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Commentaries & market updates.
Where’s The Beef?
Where’s The Beef?
Now that Japan has banned imports of U.S. beef, America’s already massive
trade deficit with Japan will only worsen. The result will be that instead
of Japanese consumers buying American beef, the bank of Japan will have to
buy even more U.S. Dollars and treasuries in its misguided effort to preserve
an unsustainable “trading” relationship. The Bank of Japan recently
revealed that it is willing to buy an additional 375 billion dollars in the
next 15 months to subsidize American consumers. The mad cow scare only adds
to the dollar’s considerable woes (the U.S. dollar index hit a new seven
year low today) by further reducing demand for dollars, as foreigners no
longer need them to buy U.S. beef.
For the past several weeks, I have watched in utter amazement as Wall Street
traders, economists and financial journalists continue focusing on bogus
government statistics while ignoring economic reality. It appears that what
matters is not what is actually happening, but what analysts can pretend
is happening. Just as pro forma earnings are embraced while GAAP losses are
ignored, government reports depicting low inflation and strong economic and
productivity growth are embraced, while reality reveals the opposite to be
true. The dollar is collapsing, commodity prices are soaring, the trade deficit
is exploding, and Americans continue going deeper into debt. Were it not
for massive foreign aid to America disguised as currency intervention by
Asian central banks, the absurdity of America’s folly would be plain for
all to see. American investors rejoice as the dollar value of their accounts
rise, while ignoring the fact that the dollars in which those accounts are
denominated are becoming increasingly less valuable.
As an example, this morning on Bloomberg I watched in amazement as an “economist” compared
today’s increasing “productivity” in American manufacturing with
the increases which occurred in the agricultural economy around the turn
of the last century. She said that as American manufacturers are able to
produce more products with fewer workers, those displaced workers will find
higher paying employment elsewhere, and that the overall American standard
of living will rise, much as it did during the industrial revolution as displaced
farm workers found higher paying manufacturing jobs. This comparison is absurd,
as the productivity gains experienced by American farmers were real. American
farms actually did produce more food with fewer workers. They didn’t simply
replace domestic labor with foreign labor, running up huge trade deficits
in imported food! Productivity gains among American manufacturers are a myth.
We are not manufacturing more products with fewer workers, we a manufacturing
fewer products with fewer workers– we’re simply importing the difference.
Instead of the displaced workers being re-employed in higher paying jobs,
they are being re-employed in lower paying service sector jobs or are remaining
Government reports are nothing more than propaganda. The government, in order
to peddle its bonds around the world, keep interest rates low and the bubble
economy inflating, must deceive the public into believing that there is no
inflation and that the American economy is both growing and productive. It
should not be a surprise that government prepared reports show this to be
the case. What is surprising is the degree to which these bogus reports are
accepted as truth by the public. It is as if a government weatherman forecasts
a sunny day as rain falls rapidly from a cloudy sky. I don’t know about you,
but I’m carrying an umbrella; those of you listening to the government, prepare
to get soaked.
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