Thursday, March 09, 2006

Trade Deficit Sets Yet Another New Record--Reckless Spending Is Destroying America


By Elaine Meinel Supkis

Yet again, this last month's trade deficit is horrendous. Grinning moronically, our pundits and rulers assure us this is a good thing, no one, especially a very angry China is going to chop our silly heads off, are they? And the Japanese and Saudis won't shove us into wars they want us to fight for them? Gads. Are we doomed.

Note that socialist, non-oil exporting Germany and cheap yen Japan are at the top of the positive trade flow list here. And America at the bottom absolutely dwarfs all the other red ink nations, we are several hundred billion greater than the deficits of all other countries put together.

From the NYT:
The nation's trade deficit widened to another record in January, the government reported today, as the strengthening American economy attracted a surge of imported cars, household goods and petroleum products.

Text: U.S. Trade Report
Americans imported $68.5 billion more in goods and services than they exported at the start of the year, up 5.3 percent from December, the Commerce Department said. It exceeded the previous record in October, when the deficit swelled to $67.8 billion.

A 3.5 percent jump in imports in January appear to reflect the sharply higher consumer spending during the month and rising price of oil, gasoline and other energy products. Automobile and car parts imports increased 5.3 percent during the month and the country spent 4.3 percent more on petroleum-based imports.
Amazing, isn't it? I warned everyone about this last month.
In turn, since interest rates are still (as always these days) below the rate of inflation and the interest offered for "saving" money is woefully behind the rate of inflation, no one saves and everyone spends as fast as possible and combined together, this increases importation of goods that have been scrubbed of inflationary forces and voila, we have a trade deficit of nearly a trillion unsustainable dollars.

Aesop's Ant and Grasshopper Story is one we easily misinterpet. The ant plans ahead for bad times and works in concert with other ants (this is the important part) to insure the ant community can live through the winter of hard times. The grasshopper doesn't cooperate with anyone and happily hops about, stuffing its face and living hand to mouth. Then it dies in winter. Just call it a libertarian or Republican.
Ahem. Even the NYT admits that the Boeing contracts are being counted in a big way to "balance" our trade only it barely makes a dent, doesn't it? Maybe the nuclear contracts for India will save us!

The Chinese are buying fewer factories from us so that part of the trade balance isn't doing very well, is it? Could it be, we are running out of factories to dismantle? Geeze. Here is a graph showing foreign ownership of American debts and other goodies.

It ain't pretty.

Like our trade deficit, in the exact same timeframe, starting in 1983 under Herr Ronald "Give me $2.5 million, please, Japan!" Reagan. He made a neat deal with Japan. To make our inflation disappear, the Japanese would soak up the red ink our government began to grind out that year to pay for the Laffer Curve tax cuts. Once this system was set up, it ran awfully nice, for FOREIGN POWERS. Others piggybacked into the system. I even explained how it worked to the Chinese so they could grasp what "traitor" means. They are in absolute awe of the propaganda machine that kept Reagan in power and popular even until this traitor's death.

No one has been able to pull our country out of this nose dive. Clinton and Rubins gave it a shot but hit so much flack, they had to give it up. This is because the bait: cheap interest below inflation and exporting of said inflation is just jim dandy for nearly everyone even as the downside to all this becomes increasingly obvious to even Republican right wingers. But like crack addicts on cheap speed, we can't drop the pipe or stop injecting.

You know what happens to crack/speed freaks. The become violent and end up dead.

Oh, and a peek at the Cato Institute of Deranged Right Wingloons: From the Cato dudes:
America’s chronic trade deficit continues to set new records, both for its sheer size in nominal terms and for its share of an expanding gross national product. The record deficit is fueling worry that it could hurt U.S. industry, destroy jobs, burden future generations, and cause the current economic expansion to end in a “hard landing.” But those worries rest on a fun-damental misunderstanding of the causes and consequences of the U.S. trade deficit.

In November 2000 the congressionally appointed Trade Deficit Review Commis-sion issued its final report, The U.S. Trade Deficit: Causes, Consequences and Recom-mendations for Action. The report reflected the views of a sharply divided commission, with Democratic-appointed members warning of the dangers of the deficit while Republican-appointed members empha-sized its more benign nature.

Economic theory and experience demonstrate that trade deficits are driven primarily by macroeconomic factors, in particular investment flows, and not by allegedly unfair trade barriers or declining industrial competitiveness.
This is the sort of insane tripe our rulers read to each other lest they feel a twinge of guilt. The headline of this article is hilarous: "America's Record Trade Deficit--A Symbol of Economic Strength". Truly, this is deep inside Orwellian Language Use.
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