Trade and Jobs

[Dr Q]

I've always been a conservative on issues of tariffs and free trade.  Free markets boost the economy, provide us with low-cost goods and services, and overall provide the most product for the least money.  It wasn't until I lost my job as an engineering manager that I started re-thinking this problem.  Maybe I was being too selfish in my position so high on the food chain.  I watched as our entire staff of programmers lost their jobs to our division in India, while keeping my management job.  In 2003, that job also disappeared.  My last gig as a consultant was working for a small company in Tucson training some engineers in Bulgaria to take over the final, more sophisticated parts of the design process.  I can't say that these were bad decisions for the company.  The stock price went up, and I now have a comfortable retirement.  Companies in this industry that didn't outsource went out of business.

Here is the problem as I see it now.  All of this extra prosperity is being borrowed from our future.  We are importing far more than we are exporting.  This has resulted in an ever-growing debt, and unless there is a change in course, we are headed for bankruptcy.  What Trump is doing now is not the solution.  When we apply tariffs to specific countries, specific industries, even specific companies, as we have done in the past, the details are worked out by lobbyists, and the result is corruption, unfair benefits to political cronies, and even trade wars.  What we need is a system of tariffs that will encourage exports, and discourage imports, without any favoring one country or industry over another.  The goal should be simply to bring down our trade deficit.  Our trading partners will understand that, and not take it as any provocation for a trade war.

Warren Buffet is also a conservative when it comes to balancing our budgets. Here is an article he wrote 13 years ago, which is still relevant, in fact urgent, given the recent trends in both our national debt and our trade deficits.
http://fortune.com/2016/04/29/warren-buffett-foreign-trade/

In the years since this was written, I have heard no proposals from politicians, no discussion in the media, nothing that would show me anyone is taking the trade deficit problem seriously. Of course, there are discussions about loss of jobs, trade agreements, etc., but they really miss the mark on what to do about it.  It may be too late already. It feels like we are in a bubble, and the slightest loss of confidence, perhaps Trump's threat to renege on our national debt, could cause the collapse.

[Dr Q]

Wow, I can't believe it has been three years since I posted this.  In that three years the national debt and trade deficits have increased.  What is even scarier is that there is still no plan to recover.  We should be REDUCING the deficits while we still have a few years of prosperity left in the current business cycle.  That is the only way we can convince our creditors that they will be repaid.  Instead we have taken the freeway to bankruptcy, and we just passed the last offramp.

Play the markets short.  Don't be left holding the bag.  Don't let anyone tell you that shorting is unpatriotic.  Like ordinary trading, just try to buy low and sell high.  If you are successful, you will contribute to stabilizing the market, and perhaps reducing the impact of the next crash.  Doing like most people, acting on fear and greed, will lead to the opposite strategy, and the opposite outcomes, for both your portfolio, and the economy.