(Off Topic) Trade Deficit and political fallout --- a reply
I don't think the administration can do anything about the ballooning trade deficit with Japan in particular and with the rest of SE Asia in general. This is a deeply rooted structural problem involving our addiction to buying cheap foreign goods with excessive domestic consumption based upon easy credit. We have been running up of massive foreign debts for decades. When your entire economy is based upon conspicuous consumption, its something of a bad joke to complain about trade deficits! And structural problems are only addressed when events force change. That's why I believe we are in for a crash.
Consider some of the alternatives:
Too much saber rattling about Japanese exports would only worsen the international trade situation for us and frighten Japanese consumers into buying even less.
For American finance capital this is the greatest opportunity to print $$$ and buy up Asian assets at depressed prices in a generation.
With the $$$ king few think these deficits make any difference anymore to the people with money. Congress may scream about the deficits ultimately when manufacturing slows down but I doubt it will enact any protectionist legislation.
I would say the Administration is in retreat and its policies on trade are crumbling. They are having a hard time keeping up with events and even understanding the new reality. Greenspan has decided that he will let the asset inflation continue, thus assuring his place in economic history as the fool who sat by fiddling while Rome burned.
And as for the current administration policy of pressuring Japan into "expanding" its economy via tax cuts, this pathetic attempt to get Japan to consume more and thus alleviate the US balance of payments problem vis a vi the Asian flood of goods isn't going to happen.
Japan is going deeper into a recession. Japanese "consumers" will save any money that comes their way (probably under the pillow because they are worried about the solvency of their banking system) and most certainly Japanese corporations are not about to expand capital spending or production in the midst of a recession and record earnings declines.
However our wonderkinds in the Treasury haven't given up on this pump priming idea yet because let's face it, they haven't got any other idea about what to do.
Nor are they alone. The whole crisis is just too big for the Rostenkowski sized brain to grasp. Does anyone really expect Al D'Amato to solve our world trade problems? Or the Asian crisis?
The most obvious short term thing, help Japan support the Yen, was rejected at the G7 meeting. The Japanese market promptly sold off and has been going down ever since. They are leaving Japan to solve its own problems.
Its a comedy or tragedy depending on your exposure to any potential collapse.
Wall Street which keeps going up on a belief in American exceptionalism and easy credit, is raking it in. (I hope some people here have raked it in already and parked the cash safely by now!) What I read through the clenched teeth of the idiot savants (like Cramer) however is the belief that they will have plenty of time to get out of the market should Japan move into a meltdown phase.
By the way the administration is still touting free trade, counting on China to behave "responsibly", that is, not devalue its currency to keep its growth rate up and give Clinton some good PR by buying more US products. But China is stuck with overproduction in manufacturing. Too many goods piling up and at too high a currency price to export. I wouldn't rely upon the Chinese Communist Party in a pinch when they finally believe they have to do something to alleviate a domestic economic slowdown. In other words we haven't seen all of the consequences of the slowdown in Asia yet! More are ahead.
So Clinton begging for more trade with China is probably going to play as comedy in Asia. Free trade is dead except in the liberal imagination. He is President, I guess we should humor him.
So to answer your question, I think the political fallout from the Clinton administration on the trade figures will be nothing. They will let events steer them and not vice-versa.
Clinton is no leader. When a crisis finally lands in his lap (such as a political/economic collapse in Russia) you are going to see the same mediocrity, equivocation, and half ass measures associated with Herbert Hoover together with an attempt to hang the problem on somebody else. (Hey Newt its time to come out of the closet and talk somemore about putting all of our Social Security money into the stock market....)
Should we be surprised? |
