Posted on 08/03/2018 10:08:33 AM PDT by Rashputin
Why is Trump fighting the trade war? Here's why.
Critics of Trump's trade policies think everything is okay if we don't do anything. The chart below shows that everything is not okay if we don't do anything.
This is a chart of capital spending in the U.S. from 1968 through to the present. It is a straightforward presentation of monthly data from the Commerce Department. There is nothing clever, nothing tricky about this presentation or about the time frame chosen. The Commerce Department started this series in 1968. It superseded another series on capital spending.
Source: U.S. Department of Commerce.
Why is this chart important?
It is a death sentence for America.
Although it is a single series of data, the chart is essentially in two parts, split in the year 2000. There is no manipulation to achieve this effect. This is how the data lay out, which is why this chart is so significant.
(Excerpt) Read more at americanthinker.com ...
But if one side trades goods for the other sides capital, including real estate, intellectual property, factories, and congresscritters, then it is not trade in goods but subversion of the other wastrels' ability to do anything productive.
GDP has also grown significantly slower since we started “free trade” in the late 90s with China and others.
Answer: To save America.
Thanks for publishing. We’ve had 50+ years of do nothing politicians of both parties owned by NYC and London banker oligarchs that have sold our country out to global trading partners. None of them had a philosophy of USA first.
America once had tariffs that provided income and incentives for other countries and Americans to produce here. We had no income tax. That was before the Central bankers connived and established the fed and (fraudulently?) got an income tax Amendment and put us into perpetual debt.
Trump is actually fighting back in the trade war the other countries have actively engaged in against US. All these free traders screaming the sky is falling shows their complicity in the screwing of the American people.
If I am paying a 30% tariff on the automobiles I export to your country and you are paying nothing for yours coming here that is not free trade or any where close to it and the sellouts either corporations or the elites know this. But there is $$$ to be made at their fellow countrymen’s expense. If you want free trade I’m all for it but lets be clear it’s resiprical.
The sky is falling “free traders” on the take remind me of the Samuel Adams quote:
“If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom - go home from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!”
Samuel Adams
I’m not convinced though that it is controlled by international trade. We’ve been running a big trade deficit since the mid-1970’s. Lots of other countries have been running surpluses because of their trade barriers and their tariffs, but look who has the best economy in the world... not them.
The main reason we are running a trade deficit has nothing to do with “unfair” trade. It’s the inevitable result of the fact that foreigners are willing to hold US dollars. The US dollar is the closest thing there is to a world currency. No one wants to hold the yen or the yuan. They might trade with the yen or the yuan, but no one wants to hold them. As long as foreigners want to hold the US dollar, there will be a flow of US dollars out of the US, and that means there will be a trade deficit. The surest way to stop it would be to trash the dollar. Make it so that no one wants to hold it. Then the dollar will collapse and they will start to flow back in.
But that would not be a good idea. And tariffs will be only marginally successful in reducing the trade deficit because when you raise tariffs, the dollar naturally goes up in value, partially offsetting the tariff increase.
Close, it’s not that they are willing to hold US dollars. When others are paid with US dollars they have the ability to spend those dollars on what dollars can buy. This can be US commodities, US manufactured products, or debt.
The debt is what is fueling the trade deficit.
Good piece, thanks.
How much consumer goods production has Walmart pushed over to China? And all the capital equipment required to do it?
I remember several stories of entire US plants being bought by the Chinese, disassembled and shipped to China. And the Walmart purchasing group helping US manufacturers move production to China to help them meet price targets.
“It’s the inevitable result of the fact that foreigners are willing to hold US dollars.”
True, and why is that? How does it benefit them to put dollars under their mattresses?
I agree it’s a good article. However, it lacks a basic understanding about the link between “Capital Spending” and trade.
Capital Spending is a national (not international) measurement. It is an indirect link to international trade economics. So, for good reason, nobody compares or equates the two. Capital Spending is better linked to the performance of the American Economy (Trade is only a part of that).
All that said, I agree with the use of the graph as an indicator of economic strength, of which trade is a component. Capital Spending is investment in assets to produce products & Services (Buildings, equipment, machines, materials, etc.)
What the author seems to be ignoring here is that U.S. GDP has grown considerably even during this period when capital investment has stagnated or declined. How does he explain this? As a nation we haven't just slowed our capital investments and then sat back and watched as our economic activity declined.
I would suggest that we've collectively made a simple -- and perhaps ultimately destructive -- decision to channel our financial resources into "investments" that either: (1) have no long-term return that can be measured in financial terms, or (2) are so badly misdirected that they actually have a NEGATIVE return.
I'll offer three perfect examples of such "investments": education, pensions, and health care.
It really is that simple, folks. Over the last 50 years we've made a conscious decision to trade in our domestic capital stock for a declining education system, overpriced health care, and trillions of dollars of financial support for elderly and infirm people who are no longer productive contributors to the nation's economy.
There are a lot of reasons I think. One obvious one is that it is partially the foreign central banks that are doing it to keep their currencies down. But another is simply that the dollar is so versatile. No one trades in the yen except the Japanese. No one trades in yuan except the Chinese. But EVERYONE trades in the dollar. You don’t need to be trading with an American company to trade in the dollar. Two Chinese companies can trade between themselves and be perfectly happy using dollars. Same with every other country.
The reason for this is that the Fed has done such a good job of managing the currency, and the US is such an important trade partner for virtually every nation. Thus, dollars are very useful to everyone.
One way to change that would be to cut off or mismanage US international trade. Then foreigners will decide that they don’t want to hold the dollar, and we’ll get a balanced trade account, but at a very high price.
U.S. debt is driven by the value of the U.S. dollar as the dominant global exchange currency. I contend that military spending has been the most productive "investment" of all in that regard.
Brellium correctly pointed out that a U.S. trade deficit provides dollars to foreigners who then use that money to buy U.S. commodities, manufactured products, or debt. But it also allows them to buy the cheapest, shabbiest, but most cost-effective U.S. assets of all: OUR ELECTED LEADERS.
And what do our elected leaders offer these foreign investors in return for their money? That's easy: They offer the unfettered use of U.S. military assets to topple governments, suppress rebellions, and invade neighboring countries.
With that in mind, how can the author possibly analyze capital investments and U.S. trade policy without including military spending?
The business of America is business.
That which helps to increase sales is good
Symantics are irrelevant
I don’t look at it that way. There is nothing that says that if we write debt, the foreigners have to buy it. We could sell it to Americans. The way I look at it is that the trade deficit is enabling the foreign debt (because foreigners have a demand for US debt), rather than the debt causing the trade deficit. But you are right that they go hand in hand. If we were to ban foreigners from owning US debt, that would definitely reduce the trade deficit, but not necessarily eliminate it since foreigners are happy to use the US dollar in transactions between themselves that do not involve Americans in the slightest.
In fact, when foreigners own US debt, they are really holding US currency anyway, albeit as futures. They are still taking the US currency risk, though. So what you are saying is really not that much different from what I’m saying. I guess that’s why you said “close.”
That’s a good point. How do we “value” military assets thought? Think about depreciating an asset (not that the military pays taxes). What is the “useful” life of an Aircraft Carrier or B-52 or Abrams Tank for accounting purposes. ;o)
I do get your point. He is calculating the spending side and our government spending would certainly affect the numbers. It’s not chump change.
So what is your solution for elderly and infirm people who are no longer productive contributors to the nation’s economy. Euthanasia? The Final Solution? Soylent Green? Inquiring minds want to know.
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