middle class

It is our generation’s task, then, to reignite the true engine of America’s economic growth—a rising, thriving middle class.

So said Barack Obama in his State of the Union.

And for one of his ideas to reignite that engine, Republicans applauded.

“And tonight, I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union—because trade that is free and fair across the Atlantic supports millions of good-paying American jobs.”

One wonders if any of those in the hall who rose robotically at the phrase “free and fair” were aware of the trade results just in from 2012.

What were the 2012 figures for the European Union?

U.S. exports to Europe fell, imports from Europe rose, and our trade deficit with the EU shot up 16 percent to $116 billion.

We ran a trade deficit with Italy of $20 billion, with Ireland of $25 billion, with Germany of $60 billion. The Europeans are eating our lunch.

What about South Korea, the country with whom we signed a free-trade deal in 2012?

U.S. exports to Korea fell last year, and due to a surge in imports our trade deficit in goods with South Korea soared 25 percent to $16.6 billion.

Seoul’s trade minister who cut that deal and cleaned our clock should get a medal and the kind of bonus Americans reserve for people like hedge fund managers and the folks who ran Fannie and Freddie.

And Japan? Last year, Nippon ran a $76 billion trade surplus with the United States, second largest of any country.

But that is insufficient for Prime Minister Shinzo Abe, who has bullied the Bank of Japan to drive down the yen 20 percent against the dollar in three months—to increase exports to America and cut imports.

Look for the U.S. trade deficit with Tokyo to explode.

What about that NAFTA treaty the establishments of both parties heralded in the Clinton era? How has that worked out for Uncle Sam?

Last year, the United States ran a trade deficit of $32 billion with Canada and twice that, $61 billion, with Mexico.

What was America’s overall trade position in 2012?

We ran a global trade deficit in goods of $736 billion. That is 5 percent of the U.S. economy. We are hemorrhaging jobs, factories, wealth.

In banking, consulting, lawyering—i.e., services—we had a nice surplus. That’s what we Americans do now.

Since Bush 1, when some of us began to argue loudly that a mindless ideological pursuit of free trade would imperil America’s industrial base, the total of U.S. trade deficits in goods with the world is approaching $10 trillion—10 thousand billion dollars!

Might this humongous dumping of foreign goods into the U.S.A., killing our factories, and the liberation of our transnational elite to close plants, outsource production, and bring foreign-made goods back free of charge into the U.S. market, have had something to do with killing the middle class?

The U.S. median income stopped growing in the mid-1970s, the same time we began to run 40 straight years of ever-expanding trade deficits.

And how are we doing with China?

Well, if one reads the weekend Wall Street Journal, Feb. 9-10, on page A3 in the lower left-hand corner is a box with a story headlined, “Trade Gap Shrinks 21 Percent as Oil Imports Decline.”

A positive headline, but about December only. In the 10th paragraph, however, was this tiny item: “Although the trade deficit with China narrowed 15.5 percent in December … the year-long deficit grew to a record.”

“Grew to a record”? What did that mean?

Elsewhere, one learns that the U.S. trade deficit in goods with China was not only an all-time record, but the largest between any two nations in the history of the world—$315 billion.

China now exports 6.3 times as much in manufactured goods to the United States, $417 billion’s worth, as we export to China.

Over two decades, Republicans in the lead, America granted Beijing most favored nation status, then permanent normal trade relations. Then we squired Beijing into the World Trade Organization.

And since the courtship began, the trade surpluses China has run with the United States have enriched, empowered and emboldened her so that, today, brimming with ethnonational arrogance, China has laid claim to all the islands in the South and East China seas and is telling the U.S. Navy to stay out of the Yellow Sea and Formosa Strait.

And the free-trade fanatics responsible for building up this Asian colossus challenging us in the Pacific now tell us we must “pivot”—i.e., shift—our planes, ships and troops out of Europe and the Mideast to Asia and the Western Pacific to contain the mighty and mammoth power their stupidity created.

Every nation seems to understand what our baby boomers were never taught. A trade balance is a measure of national power that reliably identifies rising and falling nations.

Books related to the topic of this article may be found in The Imaginative Conservative Bookstore

Published with gracious permission of the author. Copyright 2012, Creators.com.

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3 replies to this post
  1. Free trade as such is not the culprit, bad monetary policy is. Milton Friedman explained very well how free markets deal with trade deficits in Free to Choose. He noted that when another country has relatively cheaper goods, then the demand for those goods will raise the demand for that country’s currency. A higher demand for foriegn currencies, motivated by the desire to buy cheaper goods, will push up the price of that currency and eventually cancel out the imbalance.

    So why hasn’t this happened vis-a-vis China?

    Because the US Federal Reserve won’t let it. Quantative easing floods the global market with dollars, and those dollars go towards feuling a global boom-bust cycle that allows America to produce paper which everyone uses in exchange for yuan with which to buy real goods produced in China.

    Naturaly this cannot last, as dollar inflation will ultimately eat away at its purchasing power relative to the yuan. And that is what is happening,and why the Chinese, recognizing that currency manipulation will only carry them so far, are working to boost domestic demand and, more importantly, opening up new markets.

    While America has been bogging itself down in mindless wars, China has been investing in countries like Africa which the US ignored, prefering to give them foriegn aid for decades rather than develop business relations. China ultimately does not need the US consumer market. If it comes to it, China will do just fine with domestic and international demand. Americans, if they don’t change course, will end up a nation whose main product is a strong military and paper money nobody wants to use (sounds like North Korea).

    As for Japan: it is true that the yen is down 20% against the dollar in 3 months – but in 2007, before the crisis, you could get 10 thousand yen for 100 USD. By May of 2010, you had to pay 140 USD to get 10 thousand yen. The period 2007-2011 saw the price of yen skyrocket in USD (and other major currencies), which led to a crisis in productive capacity in Japan. Were the Japanese just supposed to sit around and let their eeconomy die because the FED was destroying the dollar to bailout pyramid and ponzi scheme banks and failing auto companies? I think Abe acted with resolve and courage.

    Ultimately, as long as the USD remains the world reserve currency, and America remains a super power, Americamust lead. America neeeds to stop quantative easing and adopt a Gold Standard. This will limit the desperate propensity for other countries to try to save themselves by way of currency manipulation. If America does not act, it will soon become a third rate economy, and we will be looking to Chinese mometary policy to get our bearings.

    As for free trade with the EU: unless that involves putting VAT liability on imports to the US, it can only mean eliminating VAT on American goods in Europe. This will bring their price down by 15 to 25% immediately. American companies and the Chinese factories who make their goods will profit. If America lowers its costs of doing business then who knows – maybe Americans on the homeland can actually build and export things again.

  2. If monetary policy were the culprit, the dollar would get cheaper, not more expensive; it would take more dollars to buy foreign goods and fewer Yen, Euros, Yuans to buy American goods. Imports would decline and exports would expand. The opposite is happening. Chronic Trade imbalance always represents a moral problem, a violation of justice in trade. Trade is good when it’s conducted with justice, evil when it pits the poor against the poor. How can you judge when trade is just? One quick reference point is the balance of trade, the sign that all parties are getting, or failing to get, fair values.

  3. The Federal Reserve killed the middle class. Richard Nixon ended the international gold standard in 1971 and the dollar went into free fall. In the only year for which we have an audit – 2008 – the Federal Reserve gave away more free money to the well-connected ($1 trillion) than have ever been spent on the poor in the entire history of our country. The welfare kings and queens work on Wall St and K St.

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