Monday, August 4, 2014

Krugman needs to look at his own graph regarding trade

Krugman on trade, a paper for Brookings.

For you have been following the entire thesis on government induced cycles, you already know the presidential recession cycle. The periodic feature in even in the trade data which Krugman assembled. Click thru the link and go to figure 1` where he shows the import pattern for the American economy. The notmal presidential recession cycle is clear in the periodic pattern. Imports go with the cycle.

I bring this up because Krugman has a hard time identifying cost factors, yet here we have the major cost factor clear as day.  The presidential recession cycle is clearly endogenous to the domestic economy, foreign exporters do not see that cost. So they can just sett right out of inventory when the deficit is large and imports running high. Or they can plan for that event a year in advance.  The is a comparative disadvantage we impose on ourselves.

Summary for Krugman:

We have increasing exports because our exporters are increasingly squeezed by the presidential recession cycle and foreign exporters do not suffer that restriction.

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