Posted on 06/23/2011 5:11:51 AM PDT by 2ndDivisionVet
Maybe he just toggles back and forth between FR and his companis website...
http://www.bobthebuilder.com/usa/index.asp?origref=
You have a point.
“Why? Inflation hit 3.6% in May, even though gasoline prices actually fell that month. Inflation has been rising since November, as shown in the graph below:”
Uh, energy and food are deemed too volatile and not even considered in the government’s inflation calculations.
If a gallon of gasoline went up to 100 $ and a loaf of bread to 50 $, official rate of inflation would not go up at all.
True, but who remembers them, what was said, or impact they had? Like the old EF Hutton commercial, when Sarah Palin talks, people listen.
The LSM and PDS crowd constantly trots out and runs up the flag for their latest candidate du jour as a distraction hoping to delay the inevitable coming Palin announcement.
“There is no “draft Rick Perry” club among FR’s Palin supporter ranks. The people pushing him around here are either Texans or GOP “Anybody but Palin” hacks.”
Agree.
I’m with Gov. Sarah Palin. NOT Gov. Rick Perry.
;)
Though it appears to be a "pro-Palin" article, it's really a "pro-tariff/trade barrier" article. On that account, the article and the authors need to be severely criticized.
Indeed, worsening net exports (exports minus imports) have been keeping the United States stuck in its current economic stagnation.
Complete baloney. The authors are parroting know-nothings like Donald Trump, thereby proving that they themselves know nothing.
When imports go up relative to exports,
Huh? Not possible. WE PAY FOR IMPORTS BY MEANS OF EXPORTS. Every dollar a U.S. housewife spends on a Chinese-manufactured consumer good in Wal-Mart, winds up in China where it is completely useless until that Chinese person spends it on some U.S. manufactured good. Hello? Howard and Raymond Richman? A citizen of China cannot spend that dollar on tea in Shanghai or a dumpling in Beijing. That dollar is only worth something -- exchangeable for some good -- in the U.S.
Conclusion: every dollar we spend on a Chinese-manufactured good is returned to us by China's spending on U.S. goods.
Ah, but here's the so-called problem:
In the hypothetical above, the U.S. housewife spends 100% of that dollar on a Chinese-manufactured consumer good (e.g., diapers); but the Chinese exporter, who winds up holding that U.S. dollar, might decide that he only wants to spend half of that on a U.S.-made consumer good -- e.g., a candy bar -- and the other half (the other 50 cents) he would like to spend, instead, on buying a share of stock in the candy bar corporation. Guess what? According to the way "Current Accounts" are reckoned -- "net consumer goods exports minus net consumer goods imports -- the U.S. has a 50-cent trade deficit. Despite the fact that 100% of that dollar was spent back in the U.S., though half of it went toward a consumer good (the candy bar) and half toward a producer's good (stock in the candy bar corporation). Similarly, China has a 50-cent trade surplus. But . . .SO WHAT. The U.S. "capital accounts" is now running at a surplus (by fifty cents, invested by China), and the Chinese capital accounts is now running at a deficit (by exactly 50-cents: the amount China invested in U.S. producer goods, instead of buying consumer goods).
Is it good that China invests in U.S. productivity? Yes. Does it matter WHO invests in U.S. productivity? No. Does more investment in U.S. productivity -- e.g., real estate, machinery, stocks, bonds, R&D, etc. -- enlarge America's "tool box" -- tools capable of producing things -- thus making us a more productive, economically richer nation? Yes. Does enlarging U.S. productivity eventually cause an increase in U.S. production of consumer goods, thus leading to lower prices of consumer goods for all Americans? Yes. In general, isn't MORE STUFF at LOWER PRICES (meaning: greater choice combined with greater purchasing power) the essence of what we mean by the term "economic progress"? YES.
Sorry, Richmans, but all of this is Economics 101.
Now, according to the O'Reilly's of the world, who are acquainted with these facts, the problem with the so-called "trade deficit" stems from the fact that one of the U.S. investments the Chinese are buying with the U.S. dollars we send them for their cheap goods is U.S. Treasury Bonds -- U.S. government-generated IOUs. The fear seems to be that China will end up "owning" the U.S. when it comes time to pay off on those bonds.
