Protectionist Rhetoric Will Accelerate the Dollar's Slide
Pat Buchanan's recent attempt to diagnose the sinking dollar demonstrates that ignorance of basic economics is not limited to the Left.
Buchanan points out the plummeting value of the dollar relative to other currencies and major commodities such as gold (up 24% this year) and oil (up over 50% in 12 months). He then declares that "the prime suspect in the death of the dollar is the massive trade deficits America has run up" to "maintain her standard of living and to sustain the American Imperium." This diagnosis offers a tantalizing glimpse of the truth, yet shatters it with protectionist bromides.
The primary reason for the growth of the $9 trillion federal debt is the so-called "War on Terror," including the spending on Homeland Security, Afghanistan, and Iraq. Unless you believe these funds averted an economic meltdown due to terrorism, these funds represent a near-total loss. Tanks, bombs, and bureaucratic paper pushers consume vast funds, yet they contribute nothing to the economy, aside from benefiting military contractors. This economic destruction is one of the biggest reasons for the declining dollar. FULL ARTICLE
Comments (47)
Buchanan has always been a "conservative" central planner with little understanding of economics. His populist rhetoric is simply a continuation of his confusion.
Published: November 20, 2007 6:39 AM
When will this country learn that increasing exports (They are at record levels right now.) are a sign of recession. Increasing imports are a sign of economic growth.
As the currency slides in value, US business see a pickup as foreign customers see a price break relative to their currencies. But as time goes on, business in general and manufacturing in particular can not afford to buy raw materials, equipment and technology outside the US. So these businesses raise prices or simply face ruin.
Published: November 20, 2007 8:05 AM
"Americans are not living 'beyond our means,' as Buchanan claims; we are simply a more profitable investment, with a more stable currency, than the foreign investors' own countries."
Excuse me, but if the US had a more stable currency, OPEC wouldn't be discussing abandoning it. As Dan Deming writes in this morning's Rude Awakening (free subscription):
"The dollar's decline poses a real problem. Sooner or later OPEC will have to switch to a basket of currencies that stabilizes the oil price in something other than a depreciating currency."
Couple that with the fact that the PBOC is the US's real central bank, and it's clear that our borrow-to-spend economy is at the mercy of forces beyond its control.
Which is to say, we are in the endgame of the dollar-induced fiat fraud and the welfare-warfare colossus whose existence depends on it.
Published: November 20, 2007 8:13 AM
David, I suspect that protectionist pressures will grow with the elction season, especially among Democrats (in sympathy for workers vulnerable to losing their jobs as the economy changes) - but there is a wide range of discontent on the fringe right (and Christian right) with the rapid pace of social change that accompanies economic change.
When the US Treasury sells bonds to individuals, it diverts savings from private investments; this diversion is a form of taxation.
A diversion of funds from productive to non-productive uses, yes; a form of deferred taxation, yes; but the sale of T-bills and bonds is otherwise not in itself a form of taxation.
Published: November 20, 2007 8:17 AM
But TokyoTom, wouldn't you agree that protectionism would reduce global fossil fuel usage?
Published: November 20, 2007 8:34 AM
David (White), OPEC is still using the US Dollar as the oil trade currency. All the noises about switching is only indicative that the paramount superiority of the US Dollar over all other currencies is now not as absolute as it used to be.
"Central bank" means the ability to create legal tender by fiat. The last time I checked, China does not have that ability regarding the US Dollar; only the US Federal Reserve (Inc.) can. North Korea and Iran are rumored to print US dollar from time to time, but the amount is quite small/irrelvant compared to the amount created by the FED out of thin air every day.
"Trade deficit" is simply a the result of incomplete counting by bureacrats: the "surplus" and "deficit" of all countries of the world put together is a pretty big "deficit" number. Guess earthlings must be importing a lot of goods from Mars :-) More importantly, "trade deficit" is the result of systematicly not counting an important commodity: currency. If gold were still money, would we consider a gold exporter running a "trade deficit"? The US is simply an exporter of the commodity called the US Dollar. Like any gold rush story of the 19th century, goods and people flood to gold rush towns in search of better return/opportunity. In our time, the gold rush towns are New York City and Washington D.C. "Trade deficit" was quite common for every gold rush town.
