Category Archives: trade deficit

Dear Orange Blossom, Perhaps if you understand titties you can comprehend why we don’t tick off our milk and cheese buying partners?

Dear Pootus, I am taking a page from the good people at the EU who decided that the way to explain trade policy to you was to provide colorful cue cards.  I will not burden you with graphs (and those tricky x and y axes), nor will I encumber you with charts, which you might have to interpret in light of some very common tricks producing “Gee Whiz Graphs” and other illusions.  Let’s just keep this simple.  If you understand the concept of titties, then you should be able to comprehend the idea of international commodity trading — like milk and milk products.

milk cow 1  Step One: COW 

Notes for your experts who can explain more if you feel the need.  The milk comes from the COW, more specifically from the FEMALE.  This happens BEFORE the milk is in the carton in your refrigerator, or the cheese (made from milk) is inside the fridge too!

milk cow 2 Step Two: Female Cow

The titties portion of the female cow is where the milk comes from.  It is called the udder.  There are many cows, and therefore many udders.  Many udders make lots of milk.  Notes for your experts who can explain more if you feel the need.  There are approximately 8.75 million milk cows in the United States.  Female cows — the ones with the udders — produced about 17.2 billion pounds of milk in June 2018.  This is the highest productivity rate since 2003.  You might wish to take credit for all the milk being produced from all those udders — more than under any other President EVER!  Not that your presidency has anything in the world to do with cow productivity, but since you delight in taking credit for everything else that happens — even if it doesn’t — on your watch, why not take credit for milk production?

milk cow 3 Step Three:  Milk Comes From Cows

There is a surplus of milk on the market.  As of last May dairy farms were getting hammered by low prices for milk because there was too much of it on the market.  Therefore, you might want to be very careful about crowing about those production numbers?  Notes for your experts who can explain more if you feel the need.   There were things dairy farmers wanted your administration to do. For example, they suggested putting a floor on milk prices at $20 per hundred pounds.  They suggested stabilizing volatile markets.  They suggested government purchases of milk for public food pantries.  (That’s NOT panties for the udders, that’s pantries for people who need food assistance.) [USAT]

milk cow 4 cheese Step Four: Cheese and other products come from milk.

In order for the dairy farmers to stay in business someone needs to buy the milk produced by their cows.  Some of the milk is purchased for domestic consumption. That means “here at home.” Some of the milk is purchased by our trading partners.  Notice that one of our major trading partners for exported cheese is Mexico. In fact, US Export Data shows Mexico as the Numero Uno buyer for cheese exported from the United States.

Am I getting the message across to you yet?  When all those titties (udders) produce all that milk, the milk must be sold for the dairy farmers to make a profit.  Cheese is made from milk, and Mexico, South Korea, Japan, Middle East/North Africa, Australia, Central America, SE Asia, Canada, and China are our biggest buyers for cheese products.

Have you suggested setting a floor on milk prices?  No?  Or, stabilizing volatile markets (including the international ones)? No? Or creating new markets for American milk and cheese products? No?  Or, supporting the USDA food assistance programs like public food pantries? No?  So, what have you been doing?  Oh, that’s right — slapping tariffs on our trading partners…

“In the past few months, Trump’s administration has proposed steel and aluminum tariffs, and increased tensions with trade allies in Europe, Asia, and North America. This week, reports of a White House proposal that would call on the United States to disregard World Trade Organization rules are making lawmakers on both sides of the aisle fret that the United States could be staring down a trade war — one that is likely to hit the agricultural industry the hardest. On Thursday, Mexico announced 15 to 25 percent retaliatory tariffs on dozens of US goods, mostly on agricultural products — including cheese.”  [Vox 7.5.18] (emphasis added)

One more time: Milk comes from cows; cows have udders; too many udders are producing too much milk; too much milk is being stored as cheese (because it doesn’t spoil like fresh milk); there are not enough buyers for our cheese; and, therefore, the price of milk and cheese decline.  When the prices decline below the break even point the dairy farmer is out of business.   When the farmer is out of business he can no longer buy the Red Hats you had manufactured in China.  NOW, are you getting the point?

