Posted on 11/27/2004 10:24:13 AM PST by soccer_linux_mozilla
The United States’ trade deficit is soaring and the once high-flying dollar has sunk to record lows against Europe’s common currency.
The dollar’s record low against the euro coincided with the government’s report that the United States was running a trade deficit through September at annual rate of 592 billion dollars. That compares with last year’s record 496 dollars billion. As a result, the country is having to borrow almost 600 billion dollars from overseas this year to pay for the imported cars, televisions and other items Americans are buying.
We should be so lucky. Only problem is that it will be the affluent EuroSnobs who likely will be running around sniffing at the lowly American middle class, and loudly complaining about Jesus Country.
Good things,
US produced goods and services become more competitive in the global market
The 45 Trillion dollar debt gets easy to deal with since the real value of 45 trillion dollars is less with a devalued currency.
Bad things
Everything gets more expensive, since your dollar is worth less after being devalued you have to fork over more of them to buy stuff.
Interest rates go up, since nobody wants devalued dollars you have to raise interest rates to make them attractive to investors.
Americans get poorer, foreigners get richer, the buying power of foreigners goes up and the buyer power of Americans goes down.
In general weak currencies are bad news for those holding them. In particular a weak dollar is bad news for Americans, since prices will rise but pay checks (for most) will not. Should the fall of the dollar get really bad, and there is no reason to think it will not, then we might find that our paycheck buys about as much as any other third world worker paycheck. Which buy the way, as many of us have pointed out over the last several years is the plan. No way the US can compete in the global market with a high paid work force, so Gov decided it is time for a pay cut, hence the falling dollar.
Hope that helps.
The real issues are the velocity of change and the frictional costs along the way. For some years now, the gloom and doomers have been arguing that we could not possibly survive the strong dollar, as our whole productive apparatus was going offshore. Now the doom and gloomers, many of them the same people as before, will argue that we cannot possibly survive a weak dollar. Apparently we are dead one way or the other.
I for one hope for a relatively smooth adjustment, though I recognize there are no guarantees. One ace in the hole the U.S. currently possesses is that we have had a somewhat greater degree of political discipline than most other major nations. Yes, we've let spending slip, but we still have the freest labor market among the majors, the most flexible, diversified, and balanced economy, among the lowest barriers to trade and, in general, a greater facility for change. The U.S. economy seems to be able to adjust while the central planners elsewhere are freezing things in place with controls while they try to formulate their strategy. So now the dollar is adjusting. Fine; we've been saying the trade deficit was unsustainable, and this is how it corrects. Let the rest of the world suck up ourexports for a change. The aggregate flows have to balance sooner or later. Let it begin. We'll manage.
Ah, but they won't. All they want from us is the technology, and the industrial infrastructure. Once fully transferred, its over baby. They are not about to help us restore our industrial foundation. They will keep us down, and kick us...good and hard. Laughing all the while at the foolish free traitors who ignored the fact we were dealing with an Mercantilist Communist Industrial Piracy.
U.S. Moving From First to Third World
Paul Craig RobertsIn the early 1980s, when I was assistant secretary of the treasury, the U.S. trade deficit was due to oil imports.
Wednesday, Oct. 20, 2004
The United States is ceasing to be a manufacturing country. America has a trade deficit in almost every manufacturing product.
Comparing the first eight months of this year to the first eight months of last year, our trade deficit in manufacturing products increased by 16 percent. In iron and steel mill production, it increased 146 percent.
The United States has a trade surplus in corn, cotton, wheat, scrap metal and animal feeds. The only manufacturing products in which the United States has a (small) trade surplus is airplanes and scientific instruments.
Since 1985, the U.S. trade balance with China has deteriorated from balance to a deficit of $160 billion. Who has the high-tech economy, and who has the Third World economy? Normally, Third World countries run trade deficits with high-tech countries.
Charles McMillion, president of MBG Information Services, notes that the U.S.-China trade relationship is the most unequal in the world. The United States has a trade deficit with China in almost every industry code. The U.S. deficit in advanced technology products with China is astounding.
