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Willisms

« Quotational Therapy : Part 102 -- Tom DeLay's Farewell Speech. | WILLisms.com | 10 Goofy Thoughts About Zarqawi's Death »

Trivia Tidbit Of The Day: Part 342 -- The Power Of Growth.

Growth Is Good-

Some more perspective on the global economy:

The global economy is roaring. "For the first time since 1969," reports a newsletter I rely on, Bridgewater Daily Observations, "not a single country in the world has had negative year-over-year growth."

Overall, the world economy is rising at a 4.4 percent rate, after inflation. At that pace, Gross Domestic Product doubles in 17 years, quadruples in less than a generation and rises by a factor of about 30 in a lifetime. Imagine the average nation being 30 times richer than it is today!

Okay, let's imagine it:

4point4.gif

4.4% growth is excellent. Not quite as fantastic as America's 5.3% Q1-2006 growth, but better than America's 3.5% 2005 GDP growth. And much better than the European Union's 1.7% 2005 GDP growth.

If the United States, at every level, aggressively pursued pro-growth policies (less and fewer taxes, less and fewer regulations, etc.), we may very well be able to sustain 5.3% growth, year after year, for decades. Then again, you never know. Let's just assume we could. Here's what that 0.9% additional annual growth would yield over a lifetime:

5point3.gif

A LOT more, in other words. Even with just 3.5% growth in 2005, the United States Gross Domestic Product (including inflation) added 10,000 dollars worth of value PER family. In just one year.

Now, let's take Europe's 1.7% rate over a lifetime:

1point7.gif

Weak.

Those percentage points-- and fractions of percentage points-- so boring and underreported, have amazing implications over time. In the long run, the divergence we're likely to see between the United States and Europe will lead to two drastically different societies, with drastically divergent standards of living.

More from a 2001 piece on how to tweak these percentages for the better (underlining mine):

Growing trade deficits signal improving economic conditions, while shrinking deficits often occur in times of economic trouble. During the last 25 years, the U.S. economy has on average grown about a percentage point faster, 3.5 percent vs. 2.6 percent, in years when the trade deficit expanded compared with years when it shrank. The unemployment rate on average fell 0.4 percentage points during years of rising deficits and rose 0.4 points when the deficit shrank. Manufacturing output rose much faster during years of rising trade deficits than during years of shrinking deficits.

America's largest trade deficits in recent decades occurred during economic expansions, its smallest deficits during recessions. It's no coincidence that as the economy shows signs of slowing down, the monthly trade deficit numbers have also begun to shrink with the economy's growth rate. (Those critics who demand that something be done to "fix" the trade deficit should be concerned that they might get what they ask for.)

Critics of trade liberalization often point to the trade deficit as proof that trade destroys jobs. If exports create jobs, they argue, then surely imports mean less domestic production and fewer jobs. In fact, imports and domestic production rise and fall together. Since 1987, manufacturing output in the United States has risen the fastest during years when the volume of imported goods has also risen the fastest. The two years of slowest import growth, 1990 and 1991, were the only two years in which manufacturing output actually fell. The same economic expansion that spurs manufacturing growth also attracts more imports and enlarges the trade deficit.

Another unfounded worry about the trade deficit is that it will saddle future generations with an unsustainable "foreign debt." It is true that foreign investors own about $1.5 trillion more in U.S.-based assets than Americans own in foreign assets abroad. But about half of foreign-owned assets in the United States are not debt but equity--direct investment in factories and real estate and portfolio investment in corporate stock. And the $1.5 trillion in net foreign investment in the United States is only about 16 percent of Gross Domestic Product, and 4 percent of the net wealth of all U.S. households and non-profit organizations. Net payments to finance our foreign "debt" were less than $20 billion in 1999, about one-fifth of one percent of GDP.

Growth has profound consequences over time. Economic consequences. Political consequences. Moral consequences. When we trade growth for the false promises of liberal utopianism, we are shaping the future-- profoundly-- for the worse.


-------------------------------------

Previous Trivia Tidbit: Late Night Jokes.

Posted by Will Franklin · 9 June 2006 03:32 PM

Comments

Does that include all of the foreign nations with their hands in the taxpayers' pockets. Over a quarter of our $8.4 trillion debt is financed by foreighn nations. If you don't believe me you can check it out at http://payyourshare.blogspot.com

Posted by: young_activist at June 9, 2006 03:56 PM

Over a quarter of our $8.4 trillion debt is financed by foreighn nations. If you don't believe me you can check it out at http://payyourshare.blogspot.com

And why do foreign nations hold US Debt? First, because we are good for it. Hence why we pay lower interest rates than nations with poorer prospects of repayment. Second, because America is the largest economy in the world and more than double the size of number 2, China. Our economy is more heavily intertwined with the rest of the world's.