Nonsense. Is China forcing the U.S. Treasury to create and sell IOUs? No. Big Government is creating them and offering them for sale because it's on a disgusting spending binge. It's government's fault for printing them up and selling them; it's not China's fault for buying them. In fact, it's better for the U.S. if China buys them than if American dollars are diverted from more productive uses into Treasuries. The problem here is U.S. government spending, not Chinese purchases of our IOUs.
Americans get more debt …,
This is pure gibberish. The debt that the authors mention comes from the U.S. government's issuing DEBT, i.e., IOUs, payable out of future income of Americans. This debt has zero to do with trade, per se. The only reason the U.S. government is issuing IOUs is to pay for its spending. End the spending, end the debt.
and lose jobs
More gibberish. More economics 101. When American consumers save money by purchasing cheaper Chinese goods, there's more money left over for them to spend on anything else, including U.S.-made goods or U.S. investments. Jobs are not lost; they are restructured into a different composition of jobs -- the pattern of employment changes; some industries declining as others rise. Capital and labor will flow from those industries that are declining into those industries that are starting to flourish. For example: when housewives across the U.S. prefer to spend one dollar buying Chinese-made diapers (instead of, let's say, 5 dollars on U.S.-made diapers), this is obviously bad for the U.S. diaper manufacturers, some of whom will go out of business. But now that those housewives have 4 extra dollars to spend that they didn't have before, they have additional demand for OTHER THINGS. Who will produce those "other things" and sell them to those housewives? I don't know. Might be Americans if they can compete efficiently -- if the new "other things" industries don't get hamstrung having to deal with (i) labor union costs, or (ii) minimum wage costs, or (iii) inflation, or (iv) a general business climate of uncertainty. It should be pretty obvious that (i) thru (iv) are caused by government hampering of voluntary trade, and not by voluntary trade itself.
whereas when exports go up, relative to imports, Americans get more income and gain jobs.
The authors are ignorant of economic history, let alone economic theory. During the Great Depression, the U.S. had a TRADE SURPLUS, i.e., exports were up relative to imports, yet the country lost jobs -- 25% unemployment! -- and the economic downturn reduced everyone's income, both nominally and in real terms.
The decline in net exports may be slowing or preventing the U.S. economic recovery.
The U.S. economy has a number of structural problems (see (i) thru (iv) above), but free, voluntary exchange with trading partners isn't one of them. Not mentioned by the authors, but easily confirmed by surfing to the BLS site, is that U.S. worker productivity is not only the highest it has ever been, but it is the highest in the world. Part of the loss specifically of manufacturing jobs is because of that productivity: more and more, and better and better technology invested per worker. In the year 1700, about 95% of the U.S. population was employed in "the agricultural sector", i.e., on farms. Today, a little over 2% of the U.S. population is employed in that sector. Hey, Howard and Raymond Richman! What happened to all those American agriculture jobs? Did we "lose" them to foreign competitors because of "unfair trade practices"? Does anyone complain about the loss of those agriculture jobs? NO! We didn't "lose" them to anyone. We "lost" them to economic progress: more and more, and better and better technology: chemical fertilizers, pesticides/herbicides, mechanized farm equipment, genomically-enhanced produce, etc. As productivity-per-agricultural-worker increased, the economic need to have so many workers employed in agriculture declined drastically. Where did those workers go? They eventually learned new skills and found their way into the Next Big Economic Thing in the U.S.: industry and manufacturing. And just as there was no good economic reason that a large agricultural sector should have been declared sacrosanct and made permanent through trade barriers or other practices whose purpose is to lower individual worker productivity, so, too, there is no good economic reason that a large industrial manufacturing sector should be declared sacrosanct and made artificially permanent by means of trade barriers or other practices whose purpose would be to lower individual worker productivity.
Sorry, folks, but what happened to U.S. agricultural jobs -- lost to higher and higher productivity due to more and better capital invested per worker over time -- is now happening to U.S. manufacturing jobs. The fact that the U.S. is great at performing high-end skilled labor such as writing software and designing smart-phones in no way means that, economically, we ought to be physically manufacturing computers and smart-phones, too. That's also Economics 101.
For more reliable information on the so-called trade deficit with China, see this recent article in the Freeman by economist Robert Murphy:
And watch this Cato Institute video of Donald Boudreaux, professor of economics at George Mason University:
Since I can no longer read economic news without an O’Bama decoder ring, is 3.6% in May the rate extrapolated for a year or are we possibly seeing 30+% inflation in the foreseeable future?
Cheers!
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