How was it possible for China, alone in world history, to outpace the most advanced country on earth? Was China elevated to the forefront by U.S. firms who moved their production for the American market to China in order to take advantage of essentially free labor?
Americans no longer produce the "American goods" that they consume. American incomes are falling, as economist Joseph Stiglitz recently pointed out. When the dollar gives way, as Dallas Federal Reserve Bank President Robert McTeer says it must, Americans will not be able to purchase the goods and services that American firms produce abroad with foreign labor.
U.S. firms will have to sell their offshore-produced wares to the labor that produces them. "Cheap foreign goods" will be beyond the reach of Americans, whose country is in rapid transformation from a superpower to a Third World economy.
COPYRIGHT 2004 CREATORS SYNDICATE, INC.
Thanks for that article Paul.
Makes it very clear how dangerous this trend really is.
He was the lesser of two evils. 52 to 48 against an extremely liberal northeast senator is pathetic.
But it stinks that he won, doesn't it?
Nothing beats a sound or stable dollar that fluctuates with an efficient market. In theory that's what the Bush administration supports, but in reality it's nothing more than a Clintonian promise. Currency policies whether strong or weak cause problems in the long run when they are taken too far, which is almost always the case.
If the dollars crashes and the middle class goes broke I wonder who they will blame in the next election and who they will not reelect.
Could this be the dollar crash? Maybe, is a dollar crash coming absolutely. We had a chance, with the budget in balance, to get ourselves out of this mess with real world trade policy. But the GOP turned into a borrow and spend machine that even put the democrats to shame. That coupled a with HUGE, unbelievable trade deficit is just too much for the dollar to bear.
Will Bush like Hoover get blamed for a crash and stick us we another 60 years of socialist Democratic rule? Keep your eye on the dollar.
--the worlds businesses that is, while the doom and gloomers will manage to be scared. Take that "SCARY" chart in 'post#1' (please). Of course if we look at the rest of it we can see that the exchange rates are simply coming out of an excessive peak. IMHO the reason that these clowns can get away with this crap is because they know that both the democ
s and the noisiest of the freepers will just lap this stuff up.
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You can bet that if Kerry were elected, they'd be using these very same numbers to announce that the international markets are liberating us from the terrible Bush economy and taking us back to the our lost glory days of the wonderful '90's.. |
It is truly frightening how close they came. We were not confronted with merely a liberal northeast senator. He was classified as "the most liberal U.S. senator by voting record". Actually He was far more an "anti-american" whose radicalism is carefully modulated to conceal his true allegiances. And the MSM of course found him "their Man in Washington."
It is also not an accident he was endorsed by the Communist Party U.S.A. (CPUSA).
Meanwhile the U.S. history courses in high schools across the country are indoctrinating America's youth with a horribly-skewed hatefilled anti-American diatribe against our country. Then the lefties wonder why the youth vote is not terribly interested in voting. As Dennis Prager has observed, the Left is undermining democratic (small d) morale wherever it goes.
GWB has already presided over one Hoover-like crash, and thanks to 09/11 he got through it.
But the bad news is that if the dollar tanks the GOP will be blamed, and they deserve alot of the blame, and the GOP will be finished as a polical party. No one is going to vote for the party that put them in the poor house, no one.
The dot com bubble was nothing compared to that is right around the corner, how does a 25% or 50% or more pay cut sound to you.
I have to also add that Carter was an idiot (big surprise) for running a weak dollar policy.
And while you're at it, look up a long term chart of the CRB index.
I don't know about that. The GOP and politicians in general are pretty good at shifting blame (see Jamie Gorelick), especially with the "new tone in Wahington," where it's clearly big government vs the little people. GWB has done an excellent job of blaming his pathetic economic performance of 2001-2002 on Martha Stewart and 09/11.
