1. Banks and note holders are complicit in building the balloon, the true market value for homes being what we are seeing right now, not what you paid 5 years ago. "Underwater Mortgages" are the new reality, and every homeowner needs to ask why that is. Simply, GSEs and the banking industry distorted the markets so grossly that for every qualified homeowner bidding on a property, there were 9 or more unqualified bidders. In any other instance, it would be called "shill bidding", artificially driving up the price and as a side note, prosecutable under the RICO Act.
2. Broken title robs the States and Counties of revenue (of interest now that many are near insolvent) and individuals of certainty (more later). What's more, proprietary land registration attempts to circumvent real property laws and State sovereignty, but then through Foreclosure proceedings, the same folks that circumvented the law rely upon it for relief. Just another case of privatizing gains while publicly claiming losses.
3. Mark my words, the foreclosure crisis hasn't even hit us yet. When the accountants and lawyers get to work, we'll see even paid up mortgages will end up in foreclosure because the servicing arrangements are as shoddy as the registration process. The note holders and MBS holders will reconstitute and go after home owners that believed their payments through servicers were paid up, when in fact the servicers will probably be holding back to preserve capital reserve requirements and when the dam breaks, it will be found the individual accounts are in arrears. If Bernie Maddoff could keep it up for 10 years with a staff of less than a dozen, just imagine what BofA, JPMorgan, and the usual suspects can pull off. Too big to fail, or too big NOT to fail?
4. Whether Broken Chain of Title (like MERS), or unregistered Servicer/Holder arrangements (check your county land title office, see who holds your note, good chance it's not even recorded), especially in non-judicial states, it's up to YOU to check with your bank/servicer to see the status of your payments applied against the loan. Good luck, if GSEs hold the notes, where can you even begin. If it's a private investor, do you even know who it is?
5. If you move first, you can file for Quiet Title and expunge the mortgage note (Deed of Trust), especially if it wasn't properly reconveyed after the originator sold the note into a traunche. If you know your servicer isn't the note-holder, then ask who it is. Then ask the bank to provide verification of payment.
6. More importantly, ask the note holder to verify they hold both the Deed of Trust and the Loan Note. If they don't, it's broken chain of title, if they don't respond, you simply file to Quiet Title. If your bank won't/can't tell you who holds the note, file to Quiet Title. If the note holder/investor won't respond in 30 days, file to Quiet Title.
7. When FDIC (already insolvent) takes BofA and other banks into conservatorship, don't be surprised that loans haven't been properly credited. You could be paying your servicer for years just to find out the money went into a black hole in the Bankosphere (TM). You'll have no recourse but foreclosure and bankruptcy or to somehow repay what you've already paid.
8. Don't think it can't happen. It's already written in the cards because it already happened in the 1910s and again in the 1930s. Behind the facade of smiles from friendly tellers and loan officers, there's no law protecting you except basic property rights which if you don't timely exercise, will be forfeit and you'll be at the mercy of much more powerful players.
The problem is in Ricardo's theory, the means of production are assumed static, i.e. not mobile. In other words, it's only the finished good traded and instead they are trading people, they are trading labor forces.
Not supposed to do that for this infamous "win-win", but even so, there it also shows it's not always this win win.
That said, yeah, it's it amazing how population is ignored. They have made it political poison, when so much theory and statistics rest of the baseline of population, workforce.
I beg to differ that the trade deficit with China isn't a problem, uh, it ranges from 70-80% of the total goods, non-oil trade deficit! Bottom line fact there are 1.6 billion people over there, a never ending cheap labor supply, is a real problem, esp. when there is no "domestic consumption" despite all of the wishes, myths and agenda to make it so. Even if they do, so what, unlike China's goods, U.S. goods are .....made in China, so that does nothing for the American people, U.S. economy, it's only good for multinational corporations and "if" they pay any U.S. taxes, which most do not.
Our enormous trade deficit is rightly of growing concern to Americans. Since leading the global drive toward trade liberalization by signing the Global Agreement on Tariffs and Trade in 1947, America has been transformed from the wealthiest nation on earth - its preeminent industrial power - into a skid row bum, literally begging the rest of the world for cash to keep us afloat. It's a disgusting spectacle. Our cumulative trade deficit since 1976, financed by a sell-off of American assets, exceeds $10 trillion. What will happen when those assets are depleted? Today's recession is the answer.
Why? The American work force is the most productive on earth. Our product quality, though it may have fallen short at one time, is now on a par with the Japanese. Our workers have labored tirelessly to improve our competitiveness. Yet our deficit remains as large as ever. Our median wages and net worth have declined for decades. Our debt has soared.
Clearly, there is something amiss with "free trade." The concept is rooted in Ricardo's principle of comparative advantage. In 1817 Ricardo hypothesized that every nation benefits when it trades what it makes best for products made best by other nations. On the surface, it seems to make sense. But is it possible that this theory is flawed in some way? Is there something that Ricardo didn't consider?
I am author of a book titled "Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America." My theory is that, as population density rises beyond a critical level, per capita consumption begins to decline. This occurs because, as people are forced to crowd together and conserve space, it becomes ever more impractical to own many products. Falling per capita consumption, in the face of rising productivity (per capita output, which always rises), inevitably yields rising unemployment and poverty.
