Have you recently made purchases such as furniture, car parts, clothing, electronics, or other assorted items? If so, it’s very likely that these products were imported from abroad.
In February, the U.S. trade deficit reached a new all-time high. The Commerce Department reported that the nation imported $71.1 billion more in goods and services than it exported, with a staggering $30.3 billion stemming directly from China.
It’s worth noting that February only had 28 days. At a daily deficit of $2.54 billion, if the month had lasted for a full 31 days, the trade deficit could have exceeded $78 billion. This raises some important questions…
It’s crucial to understand that a trade deficit is not always detrimental. You see, countries don’t engage in trade with one another as a whole; it’s individual people and businesses that do so. And generally, transactions occur because they offer mutual benefits.
In a world characterized by sound money, limited supply, and interest rates set by market forces, trade deficits would naturally have limits. Unfortunately, our current reality is defined by artificial monetary practices, where central planners dictate interest rates.
The monumental trade deficit serves as a symptom of the irrationalities stemming from central economic planning. Let’s trace the consequences of this artificial monetary system…
The Federal Reserve generates credit from nothing and lends it to the U.S. Treasury through its purchase of Treasury bonds. Concurrently, commercial banks create credit through fractional reserve banking. By keeping interest rates artificially low for extended periods—often lasting a decade or more—the Federal Reserve encourages excessive credit issuance.
This ongoing surge of credit, the flip side of the increasing debt, flows into stocks, real estate, and imported goods. It even funds extravagant purchases like enormous flat-screen televisions.
Surplus trading nations, particularly China and Japan, recycle dollars back into U.S. Treasuries, leading to further debt accumulation and a continuously widening trade deficit. Many nations also resort to competitive currency devaluations, enabled by artificially manipulated money, to secure a trade advantage.
Essentially, the trade deficit is a direct result of fictional money and loose fiscal and monetary policies. Without this fabricated currency, the deficit could never have escalated to the current unprecedented level of $71.1 billion.
“Waikiki of Southern California”
The consequences of central economic planning become glaringly apparent at the Port of Los Angeles and the Port of Long Beach (POLA / POLB) shipping complex, which together account for over one-third of all U.S. imports. This is an area we know quite well, having passed through it almost daily.
The Southern California coastline, extending from Orange County to the southern reaches of Los Angeles County, curves westward. Standing on the shores of Long Beach, when you look out toward the Pacific Ocean, you’re actually gazing south.
The body of water immediately offshore is San Pedro Bay, sheltered to the west by the Palos Verdes Peninsula. This bay is normally bordered by the San Gabriel River to the east and the peninsula’s eastern edge to the west. The Los Angeles River’s terminus lies roughly at its midpoint.
Unlike the entirely land-locked San Francisco Bay or San Diego Bay, San Pedro Bay is open to the south and can be affected by summer swells driven by storms from the South Pacific and tropical storms off Mexico’s coast.
In the early 1900s, Long Beach earned the moniker “Waikiki of Southern California,” thanks to its surfing-friendly waves—a claim that remains a distant memory, as no local has surfed there in over 70 years.
A massive breakwater, constructed between 1899 and the 1940s, was erected to protect San Pedro Bay. This colossal structure enabled the development of the expansive POLA / POLB complex. Yet, despite its immense scale, it, too, is not large enough to accommodate the challenges posed by unrealistic monetary practices.
The vast fiscal and monetary stimulus measures enacted by Washington and the Fed under the guise of COVID-19 relief have further exacerbated the U.S. trade deficit with China.
Definitive Absurdity
Beginning last fall, container ships have been clogging the berths at POLA / POLB, with many anchoring in San Pedro Bay.
In February, nearly 40 vessels were at anchor, unable to dock. Although this number has lessened, around 30 ships still remain. As the relentless money printing becomes the explicit policy of America’s central planners, this scenario is expected to persist throughout the year and possibly beyond.