"Trade deficit" itself is not a problem at all, so long as new capital coming into town can continue to get better return than jurisdictions outside the town. When the gold mine is tapped out however (in our case, when the goose that lays the golden egg is finally killed by the greesy hands of the politicians), gold rush towns turn into ghost towns. That's why we need to maintain a system that continue to reward foreign investments instead of punishing them by capital control.
Published: November 20, 2007 10:49 AM
"A trade surplus on the other hand, means that in sum, US goods are being sent abroad in exchange for foreign currency. "
&
"...when the domestic economy is stifled by regulations and monetary manipulations, investors will send their savings abroad and the country will run a trade surplus."
I'm confused, am I missing something? The first paragraph implies greater exports, the secong greater imports, yet they both refer to a trade surplus.
Published: November 20, 2007 11:26 AM
Jim,
It's simple: If -- excuse me, WHEN -- China decides that vendor-financing its US exports is a losing proposition, it will take its toys and go elsewhere, in which case the PBOC will stop buying US bonds.
Result? The US bond market will implode and interest rates will soar, collapsing the economy even as prices for food, energy, etc., skyrocket.
In other words, a hyperinflationary depression, compliments of the Fed's decades-long destruction of the people's money.
Published: November 20, 2007 11:40 AM
May 9, 2006
Currency Ruin Or Compensating Tariffs
By Kent Welton
Currency Ruin Or Compensating Tariffs?
- A Lack Of Compensating Tariffs Ruins Our Dollar And Economy -
“An unspoken, yet widely accepted reality is that the United States will have to massively debase its currency to deal with the fiscal mess it has created. A weaker dollar means more competitive U.S. exports and more expensive foreign imports, both of which are meant to counter the growing trade deficit. It also means big losses over time for any foreign financial institution with significant dollar reserves. The elephant in the room is whether or not the greenback's managed decline will turn into a downside blowout. The soaring gold price suggests that the world's dollar-holders are becoming a little nervous…The endgame for the Fed comes down to a Hobson's choice: destroy the economy or destroy the currency. Is there any doubt which option Ben Bernanke would chose?”
The Daily Reckoning
The idiocy of free trade as we know it is becoming clear today as our trade deficits mount, our ability to manufacture falls, and the administration is busy trying to deliberately destroy the value of the dollar – all in order to make up for counterproductive, ruinous, undemocratic, and costly “free trade” policies.
The result of currency value decline is that we lose any previous gains from free trade and, worse, purposely reduce the value of our money and assets. This self-defeating process is in lieu of simple, compensating and incentivizing, tariffs giving every country the freedom to control their level of globalization and interdependency… via their own democratic processes.
What we are now getting from this no-tariff, costly, and far-less-than-free trade policy today are price increases which give rise to inflation – meaning the “Fed” will raises interest rates throughout the economy. This then hits the consumer and families hard and so reduces the very consumption the economy is so dependent upon. Worse, it leads to a flight to unproductive gold and precious metals investments as people attempt to protect themselves from the stupidity of “their” own politicians trade policies and competitive currency devaluations.
So all these predictable reactions to our currency destruction policies reduce any previous benefits gained by so-called free trade. What we end up with is a weaker dollar, a weaker economy, more dependency on imports, less domestic freedom, more assets transferred to foreign owners, less investment in domestic production, and less control over our destiny. Again, the flight to gold and hard assets (caused by forced trade policies and Bush deficits) drives the predictable investor defense against dumb trade polices and deliberate currency value destruction - all of which drains capital from the very industries that make the goods and services we might trade.
The idiocy is thus complete. The question is whether this “strategy” is deliberate or simply the result of true believer, blind-faith, religio-economics? Either way, the dismal result is the same.
Nevertheless, rather than admit their mistakes with our money and future, true believers must cling to the idea that this very calamity is somehow the much heralded “universal gain” of which capital’s amoral economists speak of as occurring via free trade “in the long run.” In fact, however, this forced, undemocratic, “harmonization” is ruining America and what we have is an illusion of a recovery supported by unprecedented levels of monetary creation and debt levels while the middle class is eviscerated.