This theory has huge ramifications for U.S. policy toward population management (especially immigration policy) and trade. The implications for population policy may be obvious, but why trade? It's because these effects of an excessive population density - rising unemployment and poverty - are actually imported when we attempt to engage in free trade in manufactured goods with a nation that is much more densely populated. Our economies combine. The work of manufacturing is spread evenly across the combined labor force. But, while the more densely populated nation gets free access to a healthy market, all we get in return is access to a market emaciated by over-crowding and low per capita consumption. The result is an automatic, irreversible trade deficit and loss of jobs, tantamount to economic suicide.
One need look no further than the U.S.'s trade data for proof of this effect. Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!
Our trade deficit with China is getting all of the attention these days. But, when expressed in per capita terms, our deficit with China in manufactured goods is rather unremarkable - nineteenth on the list. Our per capita deficit with other nations such as Japan, Germany, Mexico, Korea and others (all much more densely populated than the U.S.) is worse. My point is not that our deficit with China isn't a problem, but rather that it's exactly what we should have expected when we suddenly applied a trade policy that was a proven failure around the world to a country with one fifth of the world's population.
Ricardo's principle of comparative advantage is overly simplistic and flawed because it does not take into consideration this population density effect and what happens when two nations grossly disparate in population density attempt to trade freely in manufactured goods. While free trade in natural resources and free trade in manufactured goods between nations of roughly equal population density is indeed beneficial, just as Ricardo predicts, it’s a sure-fire loser when attempting to trade freely in manufactured goods with a nation with an excessive population density.
If you‘re interested in learning more about this important new economic theory, then I invite you to visit my web site at http://PeteMurphy.wordpress.com.
Ya all, in addition to this site, I recommend reading Dean Baker. He puts posts in English but always seems to catch a critical piece on an economic report and calls out the press for their lack of accurate reporting.
He just commented that Germany's unemployment rate is down and their productivity did not soar and that's due to work sharing, they didn't lay people off, just reduced hours.
Not quite the same as this post trying to point the spotlight on offshore outsourcing, but one might note that when work sharing in Germany, that also means that job is not offshore outsourced.
He's on our list of must read sites in the column, but I'm noticing over and over again he finds the fatal factual flaw or misinformation piece and writes about it.
It's scary because I've usually already written the facts over here in an eoonomic report or whatever, and then that goes against whatever the headline buzz is...
to see that Baker caught it too.
Calculated Risk is accurate as well but Baker cuts to the chase.
People have been persuaded that since we are surrounded by foreign goods and services, that we should give up: that it's futile to even try to fight it. Yet, careful label reading while shopping may yield some surprises. At Walmart: two large dog dishes, one from India, one from the USA. Matches: Ohio Blue Tip at Kmart. And my first shopping choice for fashion and household goods is the thrift store: even if the item is foreign, it won't make the globalist cash registers ring twice. Even a 2% change would have business analysts screaming to corporate leaders - yes they keep track of our behavior that closely. People just need to try.
"Notwithstanding the prohibition against torture and the clear duty to prosecute torturers imposed by international and Egyptian law,12 Egyptian security forces in 1991 continued to torture detainees with apparent impunity. In an October 1991 report, AI found the existence of "widespread [and unabated] torture of political detainees in Egypt."13 EOHR reported in August 1991 that there was a "total absence of safeguards for the prisoner while in detention in public prisons." For example, in the case of those accused of the October 1990 assassination of Parliament Speaker Dr. Rifaat al-Mahgoub, EOHR found that Egyptian laws prohibiting security-force access to prisoners without an official permit from the public prosecutor's office were openly flouted." Human Rights Watch World Report 1992 http://tinyurl.com/5v6g28c
The income disparity, the obvious anti-life policies (longevity low, infant mortality high), and violence against the people coalesced to bring people to acts of desperation and rage.
But how about those Wall Streeters and their privatization and open market economy. The Egyptians got stuck with everything but Tom Friedman as gifts from their biggest donor.
It's been throughout history that when income inequality reaches a certain point as well as events like Italy being wiped out by their trade deficit (5%) in the 1930's, Weimer Republic hyperinflation, WWI reparations, "Let them Eat Cake" (French, Russia) and corruption, revolutions are sure to follow and many of them are frying pan to fire.
I saw they have some of the most corrupt, income inequality with massive poverty and the young, no opportunity.
Then, China exceeded the U.S. manufacturing output, this year. The reason we get so much of the trade deficit with China is China has really targeted the U.S. market.
i.e. we are their #1 export destination.
This is claiming the U.S. output if 40% larger than China, and use manufacturing in the same breath. If they are talking about GDP, that might be true, but just manufacturing, it's not from every stat am aware of.
Honestly, this isn't the first time I've seen bogus "major press" when some blogs pull out some facts they don't want people to read...kind of an "misinformation campaign" to drown out the other articles and writings.
It's just ridiculous and they refuse to acknowledge partial or semi-finished goods, global supply chains either...
trying to of course claim the entire reason the U.S. has no jobs and is in decline is because of 'technological advances', if that were true, Japan would have an unemployment crisis and a massive trade deficit, Germany would have a massive trade deficit and a job crisis...
neither of these higher wage countries do and they have some of the most advanced manufacturing processes globally.
