Washington Idiots at Work, by David Stockman

Give people a lot of money in response to Covid and they’ll spend it. Much of what they buy will come from China, so the trade deficit soars. From David Stockman at davidstockmanscontracorner.com via lewrockwell.com:

If you don’t think Washington is populated by the world’s greatest collection of idiots, just consider some of today’s incoming data, starting with another disastrous trade report.

The trade deficit in goods for August posted at -$89.4 billion, which is nearly the worst monthly figure on record and 40% below the already huge -$63.7 billion deficit posted for the pre-Covid peak in February 2020. And, no, we are not harping here on the trade account’s tsunami of red ink out of some Trumpian affection for protectionism.

To the contrary, this is the result of stupid economics – specifically the $6 trillion bacchanalia of Covid bailouts and stimmies enacted during the last 18 months. Self-evidently, the overwhelming share of that gratuitous add-on to spending flowed into the veins of international trade and came ricocheting back in the form of a $26 billion monthly increase in the goods deficit.

Xi Jinping is surely marveling at Washington’s endless capacity to keep his Ponzi alive every time it begins to unravel, as was the case in the spring of 2020.

Indeed, the blue line in the chart has been driven for the last 30 years by the massive deficit in goods with China. The latter, in turn, provided the hard currency earnings which enabled the Red Suzerains of Beijing to build a massive industrial economy from whole-cloth on the back of $50 trillion of debt.

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