I disagree when a friend of mine ignores trade deficits and downplays the loss of US industry. The sky is not falling, he says.
|
If we make so much less than we buy, and we sell so much less of value to pay for the imported goods we do use (about $1 of $3 imported), how can that be a sustainable economic policy? Wall Street greed was an attempt to rectify the difference, by creating financial products out of thin air and selling them all over the world: the result was the crash of 2007-8, and unless our economic policies change dramatically, we will have a repeat in another few years.
We are borrowing from (nearly) everyone, but especially the Chinese, to buy cars, computers, and even shrimp and garlic from abroad. And every month our trade deficit is somewhere between $30 and $60 billion. A good month comes in at the lower figure. Most countries around the world are running trade surpluses with us month after month, year after year.
How is that normal? The only way we have been able to sustain this trade policy for so long, and also fight two unnecessary wars, has been because the US dollar has been the world's reserve currency. However, our very profligacy will end the dollar's special status sooner rather than later. Then we really will be in the trade soup. We won't be able to pay for anything without foreign exchange, or SDR-type international currency. Our trillions in foreign debt will become real.
Since large global corporations have internationalized their supply chains, we will need international currency, or to pay off our debts, before we buy almost anything, even so-called "American made" goods, since most components are imported. How will we even import all the oil we use--well over half of our yearly consumption?
My friend said people wouldn't want to work in factories, anyway. People who now can only work at MacDonald's or a customer service outlet for a dollar or two above minimum wage would much rather work in factories. My friend's dismissal of such work is incredibly elitist. It was the basis of America's mass middle class that emerged in the late 1940's and was strong through the late 70's. The disappearance of factory jobs has bolstered the desperate underclass, undercut whole areas of the nation--driven through Detroit or Milwaukee lately--and has accelerated our soaring
trade deficits.
And it's not just factory jobs that have disappeared. Tech jobs, computer jobs, customer service jobs, all are being "out-sourced." My son's previous NYC employer, Thomson-Reuters, outsourced his whole business data section to Poland, even though there weren't many Poles who could manage the Spanish needed to deal with business data from Latin America, one of the sections' main subjects.
How can you sustain an economy that doesn't even produce most of the services we need? People tried to sustain themselves by borrowing against their house equities, since they couldn't get jobs that paid enough to maintain the US middle class lifestyle. See how that played out? Ultimately, most of that borrowed money came from China, Japan, Germany and Saudi Arabia, but even the Chinese are doing their best to get off their dollar dependency, because its leaders know that US trade deficits are not sustainable. Proof? China is massively in the market for gold, and for non-dollar currencies, and is expanding its bilateral, non-dollar transactions with nations in Asia, Africa and Latin America at an astounding rate. It is now Brazil's number 1 trading partner, but not in dollars.
Maybe the sky's not falling, yet, but that's because something as massive as a global economy will take a long time to stabilize, but at present it is not normal, and not stable that the US runs trade deficits with almost the whole developed and most of the developing world, and has since 1981. It's crazy. And US policy makers are, either: crazy, incompetent, or stalemated by our purposely, (constitutionally) ineffective government and by the rapacity of our global corporations, which are only nominally American.
Now, with Citizens United, corporations have demonstrated: they can buy and sell virtually every American government institution, even the elected parts. They have no loyalty to the good of the nation, only to their own bottom lines. So, what's to prevent us from being sold down the tubes?
As I've pointed out many times before, the elites are enriching themselves at everyone else's expense (earning dividends and capital gains on profits from imports and foreign subsidiaries). But they will either not stay in the US (beckoned by "80+ beautiful countries" memorialized in a business newsletter I mentioned on my blog), or they will buy things like gold and collectibles, and hope for the best.
When Rome fell, the worst happened, instead: the barbarians tortured the remaining elite to reveal their treasures--and then stole them.
