Supply Chain Chaos Fueled by Overpopulation

October 18, 2021

We’ve all seen the empty shelves in our stores and have had to adapt and substitute as everyday items that we’ve long taken for granted are suddenly out-of-stock. And we’ve heard the stories and seen the pictures of massive back-ups at our ports – shipping containers stacked high and dozens of cargo ships anchored off-shore, waiting to be unloaded. The global supply chain is in chaos. The Covid pandemic is taking the blame because the globalists who created the global supply chain don’t want you to understand the real issues.

The global supply chain is a “system” and, like any system, requires controls to keep it stable. The more variables there are in a system, the more difficult it is to control. Take your car, for example. Maximizing your fuel mileage requires a computer that adjusts the fuel-to-air ratio to any given combination of conditions – air temperature, engine temperature, octane rating of the fuel, throttle position, oxygen level in the exhaust, and so on. When your car is first started, all of these variables are in such a state of flux that it’s impossible to control in such a way that minimizes your fuel consumption. So your car runs in “open loop” mode until the variables settle down. Only then does it go into “closed loop” mode where the computer (using that “chip” you hear so much about that is in short supply because of the global supply chain chaos) can actually fine tune the fuel injectors and spark timing. Any disruption in any variable that’s out-of-range will cause the computer to throw up its hands and default back to open loop mode and your “check engine” light comes on.

That’s just your car. Now think of more complex systems. Think of nuclear power plants, for example. Maintaining precise control is absolutely critical. Loss of control can result in a core melt-down which isn’t just a matter of life and death, it’s an existential threat to everyone and everything within a huge radius. Everything has to work perfectly. Sometimes it doesn’t. A weather event, a power failure, a failed cooling pump, a crack in a pipe, a failed valve and pretty soon you have a Three Mile Island, a Chernobyl or a Fukushima.

Complex systems that experience loss-of-control can deteriorate until they experience a catastrophic failure. Control algorithms can be developed to reduce the risks to an infinitesimal level, but the risks can never be completely eliminated. So there must also be plans in place to mitigate the destruction and clean up the mess.

With all that said, let’s now look at supply chains. You’re a company that needs a widget. You go to a widget manufacturer down the road. “Sure, I can supply you with your widgets. Tell me how many you want and when you need them. Here’s your price.” Pretty simple. Not a global supply chain, though. There’s nothing simple about that. In fact, there may be nothing more complex. The variables are almost infinite. Your manufacturer may be in China, and has a whole supply chain of his own to manage just to make your part. Then there’s obtaining a shipping container, transporting it to a port in China, obtaining and loading a cargo ship, traversing a stormy ocean, dealing with customs, unloading at the port on the west coast, loading your container onto a truck and, after your container has made its way from one distribution center to another, with multiple carriers involved, it’s supposed to make its way to your door just in time – just as you’ve used the very last widget from the previous shipment.

A failure anywhere along the line can throw your whole supply chain out-of-control. So why would you set up such an elaborate supply chain? Sure, the labor may be cheaper at your manufacturer in China, but all of that around-the-world shipping doesn’t come cheap. The fact is, it isn’t cheaper. So why don’t you just get your widget from a local source? Because there isn’t any. There used to be, but they were driven out-of-business by the global supply chain. Wait, you say. That doesn’t make any sense. If the supplier in China isn’t cheaper, then how did they drive the local supplier out of business? They did it by selling at a loss. Why would they do that? Because the purpose of globalism isn’t to reduce the costs for American companies. The purpose is to establish an economy in third world countries, like China, where they have four times as many consumers as the U.S., and turn them into U.S.-style consumers. That way, sales volumes and profits for global corporations grow four times as fast as they would have if they focused only on the American market.

Look at these charts, updated through August, the latest month for which trade data is available: https://petemurphy.files.wordpress.com/2021/10/balance-of-trade.pdf, https://petemurphy.files.wordpress.com/2021/10/manfd-goods-balance-of-trade.pdf. The first is a chart of our overall trade deficit. It’s a perfect representation of the state of our supply chain. Stable until the onset of the pandemic, it’s now out-of-control. If this were a chart of a nuclear power plant’s reactor core temperature, rising as fast as the trade deficit is rising, you’d be in a state of panic if you were an operator at that plant, and lights in the control room would be flashing red. The 2nd chart is more narrowly focused on our deficit in manufactured goods. It, too, is out-of-control, though in recent months it’s begun to show signs of stabilizing. Are trade policy changes enacted under Trump – the USMCA agreement with Mexico and Canada and the tariffs on Chinese imports – showing signs of having the desired effect of boosting domestic production? Or are we seeing signs that companies are awakening to the follies of the global supply chain? It’s too early to tell.

The global supply chain is in a state of “melt-down.” The crisis is more likely to get worse than improve. Thousands of businesses are responding by increasing orders in reaction to their empty shelves and are scrambling to find new suppliers. A few major retailers are bypassing the shipping companies by chartering their own ships. All of this will add to the chaos. However, perhaps the biggest factor working against regaining control of the supply chain is the fact that the main purpose of the global supply chain isn’t supplying us with goods at all. The real purpose of the global supply chain is to tilt the balance in favor of the “developing world” in the global war for employment. The economies of badly-overpopulated nations need to be propped up with manufacturing-for-export in order to employ their bloated labor forces and maintain political stability. As the supply chain chaos begins to unravel that grand plan, nations and global organizations like the UN, the IMF the World Bank and others will begin to react in ways that aren’t necessarily productive toward restoring stability to the supply chain. It’s impossible to predict the effect on such a complicated, out-of-control system.

