Libertarian economist Walter Williams jumped for joy when a Federal Reserve Bank study found that imports from China amount to “only” 2.5% of US GDP. Finally! Some solid evidence that our libertarian open-borders policy wasn’t destroying America!

But should libertarians and other globalists really be breaking out the champagne? I don’t think so. While 2.5% of GDP sounds pretty small, remember that our GDP is rather gigantic at $15 trillion. So, the Chinese bite amounts to $375 billion.

What does that translate into jobs-wise? Hard to say, but let’s calculate a rough estimate. In 2010, Walmart’s US sales were $258 billion. So, we can say that China has bitten off about 1.5 Walmarts. And since Walmart has 1.4 million employees in the USA, we arrive at a rough estimate of 2.1 million jobs lost to Chinese imports.

That’s not small potatoes.

Do we have 2.1 million jobs to burn? Not hardly. Would President Obama like to have those 2.1 million jobs in his pocket as he seeks re-election? He sure would.

And of course, when I rant about China, I am only using it as an example of our larger policy of free-trade with low-wage nations. So, countries like Mexico and India would have to be added in. Not only that, but the Fed’s calculation doesn’t consider collateral damage.

What happens to local businesses when you pick up the 250,000-strong US shoe industry and move it China? Do we only lose 250,000 jobs? Of course not. Just imagine all the restaurants, dog-groomers, and accountants who no longer have those 250,000 shoemakers as customers. The Fed report did not consider that, but the truth is that imports of sweatshop goods and services have cost the USA several million jobs.

Is it a coincidence that strong US economic growth is a thing of the past, and rapid Chinese growth is now the standard?.

Is it a coincidence that “jobless recoveries” began shortly after the gates were thrown open to cheap imports?

Is it a coincidence that the number of Americans on food stamps has nearly tripled since China was admitted to the World Trade Organization?

I don’t think so.

People like to blame Alan Greenspan for keeping interest rates too low, blowing up the housing bubble, and destroying the financial system. But I hold that Greenspan kept his foot on the gas peddle too long because he was unknowingly trying to fight the massive tide of offshoring. The real root cause is the libertarian, free-trade dystopia that was constructed at the end of the last century.

When you look at a product stamped with “Made in China” on a Walmart shelf, you are really looking at the tombstone of an entire American industry. See this story for how China targets small American manufacturing companies. Ironically, if an American company fights back against the mafia-style tactics of the Chinese, they are attacked by American retailers too. You see, retailers want those cheap Chinese products on their shelves, and actively try to destroy American producers.

Of course, American exporters are selling to China. Back in the day, the globalists used to argue that those new exports would create enough new jobs to offset the jobs lost. But that has been completely debunked. Not even Larry Kudlow will make that argument now!

History will prove my view correct. Wait and see. The USA topped-out when we brought China into the WTO. Short of trade-reform, it’s all downhill from here.

Note: China was admitted to the WTO in December of 2001. However, nations like Mexico and India were admitted earlier. See the list here.

Note: The Fed study linked above was conducted in response to the charge that the Fed’s QE2 policy would create inflation in the USA. The Chinese peg the yuan to the dollar, so they had to print huge amounts of currency to maintain the peg. That caused inflation in China, and the prospect of it propagating to the USA via higher-priced imports. I’m not saying that the Fed’s study is flawed. However, it is important to consider the context. The study would likely have not been done if the Fed didn’t feel the need to justify QE2. So, they did have an axe to grind.

Note: I was a supporter of QE2, and took much delight in the squealing of the Chinese, and their globalist fifth column here in the USA.

Update: The list of top investing websites now has a permanent home on this page. Please go there to see the latest Alexa rankings.

Here is an update to the list of top investing websites as compiled by my Rank-O-Matic app. I have added 19 new sites – denoted with an asterisk after their name. I found a few more, but their Alexa ranks were so low that I decided not to add them. I like having Larry Kudlow as the anchor (ha, ha) of this list. He’s great at SHOUTING ON CNBC!!!, but apparently couldn’t write his way out of a paper bag. Take that Kudlow!

Note: SPYderCrusher debuts with his new site, already above Kudlow.

Note: I outrank The “World Famous” Gartman Letter, of which I am not “subscribed of”.

Note: I have added Niall Ferguson because it pleases me to out-rank famous people. While he is an historian, he does specialize in economic and financial history, so one can make a case for his inclusion.

On the morning of October 5th, Challenger, Gray & Christmas released their monthly job-layoffs report with a headline screaming: “Layoffs Surge to Highest Total Since April 2009″.

Later that night, I was quoted in Investor’s Business Daily commenting on withholding-tax collections:

“the data show no evidence of serious job losses”

And I was vindicated on the following Friday, when the big “Employment Situation” report almost doubled analyst expectations showing 103,000 jobs added in September. Not to mention hefty upward adjustments for both July and August.

Maybe Challenger’s layoffs have yet to bite since they report layoff announcements rather than actual layoffs. But then again, maybe they won’t. See the explanation that Business Insider published here.

In any case, the hardest of hard data on jobs (federal withholding-tax collections) will continue to give my subscribers at The Daily Jobs Update the straight story. Which, as the jobs report showed last week, is that the economy is not in recession like everybody thinks.

After I wrote The Perry Panic, the Dow plunged another 500 points. The panic raged until the following Tuesday when Ben Bernanke told Congress:

“We would make sure we would stand ready to provide as much liquidity against collateral as needed as lender-of-last-resort for our banking system.”

The Dow immediately ceased plunging, and staged a dramatic 400-point intra-day reversal.

The market rallied because Bernanke turned away from the dark side. So, my initial analysis of blaming the plunge on Perry was proven correct. Perry’s campaign to bring back 1930s-style bank-runs has been defeated.

This is an excellent example of why we must have an independent Fed. Rick Perry has just shown us that if a politician could gain political advantage from zeroing out your bank account, he would do so. Pressuring the Fed to give up its role as “lender of last resort” during a financial panic seems impossible and insane. But that is just what we saw Rick Perry do.

The people of Texas should be grateful that the legal-tender laws force them to use US dollars. With a bomb-thrower like Rick Perry in charge of their banking system, there would be anarchy in Texas.

The horror! Another month of the private sector adding jobs (click chart to enlarge):

I have taken the liberty of adding back in the 45,000 jobs that were subtracted from the August total due to the Verizon strike. Those jobs are still there after all. But even without that adjustment, it would still have been 18 months in a row.

So why did the stock market dive 2.5%? Investors are worried that the economy is stalling and becoming vulnerable to recession. And indeed, if we look at the second derivative of the first chart, we see that jobs growth has stalled. And the annual growth rate has ticked down for the first time since the bottom:

However, if you look back at the top of the last cycle, you can see that the growth-rate peaked in early 2006. And the stock market didn’t top out until October 2007 – a year-and-a-half later. So, while the slowing of the growth-rate is concerning, it is not necessarily the kiss of death.

And there is a huge difference between now and the last peak: the Fed had taken rates up to 5% and held them there until the housing bubble popped – and the rest of the economy along with it. Back then, the Fed was deliberately squeezing the economy, and that is the very best sign of a coming recession. Look at this Fed Funds chart:

Is it a coincidence that recessions are triggered by rising rates? I don’t think so.

And is the Fed squeezing the economy now? Not hardly, right? Is it possible for a recession to begin with rates at 0%? I suppose so, but it’s not something that has happened in the last 60 years.

Now, if Bernanke started raising rates while complaining about a gold bubble, then the odds of a recession would skyrocket. The Fed also likes to have a recession when workers get too uppity. Got to fight that “wage inflation”, right? Not exactly a problem at the moment…

And of course, there is a presidential election coming. Unless the powers-that-be give Obama the thumbs down, you can bet that the entire federal apparatus will be in high gear trying to keep the economy afloat. Hell, some of those CIA black helicopters might even fly over here and drop some bales of cash on us when they are done in Libya.

A non-hysterical scenario would be a muddle-through economy over the next year, accompanied by a range-bound stock market. Time will tell, but as I’m sure you know, swing traders can make huge profits in such a market. I think that’s a more likely scenario for as long as the Fed remains friendly. If the Fed turns hostile, Jean-Claude Trichet style, then I can’t be responsible for what happens. Of course, the ECB has already backpedaled, so the world’s two most important central banks are now dovish. Maybe it’s too late, and Trichet has doomed the world to recession. What do you think?