Groton Guard detachment is heading to Egypt
Published 01/24/2011 12:00 AM
Updated 01/24/2011 04:59 AM theday.com Connecticut
Groton - Connecticut National Guard Detachment 2, Company I, 185th Aviation Regiment of Groton has mobilized and will deploy to the Sinai Peninsula, Egypt, to support the Multinational Force and Observers.
The unit left Connecticut Jan. 15 for Fort Benning, Ga., for further training and validation. The unit operates C-23C Sherpa aircraft and has deployed three times in the last seven years in support of the conflicts in Iraq and Afghanistan.
The unit will provide an on-demand aviation asset to the Multinational Force and Observers commander to support its mission of supervising the security provisions of the Egypt/ Israel Peace Treaty.
Read the site, Google it and read especially the links in this post. When I watched the mass exodus in San Francisco of people losing their jobs, during the "dot con" crash, most were seemingly oblivious to the fact many of their jobs were offshore outsourced, that is when I pulled out my economics background and started studying.
I knew right then something was afoot and was also aware of this intense agenda by India to capture the entire STEM/IT/information services sector.
So, this is not "new" to me at all, just the latest article in many.
As far as mathematics go, math is for people who think, it is philosophies for people who are corrupt or can't "do math". If one reads these "papers" including the "math", one will see variables set to zero, you'll see assumptions that are beyond absurd, such as no Americans can code and no illegal can do a job that previously an American did...
all sorts of bias, fictional assumptions, manipulation of mathematical equations from the theory and my favorite, even cherry picking existing government statistics, which clearly show something really bad has been happening for the U.S. middle class for a while now.
This irks me and earlier it was similar, the data shows very clearly China is a huge problem for the U.S. economy, the trade deficit is a problem and the mathematics show, offshore outsourcing, labor arbitrage is a huge problem.
Why people attack mathematics, data, statistics is beyond me, that's not the problem, it shows what's going on is labor arbitrage...
Math is your friend, the data is your friend and correct statistics are your friend.
it's the people who manipulate the above to write fiction that are the problem.
Just earlier, I noticed instead of understanding what various economic indicators mean, how they are created, they are attacked as "bogus", they are not "bogus", and if one learns how to read them, they too clearly show the U.S. is in huge trouble...
the entire middle class, U.S. workforce is under enormous attack, used like disposable diapers for some multinational's quarterly profit statement.
Get an account! You comment all of the time and that way you don't have to deal with the CAPTCHA or waiting for the moderation queue to comment.
I learned a while back that math is for people who wish to avoid having to think. The flaws are almost never in the math. They are virtually always in the assumptions behind the math. Does AGW ring a bell? Where is Mann now? Probably playing "hockey" . Ricardian analysis of the effect of tariffs applies the MICROeconomic definition of ceteris paribus to a MACROeconomic system, and therein lies the fundamental error, not in the math.
The folly of secular providentialism runs rampant in economic thinking. Such things as "technological advances" are taken as manna from heaven, and presumed to be providence without cause, thus allowing blindness to effect their destruction (can anybody say Henry George?). The fact that "The North was industrialized, while the South was agrarian" is likewise considered by historians to be merely "providential," as is the fact that "the population of the North was double that of the South." and on and on. **These facts all had causes.** John Chamberlain wrote that "what [Jefferson] objected to in Hamilton's position was its emphasis on tariffs, which would force an uneconomic shift of resources from farming and trade into manufacturing." How? Because without the protection of tariffs, foreign manufactures would always have the comparative advantage, and thus American manufacturing would never have developed? What else could Jefferson have been talking about? How else could the imposition of tariffs possibly force reallocation of capital from farm to factory?
The most glaring assumption of secular providentialists is the idea that it is even possible to discount political sovereigns, ignoring that they are sovereign entities, for the purpose of the analysis of international commerce (hint, it's not).
Here's one for you. If the proper MACROeconomic definition of ceteris paribus is applied to international trade models with respect to the effect of tariffs (i.e. aggregate TAXATION -- tariffs plus tax -- is held constant), then the result is that tariffs effect NO CHANGE, NONE, in import consumption. Chew on that one for a while.
Sorry for the rant dude, I'm just a little knocked over that you are just now, in 2011, coming out against outsourcing. I was a well paid software engineer for fourteen years, and have been a barely-surviving taxi driver for the last eight. Yes, I have a big ole chip on my shoulder because of that. On the other hand, if an internationalist free-trader can come out against outsourcing, there may be hope for us yet.
Projections by the Bureau Of Labor Statistics, United States Department Of Labor, indicate negative growth for manufacturing. ( Projections for 2008 through 2018 )
Prolonged, persistent, and ever increasing trade deficits, cause many problems not covered by the GDP numbers.
Examples:
(1) Increases in poverty and homelessness.
(2) Lower wages across most industries.
(3) Dependency on government assistance programs.
(4) Lost industries.
(5) Lower living standards.
(6) Inadequate tax revenue.
(7) Lost skills and trades.
(8) Import dependency.
The trade deficits we experience support foreign economies at the expense of our own.
