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.


February Trade Deficit Ties Record Set in January

April 7, 2022

At $89.2 billion, the February trade deficit, released by the Commerce Department on Tuesday, tied the record set the previous month. The all-important deficit in manufactured goods was down slightly at $103.4 billion, but not enough from January’s record of $106 billion to avoid being the 2nd worst deficit in manufactured goods ever. Here’s the chart.

In a related piece of news, the March employment report included a tally of which sectors of the economy added workers since the start of the pandemic in February, 2020 and which sectors lost workers. Manufacturing was one of the big losers, shedding 128,000 workers. The biggest loser was leisure and hospitality, down 1.5 million workers. Surprisingly, the next biggest loser was health care, down by 298,000 workers. Manufacturing was the third biggest loser. That’s not a good sign. The trade deficit exploded during the course of the pandemic as government stimulus money fed a healthy appetite for goods. For the manufacturing sector of the U.S. economy to suffer like that is an indication that the long decline in U.S. manufacturing has actually been accelerating during the course of the pandemic, making it obvious that the Biden administration’s talk of a renewed emphasis on manufacturing is a bunch of BS.

The big winners during the pandemic? Professional and business services gained 723,000 jobs during the pandemic. Transportation and warehousing added 608,000 jobs. Retail added 278,000. Construction was flat.

It’s going to be fascinating to see what happens going forward as the federal government continues to run massive budget deficits (driven mostly by the need to offset the drag of the trade deficit) – forcing it to sell huge quantities of bonds – while, at the same time, the Federal Reserve will begin selling off its $6 trillion worth of bonds in an effort to drive up interest rates and slow inflation. It’s hard to see how this ends well. In my opinion, a recession – likely a bad one – is a sure bet.


U.S. Economy may be beyond repair.

March 29, 2022

On top of all of the other depressing developments in the world, this one was just too much for me, so I’ve been sitting on it all month. I’ve come to the conclusion that the only way to deal with it is to finally admit the obvious. America’s economy is broken beyond repair. There is no hope of fixing what’s wrong.

The January trade data, released earlier this month (February data will be released in early April), is the final straw. Here’s a chart of our total goods trade deficit. And here’s the deficit in manufactured goods alone. The records set in both categories in the previous month were bad enough, but they exploded further in January. It’s now abundantly clear that the U.S. has become totally dependent on foreign suppliers for our every need. They have a death grip on our economy.

I believe it’s reached the point where we can no longer fix this problem even if we wanted to which, sadly, no one seems to want to do, because no one cares. Even the basic things we’d need to even try would have to be imported. Even the tools we’d need to make the basic things would have to be imported.

Just this morning I came across this article about a senate bill to fund the rebuilding of the computer chip industry in the U.S.: https://www.foxbusiness.com/technology/us-senate-approves-52b-chips-bill-in-bid-to-reach-compromise. First of all, you need to understand that this is exactly the kind of thing that politicians do to create the illusion that they’re doing something to fix the problem. It’s exactly what the global corporate benefactors of the politicians pay them to do to avoid what they fear most – a turn away from free trade toward a return to tariffs that are so badly needed to provide real incentive to manufacture products domestically.

It’s nothing but extortion, in essence telling America that we won’t even make a show of fixing the problem we created unless you give us $52 billion. Even then, the problem would persist. Most of that $52 billion would be used to import the products needed to build the facilities. Beginning with the heavy equipment needed to develop the sites – the bulldozers, excavators, cranes, etc. – even many of those would be imported. (Caterpillar would get a small piece of the action.) Most of the steel would be imported. Virtually all of the machinery needed to build the chip-making process would be imported. And, once ready to run, virtually all of the raw materials would be imported. Throughout the building process, much of the labor involved would either be illegal or foreign workers here on work visas.

Then, guess what? Once this new chip manufacturing capacity is ready to start up, foreign-made chips will suddenly be in abundant supply again and the customers will shun the new, American-made chips in favor of the cheaper imports, the price of which will have been suddenly cut. The new plants will sit idle because there are no tariffs in place to protect them. The foreign chip-makers will come in, crate up the equipment, and ship it back to their overseas plants for pennies on the dollar. The global corporations will be $52 billion richer and American taxpayers will be stuck with the bill. We’ve seen this same scenario play out over and over.

Recently, President Biden warned the Chinese not to help Russia avoid the economic sanctions imposed when they invaded Ukraine, or there would be serious consequences. The Chinese must have been rolling in the aisles laughing after that meeting! Serious consequences? Oh, you mean like the ones for completely ignoring the Phase 1 trade deal? The tariffs that China agreed in writing would be fair consequences? The tariffs that not a penny’s worth has yet to be implemented? Don’t be ridiculous! China owns us lock, stock and barrel and they know it. They fear nothing that America says because America never follows through on anything.

America prevailed in World War II thanks to its industrial might. Its military at the beginning of the war was barely up to the task. However, thanks to its ability to convert its industrial capacity to war-time production, by the end of the war the Willow Run bomber plant in Michigan was cranking out a new B24 bomber every hour, while the shipyards on the west coast were building new destroyers at a rate of one every two days. Today, we have no such industrial capability. I doubt that we could sustain a military effort of any size for much more than a month before we ran out of imported supplies.