As proof that powerful global forces are at work shoving the “global supply chain” model down our throats, consider this. We’re subjected to a daily drumbeat of warnings of an existential threat posed by carbon emissions. So dire is the threat that our energy industry must be converted to wind and solar and our auto industry must become all-electric, they say. Beyond that, elaborate plans are underway to “capture” CO2 from the atmosphere and from smoke stacks and to store it in underground caverns, in tanks, or anywhere they can hide it. Yet, you never hear anyone utter a single peep about the fact that the vast fleet of ships plying the oceans as part of the global supply chain consume five billion barrels of oil per year – not gallons – barrels. Those are emissions that could be completely eliminated by returning the world to a domestic supply chain.

Nor do you hear a single peep about the role of out-of-control population growth. No one bothers to even ask the question, “What will we gain if we reduce per capita oil consumption and carbon emissions by 50% if we double the population?” Globalists don’t want you to think that far. They deceive you into believing that the existential threat of climate change can be controlled by elaborate plans for reshaping our entire economy, and by throwing around oxymoronic terms like “sustainable development” so that you won’t begin to ask about simple, cheap fixes like returning to domestic supply chains and stabilizing the population. Those simple, cheap fixes would pose a threat to what they’re really concerned about – big profits available from developing third world countries and never-ending population growth. They think we’re all idiots.

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As an aside, I went to a home improvement big box store this week to purchase a shop light to replace one that I use throughout my basement and garage for lighting. To my dismay, I discovered that all such lighting has been converted to LED. You can still get flourescent bulbs for your existing light fixtures, but new flourescent fixtures are no longer available. This particular store used to stock at least 20 of these basic shop lights because, as you can imagine, there was a constant demand for them. But they didn’t have any of the basic 4-foot, two bulb shop lights available in the new LED design. I went home to search online for stores in the area might have them in stock. Not a single store in the whole metropolitan area had a single one in stock! Supposedly, I can get one within a couple of weeks if I order.

Doing some research into these new LED light fixtures, I made another interesting discovery. Every single LED light bulb, regardless of its configuration, uses a “chip” to make it work. Think about that. Just converting lighting to make it more efficient requires an additional billions of “chips” per year (which will add to our landfills), and now we can’t get enough chips to build cars. The entire world has gone mad.


Existential Threats

September 21, 2021

“Existential threat.” It’s a term that gets thrown around a lot these days. What is an existential threat? It’s something that threatens your very existence. Someone who wants to murder you is an existential threat to you. You will stop at nothing to stop that person because your life depends on it. Another nation that wants to overthrow our own nation and make it their subject is an existential threat. Our nation’s continued survival depends on stopping that other nation, just as we had to do in World War II to stop Japan and Germany. Every citizen took part in mustering everything we had to fight them.

So, when you hear that term used today, you would expect an all-out effort to combat the threat. Consider China. Over the past 2-3 decades, China has used trade to its advantage to put it on a path to becoming the world’s most dominant economy, making us utterly dependent on them for virtually everything while draining the wealth from our own economy through their massive trade surplus. And, using those trade dollars, they’ve engaged in a massive military build-up and have begun bullying other nations in that part of the world. Belatedly, our own leaders now consider China to be the biggest existential threat that we may face in the world.

To counter that threat, Biden just cut a deal with Australia and Great Britain to provide Australia with eight new nuclear-powered submarines. That’s about $24 billion worth of naval power. If we’re willing to go to that extent, wouldn’t you think that we’d jump at the chance to put an end to China’s ambitions for a teeny, tiny fraction of that cost? Trump, Biden’s predecessor, left him with the perfect tool to do exactly that when he cornered them into agreeing to the “Phase 1” trade deal in January of 2020. Take major steps toward reducing their trade surplus with the U.S., or have a 25% tariff slapped on the remaining half of their exports to the U.S., just like Trump had already done to the other half. That was the deal.

China agreed to it but, not surprisingly, they never intended to comply, believing that we would never enforce it, just like we had demonstrated for decades that we never enforce any trade deals. A year and a half into that two year trade deal, China has reneged on every aspect of it. They agreed to very specific goals for imports of American agriculture products, energy products, manufactured products and total goods. Through July, the most recent month for which trade data has been released by the Commerce Department, China is $74 billion short of its goal for manufactured goods, $43 billion short of its goal for energy products, $25 billion short of its goal for agriculture products, and a whopping $134 billion short of its goal for total goods.

When Trump slapped the 25% tariffs on half of all Chinese imports (something Biden has wisely left in place), it put a real hurt on China. Their total exports to the U.S. have fallen by – guess how much? – 25%, falling $108 billion in 2020 from their record amount of $418 billion in 2018.

China has thumbed its nose at the U.S. on this deal. What has Biden done in response? Absolutely nothing. In fact, not one time has he ever even acknowledged that the Phase 1 deal even exists. I don’t get it. The U.S. is desperate to counter China’s growing influence, willing to spend many billions of dollars to do it, yet the Biden administration won’t take advantage of this powerful tool – the one China fears the most – and, in relative terms, it wouldn’t cost a damn dime to implement. Why? It’s difficult to come to any other conclusion than Biden doesn’t want to give any credit to Trump. We’re faced with an existential threat, and Biden won’t lift a finger for political reasons.

Another example is global warming. Just today, Biden addressed the UN and emphasized the need to take more drastic action to blunt this threat to the very existence of our planet. On Sunday, when questioned by Margaret Brennan on Face the Nation about his claim that the Democrats’ infrastructure bill should be $6 trillion instead of $3.5 trillion, Bernie Sanders replied by asking “How much would we be willing to spend to save the planet?” It’s a good question, actually. If the earth could become uninhabitable, then we should stop at nothing to prevent it, no matter how great or small the cost and no matter how complex or simple the solution.

