Trade Red Ink Is Major Cause Of All Our Economic Woes

[Joanne98]

The US trade deficit went down. It is half of what it was in the disastrous year of 2007 when it was nearly $900 billion. Still, it is far, far greater than it was in 1999. And is going to grow again as the US prints more and more money. Time to talk again about ‘red ink‘, that mysterious substance that will lead inevitably to this other mystery called, ‘bankruptcy’. Seems many US economic eggheads and of course, the Federal Reservists, cannot understand the nature of ‘red ink‘ so I will try to explain this mystery yet again.


Trade Deficit in U.S. Narrowed in May as Exports Rose (Update2) – Bloomberg.com

The U.S. trade deficit unexpectedly narrowed in May to the lowest level in almost a decade as exports jumped while imports of crude oil and auto parts declined.

The gap between imports and exports decreased 9.8 percent to $26 billion, the smallest deficit since November 1999, from a revised $28.8 billion in April that was lower than previously estimated, the Commerce Department said today in Washington. Imports fell while exports rose the most since July 2008….

The dollar remained lower against the yen after the report, trading at 92.24 yen per dollar at 9:11 a.m. in New York, compared with 92.99 late yesterday. The dollar was at $1.3902 per euro from $1.4020.

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So, the trade deficit this year, during a Great Depression II year, will probably be ‘only’ $350 billion? HAHAHA. Great gods! Let’s look back in time to the last time this trade deficit was ’small’ was in 2001:

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America’s Record Trade Deficit: A Symbol of Strength | Daniel Griswold | Cato Institute: Daily Commentary

The U.S. Commerce Department announced today that America’s trade deficit in 2000 was the biggest in the history of the world. The difference between what Americans imported and exported last year should reach about $370 billion — more than $100 billion larger than the previous record deficit set in 1999 and double the 1998 deficit. Many headlines and quotes from trade skeptics will sound a familiar refrain: “Worst Year Ever for American Trade.” “Trade Deficit Costs Jobs.” “Trade Gap Undermines Dollar, Threatens Expansion.” Should Americans worry about the trade deficit? Or is it a sign of our nation’s strong economy? A $2-million federal commission on the trade deficit issued a final report in November that answered yes to both questions. Economic theory and experience show that trade deficits are driven by levels of national saving and investment in the U.S. economy, not by allegedly unfair trade barriers abroad or by declining industrial competitiveness at home. America’s record trade deficit is a symbol of economic strength, reflecting a strong net inflow of foreign investment drawn to America’s dynamic economy. Growing trade deficits signal improving economic conditions, while shrinking deficits often occur in times of economic trouble. During the last 25 years, the U.S. economy has on average grown about a percentage point faster, 3.5 percent vs. 2.6 percent, in years when the trade deficit expanded compared with years when it shrank. The unemployment rate on average fell 0.4 percentage points during years of rising deficits and rose 0.4 points when the deficit shrank. Manufacturing output rose much faster during years of rising trade deficits than during years of shrinking deficits.

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The Cato Institute hires people who have great talent in not seeing the obvious. Mixing up cause and effect is a common problem with people who have ideological points of view they must cling to no matter what. First off, in early 2001, before the 9/11 business, we were running an immense trade deficit. It increased by $100 billion in just one year. This heralded a series of very serious trade deficits that shot to nearly a trillion dollars when finally, the entire world trade system collapsed.

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This collapse is a depression. Now, the only times in the last 30 y ears that the US has reduced our trade deficit is either when we made deals like the Bretton Woods II and Plaza Accord business, raising the value of the yen and DM artificially. Or when we have massive recessions. Only when we cease buying foreign oil and foreign goods, do we see any reduction in our trade deficit. The way we end all our recessions so far, is to increase the availability of credit. This means, all the good times we have enjoyed after previous recessions has been nearly entirely based on increasing our levels of debt.

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Now, this Cato character thinks that trade deficits getting worse means our economy is improving because we are buying more things! This is totally infantile. This is what happens when people don’t look at all the facts. He ignores the fact that trade deficits are RED INK. So are government deficits. And when we increase borrowing for domestic consumption purposes, that, too, is RED INK.

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Red ink means losses. Somehow, we must hammer this basic concept into the pea-sized brains of people like Mr. Griswold! Red ink is BAD. Just like bleeding blood is bad. When any business notices that is is running in the red, it panics. If that business doesn’t stop the red ink, it goes BANKRUPT. If all conditions concerning this mysterious substance called red ink inevitably leads to bankruptcy if not turned into green ink, then running a trade deficit deep in red ink is BAD NEWS. Perhaps if we always write the words ‘red ink‘ in red, we can note it more often and this is a red flag which means ’stop whatever the hell you are doing, you idiots!’

