douglaschick21's Blog

Where did you study economics?

Spending money on foreign goods does not mean "never seeing it again." If that were true then the US would have collapsed 50 years ago since we have consistently run trade deficits (and massive ones during great economic growth periods).

The US buys so many foreign goods because our economy is so powerful it demands them. The money comes back in the form of investments.

When the US economy was dragged into the Great Depression by oppressive tax and tariff policies, prices crashed and we ran a trade surplus... because Americans couldn't afford foreign goods. Our surplus dragged the rest of the world into a worldwide Depression.

Trade deficits followed the massive JFK and Reagan tax cuts because the US economy was so stimulated by the influx of capital into the hands of the population that demand for foreign goods increased.

You can keep buying used goods, but that will not stimulate much because those things are already here. It is a fool's road; eventually that money must go to new items.

Taxes and tariffs dragged the US into the Depression. Are you suggesting they didn't have an effect?

Explain exactly how the New Deal pulled us out of the Depression? What is your evidence for such a claim? Unemployment remained extremely high until the war and in 1938 (5 years into the New Deal) GDP dropped, investments dropped and consumption dropped.

Unemployment didn't drop below 10% until 1942, the ninth year of FDR's administration... meanwhile he was rounding up tens of thousands of Americans and putting them in internment camps... as he was stocking the State Department with Soviet spies and the Supreme Court with activists.

The 2006 unemployment rate was 4.6%. In 1996 it was 5.4%. NAFTA was ratified in December 1993 with unemployment at 6.9%.

NC hit an historical low of 3.1% in 1999... the year I lost my job with Cone Mills.

You can't follow because I said no such thing. Trade policy and monetary policy go hand in hand (see my comment concerning the value of the dollar in chick's other post on this topic).

I have argued that trade deficits are not necessarily (note that word) bad things. If I supply a business with pencils and they begin to do extremely well and buy more pencils from me... would you look at their balance sheet, see the increase in pencil expenditures and determine that the company is failing?

Items made inexpensively in China make more items more affordable for more Americans. When you buy a Chinese-made item from Wal-Mart, only a tiny percentage goes to China. Wal-Mart, its workers, the shippers, the warehousers, the truckers

"No nation was ever ruined by trade, even seemingly the most disadvantageous."
-- Benjamin Franklin, Principles of Trade, 1774

Your comments "One of the reasons jobs go overseas is because of the regulations in the US for starting a new company. Environmental extremism, punishing taxation and over-regulation make it too difficult for companies to compete.

Free trade, low taxes and deregulation will encourage investment, expansion and greater response to consumer demand through competition. Freedom leads to prosperity."...
I agree, and if I had my way, most of the laws written in the last one hundred years would be in the garbage bin. We need less regulation, not more of it. Even though it is a bit late for the once great American Industry.

Hank I can vouch for the low quality china steel the company I work for started buying steel from china 3 years ago, failures used to be rare but now we have many stress failures. Also we are now doing business in china, in order to do business in china you have to produce a product in china employing their citizens that is why we no longer boast of being made in America because we now manufacture one of our small models in china. Maybe we should do the same in order for china to do business here they should manufacture a product here thus creating jobs, but I know bleechers would not think that would be a good idea to force a company to create jobs here but he would feel it's ok for china correct me if I'm wrong economic guru! If the trade off for not protecting American jobs is investments they must be making these investments with the Euro because the dollar keeps getting weaker and weaker!

I agree with you Axe. It has to be a 2 way street. I posted this on another blog spot this morning, but it does apply here also

From Wikipedia
"The North American currency union is a theorized economic and monetary union of the three principal countries of North America, namely Canada, the United States, and Mexico.[1] Implementation would probably involve the three countries giving up their current currency units (Canadian dollar, U.S. dollar, and Mexican pesos) and adopting a new one, created specifically for this purpose. The hypothetical currency for the union is most often referred to as the amero.[2][1] The concept is modeled on the common European Union currency (the euro), and it is argued to be a natural extension of NAFTA and the SPP. Conspiracy theorists contend that the governments of the United States, Canada, and Mexico are already taking steps to implement such a currency.[1] No current members of any country's government have stated a desire to implement a "North American Union"."

With all the behind closed door meetings going on with Bush, and the leaders of Mexico and Canada why would I not believe this to be a very real possibility?

Axe this was a response from me to an interesting BBC news report as to how Venezuela and Iran were going to start demanding oil purchased by Euro's, thus weakening the US dollar even more.

I don't mind NAFTA and all of those other AFTA's in original idea and principles, but the reality of all of them has been unfair and very one sided.

No correction needed in my eyes Axe

If the US is demanding goods from overseas it is because our economy is so strong. The declines in the US trade deficit have generally occurred when one of the following was happening:

1. The third world was in an economic growth period and they increased demand of US goods.

2. The US was in recession and our ability to purchase foreign goods declined.

A trade war would be a disaster. If we demanded so-called "fair trade" with all our trade partners it would shock the economy the way raised tariffs did in the 1930s. In that decade, the US ran 9 years of trade surpluses... but that wasn't good!

The best thing we could do is to expand NAFTA to the entire western hemisphere and slash taxes in the US.

You're welcome to buy Swiss-made items if you'd like. It's a free country. You can spend what you want or spend nothing at all.

:)