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The Trade Deficit Nightmare

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When they hear the word deficit, most Americans immediately think of the U.S. government budget deficit which is rapidly spiralling out of control.  But that is not the only deficit which is ripping the U.S. economy to shreds.  In fact, many economists commonly speak of the “twin deficits” that are destroying the U.S. financial system.  So what is the “other deficit” that they are referring to?  It is the trade deficit.  Every single month, we buy much more stuff from the rest of the world than they buy from us.  That means that every single month there is a massive outflow of wealth from the United States.  Every single day, America becomes just a little bit poorer as Americans continue to run out and fill up their shopping carts with cheap plastic crap from China and dozens of other emerging economies.  Not that trade is a bad thing.  Trade can actually be a very good thing.  But the gigantic trade imbalances that the United States has been running for years are absolutely bleeding us dry.  Unfortunately, our politicians have just stood idly by as each month we continue to transfer massive amounts of wealth out of the United States.

The U.S. Commerce Department recently announced that the U.S. trade deficit increased by 18.8 percent in June to $49.9 billion.  Most analysts had expected the figure to be somewhere around 41 to 43 billion dollars.

In the month of June, imports rose to approximately $200 billion while exports fell to about $150 billion.

So can we afford to have a net outflow of 50 billion dollars each and every month?

Of course not.

We had so much wealth as a nation that we could afford to do this for a while, but the reality is that if this keeps up the rest of the world will eventually drain us dry.

So just how dangerous is the trade deficit?  Well, world famous investor Warren Buffett once put it this way….

“The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil… Right now, the rest of the world owns $3 trillion more of us than we own of them.”

But very few Americans talk about the trade deficit.


Number one, it is because our education system has become so dumbed down that most Americans (especially among the younger generations) do not even know what the trade deficit is.

Number two, most Americans are so obsessed with frivolous things such as American Idol, Dancing With The Stars, Lady Gaga and their favorite sports teams that they couldn’t care less about thinking about real issues.

But they should be thinking about foreign trade, because it is literally destroying the nation.

What we have done is we have allowed the monolithic predator corporations that dominate our economy to slowly but surely move their operations to countries such as China and India where labor costs less than a tenth of what it does here.  In the process, executives at those predator corporations are earning huge “performance bonuses” while millions of hard working middle class Americans are losing their jobs.

It is time to wake up.  Have you ever wondered why it is so hard to find a decent job out there right now?  Well, there is a good reason.  The giant predator corporations have decided that they don’t really need us anymore.

Once upon a time, great American companies provided great American jobs for great American workers.  We created the biggest middle class in the history of the world and great industrial cities like Detroit, Michigan were the envy of the world.

But have you been to Detroit lately?

One of the greatest cities in the United States has become a hellhole.  The mayor says that nearly half the people there are out of work.

So what happened?

Did the giant corporations who used to make stuff in Detroit stop making stuff?

No, they are still making lots of stuff.

They just aren’t making their stuff in Detroit anymore.

Now, the truth is that it is really easy to jump on Detroit.  It is a city that has been mismanaged for decades.  But Detroit is far from alone.

All throughout the “rust belt” you can find other Detroits.

At this point many of you may be thinking that people living in places like that should just move.

That may be good advice, but the truth is that what has happened to Detroit is going to be happening everywhere.  It is going to come to your own neighborhood soon enough.  The giant predator corporations are going to continue to try to outsource and offshore every job they can.

Your job may be next.

Perhaps you should start learning about the trade deficit.

Perhaps you should start asking your representatives about it.

Just look at what all of this “free trade” and “globalism” did to our trade deficit between 1991 and 2005…..

Are you troubled by that chart?

You should be.

The U.S. economy is bleeding and the top politicians from both political parties act as if they could really care less.

What do you think is going to happen if tens of billions of dollars continue to pour out of the United States month after month after month?

The economic prosperity that we have all been enjoying is not guaranteed to last forever.

The system of world trade that has developed over the past few decades has provided us with gigantic mountains of cheap plastic crap, but it is not a good system for America or for middle class American workers.

Someday we will look back in horror at how incredibly stupid it was to ship our manufacturing base, our jobs and our prosperity to China.   

But the American people have made their choices.  They allowed the politicians to convince them that NAFTA, GATT and the WTO would be wonderful things for Americans.

They didn’t listen to the warnings about what would ultimately happen to our jobs and our economy.

They didn’t take the time to get educated about foreign trade and the exploding trade deficit.

So now we all get to pay the price.

  • Sam

    Trade deficits and more broadly balance of payments deficits show up in govt. and private debt balances: The govt. is taxing the population too little relative to its obligations which leaves the population more money to spend on Chinese crap and leaves the govt. with the deficits. Of course the shrewd retailers and banks want the population to buy even more of the crap now as opposed to later and finance this leaving population with the debt. I don’t really see how trade deficit is more dangerous than the debt, really they are just accounting entries on different sides of the equation. That is unless there is this odd idea that domestic creditors will not need to be paid back…Good luck with that!

  • DMyers

    I totally agree, the politicians are incredibly appalling and insulting. They are blatantly stupid in all matters of economics. We need leaders who know something about what is going on so they can set an intellectual heading.

    However, there is much here beyond what politicians can control. To blame the government it to imply that the G can cure all, a terribly inadequate proposition.

    What we have to face here is ourselves. We are as much to blame as the government or corporations. That is not to diminish the evil and inhumane motivations of these entities, but simply to put the situation in context and see how human propensities serve this process.

    Let’s say Company A makes cars. Something like 1970’s inflation has made consumers poor. Company A cannot lower prices to affordable levels because its cost of labor will not adapt to these circumstances. Company A engineers a way to build factories in foreign countries and get around the high cost of home grown labor. Now, Company A can offer a car to the poor American consumer, poor in part because Company A has off shored its operations, at a price the consumer cannot otherwise afford.

    Now, company B has to compete with Company A. Obviously, Company B has no choice but to off shore its own operations as well. It can do that or die. So it goes with Company C and ad infinitum.

    Now, it could have been that American consumers chose to buy only American, even if the foreign product was cheaper, as a matter or principle and community interest. This, however, did not happen. The consumer has on and on chosen price over principle.

    I’m not saying anyone should have done otherwise. I’m only pointing out the phenomenon. That is simply the way it has gone. Price always wins out over principle. That is human nature, and this is no more than a phase in a very painful process of renewal. We have made our own bed and must now lie in it.

  • Gary

    The employee free choice act needs to be passed so the service sector can be unionized.

    Service sector jobs do not have to be the low paying crap jobs they currently are. At one time manufactoring jobs were bad but due to the hard work of unions they became family suppoprting jobs.

    The same can also be done with the service sector.

    I think the winners in free trade need to compensate the loosers. I think the entire free trade issue is more of a moral issue than economic.

    Is it moral for a person to take away from another say $5 so that they can make $6? What if the person getting the $6 already has a lot of wealth? What is the destroying the standard of living for another person worth?

  • Sarma

    – Unnecessary gloom story.
    – You have not considered the value of USA as a great country and the universal acceptance of US Dollar. The whole world looks up to USA for guidance and leadership. If USA prints Dollar bills uncontrollably, there is no great misery to its citizens because world swallows all the excessive printing as Dollar has the requisite value. Whole world is intent on selling goods and services to USA to earn Dollars which are printed by USA as per need. The exporting countries do not ask USA to pay them in their currency but in US currency. So for the value of some paper and ink, USA gets products and services. Further, when two other countries trade, the currency is US Dollar which gets US additional strength in conversion process while buying Dollar to pay for the exporter and while selling of the Dollar by the importer. The third aspect is that all the countries park their money and assets in US treasuries and US Companies. While principal amount remains with US Banks, the investors earn interest and dividends which is almost nil due to current economic meltdown.
    – Author should consider these financial strengths before demoralising the American public. US has sold itself very well over a long period of time, by protecting individual freedom and right of property.

