The Dragon vs. The Eagle: Trade Wars and Beyond ‘The Boston’ Tea Party

It should come to no one’s surprise that our Dragon has gotten too big for his britches. That since 1978, when we open the door to an enlightened trade policy, China has taken great advantage of free trade, to the detriment of the USA. The eagle has flown too close to the fire of the dragon – allowing it to dictate now how we operate in trade markets and foreign relationships. (Its support of Sudan in the Darfur crisis. Its edict and proposal for a new global currency - obviously, to undermine our U.S. dollar and to put China as the controlling financial superpower.)

A breakdown of trade data since 1985 is as follows:
From: http://www.census.gov/foreign-trade/balance/c5700.html#1985

Trade Deficit	USA	China
Year	Exports	Imports	Trade Deficit	President
1985	3,855.70	3,861.70	-6	Reagan
1986	3,106.30	4,771.00	-1,664.70	Reagan
1987	3,497.30	6,293.60	-2,796.30	Reagan
1988	5,021.60	8,510.90	-3,489.30	Reagan
1989	5,755.40	11,989.70	-6,234.30	Bush
1990	4,806.40	15,237.40	-10,431.00	Bush
1991	6,278.20	18,969.20	-12,691.00	Bush
1992	7,418.50	25,727.50	-18,309.00	Bush
1993	8,762.90	31,539.90	-22,777.00	Clinton
1994	9,281.70	38,786.80	-29,505.10	Clinton
1995	11,753.70	45,543.20	-33,789.50	Clinton
1996	11,992.60	51,512.80	-39,520.20	Clinton
1997	12,862.20	62,557.70	-49,695.50	Clinton
1998	14,241.20	71,168.60	-56,927.40	Clinton
1999	13,111.10	81,788.20	-68,677.10	Clinton
2000	16,185.20	100,018.20	-83,833.00	Clinton
2001	19,182.30	102,278.40	-83,096.10	Bush II
2002	22,127.70	125,192.60	-103,064.90	Bush II
2003	28,367.90	152,436.10	-124,068.20	Bush II
2004	34,744.10	196,682.00	-161,938.00	Bush II
2005	41,925.30	243,470.10	-201,544.80	Bush II
2006	55,185.70	287,774.40	-232,588.60	Bush II
2007	65,236.10	321,442.90	-256,206.70	Bush II
2008	71,457.10	337,789.80	-266,332.70	Bush II
2009	4,178.10	24,748.00	-20,569.90	Obama*

Trade Deficit	USA	China	Billions (Deficit)
Reagan	15,480.9	23,437.2	-7.96
Bush	24,258.5	71,923.8	-47.67
Clinton	98,190.6	482,915.4	-384.72
Bush II	338,226.2	1,767,066.3	-1,428.84

It takes very little understanding or logic to see that of the $1 Trillion plus in U.S. currency China is sitting on, most of it came in just the past 4-8 years. Even if you compare George W. Bush to Clinton (who didn’t help create the original policy, but carried it through) - but compared to our NAFTA partners, trade with China was of little consequence, then - it is no real comparison.

China’s goods have steamrolled America’s manufacturing might. With a few instances of dangerous goods entering the United States.

Trade with NAFTA partners:
Source: http://www.census.gov/foreign-trade/balance/c1220.html

Canadian Trade		USA	Canadian	Imbalance
	Millions	Exports	Imports	Balance
2008	TOTAL	261,380.00	335,555.30	-74,175.30
2007	TOTAL	248,888.10	317,056.80	-68,168.60
2006	TOTAL	230,656.00	302,437.90	-71,781.80

Source: http://www.census.gov/foreign-trade/balance/c2010.html

Mexican Trade		USA	Mexican	Imbalance
	Millions	Exports	Imports	Balance
2008	TOTAL	151,538.60	215,914.90	-64,376.30
2007	TOTAL	136,092.10	210,714.00	-74,621.80
2006	TOTAL	133,978.80	198,253.20	-64,274.30

We actually had a trade surplus with Mexico back in 1994, shipping several billion more to them than they did to us. But since, we have ran trade deficits of significant amounts with OPEC nations, the European Union, Japan, and the United Kingdom (as part of the EU, it likely is not as important.)