I cannot, for the life of me, figure out a way to make this any simpler for you.  I will now return to writing posts for the adults in the room.  Thank you for your limited attention.

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Filed under Economy, Farm Subsidies, trade deficit

There Never Was Any Plan: The Story of the entire Orange Blossom Administration

Return with us now to those days of yesterday, if not exactly yesterday, when the Trump declared his health care plan would be wonderful — “No one will lose coverage. There will be insurance for everybody. Healthcare will be a “lot less expensive” for everyone — the government, consumers, providers.”  [Politico]  That was March 13 2017.  Well now, some people have lost coverage, it isn’t going to be any less expensive to get health insurance. In fact, health insurance premiums are expected to increase in California, Connecticut, and Pennsylvania, and it is just as bad elsewhere:

Rate filings to date show that many insurers are requesting large premium increases for 2019. The average requested rate increase was 30.2 percent in Maryland and 24 percent in New York state. Most insurers have specifically cited the repeal of the individual mandate in their actuarial memorandums. In New York, insurers attributed about half their large requested increases to mandate repeal. Even in states with small rate increases or overall decreases, insurer filings state that premiums next year would be significantly lower in the absence of federal sabotage. For example, BlueCross BlueShield of Vermontrequested a relatively small 7.5 percent increase for 2019 but said that its request would have been 2.2 percentage points lower if not for mandate repeal. Peter V. Lee, the director of Covered California, said that his state’s average rate increase of 9 percent “could—and should—have been much lower.” [CAP]

Let’s be serious here. There wasn’t a health care plan, not one with any specifics. There was a ton of “repeal and replace” rhetoric.  Trumpian campaign slogans never translated into much more than the continual erosion of Affordable Care Act provisions in favor of the insurance industry.  There never was a comprehensive plan to deal with market problems, industry sector issues, and the health care needs of some 330 million people in this country.  This administration doesn’t PLAN.

But wait, wasn’t there an “infrastructure plan?”  It would seem there should be since we keep having infrastructure weeks?   On February 11, 2018 the administration rolled out its grand infrastructure proposal [CNN] albeit without any suggestion about how this would be paid for;

“At the Conference of Mayors in January, Gribbin explained that the Trump administration would not be proposing a specific funding mechanism for the infrastructure plan, saying that will be a conversation with Congress. But that discussion just got a lot harder following the passage of a tax plan that is expected to expand the deficit by over a trillion dollars over ten years.” [MoneyCnn]

So, we got “conversations with Congress” about how to implement the “infrastructure plan,” but no infrastructure plan with much of anything except sops to for profit job training centers, lowered work rule and environmental permitting standards, and precious little else.  There never was a real, a comprehensive, plan in place such that the negotiations (or conversations) with Congress would ever be on a firm foundation. Surprised? We shouldn’t be.

Perhaps we should have been impressed with the trade plan?  After all, isn’t this supposed to put America First?  However, our friends and trading partners have been reduced to using color coded cue cards to explain high school level trade concepts to an American president [Marketwatch] and he doesn’t give any appearance he understands  fundamental concepts.  Reason sums up one area of dissonance:

“As Veronique de Rugy noted here a couple of weeks ago, “This is one policy area where he’s been remarkably consistent over the years.” Even when Trump pays lip service to free markets, she observed, it’s with the aim of increasing exports and reducing imports so as to bring down the number he thinks crystallizes our failure and lack of resolve. Trump is not talking like a mercantilist in service of free trade; he is talking like a free trader in service of mercantilism.” [Reason]

Let’s just operate on the simpler assumption — he doesn’t understand the subject; he doesn’t really have a plan; and, all the “motion” that passes for “action” in this administration’s trade policy is tantamount to economic and monetary plate juggling.  As long as he can make grand announcements about vague promises to eventually do something, and none of the plates fall, he’s all good.  Witness the EU deal:  “In reality, the Europeans gave up little except their prior refusal to negotiate under threat. Juncker’s pledge that the E.U. would import more U.S.-grown soybeans, for instance, formalized something that was likely to happen anyway.” [NewYorker]  Always assume: There is NO Plan.