  • ZeroCool

    Other countries are facing the same problem. Even if their trade balance is not negative. I am living in Germany. Our Administration has bought us the “great” trade balance by pressing the workers’ income levels at lowest since the mid 90’s and by reducing social security costs. Many people over here are working for less than 3 EUR per hour, and some even for 1 EUR/hour (forced labor by government). We are not a poor country, but the profits resulting from the trade balances are not spent to the people of a country, instead they are eaten up by the big companies’ shareholders and managers as well as the administration which has to pay the interests for the government imbalances. The interests are about 15% of the yearly state budget – in times where the central banks’ interest is 0.25%.
    The problem is – as it is in U.S. – most daily products cannot be produced within the country itself. Germany ist great in building cars and machines to produce something else, but all our daily consumer goods like clothing, toys, electronics, washing mashines, coolers, stoves etc. are produced in eastern europe or asia. Buying local TODAY is not an option, because there is just nothing left one can buy locally, even if there’s a stamp like “Made in U.S.” oder “Made in Germany” on it, the single parts which are used to build the product are simply not.

  • bandv

    heres a good article on the fed not being your friend

    love the articles on theeconomiccolapse keep them cominbg

  • ronny c

    This is all to true to ignore. IT is also the direct result of “free trade” and it’s not fair to blame “all of us” – the most to blame are the criminally greedy banks and financiers who are behind the $$$ behind the big corporations who are real VICTIMS of the evil of GLOBALIZATION – the new name for slavery. We will NEVER pay this back, it is the beginning of the end for the current US economy, which is on the edge of a very tall cliff.

    Get ready to try to make your own soft landing. The US govt is utterly corrupt and incompetent, the multinational corporations are totally corrupt and greedy.

    the entire financial system is on life support, and is collapsing around us. I give the thing 24 months MAX before the dollar crashes totally and shit really starts to hit the fan.

    Buy food NOW – buy silver Canadian 1-ounce coins NOW – don’t spend a CENT on anything but survival items. Watch Gerald Celente (trends forecast) –

    Scary shit is about to hit the USA.

    Check out my blog on this at Common Sense 3.0


  • David M

    I think the trade imbalance for the last few decades is the root of most of our problems.

    The deficits we have run have been covered by borrowing money, transferring the debt around creatively, and finally printing money to replace what has been lost.

    The Federal government, always hungry for money, should renew tariffs. With imported goods becoming more expensive, domestic goods would become more comparable in cost, ending with money recirculating internally in America. A good thing!

    Making US businesses compete with child and slave labor and countries with no environmental protections is a great way to put them out of business.

  • Something Wicked This Way Comes

    Most people are morons. Trying to get them to care about important things is such a waste of energy.

    Of course that includes those “bright” politicians that bought into free trade. We are hosed.

    China is what America was. We simply don’t have the capacity or courage to change that.

  • lostinmissouri

    Americans have been fed the “free trade”,”global economy is good” lie, for over 50 years. Look where it has taken us.

    At the end of WW2, everything in America, was made here, by Americans. The country prospered greatly, and the American standard of living increased yearly.

    It is well past the time, for Americans to wake up and take our country back. Close our boarders, dump the free trade lie, and tax imports out of business. The pendulum will swing back to manufacturing everything here.

    We have done it before, and we can do it again. We just have to get the Government out of our way.

  • Larry

    Our politicians are not stupid. If they were as ignorant as people think they are they never would have made it this far in government. They are just as greedy as the predator corporations. The money they are getting from the predator corporation lobbyists is far more than they are receiving from their wages as our legislators. The US people also got too greedy during the years prior to NAFTA and free trade. That’s why the corporations pushed free trade through. As soon as it passed they moved to where they could make cheaper crap for a lot less money to sell to the ignorant folks here who just keep buying it up.

  • BuyAmerican

    I agree with DMyers. It is so much easier to point our fingers at the politicians (which we elected) than ourselves. They are powerless to create the necessary trade reforms because they have to answer to our foreign creditors who are bankrolling our economy right now. If Americans would stop buying foreign goods, they would have to answer to us first.

    The American government is powerless to stop the economic crisis. But we the American people can stop it dead in its tracks if we start preferring American made goods whenever available.

    “Buy Homespun” – a proven concept which changed the course of history for the Indian nation!

  • Joe in JT

    I’d rather buy a 4 pack of boxer shorts from Wal-Mart for 8 bucks that’s made in Thialand, because I could buy the same 4 pack that’s made in America, better quality, but all the proceeds are stolen by Washington DC through taxes, then given away to the Military Industrial Complex for overpriced adventures like Iraq. Only to enrich warmongers like Dick (if I only had a heart) Cheney.