In reality, as we now better understand, the no-tariff game (not appropriate for a still very disparate and undemocratic world) is very costly, particularly as this counterproductive “efficiency” loop gains steam. Trapped therein due to a lack of tariff freedom, we must get into competitive, repetitive, currency devaluations in order to keep “winning” in the forced free trade game. Meanwhile, the Chinese continue their currency peg to the dollar and have given up only token moves on the upside. Either way, Chinese producer currency up, or USA consumer currency down, we lose.
All this ruinous, dependency-generating, forced trade nonsense is in lieu of simple, rifle-shot, tariffs giving us the freedom and focused ability to offset imbalances in trade, and incentivize democratic and environmental reforms as a prerequisite to gaining entry to First World market. As they stand, however, GATT and NAFTA take away from the vast majority the very freedoms we need to create a sensible and flexible trade policy, and adjust imbalances with rifle-shot tariff changes rather than wholesale currency destruction.
Short of sane, smart, countervailing, tariff freedoms we are simply competing with other countries to make our own citizens poorer and, incredibly, coveting the greater slave’s “comparative advantage.”
Indeed, the costs of corporate-defined and driven “free trade” are already high, and will become even more enormous, if not disastrous and lead us to serious inflation/depression. In fact, they already have, “free trade” will continue to exceed the cost of rational tariff policies – particularly if you properly value quality-of-life issues typically left out of “economic” equations, and have no provision for Distance Tariffs as proposed by this writer.
We should remember that the US, Japan, and Germany did not become the world’s greatest economies via free trade and, further, the depression was not caused by “Smoot-Hawley.” Today, however, the middle classes of the G7 First World countries, with their once better wages and standards, are fast disappearing as a direct result of a ruling corporate elite’s “race to the bottom” trade policies, and their secret trade tribunals you never see on television.
In short, the GATT-NAFTA scheme passed by our Congress (without being read or understood) was the beginning of this ruling-elite, counterproductive, trade scheme… one for which we are now paying in spades.
In any case, the real problem is that, in a still very disparate and undemocratic world, a truly costless free trade is possible only between countries of relatively equal wages, standards, and values – where labor arbitrage is not used to terrorize First World workers and transfer the wealth of generations to the greater slave, undemocratic, regime.
As for progress, all China and India need do is change the incentives in their own economies and societies and they will prosper without decimating the very First World wage levels and standards they seek to acquire. Instead, ruling corporate elites have set up the perfect zero-sum game… and we’re guaranteed to be the “harmonized” losers by the very nature of the rules.
Again, tariff-less trade is neither appropriate nor free for trade between disparate nations – unless rewarding the greater slave, and ending First World wage levels and standards is the objective. Disparate nations and cultures need disparate policies and freedoms democratically tuned to their own economies, stages of development, environments, and the freedom to come and go from a global economy as they see fit.
This is true trade freedom and real free market economy because it is determined by wage-earning majorities in each nation. This is exactly what the growing backlash to globalization is telling us.
Exactly such local democratic powers and rational tariff freedoms, fit for a disparate world, were crushed by a corrupt and fascist GATT-NAFTA. As a result, all we have left is to devalue our currency rather than employing rifle-shot tariffs to adjust trade imbalances, and more effectively gain human rights, and environmental concessions out of developing, and undemocratic, economies.
In sum, instead of rational, smart, and truly free trade, determined democratically by the vast majority, we now have forced trade imposed by stateless corporations. These so-called Free trade treaties, as written and implemented by capital alone, are turning into the worst possible investment – a sorry strategy indeed and one giving a totalitarian “capitalist” nation control over our currency and First World economies. Surely, the veterans of WWII and Korea must be turning over in their graves.
Kent Welton,
TheCenterForBalance.org
Authors Website: TheCenterForBalance.org
Authors Bio: Author, Exec. Dir. The Center For Balance. Websites: PanditPress.com, OligarchyUSA.com, PublicCentralBank.com, EditorFreedom.com, FascismUSA.COM & more
Published: November 20, 2007 11:52 AM
When I hear capital being anthropomorphised my eyes tend to glaze over...
'"A trade surplus on the other hand, means that in sum, US goods are being sent abroad in exchange for foreign currency. "
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"...when the domestic economy is stifled by regulations and monetary manipulations, investors will send their savings abroad and the country will run a trade surplus."
I'm confused, am I missing something? The first paragraph implies greater exports, the secong greater imports, yet they both refer to a trade surplus.'
If by 'abroad' it means anywhere but the US, wouldn't that mean more exports?
Published: November 20, 2007 12:02 PM
David (White),
China does not have a unique position in the global trade system, or the external trade of the US in general. Japan has a stash of US Dollar almost as big as that of China, so does Taiwan, so do the oil sheikdoms. In order for any and all of these countries to send us what we need here in the US, we need to make the Dollar a strong currency, so they will keep investing their money in dollar-denominated assets.
If you really want to talk about who's being the banker, let's look it this way: think of a hypothetical town living in a closed economy called "Global Village" (hahaha), if you look at the town banker's house hold books, you'd see huge "trade deficit" because he neither ploughs nor sews. He and his family get what they want by issueing banknotes (in other words, IOU's), and the rest of the town deposit these same banknotes back at the bank! Sound familiar? That's exactly what the US FED is doing. It is the central bank of the world. The gig becomes threatened with the kids at the banker's household become too profligous, and the town start to catch on that there are too many banknotes circulating in town. When the townsfolks decide to store their values in, say gold, instead of with the savings account of the bank, then the gig is up. Now, how silly would it be for the bank to suddenly start charging deposit fees, withdrawal fees and daily withdraw limits?? It would only exacerbate the run on the bank.
Published: November 20, 2007 12:15 PM
If a foreign government is able to enslave its population as slave labor force, what are the chances that the tarriff schedule of that country would be democraticly determined?
The points that you are raising have all been covered by the British Corn Law debates back in the 18th century. You think manufacturing self-sufficiency is important to a country? How about food? Free trade brings its own reward. A country engaged in free trade will always pull ahead of another that insitutes protectionism, all else being roughly equal. Just look at North Korea . . . how little a national policy of "self-sufficiency" has done for them . . . or closer to our shores, Cuba. Free trade is what promotes efficiency and prosperity. Tarriff is no different from other forms of taxation: it's fundamentally looting at gun point. Whether looting is done by a dictator or by a mob, it's still looting . . . and looting is not a sustainable economic modus operandi.
Published: November 20, 2007 12:25 PM
Anthony,
The two statements are not contradictory. Current account surplus is usually offset by capital export . . . and vice versa for the country running current account deficit. No country is so dumb as to stuff paper dollars in their collective matresses (in which case they'd lose even more). They have to put dollars into something that's interest-bearing, and in the process of doing that they repatriate the dollar back into the US as capital investment.
Think of the closed town economy mentioned earlier: the banker issues banknotes, which buy goods from other townspeople, who in turn put the money back in the bank's savings account. The banker makes out like a bandit even though he is not making any tangible goods. He is living off the townspeople's faith and trust in his ability to manage the currency and take care of their savings. His mismanagement of the currency (like printing too much) or the banking service itself (like imposing ridiculous fees/tarriffs that makes transaction tedious) would be his own undoing.
Published: November 20, 2007 12:36 PM
I was trying to point out why they're not contradictory, but seems I didn't manage too well. :p Thanks for the explanation.
Published: November 20, 2007 12:54 PM
TokyoTom:
"A diversion of funds from productive to non-productive uses, yes; a form of deferred taxation, yes; but the sale of T-bills and bonds is otherwise not in itself a form of taxation."
This is what I was taught in economics, but it doesn't make sense to me. Selling bonds to Americans to pay for more tanks requires diverting investments that would have been spent for more or better iPods. This lowers by standard of living, does it not? Taking some of my income to pay for government expenditures is what I call a tax.