Global warming (or climate change, if you prefer) is caused by human activity which generates greenhouse gases like CO2 and methane to name a couple, which trap heat in the atmosphere. It was never a problem until, during the last couple of centuries, the human population exploded, doubling over and over again while clearing forests to develop cities and fueling an improved standard of living with fossil fuels. Greenhouse gas emissions grew beyond the planet’s ability to absorb them. The problem is total emissions, which is the product of per capita emissions multiplied by the size of the human population.

But what if we didn’t have to spend trillions of dollars (maybe quadrillions?) to wean the world off of fossil fuels in favor of renewable sources like solar and wind? What if greenhouse gas emissions could be reduced for free? It can be done. It was demonstrated by the Covid pandemic when most people stayed home during the early weeks of the spread of the disease. Amazingly, the air cleared all over the world and the concentration of CO2 in the atmosphere dropped for the first time in many decades, something that all of the thousands of wind turbines and millions of solar panels had yet been able to achieve. When so many people hunkered down, it simulated what the world would be like with a smaller population.

It wouldn’t cost a thing and could be done more quickly than the decades-long or century-long timelines we’ve heard for cutting greenhouse gas emissions by X percent that scientists say needs to be achieved, though there’s little agreement on what “X” is. It can be done ethically, without resorting to Draconian measures. Birth rates can be influenced by something as simple as tax policy, and immigration can be cut. Reducing the population would not only solve global warming but virtually every other environmental threat along with it.

Yet no one utters a word to suggest reducing the population. In fact, the powers that be want it to continue to grow. The Paris Climate Accord pulls no punches in admitting that its real mission is not to stop global warming, but to reduce it to a manageable level so that “sustainable development” can continue. It’s not the planet they’re worried about. It’s “Sustainable development” – an oxymoron designed to fool you into believing that there really is such a thing – that you don’t need to worry about the environment because they’ve got everything under control.

In fact, the whole environmental movement has devolved into a scam meant to lull you into believing that everything is under control so that you won’t think about the situation so hard that you stumble upon the real problem – that it’s impossible to continue growing our population in a finite world. It’s a lesson that you learned as a child when you watched all the baby guppies die in your aquarium simply because there were too many for that little ecosystem to support. But that lesson has been tamped down by the purveyors of “sustainable development,” by the environmental proclamations of global corporations who are desperate to prop up growth in sales volume with population growth, and by politicians who tighten their grip on power by growing their electorate.

We are, in fact, facing existential threats, but the supporters of free trade and economic growth (code for population growth) would rather continue to profit from unsustainable policies in the short run, the future for our children be damned. They’d rather continue to trade with communist dictators today. Who cares if our children one day live under them? They’d rather have you believe that the recycle you put out on the curb for collection isn’t really going into a landfill, that your water-efficient appliance is actually saving you water, that your electric utility’s wind turbines and small solar panel farms are anything more than a drop in the bucket relative to the problem. Worst of all, the economists want you to believe that mankind is clever enough to overcome all obstacles to growth. I can think of two obstacles that we have yet to demonstrate we can overcome – stupidity and hubris.


Pro-China Lobby Groups Lying in their Quest to End Tariffs on Chinese Imports

August 7, 2021

Let me begin with a question. The U.S. Chamber of Commerce is an agency of the U.S. Department of Commerce whose mission it is to aid U.S. businesses. True or false?

If you answered “true” to this question, as most people would, you’re dead wrong. The U.S. Chamber of Commerce is a lobbyist organization that promotes business interests and is funded by its member businesses – from the smallest of local businesses to global corporations. Naturally, the interests of those businesses that provide the lion’s share of their funding – global corporations – take precedence over all others. And they’re not above speaking out of both sides of their mouth in promoting those interests.

The subject of trade is a good example. Check out this “policy priorities“page from their web site. Click on the “Internation Trade, Investment and Regulatory Policy” link. Scroll down about half-way to the section on “International Trade, Investment and Regulatory Policy.” The third bullet item reads:

“Press for a China policy that seeks improved access to the Chinese market, advances structural reforms in China and tariff relief through new negotiations …”

Now, see the links to “Go Deeper” articles in the right-hand margin of the page. There you’ll find two conflicting articles. One is titled: “Two Big Wins for U.S. Trade: Completion of USMCA and the Phase 1 deal with China mean big things to American business.” The other, just above it, is titled “They’re Still There: Tariffs Weigh Heavily on U.S. Economy.”

Those tariffs on China – 25% on half of all Chinese imports – were the only thing that brought China to the negotiating table – and the threat of imposing them on the rest of all Chinese imports was the only thing that forced them to agree to big increases in their purchase of American products as part of the Phase 1 trade deal.

You can’t have it both ways. Either the Phase 1 deal was good for American business or it wasn’t. You can’t argue that it is and then complain that the very heart of the deal – the tariffs – is bad for American business. Yet, that’s exactly what the U.S. Chamber of Commerce does. To placate their small, local business members, they praise the deal. But, in the interest of big, global corporations, they complain that it’s a bad deal and what it terminated.

As further evidence, check out this article: https://www.foxbusiness.com/politics/business-groups-call-biden-restart-trade-talks-china. Here’s the key excerpts:

“Nearly three dozen of the nation’s most influential business groups — representing retailers, chip makers, farmers and others — are calling on the Biden administration to restart negotiations with China and cut tariffs on imports, saying they are a drag on the U.S. economy.”

“In a Thursday letter to U.S. Trade Representative Katherine Tai and Treasury Secretary Janet Yellen, the business groups contend that Beijing had met “important benchmarks and commitments” in the agreement, including opening markets to U.S. financial institutions and reducing some regulatory barriers to U.S. agricultural exports to China.”