  • caryn verell

    check ea. label on everything you want to purchase…if it comes from anywhere other than america put it back on the store shelf and walk away…first, you will have saved a little money, second, the money you have saved is in america and if spent on american goods than you know someone still has a paying job and you are doing your small part in keeping that person employed. third, is the item something that you just cannot live without…i doubt it…americans are not total morons-when push comes to shove they can make their own product called diy.

  • Pappy

    DMeyers is 100% on the money. No matter how patriotic a company’s owners or management are, once their competition begins outsourcing they have to do likewise. It becomes a matter of compete or die.

    Much criticism is directed at the UAW for the JOBS bank program they negotiated. Media takes the sensational angle of reporting that those idled workers are paid for doing nothing. Not reported is that the JOBS bank was intended to DETER automakers from shipping jobs to Mexico, China, India etc. Companies chose to stupidly pay BOTH for work done offshore and idled workers in the US.

    We all bellyache about the loss of American jobs but it seems we cry even louder about some of our countrymen having managed to dodge that bullet . . . albeit temporarily.

    We need to tune out the Cavutos and the Forbes’ and the Kudlows when they speak about the dangers of protectionism. We also need to see through their line that tax cuts will lead to investment in plants and equipment. Trickle down economics might have had merit during the Reagan years. That was before NAFTA and before China was admitted to the World Trade Organization. It was also prior to technology taking an enormous role in eliminating jobs. Tax cuts today might be invested in plants somewhere but probably not here. They also might be invested in equipment that, more likely than not, will kill more jobs than it creates.

    And, like the man said, politicians will do as they damnwell please knowing that most of their constituants are too occupied with their Ipads, Playstations, American Idol or Lady Gaga to have even a crumb of accurate situational awareness.

  • Mr Carpenter

    Added to this complication is the fact that (for an example, cars) some products made in the United States were formally imported.

    The two cars in our garage are great examples. Both are “foreign” brands, but manufactured (not just assembled) in the United States, on in Indiana, the other in Alabama.

    When I was shopping for the most recent car (mine), I “could” have purchased an “American” branded competitor with the specific attribute that I wanted (all wheel drive), but this particular vehicle (a Ford Fusion) had three strikes against in in comparison to the Subaru Legacy;

    a) It cost $5000 more than the Subaru
    b) It was only sold in V6 form and I wanted four cylinders (since that is all I need)

    So I specifically purchased the American built vehicle, which is branded “Subaru” instead of the Mexican produced vehicle branded “Ford”.

    There were literally no other similar vehicles on the market to compare; just two.

    In fact, I try to buy American when possible. The mega-conglomerates and mega-stores (specifically Wal-Mart) have virtually made this impossible in many aspects of life. You simply CAN NOT FIND US produced goods at any price.

    Clothing. Shoes. Electronics (for the most part). Alloy wheels for cars. (Even FACTORY wheels for BMW’s are now built – in communist China, even if the car was built in the USA).

  • Jackson

    Here is a video about free trade & the trade deficit, There is 6 parts to it. Check it out.

  • schwartzer

    Another fine article. Ron Paul is, was and will be the only person that had/has the foresight to this mess. He is totally against all these organizations. i.e., Nafta cafta wto nato nau etc and voted against each and every one EVERY time.

  • tom

    Here’s a chart that goes past 2005… notice the sharp turnaround in 2009-09:

    Yes, we’re in a bad situation, but you’re exaggerating it, and protectionism looks like an unnecessary overreaction.

  • Lennie Pike

    If the U.S. exported nothing, imported nothing (including cheap labor), and became totally isolationist, the standard of living for everyone except the ones profiting from destroying the U.S would quickly go way up.

    Part of the process would be throwing all of the traitors who caused this situation into jail as a deterrent but more importantly as a punishment, and also all of the illegal aliens along with their “citizen” children out of the country. This would be good, and I use the word good literally. It would be good if the illegal aliens would go home to be forced to throw the ones in their own countries in jail for similar crimes, and it would be good to not have our country destroyed so that the coming misery, poverty, and violence could be prevented.

