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NAFTA Destroying Economy
Ladies & gentlemen:
I am forwarding this article on to you because the damage inflicted on the American economy by NAFTA and GATT is now becoming so obvious that only the most dishonest analyst would still defend their passage. Rush Limbaugh is one such dishonest man, and his support for NAFTA and GATT is the reason I never listen to his show anymore.
NAFTA and GATT are international treaties that should have required a 2/3 Senate approval. Instead, they were passed into existence like regular legislation, and the corrupt federal courts have thus far dismissed the constitutional challenges brought against them.
Only a select few Americans stand to benefit from NAFTA and GATT in a big way, but they are in powerful positions in both government and corporate America, and they have used that power like a blunt instrument to fend off all critics and stay this disastrous course.
America has only 290,000,000 people. When compared to the population in the rest of the world, we represent but a handful, but our personal citizen wealth is disproportionately higher than anywhere else. Thus, when NAFTA and GATT have successfully drained off our citizens' personal wealth through loss of family-wage manufacturing jobs which will result in drastic reductions in consumer spending, it will have no real positive effect on the economies of the rest of the world. Our wealth poured into the world economy will make about as much difference as pouring a 5 gallon bucket of water into an Olympic-sized swimming pool.
We are hemorrhaging more and more of our personal wealth every day to nations like China, which now produces just about everything we currently buy at the mall. The only way to stem these continued losses is to bring about the repeal of NAFTA and GATT by whatever means are necessary -- and all that that implies. The ultimate survival of our very nation rests on this generation right now.
Carl F. Worden
NAFTA Destroying Economy
The North American Free Trade Agreement (NAFTA) had been widely heralded by its proponents, pundits and cheerleaders as a pact which would bestow immense U.S. trade supluses, stimulate manufacturing and production, create thousands of new U.S. jobs, bolster consumer spending and increase prosperity within the United States. NAFTA became implemented in 1994, and the U.S. economy began its downward spiral these past eight years. It is now evident that NAFTA is a disaster which has produced unprecedented trade deficits, eliminated millions of good U.S. jobs and is killing the consumer, the backbone of a thriving economy, who is responding by curbing retail purchases. Click NAFTA Devastation on this website for a more in depth article.
On November 13 Federal Reserve Chairman Alan Greenspan conceded that if consumers and businesses continue to refrain from spending, the economy will not recover. Fearing the slump in retail sales may collapse the economy, the Federal Reserve cut short-term interest rates 12 times since January 2001. Chairman Greenspan said that if the central bank fails to stimulate retail sales with interest rate cuts the Federal Reserve will attempt to stimulate by buying long-term government securities.
This of course would further drop the interest rate on home mortgages. Debt laden consumers were encouraged to refinance their homes, pull out much needed cash and continue spending. Now cash starved consumers are still left with a mountain of debt but with reduced or zero equities left in their homes.
According to Market Watch, "Banks reported that a significant percentage of households opted to increase their loan balances to fund other purchases as they refinanced, a practice called 'cash-out refinancing'." Bankers are extremely worried that home prices may moderate, decline or even collapse over the next 12 months. According to a troublesome report by top bank regulators, risky loans rose 22% to $236 billion for the year beginning June 2001 and ending June 2002. Loans classified as substandard, doubtful or unrecoverable leaped a whopping 34% during this period. Meanwhile deflation is the Fed's worst nightmare.
Retail sales fell another 1.3% in September, recovered marginally in October only to erase that nominal uptick in November by declining again. Chronically slumping retail sales threaten to plunge the economy into deflation, greatly alarming the Federal Reserve which has been powerless to reverse the sinking economy. The economy cannot recover unless retail sales prosper, since consumer spending accounts for well over two-thirds of all economic activity in the United States. Retailers are now looking to the holiday season to reverse the retail sales malaise and give the economy a boost.
Sectors of the economy that posted retail sales growth did so at the expense of profits. Retailers slashed prices to attract consumers, decimating profit margins. In massive numbers consumers are refusing to spend, unless retailers substantially discount prices. Consumers are buying only deeply discounted items and bargains, and here too sales are beginning to decline. Deep discounts and zero-percent financing deals, especially on cars, have greatly impacted the deflationary price trends threatening to collapse the U.S. economy. October new car sales fell 1.9% following a 5% drop the previous month.
Slumping retail sales are now collapsing every other sector, from Wall Street all the way down to employee pension funds. Through a little known legal technique to exaggerate earnings and bolster balance sheets, many companies include their employee pension plan portfolios to boost company assets and project gains. The pension plans of many U.S. companies are funded primarily with stock and bonds which in many cases are composed largely of stocks and bonds of the company itself. Corporate pension plans are often funded with little actual cash. Now those expected gains in employment pension plan portfolios are plummeting as the value of stocks collapse on Wall Street.
Huge losses in employee pension funds will force companies to fork over billions of dollars to replenish pension fund deficits by slashing billions from earnings. A list of companies with huge unfunded pension plan liabilities follows.
Consider these unfunded pension liability cases.
* General Motors Corporation has a whopping $12.7 billion employee pension fund deficit. The pension plan is partially funded with the company's own stock. On May 14, 2002 GM stock was selling for $68-a-share, whereas the stock is currently selling for $35-a-share, a drop of 48% in six months. The company will be forced to cover this unfunded employee pension liability out of current earnings at a time when new car sales are free falling.
* Honeywell International announced it will add $900 million to its unfunded employee pension plan deficit which must be covered by the fourth quarter of 2002, and that was on top of the $100 million the company added during the third quarter. Much of the $900 million pension plan funding will be in the form of Honeywell stock, which dropped 43% after hitting its high on April 16. Should the stock continue to drop, the pension fund will continue sinking into the red.
* IBM has an unfunded employee pension plan deficit of $1.5 billion which the company will fund with newly created shares of its own stock. If IBM stock keeps falling, more employee pension fund deficits will arise.
* SBC Communications needs $1 billion to $2 billion to cover losses to its employee pension fund stock portfolio. The company announced it will cut earnings 20 to 40 cents a share to help cover the deficit.
NAFTA and free trade have destroyed and eliminated millions of U.S. jobs, since factories, growers and producers are encouraged to leave the United States in search of cheap labor. The consequent unemployment suffered by U.S. workers is dragging down retail sales. When retail prices collapse, the entire economy is dragged down with it. That is exactly what is now occurring in the U.S. economy, and it is all just beginning.
When retail prices collapse, price deflation follows moving values of virtually everything including real estate to lower levels stimulating bankruptcies in its wake. Once this deflation takes hold, there is nothing the Federal Reserve can do to reverse it. Lowering interest rates and extending easy credit is the tail wagging the dog. It is like pumping blood into a corpse. The economy will simply adjust to prices of everything at lower levels. Free trade, NAFTA and subsequent U.S. unemployment will eventually decrease wages and salaries earned by U.S. work ers. That is already beginning. Consumer spending mirrors earnings. If consumers earn less, they spend less. Consequently the U.S. economy is headed in the direction of deflation and depression. Unless free trade and NAFTA are repealed, the United States will devolve into a permanent Third World economy with a substantially reduced standard of living. Consumers are the most powerful force driving the economy, and when their collective buying power diminshes, the economy collapses. NAFTA and free trade are poison for U.S. workers but enormously beneficial to a select few special interests who can manipulate the system to their advantage.
The purpose in writing this article and others is to demonstrate with actual events the need to rescind the 17th Amendment. NAFTA and free trade must be repealed, and we must return to our national economy. Rescinding the 17th Amendment is central and crucial to gaining back our constitutional republic, restoring sovereignties back to the states and returning the power of Government to the states and people.