“The trade groups include some of Washington’s most influential big business associations, including the U.S. Chamber of Commerce …”

The claim that China has met its commitments and therefore qualifies to have the tariffs dropped is a flat-out lie. The Phase 1 deal set very specific goals for Chinese imports of American products. Meet those goals and the existing tariffs could be dropped. Fail to meet them and the tariffs would be extended to cover all Chinese imports. That’s the deal, stated in very clear terms. So far, through June, the most recent month for which trade data is available, China has failed to meet a single commitment.

In 2020, China fell short of its commitment for purchases of total U.S. goods by 33.5% or $62 billion. They fell short of their goal for the purchase of energy products by 64%. Among the four categories of goods for which specific goals were set – manufactured goods, energy goods, agricultural goods and total goods – they met the goal for agricultural goods only during the last three months of 2020, but fell far short for the year. Four categories of products. Twelve months in the year. That’s 48 opportunities to demonstrate a willingness to meet their commitments. They failed 45 out of those 48 times. In fact, for the year, they barely exceeded the 2017 baseline of the deal. In the all-important category of manufactured goods, they actually imported less than the 2017 baseline.

Six months into 2021, their performance is even worse. Their imports of total goods are 46% below their commitment. Their imports of energy products is 78% below. Even their imports of agriculture products, the category where they at least met the goal for the last three months of 2020, have collapsed in 2021, falling short of their commitment by 46% and even falling short of the 2017 baseline by $10 billion.

China hasn’t met their commitments, as the U.S. Chamber of Commerce claims. It’s failed abysmally. Contrary to the Chamber’s claim that China has earned the elimination of tariffs on its products, it has blatantly thumbed its nose at the Phase 1 deal, believing (and rightly, so far) that the U.S. will continue its long-demonstrated practice of failing to enforce trade deals.

President Biden, don’t listen to these globalist lobbying organizations. They’re lying to you. It’s time – past time, actually – to declare China a failure and to enforce the Phase 1 trade deal by extending the 25% tariffs to all Chinese imports. Fail to act and the U.S. will continue to be the laughing stock at the trade table for all other countries for years to come. That’s certainly not in America’s interests.


Biden Tackles Minor Corporate Abuses While Ignoring the Biggest and Most Obvious

July 11, 2021

As reported in this Reuters article, Biden has signed an executive order that tackles many corporate abuses in an effort to help American consumers. Good for him. Many of these actions have been long overdue. But he has completely ignored the one “corporate abuse” that dwarfs all others in terms of its impact on American workers. I’m talking about the trade deficit and the practice of off-shoring millions of manufacturing jobs.

To his credit, while ignoring the abuses that Biden addressed with this executive order, Trump is the only president since World War II who took the trade deficit seriously and took concrete steps to address it.

You may wonder why I focus so much attention on the trade deficit since the purpose of my book, Five Short Blasts, and the purpose of this blog, is to raise awareness of the economic consequences of overpopulation – namely, that falling per capita consumption as over-crowding worsens must inevitably drive up unemployment and poverty. And poverty kills. Ultimately, if nothing else gets us first, it will prove to be mankind’s undoing.

It’s really not that hard to understand once you understand that increasing over-crowding as the population continues to grow inevitably drives down per capita consumption and, along with it, the need for labor. People living in crowded conditions live in ever-smaller dwellings. They own little furniture and appliances because there’s no room for them. They own less clothing because of a lack of closet space. They don’t have yards and gardens, so they don’t need tools to maintain them. They don’t own cars because roads are choked with traffic and there’s no place to park. So they don’t have garages. They don’t participate in sports because there’s nowhere left to play them. They don’t engage in recreational boating because launch and dock space is all taken.

You get the idea. But what does this have to do with trade? Consider a country with a reasonable population density. Let’s say there’s 100 million people in this country. Their lifestyle resembles that of the U.S. Now suppose that they engage in free trade with another nation that is far smaller – say one tenth the size – but also has 100 million people. It’s ten times as crowded and people live in conditions like those described in the previous paragraph. For that reason, their consumption is only half that of the first country.

Through free trade, these two countries, though each is still a sovereign state with borders, behave economically as one country. The work of manufacturing the products that their combined population needs is spread evenly across the work force, but the consumption of those products isn’t. Consumption in the 2nd country remains low because of their over-crowding. The end result is that the first country has lost 25% of their manufacturing jobs and has lost even more in terms of market share. In essence, the first country has been forced to pay the price for the 2nd country’s overpopulation.

By trading freely with the 2nd country, the first country has immediately taken on the economic traits of a country twice as populated – something it would have taken decades to happen through the course of normal population growth. Worsening unemployment and poverty are the inescapable consequences of free trade with overpopulated nations. This is why my concern for the economic consequences of overpopulation has driven me to put such heavy emphasis on trade.

With all of that as a backdrop, what has Biden done to address our massive trade deficit – now an annual one trillion dollars in trade in manufactured goods? Absolutely nothing. Oh, he’s paid some lip service to wanting to help American workers and has encouraged us to “buy American.” But he’s done nothing about our trade policy and hasn’t spoken a word about our trade deficit.

As reported this past week by the Commerce Department, our trade deficit in May continued to hover at a near-record level of $71.2 billion, the 2nd worst reading ever since setting a record of $75 billion in March. In fact, in his first four full months in office for which trade data is available – February through May of this year – Biden owns the four worst monthly trade deficits ever recorded.

Our largest trade deficit is with China. Thanks to Trump’s enactment of 25% tariffs on half of all Chinese imports, however, that deficit isn’t nearly what it once was. Our annual deficit with China peaked at $418 billion in 2018. Thanks to Trump’s tariffs, that fell to $344 billion in 2019, and fell again in 2020 to $310 billion. So far this year, it’s on track to remain at that level.

