patrick.net

this is old news. Ross Perot's nightmare went into full effect the second NAFTA was signed. We outsourced every possible thing we could and ran up more debt than Perot even imagined we could.

It may be old news but is becoming very evident as a base problem. The expensionary monetary policies are evidently not working as this recession drags on. You would think that lower interest rates increases loaning and borrowing and increases consumption. This results in job creation.... but the jobs are overseas. I don't see a change in jobs.

http://research.stlouisfed.org/fred2/data/UNRATE.txt

Will the continuation of an expansionary monetary policy eventually lead to inflation without job creation? We may have to rapidly switch to a contractionary monetary policy which is going to really hurt.

Where are we going to create jobs if they are overseas? One solution is to raise taxes on the wealthy and any business that imports goods or employs people overseas. These business are making huge gains by sending jobs overseas at the expense of American workers which further shrinks the middle class.

I don't think these business owners understand, it is to their benifit to have a strong middle class consumer.

We outsourced every possible thing we could and ran up more debt than Perot even imagined we could.

Actually things went pretty well through 2000.

http://research.stlouisfed.org/fred2/graph/?g=18e

Since manufacturing jobs went up in the 1990s I think we were only partially outsourcing our jobs, eg. stuff on the low end of the value chain was being outsourced but final assembly was still done here.

Retail expanded by 2M jobs in the 1990s thanks to the big-box retail revolution I guess. Things did in fact get a lot, lot cheaper, and this resulted in a temporary standard of living increase (as long as you weren't competing with Chinese or Mexican labor).

Trade figures (exports to, imports from, deficit in billions:)

Mexico:
TOTAL 1992 40,592.3 35,211.1 5,381.2
TOTAL 2010 163,473.0 229,907.9 -66,434.9

30% trade deficit

Canada:
TOTAL 1992 90,594.3 98,629.8 -8,035.5
TOTAL 2010 249,105.0 277,647.5 -28,542.5

10% deficit

China:
TOTAL 1992 7,418.5 25,727.5 -18,309.0
TOTAL 2010 91,880.6 364,943.9 -273,063.2

75% deficit

Canada has a floating currency AFAIK and that will take care of trade imbalances, within limits of the Triffin Dilemma (Canada needs USD for its own trade so trade should be in deficit against us)

Mexico is partially worse but compared to China not that bad.

And as for the debt, Clinton inherited a 45% debt to GDP and left it at under 35%. Bush is the one who ran up the debt with his irresponsible tax cuts ($4T) and wars ($3T so far). He was able to cover his tracks with the housing bubble but that only was a temporary stimulus.

Instead of fixating on taxe increases for the wealthy; we go after the trade agreements that allow them to produce cheap crap and suck out our jobs.

It's not the "cheap crap" that is sucking out our jobs it is the trade deficit itself. If the Chinese bought $360B stuff from us last year (what we sold them) we'd have several million more jobs here. But that's not how they operate.

Same thing with our oil consumption. We're sending hundreds of billions of dollars out of our paychecks to OPEC and this is not coming back to us as paycheck money.

I think this is one of the fundamental faults in the system, along with unchecked rentierism in land of course.

To develop this further, it's a good thing that we can buy xboxes for $200! Chinese work for $2/hr so if we were to build this with $20/hr labor xboxes would cost $500 or more.

The problem is two-fold; one , we lose manufacturing jobs so we have to retrain people who were doing that line of work. Easier said than done since not everyone has the skills to move up the value chain to avoid competing with 3 billion third-world people.

And as I said above it's the trade deficits that are killing us now. We spend our paychecks at Walmart and the gas station, but the money that's leaving our economy is not coming back as orders for stuff here. It's coming back in the form of 0% credit offers, treasury bill purchases, and other asset purchases like real estate investments, stocks, and outright buyouts of our businesses.

I only began to understand this last year and haven't seen anybody else develop this thesis. Even Krugman and the other centrist economists were very pro-Globalism so they have a blindspot about this I think.

Freshwater economists are mofos so they are cheering this creative destruction on.

Troy says

And as I said above it's the trade deficits that are killing us now. We spend our paychecks at Walmart and the gas station, but the money that's leaving our economy is not coming back as orders for stuff here. It's coming back in the form of 0% credit offers, treasury bill purchases, and other asset purchases like real estate investments, stocks, and outright buyouts of our businesses.

Troy, you did a good job explaining that. Okay, so the trade deficit is a big problem. Shouldn't we just level the playing field? I know there are standards in place that let other countries ship as much inventory into the country but restrict how much we can ship back. That is killing us, and of course cheap overseas labor. Second, I really hope we are sitting on a massive lake of oil somewhere and are just trying to suck the Arabs dry of all their oil. It would be nice to have a conspiracy theory that worked in our favor for once.

Okay, just learned some new words today. Triffin Dilemma and renteirism (I thought you were making that one up).

We might be looking at a lost decade or more here in the U.S. It is time for a visionary to step in and lead us in the right direction.

The USDA and Custom agencies hasn't expanded much relative to the huge growth of free trade. They no longer have the staff or funding to inspect all but the smallest fraction of imports.

Many would be surprised how much of our fruits, vegetables, and even meat comes from China, a country whose environmental record is the stuff of legend. A substantial portion of ground beef, apples, and garlic come from China to US supermarkets. The big distributors are steadfast in the opposition to labeling on many meat and fish products, and in preventing US Beef from being labelled or inspected by Japanese or other Asian countries.