For example, during World War II, Americans spent a significant percentage of their income on war bonds. This dried up the consumer investment market. After the war, the government kept taxes high to pay off the war bonds, but in aggregate, it was just transferring wealth from tax payers to bond owners. However, if all Americans bought war bonds equally, then only the initial spending of the war bonds could be considered taxation.
Published: November 20, 2007 12:58 PM
"...when the domestic economy is stifled by regulations and monetary manipulations, investors will send their savings abroad and the country will run a trade surplus."
Perhaps I wasn't clear. When *foreign* investors send their money abroad (to the U.S.) then we experience a trade deficit. The *foreign* country is the one which will run a surplus.
I have changed the article to say:
"Conversely, when the domestic economy is stifled by regulations and monetary manipulations, investors will send their savings abroad and their country will run a trade surplus."
Published: November 20, 2007 1:04 PM
"Eventually, it will be forced to either cut spending, explicitly shift costs to US citizens by increasing taxes directly, or (most likely) increase taxes through higher inflation."
Based on what Heli-Ben believes about the role of money, he will obviously chose inflation. However, this is very dangerous. The US$ is a reserve currency, which means that as Heli-Ben inflates the US$, he simultaneously inflates the central bank reserves of many countries in the world, creating inflation in those countries. The situation looks very much like the gold-reserve system set up after WWI, the collapse of which brought on the Great Depression.
We're in for a wild ride while Heli-Ben learns a lesson in Austrian monetary theory.
Published: November 20, 2007 1:51 PM
As horrendous as our involvement in Iraq and the "war on terror" is, I am surprised that no one seems concerned about the financing of our entitlement programs--social security and medicare. Aren't these items at least as financially destructive as our war on terror, if not more so?
Published: November 20, 2007 2:10 PM
It doesn't matter what currency oil is priced in. Iran and Venezuela, both with inflation over 15%, think changing what currency it is sold in will make a difference. Taking advice from those clowns is not advised.
What matters is supply/demand for dollars. OPEC countries pegged to the dollar are talking about abandoning it, that is serious. But just as serious as an oil importer like Japan deciding to abandon the dollar.
However, one part of the problem I do not usually see discussed is money demand. The Fed cannot control money demand, only money supply. The ECB has been running the printing presses much faster than the Fed, yet no one is running around screaming that the ECB is devaluing the Euro. Don't even get me started on China, which runs the presses at over 20% a year. Now, if you want to argue that the ECB is meeting foreign demand for Euros that's fine, but that's what the Fed was doing before. So who's fault is the drop in money demand? The article blames protectionism, and surely that will cut demand, but what else specifically? If all you have to offer me is Iraq and a dislike of Bush, then I will open major long positions in the dollar and short gold and oil in anticipation of January 2009.
Published: November 20, 2007 2:49 PM
The growing debt in America is not understated. Do you think that the "War on Terror" has affected the dollar or could it be the credit crunch?
Published: November 20, 2007 3:45 PM
8, Very very good points that you have made. Agree with you on everything except for the speculative bet that you mentioned at the end of the post, presumably in jest. IMHO, none of the alternatives (to Bush) for January 2009 promise a bright future for the Federal Reserve Notes:
Guiliani is committed to continuing the "wars," foreign and domestic, on taxpayers;
Clinton, with most probably a Democratic Congress, would have a free reign to your purse;
The only one who has a real small-government agenda (i.e. not someone who pays lip service but envisioning programs that inevitably bring us even bigger government, like Bush did) is Ron Paul, and he is not promising a great future for Federal Reserve Dollars. I don't think there is anyway de jure way to open a long position on the US Dollar right now that does not guarantee the account clearing house to pay you back in the most worthless form of legal tender, the Federal Reserve Notes and their electronic representations; Gresham's Law.
Published: November 20, 2007 3:48 PM
Bush invaded the last major oil producer who suggested switching to payments in euros. Who gets invaded next? Chavez or Iran?
