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5/21/01

STRAPPADO WRACK

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Balance of Payments Deficits
 Caused by the Real Voodoo Economics

With the announcement of the all time record balance of payment deficit, the US is reaping the repercussion of decades of insane trade policies. The rush to establish Free Trade, with the absence of Fair Commerce is nothing short of a pathological sickness. Virtual agreement of acclaim for this new dogma of the Corporate/State seldom is challenged. Free Trade is the sacred cow that must be allowed to graze on every field, feed on any food, and consume all that passes in front of its plate. But what is the record of this, indiscriminate dash to open American markets? Who benefits; and who pays, the high price measured in a cost much greater than money?

When a nation has a deficit in their trade balance, that is REAL money that leaves its shores. Contrary to the paper loses of the recent market decline, these pre-taxed sums were never realized, spent or consumed by the stockholders. The wealth effect that increased equity values create are psychological, until they are transformed into cash. This cannot be said about trade transactions. A deal can be a wash, a profit or a loss. But when a country adopts practices that structurally determine that a drain on national resources is the inevitable result, we should view such a policy as self destructive.

What is seldom told in the financial press is that the Corporations, who are the trading engines of most transactions, are transnational entities with very different motives than the businessman. A merchant recognizes that business is conducted within a community and that success is based upon a continuous flow of repeat customers who are satisfied. The price that his clientele is willing to pay, must reflect market value. The entrepreneur is but one in thousands, that compete for business. His achievement must mirror sound business principles, high service levels, reliability and ingenuity. Contrast this method of standards with the practice within the Corporate realm.

Jack Welch of GE, virtually the most successful company that produces real products, states that you must be the industry leader and that the lowest performing employees need to be cut every year. You may say that all sounds fine. But what does the rush to become the industry leader, truly mean? Profit IS Good, but when it becomes the holy grail and is sought above all other responsibilities, it can be destructive while achieving record returns.

Mergers and Acquisition for the past twenty years has produced an economy that considers the prosperity of the transnational corporations above the interests of their host nations. The Chrysler acquisition by Daimler-Benz is a classic example. US taxes are no longer owed on its foreign operations and decisions are now being made in Stuttgart. Are those UAW workers now part of those lowest performing employees? When Steve Case of AOL, states that this world's largest media entity must think and grow internationally, does this mean that the corporate domicile will be offshore in the future? Are you ready for added language prompts from their customer service phone system? You get the picture . . .

NAFTA and every other open door trade scheme, is at the root of the record balance of payment outgo. One way policies that distort International Trade are designed to solely benefit stateless corporations. When American consumers bleed, another Nike shoe is sold for over a hundred, while the foreign labor is paid in pennies. The inane and ridiculous notion that American consumers will only buy inexpensive products, is based upon the reality that Free Trade policies have created an economy, where they only earn meager wages from flipping burgers.

Commerce is vital and should be vigorously pursued. But it must be based upon rules that are played on a slope that is level. Michael Milkin was crucified for financing ventures with junk bonds. Yes, high rate borrowing entails greater risk, for the lender. But this approach created an alternative to the M&A variety of 'so called', "progress is our more important product", version. Just ask the Honeywell unemployed, when GE takes charge.

The negative effects of the drain in national wealth because of the outflow in trade deficits can only run up prices in the long run. A country dependent upon foreign production, controlled by faceless supranational world citizens, will pay a heavy price for the loss in domestic independence. The temporary compensation for owning their stock, can be taken from you even more quickly than it was given. When dividend are abandoned for capital appreciation, you are being sold snake oil.

Get REAL! The voodoo that IS Free Trade, is a curse. Restore taxation law based upon entry to our market. Tariffs are the balance that this system was designed to circumvent. FAIR Trade demands that American consumers protect their own means of production. Corporations never pay taxes, their customers fit that bill. So why should these pillagers of the national interest, be given a free ride to build even larger corporate monsters?

For those who say this is a new age, are ignorant of axioms in economic principles. The businessman is not the enemy nor is he the cause of this hemorrhage. The unholy alliance of academia, who rationalizes intellectually suspect policies, is based upon the contributions and grants from their corporate donors. Government embraces their trickery as an easy means to control the consumer and require that they become more dependent upon the policy makers and bureaucratic dispensers. No wonder the outflow of real wealth needs to be downplayed. The balance of payments extends to more than foreign trade. It rests upon a Fair relationship of government to its citizens. At present this deficit is far from Free, for its cost grows even greater than the dominance of the International Corporate Raider. George Soros, you are not my mentor. You, and those like you, are the enemy.

SARTRE - May 21, 2001

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