What the world needs now in addition to love is wisdom.
Saturday, February 20, 2016
King Solomon, Donald Trump, Fair Trade Post Six
After you read this post of how really foolish (Trump says stupid), our Congress is, you may need to take a German Alka-Seltzer to calm your upset stomach.
In my previous post I stated I would explore the Germany economy, which also enjoys huge favorable trade balances. The reason is not low wages. It is because German political leaders are smarter than our Congressional leaders. I will explain why.
Do not make a habit of striking hands of going surty for debt. If you have no resources to settle them
Why should your bed be taken from you?
Do not remove the boundary markers which have always been there, those which your ancestors fixed. (Proverbs 22: 26-28)
I will explain my interpretation of the relevance of these verses to you in this post.
Why German Leaders are Smarter Than Our Congress
Instead of believing that a service economy would benefit the nation in the long run and not harm their workers, the smarter more pragmatic German leaders planned and established a long range economic strategy to become an export leader of high priced, close tolerance, highly engineered machinery and equipment for export. They understood that deficit trade balances would be harmful for their nation.
Some Steps Germany Leaders Took
German schools encouraged their youth to become design engineers, scientists, including apprentice programs to become skilled machinists capable to operate and understand close tolerance machining skills to build expensive million dollar machines for export.
The next step was to buy out US machinery manufacturers to corner the market on production machinery and gain access to the American distributorship and customer base. This enabled them to ship German steel to sell in the American markets as well as to supply German made components into the products sold in America.
In Germany, a skilled machinist would not be laid off and allowed to drift away from a machinery skill. Instead the Germans lowered the hours to keep skilled machinists employed even when their would be market ups and down cycles.
The result is Germany is now the leading world manufacturer of close tolerance machinery for use for both manufacturing and health care high image machines used in hospitals in the world, including autos.
Meanwhile ‘Back at the Farm’ in America
We no longer teach industrial arts in high schools. The reason is partially because what an American was taught to make in high school was how to make a simple ash tray. In Germany, a youth was required to build close tolerance machine products and assemblies. Anyway who wants to work in a factory, We all want to work in the office.
Back to King Solomon
We Americans continue to send our college students to major in social science, biology, business administration, accounting, etc. These skills do not make any product that can be exported so the dollars can flow back to the USA. In addition, there are far too many graduates of these college majors than needed In the US economy. So when they do graduate, a large majority of the college graduates may never do anything close to what they majored in College. Also they will never make enough money to ever pay off their college debts if they wind up being a bartender or work in a big box store stocking shelves with foreign made products.
If you take the time to read a very brief article, you will have a better understanding of the proverbs I selected above as relevant to the subject of free trade. In my opinion, the USA has made a terrible mistake in allowing the huge trade deficits to continue to occur over e a long period of time. I encourage you to read this article HERE,
Trade Deficits Add to our National Debt
Trade deficits have added a significate portion to the US National Debt. Our trade partners know the dollar will in time have less value. Evidence is in the article I read today of how an anonymous obvious super rich guy just paid $454,000 for a first issue of spider man comic book.
In the proverb, King Solomon asks why should our bed be taken from you. It is not our bed being taken, it is our nation and our assets that the foreign holders of American dollars are buying, not our products. China owns vast American real estate, farms, hog farms, and now even the Chicago Stock Exchange. (Wonder how that is going to work out for the biggest trade partner known for devaluing their currency to maintain exports.).
The article mentions what other nations now own in the USA. To make matters worse, not much of American assets are not on the for sale table off the table by our politicians if a speaker fee is included in the deal. For example, Hillary Clinton approved the sale of an American uranium mine to Russia when she was Secretary of State.
So Much for rhe Failed Economic Theory
So what happened to the economic theory that every US dollar would return to the US to buy American products. Yet even though it is now proven to have failed, our comatose Congress still believes free trade is in the best interests of the American workers.
In future posts I will explore what the current crop of Presidential candidates are selling you about how they intend to increase exports to solve the trade deficits and increase employment, and why it will not work.
Seems to me that most politicians only bring up jobs and employment at election time and then forget as soon as they are elected. For example, does anyone remember this promise tin the last election “elect me and :job creation will be my number one priority.” For some reason the politicians never include “livable wage jobs,” do they?
In My Next Post
I will explore what the term Value Added means in American Manufacturing.