    Americans who buy exports because they have the lowest prices can not be blamed because from the instant the first job was eliminated in the U.S and taken to a foreign country primarily for the slave labor – the standard of living and the money available for Americans to make purchases decreased by a corresponding amount, forcing them to buy the import to retain the same standard of living. If absolutely no one had purchased that first imported item, then there would be no problem, but as soon as it was purchased, a measurable amount of pressure for others to do the same to survive was applied. Maybe it takes more than one purchase to get the snowball rolling, but it doesn’t take a lot.

    George Soros was around at that time, I bet he bought the first one.

  • Johnny Canuck

    I’m beginning to think that it’s time we in Canada organized to begin putting together a gigantic food bank for our soon-to-be impoverished American friends and neighbours. It would be small compensation for the incredible generosity of ordinary Americans in responding to the needs of the rest of the world over the past decades, but its sad to contemplate that such a wholehearted response from ordinary Canadians to widespread starvation and suffering in the United States might be vitally necessary sooner than we could even imagine. The American economy is in an accelerating death spiral and its likely to literally take many Americans down to the grave with it unless we show the same generosity to them that they have so often shown to others.

  • bandv
  • El Pollo de Oro

    I remember the NAFTA debate of 1993 quite well. The supporters ranged from Bill Clinton and Al Gore to Newt “Contract On America” Gingrich and a morbidly obese neocon pillhead named Rush Limbaugh. The opponents ranged from Ralph Nader to Patrick Buchanan to Ross Perot, who spoke of that “giant sucking sound” of American jobs heading to Mexico. Limbaugh hated Perot, which is to be expected of a worthless GOP hack–and said that if American workers lost their jobs because of NAFTA, he could have cared less. “Free trade” was a must. Well, it turns out that Ross Perot was ABSOLUTELY RIGHT about NAFTA, which has been a total disaster for The Banana Republic of America (formerly the USA) as well as for Mexico. NAFTA helped enrich the Mexican ruling class elite, while pushing Mexico’s poor even deeper into poverty and undermining the growth of a Mexican middle class. As a result, the Mexican drug cartels grew by leaps and bounds–los carteles narcos are always hiring even when a Mexican farmer has lost his livelihood–and the Mexican drug war became increasingly bloody over time. NAFTA screwed Mexico, and it played a major role in turning the former USA into a pathetic, broken down Third World banana republic.

    And make no mistake: the former USA is now a banana republic in the true sense of the word. The BRA’s top 5% will be fabulously rich, while the other 95% will be competing for jobs at the dollar store–that is, unless they decide to apply for jobs with the Mexican drug cartels. Just be warned that the working conditions, as Los Tigres del Norte and Los Tucanes de Tijuana have articulated in many of their corridos, are extremely dangerous. I don’t recommend working for a cartel unless you’re comfortable with the fact that getting beheaded can be an occupational hazard. NAFTA was a Pandora’s box indeed–una maldita pesadilla para México, y una maldita pesadilla para La República Banana de América también.

    To quote Alex Jones: “We are in deep tyranny–deep, deep, DEEP.”

  • tyler

    If American jobs aren’t being shipped over seas there being taken by mexicans who can’t speak english. Globalism is a bitch.

  • Joe in JT

    Can’t find a product made in good ole USA?

    I changed my motor oil to Mobil 1 and used a Mobil 1 oil filter. It was heavier than a Fram, better quality, and rated almost number one. Upon closer inspection the words lazered into the oil filter said “make in USA”. Nice.

    By the way, that oil gives me 10% better gas milage, and you don’t have to change it again for 15K miles.

  • Mr Carpenter

    Thank you, Johnny Cannuck. That’s the nicest thing I’ve read today.

    Personally, I love Canada and (most) Canadians. Nobody’s perfect, of course.

    Perhaps once the Untied Status of Amerika collapses into pieces, Canada will be able to pick up a few new southern provinces, such as Washington State, Michigan, Minnesota….maybe Vermont and New Hampshire…

  • Flyer1

    Capitalism always destroys the economy. Ask yourself, what is the goal of Capitalism? What is the goal of Socialism? Stagflation will continue to make you poorer if you choose to stay.

  • chon

    One interesting thing:

    Time ago you started writing about that the total deficit is near 13 trillon right ?

    i suppose that the 4 trillons of holding that other countries have on usa bonds are not included in the 13 trillions right ?, so that amounts now to 17 trillions

  • i

    The American “government” has been purchased by an uninterested foreign power – the collection of governing boards of multinational corporations. They write our laws, and have since Reagan got into office.

