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Protectionism

“A number of emerging economies are the ones who instigated the so called currency war a decade ago, through their export-backed forex reserve accumulation strategy. By keeping their currencies artificially low, they managed to attract domestic and foreign corporations to invest in export focused production capacity and thus steal jobs that would not have been lost in other countries had exchange rates been driven by the markets.

 

The rise in protectionism in the years after the credit crisis began is disguised by currency manipulation and bailouts of banks and corporations, because even though these are a form of protectionism, WTO rules are ambiguous on them. In a fiat currency system it is increasingly difficult to devalue a currency if everyone tries it at the same time, as demonstrated by the fact that most major currency pairs have not moved much on an average over the last four years as a result of constant interventions through quantitative easing and other actions by central banks.

 

Frustrated by this failure, the Swiss National Bank and the Bank of Japan have fired the first open shots and others are likely to soon follow suit as falling global trade leads to a rise in protectionist sentiment across the globe. Once central bank action fails in this covert trade war through currency manipulation and bank bailouts, governments will be forced to take direct action through subsidies, tariffs and other trade barriers.” Humayun Shahryar,Forget currency wars, we are in the middle of a trade war, ft.com

 

Middle Class Disappearing

 

The U.S. is hemorrhaging jobs and wealth, the effects of the U.S. trade deficit is financially wiping out the middle class - defined as those with annual household incomes in 2010 between $39,000 and $118,000 for a family of three. According to a report released in August of 2012 by the Pew Research Center the U.S. middle class has been steadily shrinking, dropping from 61 percent of all adults 40 years ago to a bare majority, 51 percent, now.

 

"The notion that we are a society with a large middle class, with lots of economic and social mobility and a belief that each generation does better than the next — these are among the core tenets of what it means to be an American. But that's not necessarily the case anymore." Paul Taylor, Pew Research Center

 

The U.S. has become a service economy with too high a proportion of part time, benefit free, low paying jobs…

 

For services, exports were $632.3 billion and imports were $437.0 billion, resulting in a services surplus of $195.3 billion, $16.8 billion more than the 2011 surplus of $178.5 billion.

 

Please Sir, Can I Have Some More?

 

More than 46 million people now live below the poverty line. Tens of millions more are at risk as median incomes continue to decline. The US Census Bureau has set the poverty threshold for a four-person household at $23,000, its latest figures show that in 2011 46.2 million people, or 15 per cent, lived in poverty.

 

Nearly half of them live in 'extreme poverty' with an income below 50 per cent of the poverty threshold. The Census Bureau also estimated that an additional 51 million people are near the poverty line, with incomes less than 50 per cent above the threshold.

 

The U.S. population, as of July 2012, was 313,914,040. That’s almost a third – 97 million people - of the U.S. population living in, or almost living in poverty.

 

Food stamp rolls have risen to more than 47.69 million people in America, that’s a million more people than the entire population of Spain.

 

 

 

The real median earnings of men and women who worked full time, year round declined by 2.5 percent between 2010 and 2011.

 

Conclusion

 

Does it sound to you as if trade deficits and ‘jobs supported by imports’  are a good thing? Seems to this author that the opposite is true, that a goods trade surplus shows a country with economic strength and fully employed prosperous citizens. Trade deficits show economic weakness and a lack of prosperity.

 

What makes a country great is exploiting its natural resources, making things and selling them.

 

The race to worthless is a fool’s game you can’t win. A rise in U.S. protectionism is on my radar screen, it doesn’t yet seem to be on politicians screens but is it on yours?

 

If not, maybe it should be.

 

Richard (Rick) Mills

 

rick@aheadoftheherd.com

www.aheadoftheherd.com

 

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:

 

WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTReport, Vantagewire, Indiatimes, ninemsn, ibtimes and the Association of Mining Analysts.

If you're interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at www.aheadoftheherd.com

 

***

 

Legal Notice / Disclaimer

 

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

 

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

 

Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.

 

Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.



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