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A Costly Protection Tariff is Considered Better for a Nation than the Benefit of Cheaper Prices

This is the 'intelligence' both the US and the EU are using to drive both their enormous economies. 

"We know the tariff will be harmful in inflation. But we believe by protecting the home industry the net effect will be better for us" is how the experts, civil servants and bureaucrats are leading our leaders. And our leaders lack the wisdom to select out those who are lying to them.

Can you imagine a more nutty policy? Yet this is the systemic economic policy of the worlds biggest economies. 

The sad thing about the UK is that it had the opportunity to break free from both these psychotic institutions. When it voted to leave the protectionist state of the EU in 2016. Its sad because no sooner had it broken free from a systemically destructive system of tariffs, than it set up its own form of tariff with identical results. So we're still on the 'stupid pathway' as a nation.

In general, the knock on effect of the tariff is not inflation as most senior experts and influencers encourage us to believe. A tariff must always result in real and actual prices rises, which are fundamentally different. Inflation is the result of sovereign monetary policy. Price rises are the ultimate result of government stupidity interventions, blocking trade from taking place.

Deliberately blocking trade and inflationary monetary policy are both destructive. More so than doing neither. The best policy is NOT to do either in the first place. Both are harmful even if you believe another stupid political idea that 'sometimes you have to to bad to do good'. 

If you insist on the tariff, then it would be far more efficient to sink all ships containing goods your nations business and citizens want - due to being cheaper relative to what the home industry can make, as they approach port! And likewise for all ships leaving port with domestic goods that foreign nations dearly want and which would they were not at the bottom of the sea, pay for all imports.

Still stupid. But not quite as stupid.

This general policy is known as autarky. It has been practiced for several centuries most intensely by the United States of America, the Soviet Union, the European Union, pre WWII Germany and North Korea. 

Comments

  1. This is resurrected Mercantilism. It began with the theory of Shrinking Markets devised by Werner Sombart. It was promoted in Mein Kampf and implemented in 1934 as the Autarky policy.

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    1. True, but I would say pre WWII Germany was not the most significant case. The US and Soviet Union in the 60's were more autarkik still if you compare relative GDP. I think the number is below 10% of GDP in foreign goods exchanged is officially accepted as making a nation autarkik

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