This morning, it was reported that Ukraine has asked to U.S. to continue to supply them with Javelin missiles at a rate of 1,000 per day. The reporter noted that our own military’s supply has been critically reduced by what we’ve provided to Ukraine already. Seriously, do you think the Pentagon has been paying the builder of the Javelins for spare capacity to make 1,000 per day when we probably haven’t even been using them in training exercises at a rate of ten per week? I doubt that we have the ability to produce even ten per day. They’d quickly run out of chips. GM just announced a 2-week closure of one of its most profitable pickup truck assembly plants for that very reason.

The federal budget deficit and the national debt are tied directly to the trade deficit, which is now contributing $1.25 trillion per year to each of them. (The federal government has to pour that much back into the economy to offset the drain of the trade deficit in order to avoid a deep recession or depression.) It’s a problem that they could ignore as long as interest rates were near zero, since that made the interest on the national debt close to zero too. But now interest rates are rising fast. Suddenly, the current level of federal spending is a major problem as the Federal Reserve finds itself far behind on inflation and is raising interest rates fast. Now, the economy is boxed in from all directions. We can’t spend our way out of the trade deficit to avoid an economic collapse. It’s right around the corner and coming fast.

I wrote Five Short Blasts and began this blog in 2007 in the hope that my warning of the effects of the relationship I had discovered between worsening overpopulation and unemployment could lend some urgency to the need to protect ourselves from badly overpopulated nations who were preying on our market, and the need to avoid their same fate.

Now, it’s too late. The foreign globalists have achieved their goal. America has been brought to its knees without firing a shot. What’s going to happen next is just a matter of time. It was foolish to think I could make a difference. My time and efforts have been wasted. Maybe something will happen yet to change my mind. At this point, it’s hard to see it. I may continue this blog, but the nature of it may change. The economic collision that I hoped my Five Short Blasts could avert has finally happened. Now, all that’s left is to say “I told you so” as the rest of the world begins to scavenge the wreckage.


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.


BEA to begin tracking “trade in value added”

December 13, 2021

If you visit the web site for the “Bureau of Economic Analysis,” you’ll be greeted with an announcement that the Bureau will begin tracking “trade in value added,” which I find very interesting. Could this be the first step toward the U.S. imposing a “value added tax” – or “VAT” – on imports?

What is a “value added tax?” It’s a very complicated subject. It’s essentially a sales tax – one that would be levied by the federal government. Nearly every country in the world uses it to generate a substantial portion of their government’s revenue. The United States is one of the few, and most glaring, exceptions. When applied to imports, it essentially functions as a sort of tariff – but one that’s perfectly legal under the rules of the World Trade Organization.

Wikipedia has a very long article explaining the value added tax and it will leave your head spinning when you’ve finished it. What’s most important is the effect on trade. For that, zip right to the end of the article:

Many politicians and economists in the United States consider value-added taxation on US goods and VAT rebates for goods from other countries to be unfair practice. For example, the American Manufacturing Trade Action Coalition claims that any rebates or special taxes on imported goods should not be allowed by the rules of the World Trade Organisation. AMTAC claims that so-called “border tax disadvantage” is the greatest contributing factor to the $5.8 trillion US current account deficit for the decade of the 2000s, and estimated this disadvantage to US producers and service providers to be $518 billion in 2008 alone.

In other words, other countries use the VAT as a sort of tariff, which the WTO allows. The U.S. doesn’t, putting it at a huge trade disadvantage. So this announcement by the BEA that it will begin compiling “value added” data may be signaling that a move in that direction. In other words, the U.S. may finally have reached the conclusion that “if you can’t beat them, join them.” This would be an enormous development!

Some may protest that they don’t want to pay more sales tax – one to the federal government on top of what they already pay to their state. But if it were accompanied by a corresponding reduction in federal income tax, the only effect would be its role in leveling the trade playing field, at least to some extent (probably not enough to offset the the effect of population density disparities), bringing high-paying manufacturing jobs back to the U.S.

If the U.S. doesn’t have the guts to thumb its nose at the WTO and impose tariffs on imports (like Trump did with China), at least a VAT would be a smaller step in the right direction.


Trade Deficit Down as Exports Rise

December 11, 2021

In a rare bit of good news on trade, as announced by the Commerce Department this week, the overall trade deficit, led by exports of U.S.-manufactured goods, fell by $14.3 billion in October to $67.1 billion. Here’s the chart: https://petemurphy.files.wordpress.com/2021/12/balance-of-trade.pdf. The decline in the deficit was due to a big jump in exports, rising by $16.8 billion to $223.6 billion, shattering the previous record of $215 billion set in May of 2018. The jump in exports was more than enough to offset a $2.5 billion increase in imports, which set a new record of $290.8 billion, the fifth consecutive monthly record.

The best news, however, is that the decline in the trade deficit was led by a decline in the deficit in manufactured goods. Here’s the chart: https://petemurphy.files.wordpress.com/2021/12/manfd-goods-balance-of-trade.pdf. Exports of U.S manufactured goods jumped by $10.3 billion to $125.5 billion, beating the previous record of $119.7 billion set only two months earlier. It was enough to offset an increase in imports of $1 billion to $207.4 billion – also a new record.

