The U.S. trade deficit hit an all time high in August reaching a stunning $69.9 billion. That was a 2.7 percent jump from July's $68 bn which had also been a record.
The administration, through the auspices of Hank Paulson the new Treasury Secretary and former 'old China hand' while heading Goldman Sach's has made negotiations with China a priority, according to the Financial Times, focusing on China's currency system and other trade policies. Significantly the deficit with China has shot up 12.2 percent to a record $22 bn in August, and is currently running 13.5 percent ahead of last year.
The administration has voiced concern about what it perceives to be China's unfair trade practices. Paulson has argued that China's currency is being manipulated, that China is keeping its currency artificially low against the dollar by as much as 40 percent in order to make Chinese goods cheaper in the U.S. and American products more expensive in China.
But what was largely overlooked or swept under the rug by the policy wonks in Washington in the latest trade figures was the fact that of the $69.9 bn deficit, $29.7bn was made up of oil imports, an all time record.
Certainly China's trade policies makes it difficult for our industries to compete, but at least the Chinese sing for their supper. By indirectly subsidizing exports they keep our inflation down, provide us with myriad goods at affordable prices and make it possible for us to access all manner of household and industrial wares that might otherwise be out of reach to the average consumer. That our industry has difficulty competing, that it costs industrial jobs is certainly the case, but there is a modest offset in that distribution and marketing positions are being added.
The trade figures show that with the acquiescence of an executive branch whose home base is energy intensive Texas and Wyoming, together with "K Street" lobbying tentacles that reach deep into Congress, the oil industry's policy objectives to make the rest of us pay more for oil and energy, all the while getting us to consume more of the same, has succeeded brilliantly. Where is the government's sense of outrage that nearly half of our trade deficit is made up of oil imports. Where are the Paulsons of government being sent to read the riot act to the OPEC mafia and their handmaidens, the oil industry chieftains. Where are the government's initiatives to curtail our 'drunken sailor' usage of fossil fuels. Where are the steps being taken to reduce our oil imports if for no other reason than to rectify the trade deficit, as if destruction of our environment, extortive prices and our national security have not yet registered as reasons enough.
Why is it so clearly apparent that China can manipulate its currency, but that government tenaciously holds to the fiction that egregious prices for oil iis the result of 'free market' forces.
Chinese policies, for all their downside, bring something to the table. The oil industry adds nary an iota of additional value other than jacking up prices and high jacking our future. But according to government at its best, that's OK. Let's get everyone to focus on China and take the heat off the boys in the oil and energy shop. Let's get back to the government's real business, like royalty giveaways to their oil company buddies.