Every American has to decide

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July 18, 2012.   Federal Reserve Chairman Bernanke "warns that economic recovery is weak".

Obvious!  How could recovery be anything but "weak" while the economy is hemorrhaging out to foreign countries nearly $600 billion per year to pay them to do our manufacturing for us.  This amount, $600 billion, is real wealth going out of our pockets at the rate of over $1800 per year for each and every American man, woman, and child.

If a ship hits a rock and water is pouring in, is the ship going to show "recovery" from the accident while water continues to pour in?  No, of course not.  The inflow of water first has to be stopped, to allow "recovery".  Every eight-year-old knows this.

Similarly in the case of our economy, the outflow of $600 billion per year first has to be stopped, to allow "recovery".

This figure of $600 billion per year is found in official reports from two different U.S. government agencies.  Does Bernanke read these reports?  Does Bernanke understand the significance of the data presented?  Do Obama and Mitt read and understand these reports?  Are any politicians in Washington, other than a very few, aware of these reports and their significance?

It is really weird when high officials, such as Bernanke or Obama, in charge of everything, issue statements "warning" about the economy.  They have the power to fix the problem, rather than stand around like an outsider, issuing "warnings".

Similarly in the case of a politician who "warns" that there is a long road ahead in a war situation, with many sacrifices to come. If the politician knows this, then why did the politician start the war in the first place?  Or if the politician inherited the war, as in the case of Obama, why doesn't the politician get us out of the war immediately, rather than drag on with a daily toll of brave soldiers lost for no reason.

UK politician Nigel Farage recently made a speech to EU officials concerning the huge financial problems of the Euro system.  He said "we need to recognize that a terrible mistake has been made" in setting up the Euro.

In our good old USA we need Obama and Mitt and all other politicians to stand up and say "we need to recognize that a terrible mistake has been made" in sending or allowing the sending of manufacturing jobs away.  We need to restrict imports so that exports and imports of manufactured goods are approximately equal.  In this way we can eliminate the lethal hemorrhage of the $600 billion per year trade imbalance, and allow our economy to recover.


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There is only one way to save America, and that is to very substantially reduce imports of manufactured goods.


Every American has to look into his or her own heart and decide:


Am I in favor of action to reduce imports and save America? 

Or, am I in favor of the existing complete inaction, and the continuing decline of America?


Forthright action

What would be the result if there is forthright action to reduce imports?  Our present net hemorrhage of nearly $600 billion per year going out to foreign countries would be eliminated.  Money spent on American-made goods in stores would stay in USA and keep working in USA.  Americans would be back at work, in manufacturing and in many other types of employment.  Unemployment costs and welfare costs would go down, and tax revenue would go up.

An economy works on psychology and expectations.  Every time an unemployed worker finds employment a bright light goes on, spreading to other people.  Confidence and hope replace despair.  Young people will have an incentive to stay in school and learn, because there will be a definite chance of jobs available on graduation.


The flip-side:
Continuing complete inaction

Complete inaction has been the policy of Obama.  I am very much afraid that complete inaction will continue regardless of who is our next president.

What will be the result if complete inaction continues?  America continues to hemorrhage a net $600 billion per year out to foreign countries to pay them to do our manufacturing for us.  Money spent in stores goes straight to China or other foreign countries.  China continues to use our money to buy up chunks of our economy.  Chinese control of U.S. government policy continues to grow.  Government deficits increase, leading to more layoffs.  The negative atmosphere itself causes more layoffs.  Just as good news is contagious, despair is contagious.

Dispirited young people in towns and cities that are falling apart will turn in ever higher numbers to crime and drugs.   There will be social dislocation and riots in the streets similar to what has been seen recently in Greece.  In fact, America will become Greece, with impossible foreign debt and impossible hemorrhage of money out of America to pay interest on foreign debt, and to pay foreign countries to do our manufacturing for us.


What could be done with $600 billion per year

This is real money, real wealth, sent out of America to China and other countries.  This $600 billion per year is real, very real, not just a theoretical concept used only by economists.  Proof is that China, as one example, is rolling in money.  With this money, China has purchased over $1 trillion of U.S. Treasury securities, and large chunks of our economy.

To keep this $600 billion per year in the USA, we don't have to prohibit all imports.  We only have to cut imports of manufactured goods down to approximate balance with our exports.  It is only common sense that our imports should balance (be approximately equal to) our exports, in terms of total value of goods going in each direction.

$600 billion per year is equal to $1800 for every man, woman, and child in America.  Or, look at it as over $3000 for each and every family.

This money kept in America could pay wages and provide machinery to work with for ten million workers in manufacturing.  Think of the effect on America if we had an additional ten million people employed, rather than unemployed, and, especially, employed in manufacturing.

Every economics textbook states, or at least 50 years ago every economics textbook stated, that there is a multiplier effect of manufacturing.  For every worker in direct manufacturing of finished goods, two jobs are created in other industries.  Even if we assume only one job, that is an additional ten million people put back into the work force.

Taking account of reduced unemployment insurance payments, reduced welfare costs, and increased tax revenue, I estimate the equivalent of an additional $200 billion of tax revenue each year.

Politicians talk constantly about deficits, but they never talk about $600 billion hemorrhaging out of our country every year. It is a banned, censored, subject. Politicians don't know and don't understand that they could get an additional $200 billion in tax revenue, simply by acting to bring imports down to balance with our exports.


Who wants action and who wants complete inaction?

I estimate that 1% of Americans want continuing complete inaction, and 99% of Americans want forthright action to reduce imports and turn America around.

It is a mystery to me why the 99% are so passive.  During the Vietnam war we had million man/woman marches in Washington.  These marches were effective in ending a completely pointless war earlier than otherwise would have been the case.

Now we have somewhere between 25 and 40 million people unemployed. These people and most other Americans are very worried about the future.  Why don't we have five million man/woman marches in Washington?  Think of it.  Five million people marching in Washington, scaring our completely corrupt and paralyzed government into action.

The 1% of Americans who want continuing complete inaction are predominantly the people who have some power and control over events.  They are predominantly wealthy.  Why do the wealthy and powerful think they will be better off in a wrecked America than in a prosperous America?  These people may be wealthy and powerful but they sure can't think straight!

But part of the reason is that China exerts a lot of control on our government.  China owns a significant chunk of our economy.  China is lobbying very hard to prevent any type of controls on imports of manufactured goods.  Wealthy and powerful Americans are predominantly in a treasonous state of alignment with China.

Now consider all the charitable foundations, such as Bill Gates' foundation, and thousands of others.  If they really wanted to help America, they would lobby just as hard for cuts in imports, to enable America to get back on its feet.


Propaganda

The wealthy and powerful are supporting a propaganda campaign to try to make Americans forget how we got into our present mess, to try to divert attention away from how really simple it would be to turn things around.

The latest propaganda effort has so-called scholars writing about the Roman empire of 2000 years ago, and reviving interest in the famous book "Decline and Fall of the Roman Empire".  They are trying to prove that America is undergoing a sequel to the Roman experience, i.e., an inevitable American "Decline and Fall" that we are powerless to prevent. 


Where that propaganda goes wrong

In the Roman Empire of 2000 years ago there was also a 1% that controlled everything.

But there is a huge difference.  The outlook of the ordinary Roman Empire citizen was that you accept your situation.  The outlook of the ordinary American citizen of today is to apply intelligence and initiative to improve things.  We have instant worldwide communication.  We know what is going on.

Coming out of American intelligence and initiative we need leadership with one simple clear-cut goal and that is to greatly reduce imports.  We need leaders to organize a five-million man/woman march on Washington with this one simple clear-cut goal.

Once imports are reduced, all other goals will flow from it:  greatly reduced unemployment, greatly reduced poverty, greatly reduced homelessness, greatly improved prospects for young adults and for all Americans.

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Appendix

I often contact anti-poverty organizations to try to get them on board.  I quickly give up.  In fact I become furious with their attitude.  How is it possible they don't understand that poverty would be reduced by ending a hemorrhage of nearly $600 billion out of our country every year, and by greatly reducing unemployment?  I guess these people would also attempt to restore the interior of a house without first fixing the roof!

There is complete censorship in America.  No one is allowed to talk about reducing imports.  I believe these anti-poverty organizations are afraid they would lose their charitable status if they joined efforts to reduce imports and increase domestic manufacturing employment, and related employment. 

The idea of overt action to greatly reduce imports may seem very radical.  Maybe people would stop contributing to an anti-poverty organization that has come out in favor of reducing imports.  But after five to ten more years of devastation of America, the idea will not seem so far out!

All western countries, United States, Australia, Canada, U.K., France, Spain, others, are suffering because so much manufacturing has been sent away.  Governments are running around in circles trying to solve the problems of debt and unemployment, but won't listen to suggestions to reduce imports and increase domestic manufacturing.

I predict in another five to ten years things will be so bad that people in authority, the 1%, will have to listen.  There will be continuous unrest, rioting in the streets, etc.  Ordinary Americans will be so poor, and the currency will be so low, that purchase of imported goods will be reduced.  The immutable laws of economics will come into action and domestic manufacturing will slowly come back without government action.

I further predict that in ten years the only people with money will be people who have received significant inheritances, or whose parents have received significant inheritances.  The ordinary working men and women of the western countries, even if they have employment, will be receiving such slim wages that they won't be able to save and leave money to their children.

Why wait for these tragic predictions to come true?  What wait for things to get so bad?  Reduce imports of manufactured goods now!  Not to zero; only down to balance with our exports.  What is wrong with this idea?  Why won't the 1% take action before America and other western countries are down below the situation of Greece today?


Reader comments (thanks to readers for comments!)

One reader appears to agree with the idea of cutting imports but comments "hard to get there without leadership".  Ed's response:  Very good point.  That is one of the weak points in my reasoning!  Where is the leadership to come from?  The Occupy movement is very good but bogged itself down with too many issues, and with the issue of occupying parks, etc.  The media happily emphasized the battles over kicking people out of parks, thus obscuring the issues Occupy was trying to raise.  Some people recently won a $200 million lottery prize.  With a fraction of that money, I am sure I could get things going!

