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 These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The Commerce Department reported the deficit on international trade in goods and services was $51.8 billion in March. This was up from $45.4 billion in February, thanks to weakening conditions in Europe and chronic deficits with China and in petroleum.

The $620 billion annual deficit is the most significant barrier to economic recovery and creating jobs, and consumer goods from China and oil account for virtually the entire problem.

Economists agree the pace of economic recovery has been too slow, because of too little demand for what Americans make.

Consumers are spending again, the process of winding down household debt that followed the Great Recession; however, too many consumer dollars go abroad to purchase Middle East oil and Chinese consumer goods but do not return to buy U.S. exports. Consequently, businesses can’t justify expanding U.S. facilities and hiring workers.

Since the economic recovery began in June 2009, the trade deficit has doubled and GDP growth has averaged a disappointing 2.4% a year. Unemployment has fallen from above 10% to 8.1% mostly because Americans have quit looking for work, not found jobs. Continue reading…

 A reader in California responds to Jared A. Favole and Tennille Tracy’s story “WSJE(4/18) Obama Seeks Oil-Market Curbs”:

President Barack Obama doesn’t realize that raising margin requirements outright would also make it more difficult for short sellers in the oil market.

Having traded oil futures for over 10 years, I understand how leverage and margin can affect the ability to create new positions in futures markets. If Obama wishes to limit the speculation that is pushing prices upward, he should only increase trading margin requirements on speculative long positions, not on short positions. This would give the advantage to short sellers, the ammunition they need to overpower the bulls.

If we’re going to pick winners and losers, for the sake of the country, the Commodity Futures Trading Commission must have policies favoring short sellers, as long as the price of oil remains above $100 and as long as large speculative noncommercial traders hold a net long position in oil futures contracts. Continue reading…

Gasoline prices are zooming past $4 a gallon, and the nation is hardly freer from the grip of imported oil or closer to robust economic recovery. With his approval ratings dropping precipitously, President Barack Obama is blaming speculators and investigating fraud and at the pump, when this mess is the direct result of failed federal energy policies.

By word and deed, the Obama administration has sought to limit off-shore oil exploration and development, and hasten the commercial viability of solar, wind and alternative vehicle technologies.

All this is based on two erroneous, but strongly-held beliefs among liberal policy makers, academics and pundits–increasing oil U.S. production would do little to lower U.S. gas prices, and but for the vested interests of multinational oil companies, mankind would have long ago harnessed renewable energy sources and freed itself from the sin of burning hydrocarbons. Continue reading…

A college adjunct instructor in Oklahoma responds to “HEARD ON THE STREET: Apollo, Blackstone Offer Private Member Benefits For Natural Gas’”:

Why would anyone on the production side of the natural gas industry want to use the futures market to lock in what would be marginal profits, if any?

The only thing keeping natural gas prices afloat is the price of the natural gas liquids, and we could find ourselves in a liquids “bubble” before long.

Natural gas prices don’t hit $5 until December 2017. The downside in this market is far less than the potential upside. Dry production is becoming less and less profitable so it seems highly unlikely that locking in forward prices at these levels would be a prudent strategy.

Private equity companies invested in midstream companies could lock in the lucrative forward spreads by buying natural gas futures and selling NGL forward swaps. Even using crude oil as a “dirty” swap would allow them to take some of the profit inherent in the processing spreads that exist.

While I enjoy reading Liam Denning’s articles and agree with his perspective most of the time, I have to disagree with his contention that private equity investment groups can use the futures market at this time to ensure profitability down the road. Continue reading…

U.S. policy needs a complete overhaul to save the economy from a second Great Recession, but instead the president promises more of the same policies that have failed–stimulus spending, higher taxes and onerous, ineffective business regulations and health-care costs.

Domestic demand for what U.S. workers and businesses can make remains inadequate to ensure full employment. Americans are spending more these days, but too many of those dollars go abroad to purchase more expensive imported oil and Chinese consumer goods that do not return to purchase U.S. exports and create jobs.

Instead of addressing these problems, the president proposes a package that will do little to boost domestic demand, and that will permanently hamstring the economy with higher taxes and mindless bureaucracy.

The president proposes spending an additional $140 billion on roads, schools and other infrastructure, but wants Congress to pay for this with cuts in spending on Medicare, Medicaid and other programs. How will adding construction workers to the national payroll, while laying off health-care workers boost employment?

The proposed privately funded infrastructure bank is a great idea; but it will take some time to get going, and it will lend money to state and local governments that must be repaid.

Many jurisdictions are already at the limits of their borrowing capacity. While the bank would alter state and local priorities in favor of spending on needed public investments–instead of more local officials to harass homeowners and businesses–the near-term impact on domestic spending and employment would not be large. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

America is in crisis.

The new normal is not good enough. The unemployed can’t find jobs, the old can’t retire and those in between live in constant fear of being tapped on the shoulder and thrust into the abyss.

Property values are lower than a snake’s belly, stocks are diving and gold–the “fear asset” seems the only sound investment.

Thursday the President addresses Congress and is expected to propose ideas that only maintain the status quo, or perhaps do worse.

Infrastructure spending, payroll tax holidays, and unemployment benefits will only replace monies now running out from the $800 billion stimulus package and subsequent initiatives. Job training is the biggest folly–the economy is not creating many decent openings for trainees to fill.

New tax breaks to encourage hiring and investment won’t work, because domestic sales are not growing fast enough to occupy new hires at most businesses.

Americans are spending and businesses are investing a lot more than two years ago, but too much of what they spend is going into higher priced imported oil and more consumer goods from China.

The $600 billion trade deficit oil and China create are a tax on domestic demand too heavy for the economy to bear. Simply, dollars that go abroad for gasoline and coffee makers that don’t return to buy U.S. exports destroy millions of jobs.