And, about that Immigration enforcement policy which was supposed to have a plan to reunite children with their parents?   As of June 22, 2018 the Trump Mis-administration had to admit it had NO PLAN to reunite all children with their parents. [NYMag]  Really?  Well, not really completely opaque since the policy was all about punishing people who had the temerity to appeal for asylum in the United States who happened to be people with slightly darker skin than their Caucasian cohorts.   Thus if the policy didn’t meet the needs of the children and their parents, then the children could be conveniently re-categorized as “ineligible”  meaning the mis-administration might side step any accountability for their plight. [MSNBC]

Pick a topic, any topic.  Speak of environmental protections, clean drinking water, the protection of wildlife, or the protection of consumers from banking institution predation.  Speak of plans to provide better housing for married members of the US Armed Forces? Speak of plans to offer better, more efficient educational, medical, or dental services to Veterans?  Speak of plans to insure more cities are not plagued with lead in their water supplies?  Speak of how to provide long term assistance to American ranchers and farmers, and to promote the global trade in the crops and animals they raise for sale? Speak of how to research, study, and restrain the levels of gun violence in this country so that we are a safer place for ourselves and our children?  Speak of how we address matters of election security? To address Russian infiltration and attacks on our political institutions?  Pick a topic. Any topic.  Then rest unassured, this administration HAS NO PLAN.

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Filed under Health Care, health insurance, Immigration, Infrastructure, Politics, trade deficit

>Which economic news would we like? Real or Wall Street


Members of the TARP Oversight panel went up close and personal to see foreclosed properties in Las Vegas, Nevada, and were told “a financial giant back East isn’t being cooperative as the Housing and Urban Development Department tries to get loans for homeowners and restructure existing loans to prevent more foreclosures.” [LV Sun] If the $45 billion figure was an accurate estimate of the funding given to the “financial giant” then it would match the amount given to Citigroup on October 14, 2008. []

Meanwhile back in the District of Columbia, Steve Preston, Secretary of Housing and Urban Development was making a circuitous argument that blame for the slow assistance to mortgage holders rests with Congress – presumably for enacting limitations on the homeowner relief programs insisted upon by the Bush Administration and Republican members of Congress. [WaPo]

While “the financial giant” may be resisting requests to restructure its mortgages, it certainly isn’t resisting efforts to rearrange its deck chairs (on the Titanic?) Citigroup is reported to be in the process of merging its investment and commercial banking operations in an attempt to “integrate its businesses and successfully emerge from a financial crisis.” Federal officials gave $326 billion to rescue Citigroup in November, a deal that gave the U.S. a 7.8% stake in the firm. [MrktWtch] That 7.8% stake appears to be enough to give Federal banking regulators more incentive to exercise greater oversight into Citigroup’s operations. The Federal Reserve and the Comptroller of the Currency expect to have a virtual veto power over strategic decisions at the firm. [TheStreet] The FDIC has joined the show, advising the company about mergers that would improve liquidity by adding more deposits, and in other instances putting the brakes on deals that seemed “overly ambitious.” [SmartMoney]

As Citigroup wiggles and squirms its way out of its dismal position more information continues to leak out about the rationale behind the $25 billion bailout that included other, far more solvent banking operations. The accepted wisdom of the moment is that the other recipients of government largess were cover so that Citigroup’s problems wouldn’t be revealed for all the world. There may be some history behind this move. When the Reconstruction Finance Corporation was established by the Hoover Administration in 1932 in part to stem the runs on banks, it was initially bogged down in red tape, and failed to distribute much of its funding – but perhaps more to the point, as the agency initially succeeded in reducing the alarming number of bank failures, it began publicizing the names of the banks receiving aid in August 1932. [Wik]

Two objections were raised about the funding for the banks in 1932. First, that some of the loans appeared to be politically motivated, and secondly when the names of the banks were published everyone in the world knew exactly which banks were already in trouble and individuals and institutions began moving their money out of them – exacerbating the problem the RFC was supposed to address in the first place. This may explain, at least in part, the reluctance of the Federal Reserve to speak about the targets of its assistance.

