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I am not an economist and will not try to sustain a technical argument on this subject, but even a layman is entitled to point out the obvious. Trade flows and currency values are supposed to self-adjust over time. We have been running huge fiscal and trade deficits. This will necessarily undercut the dollar. Higher interest rates and inflation are the likely downside. Greater trade competitiveness and a rebounding trade balance is the plus side. The pendulum swings. In the long run, it balances out. I think we all understand this.

The real issues are the velocity of change and the frictional costs along the way. For some years now, the gloom and doomers have been arguing that we could not possibly survive the strong dollar, as our whole productive apparatus was going offshore. Now the doom and gloomers, many of them the same people as before, will argue that we cannot possibly survive a weak dollar. Apparently we are dead one way or the other.

I for one hope for a relatively smooth adjustment, though I recognize there are no guarantees. One ace in the hole the U.S. currently possesses is that we have had a somewhat greater degree of political discipline than most other major nations. Yes, we've let spending slip, but we still have the freest labor market among the majors, the most flexible, diversified, and balanced economy, among the lowest barriers to trade and, in general, a greater facility for change. The U.S. economy seems to be able to adjust while the central planners elsewhere are freezing things in place with controls while they try to formulate their strategy. So now the dollar is adjusting. Fine; we've been saying the trade deficit was unsustainable, and this is how it corrects. Let the rest of the world suck up ourexports for a change. The aggregate flows have to balance sooner or later. Let it begin. We'll manage.

Fine; we've been saying the trade deficit was unsustainable, and this is how it corrects. Let the rest of the world suck up ourexports for a change.

Ah, but they won't. All they want from us is the technology, and the industrial infrastructure. Once fully transferred, its over baby. They are not about to help us restore our industrial foundation. They will keep us down, and kick us...good and hard. Laughing all the while at the foolish free traitors who ignored the fact we were dealing with an Mercantilist Communist Industrial Piracy.

U.S. Moving From First to Third World

Paul Craig Roberts
Wednesday, Oct. 20, 2004

In the early 1980s, when I was assistant secretary of the treasury, the U.S. trade deficit was due to oil imports.

Currently, the U.S. deficit in manufactured goods alone is 3.5 times our oil imports. Our trade deficit in vehicles is nearly equal to our deficit in oil, and our deficit in clothing, ADP equipment, office machines, TV and VCRs is 1.5 times our oil import bill.

The United States is ceasing to be a manufacturing country. America has a trade deficit in almost every manufacturing product.

Comparing the first eight months of this year to the first eight months of last year, our trade deficit in manufacturing products increased by 16 percent. In iron and steel mill production, it increased 146 percent.

The United States has a trade surplus in corn, cotton, wheat, scrap metal and animal feeds. The only manufacturing products in which the United States has a (small) trade surplus is airplanes and scientific instruments.

Since 1985, the U.S. trade balance with China has deteriorated from balance to a deficit of $160 billion. Who has the high-tech economy, and who has the Third World economy? Normally, Third World countries run trade deficits with high-tech countries.

Charles McMillion, president of MBG Information Services, notes that the U.S.-China trade relationship is the most unequal in the world. The United States has a trade deficit with China in almost every industry code. The U.S. deficit in advanced technology products with China is astounding.

How was it possible for China, alone in world history, to outpace the most advanced country on earth? Was China elevated to the forefront by U.S. firms who moved their production for the American market to China in order to take advantage of essentially free labor?

Americans no longer produce the "American goods" that they consume. American incomes are falling, as economist Joseph Stiglitz recently pointed out. When the dollar gives way, as Dallas Federal Reserve Bank President Robert McTeer says it must, Americans will not be able to purchase the goods and services that American firms produce abroad with foreign labor.

U.S. firms will have to sell their offshore-produced wares to the labor that produces them. "Cheap foreign goods" will be beyond the reach of Americans, whose country is in rapid transformation from a superpower to a Third World economy.

We'll manage--

--the worlds businesses that is, while the doom and gloomers will manage to be scared. Take that "SCARY" chart in 'post#1' (please). Of course if we look at the rest of it we can see that the exchange rates are simply coming out of an excessive peak. IMHO the reason that these clowns can get away with this crap is because they know that both the democ s and the noisiest of the freepers will just lap this stuff up.

You can bet that if Kerry were elected, they'd be using these very same numbers to announce that the international markets are liberating us from the terrible Bush economy and taking us back to the our lost glory days of the wonderful '90's..