Published: November 20, 2007 8:23 PM
ken welton writes:
"what we are now getting from this no-tariff, costly, and far-less-than-free trade policy today are price increases which give rise to inflation – meaning the “Fed” will raises interest rates throughout the economy. This then hits the consumer and families hard and so reduces the very consumption the economy is so dependent upon."
this screed is so wrong on so many levels, that it would take all day to systematically refute all points. however, the above snippet at least shows that welton believes that price increases lead to inflation. i would have thought that even the most casual and uninformed visitor to mises.org would have grasped the central argument of the austrian school, viz. that inflation is a monetary phenomenon, and in our day entirely attributable to the central bank. the consumer as the linchpin of the economy shows that welton has a keynesian outlook. the austrian school stresses the primacy of production, with consumption as consequence. a little bit more effort on homework before next post, please!
Published: November 20, 2007 9:03 PM
Here's another perspective on the global economy from the author of the most popular textbooks on economics, Paul Samuelson: http://www.iht.com/articles/2007/11/19/opinion/edsamuel.php
I think Samuelson clarifies how the Fed sees itself near the end: they think they're a bunch of doctors watching over a sick patient. Unfortunately for all of us, they're also the bacteria making the patient sick.
Published: November 20, 2007 9:45 PM
re: Samuelson
Why am I not surprised that the quants professor is out lobbying for public bail-out for some of his students and colleagues who got themselves neck deep in collapsing "models."
Published: November 20, 2007 11:40 PM
What is President Bush's goal: to preserve freedom in America by threatening unstable nations (Iran or Venezuela) or is he trying to drive down oil prices by stabilizing these nations? I am not sure myself. Sometimes I am not quite sure what his goal is.
Published: November 21, 2007 12:25 AM
Bush's goal? Make oil expensive enough so that his oil drilling buddies can make a good profit and cause huge inflation so that his business buddies can give their employees a lower real income. I have a populist streak in me, which is why I want to stop inflation, which allows businesses to take advantage of the middle class. I do admit it is the workers' fault that they don't realize the threat of inflation to their real income.
Published: November 21, 2007 8:08 AM
Jim,
I support Ron Paul for that reason. I did make the comment about going long partially in jest, but I do wonder how much dollar antipathy is politically motivated. There is a confluence of rhetoric from the anti-fiat money crowd and anti-Americans with respect to the dollar, and I think some of the decline in the dollar is a result of a loss of confidence leading to a reduction in demand.
There is also the issue as to whether the EU will exist in 10 years. I can imagine the financial nightmare if OPEC countries and others abandon their dollar pegs at the lows only to witness the dollar rebound if the Euro fades.
Published: November 21, 2007 8:30 AM
IMHO, the Neocon foreign adventurism was motivated by bad economic theory . . . just like their earlier domestic adventurism when they were still "liberals" back in the 70's. If you go out to the street and ask the average person what caused the 70's stagflation, chances are that they will tell you it's because of the oil shock. If that's the understanding, what's the corollary course of action if you are the policy maker faced with the prospect of 70's re-run back in 2001? Control the oil exporters so they can give us another oil shock.
The fallacy of that theory of course is that the 70's oil shock was not really a political phenomenom but a monetary phenomenom. The supply-siders like Robert Mondell predicted the oil shock as soon as Nixon abrogated the US obligation on gold exchange for foreign central banks. The "ex-liberals"/"neocons" went on a quixotic crusade to force democracy in Iraq just like they used to force "Great Society" in the inner-cities in the late 60's and the decade of 70's. The result is simply enormous amount of wasted public money for the benefit of a few government rent-seeking high priests.
Published: November 21, 2007 8:56 AM
8, I agree that EU may not exist in another decade. I do think however the 3T a day currency market does not trade on emotions (aside from the usual fear and greed); politics need not apply, aside from politicies that have direct economic consequences.
Published: November 21, 2007 9:04 AM
Jim, but almost all of the currency traders think that money printing has nothing to do with inflation, and other bad ideas. Like most of the world.
I agree with 8 in that demand for dollars is much less, because of political or sentimental reasons. I feel that US has become a bad word to lots of people around the world (this from my south-american perspective).
As an aside, I REALLY wish that Ron Paul wins, in order to turn over all this madness. We surely need a beacon to show the way. Down here we are several years away from the possibility that these ideas gain favor.
Published: November 21, 2007 11:20 AM
Protectionism seems to be the one economic fallacy that will never die.
Published: November 21, 2007 12:19 PM
Protectionism won't die because to many, if not most people, it seems as though its a job protector. The Lou Dobbs' of the world have a much easier intellectual selling job than do free traders. "Imports provide incomes and jobs for foreign workers, while domestic production creates jobs and incomes for Americans." How much easier to get the masses nodding in agreement to that assertion than the one that says "free trade creates higher domestic living standards than foreign trade restrictions." The problem is that a large number of people will only think as far as the obvious direct effects are concerned. When the, often more important, indirect effects are discussed they can't or, in many cases, won't follow the argument.
The other problem is that many people choose to work backwards from a conclusion that they choose to believe (for whatever reason) to premises that they think will at least partly support their conclusion. Of course, many times the argument is faulty, but again they refuse to admit that fact because that would mean they would have to give up the conclusion that they have invested so much emotion in wanting to be true.
Published: November 21, 2007 1:08 PM
Very good points, Alex. People need to know that a job only exists if it is in demand by a free market place. A "protected job" is little more than a sinicure on a sharec-ropping plantation . . . sure, you can work on the plantation and use the tokens to exchange for items at the plantation store . . . but the tokens are not worth much outside the plantation because it's not currency outside. Of course, the owner of the plantation gets to decide how much of your labor it takes to exchange for a bar of soap. Sure, some may call the share-crop plantation a community . . . but in reality it's little better than slavery for the vast majority of its inhabitants. That's the reality of protectionism. That's the stark reality we need to point out to the Dobbsians. Whose money is it in our pockets? Our own money that we can use as we please, or "sinicure job distribution certificates" issued by the government??
Published: November 21, 2007 3:32 PM
ps. the term "share-cropping" was used in the common American expression in the last 100+ years, denoting de facto serfdom and indentured labor (as Protectionism by law would indeed be, involuntary) . . . not the syntatic meaning of "share-cropping" which could be a voluntary association between different individuals or enterprises.
Published: November 21, 2007 3:58 PM
The task of (1)explaining the benefits of free trade so that the majority of people can understand the explanation and then (2) getting people to accept the implications of the explanation may be (I hate to say it) impossible.
I know it's an old joke, but remember that 50% of the population have below average intelligence. And if you have ever tried teaching people of average intelligence, you will realize that that statistic is a very depressing fact.
The good news is that only the majority of voters need to be convinced. The average voter has above average intelligence. But even so, the explanations must be presented in as attractive a manner as the dramatic calls for protectionism so that the argument for free trade can be emotionally accepted. In other words, the argument must be packaged better and sold with the same kind of enthusiasm as protectionism. Where is the free trader counterpart to Lou Dobbs?!
Published: November 21, 2007 5:50 PM
Free Trade is much better than Protectionism since people do it to help themselves, and everyone is better off. There are no losers, but when the government gets involved, there is only one way for any change to happen, and that is down. No government can improve any outcome in trade.
Meanwhile, trading partners in business need to have the morality and scruples not to trade with some of the dangerous enemies around the world, because if they do, the government, through the will of the ignorant masses of people may force them to stop trade with countries who are no threat. Therefore, such acts will not be in the best interests of the country, since people in government have no way of knowing what is best for each free man on an individual basis.
However, if left unchecked, the government through its actions will disrupt trade and commerce in many detrimental ways to the people. Mainly because a lot of people in government are ignorant of economics, science, and history. Yet the worst ones are nothing but conniving crooks, and political panderers who will do absolutely anything to get your vote.
Nevertheless, none of that would matter to Americans if the federal and state governments would eliminate all income taxes and regulations, and return the dollar to a gold standard. This would entice business and manufacturing to stay in America, and foreign companies to locate here. The American people would have full employment and everyone would be happy.
Simple as that. It's really a very simple concept that liberty improves the lives of all people. It is a real tragedy that we have a government filled with people who do not understand that liberty is essential to achieving prosperity. Perhaps some have other sinister motives as well.