Another reader comments:  "I agree to a point.  I think we should trade with all but I would personally much rather buy American products."  Ed's response:  In my proposal, we continue to trade with all countries we are trading with now, but we have balanced trade with each country.

Another reader also appears to agree with the need to cut imports but comments "but what is a realistic way to (cut imports)?  Would it make sense to increase our exports to the level of our imports?"

Ed's response:  This reader's excellent comment raises a lot of issues.  In my blog post above, I gloss over a number of important issues. How would it be determined which goods would come into the USA?  During a transition period, there could be shortages and other dislocations.  But America has successfully dealt with this type of issue in the past, such as during World War II.

In terms of manufactured goods, we buy four times more from China than they buy from us.  So my proposal means eliminating 75% of present imports from China.  The fury of China would know no bounds.  Maybe China would switch from its present economic war against USA (which it is winning hands down) to a real shooting war.  In any case there would be great upheaval.  I doubt very much that our exports could go up to match our imports. We can't simply create new customers!  But in a peaceful changeover, maybe our exports could go up over time as we increase our manufacturing activity and improve our efficiency.

China is only one of many countries we trade with, but China is the largest in terms of our imports, and China is the most aggressive country.  I think China is itself confused as to its objectives:

Alternative 1.  Does China want to completely destroy the American economy?

Or, alternative 2, does China want to allow some viability to continue, so that America continues to be a customer of China?

I don't think the fine-tuning needed for alternative 2 is possible.  I think that as matters stand now we are on a direct path to alternative 1.  China is killing the goose that lays the golden egg.

Politicians, commentators, and the business community are wailing about "poor store sales" in USA, pretending to not understand why sales are poor.  Obviously, sales are poor because unemployed people can't buy.  Sales are poor because employed people are getting lower wages and are constantly afraid of losing their jobs.

All the western countries, USA, Canada, UK, France, Australia, Italy, Spain, others, have the same problem.  Their economies have been damaged by severe loss of manufacturing employment.  Ideally, America would take a leadership role and work with all western countries to reduce imports and increase domestic manufacturing in those countries.  If all western countries worked together, then maybe China would be afraid to start a shooting war or take other drastic retaliatory action.

If USA and other western countries were to reduce imports, China would still have a way of keeping its manufacturing industry going.  But China would have to do what it has not yet done, and that is allow all its own citizens to benefit from its manufacturing success.

Reader @K3vinFox says that "President Obama has plenty of incentives for USA manufacturing in his jobs bill but the GOP House shot them down."  Ed's response: I don't doubt that there are useful features in the proposed bill.  I agree that good proposals are often obstructed for the sake of obstruction.  But, to save the American economy, action on a much larger scale is needed, namely reducing imports so as to eliminate our net hemorrhage of nearly $600 billion per year, in turn providing the greatest incentive of all to USA manufacturing.  Further, President Obama during the campaign in 2008 said "We have to get the jobs back from China".  Initially he had a Democratic House but he did not have the courage to act on his statement.  Four years slipped away without facing up to the problem.

Reader  @mercury6281 says  "...you're right, (cutting imports) would definitely help.  Keeping jobs in USA, fair taxes on the 1%, additional fuel alternatives, to build USA".

A reader says he blames GOP for idle factories.  Ed's response:  I am no defender of GOP.  Jobs were sent away at a steady pace throughout the last 50 years, under BOTH Democratic and Republican administrations.  All presidents, all members of house and senate, over the last 50 years, are to blame.  At any time since the early 1960s, when jobs started going overseas, have you heard even one politician question this process (other than one or two cases during an election campaign, and promptly forgotten after the election)?  America is suffering today from 50 years of criminally negligent management of our economy and our country.

@NorCalCrush says that one problem standing in the way of increased manufacturing is training qualified workers.  Ed's response:  I suspect that claims of inability to fill millions of high-tech manufacturing jobs are not completely valid.  I suspect that employers today are  not willing to spend one cent toward training.  So of course if they take this attitude they won't be able to find workers.

No one knows how many people in USA are unemployed but want to work and are ready and able to work, but can't find jobs.  Let's say there are 40 million people unemployed, in these terms.  Surely one person out of each 40 persons could be trained for high-tech manufacturing.  So there you have one million potential manufacturing workers.  Probably out of this group of one million people there are many who already have some relevant training.

Another statistic.  About 2.5 million students graduate from high school every year.  Surely at least 10% of these students would be interested in training for high-tech manufacturing, if there was some certainty that a job would be waiting at the end of the training.  Once the pipeline is filled, employers would see a quarter million new trained workers every year.

What  is happening now is random.  Many students coming out of high school, and many older unemployed workers, go into training programs on their own initiative but really have no idea whether jobs will be available.  So a tremendous amount of money and time is wasted, and the economy of the USA does not benefit.  What is needed is a highly efficient agency (can we find any highly competent, honest people to run a highly efficient agency?) that works with employers to obtain information on employment needs projected over at least three years.  This agency also works with new high school graduates and older unemployed workers and slots them into relevant training programs, so that on completion of training there is near certainty of employment. 

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