Now as is written about here the current administration is putting forward mostly band aids for the economy and just waiting for the market to right itself. I favor radical reform of the economy, and for that matter the culture, but if that isn't going to happen then there is actually something from the current economic playbook which does offer a real policy initiative to boost the economy, new free trade initiatives. This is not an awfull idea, if we assume that the largest amount of growth is occuring in emerging markets the best thing we can do is piggy back the U.S. economy on that growth.

Now there is the issue of potential job loss, there is the issue of maintaining a strong enough dollar to maintain faith in the system without strangling export potential through exchange rates, these must be addressed by policy initiatives to help out the ability of U.S. businesses to compete. I wont step into that here, but I think it would be a fine idea to listen to the businesses which are competing or are the verge of doing so to find out what their priorities are, then building policy around the reasonable ideas, tax reform may be, protectionism may not. In that regard the one thing I would just hate to see is for the conversation to become dominated by uncompetitive industries looking for a helping hand. There are plenty of good companies out there, the failures shouldn't run the show.

You know it's sad if you do an internet search about initiatives to increase U.S. business competiveness just about all the results are from conservative groups. I believe the government has a very large role to play in the economy, but I also recognize that for it to do so you must have a vibrant tax base to draw on, it's a pity the left seems so left out of the conversation on how to accomplish that.

As an aside, and hardly from the playbook, we really must find a way to invigorate investment in small business start ups and expansions. It would be nice if we could kill two birds with one stone and draw money out of the big time Wall Street financial sector while doing that. We are looking for ways to tame the financial sector, why not apply the same idea to it that conservatives like to apply to government, starve the beast. Perhaps by seeing the creation of funds which pool capital and make it available to small and mid sized businesses for expansion or even operating shortfalls, sort of like the micro bank idea, except serving let's say businesses with earnings under 25 million dollars a year. From a tax standpoint we would need to make it easy to move money there, and could even make it less desireable to keep it in the financial sector. For instance much is written here about the perverse effects of housing tax policy, one of these is surely that the write offs help to encourage investing money in the financial sector. Now the write offs will off set anything but for middle income investors I think there is a direct psychological correlation between capital gains and real estate write offs.

The bigshots here aren't stupid, but they are.

They have obviously decided that anything (ANYTHING) that can be made in or by China will benefit themselves. The Chinese are biding their time and playing ball until they can take ownership of any stakes left in USA owners' hands. We have to get even our miltary chips from them or Japan-Taiwan.

Our govt pols get their money from those same bigshots.

No way will factories be allowed back into USA.

How it all adapts is NOT the concern of plutocrats. It will adapt. Unless China and Europe object. Guatemalans live on and breed. That might be the result.

Well...

We export about 2/3 the level of goods we import. We do make things here, a lot of the things we make here we export. Dont make it sound like all the factories have closed. There are businesses here that can compete, we need to strengthen them.

Now the economy is in the toilet, and like it or not most prosperous economies through the ages have gotten that way via trade. Now we can argue the details of how trade agreements should be structured, I am perfectly open to that. And it wouldn't be my first choice of things to do with the economy, but if we want a real world, possible to enact way of goosing the economy trade makes sense. After all while we sit here stewing about fair trade other countries are setting up trade agreements. We aren't serving our self interest in the least by dropping the idea as completely as we have.

We even have a pretty big bargaining chip in our agricultural sector. Given our fiscal state it makes sense to drop the subsidies anyway. And losing domestic production there doesn't hurt employment as much.

Farms going fallow popular, no. Free trade agreements popular in a time of high unemployment, no. But you know what, there aren't a lot of possible options that would be as affordable, and have as much of a real impact.

You said what "they" want you to say.

It's utterly amazing that a very sensible smart guy like you gets snookered where it counts.

That's how "it" is done: enough acceptance of a few big "facts" to get you to go along -- then you wake up one day and it's Guatemala!

USA has now 17.5% unemployment using the "official" stats including part-time
workers who can't get full-time jobs. Bill Bonner last month had it at 21.4%.

It IS getting WORSE. Globalism with its "Newspeak" is a main cause. This is no time to phumpher around talking idealized-college-boy-"economi­cs."

You know another part of this is that if China is the empire threat we all make it out to be, and it's trump card is its rapid industrialization, the best way to counter that is to strengthen our ties with other countries through trade. And once again we can open our agricultural market with minimal damage while gaining access to other areas.

The unemployment situation wont change much for the better. If there isn't catastrophic change for the worse the future of the U.S. is to be more like Europe, high social costs and high unemployment. But we can throw up our hands and wait to be flushed or we can try to do something to help the situation.

You cant win at trade without a comparative advantage, so we need to make sure we have that in something and use policy to keep it, but once again, prosperous economies have gotten that way for centuries, its silly to say it isn't a potentialy valuable tool to stop the desperate slide this economy is in.

Besides what else that has even the faintest chance of being enacted is on the table?

But you make it sound like all we have to do is sell Hummers and life-insurance-policies to Zimbabwe.

