"ALL CAPS IN DEFENSE OF LIBERTY IS NO VICE."

Tuesday, May 23, 2006

SO-CALLED "TRADE DEFICITS" AND "TRADE IMBALANCES": BOGEYMEN - or why the only way to "make poverty history" is to make the Left history

Economist and former Clinton Administration official Joseph Steiglitz is a NOBEL LAUREATE - (something he shares with ARAFAT!).

He wrote a knee-jerk Leftist column which repeats vestigial Leftist NONSENSE about world trade and national savings rates. EXCERPT:
In 2005, the US trade deficit was US$805 billion, while the sum of the surpluses of Europe, Japan, and China was only US$325 billion. Any focus on trade imbalances thus should center on the major global imbalance: That of the US. The task of assessing trade imbalances - whom to blame and what should be done - involves both economics and politics. Trade imbalances are the result, for instance, of household decisions about how much to save and how much, and what, to consume.

...With the US trade deficit the major global imbalance, attention should focus on how to increase its national savings - a question that US governments have struggled with for decades, and one that was frequently debated when I was chair of President Clinton's Council of Economic Advisers. We found only one solution: Reduce the fiscal deficit.

If the IMF does not direct its attention on America's need to reduce its fiscal deficits - through higher taxes for America's richest and lower defense spending - the Fund's relevance in the twenty-first century will inevitably decline.
Steiglitz - like most Leftist - gets it ALL WRONG. Trade deficits - and low savings rates - are chimeras - ("a fanciful mental illusion or fabrication"). Low savings is something the left likes to harp on - as if people wpouldf be better off if they oput their money in savings accounts instead of the place where they are currently puuting their savings: IN THEIR HOMES. And need I remind you that home values - and therefore SAVINGS - are SOARING?! This means savings rates are NOT as low as the Left would like you to believe. (The Left wants you to believe this so they can get more power for the State or for international non-elected UN-democratic organizations like the IMF. In his column, Steiglitz argues this point EXPLICITLY - see the red-highlight!)

Trade deficits are also BUNK - illusions - a bogeyman promoted by polemicizing Lefties. Here's proof:

When WAL-MART buys goods in China - and pays for them with an LC, (which is for all intents and purposes CASH) - Wal-Mart gets GOODS for this cash. There is NO IMBALANCE OR DEFICIT. Wal-Mart and their supplier have MADE AN EVEN-STEVEN TRADE: the supplier gave up GOODS for CASH; Wal-Mart gave up cash for GOODS. As a bookeeping matter, Wal-Mart decreases its cash balance and increases its goods balance - BY EQUAL AMOUNTS. Furthermore, WAL-Mart will MAKE A PROFIT SELLING THOSE GOODS, and CONSUMERS WILL GET A GOOD VALUE, TOO! The enitre transaction is GOOD.


Wal-Mart is NOT endangered because it buys goods from China, not anymore than you're endangered when you buy goods from your local grocery - as Walter Williams has PROVEN.

The so-called "trade imbalance" or "trade deficit" is a phony number derived by treating GOODS as VALUELESS - which is ABSURD.

These two BOGEYMEN (trade deficits and trade imbalances) were INVENTED AND PROMOTED by groups which had an interest in stopping or slowing international TRADE - like Leftist parties or unions or industries which wanted PROTECTIONISM so that they could continue to offer inferior GOODS to a CAPTIVE market.

It's long passed time that the public demanded that politicians and demogogues and other assorted protectionists stop using thess BOGUS terms.

International trade increases competition which in turn improves the quality of goods and services AND THEREFORE VALUES TO CONSUMERS. It is a good thing.

Nations which trade more with other nations improve the quality of life for their citizens. Protectionist nations do not. Protectionism helps a small segment of the economy - (a SPECIAL INTEREST) - and hurts ALL THE CONSUMERS; therefore it can NEVER be the greatest good for the greatest number.

Globalization is the second greatest engine for growth and IMPROVING the lives of poor people EVERYWHERE. The first is INDUSTRIALIZATION.

Africa needs factories and OPEN ECONOMIES, not foreign aid. Ditto the rest of the Third World. Asia went from being the POOREST PLACE ON EARTH in the 1970's - to the third richest, as living standards for HUNDREDS OF MILLIONS OF PEOPLE IMPROVED - because they gave up on "command economies" and protectionism, and got INDUSTRIALIZED. Asia still has a long way to go. As do Africa and South America. The poor people of the world need more liberty and more industrialization and more globalization.

The Left, which hates industrialization - (because in their fantasies it's "killing" the Earth) - also hates GLOBALIZATION. So, the Left is the MAIN OBSTACLE TO THE TWO THINGS WHICH CAN BEST END POVERTY IN THE WORLD.

TO MAKE POVERTY HISTORY, WE NEED TO MAKE THE LEFT HISTORY.

(More HERE.)

1 comment:

BillDaCat said...

When we have a trade imbalance and the money doesn't come back here for goods or services, it becomes DEBT.

Current debt due to the trade imbalance is over 5 trillion dollars. This is money that will come out of future consumption. Our trade debt is dollars pulled out of the World's economy for our consumption.

We are consuming far more than we produce. That cannot continue in the longer term as at some point, even the most open bank has to cut off people that go deeper and deeper into debt.

We currently have more than 8 trillion in government deficit debt and 5 trillion in trade debt.

Left or right politics do not matter, the founding fathers would have never tolerated this amount of dumping of goods on our country and if you actually study history you might understand what happens to a country that decides to pay for everything with fiat dollars. Rome is one example. Inflation erodes the value of the currency and the standard of living in that country decreases.

In effect, a country which exports raw materials and imports finished goods, as is largely the case with this country now, is usually considered a third world country.

Increasing your standard of living through debt looks good if you don't look at the amount of debt involved.. when you take the debt into consideration, it tells a completely different story.