by Jeff Berwick, The Dollar Vigilante:
For the last eight years we’ve seen the rise of the Social Justice Warriors (SJW’s), as they had lobbied their man, Obama, for the political power required to direct the force of government in the name of their own peculiarly relativist brand of “social justice.”
While they are still busy demonstrating the violent soul of what is inherent in all brands of statism by breaking storefront windows (masked), under the Trump epoch a new type of statist “warrior” has emerged… let’s call them the Economic Justice Warriors (EJW’s).
Like the SJW’s, the EJW’s ultimately also want to direct the “force” of government in the name of justice, albeit slightly different. And, much like the SJW’s, this new form of economic justice isn’t just at all. In fact, it is antithetical to the goals of the EJW’s.
One of the big rallying cries of the EJW’s has been to “build a wall” across an entire continent!
This is silly for a few reasons.
One is that there already is a wall across most of it… but all it takes to defeat a wall is a ladder or a shovel. Or a boat.
But, even that is silly because there have been more Mexicans leaving the US than migrating there for the last five years (“More Mexicans Leaving the US Than Entering” – New York Times). Most say they leave due to how unfree the Land of the Free is nowadays.
In fact, Americans may be building a wall that eventually will keep them in. The IRS has just announced that it will be notifying the State Department of anyone with overdue extortion (tax) payments. Anyone with overdue tax payments will not be given a passport to defect from the country.
Adding insult to injury on building this useless wall is Trump’s idea on how to “make Mexico pay for it”. His way of “making Mexico pay for it” is to charge American’s 20% more on anything imported from Mexico.
Mexico is one of the biggest importers into the US and two of its biggest imports are petroleum and food… so get ready for food and gas to rise 20% in price in order to build a wall that is already mostly there and is useless.
But, imposing tariffs on foreign imports and building walls isn’t just useless and increasing the cost of things for Americans. It actually threatens to destroy the entire American economy.
TDV’s Senior Analyst wrote this in our last issue to subscribers:
Like most Americans, [Trump] is unaware of the role that international trade has played in developing wealth, not only for American corporations, but also, American consumers and the many countries engaged in it.
Ed points out that Trump doesn’t make the proper distinction between trade and globalism.
Besides failing to grasp the mutually beneficial nature of trade, he doesn’t understand the complexities involved in the balance of payments theory, which has long been discredited as an old mercantilist doctrine. He uses it to attempt to define who the winners and losers are in trade. But, Ed points out, the accounts are always in balance; the other side of a “trade deficit” is a “capital surplus.”
When enough money is put into American goods and services – and when people who trade with Americans also store their money in the US – the US can develop a “capital surplus.” As Ed explains, a country can have a trade deficit because its capital markets are attractive. It is after all trading financial claims for goods and services.
A country may also have a trade deficit if it prints more currency than its trading partner, but this kind of cheating tends to self correct via exchange rates eventually.
On the contrary, the US has had a “trade deficit” for as long as the US dollar has floated freely, and probably longer. Sometimes this is the result of its inflationist policy, but mostly it is because the US has always offered a relatively more attractive – i.e., more diverse and more liquid – and more politically stable capital market environment to store wealth.
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