Trump left Biden the perfect tool to build on that progress. In January, 2020, he got China to sign the “Phase 1” trade deal which held at bay his threat to extend his tariffs to all Chinese imports in exchange for China’s agreement to dramatically increase their imports of American goods. What’s happened? China is failing miserably in its commitments and, not only has Biden done nothing to enforce the agreement, he hasn’t even acknowledged that the Phase 1 trade deal even exists. So far, through May, China is 39% behind its commitment on manufactured products, 43% short of its goal for agricultural products, and is a whopping 78% short of it goal for energy products. They’re barely exceeding their imports in 2017 which formed the baseline for the agreement.

So far, the Biden administration makes a good show of supporting American workers but, on this most critical issue – the one that would help us the most – all we hear from the White Houe is …….. the sound of crickets.


Time to Leave the World Trade Organization

September 16, 2020

https://www.reuters.com/article/us-usa-trade-china-wto/wto-finds-washington-broke-trade-rules-by-putting-tariffs-on-china-ruling-angers-u-s-idUSKBN2662FG

As reported in the above-linked article, the World Trade Organization has announced its finding that the U.S. broke its rules when it imposed tariffs on Chinese imports two years ago.

The timing of this announcement is curious.  Of course the U.S. broke the rules.  Everyone knew it at the time.  Trump didn’t care.  It was the only way to make any progress on halting the explosion in the trade deficit with China.  So why wait until now?  Is it because Trump faces re-election in less than two months, running against a candidate who played a big role in the advancement of the globalism that the WTO enforces?

The WTO is the enforcer of the ill-conceived trade scheme hatched in the wake of World War II to bring the world together by employing the unproven concept of “free” trade.  Decades later, the results are in and “free” trade is now a proven failure.  Instead of lifting all economies of the world and bringing the world together through an inter-dependency, the WTO has destabilized the world by establishing a host-parasite relationship between reasonably-populated nations, like the U.S., and the others – like China, so badly overpopulated that they are totally dependent on manufacturing for export and feeding off of America’s market.  The WTO is directly responsible for building up a totalitarian communist regime bent on dominating the rest of the world.

It’s time to put an end to this.  Trump can do it by simply withdrawing from the WTO, a move that would quickly lead to its collapse.  Let’s return to truly free trade, where every nation is free to set its own rules in its own best self-interest.


Trump’s Efforts on Trade a Spectacular Failure

September 9, 2020

I can’t tell you how disheartening it was to sift through the latest trade data, for the month of July, released by the Commerce Department late last week.  There’s just no getting around the fact that the administration’s efforts to cut the trade deficit and bring manufacturing back to the U.S. have failed.  “Failure” would be the word to describe results that haven’t shown any improvement.  But America’s trade picture has deteriorated so badly that the scope of the failure can only be described as “spectacular.”

In his inauguration address, Trump observed:

…  rusted-out factories scattered like tombstones across the landscape of our nation …

Earlier in the address, regarding situations like that noted above, he proclaimed:

… That all changes – starting right here, and right now …

The July trade data comes 3-1/2 years into his administration – plenty of time to implement changes and to see the effects.  It’s hard to find any silver lining.  Consider:

  1. The trade deficit in manufactured goods in July soared to $80.4 billion, a new record that completely blows away the record set under the Obama administration ($63.3 billion in March, 2015).  Check out this chart:  Manf’d Goods Balance of Trade.
  2. During the 2016 campaign, Trump vowed to quickly tear up the NAFTA deal and replace it with a much better deal.  Most of his term has been wasted negotiating the new “USMCA” trade deal that replaces it.  It finally went into effect on July 1st of this year, but the terms have been known for a long time, so you’d expect that manufacturers would have been busy implementing plans to get in compliance.  The results?  In July, the trade deficit with Mexico soared to $10. 6 billion.  When Trump took office in January, 2017 it was $3.8 billion.  Since then it has nearly tripled.
  3. When Trump took office, the deficit with China was $31.4 billion.  In July of this year it was $31.6 billion.  After Trump took office, the deficit with China continued to grow until, finally fed up with China’s promises to buy more American products, Trump imposed 25% tariffs on half of all Chinese products.  Almost immediately, the deficit with China began to shrink dramatically.  However, all momentum was lost with the signing of the “Phase 1” deal with China, when the U.S. agreed to halt plans to impose tariffs on the remainder of China’s products in exchange for Chinese promises to dramatically increase their purchases of American goods.  The results were predictable; China reneged on the deal.  They haven’t even measured up to the 2017 baseline that was used as a starting point.  Here’s the data, updated through July:  Phase 1 China Trade Deal 2020 YTD.  What has Trump done in response?  Nothing.  He continues to insist it’s a good deal, in much the same way that Obama stuck by his trade deal with South Korea while our deficit with them exploded.
  4. What progress was made in at least stagnating the deficit with China didn’t translate into any benefit to American workers.  Instead, it contributed to the tripling of the debt with Mexico and also ballooned the debt with Vietnam.  When Trump took office, the trade deficit with Vietnam, an economic back-water, was $3.3 billion per month.  In July of this year it was more than doubled to $6.8 billion per month.  Why?  Because no tariffs were applied to anyone other than China.  The tariffs motivated manufacturers to begin moving out of China, but there was no disincentive to simply move to secondary suppliers in Mexico, Vietnam and other places.

Some might say that such conclusions are unfair in the midst of the pandemic.  Not so.  The effect of the pandemic has been to cut economic activity to a depression-like level, and the effect of an economic slow-down has always been to shrink the trade deficit, not grow it.  That makes the enormous deficit in manufactured goods in July even more troubling.

Speaking of the pandemic, at least people are beginning to realize that being dependent on foreign suppliers for critical goods like ventilators and face masks is a threat to national security.  It’d be nice if that realization extended to other products that would just as easily be cut off during war time.  Better yet, wouldn’t it be nice if people realized that an economy that needs to stand on agriculture, construction, manufacturing and services is hollowed out and unstable if one of those legs is gone?

