Your Lying Eyes

Dedicated to uncovering the truth that stands naked before your lying eyes.

E-mail Me

Twitter: yourlyingeyes

24 February 2009

The Hillary Paradox

Hillary Clinton went hat-in-hand to China last week to beg them to buy our T-Bills so we can fund our stimulus package, arguing it is in our mutual interest for them to do so? Why would it be in China's interest? So the U.S. can continue to import their goods, of course. But if we're spending the stimulus on Chinese imports, then it isn't much of a stimulus for the American economy, is it?


Anonymous Anonymous said...

Actually, it is... assuming you believe in fedgov spending as "stimulus," of course. First, you want the government to fund as many projects as possible, and it can do that by getting the best price for related inputs (like steel for bridges). Import competition will help ensure that the government gets the biggest bang for its (read: your/my) buck when buying inputs.

Second, American workers in downstream manufacturing (like construction, autos, aircraft, etc) outnumber American input-producers by 40:1 or higher. Thus, if you get a cheap input from China, you might sacrifice one US input-producing job to save 40 input-consuming jobs. Seems like a no-brainer to me.

Third, US economic growth is positively correlated with rising imports. So let's not blame imports - or import competition - for our mess of an economy, ok?

February 24, 2009 2:46 PM  
Anonymous Anonymous said...

Ziel wrote:

"Hillary Clinton went hat-in-hand to China last week to beg them to buy our T-Bills so we can fund our stimulus package"

So help me God Ziel, I was telling that to my dad that just the other day. Hillary is in China begging the Chinese. Our Secretary of State, on her knees.

February 24, 2009 6:09 PM  
Blogger ziel said...

Third, US economic growth is positively correlated with rising imports.

Where did you get that from? Show me some evidence of this - go to the NBER site and see if you can find any such correlation. In fact, you'll find it's negative.

Of course you don't have to do this on your own, I already did it for you!


February 25, 2009 7:13 AM  
Anonymous Anonymous said...

Cato Institute has written abt the positive correlation between GDP growth and an expanding trade deficit for years and years. For about a hundred articles, empirical studies, etc on this fact, go here:

Even your own analysis in the posted link shows this. Look at what GDP growth typically does (since about 1980) as the trade deficit is expanding. (Answer: it increases) And when GDP growth plummeted in the early 90s, what happened to the trade deficit? (Answer: it contracted).

February 25, 2009 12:48 PM  
Blogger ziel said...

My simple analysis showed a slight negative correlation in gdp growth with the level of trade. The graph does show imports dropping at around the same time as dips in GDP, but this is expected. Imports typically tank during recessions. I think your causation is backwards. I'm thinking we could probably demonstrate that with a lag-correlation, but I don't have time to do that right now. I'll try to post on that sometime soon.

I appreciate the comments, though - it's certainly worth a closer look.

February 25, 2009 8:37 PM  
Anonymous Anonymous said...

I look forward to seeing the lag analysis. But be sure to check Dan Griswold's (Cato) extensive work on this before you spend the time. And please understand that I would never be so foolish to assume any sort of causality between rising imports and GDP growth. My only point was that there is a positive correlation between GDP growth and import growth, as with GDP contraction and import contraction.

The reasons for this, I think, are pretty simple. We consume more stuff in the good times than in the bad (and countries are willing to invest more - read: take credit - in the US during the good times). And this includes raw materials and equipment (abt 50% of all imports, btw) that our manufacturers use to make downstream products.

But whatever the reason, the fact remains that tradeflows don't cause economic woes. They're merely a symptom of countries' respective savings/consumption rates and investment climate. Imports can, however, keep interest rates low, improve supply chain efficiency and downstream competitiveness, and stretch family budgets.

February 26, 2009 11:57 AM  

Post a Comment

<< Home