Record US Trade Deficits Spell Impending Economic Defeat

AmericanEconomicAlert.org ^ | Thursday, February 17, 2005 | William R. Hawkins

[Citizen of the Savage Nation]

It looks like it was 1975.

So we should be so lucky to have it like it was in the '70s and we will be better off to have the lifestyles that the Chinese, Japanese, and German economies afford their citizens? No thanks. If having a balanced trade means earning less, higher taxes, and paying more for home-grown goods (like EU), I'll pass. Hasn't exactly worked out so well for them, since they can't even afford their own goods.

[pfony1]

Nevertheless, economic conditions in Japan have become so difficult that Japanese babies have become rare and Japan's population is decreasing.

Could it be that young Japanese see that their parents and grand-parents, who had hoped to live on the interest earned by their savings, are being cheated by the government's low interest rate policies?

BTW, on my last trip to Japan, I saw many of Japan's "invisible" unemployed sleeping in parks in Tokyo. I wonder if Japan's unemployment rate be higher if unemployment benefits were offered in Japan.

[A. Pole]

Brooks warned against the classical economists dogma of free trade. "Now men are apt to lecture on political economy as if it were a dogma, much as the nominalists and realists lectured in medieval schools. But a priori theories can avail little in matters which are determined by experiment....No one can say a priori what will succeed; the criterion is success." By this standard, U.S. trade policy is a failure, no matter how many academic economists claim it should be working in theory.

Free trade bump!

[NRA2BFree]

It just keeps on getting Worse.

[A. Pole]

Another function of decline is the kind of blind complacency so characteristic of late imperial rot. Deficit ? What deficit ? So long as we have Chinese imports everything is fine.

"Let London manufacture those fine fabrics of hers to her heart's content; let Holland her chambrays; Florence her cloth; the Indies their beaver and vicuna; Milan her brocade, Italy and Flanders their linens...so long as our capital can enjoy them; the only thing it proves is that all nations train their journeymen for Madrid, and that Madrid is the queen of Parliaments, for all the world serves her and she serves nobody."
(Prominent Spanish official - Alfonso Nunez de Castro in 1675)

[A. Pole]

Trade deficits do not mean economic woe, they mean Americans have lots of money to spend, and can afford imported goods. Where did this concept that Americans must ship out more than they ship in come from?

"Let London manufacture those fine fabrics of hers to her heart's content; let Holland her chambrays; Florence her cloth; the Indies their beaver and vicuna; Milan her brocade, Italy and Flanders their linens...so long as our capital can enjoy them; the only thing it proves is that all nations train their journeymen for Madrid, and that Madrid is the queen of Parliaments, for all the world serves her and she serves nobody."
(Prominent Spanish official - Alfonso Nunez de Castro in 1675)

[NoControllingLegalAuthority]

Economic growth will lead to political reform.

This is the common argument for dealing with Chinese tyrants. (ie. Yes, we are making the tyrants richer by buying more Chinese goods but eventually, the slaves will free themselves.)

When does that happen?

Making tyranny more profitable to a tyrant ends the tyranny?

[sully777]

International trade is as old as man yet globalization remains a scare tactic for the far right and far left, who are as ejamacated as titmice when you combine the intelligence http://www.freerepublic.com/focus/f-news/1345344/posts

[Golden Eagle]

Seriously, the bulk of our trade defecit is due to our large need for energy. Cut our oil imports and our trade defecit drops

And how do you propose we do this? Is oil use going up, or down? And WE don't own the oil, mostly the Arabs do, since we searched it out for them, built the refineries, and then let them nationalize it. Who's to say the Chinese won't nationalize our stakes in their factories over there? They already are majority owner in them.

[Veritas et equitas ad Votum]

"and can afford imported goods"

That's about all we can afford. Without Chinese and Vietnamese imports, many Americans couldn't afford nearly as much 'stuff' as they can now.

[Golden Eagle]

If having a balanced trade means earning less...

FYI median income in the US has been down the last several years...

Since 2000, the median household income has declined consistently in real terms, down $971, $502, and $63 in 2001, 2002, and 2003, respectively, for a cumulative loss of $1,535—a 3.4% drop—over these years.

[Dont_Tread_On_Me_888]

As America writes off more and more industries and stops competing with foreign companies, we lose not only the maufacturing side of it but also engineer, scientists and tech people who would have worked in Reasearch and Development for those products/industries.

That is one of the big negatives.

I do see something positive about the huge trade deficit:

All the blue collar, undereducated class may finally get off their lazy asses and start taking night school courses to get certified (or get a degree) in a high tech profession that is more insulated from our manufacturing base going overseas.