Trying to support the world’s trade – and allowing a communist nation to have us in over a barrel – is a likely cause of a trade war. Mexico, with their recent troubles against drug lords, has imposed tariffs on our goods since we stopped their trucks from roaming freely. They are just one of many. Japan’s trade is off by 50% in the last two months.

And protectionist policies are what governments are prone to do – to keep the fringe people from turning to revolution. (Even though it does not promote economic stability – only ascerbates the problem. Yet, trade is suppose to be fair & equal - not free (meaning: constraints to it are reasoned/reasonable due to the destruction of otherwise competitive markets in the consuming country, as the saving country manufactures at will) - when we run these huge deficits it sells off the assets of the United States because these other countries have to reinvest those notes somewhere where they can get the most benefit – where else but the United States?)

Yet, the biggest consequence of the prior policies is that it has hamstrung our ability to modify our own economy. Yesterday, people embarked on a Tea Party protest of their taxes being raised or the policies of the Obama administration. Really? Are we that desperate to show our anger toward what is the only course of action – to rebuild through infrastructure projects, education dollars and energy programs.

Conservatives our forgetting that it was George W. Bush, not Obama, that put off technology, energy and educational improvements to go with a holy war, a financial Ponzi scheme of epic size and scope and ignoring the fleecing of America through trade imbalances.

China has us by the short and curlies for now. If we ignore them, they will make policies that can only lead to confrontation on a military field. Proxy wars are inevitable; sown in the economic philosophies of conservative thoughts. Yet, we can reverse this direction through smart investments, economic independence (not revolution on hypocritic grounds) and a spirit that led our forefathers to explore, innovate and invent an entire nation.

Make no mistake about it: we are in a war of ideology. But we have to tamper the crazy talk and fight both fronts smartly. The external threat and the internal craziness that grips aspects of fringe people unwilling to reason out their beliefs to a better end. We must if America is to maintain its place as the sole superpower.

A place I must admit I have a hard time giving up.

Prediction Revisited: Decidedly Correct about The Storm

I should not toot my horn on this one, yet, my prediction came to pass: The U.S. Economy has fallen into a Great Recession, heading toward Depression, unless these policies of Obama can turn around a Titanic ship of economic failure.

On March 14, 2008, I wrote: The Bear is Yet to Come: The U.S. Economy will fall into a Depression. I was looking at the markers in the economy then:

1. Commodity Prices were unreasonably high
2. Oil Prices (and energy) were sapping our spending dollar
3. Weakness in the U.S. currency
4. Unemployment losses were starting to mount (nothing like the last 5 months)
5. Mortgage crisis finally hitting home
6. Zero GDP growth
7. Inflation

The last was a complete error – it was occuring at the moment in commodities and staples – however, the mortgage and used car markets would reflect large DEFLATION, and a much larger piece of the puzzle.

Today, the Fed reported the largest loss in family wealth on record. Since its peak in June 2007 we have loss nearly $13 Trillion in personal wealth. From Yahoo! Finance:

Family net worth had hit an all-time high of $64.36 trillion in the April-June quarter of 2007 but has fallen in every quarter since that time.

The record 9 percent drop in the fourth quarter pushed total net worth down to $51.48 trillion, a level that is 20 percent below the third quarter 2007 peak.

 Meanwhile, the U.S. stock market capitalization has lost nearly 1/2 of its value  which stood at $15.34 Trillion in May 2007. So, all total, approximately $20 Trillion dollars in lost value, twice the National Debt of the United States.

 We are in unprecedented waters with a monster cyclone churning over us. The Great Depression did not have the National Debt problems we currently have – the government had room to allow for deficit spending – and so, pumping money into the system made sense and worked to bring us at least back to the same point we were at in 3-4 years. (1929 the Depression started, 1933 it bottomed, 1937 we were back to 1929 values…WWII brought us to a better point, oddly enough.)

We also did not have a medical crisis – retirees, health concerns, and Social Security claims – piling up on our balance sheet. This made it doable to start such programs back in the 1930’s. Which is why we need a major overhaul of the system else we fall into a quagmire of unimaginable depths.

