Posted on 06/20/2002 6:52:39 AM PDT by GeneD
WASHINGTON (CBS.MW) - A flood of imported goods, including expensive crude oil, boosted the U.S. trade gap to a record $35.9 billion in April, the Commerce Department said Thursday.
Imports surged 4.7 percent to $116 billion, led by crude oil, autos, computers and consumer goods. Meanwhile, exports rose 2.2 percent to $80.1 billion, led by chemicals, machinery, semiconductors and autos.
The report shows importers are meeting much of the increased demand for goods and services in the United States. U.S. producers are also benefiting from the global recovery, but at a slower pace.
In a separate report, the Commerce Department said the current account deficit widened to a record $112.5 billion in the first quarter, 4.3 percent of gross domestic product. Read the full reports.
The current account is the broadest measure of the nation's balance sheet with the rest of the world. It includes trade goods and services as well as capital flows.
Inflows of foreign capital fell 55 percent to $113.3 billion after particularly strong inflows following Sept. 11 as investors sought the safety of U.S. Treasuries.
American capital outflows to other countries also shrank sharply in the first quarter, falling 86 percent to $13.9 billion.
The dollar's value rose 3 percent in the first quarter against a trade-weighted group of seven currencies, the government said.
Economists expected the monthly trade deficit to widen to $32.1 billion and the quarterly current account deficit to grow to about $107 billion. The reports generally have little impact on financial markets, since the data are so backward looking. See Economic Calendar.
The euro rose to a two-year high of 96.13 cents after the two reports were released. Stocks and bonds were both weaker at the open. See Market Snapshot.
Meanwhile, the Labor Department said first-time jobless claims fell 2,000 to 393,000 in the latest week while continuing claims rose 23,000 to 3.8 million. See full story.
"The widening of the real trade deficit points to a more significant trade drag in the second quarter," said John Youngdahl, economist at Goldman Sachs, which now expects second-quarter GDP to rise 2 percent instead of the 3 percent it was forecasting previously.
"The April number is a shocker," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
The rising price of crude oil was a major factor in the monthly trade gap, but even the non-petroleum deficit of $30.4 billion was a record.
The price of crude rose $3.30 to an average of $22.48 while the volume of imports rose to 10.09 million barrels a day, the highest in a year. The value of the oil rose 37 percent to $6.9 billion.
The increase in the price was the largest since October 1990, as U.S. forces were preparing to liberate Kuwait.
Imports of autos rose 5 percent to a record $16.8 billion. Imports of consumer goods rose 5.4 percent to a record $24.9 billion, led by art, diamonds, apparel and TVs.
Imports of capital equipment rose 1.5 percent to $23.8 billion, led by computers. Imports of airplanes and semiconductors fell.
U.S. exports of autos and auto parts rose 7 percent to $6.7 billion, the highest in nearly two years.
Capital equipment exports were nearly flat. Increases in machinery and semiconductor exports were offset by declines in aircraft, engines and telecommunications equipment.
Exports of selected advanced technology products fell about 15 percent to $14.4 billion.
Exports of foods and feeds were flat, while exports of consumer goods rose 5 percent to $7.1 billion on increases in drugs and diamonds.
The surplus in services of $4 billion was the second lowest on record.
The trade gap narrowed against Canada and Mexico, but widened against China, Japan and Western Europe.
Rex Nutting is Washington bureau chief of CBS.MarketWatch.com
I am starting to doubt very seriously that anyone has the fortitude to stand up to the China lobby. Fair trade with China means "you buy our stuff, because you are rich and we are poor. you owe it to us. you are a hegemon and a bully who needs to make reparations anyway"...
Is he waiting for the economy to clear up, or what? What's he waiting on??
We need a big fix.
If it's broken, don't fix it!
Tuor
Give me liberty or give me death.
Meanwhile, those nations destroying wealth -- socialist nations -- have people working with little left to spend after toiling for food, clothing and shelter.