    Once the USA can no longer produce profits, these people, who live everywhere, and nowhere, will move on to the BRICs or Germany, or wherever the money is.

    We too have been bought, with bread and circuses, in the form of cheap debt, cheap food, cheap drugs and cheap entertainment.

    Eventually, of course, the chickens come home to roost, as the French aristocracy discovered. The final inescapable trigger event will almost certainly be oil prices. When they go up again, in say, about 5 years – perhaps less, the resulting economic depression ends the party permanently.

  • Sarge

    Adam Smith essentially stated that people act in their own best self-interest. Corporations do the same. I don’t like manufacturing fleeing the US but they are exercising rational reasoning for their success. What our sorry excuse for a constitutionally faithful congress should do is to address and fix taxation and regulation that would draw businesses VOLUNTARILY to return to the US. Businesses have investors and many/most of them are Americans. Those
    investors/Americans are looking for their investments to reap a financial benefit. Businesses being successful are investors nest eggs, retirement, college funds for kids, etc… I agree that we must get manufacturing and business back in the confines of America, but let’s do that properly, through persuasion and creating favorable circumstances for businesses to thrive in the US again. Otherwise we are not a free nation.

  • Pangea

    I keep hearing people say “it’s time to take our country back”. It all sounds authentic and genuine. But it’s too late. We as a society celebrate our millionaire ceo’s and sport stars like gods. We have been led to believe that these people “earned” those millions. Did those people work harder than you did? When did this country as a whole decide that delegating or outsourcing work, or “chasing after a ball”, was more important enough to merit millions of dollars, in comparison to what you do for a living. At this point, other than a Great War, a War that would shake the economies to the ground, can I see a solution to the entire mess.

  • OtownRightGuy

    I can’t believe the economic idiocy that I am reading on this site.

  • sotruth181

    Mr. Carpenter said:

    >> So I specifically purchased the American built vehicle, which is branded “Subaru” instead of the Mexican produced vehicle branded “Ford”.

    >> There were literally no other similar vehicles on the market to compare; just two.

    Do you work for Subaru by any chance, Mr. Carpenter? Ford Fusion with 4 cyl engines have the same MSRP as Subaru Legacy, and get 22/31 fuel economy compared to 19/27 for the Legacy.

    Subaru btw, is a subsidiary of Fuji Industries. Fuji is known to some as the producer of Japanese 97 carrier fighters during WWII (the ones that attacked Pearl Harbor). But hey, they are a more gentle, more caring company today, right???

    Built in the US? Where did the steel come from, Mr Carpenter? Who built the stampiong presses? If no alloy wheels are made in the US, where did the Legacy’s wheels originate?
    And where is Subaru’s profit from the sale going? More investments into US mfg capacity? Sure…..

  • Lennie Pike

    If taxation and regulation of corporations was totally eliminated, that would not be even close to enough for manufacturing to return to the U.S.. They have moved their factories in search of cheap slave labor. What is the total dollar amount a corporation spends on labor compared to taxes and regulations? If they can pay 95% less for the labor, why did they move?

    True, taxes and regulations need to at least be cut in half. The size of government has to be cut in half for that to happen or those costs will still be paid by deficit spending which we all pay for through inflation.

    Remaining a free nation has nothing to do with allowing corporations to take their manufacturing overseas, but just the opposite. This freedom will be the main cause for individuals to lose their freedom.

    Until countries cease to exist and until there is a one world government, it is in the best interest of each country to prevent it’s manufacturing base from leaving. All countries except the U.S fight to retain their manufacturing. The reason for that is that leaders in other countries actually put the future of their country ahead of making a quick buck, and know that there would be riots immediately if they allowed it to happen.

    There will be riots here and soon. It’s just taking longer than it would in other countries because we have had such a high standard of living that it takes longer for it to drop to the level where rioting begins.

    Freedom has nothing to do with being free to do whatever you want. That would include having the right to throw everyone other than yourself in jail or worse yet into a slave labor camp.

  • Let’s suppose that our trade deficit for this year is $600 billion. If every $2 of that deficit works out to $1 that would otherwise go towards paying workers in the U.S., it means that our nation has lost 6 million jobs that would pay $50,000/year. That also works out to 7.5 million $40,000/year jobs.

