Curtis Ellis's Blogtag:tpmcafe.talkingpointsmemo.com,2009:/talk/blogs/curtis_ellis//89992009-01-07T14:41:27ZMovable Type Pro 4.21-enThe U.S. Trade Deficit Caused the Recession and the Financial Crisistag:tpmcafe.talkingpointsmemo.com,2009:/talk/blogs/curtis_ellis//8999.2506472009-01-07T14:30:21Z2009-01-07T14:41:27ZCurtis Ellishttp://ellisinfo.blogspot.com/
THE U.S. TRADE DEFICIT CAUSED THE RECESSION AND THE FINANCIAL CRISIS
Even the most optimistic among us must now realize that the United States is in a recession, but if we all had good paying jobs we would not be in a recession.
We have lost 4 million manufacturing jobs since October 2002. There are now over 10 million Americans out of work.
The recession and financial crisis has been caused by the transfer of jobs and our wealth to foreign countries. First we lost our jobs, and then our wealth.
Trade deficits kill domestic jobs. Our trade deficit is now 2 billion dollars a day. Two billion dollars a day in imports is 700 billion dollars a year.
Today, one billion dollars of manufactured imports equals 13,000 jobs lost. Therefore 9 million jobs lost.
Over the past 20 years, our trade deficit totals about 5 trillion dollars. Not coincidentally, our government also owes foreign countries 5 trillion dollars.
And behind all of these numbers, the percentages and statistics, there are real people. Americans are struggling to pay their bills, keep their homes, and secure their retirement. We now buy products from overseas that we used to manufacture here, and we wonder what happened to our jobs?
It doesn't have to be this way. If we all had good paying jobs, we could pay our mortgages. If we paid our mortgages the banks would not have a liquidity problem and we would not have the financial crisis on Wall Street. Rather than more of the same, we must start manufacturing and selling more than we are borrowing and buying.
We didn't get here all at once. There have been many mistakes made by many smart people. But we are not going to tax our way out of this recession, or borrow our way out of this recession, or even bail our way out of this recession. We are going to have to work our way out of this recession to become a wealthy country again.
Federal, state and local elected officials still don't understand the cause of the recession and financial crisis. The current federal solution is just more of the same - spend more of our tax dollars. We were given a high price tag without much of a plan and now we learn that not only is there no oversight of the rushed bailout package, but the lobbyists are already working the system and bending the rules to get their clients our tax dollars.
Our tax dollars are used to bail out banks, insurance companies, and now, the auto industry, but nothing is done to change the policies that got us here in the first place. It would be cheaper, smarter, and in the long run, more profitable to create jobs and put Americans back to work. The past two Presidents have experimented with so called free trade deals that have been anything but free. They opened our market to foreign producers without protecting our jobs and industries from predatory trade.
Free trade is just another economist theory that has been a failure in practice: the NAFTA, CAFTA and WTO agreements have destroyed mining, farming, and manufacturing and have transferred our wealth-producing capacity to foreign countries.
Robert Cassidy, the chief U.S. trade negotiator who negotiated China's entry into the World Trade Organization, now says the deal has not worked to the benefit of the U.S. economy and its workers.
Warren Buffet believes that over the long term, running large and persistent trade imbalances will be problematic for the United States.
Both Buffet and Cassidy are right. And the cold, hard facts now make it plain to see for everyone.
The job losses are now no longer just in manufacturing. Managers, bankers, stock brokers, insurance agents, all types of jobs in retail and wholesale are gone. Over 10 million workers are out of jobs, more are under employed, and it will get worse.
The U.S. housing market has lost 5 trillion dollars in value. Millions of Americans have lost their homes, millions are behind in payments and others are paying mortgages that are higher than the present value of their home.
Americans with savings, pensions or retirement plans in stocks and interest paying investments, have lost over 10 trillion dollars in value.