I don’t doubt Trump’s desire to truly “make America great again” by bringing back our manufacturing sector.  But he sees himself as a “deal-maker” and believes he can deal his way out of the trade deficit.  That’s where the problem lies.  For America, at least, there’s no such thing as a good trade deal.  I defy anyone to identify a single trade deal that has ever left America with anything but a growing trade deficit.

And forget about “free trade.”  That centuries-old concept is about as relevant to today’s trade environment as theories about a flat earth and how the sun rotates around it.  Today, trade is war – a war for increasingly scarce jobs in an ever more over-populated world.  Unlike America, the rest of the world understand this.  They know that what they really need is access to America’s market so that they can keep their bloated populations employed manufacturing goods for export.  Americans don’t have a clue.  They think it’s about lower price and more choice.

Had Trump simply applied tariffs everywhere where America was suffering a big trade deficit in manufactured goods, manufacturers would have come running back like refugees fleeing a war.  Instead of improving incrementally, our economy would have exploded.  Manufacturers would have eagerly snapped up any workers who lost their jobs to closures of restaurants, bars, gyms, movie theaters, etc. during the pandemic.  Trump’s re-election would be a foregone conclusion.  Instead, he’s going to be lucky to win.  Forget about the pandemic.  It’s his failure to make progress on truly making America great again that has left him vulnerable.

Don’t interpret this post as an endorsement of Biden.  It’s reported in the news today that Trump has criticized Biden as a “globalist.”  He’s not wrong.  But it’s not just Biden.  Until Trump came along, every politician, Democrat and Republican alike, were and still are globalists.  I’d vote for Biden in a heartbeat if he vowed to use tariffs to restore a balance of trade, but he won’t.  Though the results under Trump have been disappointing, things could and would be much worse under virtually anyone else, at least until more American politicians are willing to engage in the trade war that they don’t even acknowledge today.

 

 

 

 


Verdict is in: “Phase 1” Trade Deal with China is a total failure.

August 6, 2020

Trade data for the month of June was released by the Department of Commerce yesterday, so we now have a full six months of results of the “Phase 1” trade deal with China.  As I predicted when the deal was signed in January, the deal is a total failure.

You may have heard stories in the news, as I did, about how the Chinese were beginning to make progress on catching up to the goals established by this deal.  I had my doubts, so I was anxious to see the real data.  Here it is, year-to-date through June:  Phase 1 China Trade Deal 2020 YTD.

The deal established goals for the Chinese import of American goods in four categories, using 2017 trade results as a baseline:  manufactured goods, energy goods (like oil, gas, coal, etc.), agriculture goods, and total goods.  The goal was for them to increase their imports substantially in 2020, and then even more in 2021.  In the spreadsheet, I broke down those goals into monthly goals, ramping them up at a rate that would meet those goals by the end of the year.

Through May, the results were abysmal.  They failed to meet the goal in any category of product.  In fact, only their import of energy products even exceeded the 2017 baseline.  You’d think that if China were anxious to meet the goals in order to avoid further threatened tariffs, they’d at least make some good faith effort that they could point to as progress.  So what happened in June?  Their imports actually declined in every category.  They didn’t even meet the 2017 baseline in a single category.

A good faith effort to show progress?  The June results are exactly the opposite.  They are a slap in the face.  The Chinese are taunting the Trump administration – betting that they’ll be too distracted with other events to take action.

It’s time to put an end to this stupid trade deal and follow through with the threatened 25% across-the-board tariffs on all Chinese exports to the U.S.  Trump was elected, in large part, to make real progress in cutting America’s trade deficit and bringing manufacturing back to the U.S.  Aside from tariffs on half of Chinese exports and a new trade deal to replace NAFTA, little has been accomplished.  All momentum on the trade front was killed when Trump signed the “Phase 1” deal with China.  Three-and-a-half years have been frittered away.  His supporters are getting disillusioned by the lack of progress.  If Trump loses the election, it will be due in large part to his failure to fix our trade mess.

There’s no more time to waste.  It’s time to declare this deal a failure and impose the tariffs that were put on hold.  In addition, it’s time for Trump to get serious with other Asian nations and the European Union as well.  Slap all of them with tariffs and start making real progress in bringing our manufacturing jobs back.


Protests against “systemic racism” are off the mark.

August 3, 2020

For a web site dedicated to raising awareness of the economic consequences of population growth, this topic may seem “off the mark.”  But bear with me.

The “Black Lives Matter” movement has evolved beyond protesting the brutal tactics used by some police when dealing with the black community to include “systemic racism” in broad terms.  Exactly what “systemic racism” is can be difficult to pin down and varies depending on who you ask.  There was a time when racism was codified and blatant.  Blacks were barred from voting in many places prior to the Voting Rights Act of 1965.  Segregation was practiced openly throughout society, limiting black access to virtually everything.

But all of that has changed.  The right to vote is secured.  Discrimination is now illegal everywhere, but I won’t deny that it still exists.  There are still subtle ways in which anti-discrimination laws are skirted, and this is the “systemic racism” that is the target of protesters.  I recently heard a protestor say (or perhaps I read it on a sign at a protest – I can’t remember exactly) that “we’re not just here to change laws, but to change attitudes and eliminate all sytemic racism,” or words to that effect.

Good luck with that.  Whatever “systemic racism” still exists is because people are prejudiced, and admonishing people for it won’t change them.  It’s likely to have the opposite effect.  People only change their prejudices out of necessity.