We had a still growing and developing America. Land was still open; manufacturing still growing; grand infrastructure projects still on the horizon. We are now locked into a complacent viewpoint that we should not redevelop, tear down bad ideas and systems, and unlock the innovative and unique spirit that drove us to the position we still hold as the richest country on the Earth. This is paramount to not slipping further down the slope of economic woe.

We are in these uncharted waters due to poor planning, ideological shifts and the blaming of common folk (that made their mistakes) for the elitist and greediest amongst the Wall Street and Washington power gangs. The latter have the power; the connections; the education; and the we know what is best attitude that comes from their MBAs, Ph.Ds., J.Ds., and billions made off the common rabble making their daily bread.

A History of Worst Days on Wall Street

So, it is up to common folk to make opportunity where little seems to exist. To batten down the hatches, set a new course, and make a new discoveries during an Economic Perfect Storm.

They’re will be likely worst days on this choppy, tsunamic-laden horizon – predictions like mine were made during a bad stretch – however, we Americans have to be better than our educated, snooty and self-absorbed elite. And their predictions of all is well in a free-market, free-for-all but those that ultimately pay for their misguided attempts to casino the market daily. 

And let us hope our President sides with us more than the morons of money in our desire to change the path and make a new America that can weather any of the self-induced problems of the Gangs of New York Finance made.

The clouds are dark, but we can weather through the storm.

2010 Budget & Beyond: It’s the Refinancing of a Failing Economy

I haven’t yet digested the new outline for the 2010 Budget but I am sure it includes some real tough figures to swallow. Many are all ready posturing that it is, “too big” and just another, “tax and spend”budget by a Democrat. Really?

The former President Bush II, didn’t tax and spent like a drunken sailor on liberty for eight years. As a result, the economy (with a huge banking fiasco and poor consumer decisions and 25 years of mismanagement of the US economy) now faces tough choices today.

Today. We have to somehow avert a catastrophic failing of the U.S. Economy by creating job opportunities, buttressing credit markets, and figuring out where all the money will come from and where it all will go while simultaneously trying to fix health care, stave off energy problems, and get America back making things with limited education in the right areas.

You want to be President? (I sure as hell wouldn’t have.) 

Meanwhile, the war has only just begun again in Afghanistan, with Pakistan and India likely going to be at each other’s throats.

So, my fellow Americans, while it might seem that $1.75 Trillion is obscenely over the top, you must thank Obama’s predecessor for leaving the cabinet bare. The only tools Obama has: spend money he’ll have to borrow to fix what wasn’t fixed in the last decade; tax the wealthiest Americans their fair share for what many of them participated in and caused to happen during the financial meltdown. (Ask UBS about those that sent their money to them…)

The difference is finance and economics. Financing this debt is going to be hard – and it requires at some point we get back to frugality. (2011-2012) However, economically, we are facing a far, far worse course if we do not spur growth, reduce taxes on the average American and get infrastructure, schools and other public avenues rolling

The Economic cycle requires Keynesian philosophies, not Friedmanite  mantras that have caused this fiasco. Sure, if you are 1% of the weathiest people, you like cut rate taxes and all the deductions you can swindle out of the system. But the bottom 25% need help, else, the revolutionary option always exists. Remember that rich clog.

It should be a fun budget to haggle over.

U.S. Economic Plan 2009: The Path to Economic Independence

Are you ready to create a new Nation?

 

Recently, I took a hiatus from blogging heavily by playing an old game called Colonization. (Sid Meier, of Civilization fame, developed Colonization.) Now, the game is nearly 15 years old, the graphics suck, and the play is slow and antiquated. However, it does one thing fairly well: it mirrors the ideas of trade, money, tax hikes, and infrastructure building, or in short, the economic planning of a fledgling nation.

 

We no longer are fighting for independence from a tyrannical king, but we Americans are fighting the forces of Globalization during the midst of a once-in-lifetime economic mess. Housing sector damaged. Heavy industry nearly gone. Financial institutions teetering on the brink of collapse. The United States is no longer like it once was during its economic heyday of 1946-1972, before I was born.

 

In my lifetime, the forces of international competition from Japan, China, India, Mexico, Brazil and our former cold war foe, Russia, among others, have left us mired in a quandary of our own making: stuck believing the once considered impervious industrial might may resurrect while under investing in education and technology and overlooking real budgetary and fiscal problems for the last 25 years. And the solutions to these often opposing forces will require great sacrifice and a new vision to stem the tide of a soon-to-be overwhelming problem of under utilization and individual obsolesce.

