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Darius Dale and I were just grinding through US government data and had to keep pulling the curtain back to prior decades until we found one that actually showed a US Trade Surplus. Not months; not years; decades. You have to go back to 1976 before this chart registers anything that resembles a surplus (i.e. more exports than imports).

As we headed into the late 1970’s, the Keynesians were as willfully blind to the prospects for importing inflation are they are right here and now. But, as they say, nothing focuses the mind like a good ole hanging would in the ole West… and as harsh as that might sound, its the political metaphor to consider when these conflicted and compromised politicians promise that Americans will never have inflation and that interest rates will never go up.

You can look at this chart for what it is and tell me if you think running a national trade deficit policy has done anything but add to the cyclicality of a jobless economy. On a cumulative basis, the most recent decade (2000-2009) didn’t create any net jobs. ZERO. Why? Well, that’s easy. We import asset inflation and ignore it until we have a crisis; then we cut rates to zero and hope and pray that the world will consider this trade deficit chart a healthy solution.

Now there is always hope that we will have a Reagan revival and that we will get this trade deficit in order, but until the data supports that idea, it will be nothing but that – a hope. Hope is not an investment process.

This morning’s US Trade Deficit hooked down again to almost -$40B from January’s -$37B. I understand that a billion dollars aint what it used to be, but neither is a political hanging or the Coinage Act of 1792 (where a politician would be sentenced to death for debasing the currency of the citizenry).

This is a very sad long term secular chart, indeed. The world economy is starting to hold us accountable to what we are trying to ignore.

KM

Keith R. McCullough
Chief Executive Officer

A Very Sad Secular Chart: US Trade Deficit - US Trade Deficit Long Term