Fast forward to 2008 and we find that the “Federal Reserve has loaned out $507 to banks, $50 billion to investment firms, $70 billion for money market mutual funds, and $266 billion to companies that use a form of short term debt called commercial paper.” “Following a long-standing practice designed to protect investor and depositor confidence in the institutions it deals with, the Fed refuses to name the banks and other companies accessing the cash.” [WaPo] A reasonable person could easily conclude that the “long standing practice” dates back to August 1932.

And now a word from the Real Economy

It’s to be hoped that all the efforts to keep the banks functioning don’t overshadow the problems in the real economy that keep pressing the financial markets. Granted that we have a financial crisis in the country, but that may only be half the story. The other part that sneaks into the virtually obsessive coverage of Wall Street by corporate business writers is contained in headlines like, “Construction braces for painful 2009,” [WaPo] and “Welfare rolls see first climb in years: Job losses bring applicants from Middle Class” [WaPo] “New poll shows 63% are already hurt by downturn” [WaPo] “General Mills profit falls but tops estimates” [NYT] “Honda cuts profit forecast by 64%” [NYT] “ConAgra profit plunges 31%” [NYT] “Retail prices fall at record rate” [NYT]

In all fairness, there have been some voices calling for caution, and risking the Cassandra label for their projections. One of CNN’s senior writers noted in April 2008, well before the official announcement of a recession: “As income gap widens, recession fears grow – Income fell for poor and stagnated for middle class families since late 1990s, making it tougher for them to weather economic downturn.” Santa Clara University published Professor William A. Sundstrom’s discussion on the growing income gap and its implications for public policy. And, as early as 2001 Common Dreams was asserting that “Bush tax cuts widen U.S. income gap.” GOP campaigners in 2008 labeled such admonitions as “whining,” or “income redistributionist,” or even “Socialist.” Conservatives advocated more education and job training for the unemployed, which as Sunstrom points out may get workers a job but usually doesn’t mean they get increased income.

Worse still, few have been paying much attention to the loss of the U.S. manufacturing base – outside Michigan, Ohio, and New York. The media is pleased to refer to the upper middle west as “The Rust Belt,” and move on to other topics. Most of the recent attention paid to any sector in the manufacturing realm has been devoted to the Big Three Automakers, but the estimated global consumer electronics product revenue in 2008 is $223 billion – of which only 4% comprises the North American share. North American manufacturing will likely get only a 12% share of the estimated global computer hardware revenue. [AEAlert] A 2006 publication from the EPI demonstrated the correlation between trade deficits and the loss of manufacturing jobs: “Trade Deficits and manufacturing job loss – correlation and causality” [EPI] but the business press barely nodded at the problems.

Paul Craig Roberts called the trend “Nuking the Economy” in Counterpunch back in February 2006. Roberts wrote: “The declines in some manufacturing sectors have more in common with a country undergoing saturation bombing during war than with a super-economy that is “the envy of the world.” Communications equipment lost 43% of its workforce. Semiconductors and electronic components lost 37% of its workforce. The workforce in computers and electronic products declined 30%. Electrical equipment and appliances lost 25% of its employees. The workforce in motor vehicles and parts declined 12%. Furniture and related products lost 17% of its jobs. Apparel manufacturers lost almost half of the work force. Employment in textile mills declined 43%. Paper and paper products lost one-fifth of its jobs. The work force in plastics and rubber products declined by 15%. Even manufacturers of beverages and tobacco products experienced a 7% shrinkage in jobs.”

Roberts’ assessment in 2006 is eerily similar to the November 2008 jobs report issued by the Bureau of Labor Statistics: “In November, employment continued to decline in manufacturing (-85,000), with widespread job losses occurring among the component industries. Manufacturing employment has declined by 604,000 since December. Within durable goods manufacturing, job losses occurred in November in fabricated metal products (-15,000), machinery (-11,000), wood products (-9,000), furniture and related products (-7,000), primary metals (-7,000), and computer and electronic products (-7,000). Employment in transportation equipment edged up, as a return of 27,000 aerospace workers from strike more than offset a job loss in motor vehicle and parts (-13,000). In the nondurable goods component, job losses occurred in plastics and rubber products (-12,000), printing and related support activities (-5,000), and textile mills (-5,000).”