The financial crisis has destroyed several of the largest investment banks and insurance companies. The Federal Reserve has loaned 2 trillion dollars of your tax money and has not been disclosed how it was spent.
The big three auto companies are bleeding cash, heading for bankruptcy, and are now begging for a bailout.
Locally, tax revenues to city, county, state and federal governments have all decreased.
These governments have record deficits from loss of tax revenue on wages, social security, medicare and medicaid, sales taxes, real estate taxes, capital gains and others.
Cuts in government employment, health care, education, social security, etc. will be next, unless we pursue a path of balanced trade and put Americans back to work.
We are borrowing 2 billion dollars a day from foreign countries to buy their exports. Within a year, another 700 billion dollars, the size of the bailout package, will be in foreign countries.
Bailouts are necessary because of these bad policies, but as large as they are, they are only a band-aid on a cancer.
We have become a nation of consumers of foreign products and borrowers of foreign money. That's the bad news - but the good news is that we can fix it ourselves.
For a nation to be strong and wealthy it must grow, dig and manufacture. This is all we have to do. These are the only activities that produce wealth.
Borrowing money, printing money, buying companies or products or services, does not create wealth, it only delays the day of reckoning that now approaches.
The federal government's free trade policies in the NAFTA, CAFTA and WTO agreements has destroyed jobs and transferred our wealth (money) to foreign countries. This has caused the recession and the financial crisis.
These trade agreements left our industries and farms helpless. Foreign countries attacked them with predatory trade policies.
Predatory trade promotes exports and discourages imports. They keep wages low, rebate value added taxes on their exports, and charge value added taxes on imports. They provide domestic industries with local tax incentives and offer special financing and charge tariffs on imports. They target specific industries to monopolize.
But most importantly - they keep the value of their currency low in comparison to the U.S. dollar.
No. No. No U.S. company manufacturing in the U.S. can compete and this is why we have lost jobs and complete industries to foreign competition and why we are in a recession.
It is not hopeless. This is what we must do: We must continue to trade, but it must be balanced trade.
Balanced trade means if a country desires to sell products to the U.S. they are required by agreement to buy an equal dollar amount of products or services from the United States.
If they don't buy an equal amount of products, a trade balancing tariff (tax) will be applied to their products that we import.
Owners and managers at U.S. companies and factories will then recognize the possibility of domestic growth in business and profits. They will then hire and invest in plants and equipment in America.
For too long, the American worker has been competing on an unfair and uneven playing field. The U.S. government's free trade policies have caused the recession and financial crisis by sapping our wealth, killing our jobs, and shrinking our markets.
I am passionate about protecting our workers, our families and our children's future but I cannot talk to enough people, give enough speeches or get articles printed in enough papers.
What we need is a movement. Do you see or feel a threat to your future and your children's future?
Will you help? Will you convince others to convince others to convince others that our government's free trade policies have caused the recession and the financial crisis?
We need a main street, grass roots movement to change Washington's free trade policies.
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Economic Stimulus We Can Believe Intag:tpmcafe.talkingpointsmemo.com,2009:/talk/blogs/curtis_ellis//8999.2502482009-01-05T14:28:31Z2009-01-05T14:30:55ZCurtis Ellishttp://ellisinfo.blogspot.com/ From the New York Times:
"What
we are asking," said Daniel R. DiMicco, chairman and chief executive of
the Nucor Corporation, a giant steel maker, "is that our government
deal with the worst economic slowdown in our lifetime through a
recovery program that has in every provision a 'buy America' clause."
Nucor's
'buy America' proposal is critical to making certain we get the most
bang for every buck spent on recovery programs. Along with jobs on
the road gangs (or rail gangs), we'll have jobs in mills forging the
I-beams and rebar used to rebuild highways, bridges and railroads, jobs
in the stores where mill workers spend their paychecks on clothes,
cleaners, food and household goods, and fewer foreclsoures in the
towns where all those people live.
Something else to consider...
