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Oil and China

July 13, 2011 – 5:05 pm

We had trade data out yesterday and the deficit spiked 15.1%, the
highest level in three years. Imports rose 2.6% and exports increased 1%.
On the surface this is not bad news as consumers are buying and
U.S. exports increased. The problem is that the imports are almost
all from the rise of the price of oil, since this report was for
May, and from increases from China.

Oil has come off its recent high but as this report shows we are
very dependent on oil from foreign sources. It is currently
popular to make big oil the enemy, to attack them because they
are an easy target. However, it does not seem to
slow the average person from buying gasoline that is required to
function in our economy and the economy around the world. We
could easily produce more oil inside our own country, in Alaska,
in the Gulf and in the continental U.S. Every drop we self produce improves our
trade deficit. We could also push the use of natural gas, both in
trucking fleets and home heating. Not only would it be cleaner
but we have plenty of it in the U.S.

The solution in China is all about freeing up their currency as
required by the world trade organization. This affects not only the U.S.
but the rest of the trading world as well. Increasing and continuing pressure needs to be brought to bear on the
Chinese. This is a delicate thing since we do not want to destroy
trade but increase it. However, both sides need to benefit and it has to be fair to trade. To their credit they have eased their tight control on their currency but not nearly enough. Also, to their credit they are trying to increase internal demand over exports but more needs to be done.

Both of these efforts, oil and trade will only increase job production
here in the U.S. and isn’t that the all-important effort?

Good Trading
Steve Peasley

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