Real Wealth Society

Tuesday, July 04, 2006

I’ve been thinking about our deficits with oil, manufactured goods, capital, and China By Fred Cederholm

I originally had presented the monthly trade deficit figures in Millions, It should be in BILLIONS! I should have caught that earlier sorry

Column for on/after July 2nd

I’ve been thinking about dependence. Actually I’ve been thinking about our deficits with oil, manufactured goods, capital, and China. The forthcoming July 4th holiday was supposed to be a celebration of American Independence and the freedoms we enjoy. But… the self-sufficient America of bygone days has devolved from a “production engine” for the world’s goods and capital. The world’s creditor nation has become the largest debtor nation. Freedom of choices at home (and abroad) are now governed by these our dependencies.


You see, when you are “dependent,” the options to choose that are open to you become constrained and colored by the vary nature of that dependency. It was two years ago that I first wrote “TH*NK*NG about Dependence on Independence Day” and I have since received emails asking for updates on the data/information. What differences have two years made?


We are more dependent on foreign oil, but with a slightly different percentage mix of suppliers. Our Department of Energy just provided the April figures on June 28, 2006. The top seven sources of Uncle $ugar’s crude oil imports for April 2006 were: Canada (1.710 million barrels per day--MBPD), Mexico (1.601 MBPD), Saudi Arabia (1.582 MBPD), Venezuela (1.171 MBPD), Nigeria (1.022 MBPD), Iraq (0.531 MBPD), and Angola (0.389 MBPD).
This compares with: Canada (1.596 MBPD), Mexico (1.541 MBPD), Saudi Arabia (1.161 MBPD), Venezuela (1.372 MBPD), Nigeria (1.044 MBPD), Iraq (0.755 MBPD), and Russia (0.193 MBPD) for April 2004. The biggest drops in oil supplied involved Venezuela (down 15%) and the Russians who were our 7th largest supplier in 2004, but failed to make even the top 15 in 2006. The Saudi’s picked up most of the slack with April imports from them increasing 36% over 24 months ago. The price per barrel of imported oil was $ 40 in June 2004, $ 52 in June 2005, and ended June 2006 at $ 73. Will this trend continue to escalate?


We are more dependent on foreign manufactured goods. Think about how many more US companies have downsized domestically and out-sourced production abroad in the past twenty-four months. Our current (monthly trade) deficits increased as well. The MONTHLY trade deficit for April 2006 was $63.4 BILLION, for April 2005 was $57.0 BILLION, for April 2004 it was $48.5 BILLION, and for April 2003 it was $42.0 BILLION. This steady increase holds true (comparatively) for each of the year’s other eleven months. See any trends?


We are dependent on foreign capital. On June 30, 2006, our national debt was $ 8.408 TRILLION; on June 30, 2005, our national debt was $ 7.827 TRILLION; and at June 30, 2004, our national debt was $7.274 TRILLION—an increase of $581 BILLION from June 2005 to June 2006 on top the increase of $553 BILLION from June 2004 to June 2005. Our May 2006 M2 money supply (results published June 29th) stood at $ 6.797 TRILLION, our June 2005 M2 money supply was $6.516 TRILLION, and our June 2205 M2 money supply was $6.289 TRILLION. This is on top of the national debt figure noted above. The broadest definition of the bucks in circulation, the M3, was $9.651 TRILLION in May 2005, while at June 2004 the M3 money supply was $9.294 TRILLION. I cannot provide the 2006 equivalent of the M3 money supply since the Fed/US Treasury stopped publicly reporting this number in March of 2006. Trust me that Uncle $ugar’s printing presses are still running - overtime.


The Japanese are still the "hands down" largest holders of our obligations, but it’s the Chinese who are accumulating the greatest amount of current "deficit dollars." In 2006, the Chinese will once again sell US/us some $200 BILLION more of their goods and products than they buy of whatever it is that we still make/sell. We buy their chotchkies; they buy our public/private debt instruments and they will continue to buy our companies.


In 2005, China’s Lenovo did buy IBM’s personal computer business for $1.25 billion and China’s Haier had bid $1.28 billion for the Maytag appliance company - it was eventually acquired by U.S. rival Whirlpool in 2006. What American corporate icons are now in the crosshairs of the Chinese “shopping list” - General Motors? Ford? Microsoft? Halliburton? Enjoy the 4th of July fireworks displays even if they are made in… I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.

Copyright Questions, Inc. 2006 all right reserved.
asklet@rochelle.net

To “audit” this column and to learn more about the subjects discussed, please check out:

Crude Oil and Total Petroleum Imports Top 15 Countries
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imp orts/current/import.html

U.S. NATIONAL DEBT CLOCK
http://www.brillig.com/debt_clock/

MONEY STOCK MEASURES in Billions of dollars http://www.federalreserve.gov/releases/h6/current/ MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES http://www.ustreas.gov/tic/mfh.txt

Trade in Goods (Imports, Exports and Trade Balance) with China
http://www.census.gov/foreign-trade/balance/c5700.html#2006