But from the GDP report, if you put your comment in the right place, it clearly shows the trade deficit is a huge negative on GDP.
Secondary factors in production are counted in PCE, investment and government spending is counted in GDP, just as secondary factors in production abroad are not counted in their import prices and imports here.
Imports "contributing nothing" do minorly contribute "something" in that there is an entire industry unloading containers and moving them around the U.S.
Not that they wouldn't be working doing that for U.S. goods the other way but you cannot claim it "contributes nothing" in spite of it being minor contribution in comparison to the growth and secondary industries related to full bore domestic production and goods/services for export.
Are you a one trick pony? There are many, many different ways to introduce tariffs de facto, never mind all of the other factors which create unbalanced trade. This is why a VAT is being considered, it's an "at the border adjustment tax", legal under the WTO and dynamic.
Producers generally require some production support from other producers of goods and/or services. Production support provided by governments or other non-profit entities are generally not reflected within the prices of goods.
For want of a better term I’ll describe all production supports (to the extent they’re not fully reflected within the prices of the supported products), as “secondary” production.
Rather than being supported, some secondary production of goods or services may be induced by another producer. For example increased factory production could induce increased production of local beauty parlor services. In such cases I describe these additional beauty parlor services as the factory’s “secondary” production.
All of a nation’s exports and all “secondary” production due to those exports contribute to the GDP. To the extent that export’s “secondary” expenditures are not reflected within the prices of any exports, their contribution to GDP is not attributed to global trade.
Imported goods contribute nothing to USA’s GDP. Their prices and the prices of their “secondary” production all contribute to the producing nations’ GDPs.
Purchasers can only spend their dollars once. To the extent that the USA continues to be a net goods purchaser, we’re denying ourselves of our trade deficit of goods’ amounts that could otherwise contribute to our GDP.
Due to “secondary” production, unbalanced trade’s affect upon the nation’s GDP is generally understated. Trade surpluses always contribute and trade deficits always are detrimental to the nation’s GDP.
I've been seeing a lot of regulars don't know where the graphs come from.
Graphs have titles at the bottom. I use, extensively the awesome, wonderful and free tool from the Saint Louis Federal Reserve research division FRED. This database has some awesome graphing capabilities where one can create custom graphs, which are what is in this post.
They also have the ability to download the raw data after you have customized it, which is really useful to make sure you're graphing what you think you are graphing.
Most graphs, although sometimes we miss it, if they are created originally from raw data, put the site URL in the bottom to identify who made it.
The St. Louis FRED graphing and database is simply fantastic, it's accurate, fast and one can create custom graphs for your data almost on the fly.
So, if you're looking for graphs and just plain don't know how to create them from scratch, you might check out this research tool the St. Louis Fed has created for public use.
They do not have all data and there are limits, but you can narrow down a lot of data to create a graph in Excel if you've hit the limits of what their tool can do.
Seriously, who says the government isn't web savvy, the St. Louis Fed has blown away any Google API!
To sum on graphs:
1. FRED
2. custom, often using Excel graphing capabilities and spreadsheets
3. borrowed from others, but always cited to show where the graph came from
the site actually does have the ability to create minor graphs from data but you need to use those LaTex tools and it's not very good.
If someone sees a new API, or server side graphing tools that actually work and are easy to use, let me know and I'll incorporate them on the site.
To date, almost everything I've checked out is more of a pain to use than the above methods and I think that's the last thing people need is to become a programmer in order to create a graph on some economics related data.
That's the point of this post. I'm writing up those numbers trying to show that just a sudden deceleration in imports for 1 quarter increased GDP growth the most and that is with a massive deceleration of private inventories.
I'm linking to posts showing the decorrelation of long held multipliers and relationships between GDP and jobs and pointing to some of the reasons why. That said, a reduction in a multiplier does not mean there is no multiplier or correlation.
In your comments it seems you are missing the point of the GDP equation and understanding how national accounts are glorified bookkeepers, how they are subtracting off imports/exports and how GDP is calculated.
Not surprising, frankly to understand how a deceleration of a GDP component, it's slope, it's change, is hard to get. I mean you've got an increase in inventories, absolute, but it's that rate of change which affects the GDP....because that also is a rate of change, not an absolute quantity.
Growth = Change, Contraction = Change.
Quarterly GDP data is annualized, and it's also a rate of change. So, "GDP grew 3.2% last quarter" means at an annualized rate, the change was 3.2% from last quarter. The entire report is change, ratios.
Again, trade data is in the GDP calculation, it's a huge component and it shows how trade deficits negatively impact gross domestic product.
That's why I print the basic GDP equation and break it all down based on that equation.
What it tells you on the state of the economy is current economic production, just as the title states. Gross domestic production. That does imply job growth, the question is more what percentage? 3-6 months tells you the economy is growing.
I getting kind of tired of this. Are you upset because Q4 GDP was 3.2%? By the ratios, a 3.2% quarter or even a 2.9% year is assuredly not enough for 400,000 jobs per month.
To maintain the status quo, the current multiplier ratio, or rule of thumb is about 2% annualized GDP growth.
