Consciousness.....

Interesting Times. Speaking to people while flying recently it has become clear to me that there is a greater consciousness of the reality of our economic situation. Pardon my ramblings tonight:

Free Trade is Farce! It is a scam concocted by large international corporations that no longer are corporate citizens of the USA. They have been so successful in outsourcing production away from us , their host, that they have broken the cardinal biological rule all parasites live by; Don't Kill the Host!

We live in world where "Free Trade" means that China gets to peg their currency to the Dollar and we ship all of our jobs to them as a result. Pegging your currency to another is Protectionism. What we need to do is start protecting our jobs and penalizing those companies that outsource US jobs overseas.

As Karl Denninger discussed so accurately in a recent post on the Market Ticker, Total US Credit is headed South, way south! Given our economic situation where debt based economic growth has halted due to falling credit, there are only 2 options: Either we find a way to grow our national exports to increase GDp and support our debt load, or we will see our economy continue to decline as credit creation continues to fall, and our national income continues to drop. So either we become like Germany and get our exports into balance, or we go the way of some second world country, Mexico comes to mind.

Sure we can try to print $, quantitatively ease, or otherwise bamboozle people into buying our debt, but that works as long as you don't turn into Weimar. Once you are Weimar, the party is over. The core problem of declining income will be back in any case.


The formula for GDP is:


Y = C + I + E + G

where

Y = GDP

C = Consumer Spending

I = Investment made by industry

E = Excess of Exports over Imports

G = Government Spending


So take a look at the formula:

Given Consumer Spending is in the tank and declining, Industry Investment is unknown, our trade balance is negative, and Government Spending is growing thanks to lots of bond sales. To get Y to go up we might see some help from Industrial Investments if the globalizers of the world realize they better invest in the US in order to help preserve GDP enough for us to continue to patronize them. But, really there is not much choice in the matter as far as getting our exports to grow and provide national income to increase. If we don't GDP will just continue to slide downhill towards.