Foreign Goods are Weakening Our Desire to Produce

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To Compete we must work for $4 per hour, which we can’t and won’t do.

Here are some sobering facts:

The U.S. is losing an average of $600 billion per year to foreign countries through trade losses. This money does not always come back to buy our goods and services. It also comes back in two other ways:

  1. Foreign countries bankroll the U.S. Government – with levels as high as almost 50 percent of U.S. Treasury debt held in foreign hands.
  2. Foreign countries use this money to buy out our core assets and companies. Many American industries are now controlled by non-U.S. companies.

Here is the result:

Foreign lenders are effectively propping up the U.S. Government, lowering U.S. interest rates and consumer spending. If foreign countries were to stop extending this easy credit to the U.S., imported goods would cost much more and the government would have to raise interest rates in order to attract lenders for U.S. Treasury debt. We naively place faith in the perpetuity of U.S. superpower status. No “superpower” in history has ever produced so little of what it consumes for so long while taking on such overwhelming debt.

Why is this a risk?

At some point, as U.S. debts continue to skyrocket, foreign creditors may demand something more than printed paper as security for this credit. As they are presently using much of these dollars to buy our assets, there will be less and less of the U.S. to offer as security. The U.S. rates of indebtedness and asset loss are climbing much faster than the rate we are replacing them with new industries and new assets. We assume that at any point, we will be able to rebuild our industries at a whim. It takes time, money, and know-how – three luxuries a country at war and with massive debts may not have.

Why has nothing been done?

This has been going on for more than 40 years and each new administration likes to think it will not be caught with the “hot potato.” Instead, the U.S. blames Asian countries for undervaluing their currency and not opening up their markets. The U.S. blames Europe for not helping rein in military threats to global stability and for subsidizing their own industries. Meanwhile these regions blame the U.S. for recklessly abusing its superpower status to run up huge deficits to support an exorbitant lifestyle without domestic production. By our own admission, we have converted from a production economy to a service economy. However, we don’t recognize that domestic services cannot be readily traded for foreign goods.

The reality of the situation:

At some point, higher oil prices, higher interest rates, or some other exogenous factor could disrupt the precarious balance that is presently supporting the U.S. standard of living. Our only option is to acknowledge the problem and develop a plan to deal with it. The wait-and-see approach is allowing other countries to actively execute their own “economic war plans.”

At the very least, U.S. leaders should formulate a task force to examine this problem thoroughly and understand the magnitude of our economic vulnerabilities and how the near term may unfold. To do otherwise is no less than a disgrace to past generations who sacrificed for our present position and a dereliction of duty to future generations that must live with the liabilities this generation establishes.

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