Until the Congress wakes up and the people demand accountability, what goes up must come down. The founding fathers never heard of M3. They would be spinning in their graves if they knew we even had M2. If you bought a suit with a Roman denarius in 45 BC, you could still be wearing that suit today. Because you'd be dead! It was all spelled out by Heckel and Jeckel. The bankers are like magpies. Whoever has the gold makes the rules. We're doomed, I tell ya. When all the food is gone and the Chinese are passing out chopsticks, don't say you weren't warned. Depreciation of the currency is like the marginal utility of hamburgers, and we won't even have those. Look it up... the Federal Reserve isn't even in the phone book. |
This article is the clear result of what "The Man," to whom you appear to be referring, has been doing on the spending front, the past few years--and this is before the real kicker, kicks in--i.e. Medicare Drug entitlements. The chart and article show only the low foothills of what is coming.
I know that some, both around here and in the Conservative talk show circuit, do not want to admit the reality, but the differences between Bush and Kerry were far less extreme than the differences between Bush and a real Conservative. If Bush was 10% more Conservative than Kerry, he was still at least 50% more liberal than any one who really champions traditional American values. As I stated in rejecting each of them, in the recent election, neither Bush, nor Kerry, nor Nader, would have been fit to groom George Washington's horse--nor carry ice for Jefferson's ice house. (I will admit, that I just thought of the Jefferson's ice house quip. It was not part of my denunciation in the recent carnival of moronic 30 second sound bites.)
Those who want a leader so badly that they attribute characteristics to politicians, that those politicians do not possess, need to take a long, hard look, at the unpleasant realities of our times. The real issues, such as the fate of the Dollar were largely ignored in the recent election--just like immigration and certain external, but significant unmentioned realities of this world in which we live.
We have failed in our duty to preserve what wise men vouchsafed to us, because we have allowed demagogues and ideological manipulators to create political taboos, which absolutely rule out an effective defense of that heritage.
William Flax
>>Yeah. It sucks that Bush won reelection, doesn't it?<<
Are you stupid, crazy or just being a wiseass??
The fact that the President Bush was re-elected hasn't done a thing for the US dollar except weaken it. Kerry's win probably would have done the same. No fiscal benefit from either of them. Security wise....the borders are still open, aren't they?
Who do you think keeps Wall Street moving? Foreign investors that's who. Would you buy stocks in an American company when you see that the value of the dollar and hence the value of the company is declining.
"The decline in the dollar stems from several factors, including foreign investors' increased nervousness about putting their money into the USA when America is running continualy humongous trade and budget deficits. These are considered serious risks to the U.S. economy because the dollar is down 20% since '99."
Or perhaps you live in a gold house on gold property. I hope you have thanked God for your intelligent investment moves because if you don't their value has declined.
The dollar is down 8.5% in the last six months against a basket of major currencies, according to Federal Reserve data. Yes you have lost 8.5% of your net worth in six months.
Now, if you are flatass broke, living in government supported housing and drawing benefits from every agency that gives them out, why do you care? I wouldn't either. Continue to preach the Party line. You'll only look foolish to large investors.
"Ryan Goan, president of Standish, Maine-based Verdia, which makes natural skin care products and supplements, says his costs have gone up 10%-15% in the past year. He buys fish oils and essential oils from Germany, Norway and other European countries: "Every time I place an order for raw materials, the prices have increased."
Sure, a weaker dollar abroad makes U.S. goods less expensive, but if the foreign consumers are not in the mood to spend money, U.S. firms will not benefit.
Competition among companies worldwide is so strong that firms abroad are meeting the decline in the value of the dollar by cutting costs and prices to continue to compete. That reduces any advantages all U.S. companies may have gained from the weakened dollar.
Foreigners aren't like us. They have a hard time sleeping when their credit cards are maxed out, so they cut back in their buying, of everything!
We are the largest country with the largest debt in the world and we have a falling economy because out outsourcing and other factors. Not looking the best I have seen it.
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A wet bird doesn't fly at night, folks. This piper will be paid. Do the math. Follow the money. The velocity of raw materials marginalizes the endogenous variables.