Shocking Explosion in Trade Deficit in March!

May 9, 2022

On March 29th, in the wake of the release of the January trade data, I wrote that the U.S. economy may be beyond repair. The release of the March trade data this past week should erase all doubt about that. Never in my worst nightmare did I think that what happened in March was even possible. As bad as the trade deficit had become, the March deficit completely demolished the previous record. It didn’t just set a new record; it blew past February’s record by $20 billion, a 22% increase IN ONE MONTH! The increase was driven by imports, which soared $33 billion past the previous month’s record of $319 billion.

No doubt most will think that increase can be blamed on the higher price of oil imports. Well, think again. Oil imports rose by only $1.5 billion, while oil exports rose more, resulting in a $1.5 billion surplus in the trade of oil. No, the increase in the trade deficit was driven entirely by manufactured goods, where the deficit jumped by $24.6 billion, $22.1 billion (21%) higher than the record set in January. The increase was across the board of categories of manufactured goods: industrial supplies and materials; capital goods; vehicles, parts & engines; and consumer goods. You’d better be sitting down when you look at these charts: March trade deficit; March trade deficit in manufactured goods.

If you’ve been wondering why inflation is spiraling out-of-control, this is your answer. The explosive growth in government spending has fueled an equally explosive demand for goods, nearly all of which are imported. Well, you might think, at least American manufacturers must also be enjoying this expansion in demand. Right? Think again. As this explosion in imports has been taking place, American manufacturing is in serious decline. Look at this chart of the U.S. ISM Purchasing Managers Index, a good measure of manufacturing activity. It actually fell through the first quarter and, more recently, plunged in April. Why? “The US manufacturing sector remains in a demand-driven, supply chain-constrained environment.” In other words, U.S. manufacturers can’t get the materials, equipment and parts – most notably semiconductor chips – that they need. For example, auto imports jumped dramatically in March while American production slowed due to lack of “chips.” Living in the Detroit area, I can tell you that once-empty lots are now over-flowing everywhere in this area with unfinished cars and trucks, unfinished because they’re awaiting the installation of computer chips. You have to see it to believe it.

In that same post on March 29th, I speculated on the supply of Javelin anti-tank missiles in the wake of Ukrainian President Zelensky’s request for 1,000 missiles per day to be delivered, and doubted that we had the capacity to produce even ten per day. Yesterday, on CBS’s “Face the Nation,” hosty Margaret Brennan interviewed Jim Taiclet, CEO of Lockheed Martin, maker of the Javelin missiles. Mr. Taiclet reported that his company’s capacity for production of those missiles is 2100 per year which, assuming a 5-day work week, is a capacity of eight missiles per day. (My guess of ten per day was pretty close, huh?) Clearly, there’s no chance in hell of providing Ukraine with the 1,000 missiles per day that they requested.

Mr. Taiclet also confirmed that each missile requires 250 “chips.” He said that they have enough chips today to keep production running at current levels, but would be supply-constrained beyond that. In addition it would take years to scale up significant additional capacity.

Meanwhile, China remains in a lock-down which, they claim, is an effort to stamp out the Covid virus. Does that make any sense to you? Given that the Covid virus no longer exists in its original state, and that we’re now dealing with subvariants of subvariants that no longer have the lethality of the original virus, the pandemic is for all intents and purposes over. Yet we’re to believe that it’s so bad in China that they’ve locked down entire cities? There’s something else going on. I believe that what’s happening is that China is implementing the final stage of a strategy to wipe out America’s manufacturing capability to the extent that it’s even unable to maintain its armed forces. Think about it. The war in Ukraine is sucking up all of America’s munitions while, at the same time, China is choking off our ability to replenish. The day may be rapidly approaching when Russia and China defeat the U.S. without even firing a shot, since we may not have a bullet left to fire.

Our politicians and media may not be able to see what’s happening, but Wall Street sure does. Inflation alone doesn’t explain the ongoing market crash. Not even fear of a recession can explain it. Clearly, there’s growing fear of something much worse – perhaps the end of our economy as we know it, if not the outright demise of the United States itself.


U.S. needs to accept its fair share of Ukrainian refugees.

March 24, 2022

Those of you who follow this blog, the purpose of which is to warn of the consequences of the inverse relationship between population growth (beyond a critical point) and per capita consumption – specifically, worsening unemployment and poverty, know that I am opposed to high rates of immigration. Immigration accounts for the lion’s share of population growth in the U.S., half of which is illegal immigration. It’s estimated that as many as 25% of all residents in America are foreign-born.

There are many categories of immigrants, including family-sponsored preferences, employment preferences, diversity immigrants, relatives of U.S. citizens, students, temporary workers, asylum seekers and refugees. The last two categories are similar, except that asylum seekers are already in the U.S. (often as a result of illegal immigration), while refugees are people who have already escaped their home country to another, but now seek to immigrate to the U.S.

Ukrainian refugees fall under this last category. They have already fled the war in Ukraine, arriving in bordering countries which are now overwhelmed by the sheer number, now approaching four million and climbing daily, expected to reach as many as ten million.

The refugee category has been abused for decades. Most who have been granted refugee status are merely economic refugees, fleeing poverty and/or high crime rates in their home country, and not an actual war. However, the Ukrainian refugees are different. They’re peaceful people who must now flee bombs and missiles that fall all about them, and some don’t survive the journey. Horrible atrocities have been committed against them.

President Biden announced today that up to 100,000 of these refugees will be admitted to the U.S. That isn’t nearly enough. Poland, a nation 1/25th the size of the U.S., has taken in 25 times that number. Even tiny Moldova has taken in more that that. To do its fair share, the U.S. should be willing to admit at least 500,000. Given the timidity of our response to Ukraine’s pleas for help, it seems the least we can do. That number could easily be offset in less than a year by cutting illegal immigration. These are people who despise Putin and see him and Russia as their mortal enemies. Frankly, we need more people like that in the U.S. as opposed to those willing to accommodate Putin just to make a few bucks.


Russian Invasion of Ukraine Exposes Failed Premise of Globalization

March 23, 2022

Globalization was implemented in the wake of World War II, beginning with the signing of the Global Agreement on Tariffs and Trade in 1947, in an effort to prevent any more such wars in the future. Free trade, it was believed, would make all countries more interdependent on one another and would level out living standards by elevating them in poor countries. The world would become one big, happy country where no one nation could derive any benefit from attacking another. Clearly, at least in the form that has been practiced up to this point, it hasn’t worked. War has once again broken out, a war that could easily turn into World War III.

Trade between Ukraine and Russia isn’t the issue. The issue is the notion that rewarding your enemies with lucrative trade deals will make them your friends, and not just wealthier, more powerful enemies. It’s truly no different than businesses paying “protection” money to a local crime syndicate that’s running a protection racket. When has that not ended badly? You pay until they bleed you out of business.

That’s especially true of trade between the U.S. and China. Experts have been warning for years that China is no friend, and that our trade dollars – nearly $6 trillion paid to China since they were granted “Most Favored Nation” status in 2000 – have built them into a superpower that now threatens our very existence.

Now China and Russia – two superpowers made rich and powerful by our naive embrace of the globalist trade protection racket – have aligned themselves against us. Experts have for years been raising the alarm over what we were doing – surrendering the manufacturing sector of our economy to enrich our enemies and fund their military build-ups. Now the two of them are a match made in heaven, or in hell, to use a more appropriate metaphor: Russia has the resources and China has the manufacturing might. Who can stand against that?

Layer this failure – the misguided hope that cozying up to our enemies will make them our friends – on top of the other failures of globalist trade policy. Foremost is its failure to account for the role of population density in driving massive trade imbalances (see “note” below), turning loose badly overpopulated nations to prey on the markets and manufacturing jobs of those more reasonably populated and, in addition, enabling further population growth beyond sustainable levels.

Globalist free trade policies have created huge economic distortions and destabilizing imbalances around the world and, instead of turning enemies into friends, have enriched despotic dictatorships like Russia and China, building them into superpowers that now threaten the rest of the world. Globalism has back-fired, ensuring that this next world war will be far more lethal instead of preventing it.

Note: I’ve been sitting on the latest U.S. trade data since it was released earlier this month. The explosion in our trade deficit is accelerating at an astonishing pace. I found the data to be so disheartening that I’ve struggled to even post about it. I fear that there may be no hope for the U.S. to avoid economic ruin. Nevertheless, I’ll provide the data soon in one of my next posts. Also, look for posts about admitting refugees from Ukraine and the trade sanctions imposed on Russia.