Clearly, the new records set by imports debunk the claim by some that the supply chain crisis is due in part to labor shortages caused by the pandemic at foreign manufacturers. That’s a ridiculous claim. We’ve been inundated with a flood of imports that has left warehouses stacked to the rafters.

The slowing increase in manufactured imports and the accelerating increase in manufactured exports is the best news in this report. It may be the early signs of a manufacturing revival in the U.S. and may also explain, at least in part, the “labor shortage” we’ve been witnessing. That, together with massive spending on infrastructure, have combined to attract workers to higher-paying jobs, leaving other industries that are dependent on cheap labor – like the restaurant industry (where over-building is also a likely factor) – unable to attract workers.

However, it remains difficult to draw any hard conclusion on any economic data until the dust from the pandemic and massive government stimulus spending begins to settle.


U.S. Food Deficit Grows Along with Population

November 18, 2021

We were once known as “The World’s Bread Basket.” But no more. My primary interest in trade data is focused on manufactured goods, since a trade deficit in that category of goods supports my theory that, thanks to the inverse relationship between per capita consumption and population density, it’s inescapable that trade with overpopulated nations will yield a trade deficit. However, I’ve also kept an eye on our balance of trade in food, since it could be an indicator of overpopulation in our own country.

As the U.S. population has grown, our trade surplus steadily shrank. By 2015, it was gone. Now, as the population continues to grow (almost all growth in the U.S. population is due to immigration), we now have a growing trade deficit in food. Check this chart of our food trade deficit. The data for 2021 is year-to-date through the month of September. Annualized, the deficit for 2021 will come in at about $21 billion – a record deficit in food for the U.S.

Let’s do some math. In six years, we’ve gone from a balance of trade in food to a deficit of $21 billion. Now, let’s assume that it takes about $10/day to feed a person in the U.S. That’s $3,650 per year. Divide $21 billion by $3,650 and that deficit represents what it takes to feed 5.75 million people. In 2015, our population was 322 million. It’s now 333 million. That’s a growth in the population of about 11 million people.

So, the population has grown by 11 million people in six years, and our food deficit has grown by an amount that it would take to feed half of them. One can conclude that, despite improvements in crop yield, we’re falling further behind in our efforts to feed our own population. We now find ourselves in the position where we have to rely on other “Bread Basket” nations less densely populated than ourselves, like Canada, Australia and South American nations.

It’s a sad state of affairs when America can’t even feed itself any more. Immigrants, pack a lunch and bring a cooler and a basket full of food with you. You’re going to need it.


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.


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.


No One’s at the Wheel

May 13, 2021

As reported last week by the Commerce Department, the United States’ trade deficit in goods soared to a new monthly record in March of $91.6 billion – an annualized deficit of $1.1 trillion – led by a near-record deficit of $88.7 billion in manufactured goods. Here’s a chart of that deficit in manufactured goods dating back to 2010 when the monthly deficit was only $37 billion, an increase of 140 % in eleven years.

In 2010, the goods deficit with China accounted for half of our total goods deficit. In March of this year, that was down to 30%. Since October of 2018, the goods deficit with China has fallen by 36%. During that same time frame, the goods deficit with the rest of the world has skyrocketed by 580%. Think about that. A 580% increase with the rest of the world vs. a 36% decline in the goods deficit with China! That’s absolutely astounding!

That disparity in trade results in only 2-1/2 years demonstrates the power of tariffs in shaping global trade. The 25% tariff that Trump slapped on half of all Chinese imports in 2018 was a shot to the head – a bullet right between the eyes – for China’s ambitions to dominate global trade. Say what you will about Trump, but he was the first president since World War II to defy the free trade advocates and the World Trade Organization to enact such a bold tariff program. His only mistake was not extending the tariffs to a number of other overpopulated nations that feed on America’s economy to support their bloated labor forces.

But at least he left Biden with a powerful tool to slash the goods deficit with China even further – a proven tool that could be extended to other countries to finally restore a balance of trade. I’m talking about the “Phase 1” trade deal that Trump struck with China – a deal that would have forced them to dramatically step up their imports of American goods, or face the consequence of having that 25% tariff extended to all Chinese imports. The results were predictable. (In fact, I predicted China’s failure from the moment the deal was signed). They ended 2020 by falling short of their mututally-agreed goal by $62 billion, a full one third short of their goal. Through the first quarter of 2021, they’re on track to fall short of their 2021 goal by $127 billion.

So what has Biden done? Nothing. While expressing a desire to help American manufacturing, he’s been dead silent on the subject of our trade deficit and has never even mentioned the trade deal with China which they continue to blatantly ignore. The dashboard of America’s economy has a huge, glowing red gauge right in the middle that monitors our trade performance. The problem is that, like that Tesla in Texas that sheered in half against a tree as it rounded a curve, there’s no one at the wheel. Biden’s asleep in the passenger seat, oblivious to what’s happening in global trade and the devastation to our manufacturing economy. We’re approaching that curve and all we hear is snoring.