Thursday, April 28, 2005

Mixer Has Many Things to Say

Email: Elaine has asked me to throw together an article or two for her guest blog, but hasn’t given me any direction on what types of material she wants. Soo.. I’m harvesting some posts from across the web that discuss the general fields she is interested in hearing opinions about. The format is broken down by area and displayed as question/answer:

Note from editor: I am publishing this in parcels, not all at once, an embarrassment of riches.

Deficts

"In rereading the other thread I noticed you talking about the trade deficit. Isn't the trade deficit more a matter of consumerism than national economic policy?"

There is an aspect of consumerism to trading in general, yes. Nobody is interested in buying what they don't want or need. If we want or need something that someone else has, then we trade them something they want or need for it.

Balancing trade internationally goes beyond simple consumerism, though. Since the amount of wealth present or generated by a nation is a finite value, increasing or decreasing wealth becomes a matter of economic policy (especially since we switched to a fiat currency in '64.) Less wealth means lower standards of living, less productivity, less ability to make weapons of defense, etc. So, I suppose the overall answer to your question is no, but in simpler terms (i.e. - the microeconomics of retail trade,) then it'd be sort of/yes.

"For instance, everyone buys smaller, more efficient cars, and oil imports drop along with the trade deficit. If people make those American built cars, the deficit drops even more. If we allow oil to be extracted in Alaska, imported oil decreases and the defecit drops even more"

Well, even the best guess estimates on the reserves in Alaska will only feed autos for a few months. We're not tapping into our reserves to ensure we have enough raw material to produce the plethora of other things that we use oil for: fertilizers, plastics, medicines, etc. The stuff our civilization is founded on. We only open those reserves if we don't anticipate using much, and only for a short time.

But, your question was about modifying our import habits to decrease the deficit. Yes, we could do that. However, we won't. If we decide to lower our imports, then we will only further place ourselves into debt due to that "buyer of last resort" clause we add to most every trade agreement. We would also weaken our position with the global marketplace with a lower import demand; less people would want to buy our stuff if we didn't want to buy theirs. I'm pretty certain the rest of the world would be willing to allow us some import controls to help reign in our out-of-control spending, but we're shifting away from the fair market principle to the free market principle - and the free market does not like controls. No, decreasing imports is not the answer; we have to increase true exports (and that means bringing back the manufacturing base) while reigning in spending (we can no longer afford some of our luxuries;) if we cannot stop the bleeding of our wealth, then we must slow it down enough to make it manageable. Option #1 won't happen; too many businesses would lose profits if we eliminate the "stealth imports," and they'll fight profit loss with everything they have. Option #2 looked to be the most palatable, but we don't seem to care about fiscal responsibility anymore; with the status quo, it's "buyer of last resort" until we choke.

"While I can see that financial policies that affect the strength of the dollar would also have some impact, isn't that impact a smaller percentage of the deficit than the fact that American buy a massive amount of things from overseas? Can any government policy offset the fact that we import billions of dollars of oil each day?"

Yes, we do buy a lot of stuff from overseas. The problem is, we haven't produced the stuff we buy for some time now, and the tax codes combined with the trade unions (as they exist now) make it much more profitable for a business to import products than make them here. And, to spice up the mix, we have politically powerful industries that aren't interested in doing business differently - they want everything to remain the same. Case in point: in Germany, they are producing hybrid cars. Biogas/solar cars. No oil needed. The EU doesn't have the major oil companies that we do, so they can address their oil dependency much more rationally than we can (don't worry folks - they are still making gas-guzzlers to sell to us.) A small side note: that technology platform was a member benefit of the Kyoto Treaty, so we didn't want it; but I'll bet they'll sell it to us for a nice profit if we want it in the future. So, yes, governmental policy can and does affect our trade relations.

One last thing - this isn't a problem that's creeping up on us or a problem that we have room to maneuver in; this has been going on for some time and we're kind of out of options at this point, so don't be surprised if you write your congressman and get no answer. All each of us can do at this point is try and prepare for the future.

EDITOR'S COMMENT: Often times, in the "comments" section of quite a few blogs, I read interesting and rather long replies and I know from my own experience, these are not mere cut and pasties or reguritation of some ideology but people really trying to figure things out.

I hope Culture of Life News gets thoughtful comments. It truly pleases me. Jokes are nice, too, by the way. There is room for both here!
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