I don't know about the life-insurance-policies, but won't it be the Chinese that will sell Hummers to Zimbabwe - and to us!

Look here for a relevant article. Oh, yeah: Ford said it would like to sell Volvo to the Chinese. Look here for that one.

Gingham: I think it would be a fine idea to listen to the businesses which are competing or are the verge of doing so to find out what their priorities are, then building policy around the reasonable ideas, tax reform may be, protectionism may not.

LeRoy: A few years back, I posted an interesting article here. The article was from the now-defunct Rocky Mountain News, and it was exactly what you are asking for here: a survey of businesses to find out exactly what they thought government's priorities ought to be. To the surprise of many, and to the dismay of many conservative Republican politicians, these savvy businessmen (and business-women) were practically begging the state government to do something about the miserable state of K-12 education. They were not asking for tax cuts. They were not asking for deregulation. They were imploring for an end, or at least for some serious changes, to an educational system that has been churning out millions upon millions of science dopes and math illiterates. [And we wonder why our kids end up in burger-flipping jobs?? Seriously???]

As for trade, Sovereign is ignoring the widely reported fact that world trade was collapsing during that period from September of last year into the late spring/early summer of this year, when many observers feared that the entire world economic system might be on the verge of an ugly collapse. And world trade declined dramatically during the protectionist 1930s. Why anyone would want to repeat such experiences is hard to figure. Trade creates prosperity, almost more than any other mechanism we know of, outside of major advances in science and technology......

"Trade creates prosperity, almost more than any other mechanism we know of, outside of major advances in science and technology...... "

I can't buy that statement in that form. Obviously, China and Australia (for instance) could trade the iron ore that each produces with the other and do nothing but retard the creation of prosperity. When you explained "relative advantage" (that was the phrase, wasn't it?) you came much closer to a valid observation. What creates prosperity is maximizing the availability of desired and/or needed products, whether that is done by trade or internally to a given country, or even community.

Benjamin Franklin: "No nation was ever ruined by trade."

LeRoy: It is not trade that is ruining America. [And I do think that America is being, yes, ruined.]

The phrase was comparative advantage. In your iron ore example, I am presuming that you are hypothesizing iron ore to be a homogeneous product---that there is no difference between the iron ore of China and the iron ore of Australia. [As I'm sure you know, there may be in fact some differences between deposits of iron ore. In fact, some technological historians say that China was the first to develop cast iron, as opposed to wrought iron, due to the unique properties of the iron ores found in China---but that is a subject for a different post.] Suppose the iron ores ARE, in fact, the same in China and Australia. In that case, I can indeed see little advantage in China and Australia trading iron ore with each other. [Some sharp operators might be able to create pecuniary advantages in engineering such trades, but neither society as a whole would benefit---that would be a zero-sum or rent-seeking activity which would not generate greater prosperity for the two nations---so in that sense, I think you are certainly correct.] One of the two countries might still have a comparative advantage in producing iron ores (or in producing finished iron products), however---and they might well profit by selling that iron to other countries that are not so well-endowed with iron ores. [But almost every country in the world has at least SOME iron ore deposits, so your example is not very felicitous for the purpose of exposition.]

Perhaps more later.....

"... your example is not very felicitous for the purpose of exposition."

Is that something you scrawl in red across the face of term papers?

Trade is wonderful.

Look at China and Wal-Mart.

Unfortunately, USA Globalists have bungled it. They get their money from plutocrats who want cheap labor.

You make believe that other people don't know enough to want robust free-trade globally. That's not it at all. But it is the prevailing academic conceit. USA needs to solve its very real trade problems.

Admit the problems. Define them and offer solutions.

Well one thing we should make clear is that there is very little free trade that occurs. The reason trade agreements are so difficult to make and the reason they make so much news when they happen is because so many barriers exist to trade. We should also differentiate between advocating for some trade agreements and being the mouthpiece for the concept of free trade.

I think getting some new trade agreements in place is a great idea. But I dont believe the concept of global free trade is workable when you have a system of manipulated currencies. Such a system distorts the dynamics of trade to the point that "free" trade is impossible.

I am not sure any solutions to the manipulation of currencies is really possible. But that is where you need to begin if you want to create a framework where free trade might be possible.

Now the situation with currencies has become a form of madness on the line with many things in the global economy. What should determine the value of a currency? Of course the stability of the currency is key, the interest rates paid or charged for it are another, but one thing that is key and is really skewed in the world economy is the productivity and the value of goods produced in a system. If it takes 10 workers in a given country one week to make a throw rug, but it takes the same ten workers in a different country a week to make a luxury car of course their currency should be worth more. If one thinks in these terms and looks at the value of currencies then the system appears wildly out of balance.

Anything we want to do now must also be considered within the parameters considered possible by the WTO. Otherwise what you are doing is the equivalent of saying well I am going to drive 90 miles an hour to work because it saves me time, ignoring that the speed limit is 30 miles an hour. If you wanr to drive 90 fine but you need to change the law first.