The recovery package may include spending to weatherize Snow Belt
homes. Obviously, this will create jobs for tradespeople, as this NY Times article explains.
Weatherizing
a million homes annually would also create about 78,000 jobs for a
year, according to the federal Energy Department's weatherization
project director, Gil Sperling.
The current 140,000 annual total creates about 8,000 jobs, Mr. Sperling said.
Although
that is a tiny fraction of the five million green-collar jobs that Mr.
Obama promised in the campaign, "it's a decent number of jobs per
dollar spent," said Harry J. Holzer, an economist at Georgetown
University and at the Urban Institute, a nonprofit group in Washington.
"The work is productive, and the jobs are at a mix of skill levels."
Weatherization
typically involves insulating heating ducts and water heaters.
Contractors should be required to use domestically manufactured
insulation materials as a precondition for receiving federal funds.
Buy
America helps boost domestic employment, domestic manufacturing
capacity, and increases the velocity of money circulating in local
economies, multiplying its benefits.
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Friedman and NYT confirm China free trade was sold on false pretensestag:tpmcafe.talkingpointsmemo.com,2009:/talk/blogs/curtis_ellis//8999.2499532009-01-01T13:30:01Z2009-01-01T00:50:36ZCurtis Ellishttp://ellisinfo.blogspot.com/ We were told that by moving industries and jobs Americans once did to cheap overseas labor markets like Mexico (through Nafta) and China (through PNTR/Permament Normal Trade Relations and WTO accession), wages and living standards in those benighted lands would rise and create One Billion Customers who would dutifully purchase products made by Americans in new enterprises that would spring up in the US to replace the "sunset industry" textile mills and auto parts plants that had moved offshore.
Apart from the fact that those new high wage jobs never materialized (old news), we now learn that Chinese consumers never materialized either.
China's whole system and culture nourish saving, not spending, and changing that will require a huge "cultural and structural" shift, said Fred Hu, chairman for Greater China for Goldman Sachs.
Friedman explains why the Chinese citizen chooses to save rather than spend:
China has no real Social Security, health insurance or unemployment insurance. Without that social safety net, it's hard to see how Chinese don't end up saving most of their stimulus. "You open up the newspaper every day and you hear about this factory shutting down or that supplier going belly up," said Willie Fung, whose company, Top Form International, is the world's leading bra maker. "You can never be too careful in this financial climate."
Shorn of the social safety net of the old Communist state, they [Chinese workers] squirrel away money to pay for hospital visits, housing or retirement.
This may sound like a great revelation, but it's really a fancy way of saying that workers with few benefits, minimal leisure time and no social protections do not a consumer society make.
Before someone claims hindsight is 20/20, let's remember that the perils of a lack of a social safety net in China (and Mexico) were well known - and often cited by opponents of trade deals. Critics had argued that it's disastrous for a country with a social safety net to open its markets to one without.
Businesses knew that the taxes and costs necessary to support Social Security, unemployment insurance, employee health insurance, pensions and other worker protections placed them at a significant disadvantage to foreign producers who had no such costs.
Organized labor understood that America's enviable standard of living (read consumer society) springs from social guarantees (unemployment, Social Security etc) that labor had fought for, not just "jobs."
Proponents of PNTR and Nafta ignored the fact that government-mandated programs (the safety net) played midwife to the birth of consumerism. Consumer society requires people who have money in their pockets - and the disposition to spend it.
Instead of creating Chinese consumers for American exports, Wall Street-biased trade with China resulted in American consumers purchasing Chinese exports - with money borrowed (against their homes) from China.
But the American consumer has reached his credit limit.
What's the way out?
Who knows. Maybe China will invest its people's hard-saved export earnings in American industry in order to create a middle class (here) that has the disposable income to buy China's exports. Turnabout is fair play.
