Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
US trade deficit hits $52.6 billion in January
US trade deficit widens to three-year high of $52.6 billion in January as imports hit record
By Martin Crutsinger, AP Economics Writer | Associated Press
WASHINGTON (AP) — The U.S. trade deficit surged to the widest imbalance in more than three years in January as imports hit an all-time high, reflecting big demand for foreign-made cars, computers and food products.
U.S. exports to Europe fell, raising concerns that the debt crisis in that region could dampen U.S. economic growth.
Economists are looking for the deficit this year to widen from last year’s $560 billion imbalance, reflecting in part the economic woes in Europe, which represents about 20 percent of America’s export market. A wider deficit can depress economic growth because it usually means fewer export-related jobs.
In January, the politically sensitive deficit with China rose 12.5 percent to $26 billion. Last year, the deficit with China hit a record $295.5 billion, the highest deficit ever recorded with a single country.
At a time of high unemployment in the United States, political pressure is growing to impose economic sanctions on what critics see as China’s unfair trade practices such as a currency regime that keeps the yuan undervalued against the dollar, making Chinese goods cheaper in U.S. markets and American products more expensive in China.
So there you have it. Our problems are not of our own making. It’s all China’s fault.
Now let’s get real. Why does a trade deficit negatively affect unemployment and economic growth? The answer is quite simple: Money supply. A trade deficit removes dollars from the U.S. economy.
Remove dollars, and consumers have fewer dollars to spend, which means less sales volume for businesses, which means less profits, which means job cuts. In short, unemployment is not caused by “shipping jobs overseas,” as so often is claimed. We’re shipping dollars overseas, and this dollar loss reduces consumer spending. When consumers don’t spend, we have unemployment. Period.
Now, you rightly may ask, how is it possible for a nation — a Monetarily Sovereign nation having the unlimited ability to create dollars — how is it possible for that nation to run short of dollars?
Answer: It isn’t possible, except for one small detail: Economic ignorance. Congress doesn’t know the U.S. is Monetarily Sovereign, so it restricts dollar creation. Then it blames the resultant job loss on China (and President Obama, if you’re a Republican).
No, Congress. No, Republicans. The job loss is not China’s fault; it’s yours. Those dollars, you easily can create, are flowing to China, and you’re not replacing them fast enough.
So here’s the plan — no, not developed enough to be called a “plan” — call it a “concept.” Every quarter, the federal government should replace the trade deficit. It should send the amount of the trade deficit to the American consumers, dollar for dollar.
It could be in the form of mailed checks — something resembling the very first stimulus attempt in 2008. The result: Consumers would continue to have spending money, businesses would continue to thrive and hire employees, and at long last, Congress could stop blaming China for its own mistakes.
Now is that so hard?
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports