I got into a little bit of a tussel (which I personally think was off-topic) in a thread over at Bill Quick’s site, in which we were celebrating the now-famous nose-bloodying blogo-reprimand from Cold Fury to the good folks of Vermont who are pretending to have Bush and Cheney arrested next time the executives pass through town.

I said it was off-topic…this post is supposed to provide a forum for dealing with it…which means, if I address the whole Vermont thing here, that is off-topic as well.

But indulge me for just a moment, because this is delicious.

Are you people really that damn pathetic? Really? You make total jackasses of yourselves, then whine and whimper and try to threaten the people who call you on it? Does my mockery ”harass” you clowns enough to ”cross the line” so you can prosecute me, too, officer you blustering sphincter with a badge? You gonna come down here and arrest me now, or wait until after you get the President?

Town officials say the petition that led to ballot measure complied with the law. Petition organizers say the measure was symbolic.

And your callers say the measure was idiotic. Typically silly left-wing fantasy. Childish and pathetic. Stupidly pointless. Y’know, progressive.

And, I would add…self-idolizing. Self-aggrandizing. Preening. Narcissistic. Delusional.

Nuts.

Okay, we’re done with that. Back to the subject at hand.

For many a year now, I’ve been going back and forth on whether the trade imbalance is a grave problem for the United States. For awhile I thought it was, and then I thought it was not, then long before the USD started tanking I came around to the third stage, which is where I think it is again a serious issue.

Oh, we got on to that because we were deliberating President Bush’s guilt in doing damage to the U.S. economy.

Personally, I agree with Becky the Girl in Short Shorts Talking About Whatever on this issue…the cause and effect between our government spending money like it’s going out of style, and the dollar falling against the Canuck funny-money.

Under Bush, the country’s trade deficit has been growing each year and the national debt has hit $9 trillion. Ten billion dollars a month is being wasted on the Iraq war. And it is largely borrowed money which is being burnt.

The president has done nothing to stop the bleeding of the dollar except parroting his mantra that we have a “strong dollar” and vetoing a bill for children’s health care. It is nice that he is coming around on spending, but this useless gesture is not going to undue the trillions run up in the last six years by the big pig, also known as Congress.

Yes, she’s reciting a bunch of whackadoodle bollywonkers sound bites trying to scare up votes for that lunatic Ron Paul. In a lot of ways, the girl simply isn’t mature. But give credit where it is due, she’s straight on-point here. Anybody know how these various acts of Congress are actually being paid off? Not just how they’re financed…now just how we print up the money to cover them…but how they ultimately are absorbed into the ownership of the United States public and private sectors.

There is no machinery in existence that chugs away to make sure we live within our means. There’s a national debt ceiling, but that’s nothing. It’s raised whenever it has to be.

And although the modern-day socialists are just trying to prop up self-destruction as a virtue when they complain about the “lack of individual sacrifice,” they do have a point. If there’s a war to be fought, domestic spending should be cut to the bone.

President Bush has simply failed to show leadership in this area, not accidentally, but deliberately over a fundamental disagreement he has with me about political philosophy. I think he treats “political capital” like real money. You spend what you have, and not a dime more than that. Cutting domestic programs is an expenditure of political capital. So is fighting a war. You calculate when you can do two things like this at once, and when you can do only one. That’s what he did.

And I must say, it has worked out well for him — specifically, as well as overall. It probably would have worked out for his father too, if he wasn’t steamrolled by a rock star political juggernaut from the next generation future-ward like Bill Clinton.

But that’s my beef with the Bush dynasty’s “political capital” viewpoint. It prioritizes political self-preservation ahead of strong leadership that does what’s best for the country over the long term. And the reality is, we simply have been spending too much money…we’ve been spending it, because of a leadership vacuum on the fiscal conservation front.

I referred to the trade deficit discussion as a threadjack within a threadjack, because while the President has ample opportunity to share blame with many others on the public debt problem, he certainly is tangential as a figure of culpability in the trade deficit issue. What’s a President to do? Shake a finger at domestic businesses and individuals and say “you guys quit buying so much overseas stuff”? Shake another figure at foreign concerns at say “you guys should buy more of our stuff?” Bush’s father tried that last one a few times. Not only did it fail to work, but such episodes diminished his authority on, I believe, a massive scale. He simply never looked sillier. It was on one such trip that he famously ralphed in the lap of the Prime Minister of Japan.

I thought that was aptly metaphorical.

Presidents do not tell people what to buy and what not to buy. They don’t even ask. If they undertake to do either, they set out on a trail that surely ends in severe self-embarrassment…and a big stinky mess.

Anyway, my renewed dread over the trade deficit figures met with a stiff challenge over at Daily Pundit, home of The Guy Who Invented The Term “Blogosphere”. One of the commenters pointed me over to this article, which rests its argument on this item of research by Messrs. Hausmann and Sturzenegger of the Kennedy School of Government: U.S. and Global Imbalances: Can Dark Matter Prevent a Big Bang?

