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.
Here are a few thoughts about exports. In the previous post, you read this:
When China exports to America, it expends massive amounts of energy, manpower, time and scarce resources to create products, which it sends to us in exchange for dollars, which we create at no cost, by touching a computer key. Thus, China is our slave, working and sweating essentially for nothing.
Remember also that China too, is Monetarily Sovereign. The can create unlimited numbers of their sovereign currency. So why do they want to obtain our dollars in exchange for their valuable resources? First, they don’t need dollars, and second they can get all the dollars they might want simply by buying them on the open market, in exchange for yuan.
What is true of China also is true of the U.S. When we export, what do we receive in return? Our own dollars, or a currency we can buy with our dollars, all of which the U.S. government can produce without end. The purpose of exporting is merely to import U.S. dollars. (Have you heard the expression, “Carrying coals to Newcastle”?)
The CIA Factbook tells us these were the top U.S. exports of 2011 (through October):
1. Fuel: $73.4 billion.
2. Aircraft: $70.8 billion.
3. Motor vehicles: $39.6 billion.
4. Vacuum tubes: $37.1 billion.
5. Telecommunications equipment: $33.2 billion.
All required the expenditure of natural resources and labor. Here are some specifics:
Oil – exports: 1.92 million bbl/day; country comparison to the world: 11
Natural gas – exports: 32.2 billion cu m; country comparison to the world: 9
Electricity – exports: 18.11 billion kWh (2009 est.)
Think of it. While predictions are that one day, the U.S. will run out of oil, we export 2 million barrels of this disappearing stuff, every day. What do we get in return? The same dollars our Monetarily Sovereign government has the unlimited ability to create, at no cost.
Consider excerpts from an article in http://www.ft.com:
Molycorp to start China rare earth exports
By Ed Crooks in New York
Molycorp, the Colorado-based mining group, plans to begin exports of rare earth minerals to China following its C$1.3bn (US$1.31bn) acquisition of Neo Material Technologies. Molycorp is ramping up production of rare earths, elements that are essential for many advanced technologies including smartphones and batteries, at its Mountain Pass mine in California.
China accounts for about 95 per cent of worldwide rare earth production. Because of their use in military technologies including cruise missiles and fighter aircraft, rare earths have increasingly been seen as a strategically significant resource.
Here are metals needed for a wide range of vital technologies. They are in short supply worldwide, not because they actually are rare in the earth, but because they are spread so thinly, mining them wastes a great deal of energy. Running out of rare earths could cripple our economy. But we export them.
China and the U.S. receive in exchange, their respective sovereign currencies, which each nation, being Monetarily Sovereign, can create without limit. Is this logical?
Getting back to the title question, “What if the U.S. passed a law against exporting,” there are several considerations. Without exporting, the U.S. would expend less energy and raw materials — valuable and limited commodities — while dollars are limitless and free to the U.S. government. So, from that standpoint, the tradeoff makes no sense.
Yet, for the most part, it is not the U.S. government, but private businesses, that exports. So, if the U.S. prevented all exports, many private businesses would suffer. Unless – and here’s where it really gets complicated – unless these private businesses received the same amount of dollars from the government as they profit from exporting.
With few exceptions, private industry exports in exchange for dollars. So for instance, rather than losing 2 million barrels of oil every day, what if the U.S. government simply paid the oil companies for that oil and stored it for future needs?
While the meaningless federal deficit and debt would increase, there would be no inflationary effect. Rather than dollars entering our economy from outside our borders, the same number of dollars would enter our economy from the federal government.
The U.S. government has experience with this kind of storage. The US Strategic Petroleum Reserve stores more than 4 billion barrels of oil. The Commodity Credit Corporation began buying and storing cheese back in the 1960’s. The Federal Emergency Management Agency stores powdered and canned food for emergencies. So do the Department of Defense and the Department of Homeland Security, which also store tools and weapons.
From a financial standpoint, the federal government easily could afford to buy every product that otherwise would be exported. Of course, there would be many devils in the details, mainly regarding what to buy, how much to buy and how much to pay. Quality would be a problem. Perishables, both physical and style, would be a problem. Perhaps the program would work with standardized commodities such as oil, metals, ores, sugar, water, etc.
But would the government actually have to buy and store anything? What if the government merely said, “There will be no exports of anything. No one will be allowed to sell any product or service to any foreigner. If your current business involves exporting, adjust your business. From now on, sell only to Americans.”
No doubt, this initially would cause a great upset. All major change does. But is it workable? Visualize every other nation on earth suddenly disappearing. Could America survive as a world unto itself — at least from the standpoint of exports? Native Americans didn’t export to other nations. Could a modern America do the same?
I suspect America could survive quite well without exports, particularly if the government helped ease the transition by supplying the economy with the dollars it otherwise would have received from outside our borders. And it is even more likely the nation could survive well, if the government specified only certain items that couldn’t be exported, such as: oil, coal, wood, metals, ores.
As if all of the above weren’t complex enough, we also would have to deal with world politics. If America stopped all exporting — or even stopped exporting oil — what would the rest of the nations do? Would they stop exporting to America? Probably not. Many of them would be happy not to have to deal with competition from American exports.
The world’s reaction might be related specifically to the product not being exported. If we stopped exporting wood, the rest of the world’s forests might suffer. If we stopped exporting grains or meats, some nations might face starvation.
Clearly the subject has vast implications that require far more attention than this simple blog post. But there is a bottom-line message which is:
For a Monetarily Sovereign nation, exporting has many negatives. Exporting uses up scarce resources in exchange for the freest of resources, sovereign currency. Some of those resources simply should not be exported, as they are irreplaceable. Oil is one. Natural gas, another. Most ores, yet another. Wood shouldn’t be exported, as this denudes our forests. The export of electricity uses up the energy to make the electricity.
Despite the fact that every single item of export uses up some irreplaceable asset, it is unrealistic to expect all exporting to disappear. Too many political and economic complications. I’d begin with a law against oil exports, and then add items to the list.
Meanwhile, our protectionist politicians try to restrict imports, which cost us nothing but free dollars. Ah, the irony.
What are your thoughts?
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