    When you start to think of the trade deficit in those terms, the losses to our nation’s job market are staggering.

    How are we paying for all of that? Ultimately, that money is going to end up purchasing American-owned capital assets (real wealth) instead of ephemeral consumer goods. Foreign companies and/or government will purchase American businesses and real estate. In other words, we are impoverishing ourselves long-term.

  • Wyatt Junker

    Wrong, bro.

    Its not giant predator corporations that are the root of the problem by offshoring.

    What causes the offshoring?

    Government intrusion. Government regulation. Government sponsored litigation through the EEOC. Government agencies such as OSHA who punish businesses here. Government labor boards that side with employees. Whistle blower laws. Sexual harassment laws. Artificial wage and price controls by government. ADA laws. You name it.

    And look what Obama just did. He raised the cost of labor via Obamacare and then wants to complain about why businesses aren’t hiring?!

    The dummy crats want to complain about jobs leaving America but then sponsor unions that destroy businesses and incentivize them to leave! Look at GM! It was the out of control UAW that cratered it. And we bail out the unions, not GM. We bail out the unions!

    I don’t blame businesses for wanting to leave. I hope more leave this sickening country and find free markets.

    This place is hostile to business. I hope every blue chip packs their bags and gets the hell out and lets this shithole rot. The DNC won’t care. They’ll just complain more that you aren’t paying your fair share.

    You’ll see more and more companies either branching off and selling their international operations like Altria did with PM or leave altogether. And they are patriots for doing so. What this country has become is not free anymore. The patriotic thing to do is to leave and find out where freedom exists.

  • John Galt

    It’s socialist populism to blame the corporations for the trade imbalances, when they are simply operating in self-interest, the cornerstone of capitalism.

    There is a self-correcting mechanism in global trade, through currency fluctuations, and the U.S. problem is that they (the government) allow countries such as China manipulate that system to their advantage with fixed currency exchange rates.

    The other imbalance, of government budget, is partly a result from this political overlook in the intl trade.

  • Sarge

    Lennie Pike,

    What you prescribe is not freedom. To use force to coerce or even worse, tax policy to manipulate the behavior of people and businesses is wrong. This is true even if you suffer from wealth envy. Limited, constitutional government is what is required. Businesses are no more evil than individuals and without investors and entrepreneurs, there would be no jobs or economy period. You and too many others that visit this site want complete freedom for yourselves but not for others. That’s wrong. I say again, the best solution is to create favorable conditions that attract businesses. People always respond much better when choices are presented rather than force. After all, freedom is the opportunity to choose. Without choices, there is no freedom.

  • DFC

    The process we are seeing now is:

    Trade deficit increasing—-> High indebtedness of government, companies and families –> lower expectations of all the economic agents —> less investment (public and private) —->more outsourcing (less risky due to the slave labor conditions and any environmental constraints in emerging countries)—> less local industrial production —-> Unemployment increasing –> Lower wages –>Not any recovery in consumption expected –> lower expectations–>less local production—>Trade deficit increasing

    The same process have been happening from more than 15 years ago, but to avoid the recession, the economy was based in a long succession of bubbles (mergers, dotcom, raw mats, real state…) and in the cheap credit (due to low interest rates), and the industrial outsourcing were growing exponentially, all in a unsustainable way.

    Now the fiat money and their bubbles is gone, and we need a REAL economy based on the production of REAL products, not merely smoke

    The administration needs to start to think on protectionist measures to reverse the outsourcing trend as the only way to save the middle class in america

  • Lennie Pike


    Government using force to tax and regulate business to raise any amount of money over what is needed to run a Constitutional Government is wrong. That amount is probably less than %5 of what business pays now. The size of government is ridiculous.

    That’s got absolutely nothing to do with whether U.S manufacturing should be allowed to move overseas. A fight against big government is the only option. Taking manufacturing jobs, overseas will only result in more regulations and more loss of freedom and a very dark country to live in. You might choose to move out. Now way too much of even our food is being imported due to slave labor.

    Look at the history of the world. When the standard of living gets low enough for enough people, to survive, they welcome in leadership that takes everybody’s freedom completely away except for members of the ruling political party, and sometimes for everyone except for those members and the ones who already control manufacturing. I guess that leaves you safe at least – maybe, maybe not. Hey, that’s pretty much what we have now, you’ve got nothing to complain about, you just don’t like any one speaking up.

    Over 1000 people went to prison in the savings and loan crisis. Zero were even investigated in the current crisis. But it probably is true that not many laws were broken. That’s because they all got together and rescinded the law first. Actually a lot of felonies were committed. The Regulators and Congress, are owned by these crooks (Geithner is Treasury Secretary?) and an explosion of the financial system is coming soon because of a lack of regulation. Yea, let em do whatever they want.

    I want a lot of freedom for everyone. A system with 100% freedom to do what you want in business eventually causes 100% loss of freedom if your not willing to….. well, you’ll probably find out for yourself soon enough. Hope not.

  • maguro_01

    But there was a real incentive for Washington to not mind the store, though most citizens still think it does. After 2000 the US trade deficit went to over $2 billion per DAY for years on end. The administration then relied on low prices to lull the voters who were unaware that their standard of living was on the national bar tab. The administration borrowed back the money to fund its wars, tax cuts for its real constituents, and an oddly bloated government. The US continued its path to being an import economy on the tab. The US is even exporting the core competence of engineering, eventually science will follow.

    A few years before China set its currency at half value and pegged it to the dollar. IF CURRENCIES AREN’T FREE TRADED, NOTHING ELSE IS. It was a simple plan but it has utterly defeated the vainglorious USA. We already had a huge deficit with OPEC. Just as the article stated, the US has hemorrhaged itself away. The US crashed prematurely in 2008 from China’s view – no one foresaw that the US would so incompetently govern its affairs. We are close to being a Tributary State to China now. The unsustainable US military budget won’t be a third of what it is now in a decade, though that leaves a formidable force in North America.

    The Economist said in the Sept ’03 issue that Mexican factory workers made 4 times what workers in China made, thanks to the set and peg. Mexico couldn’t compete and development stopped. That’s one reason we have so many new neighbors. NAFTA can be seen as an attempt to keep jobs in the neighborhood that otherwise would inevitably go to low cost, infinitely populated Asia. The factor of 4 was too much.

    The US has become a Banana Republic thanks to our pay to play political system – that is, large, especially financial, corporations and government become a single entity. That system is not capitalism/markets and it has tanked country after country in recent decades. The IMF has proffered bridge financing conditioned on reforms. But the US has financed the IMF. Who could, who would bail out the USA?

  • Brabski

    The reason Detroit is so depressed and the reason GM, Ford and Chrysler moved so much work to China is that the UAW was sucking them dry with their billion dollar per year jobs bank, supplemental unemployment pay, and lucrative benefits. Since the auto companies were losing money, and couldn’t get any savings out of the UAW, they took it out on the U.S. auto suppliers by forcing price downs and outsourcing work to low cost countries. The UAW could care less about the american worker, they only are about what happens to their own workforce, everyone else be damned. The wreckage of small – mid size auto suppliers around the midwest is almost all the fault of UAW greed and intransigence.

  • Sarma wrote “The whole world looks up to USA for guidance and leadership… Whole world is intent on selling goods and services to USA to earn Dollars which are printed by USA as per need.”

    No, we don’t, and no, we aren’t.

    “The third aspect is that all the countries park their money and assets in US treasuries and US Companies”.

    Wrong, except temporarily. Countries like China then take another step, using those to buy up resources like mines and agricultural land in third world countries. It’s the countries at the end of the chain that will get stuck with the US paper, once the process is complete.

  • Actually the whole Financial System is just a vehicle. Like any other vehicle it works optimally under certain conditions. Once the conditions are changed stress and Vulnerability sets in. It worked from 1913 to 1970. 1971 they removed the Gold Standard. 1980 they accelerated on monetizing Debts. That’s just a nice way to say, printing money and increasing inflation. 1990s the started playing with derivatives and hedge funds. 1997 they removed more regulations. Now they had nothing left except print, print, print.
    People took dumb loans, The War added to it and the rest is History: The Sub prime Crisis led to a Bubble and Global Economic Crisis, 2008. Hey! the crisis had already begun in 1990, But by the “mercy or stupidity” of the FED: The World only came to know about it in 2008, when the rubbish could not be swept under the carpet any more!

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