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What Did You Import Today?

By       Message David Glenn Cox       (Page 1 of 2 pages)     Permalink    (# of views)   2 comments

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What have you exported today? What do you export? I’m so tired of hearing pundits explain that the weak dollar is good for the economy, it helps exports they answer. So what do you export? Me? I don’t export anything but I import quite a bit. Most of the gasoline I buy is imported so if the weak dollar help exports it must conversely hurt imports. The rise in crude oil prices is due just as much to the loss in value of the dollar which has lost half 50% of it’s value against the Euro as it is the demand for oil.

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I’m sure a weak dollar helps GM and Ford as they export auto parts to their subsidiaries in Mexico only to import them back as finished automobiles. I sure it was a dandy negotiating tool when GM told the UAW they would shut down all US production and move overseas if they didn’t get a deal. It most certainly helps farmers to export crops abroad but still, those farmers are now being paid with weak dollars that they in turn must spend more of to buy fuel and machinery and petroleum based fertilizers most of which is imported.

But if a weak dollar helps exports and causes the price of imports to rise then how does this help an economy that imports two billion dollars a month more than it exports? The short answer is, it’s a catch phrase like eat your vegetables people are starving in Darfur. One has nothing to do with the other; my eating all my carrots will neither help or hurt the starving. An emotional argument much like your deposits are insured by the full faith and credit of the US government. What does that mean besides, you can trust us. Ask yourself, which economies in the world today are strong? And which are weak?

Germany, Japan, China and South Korea are all strong and what do they all have in common? They all manufacture products for export and heavily regulate the amount of products they import. Yet this flies in the face of the number one catch phrase of a global economy, like telling the doorman to let him in he’s all right. Germany is currently embroiled in a case in with the European Union over golden shares giving the German government a voice over foreigners purchasing German companies.

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Japan is the toughest market of any democratic nation in the world. US popcorn producers were asked to guarantee that 100% of all the kernels would pop. A US producer of salad dressing was stopped at customs and not allowed to bring in samples because Japanese officials had not tested them for safety. The producer offered to dump the contents down the drain just to be allowed to take the bottles in to show potential customers. This request was also denied for the same safety concerns. An Austrian company was denied the right to sell its ski’s in Japan with the explanation that Japanese snow was different.

For many years foreigners wishing to operate in China had to form a partnership with a Chinese company. A virtual trade school to train the Chinese to learn manufacturing techniques. Many of the restrictions have been relaxed in the import of luxury goods but still remain in place for companies wishing to compete in China.

Mazda, Hyundai and Dae Woo sell millions of Korean produced automobiles every year in the American market paying import duties of 2% on each automobile. American cars companies wishing to import American cars into Korea must pay a 25% import duty on each car. What of free trade? Why don’t American car companies protest? Why don’t they demand Congress take action? Well, Ford motor company owns 50% of Mazda and General Motors bought out Dae Woo outright after a financial scandal. Why do they need to import cars into Korea? They get the business either way if Congress were to demand higher import duties the losers would be Ford and GM.

So why then are we in America told that we must bow down to the golden idol of free trade? The same reason Ford and GM don’t want higher import duties on automobiles. American manufactures can produce off shore with $5.00 a day labor slap an American name on the product and make big money. Then with an offshore mail drop avoid paying any taxes at all and pass the savings on in political contributions to keep the free ride going.

But the greatest asset of a weak currency is the ability to pay debts and not have to pay full value. Imagine you owned a bakery in Germany after WW1 you borrowed one million marks to build a new modern bakery with funding provided by American bankers. The profit on a loaf of bread was one mark so it would take a million loaves of bread to repay the loan.

Then after the treaty of Versailles the German government obliterated the value of the mark by excessively printing money. The price of the loaf of bread soared to ten thousand marks of course this reflected your normal profit margin and the cost of doing business. Your profit on a loaf of bread went to one thousand marks so your debt was effectively reduced to 100,000 loaves or a 90% reduction in your debt. You still owned the bakery and paid your bills on time but you paid them with devalued currency.

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The German middle class was wiped out; pensioner’s starved and American bankers were able to juggle the situation and cover the actual losses temporally. On paper they were being paid in full and on time but they were being paid with worthless script. Only by a flood of capital in the 1920’s and an era of rampant speculation where everyone was getting rich in the stock market were the losses covered but we know how that tune is sung and how the last verse ends.

So if the weak dollar is so good for us who is benefiting from it? My guess would be those with huge debts especially those with huge bad debts. Those who have the availability to buy and sell in foreign markets and then convert their profits to weak dollars to pay their debts. But who owes more money than anyone else? Who is the biggest debtor in the whole world? Where do they get their money? That’s right they print it themselves.

If you were fortunate enough to have a million dollars in the bank chances are it’s not in the bank. It’s at work in the stock market benefiting from the outsourcing of jobs and American industry. You don’t own the bakery but your resources are hedged against the falling dollars but only to a point. Because sooner or later you’ll have to try and get them out and judgement days a commin.

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I was born and raised in Chicago in a liberal Democratic home my Grandfather was a labor union organizer my Father a Democratic district committeeman my Mother was an election judge. My earliest memories were of passing out Kennedy yard signs from (more...)

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