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So, the US trade deficit finally shrank down to the record deficits of 2001—-this is not good news. This is terrible news. We just passed through some of the worst economic conditions since the Great Depression I and we still didn’t even get slightly close to closing the trade deficit gap! This makes it utterly, crystal clear that our trade policies are crappy as hell.

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So, what did Obama do at the G8 minus Hu and Kate (TV gossip joke, sorry!)? Why, Obama announced he will speed up the Doha Round talks! Talk about insanity. More and more of our economy is focused on exporting stuff. Yet, our trade deficit continues and is reduced only with the vicious mechanism of total economic and monetary collapse! The dollar is weak against the yen so our trade deficit improves. But not enough to pull us out of the deep pool of red ink. More of the same won’t work. Also, we must look at what we are exporting. We rely far too much on Boeing statistics to explain away our trade deficit. That is, much of the parts and sections Boeing planes are manufactured by our direst trade rivals. We then hammer these parts together and ship the final product out again.

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This makes it look as if we are manufacturing things still when all we are doing is assembling the parts made elsewhere. This sort of deal must be closely examined. Boeing jet orders would collapse if we forced these other nations to buy our jets with no parts made in the various nations ‘buying’ our Boeing jets. All these same nations also, incidentally, run trade surpluses with the US! So, buying Boeing jets doesn’t solve our trade problems with, say, OPEC nations or China or Japan, for example.

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Lost ‘Animal Spirits’ May Worsen Economy, Roubini, Shiller Say – Bloomberg.com


The worst recession in half a century may be prolonged because consumers see few signs job losses and declines in home prices are ending, economists Nouriel Roubini and Robert Shiller said.

“The fundamental problem, as Franklin Delano Roosevelt said in 1933, is fear,” Shiller, a Yale University professor, said yesterday on Bloomberg Radio’s “Surveillance.” The Great Depression was deepened by a “sense of lost confidence or animal spirits that was a self-fulfilling prophecy. The worry is that we will have the same kind of issue arising again,” he said.

The U.S. needs another stimulus package because President Barack Obama’s initial $787 billion plan hasn’t been implemented fast enough, according to Shiller. Roubini, an economics professor at New York University, said more spending is necessary to avoid stagnation like Japan’s in the 1990s.

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Here it comes again! The baloney that people’s ‘fears’ prevent glorious days. Doing what, pray tell? Buying more stuff from overseas? The US trade deficit is the ultimate problem here: so long as we run deep in the red in this sector, all other sectors will have to also run in the red. That is, our government, which refuses to fund itself via the traditional tariffs, as well as the consumers, who see dropping wages due to offshoring of jobs and services.

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We can’t simply go ‘Whoopee! Happy days are here again! Prosperity is around the corner!’ No, we have to settle our accounts and begin running trade in the green, not the red. Then, we can gain some capital and thus, become a creditor nation again like communist China which we used to call ‘Red China.’ I used to read Roubini a lot until he went off the cliff. He now wants us to generate even more government red ink in order to stimulate us so we can do what? Buy more stuff from Japan and China? Use more imported oil?

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Whatever the hell we do with this new debts matters a great deal. We can’t rebuild our industries unless we first put up barriers against trade rivals underselling us. There is virtually no effort at this so far. Instead, we are told, if we start new industries, we will win the race with our rivals! Except, we can’t do this since they are as swift if not much swifter in building new industries. For example, the solar energy sector was of greatest interest for the Chinese back when they asked Nixon to send over my dad to start up their optics/solar energy

Continued>>>
http://emsnews.wordpress.com/2009/07/10/trade-red-ink-is-major-cause-of-all-our-economic-woes/#more-4528

[Cant trust em]

1. I'm not sure what the long term solution

Ceasing of corporate tax breaks to companies who ship jobs overseas would be a good start. Keep manufacturing local as best we can.

Consume less would be another.

[blue97keet]

2. Red ink is never a sign of strength

"The US trade deficit is the ultimate problem here: so long as we run deep in the red in this sector, all other sectors will have to also run in the red. That is, our government, which refuses to fund itself via the traditional tariffs, as well as the consumers, who see dropping wages due to offshoring of jobs and services."

Right on! :thumbsup: