2007 imports were 14 percent of US GDP and US manufacturing comprised 12% of US GDP

March 28, 2008 | The Chop Shop Economy | Other People's Money | By ALAN FARAGO
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Let's start with a simple explanation. The first step of the free-market acolytes within the Bush administration involves nationalization.

That is what Federal Reserve chief Ben Bernanke did, authorizing the use of derivative debt tied to mortgages as collateral for loans to banks. US Treasury Secretary Paulson has said, the unprecedented step is "temporary", an "emergency response" to avert a financial meltdown, but journalists need to measure the two hundred billion against the ocean of toxic derivatives whose owners now have reason to come calling for charity. It is on the order of trillions.

Taken as a whole, the US financial system was turned into a chop shop where stolen property is taken to be dismantled and sold off piecemeal. That Republicans, the party of fiscal conservatism and limited government, presided over the unravelling of fiscal common sense is astounding.
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Paul Craig Roberts wrote recently, "According to the latest US statistics as reported in the February 28 issue of Manufacturing and Technology News, in 2007 imports were 14 percent of US GDP and US manufacturing comprised 12% of US GDP. A country whose imports exceed its industrial production cannot close its trade deficit by exporting more."

Here is the point: even if we could export more, the sad truth is that after 20 years of globalization the manufacturing supply chain in the United States has rusted out. Except for airplanes and guns, every basic, wage-intensive industry that links raw commodities to end products has been shipped to low cost labor nations, either in whole or part.

The US economy spent the past decade balancing on one leg: housing. For a time, foreign investors in US debt were fine with arrangements that allowed them to charitably view this performance. ....