Cross posted at Relevant Information at http://ellisinfo.blogspot.com/. ]]>
Krugman renounces free trade, neoliberal economics and financialization tag:www.talkingpointsmemo.com,2008:/talk/blogs/curtis_ellis//8999.2494492008-12-26T05:34:32Z2008-12-26T07:11:16ZIn his December 22 column, Paul Krugman says we must step away from so-called 'free trade' if we want a sustained economic recovery (italics added).A more plausible route to sustained recovery would be a drastic reduction in the U.S. trade...Curtis Ellishttp://ellisinfo.blogspot.com/
December 22 column, Paul Krugman says we must step away from so-called 'free trade' if we want a sustained economic recovery (italics added).
A more plausible route to sustained recovery would be a drastic reduction in the U.S. trade deficit, which soared at the same time the housing bubble was inflating. By selling more to other countries and spending more of our own income on U.S.-produced goods, we could get to full employment without a boom in either consumption or investment spending.
This, of course, is heresy in the High Church of Free Trade. According to dogma, if a good or service can be produced elsewhere more efficiently (and the wizards of finance will tell you what 'more efficiently' means), domestic employment or balance of trade must be sacrificed to the higher cause.
Krugman seems to be sanctioning something dangerously close to import substitution, an approach to economic development popular in the post-colonial era - and replaced by the neoliberal 'Washington consensus.' But he doesn't stop there.
[W]here will the capacity for a surge in exports and import-competing production come from? Despite rising trade in services, most world trade is still in goods, especially manufactured goods -- and the U.S. manufacturing sector, after years of neglect in favor of real estate and the financial industry, has a lot of catching up to do.
Krugman is whacking another pillar of the church: the infallibility of the post-industrial service economy. This doctrine holds that we are past making 'things,' whether it's clothes and steel (dubbed 'sunset industries'), or computers and consumer electronics (mere 'commodities'), and our economic future is in services, as in, say, financial services. (Funny how the cheerleaders for the post-industrial economy were so jazzed by China's economic miracle - though it sprang from manufacturing, not services.)
The under-appreciated Eamonn Fingleton has pointed out that policy-makers' misplaced faith in a service economy is an error of historic proportions. At any rate, Krugman brings up the often-overlooked fact that most of the world's economic activity still involves making things - and our ability to make things has been crippled by the financial sector's growth.
The financial services industry has claimed an ever-growing share of the nation's income over the past generation, making the people who run the industry incredibly rich. Yet, at this point, it looks as if much of the industry has been destroying value, not creating it. And it's not just a matter of money: the vast riches achieved by those who managed other people's money have had a corrupting effect on our society as a whole. ...
[H]ow much has our nation's future been damaged by the magnetic pull of quick personal wealth, which for years has drawn many of our best and brightest young people into investment banking, at the expense of science, public service and just about everything else? Most of all, the vast riches being earned -- or maybe that should be "earned" -- in our bloated financial industry undermined our sense of reality and degraded our judgment.
The problem is the bloated financial industry itself, not just bloated salaries in the industry. It has undermined and degraded our productive capacity, our ability to make the things we use in our everyday lives, leaving us dangerously dependent on uncertain sources of not just energy, but food, clothing and technology as well.
Even Tom Friedman, that archbishop of flat-earthism, is beginning to see the light. Two days before Christmas he wrote:
[W]e've fallen into a trend of diverting and rewarding the best of our collective I.Q. to people doing financial engineering rather than real engineering. These rocket scientists and engineers were designing complex financial instruments to make money out of money -- rather than designing cars, phones, computers, teaching tools, Internet programs and medical equipment that could improve the lives and productivity of millions.
Sorry, Tom, but we didn't fall into a trend - we jumped head first into the post-industrial-financial-service-economy-is-the-future abyss, and you were standing tall at the edge of the flat world assuring us the bungee cord was secure.
In reality, research and engineering follow production. You'll find the researchers and engineers creating the next generation of technology right there where you find people making the cars, phones, computers and medical equipment we use today.
This is cross posted on my blog Relevant Information, http://ellisinfo.blogspot.com/.