Calls for action to stem the loss of manufacturing employment were rejected as “protectionist” by conservatives on the recent campaign trail. During his November 21, 2008 trip to the APEC meeting in Lima, Peru, President Bush was pleading during his radio address that the U.S. avoid “protectionism” that deepened the Great Depression; without, of course, noting that no one is asking for a return to the days of the Smoot-Hawley Tariff legislation. [BostonGlb] However, that doesn’t preclude the conservatives from labeling all voices for “fair trade” as “protectionist.” Nor does it impinge on the conservative predilection for free-marketeering – in which any regulation is “onerous, burdensome, and unwarranted.”

The next jobs report from the Bureau of Labor Statistics is due out on January 9, 2009. We can hope there will be better news than the November figures, but we might as well brace ourselves for another round of disappointment, and hope for a strenuous and inclusive economic stimulation package from the next Administration.

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Filed under Economy, employment, housing, manufacturing, trade deficit

>Something to think about

>I received an email the other day with a bit of humor about the ‘Economic Stimulus Payments’ we should be receiving in the near future. It went like this:

Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers.
Q. Where will the government get this money?
A. From the taxpayers.
Q. So the government is giving me back my own money?
A. Just a smidgen.
Q. What is the purpose of this payment?
A. The plan is that you’ll use the money to purchase an HD-TV set,
thus stimulating the economy.
Q. But isn’t that stimulating the economy of China?
A. Shut up.

I chuckled at the final line, but then I started thinking about it. Not only is China our second-largest supplier of consumer goods (13% of what hit the shelves in 2004), but China is a one of our major foreign holders of US Treasury securities’ to the tune of $490.6 Billion as of March 2008 (only Japan holds more), and they’re still buying us up.

Follow that up with another email that I received and it really makes you think. Here’s how it went:

Are we Americans as dumb as we appear, or is it that we just don’t think? While the Chinese, knowingly and intentionally, export inferior products and dangerous toys and goods to be sold in American markets, the media wrings its hands and criticizes the Bush Administration for perceived errors. Yet, 70% of Americans believe that the trading privileges afforded to the Chinese should be suspended. Well, duh … why do you need the government to suspend trading privileges?


Simply look on the bottom of every product you buy, and if it says ‘Made in China’ or ‘PRC’ (and that now includes Hong Kong), simply choose another product or none at all. You will be amazed at how dependent you are on Chinese products, however you will be equally amazed at what you can do without. Who needs plastic eggs to celebrate Easter?

If you must have eggs, use real ones and benefit some American farmer. Easter is just an example, the point is … don’t wait for the government to act.

Just go ahead and assume control on your own.

If 200 million Americans refuse to buy just $20 each of Chinese goods, that’s a billion dollar trade imbalance resolved in our favor … fast!! The downside? Some American businesses will feel a temporary pinch from having foreign stockpiles of inventory. Downside ??

The solution?
Let’s give them fair warning and send our own message. We’ll not implement this UNTIL June 4, and we’ll continue it only until July 4. That’s only one month of trading losses, but it will hit the Chinese for 1/12th of the total, or 8%, of their American exports. Then they will at least have to ask themselves if the benefits were worth it.

The call to action in the latter email is a double-edged sword. It would be wonderful if everything in the world was so simple, but it’s not. We’re a nation with an unfathomable national debt and an insatiable appetite for cheap consumer goods. (The current issue of FLYP has more about problems associated with Chinese imports.)

So … are you just going to chuckle at the first email, bite a hand that’s feeding you by taking the action proposed in the second email, or more than likely, are you just going to pay down a bit of your own debt when you get that stimulus check? If you’re like me, you’re just going to pay down some of your own debt. But, you might just want to go one step further … you just might want to consider writing your elected representatives, and ask them to stop borrowing and spend significantly less as they conduct the business of our nation. Afterall, each family’s share of the national debt is now: $73,733.00. That’s a sum equal to 3 years of my gross pension income. Hello … is anybody in Congress even thinking about this?

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Filed under Economy, national debt, trade deficit