I want to thank a reader who prefers to remain unnamed for pointing out the front page New York Times article highlighting the dangers of the massive trade deficit with China. It particularly hits on how this gigantic trade imbalance allowed our government to borrow over $1,000,000,000,000 abroad to support our budget deficit without feeling the true cost.
Of course, many of have been going on about how impossible it is to sustain this situation for years, but it is nice to see respected newspapers getting on the bandwagon. My own belief is that unless these trade and budget deficit issues are dealt with immediately we face a depression, but action seems unlikely: According to today’s NYT article “…the United States is likely to be more addicted than ever to foreign creditors to finance record government spending to revive the broken economy.”
What drove us to this point? The NYT article does not go beyond discussing the “addiction”. However, the fact is Wal-Mart, Target, and the rest of the big chain stores racing to get focus only on price, no matter the many other severe costs to our society.
“But in classical economics, that trade gap could not have persisted for long without bankrupting the American economy. Except that China recycled its trade profits right back into the USA.” In short, the issue should have imploded under its own weight long ago, but thanks to China funding our consumption binge continues.
Realizing the borrowing situation, the Treasury Department has gone to extreme measures to protect its money source – not branding China a currency manipulator in spite of that being their official policy (keeping their currency weak is a huge trade advantage over our producers). Their currency has “traded” at 8.3 Yuan to the dollar since 1995, “…a level that remained fixed for a decade”. It is impossible for currencies to stay that flat unless there are hugely manipulated. For instance, the Japanese Yen has ranged between nearly 80 to 200 Yen per Dollar in roughly the same timeframe.
“It (China) holds $653 in Treasury debt, up from $459 billion a year ago.” Let me spell that out – our federal budget deficit is roughly $500 billion this year, so the $194 billion increase in the debt China owns is nearly 40% of our borrowing requirements for the year! That does not even include Freddie Mae, etc. where China also loaning us hundreds of billions.
The article was excellent, but missed addressing the destruction this relationship has done to America’s industrial base. We have lost 2 million jobs this year alone! Allowing these cheap imports to crush our own makers may have allowed the Treasury an easy place to borrow, but has cost us our future as these millions of good jobs are destroyed.
We must take whatever action necessary to get us off this “addiction” and save our country’s future.
Founder of MadeinUSAForever.com your source for made in USA products.
Robert Hall is an artist, and also a thinker and one who struggles for America and our future. Through his music he is reaching out to generations of both new and old to not only entertain, but open our eyes to issues that most in the entertainment industry would rather hide from. I admire his gumption, tenacity, but most of all his artistic talent.
I found that being able to have the following interview a pleasant surprise. After all, in this age of irony with the economy sinking to new lows and all that is going on in the world, would Santa Claus really be willing, even able, to chat?
Todd: Santa Claus, thank you for joining me today.
Todd: Ah…thanks Santa. With all that is going on in the world is the Christmas spirit still alive and well?
Santa: I am as sure of the Christmas spirit being alive today as ever. As sure as your two year old daughter gazing at that Christmas tree yesterday.
Todd: You noticed that too?
Santa: A bit of me is everywhere Christmas shines. Ho! Ho! Ho!
Todd: Where else can we see Christmas spirit?
Santa: In every act of charity or kindness this time of year. Even a small moment, like holding the door open at the post office for an elderly person.
Todd: But Santa, in these troubled times where Americans know doubt and many folks real hardship, where is the Christmas spirit in that?
Santa: It is in such times that Christmas is most important. America has known many a tough Christmas in the past, and that is what defines you. Think of Christmas 1941 just a few weeks after Pearl Harbor was attached, the Christmas of 1931 during the Great Depression, Christmas 1863 when brother fought brother, or Christmas 1777 when a budding nation was struggling to be born. Today, like in those days, Americans will roll up their sleeves and make things right again.
Todd: Can we see the Christmas spirit in giving gifts?
Santa: In giving gifts “yes”, but in the true spirit of giving. Tell me Todd, would you rather have a picture drawn by your kids or a new iPhone?
Todd: Another picture for my collection Santa, but what are you getting at?
Santa: The spirit of Christmas has never been about consumerism run amuck. Buying colorful stuff forgotten within moments is not the way.
Todd: So, the big retailers…?
Santa: They have turned much of it towards their own greed, distorting beauty and joy. Santa has a special place on his naughty list for the executives of Wal-Mart, etc. It won’t be coal my raindeer leave for them. Ho! Ho! HO!
Todd: Is your workshop in China?
Santa: Never would I leave children dangerous toys, made in horrible conditions in a police state. Would you have expected me to give toys from Nazi Germany?
Todd: No way! So, where is your workshop?
Santa: Ashville, Big Piney, Cloverdale, and a thousand… actually millions of other places and homes where real things are made with heart. From grandfather’s workbench to mom’s job, and anywhere else something is made with care and pride.
Todd: Santa, you sound like a patriot. Are you American?
Santa: I have been American since before the dream of freedom was even a twinkle of an idea. Look, I got the red and white, now I just need blue! Ho! HO! HO!
Todd: Thank You Santa, you have been truly inspiring today! Any final words?
Santa: Merry Christmas to all! And God Bless America!
Founder of MadeinUSAForever.com, your source for American-made products.
Government statics reported increasingly severe news Friday, reflecting what most of us already know, that the economy is ALREADY in the worst recession since World War II. The official statistics are typically optimistic, so this glaringly poor news is even scarier:
-533,000 jobs lost last month.
-1,900,000 jobs lost so far for 2008.
-“Official” unemployment rate up to 6.7%, but “Broader” government reported unemployment rate (including folks working some part-time, but looking for full-time work) surges to 12.5%!
If even the government is calling the broader unemployment rate 12.5%, how much worse is it than that really?
Not only are company bankruptcies surging, but scarier to see is that many are taking the “chapter 7” route instead of the more normal “chapter 11” bankruptcy. In chapter 7, the company ceases to exist and the court tries to sell off any assets pay creditors (including employees) a few pennies on the dollar owed. Chapter 11 is where company keeps operating while shedding some debt liabilities and trimming back. Chapter 11 implies that with reduced debt, the company still has a chance to survive and continue operations. It will hurt some employees, but at least many other employees have a chance to keep their jobs. Chapter 7 involves an immediate shutdown with all employees terminated, and often the immediate loss of health insurance. Neither is good, but chapter 11 at least means a lot less damage to employees and communities overall. This surge in chapter 7 bankruptcies implies that the firms see no way to survive.
The employment situation has decayed so much, this morning’s Wall Street Journal even reported on a 1000 people applying for two $8 an hour gas station jobs!
The government doing something… I am not even going to write that because we really, truly cannot depend on Washington.
We can do something as individuals though. Even with the hardships rising, Americans will spend on average something like $1000 per household on the holiday season. If a small percentage of that, which was going to foreign goods, goes instead to quality, stylish American-made products we can make a huge difference overall.
Made in USA products are very hard to find at Target and Wal-Mart (I am just going to call these massive importers “Tar-Mart”). There tons of great American-made products available online though. Just search Yahoo for “Made in USA (fill in what you are looking for)”.
Founder of MadeinUSAForever.com (http://madeinusaforever.com/)