 

We cannot continue to ignore serious flaws in how we promote our nation’s success or fail to compete in a new international landscape.

 

Investment and New Trade. How we maximize trading partners is as much internal as it is external. We have logically tried to develop trading partners that can sustain and merit such ties. However, how many avenues or ventures have we short-changed in order to help another nation at the expense of developing a new product or technology base in America? Investment in eco-friendly and next generation technology has to be promoted to keep America at the pinnacle of world economy. Resting on our laurels of the 20^th century is not an option.

 

Therefore, these would be my recommendations if I had the ear of new President:

 

$200 billion in immediate investments will be made in the U.S. auto industry over a period of 4 years. We will revamp the assembly lines; construct models that not only achieve high fuel economy, but will use electric, hydrogen, natural gas and battery designs. As a result, many of the service stations we currently use, will also see much modification and upgrades. Road projects will be reflected in this new technology that all Americans must familiarize themselves with. This does not mean that every worker currently employed via this industry will stay – the industry will and has to become leaner and more efficient across the board.  A $4,000 voucher for new “eco-vehicle” purchases will buttress these new programs while getting older, less efficient vehicles off American roads.  Which leads us to the next program.

 

 

$125 billion in environmental programs will be afforded over the next four years. These industries include solar, wind, geothermal (in concert with housing) and tidal/hydro programs will be researched, implemented and launched. The immediate deployment of green workers in “green alleys”, those with all ready depressed housing markets, will result in improving current homes while harnessing designs for next-generation housing. Water usage, natural resource depletion and pressing environmental issues must be met head on by our scientists and business leaders. This broad investment will spur independent and private development with the hopes of turning America into a far more effective and efficient country. It will also lead to an “exportable commodities” that will be our way of stemming Global Warming and improving the world’s health. We will be the world leader in environmental investment, incorporating technology, manufacturing ideas and data systems into the mix. We will also assist those companies that create environmental programs, across all sectors, through tax incentives.

 

$125 billion will be afforded in additional funding of education in various programs related to these and other new technologies. Our kids, our parents, and even grandparents, must be adept at using all levels of innovation and global tools to compete and succeed in this world. Many private sector partners will introduce America to these skills quickly. We can no longer wait to disseminate these skills to only the financially well off or tech savvy. Each of us needs to learn everyday – some need to catch up to their peers around the world. The new technology officer of the administration will work with the top information technology firms, small-but-innovative outfits and large-scale businesses to adopt both at home and abroad a learning network that can educate and alleviate education and technology gaps apparent in our society.

 

$200 Billion in direct funding of infrastructure projects and urban planning will be instituted. Some of these projects may have “to tear down in order to create” because we have misused land and placed housing developments in areas that do more harm or cost us opportunities to support our population as it increases in size. Americans most affected by these projects will be adequately and uniquely compensated in that they will garner first access to the “eco-houses” we intend to build, if they desire. Inconvenient though this seems, the long-term is what we are striving for.

 

Our destiny as a great nation depends on immediate action. As intrusive as it does or may appear, doing nothing or waiting for a market solution to appear on the horizon may prolong a painful readjustment to economic forces. Many of your neighbors need help now. Waiting is time lost to an enemy that has no time constraints.

We are not a nation of haves and have nots. We are an American nation that fought and won freedom time and time and time again. We are all sharers of this land’s great abundance. We have to promote as much our economic fairness as we should promote the ability to grasp for that extraordinary potential of the human spirit and garner the rewards of that spirit. We will be better each day ahead – together, as one nation on a blessed mission.

Having the boots, roads, homes, vehicles and necessities to an independent life are at the foundation of this nation. We are all better when our neighbor can assist us readily and we in turn can assist them. This is our way of assisting – to promote economic diversification, establish new exportable commodities, rebuild the highways and highways of the human mind to a better, lasting prosperity. The long-term will see a better America for this investment that will lead to incalculable job growth, a technological superiority and ingenuity, yet envisioned.

 

This would be my plan.

 

And all this from a 15-year old game…