Also, the damn schools may be forced to start teaching more math and science and computer courses in the high schools to better prepare our studnets to work in the 21st century.

[sully777]

Let London manufacture those fine fabrics of hers to her heart's content; let Holland her chambrays; Florence her cloth; the Indies their beaver and vicuna; Milan her brocade, Italy and Flanders their linens...so long as our capital can enjoy them; the only thing it proves is that all nations train their journeymen for Madrid, and that Madrid is the queen of Parliaments, for all the world serves her and she serves nobody."
(Prominent Spanish official - Alfonso Nunez de Castro in 1675)

---

Castro erred in relying upon stolen booty. You err in relying on quoting Castro who relied upon stolen booty.

---

Spain's new found wealth was stolen booty. This wealth was transitory from the outset. But the further military campaigns against England and The Netherlands, insuring stolen cargo lost in hurricanes, supporting a dying Holy Roman Empire during the Reformation Wars. producing a mammoth navy to war against Mediterreanean commerce, putting down insurrections in the colonies, fighting against English Seahawks, as well as the various disputes within the Hapsburg family strained and sapped the Spanish treasury to the limit. To further add insult to injury, the Council of Trent's Index of Forbidden Books and the subsequent brain-drain from the Spanish Inquisitions bled the country white.

Spain's ancient wealth and economy was no longer dynamic with the fall of Catalonia and Aragon to the Castille Union. Catalonia's once coveted middle and upper class, which included a fair share of christian dissidents and heretics, agnostics, atheists, Freemasons. Jews, and Moors, were expelled. Education, outside of Catholic orthodoxy, was forbidden. Discovery of the sciences, innovating literature, breaking new territory, producing for profit, manufacturing, lending money at usury, annihilation of class distinction, the rise of merit-based success, and pushing the cliched envelope were the desperate acts of dying heretics and landless conquistadors dying of fevers in the New World.

The USA and it's economic vitality is the inheritor of the spirit of old, free Catalonia while the Luddites and Isolationists are the inheritors of the spirit of Torquemada!

[groanup]

Good grief you're a worry wart. Calm down. A trade deficit means a lot of things good and bad but the reason we have one is because we are so rich and we like to buy things from overseas.

[Golden Eagle]

Good grief you're a worry wart.

I'm a worry wart because I posted a fact that US median income is going down on a yearly basis? Please explain how that is a "worry free" scenario. Thx.

[investigateworld]

I won't bet the farm on China taking any steps to reform itself. What happened to the Communists in Russia, is gentle compared to a peasant revolt, and they know it. IMHO the Chicom leadership will start a war with one of their neighbors to divert the populace.
Our craving of cheap DVDs will fuel their engine.

[Toddsterpatriot]

Interesting source:
Who founded EPI?
EPI was founded by a group of economic policy experts that includes Jeff Faux, EPI's first president; economist Barry Bluestone of Northeastern University; Robert Kuttner, columnist for Business Week and Newsweek and editor of The American Prospect; Ray Marshall, former U.S. secretary of labor and professor at the LBJ School of Public Affairs, University of Texas-Austin; Robert Reich, former U.S. secretary of labor and professor at Brandeis University; and economist Lester Thurow of the MIT Sloan School of Management.

[groanup]

I'm a worry wart because I posted a fact that US median income is going down on a yearly basis? Please explain how that is a "worry free" scenario

I'm sorry to be joining this thread late and I didn't see your post about median income. Please refer me to the post number and I will respond to it specifically.

Of course median income has gone down in the last few years, we just came off of a bubble. In the late nineties computer geeks were strutting around like gods. They were being hired by companies who needed them for not much more than window dressing as the companies took themselves public with no earnings and no prospect of earnings. BUBBLE. We have them about every twenty or thirty years.

I remember meeting a lot of them at the smoking patio of our building. "Ohhhh, yessss, the Y2K is a biiiggggg, thing. It could destroy the country."

So, in my capacity as a financial planner and investment manger I would ask them: Are you participating in your employer's retirement plan.

Oh hell no. I'm not staying here. I have bigger fish to fry.

Bottom line, these were the guys who were making all the money in the late nineties. They were so full of themselves that they thought the world couldn't function without them. Guess what.

[Golden Eagle]

annual release of family income data from the Census Bureau

If you refute the data, provide a better source.

[Toddsterpatriot]

If you refute the data, provide a better source.

Didn't say anything was wrong with the data. Just love it when protectionists on this site post from lefty sources.