Efforts to handle the surging trade volumes have faltered. Just five years ago, most vessels had capacities below 10,000 twenty-foot equivalent units (TEUs). Now many of those anchored have capacities of 14,000 to 15,000 TEUs, with some even exceeding that.
In September, the Gerald Desmond Bridge replacement was completed after seven years of construction, costing $1.5 billion. The previous bridge’s height was insufficient for larger ships entering the Inner Harbor.
This new bridge, the highest cable-stayed bridge in the U.S., stands at approximately 515 feet above mean sea level, supported by two towering structures with 40 cables each. The entire span extends around 8,800 feet, with the cable-stayed area measuring 2,000 feet.
Construction utilized 18 million pounds of structural steel, 75 million pounds of rebar, and 300,000 cubic yards of concrete. Besides this monumental bridge, extensions of berths and deepening of channels have been undertaken to accommodate excessively large vessels like The CMA CGM Benjamin Franklin.
This mega vessel, with a capacity of 18,000 TEUs, towers over 20 stories tall, is as wide as a 12-lane freeway, and stretches longer than four football fields. It can carry enough cargo for 90 million pairs of shoes labeled ‘Made In China.’
Journey To The End Of San Pedro Bay
Driving west from Downtown Long Beach, crossing over the Gerald Desmond Bridge replacement, you are struck by the sight of a vast expanse—approximately five square miles—filled with stacked shipping containers. These arrive laden with imports, are unloaded for distribution via rail and trucks, and then returned largely empty to China.
As you continue westward, nearing Terminal Island’s midpoint, you transition from the Port of Long Beach to the Port of Los Angeles. Subsequently, you cross the Main Channel via the Vincent Thomas Bridge, another notable suspension bridge, entering the San Pedro district of Los Angeles.
To truly appreciate the chaos stemming from misguided central economic planning, ascend the east-facing side of the peninsula toward Angel’s Gate Park. Perched high on the bluffs at the southernmost tip of the Palos Verdes Peninsula, you will reach the end of San Pedro Bay.
At the heart of Angel’s Gate Park, south of the youth hostel, lies the Korean Bell of Friendship, a massive bronze bell situated atop a grand stone pavilion. The striking pyramidal roof structure, held up by twelve columns, is intricately decorated with Korean zodiac animals and vivid colors.
Directly below the bell’s location are the remnants of World War I bunkers from Fort MacArthur, named after Lieutenant General Arthur MacArthur—the father of World War II General Douglas MacArthur. Nearby, various remnants of large gun batteries can be found. This area also holds significance as part of The Great Los Angeles Air Raid of 1942, where the city faced an alleged threat from Japanese bombers.
Winds from the Pacific sweep in from three angles, rushing up the cliffs and creating swirling currents around the park’s summit. The expansive view showcases the colossal POLA / POLB shipping complex to the east, while Catalina Island rises majestically from the water to the south.
From Point Fermin Park, overlooking Cabrillo Beach, you can gaze directly east along the breakwater, spotting a jumble of stalled container ships scattered throughout the water. The vast ports complex dominates the landscape to the north and east.
In the background, the modest Long Beach skyline and its Convention Center are undergoing a rapid transformation—from a COVID-19 vaccination site to temporary housing for over 1,000 migrant children. On clear days, the ambitious Los Angeles skyline appears, framed by the San Gabriel Mountains in the distance.
How long can this trade imbalance, fueled by excessive money printing, persist?
Once the dollar collapses and trade diminishes, the sprawling ports complex could swiftly fall into neglect and decay—perhaps for an indefinite period.
The ancient Egyptians gifted us the Pyramids and the Great Sphinx of Giza. Pre-Columbian cultures erected their own monumental structures. Nearly 1,000 significant statues were left on Easter Island by its early inhabitants. The remnants of Rome, including the Coliseum and numerous aqueducts, still stand as tributes to their former glory.
It seems certain that the future will regard the ruins of POLA / POLB as a lasting testament to the folly of indiscriminate money printing and reckless central planning.
Sincerely,
MN Gordon
for Economic Prism
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