Capitalism is the product of individual freedom protected by law, while socialism is -- quite simply -- the absence of capitalism.
America -- the original source of the term "Making money."
Your comment suggests that you believe the President can do something . . . which he can't, unless it's to "talk" the dollar down, making imports more expensive.
Naturally, if that happens (and the dollar has been slipping) this forum will be flooded by doomsayers yelling "I told you so" and gold-bugs screaming "buy."
I don't recall him saying that. I must have been in the bathroom. What could he do? Put massive tarrifs on all goods from China? That would make our cost of living sky rocket.
The hand wring over the "balance of trade" is an outmoded concept. We are no longer on the gold standard so there is nothing that we have to "ship out" to these people we trade with so we aren't in danger of running out of anything, like gold. Trade by its very nature is an exchange of equal values and money is just a convenient medium for that exchange.
Wealth is created only by engaging in value-added activities. By the same token, Service sector activities do not create wealth, they merely transfer, redistribute and eventually dissipate wealth as consumption. Thus, as value-added activities move offshore and the U.S. labor force shifts to the Service Sector, wealth is dissipated, not created. And the U.S. standard of living declines as a result.WEALTH: The net ownership of material possessions and productive resources. In other words, the difference between physical and financial assets that you own and the liabilities that you owe. Wealth includes all of the tangible consumer stuff that you possess, like cars, houses, clothes, jewelry, etc.; any financial assets, like stocks, bonds, bank accounts, that you lay claim to; and your ownership of resources, including labor, capital, and natural resources. Of course, you must deduct any debts you owe.
VALUE ADDED: The increase in the value of a good at each stage of the production process. The value that's being increased is specifically the ability of a good to satisfy wants and needs either directly as a consumption good or indirectly as a capital good. A good that provides greater satisfaction has greater value. In essence, the whole purpose of production is to transform raw materials and natural resources that have relatively little value into goods and services that have greater value.
SERVICE: An activity that provides direct satisfaction of wants and needs without the production of a tangible product or good. Examples include information, entertainment, and education. This term good should be contrasted with the term good, which involves the satisfaction of wants and needs with tangible items. You're likely to see the plural combination of these two into a single phrase, "goods and services," to indicate the wide assortment of economic production from the economy's scarce resources.
TRADE DEFICIT: Formally termed a balance of trade deficit, a condition in which a nation's imports are greater than exports. In other words, a country is buying more stuff for foreigners than foreigners are buying from domestic producers. A trade deficit is usually thought to be bad for a country. For this reason, some countries seek to reduce their trade deficit by--
- establishing trade barriers on imports,
- reducing the exchange rate (termed devaluation) such that exports are less expensive and imports more expensive, or
- invading foreign countries with sizable armies.
Wrong!!!
Value is added in value-added activities.
Wealth is created when a manufacturer (or farmer, or landlord) makes a profit.
The manufacturer (or farmer, or landlord ) makes or provides something for $10 (materials, overhead, and labor) and sells it for $20. Everybody's happy and the manufacturer (or farmer, or landlord) has created $10 in new wealth.
Landlords do not engage in value-added activities.
They provide a service.
Manufacturers and farmers create wealth.
Landlords prosper through wealth transference.
First, I am not a Bush basher at all, but something does need to be done. Bush has been doing exremely good on China so far...ON THE MONEY, but so far this is the only thing left undone in my book...
I have advocated again and again, and it won't hurt our corporations at all to do it...and here it is...
Engage, and create a rival manufacturing center to counter China's dominance. You don't have to tax Chinese stuff nearly as much as you have to give incentives to go somewhere else...
Just imagine if there was a 'special economic zone' on the south east tip of India...maybe including Sri Lanka... If you import from there, tax cut... or some other kind of equalizer...
We can negotiate with the Indians, and get all kinds of goodies for US corporations...
And in the end, it will force prices of imports down not up.
China only gives what it has to give, and nothing more. Competition will change all that. Where that competition comes from is where the discussion of possibilities should take place...
When China starts to blackball our corporations for doing things the party doesn't like...the corporations will have the option to say sianara...
Beijing realizes there is becoming an real dependence on their cheap labor... and they use it as a baseball bat.
Make the global economy global... not an all China manufacturing party in Asia...Japan, the US, Taiwan, Korea, and whoever will have options...
Do you have a disagreement with me? You think we cannot create competition?
Then realize that it is not all about 100% alleviating an overall trade balance...its about diversification....
We can either have a dominant China (in manufacturing) because without an overall strategy, who can compete with $1 an hour labor?
Or we can create competition...
With China, importing goods from China does not equate to them returning the favor... creating competition, well could very well turn that around...at least somewhat...
Oh brother...
Janitors provide services, landlords provide housing for profit; and created wealth from their profits allows them to build more rental housing and create more wealth; all without "adding value" as laborers do.
Meaning that your orignal statement: "Wealth is created only by engaging in value-added activities" is still wrong.
Adam Smith's book, "The Wealth of Nations," covers the landlord angle well. Wealth is created when individuals manage to do better at something than other people can, when customers flock to use that individuals "product."
It is the wise use of capital -- and the human mind (inventions, business sense, artists, writers, etc.) -- that creates wealth.
Let's say that all international trade stops.
That would solve your problem with America's balance of payments deficit. But then, let's look at what happens in the shoe market -- a market where shoes from China now cost $40 per pair.
In "legitimate" stores, you'd be paying about $150 for similar shoes made in America; in black market stores you'd be paying about $100 for the Chinese model; and in chinese "duty-free" shops you'd be paying about $80.
Meanwhile, let's say you're a doctor serving social security patients (that means you're making "minimum" doctor wages), that you have five kids wearing shoes, and that you can't afford paying ALL the higher prices resulting from that trade embargo.
People that want Balance of Payments equalized are talking about what causes DEPRESSIONS.
Americans should be reveling in the fact that they live in just about the wealthiest nation on earth, and people should be realizing that it is individual freedom -- that causes capitalism to happen; that subsequently causes all ships (people) to rise with the growing tide of great wealth in America.
What the Chinese do with their money is another matter. If they are using their profits to arm for agressive war (as Japan did before WW-II); it is then that trade with China should be curtailed.
As stated before, Landlord's profits derived from rentals is "wealth-transference". However, construction of housing is a value-added endeavor which is "wealth creation". Subsequent rental of these facilities reverts back to "wealth transference".
Construction labor/material costs are paid from capital belonging to the landlord -- the money invested is the exact amount received for adding value to property -- there is (so far as the landlord is concerned) no money "created" in value-adding transactions.
The landlord's profit is money "made," and people "making money" is the hallmark of capitalism.
Money is not wealth, it is merely an exchange medium. Paper money has no inherent value unless there is reasonable expectation that it can eventually be exchanged for wealth.
Wealth was created when labor was added to raw materials to create property (a home)
The landlord's profit is money "made," and people "making money" is the hallmark of capitalism.
Money is actually somewhat secondary. Many of the world's wealthiest people, such as Bill Gates, have surprisingly little money in comparison to their wealth. The "hallmark of capitalism" isn't "making money", it's acquiring ownership of material goods, property and productive resources.
An equal amount of wealth was expended when the laborers and material providers were paid -- wealth added minus wealth expended equals zero wealth created.
Creation of wealth is inherent in profit resulting from investments -- profit being inherent in captalist systems, and even in semi-capitalist systems where the degree of capitalism is directly proportional to individual freedom..
The very word "profit" is evil within communist systems, and that helps to explain why Marxist systems are economic failures.
No, the amount of the exchange medium, money, circulating in our economy remained the same, "X" amount of money changed hands from the Landlord to the contractor/subcontractors/laborers/material suppliers/etc. etc. --- the sum of the money all adds back up to "X", so there was no loss there. But "wealth" increased because the amount of property increased: a new home was built were there was none before.
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