Published: November 23, 2007 1:39 AM
Alex:
What is your basis for the statement that the average voter has above-average intelligence? I know that it seems relatively obvious but am not at all sure I've ever seen anything empirical on which to base such assumption. I'm (emphatically) not disputing it--it'd be my guess, too--but I couldn't impute my belief to anything more than a hunch.
I'm also not sanguine in assessing the role played by intelligence in the determination of politically-influenced policies.
Published: November 23, 2007 7:13 AM
Robert M.:
Don't let your populist streak interfere with your thinking. It's not "business" that is benefited by inflation (as against "the working man") but, rather, particular businesses and business sectors (and which would, willy-nilly, involve benefit to the "working men" employed in those enterprises.).
It is true that there's a tendency for workers'
wages to lag somewhat the price increases brought about by inflation but that tendency is not definitive or absolute. Prices rise--but not uniformly or in any rigid relationship with the incomes/spending patterns of the workers.
The one thing that may be considered assured is that the interests of all those whose are savers and whose savings are in money or money-denominated assets will suffer to some degree and that, likewise, those with significant mortgages or other debt positions will experience a lightening of their burden. If we had to select industry likely to benefit from inflationary
policy--that is, to put ourselves in the position of a government trying to "aim" the benefit to be provided by inflation toward favored recipients--I think it'd be a hit-or-miss, "scattershot" proposition (except that, in general, the financial-services sector would likely be continually favored).
Also overlooked in the view of inflation as a conspiracy against identifiable groups is the inescapable fact that the government itself must eventually be affected in like wise and to very much the same extent (and without the inherent flexibility more characteristic of individuals and small entities. In sum, the entirety is more the operation of ignorance than malevolence.
Published: November 23, 2007 7:51 AM
Eduardo:
Don't get any hopes up over Dr. Paul. Regardless of his personal intergrity, there simply is not that much support for laissez-faire policies even on the so-called conservative side. In general, they're not for government being smaller--just for interfering with a different list of things. In this country, popular, broad-based (and, sadly, organized party) support is vital to the introduction and implementation of new policies. and Paul ain't got none.
We'll be doing well just to stave off the identity-card police state (papers, bitte?) and
all-'round, cradle-to-grave health care administered by "kinder, gentler" (for awhile) Nurse Cratchetts.
Published: November 23, 2007 8:10 AM
I think paleos like buchanan see trade deficits as the canary in the cave adn in general see the whole big decline as one thing that theywouldn't bother to sort out. example: take joe lieberman, please,. He is for the iraq war, for late term abortion, open borders, I think he wanted to censor Stern at one point. so to a conservative, basically this guys entire life is dedicated to hurting americans, wether by shipping their jobs off, sending them to war, or stripping them of their christian values. I don't agree, but it does look sort of sinister when you put it all together. Lieberman is as close as we have to communist.
Published: November 23, 2007 10:03 AM
to gene berman:
you mean nurse ratched? from one flew over a cuckoo's nest? maybe i'm watching the wrong movie.
Published: November 23, 2007 8:02 PM
Gene,
I see your point. It's a sad day indeed when poster on a libertarian forum would mistake Buchanan (the commentator not the ex-president) for a Paleo-Conservative. There is nothing small government about fighting the market forces behind the flow of goods and labor. It would take billions, if not hundreds of billions to fight the free will of individuals to make their money find the best goods/service, and for their labor to find the highest bidder. All that fruitless war on individual freedom would have to be paid for by more tax collection.
Jim
Published: November 23, 2007 8:15 PM
I was surprised when I saw the Wiki article on Buchanan. Paleocon? Seriously?
Published: November 23, 2007 9:24 PM
Gene: I have no evidence for my statement that the average voter has above average intelligence. It was purely a hunch and certainly could be wrong.
Published: November 24, 2007 9:22 AM
Newson:
Yeah,--you got it. Sorry for the misspelling--was relying on my memory from back when the movie came out (and my ear); neither quite perfect, it turns out.
Published: November 24, 2007 4:20 PM
A Men, Kent Welton. Well said.
Published: June 8, 2008 9:23 AM