If it makes you feel bad about foreign nations that hold US Bonds, let's consider why there are trade deficits. We buy lots of stuff. We sell lots of stuff too, but that is a product of the size of our economy and our prosperity. Think about why we buy timber from Canada or natural gas from Canada or Oil from Saudi Arabia or products from China. It is first, that some things we choose not to make here anymore because it is cheaper to buy them from abroad. And second, it is because the Democrats in Congress have stalled increased domestic energy production.

If you don't like the trade deficit, stop buying cheaper products from China. Pay twice as much for a computer or a car, whose components are made overseas. Start producing more oil domestically or stop driving your car.

Do you not get it that it is our relative and growing prosperity that fuels trade imbalances and trade imbalances lead to current account deficits that must be repaid by foreign direct investing or by devaluation of our currency. Problem is that our currency does not devalue easily. Ever notice that when every third world dictator on the run is caught, they have all their currency in dollars? We run the world economy, not the other way around and we are growing our way out of trade and budget deficits. Our growth is shrinking the size of these deficits in relation to GDP. You talk raw numbers, but the only true numbers are in relation to GDP.

Posted by: Justin B at June 9, 2006 06:34 PM

There are several reasons that foreign nations by U.S debt. (1) As a safe place to store excess capitol for the SHORT TERM while they decide what to do with it, (2) as an easy way to invest in the U,S dolae, and (3) some nations are even buying our debt for political leverage.

Posted by: young_activist at June 10, 2006 09:25 PM

"If it makes you feel bad about foreign nations that hold US Bonds, let's consider why there are trade deficits" I am talking about the National Debt, this has to do with government spending, not trade.

"it is because the Democrats in Congress have stalled increased domestic energy production" The last time I checcked the Republicans controlled Congress. The Democrats would have never given free handouts to billionares or the thousands of other stupid things that the Republicans in Congress have done, like all of this wasteful spending:


$250,000 for a museum dedicated to tea pots

$180,000 for research on berries

$700,000 to give the Largo, Florida Police Department laptop computers in their patrol cars

$79 million for wood utilization research since 1985

$2 million for the Ted Stevens International Airport in Anchorage

$1.4 million to replace a working dog kennel at a military base

$500,000 for design, planning, and equipment for a forensic laboratory in Vermont

$225,000 for the Beluga Whaling committee

$250,000 to fund Pinellas County, Florida's Police Athletic League

$447,000 for halibut data collection

$300,000 for the County Neighborhood Watch Program in Prince George, Maryland

$3,768,000 for research dealing with shrimp aquaculture

$500,000 for a Virtual Perimeter Video Surveillance System for the Pittsburgh Police Department

$249 million for the now infamous Bridge to Nowhere

$750,000 to give the Snohomish County, Washington Sheriff'’s Office palm-imaging technology

$200,000 to the city of North Pole for "recreational improvements"

$50 million to build an indoor tropicalrain forestt in Iowa

$200,000 to the University of Hawaii to produce a film on the Kalahari Bushmen (does anyone even know of what the Kalahari Bushmen is?)

$1,700,000 for the International Fertilizer Development Center

$1,000,000 to conduct marine mammal population surveys

$100,000 to the Institute of International Sport to prevent youth crime

$100,000 for the University of Pittsburgh Center for Sports Medicine to research the knee injuries in female athletes

$100,000 for a high school to enhance its metalworking program

$50,000 for an elementary school to start an International Baccalaureate Program

$400,000 for AIB College of Business to maintain a program that recruits and trains students in captioning and court reporting

$1,500,000 for to record data aboutAlaska'ss currents and tides

$2,700,000 for the Wood Education and Resource Center

$2,500,000 added for Pinellas County, Florida. The bill does not specify the purpose of this money.

$18,500,000 to help create jobs in Ireland through such programs as building a replica Jeanie Johnston (a Canadian ship that brought famine victims to North America)

$2,000,000 forminiaturee golf in St.Augustinee

5,000,000 for the High Frequency Active Auroral Research Program (HAARP)

$2,000,000 for a program called Seniors vs. Marketing Scams

$1,000,000 to produce a video which promotes the significance of National Patriotic Holidays for young people

$150,000 for the Military Sexual Integrity Program

$270,000 for wool research

$225,000 to repair a swimming pool that a Congressman and his friends filled with tadpoles in their youth.

$238,000 for the National Wild Turkey (NWTF) Federation

There is even more that you can read here: http://www.cagw.org/site/PageServer?pagename=reports_pigbook2006

Posted by: young_activist at June 10, 2006 09:29 PM