1. Banks and note holders are complicit in building the balloon, the true market value for homes being what we are seeing right now, not what you paid 5 years ago. "Underwater Mortgages" are the new reality, and every homeowner needs to ask why that is. Simply, GSEs and the banking industry distorted the markets so grossly that for every qualified homeowner bidding on a property, there were 9 or more unqualified bidders. In any other instance, it would be called "shill bidding", artificially driving up the price and as a side note, prosecutable under the RICO Act.
2. Broken title robs the States and Counties of revenue (of interest now that many are near insolvent) and individuals of certainty (more later). What's more, proprietary land registration attempts to circumvent real property laws and State sovereignty, but then through Foreclosure proceedings, the same folks that circumvented the law rely upon it for relief. Just another case of privatizing gains while publicly claiming losses.
3. Mark my words, the foreclosure crisis hasn't even hit us yet. When the accountants and lawyers get to work, we'll see even paid up mortgages will end up in foreclosure because the servicing arrangements are as shoddy as the registration process. The note holders and MBS holders will reconstitute and go after home owners that believed their payments through servicers were paid up, when in fact the servicers will probably be holding back to preserve capital reserve requirements and when the dam breaks, it will be found the individual accounts are in arrears. If Bernie Maddoff could keep it up for 10 years with a staff of less than a dozen, just imagine what BofA, JPMorgan, and the usual suspects can pull off. Too big to fail, or too big NOT to fail?
4. Whether Broken Chain of Title (like MERS), or unregistered Servicer/Holder arrangements (check your county land title office, see who holds your note, good chance it's not even recorded), especially in non-judicial states, it's up to YOU to check with your bank/servicer to see the status of your payments applied against the loan. Good luck, if GSEs hold the notes, where can you even begin. If it's a private investor, do you even know who it is?
5. If you move first, you can file for Quiet Title and expunge the mortgage note (Deed of Trust), especially if it wasn't properly reconveyed after the originator sold the note into a traunche. If you know your servicer isn't the note-holder, then ask who it is. Then ask the bank to provide verification of payment.
6. More importantly, ask the note holder to verify they hold both the Deed of Trust and the Loan Note. If they don't, it's broken chain of title, if they don't respond, you simply file to Quiet Title. If your bank won't/can't tell you who holds the note, file to Quiet Title. If the note holder/investor won't respond in 30 days, file to Quiet Title.
7. When FDIC (already insolvent) takes BofA and other banks into conservatorship, don't be surprised that loans haven't been properly credited. You could be paying your servicer for years just to find out the money went into a black hole in the Bankosphere (TM). You'll have no recourse but foreclosure and bankruptcy or to somehow repay what you've already paid.
8. Don't think it can't happen. It's already written in the cards because it already happened in the 1910s and again in the 1930s. Behind the facade of smiles from friendly tellers and loan officers, there's no law protecting you except basic property rights which if you don't timely exercise, will be forfeit and you'll be at the mercy of much more powerful players.
9. Don't say you weren't forewarned.
The problem is in Ricardo's theory, the means of production are assumed static, i.e. not mobile. In other words, it's only the finished good traded and instead they are trading people, they are trading labor forces.
Not supposed to do that for this infamous "win-win", but even so, there it also shows it's not always this win win.
That said, yeah, it's it amazing how population is ignored. They have made it political poison, when so much theory and statistics rest of the baseline of population, workforce.
I beg to differ that the trade deficit with China isn't a problem, uh, it ranges from 70-80% of the total goods, non-oil trade deficit! Bottom line fact there are 1.6 billion people over there, a never ending cheap labor supply, is a real problem, esp. when there is no "domestic consumption" despite all of the wishes, myths and agenda to make it so. Even if they do, so what, unlike China's goods, U.S. goods are .....made in China, so that does nothing for the American people, U.S. economy, it's only good for multinational corporations and "if" they pay any U.S. taxes, which most do not.
Our enormous trade deficit is rightly of growing concern to Americans. Since leading the global drive toward trade liberalization by signing the Global Agreement on Tariffs and Trade in 1947, America has been transformed from the wealthiest nation on earth - its preeminent industrial power - into a skid row bum, literally begging the rest of the world for cash to keep us afloat. It's a disgusting spectacle. Our cumulative trade deficit since 1976, financed by a sell-off of American assets, exceeds $10 trillion. What will happen when those assets are depleted? Today's recession is the answer.
Why? The American work force is the most productive on earth. Our product quality, though it may have fallen short at one time, is now on a par with the Japanese. Our workers have labored tirelessly to improve our competitiveness. Yet our deficit remains as large as ever. Our median wages and net worth have declined for decades. Our debt has soared.
Clearly, there is something amiss with "free trade." The concept is rooted in Ricardo's principle of comparative advantage. In 1817 Ricardo hypothesized that every nation benefits when it trades what it makes best for products made best by other nations. On the surface, it seems to make sense. But is it possible that this theory is flawed in some way? Is there something that Ricardo didn't consider?
I am author of a book titled "Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America." My theory is that, as population density rises beyond a critical level, per capita consumption begins to decline. This occurs because, as people are forced to crowd together and conserve space, it becomes ever more impractical to own many products. Falling per capita consumption, in the face of rising productivity (per capita output, which always rises), inevitably yields rising unemployment and poverty.
This theory has huge ramifications for U.S. policy toward population management (especially immigration policy) and trade. The implications for population policy may be obvious, but why trade? It's because these effects of an excessive population density - rising unemployment and poverty - are actually imported when we attempt to engage in free trade in manufactured goods with a nation that is much more densely populated. Our economies combine. The work of manufacturing is spread evenly across the combined labor force. But, while the more densely populated nation gets free access to a healthy market, all we get in return is access to a market emaciated by over-crowding and low per capita consumption. The result is an automatic, irreversible trade deficit and loss of jobs, tantamount to economic suicide.
One need look no further than the U.S.'s trade data for proof of this effect. Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!
Our trade deficit with China is getting all of the attention these days. But, when expressed in per capita terms, our deficit with China in manufactured goods is rather unremarkable - nineteenth on the list. Our per capita deficit with other nations such as Japan, Germany, Mexico, Korea and others (all much more densely populated than the U.S.) is worse. My point is not that our deficit with China isn't a problem, but rather that it's exactly what we should have expected when we suddenly applied a trade policy that was a proven failure around the world to a country with one fifth of the world's population.
Ricardo's principle of comparative advantage is overly simplistic and flawed because it does not take into consideration this population density effect and what happens when two nations grossly disparate in population density attempt to trade freely in manufactured goods. While free trade in natural resources and free trade in manufactured goods between nations of roughly equal population density is indeed beneficial, just as Ricardo predicts, it’s a sure-fire loser when attempting to trade freely in manufactured goods with a nation with an excessive population density.
If you‘re interested in learning more about this important new economic theory, then I invite you to visit my web site at http://PeteMurphy.wordpress.com.
Pete Murphy
Author, "Five Short Blasts"
Ya all, in addition to this site, I recommend reading Dean Baker. He puts posts in English but always seems to catch a critical piece on an economic report and calls out the press for their lack of accurate reporting.
He just commented that Germany's unemployment rate is down and their productivity did not soar and that's due to work sharing, they didn't lay people off, just reduced hours.
Not quite the same as this post trying to point the spotlight on offshore outsourcing, but one might note that when work sharing in Germany, that also means that job is not offshore outsourced.
He's on our list of must read sites in the column, but I'm noticing over and over again he finds the fatal factual flaw or misinformation piece and writes about it.
It's scary because I've usually already written the facts over here in an eoonomic report or whatever, and then that goes against whatever the headline buzz is...
to see that Baker caught it too.
Calculated Risk is accurate as well but Baker cuts to the chase.
People have been persuaded that since we are surrounded by foreign goods and services, that we should give up: that it's futile to even try to fight it. Yet, careful label reading while shopping may yield some surprises. At Walmart: two large dog dishes, one from India, one from the USA. Matches: Ohio Blue Tip at Kmart. And my first shopping choice for fashion and household goods is the thrift store: even if the item is foreign, it won't make the globalist cash registers ring twice. Even a 2% change would have business analysts screaming to corporate leaders - yes they keep track of our behavior that closely. People just need to try.
"Notwithstanding the prohibition against torture and the clear duty to prosecute torturers imposed by international and Egyptian law,12 Egyptian security forces in 1991 continued to torture detainees with apparent impunity. In an October 1991 report, AI found the existence of "widespread [and unabated] torture of political detainees in Egypt."13 EOHR reported in August 1991 that there was a "total absence of safeguards for the prisoner while in detention in public prisons." For example, in the case of those accused of the October 1990 assassination of Parliament Speaker Dr. Rifaat al-Mahgoub, EOHR found that Egyptian laws prohibiting security-force access to prisoners without an official permit from the public prosecutor's office were openly flouted." Human Rights Watch World Report 1992 http://tinyurl.com/5v6g28c
The income disparity, the obvious anti-life policies (longevity low, infant mortality high), and violence against the people coalesced to bring people to acts of desperation and rage.
But how about those Wall Streeters and their privatization and open market economy. The Egyptians got stuck with everything but Tom Friedman as gifts from their biggest donor.
It's been throughout history that when income inequality reaches a certain point as well as events like Italy being wiped out by their trade deficit (5%) in the 1930's, Weimer Republic hyperinflation, WWI reparations, "Let them Eat Cake" (French, Russia) and corruption, revolutions are sure to follow and many of them are frying pan to fire.
I saw they have some of the most corrupt, income inequality with massive poverty and the young, no opportunity.
I just read the most bogus piece trying to claim the U.S. is #1 in manufacturing
One claim is wrong, we do not have more capacity, raw capacity has actually decreased, the first time, starting the "Great Recession".
Here is the last industrial production & capactiy utilization report overview.
Then, China exceeded the U.S. manufacturing output, this year. The reason we get so much of the trade deficit with China is China has really targeted the U.S. market.
i.e. we are their #1 export destination.
This is claiming the U.S. output if 40% larger than China, and use manufacturing in the same breath. If they are talking about GDP, that might be true, but just manufacturing, it's not from every stat am aware of.
Honestly, this isn't the first time I've seen bogus "major press" when some blogs pull out some facts they don't want people to read...kind of an "misinformation campaign" to drown out the other articles and writings.
It's just ridiculous and they refuse to acknowledge partial or semi-finished goods, global supply chains either...
trying to of course claim the entire reason the U.S. has no jobs and is in decline is because of 'technological advances', if that were true, Japan would have an unemployment crisis and a massive trade deficit, Germany would have a massive trade deficit and a job crisis...
neither of these higher wage countries do and they have some of the most advanced manufacturing processes globally.
That said, there is also another fictional piece trying to claim U.S. manufacturing is #1.
Groton Guard detachment is heading to Egypt
Published 01/24/2011 12:00 AM
Updated 01/24/2011 04:59 AM
theday.com Connecticut
Read the site, Google it and read especially the links in this post. When I watched the mass exodus in San Francisco of people losing their jobs, during the "dot con" crash, most were seemingly oblivious to the fact many of their jobs were offshore outsourced, that is when I pulled out my economics background and started studying.
I knew right then something was afoot and was also aware of this intense agenda by India to capture the entire STEM/IT/information services sector.
So, this is not "new" to me at all, just the latest article in many.
As far as mathematics go, math is for people who think, it is philosophies for people who are corrupt or can't "do math". If one reads these "papers" including the "math", one will see variables set to zero, you'll see assumptions that are beyond absurd, such as no Americans can code and no illegal can do a job that previously an American did...
all sorts of bias, fictional assumptions, manipulation of mathematical equations from the theory and my favorite, even cherry picking existing government statistics, which clearly show something really bad has been happening for the U.S. middle class for a while now.
This irks me and earlier it was similar, the data shows very clearly China is a huge problem for the U.S. economy, the trade deficit is a problem and the mathematics show, offshore outsourcing, labor arbitrage is a huge problem.
Why people attack mathematics, data, statistics is beyond me, that's not the problem, it shows what's going on is labor arbitrage...
Math is your friend, the data is your friend and correct statistics are your friend.
it's the people who manipulate the above to write fiction that are the problem.
Just earlier, I noticed instead of understanding what various economic indicators mean, how they are created, they are attacked as "bogus", they are not "bogus", and if one learns how to read them, they too clearly show the U.S. is in huge trouble...
the entire middle class, U.S. workforce is under enormous attack, used like disposable diapers for some multinational's quarterly profit statement.
Get an account! You comment all of the time and that way you don't have to deal with the CAPTCHA or waiting for the moderation queue to comment.
I learned a while back that math is for people who wish to avoid having to think. The flaws are almost never in the math. They are virtually always in the assumptions behind the math. Does AGW ring a bell? Where is Mann now? Probably playing "hockey" . Ricardian analysis of the effect of tariffs applies the MICROeconomic definition of ceteris paribus to a MACROeconomic system, and therein lies the fundamental error, not in the math.
The folly of secular providentialism runs rampant in economic thinking. Such things as "technological advances" are taken as manna from heaven, and presumed to be providence without cause, thus allowing blindness to effect their destruction (can anybody say Henry George?). The fact that "The North was industrialized, while the South was agrarian" is likewise considered by historians to be merely "providential," as is the fact that "the population of the North was double that of the South." and on and on. **These facts all had causes.** John Chamberlain wrote that "what [Jefferson] objected to in Hamilton's position was its emphasis on tariffs, which would force an uneconomic shift of resources from farming and trade into manufacturing." How? Because without the protection of tariffs, foreign manufactures would always have the comparative advantage, and thus American manufacturing would never have developed? What else could Jefferson have been talking about? How else could the imposition of tariffs possibly force reallocation of capital from farm to factory?
The most glaring assumption of secular providentialists is the idea that it is even possible to discount political sovereigns, ignoring that they are sovereign entities, for the purpose of the analysis of international commerce (hint, it's not).
Here's one for you. If the proper MACROeconomic definition of ceteris paribus is applied to international trade models with respect to the effect of tariffs (i.e. aggregate TAXATION -- tariffs plus tax -- is held constant), then the result is that tariffs effect NO CHANGE, NONE, in import consumption. Chew on that one for a while.
Sorry for the rant dude, I'm just a little knocked over that you are just now, in 2011, coming out against outsourcing. I was a well paid software engineer for fourteen years, and have been a barely-surviving taxi driver for the last eight. Yes, I have a big ole chip on my shoulder because of that. On the other hand, if an internationalist free-trader can come out against outsourcing, there may be hope for us yet.
TD
Projections by the Bureau Of Labor Statistics, United States Department Of Labor, indicate negative growth for manufacturing. ( Projections for 2008 through 2018 )
http://www.bls.gov/oco/oco2003.htm
Cheap foreign labor adversely affects our GDP numbers.
Prolonged, persistent, and ever increasing trade deficits, cause many problems not covered by the GDP numbers.
Examples:
(1) Increases in poverty and homelessness.
(2) Lower wages across most industries.
(3) Dependency on government assistance programs.
(4) Lost industries.
(5) Lower living standards.
(6) Inadequate tax revenue.
(7) Lost skills and trades.
(8) Import dependency.
The trade deficits we experience support foreign economies at the expense of our own.
See Productivity, GDP and jobs.
But from the GDP report, if you put your comment in the right place, it clearly shows the trade deficit is a huge negative on GDP.
Secondary factors in production are counted in PCE, investment and government spending is counted in GDP, just as secondary factors in production abroad are not counted in their import prices and imports here.
Imports "contributing nothing" do minorly contribute "something" in that there is an entire industry unloading containers and moving them around the U.S.
Not that they wouldn't be working doing that for U.S. goods the other way but you cannot claim it "contributes nothing" in spite of it being minor contribution in comparison to the growth and secondary industries related to full bore domestic production and goods/services for export.
Are you a one trick pony? There are many, many different ways to introduce tariffs de facto, never mind all of the other factors which create unbalanced trade. This is why a VAT is being considered, it's an "at the border adjustment tax", legal under the WTO and dynamic.
Producers generally require some production support from other producers of goods and/or services. Production support provided by governments or other non-profit entities are generally not reflected within the prices of goods.
For want of a better term I’ll describe all production supports (to the extent they’re not fully reflected within the prices of the supported products), as “secondary” production.
Rather than being supported, some secondary production of goods or services may be induced by another producer. For example increased factory production could induce increased production of local beauty parlor services. In such cases I describe these additional beauty parlor services as the factory’s “secondary” production.
All of a nation’s exports and all “secondary” production due to those exports contribute to the GDP. To the extent that export’s “secondary” expenditures are not reflected within the prices of any exports, their contribution to GDP is not attributed to global trade.
Imported goods contribute nothing to USA’s GDP. Their prices and the prices of their “secondary” production all contribute to the producing nations’ GDPs.
Purchasers can only spend their dollars once. To the extent that the USA continues to be a net goods purchaser, we’re denying ourselves of our trade deficit of goods’ amounts that could otherwise contribute to our GDP.
Due to “secondary” production, unbalanced trade’s affect upon the nation’s GDP is generally understated. Trade surpluses always contribute and trade deficits always are detrimental to the nation’s GDP.
Refer to: www.USA-Trade-Deficit.Blogspot.com and http://en.wikipedia.org/wiki/Import_Certificates
Respectfully, Supposn
I've been seeing a lot of regulars don't know where the graphs come from.
Graphs have titles at the bottom. I use, extensively the awesome, wonderful and free tool from the Saint Louis Federal Reserve research division FRED. This database has some awesome graphing capabilities where one can create custom graphs, which are what is in this post.
They also have the ability to download the raw data after you have customized it, which is really useful to make sure you're graphing what you think you are graphing.
Most graphs, although sometimes we miss it, if they are created originally from raw data, put the site URL in the bottom to identify who made it.
The St. Louis FRED graphing and database is simply fantastic, it's accurate, fast and one can create custom graphs for your data almost on the fly.
So, if you're looking for graphs and just plain don't know how to create them from scratch, you might check out this research tool the St. Louis Fed has created for public use.
They do not have all data and there are limits, but you can narrow down a lot of data to create a graph in Excel if you've hit the limits of what their tool can do.
Seriously, who says the government isn't web savvy, the St. Louis Fed has blown away any Google API!
To sum on graphs:
1. FRED
2. custom, often using Excel graphing capabilities and spreadsheets
3. borrowed from others, but always cited to show where the graph came from
the site actually does have the ability to create minor graphs from data but you need to use those LaTex tools and it's not very good.
If someone sees a new API, or server side graphing tools that actually work and are easy to use, let me know and I'll incorporate them on the site.
To date, almost everything I've checked out is more of a pain to use than the above methods and I think that's the last thing people need is to become a programmer in order to create a graph on some economics related data.
That's the point of this post. I'm writing up those numbers trying to show that just a sudden deceleration in imports for 1 quarter increased GDP growth the most and that is with a massive deceleration of private inventories.
I'm linking to posts showing the decorrelation of long held multipliers and relationships between GDP and jobs and pointing to some of the reasons why. That said, a reduction in a multiplier does not mean there is no multiplier or correlation.
In your comments it seems you are missing the point of the GDP equation and understanding how national accounts are glorified bookkeepers, how they are subtracting off imports/exports and how GDP is calculated.
Not surprising, frankly to understand how a deceleration of a GDP component, it's slope, it's change, is hard to get. I mean you've got an increase in inventories, absolute, but it's that rate of change which affects the GDP....because that also is a rate of change, not an absolute quantity.
Growth = Change, Contraction = Change.
Quarterly GDP data is annualized, and it's also a rate of change. So, "GDP grew 3.2% last quarter" means at an annualized rate, the change was 3.2% from last quarter. The entire report is change, ratios.
Again, trade data is in the GDP calculation, it's a huge component and it shows how trade deficits negatively impact gross domestic product.
That's why I print the basic GDP equation and break it all down based on that equation.
Robert,
Why would I be upset? Since you're tired of this conversation, I'll end it here.
Thanks for your time and input.
What it tells you on the state of the economy is current economic production, just as the title states. Gross domestic production. That does imply job growth, the question is more what percentage? 3-6 months tells you the economy is growing.
I getting kind of tired of this. Are you upset because Q4 GDP was 3.2%? By the ratios, a 3.2% quarter or even a 2.9% year is assuredly not enough for 400,000 jobs per month.
To maintain the status quo, the current multiplier ratio, or rule of thumb is about 2% annualized GDP growth.
Read GDP, Productivity and Offshore outsourcing. It's from 2009, but still relevant.
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