If the trade deficit were cut in half, the economy would grow by some $500 billion and add 5 million new jobs.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Analysts expect the Commerce Department to report on Wednesday the deficit on international trade in goods and services was $47.7 billion in March, up from $45.8 billion in February.

This trade deficit subtracts from demand for U.S.-made goods and services, just as a large federal budget deficit adds to it. Consequently, a rising deficit slows economic recovery and jobs creation and limits how much Congress and the President may cut the deficit without sinking the economic recovery.

Rising oil prices and imports from China are driving the trade deficit up, and these are major barriers to creating enough jobs to pull unemployment down to acceptable levels over the next several years.

Jobs Creation

The economy added 244,000 jobs in April; however, 360,000 jobs must be added per month to bring unemployment down to 6% over the next 36 months. With federal and state governments trimming civil servants, private-sector jobs growth must exceed 360,000 per month to accomplish this goal.

Americans have returned to the malls and new car showrooms but too many dollars go abroad to purchase Middle East oil and Chinese consumer goods that do not return to buy U.S. exports. This leaves too many Americans jobless and wages stagnant, and state and municipal governments with chronic budget woes.

Simply, policies regarding energy and trade with China are not creating conditions for the 5% GDP growth that is needed and easily could be achieved to bring unemployment down to acceptable levels.

In April, the private-sector added 268,000 jobs per month, but many were in government-subsidized health care and social services. Netting those out, core private-sector jobs have increased only 229,000 in April. That comes to 73 non-government-subsidized jobs per county for more than 5,000 job seekers per county.

Early in a recovery, temporary jobs appear first, but 22 months into the expansion, permanent, non-government-subsidized jobs creation should be much stronger.

Economic Growth

Since the recovery began in mid 2009, GDP growth has averaged 2.8%, disappointing administration economists who have consistently assumed 4% growth in budget projections and forecasts for the job-creating effects of stimulus spending.

Consumer spending, business technology and auto sales have added strongly to demand and growth, and exports have done quite well. However, soaring oil prices and the continued push of subsidized Chinese manufactures in U.S. markets have offset those positive trends.

Administration imposed regulatory limits on conventional oil and gas development are premised on false assumptions about the immediate potential of electric cars and alternative energy sources, such as solar panels and windmills. In combination, administration energy policies are pushing up the cost of driving and making the United States even more dependent on imported oil and indebted to China and other overseas creditors to pay for it.

To keep Chinese products artificially inexpensive on U.S. store shelves, Beijing undervalues the yuan by 40%. It accomplishes this by printing yuan and selling those for dollars and other currencies in foreign-exchange markets.

Presidents Bush and Obama have sought to alter Chinese policies through negotiations, but Beijing offers only token gestures and cultivates political support among U.S. multinationals producing in China and large banks seeking additional business in China.

The United States should impose a tax on dollar-yuan conversions in an amount equal to China’s currency market intervention divided by its exports–about 35%. That would neutralize China’s currency subsidies that steal U.S. factories and jobs. It is not protectionism; rather, in the face of virulent Chinese currency manipulation and mercantilism, it’s self defense.

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Wednesday, Federal Reserve Chairman Ben Bernanke will discuss with reporters decisions taken by the Federal Open Market Committee. For this unprecedented press conference to be successful, Bernanke must venture where Fed chairmen are most reluctant to go–into politics.

Economists have long held that transparency about goals and means makes monetary policy more effective. However, genuine transparency requires that Bernanke acknowledge the limits imposed on the Fed policy by the actions of Congress, the administration and foreign governments.

Inflation is heating up, thanks to rising oil, food and other commodity prices. Many in Congress and financial markets blame QE2–the Fed’s policy of purchasing Treasury securities to moderate interest rates on mortgages, corporate bonds and the like–but easy money is not causing inflation.

China and several other Asian governments choose to keep their currencies substantially undervalued against the dollar and regulate domestic gasoline and other commodity prices. Those policies boost Asian exports and growth, slow U.S. and European growth, and push up global prices for oil and other commodities.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

When gas prices spike, owing to Middle East turmoil or hurricanes, conspiracy theories abound about profiteering speculators. The truth is Americans are suffering from bad energy polices–politicians eager to sell pet projects and hoist blame onto others.

In such a fit, President Obama offers fanciful alternative energy technologies as a solution to rising pump prices and a task force to ferret out fraud in energy markets.

Even before disturbances in Egypt, Libya and elsewhere, economists expected oil prices to increase from their September lows of $75 per barrel to more than $100 a barrel by this summer.

Economic recovery is pushing up gasoline demand and jet travel; President Obama’s restrictions on off-shore drilling are curtailing U.S. oil supplies; electric vehicles and hybrids won’t appreciably dent U.S. gasoline consumption before the end of this decade; and Chinese oil imports are growing 10% a year. All the Middle East strife did was accelerate the price surge.

Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The economy picked up in the first quarter. After adding 175,000 jobs in February, economists expect the Labor Department will report on Friday that the economy added 188,000 jobs in March. However, events in Japan, Libya and the wider Middle East, and the European sovereign debt crisis threaten to reverse these gains and thrust the economy into a second recession.

Longer term, job gains in the range of 200,000 a month are not enough to push unemployment down to acceptable levels. Dysfunctional energy, trade and tax policies are holding back U.S. growth, adding to unemployment and lowering wages.

Private Sector Jobs

Until February, the private sector was creating few permanent jobs. Most jobs were either in health care and social services, which enjoy heavy government subsidies, or temporary business services. Excluding those activities, the “core” private sector gained 170,000 jobs in February; whereas during the prior 13 months, the average gain was only 45,000.

Continue reading…