Take World War II for example.  Perhaps nothing, at least up to that point, did more to begin the process of changing minds and integrating blacks into society than the war.  It was an “all hands on deck” event.  Every last male of fighting age was needed in the service.  Every woman was needed to man the factories.  Even school-age kids were needed to collect scrap metal, rubber and even to glean the fields for milkweed to stuff life jackets for sailors.  Winning the war was far more important than silly prejudices.  Sure, there were still some segregated units like the Tuskegee airmen, but blacks could fight as well as whites and they all bled the same color.  A lot of attitudes began to change.

In 1970, in spite of the Civil Rights Act and the Voting Rights Act, the state of Alabama was still highly segregated and the University of Alabama football team was no different.  Bear Bryant had been head coach there since 1958 and steadfastly refused to recruit black players.  Every player on the Alabama team was white.  That year, Alabama took on the University of Southern California, a team that was fully integrated with many black players, led by Sam “Bam” Cunningham, a bruising fullback who led USC to a humiliating 42-21 lopsided win over Bryant’s team.  Like any good coach, Bryant hated losing and he could see the handwriting on the wall.  Afterwards, Bryant was overheard to say, “I want some players like those.”  He could see the folly of not recruiting the best players regardless of whether they were white or black.  The following year, Alabama fielded its first black player.  By 1973, one third of the team’s roster was black.  Bryant had changed out of necessity.  He wanted to win.

The “systemic racism” that persists today and all of its effects – chronic poverty, low wages, lousy schools, drugs, gangs, high rates of incarceration and hopelessness – won’t change because of protests against it.  It will only change out of necessity.  It will only change when every single person who wants to work is needed to make the economy function.  Instead, today, what the Federal Reserve defines as “full employment” – typically somewhere in the range of 4-5 percent – still leaves millions of Americans out of work, and those unemployed are disproportionately black.  Of those who are employed, few have any upward mobility – held back by a substandard education.

There is absolutely nothing that has hit the black community harder than America’s trade policy.  I don’t believe it was intended to be racist, but the results speak otherwise.  Aside from the vestiges of the automobile industry, American manufacturing has been totally decimated, shipping millions of high-paying manufacturing jobs overseas and putting millions of people – disproportionately blacks – out of work.  (It’s worth noting that virtually all of those jobs have landed in Asia and Europe.  Africa has been left completely out of the picture.)  Imagine if that were reversed.  Imagine if manufacturers had to scour the country to find workers to staff their production lines.  It’d take every last worker left in America to satisfy the demand.  Companies wouldn’t give a damn if those workers were black or white or purple, or if they came from Mars.  All they care about is making money.  Petty prejudices would quickly fall by the wayside, just like they did in World War II and like they did at the University of Alabama.  Every black person – hell, every person, regardless of race – could find a job making good money and good benefits.  It’d quickly break the back of the cycle that has kept blacks trapped in poverty.

America’s trade policy is racist.  Protesting loosely-defined notions of “systemic racism” is off the mark.  If protesters want to make real headway in putting an end to “systemic racism,” they need to begin taking on America’s trade policy and the politicians who do the bidding of their corporate benefactors by sustaining this totally unfair system.  It doesn’t matter if those politicians are Democrats or Republicans because both parties have been complicit.  Only when a balance of trade is restored and our manufacturing jobs are brought back home will they see any meaningful improvement.

 

 


Token Bump in Exports to China in May Falls Far Short of “Phase 1 Trade Deal” Goals

July 4, 2020

Trade data released by the Commerce Department on Thursday for the month of May reveals that China bumped up its imports from the U.S. slightly, but still fell far short of the goals of the “Phase 1 Trade Deal” signed with the U.S. in January.  Here’s the data (source:  USA Trade Online):  Phase 1 China Trade Deal 2020 YTD.

This deal sets goals for Chinese imports of American goods for four different categories of products:  manufactured products, energy products, agriculture products, and total products, using 2017 Chinese imports of these products as the baseline for increases.  Through May, we’re now five months into this deal.  That’s 20 opportunities to meet the monthly goal for each category of product.  So far, China has not met one single goal.  In fact, in May, for the first time, China exceeded the 2017 baseline for one category of product.  They imported $1.249 billion in energy products vs. the 2017 baseline of $0.758 billion, but still fell short of the goal for May of $1.943 billion.

Year-to-date, China is behind its commitments by the following amounts:

  • manufactured products – 25.7% below goal
  • energy products – 69.6% below goal
  • agriculture products – 60.6% below goal
  • total goods – 35.9% below goal

This is pathetic.  At this point, one can only conclude that, rather than trying to live up to the deal and boost its purchases of American goods, China is actually making a concerted effort to reduce its purchases.

In October of 2018, the monthly trade deficit with China hit a record of $43 billion.  In May of this year, that deficit was down to $27 billion.  But the “Phase 1 Trade Deal” gets no credit for that decrease.  In December of 2019 – the last month before the deal was signed, the deficit with China was $24.8 billion.  All of the drop in the trade deficit with China is thanks to the 25% tariffs that are in effect for half of all Chinese imports.  The “Phase 1 Trade Deal” has had absolutely no impact on further reducing that deficit.

A huge part of the “Make America Great Again” promise was to reduce the trade deficit and bring manufacturing jobs back home.  There has been virtually no progress.  In May, the deficit in manufactured goods fell just $1 billion shy of the record deficit of $75.8 billion set in December, 2018.  Trump has squandered his term with making fruitless deals.  The deficit with Mexico is worse than ever, hitting a record in March.  The progress made in reducing the deficit with China (through the implementation of tariffs) was offset by increases in other countries, most notably Vietnam and Mexico, and that progress ground to a halt with the signing of the “Phase 1 Trade Deal.”  There’s been absolutely zero progress in reducing the deficit with the EU.  To date, there hasn’t even been an attempt.

Trump needs to kill the “Phase 1” deal now and extend the tariffs across the board to all Chinese products to demonstrate that he’s still committed to the “MAGA” promise if he’s to have any hope of being re-elected.  Far too much time has been wasted, but it’s not too late.