The authors use the term “dark matter” to describe the logic they have used in determining that something’s amiss with the official trade imbalance statistics.

There is a large difference between our view of the US as a net creditor with assets of about 600 billion US dollars and BEA’s view of the US as a net debtor with total net debt of 2.5 trillion. We call the difference between these two equally arbitrary estimates dark matter, because it corresponds to assets that we know exist, since they generate revenue but cannot be seen (or, better said, cannot be properly measured). The name is taken from a term used in physics to account for the fact that the world is more stable than you would think if it were held together only by the gravity emanating from visible matter. In our measure the US owns about 3.1 trillion of unaccounted net foreign assets. This is big. Before analyzing where this comes from, we may point out that no methodological minutiae will reconcile the facts with the statistics. We can discuss the numbers but we cannot contest the existence of dark matter.

The authors draw on three distinctly identifiable sources of dark matter. All three have to do with what might be called “exports” from the United States that they say should provide an adjustment to the trade imbalance figures, but in fact do not.

The first has to do with good ol’ American know-how. They use an example of an amusement park built overseas. Our private enterprises have sunk an investment amount into this asset, and have borrowed that investment capital from foreign banks. The return from the investment is four times the amount of the interest paid on the foreign debt, because there is a significant quality of real-life-honed knowledge and experience involved in operations, which is not factored into the trade balance equation. I’m receptive to the idea that knowledge is an asset and the accounting world is historically known for a failure in taking this into account. But I’m not receptive to the idea that this calls for an adjustment to the numbers…certainly not in the manner suggested by the study. They’re saying, if I understand it right, that since the net rate of return is 300% higher than the interest being charged on the debts accumulated to install the asset, the the real value of the investment asset overseas should be trebled. Perhaps this logic could be pursued by a prospective buyer, under circumstances most blissfully favorable to the seller. But it doesn’t impress me as a sound accounting principle. It looks to me more like a sloppy conflation between income and interest. They’re presuming our domestic businessmen have been more savvy than the foreign bankers, and worked out a better deal, and this is where the logic breaks down. Interest on business loans is supposed to be dwarfed by the profits made on the use of those loan proceeds. If that were not the case, the capitalist model, at least in that one instance, would break down.

The second has to do with seignorage:

The difference between the cost of the bullion plus minting expenses and the value as money of the pieces coined, constituting a source of government revenue.

Okay, good point. But all I can realistically allow for, here, is the conclusion that more study is needed. This isn’t something that would count for anything unless some actual minting takes place. Who’s doing more actual minting, us or them? And how much minting takes place, with all of this investment activity? If it’s electronic, isn’t this off-topic? I dunno. Under this same second point, the authors make the case for counting liquidity services against the documented trade deficits in the United States. Well yeah, but I’ve seen trade deficit figures where those services are factored in…and we consume those services as well as providing them, do we not? And have not our trade-deficit chicken-littles been warning us for years, now, that the Asian markets will someday stop buying American treasury bills, with devastating consequences someday? Seems to me, lately, this is exactly what has been taking place.

Japan, China and Taiwan sold U.S. Treasuries at the fastest pace in at least five years in August as losses linked to U.S. subprime mortgages sparked a slump in the dollar.

Japan cut its holdings by 4 percent to $586 billion, the most since a new benchmark for the data was created in March 2000, U.S. Treasury Department figures published Tuesday showed. Chinese ownership of U.S. government bonds fell by 2.2 percent to $400 billion, the fastest pace since April 2002. Taiwan’s slid 8.9 percent to $52 billion, the most since October 2000.

The third factor has to do with financial solvency services provided by the United States to countries abroad, which, the authors say, also is not taken into account with the official trade balance statistics. Fine, I’ll take their word for it. But there’s overlap, in the form of U.S. treasury bills, between this third factor and the second. The above-mentioned drop-off with the exchange of the life-saving treasury bills, thus deals a double-whammy to the dark matter theory.

And this is the point, I would add, that had me worried about the trade deficit in the first place. When we say it’s all okay, or we acknowledge maybe it’s a problem but it’s a problem that won’t hurt too bad in the long run — what we’re doing is putting control over the United States financial solvency in the hands of others. Hey, we’re saved for today, they’re coming from Singapore to buy our T-bills. But that’s today. There’s tomorrow to think about, and then the day after that.

So I’m inclined to buy the argument. Dark matter does exist. But if our fortunes are attached to it, we’d better make it un-dark, toot-sweet, and learn what we can about it. And once we do that, my money says we’re not going to be too thrilled about what we discover.

The BSIHORL (Best Sentence I’ve Heard or Read Lately) award is given posthumously to Richard Feynman, about whom we learn via Little Green Footballs:

I believe that a scientist looking at nonscientific problems is just as dumb as the next guy.