Trade Deficit Trouble! From Yahoo

This is the post I made in response to this article http://finance.yahoo.com/news/Trade-Deficit-zacks-308719302.html?x=0:

This article is so laden with fallacies that I can’t pass it up. Trade deficits have nothing to do with economic growth, US indebtedness, wealth leaving the country, outsourcing of jobs, or whatever bugbear this author and the neo-classical school can conjure up. The US trade “deficit” simply means that individual market actors (you and me) are better satisfied by consuming cheaper imported goods from elsewhere. This frees up wealth to be allocated into other sectors of the economy or placed into savings where it can be absorbed into the capital structure, lengthen this structure, and provide us with cheaper goods and higher quality of life later. This author seems to say that because we have a trade deficit ergo we have higher debt loads. Completely illogical. Others are willing to buy debt because the international house of cards monetary system guarantees the US dollar will remain a storehouse of value for a long time. Many of these producers can’t spend US dollars in their own economies and instead hold cash in debt securities that can be converted into their currencies at a later date. Of course debt to foreign countries was low around WWII. There was a nationwide hysteria to buy war bonds and those who didn’t were ostracized if they didn’t purchase a bond and support their country. Such hysteria caused massive amounts of capital to flow into the coffers of the federal government only to be used for killing in an unjust war. Not to mention those who participated were shafted. The massive inflation in and around the war drastically depreciated the value of those bonds and what was received upon maturity would be nothing compared to what was actually paid for the bond. Trade deficit does not cause debt government profligate spending does. This author sounds like he took a page from Hitler’s economic program asking for national autarky or complete self sufficiency. We must end our dependence on foreign oil, on imports, on everything…this is the natural progression of things. I don’t understand the oil thing? Currently fuel is still relatively affordable for most people and as we saw within the past few years when gas goes through the roof alternatives begin to emerge. As long as government is not in the way of this mechanism, subsidies to ethanol producers, this adjustment would happen quickly and easily as capital is allocated into a growing sector. There is no issue of oil; it is propaganda. Articles like this make me realize just how close America is to becoming a fascist nation similar to Mussolini’s Italy. Business clamors for regulation to end the dog eat dog competition of the market, the people ask for security and the militarized state, the State asks you to trade your rights for security, the people become managed by a web of government managers or bureaucrats, sound familiar? The most glaring fallacy is that those similar to this author honestly believe that human action is reducible to mathematical formulas and algorithms. Even the high powered algorithms on wall street have to have the human to correct them numerous times to reflect changing conditions. Humans are not sheep and to think economic institutions and theory conform to this mechanistic framework is absurd.