How Population Density Drives Trade Imbalances

June 15, 2020

Now that an analysis of America’s 2019 trade results has revealed that population density is the biggest factor in driving our trade imbalance – just as we’ve seen in every year previous – it’s time for an explanation of how that happens.  How is it that something that seems so unrelated to the economy and trade can have such a dramatic effect, dwarfing the effect of other parameters that would seem to be more influential – things like wages, currency exchange rates, productivity and so on?

Population density is, by far and away, the single most dominant parameter in the field of economics, but one that goes unrecognized by economists because of their cowardly refusal to give any consideration to the subject.  The reason for that dates back to the mocking of economists by other academics in the wake of the seeming failure of the theories of economist Malthus regarding population growth.

The density of the population in which you live has an enormous impact on your ability to consume products.  That impact varies depending on the product in question.  In the case of food, there’s no impact at all.  Everyone needs to consume a certain amount of calories each day to survive.   At the other end of the spectrum, the impact on the consumption of housing, or dwelling space, is huge.  For example, the average citizen in Japan – a nation ten times more densely populated than the U.S. – lives in a dwelling space that’s less than one third the size of the average American.  When people are packed together so tightly, there’s simply no room for anything else.  So the average Japanese citizen’s consumption of everything used in building, furnishing and maintaining a home is less than one third of the average American’s.  Actually, it’s even worse than that when you realize that a much greater percentage of Japanese families occupy multi-family housing, like apartments.  In those cases, walls and foundations are shared, ceilings become floors for the apartment above, etc.

The effect on every single product you can imagine is to reduce its per capita consumption.  Cars?  There’s no room to drive or park them for most people in Japan.  You’ve all seen news stories of Japanese trains carrying commuters literally packed together so tightly that they can barely breathe.

Boats?  In spite of the fact that Japan is an island nation, their per capita consumption of boats is close to zero.  The same is true for Denmark, a nation consisting of one large peninsula and many islands, but which is also very densely populated.

Lawn care and gardening equipment?  On a per capita basis, lawns and gardens virtually don’t exist in Japan.  Sporting goods?  There’s little room for golf or tennis or anything else that requires much real estate.  Even things like electronics are affected, since such cramped quarters as you find in places like Japan force people to share them.

So you get the idea.  A dense population absolutely strangles per capita consumption.  On the other hand, when someone in Japan (or China, or Germany, or South Korea, or any densely populated nation) goes to work, they are every bit as productive as an American worker.  It takes no more or less labor to manufacture something, like a car, for example, in Japan than it does in America.

People make things and people buy things and that, in a nutshell, is what makes an economy tick.  But what happens if people aren’t able to buy as much as they’re able to make?  Now you have a situation where the supply and demand for labor are out-of-balance.  Less demand for labor translates into higher unemployment.  Higher unemployment means lower wages for everyone, and it necessitates greater government spending to provide a safety net for the unemployed.  It’s a recipe for disaster for any nation’s economy.

However, there’s an escape mechanism for nations that find themselves in this fix.  They can put their excess labor capacity to work making products for export.  Of course, that requires a trading partner who’s willing to share their market.  If that partner has a shortage of labor – perhaps because they are very sparsely populated and lack the labor force needed to manufacture everything they need – then it can be a beneficial situation, one that is likely financed by the sparsely populated nation selling natural resources like food, oil, lumber, minerals, etc. to the densely populated partner.

But what if that trading partner isn’t sparsely populated and has no shortage of labor?  To welcome imports from that densely populated nation will inevitably put its own people out of work and create a big trade deficit.  It’s absolutely inescapable.  The densely populated nation won’t buy products from the less densely populated nation in equal measure because they can’t even consume their own domestic manufacturing capacity, much less take in more from other countries.

Either a densely populated nation sustains its economy by manufacturing for export, or it lapses into abject poverty because of extreme unemployment.  Look around the world and you’ll see that this is true, although I should point out that there are a couple of exceptions.  Many small island nations, though they tend to be densely populated, maintain vibrant economies that are based on tourism.  And some small but densely populated nations have oceans of oil beneath their feet and trade that oil for all the other products its citizens require.  But these are the exceptions.  Any densely populated nation of any size is either dirt poor or is totally dependent on manufacturing for export.   Attempting to trade freely with such nations is economic suicide.  A big trade deficit and a loss of manufacturing jobs is inevitable.

What is the point of trade policy that only serves to erode our economy?  The purpose of trade is to make available products that can’t be obtained domestically.  For a nation like the U.S. – big and rich in resources – there isn’t much we need.  Tropical fruits, out-of-season produce, and a few rare minerals are examples.  But manufactured products?  There are none that we can’t make domestically and more efficiently, especially when you factor in the five billion barrels of oil burned annually by ships bringing in products from half-way around the world.  It makes absolutely no sense.

Tariffs are the only remedy available to maintain a balance of trade.  Trade deals don’t work, because there is no motivation for a nation dependent on manufacturing for export to abide by them.  The reduction in the trade deficit with China is proof that they work.  Those tariffs need to be expanded to include all Chinese imports, not just half of them like we have now.  Beyond that, their implementation needs to be spread to other densely populated nations that prey on the American market to sustain their bloated labor forces – Germany, South Korea, Ireland, Vietnam and other Asian and European nations.

Virtually every problem in America, beyond unemployment and low wages, in which a lack of funding is a factor, can ultimately be traced back to our trade deficit – inadequate funding of schools, neglected infrastructure maintenance and improvements, inner city blight, health care – the list can go on and on.  Ultimately, the federal budget deficit and national debt can be attributed to the federal spending needed to offset the financial drain of the trade deficit.

And still economists keep their heads in the sand and insist that population growth plays no role in economics.