affordable, even for renters.

In Five Short Blasts we saw how a rising population density, as it does with the per capita consumption of virtually everything, dramatically reduces the per capita consumption of dwelling space.  The average citizen of Japan, a nation ten times as densely populated as the U.S., lives in a dwelling less than one third the size of the average American’s.  So it’s only reasonable to expect that, as America grows more densely populated, the same thing will happen:  our homes will get smaller.

Indeed, as the per capita consumption of everything declines, it’s inescapable that employment will decline as well, and poverty will increase.  People who are poor can afford even less, exacerbating the decline in consumption.  Thus, worsening population density and rising poverty work synergistically to spawn a downward spiral.

This article is evidence of the downward spiral in the economic condition of Americans:

“The crisis in the number of renters paying excessive amounts of their income for housing continues, because the market has been unable to meet the need for housing that is within the financial reach of many families and individuals with lower incomes. These affordability challenges also are increasingly afflicting moderate-income households,” said Chris Herbert, managing director of the center.  (Harvard Joint Center for Housing Studies)

… Homeownership is now at the lowest level in half a century, and some expect it could go significantly lower. Household formation is expected to continue its slow rise, but almost entirely on renter households, not owner households.

It’s important to note the relationship here between incomes and housing.  Yes, it’s only natural that poorer people will tend to be renters instead of home buyers and will occupy smaller dwellings.  But the trend toward smaller dwellings also reduces employment in the housing industry, just as lower per capita consumption reduces employment in every industry.  We consume less because we grow more crowded.  We grow poorer when we consume less.  And we then consume even less because we’re poorer.  It’s a process that feeds on itself.

There’s only one way to break this cycle – to stop the rise in population density and level off our population at a sustainable level.