Image result for cartoon tariffs

For the first 200 years, America ran it’s whole country on Tariffs.

But today many argue that Tariffs are a bad thing. It’s not.

The first issue is fair and level playing field for capitalism. In other words, nations should compete, but if other nations have an unfair advantage – such as using slave labor and oppressive working conditions – then the similar American company can’t compete. A more common issue is the huge cost of our inefficient medical system and the massive rape level salaries ($800k a year for a cardiologist) that doctors demand. America also is a hugely inefficient nation, paying too much for warfare and welfare.

A first issue would be to have a general first tariff for everyone to cover security costs. It would be called a security fee and be just 5%.

Countries which do not allow us open market access for our goods would face a 10% tariff fee.

Those countries which have substandard ecological requirements would again face a 10% fee.

Those countries which do not have first world labor protections would again face a 10% fee.

Finally, intellectual property thief nations like China would face a very harsh 20% fee.

So lets add up china:

security: 5%

labor: 20%

open market: 10%

currency debasement and not participating in open currency exchange markets: 50%  – 5000% (depending on level of currency debasement)

ecology: 10%

Total: 45% Tariff

The reason why this is better than just picking a number is it sets clear goals for the nation. If they want to reduce tariffs what is required is clear and it is fair because it’s applied to every nation. Communist China or Socialist Belgium.

The argument that it just punishes Americans with high prices is not all that true for two reasons. First, American companies will often jump in to fill the gap at a lower price if that is possible. Second, the Velocity of Money increases when production is here. It is not only the work for the factory producer, but the supplier of it’s parts, the providers of its electricity, etc.  And those paychecks from the workers of jobs that no longer are offshored change from hand to hand increasing our total financial transactions and GDP. This is much stronger than if the profits simply go to the top 1% and end up in financial investment accounts. So the velocity of money argument is clearly a winner for production that will be taken up on-shore even if the cost is slightly increased.

Finally, Tariffs are not meant to be long term. Countries can do better and should be evaluated each year. Once they meet the minimum standards then their tariffs will be reduced.

There is another reason why Tariffs are critical and that is the balancing of dollar outflows. If dollars flow out due to offshoring, then they must be spent. So for example China has a sovereign wealth fund. They buy up the most profitable american companies, buildings and ports. Eventually Americans will own little of their own nation. By having tariffs we can raise them proportional to our dollar outflows, which will result in money NOT pooling offshore. So our nation will not be sold off.

Will it increase prices domestically? It depends. If our government were run efficiently rather than utter wanton rape, then the tariffs could be enough to balance the budge with reduced taxation. So while prices would go up, the taxes would be less so it balances out.

Fighting the Currency Debasement Wars:

The whole world is debasing their currency but some nations like Japan and China are doing so at a staggering rate such that event he horrific levels by the USA pale by comparison. From a relative debasement the USA is good but it’s all one horrific competitive spiral.

So the big “TRICK” that China used to gain so much wealth was to debase their currency by at least 50%. Now their products are cheaper. But they also block exportation of natural resources.

See normally, if a nation tried to do that with open markets we’d just be like “Oil it ten cents a gallon? We’ll take 100 billion barrels please.

We’d also like all your trees, stone, food, etc.

But China is a closed market. They only let us purchase their junk manufacturing items. The upper and upper middle classes get around the poverty of China via Tax Fraud schemes which abound. And then they need to park that capital offshore so they don’t obviously get in trouble. So to do they they buy up west coast housing. And very quickly Americans on the west coast cannot possibly fathom how anyone can afford these houses.

So Tariffs are one block against the currency debasement of China and other nations that have closed markets. Japan is similar they block American car imports even though many American cars and motorcycles have strong brand recognition in Japan. Europe does the same.

We could adopt the Big Mac rule. A Big Mac costs roughly four dollars in the USA, six dollars in switzerland, and ONE DOLLAR in China. So obviously China does not have currency parity correctly if they did the Big Mac would cost at least three bucks.

Tariffs slow down and dilute the hoped for effect of currency debasement in closed markets. That is an important role of Tariffs and without them we have been robbed blindly as nations plunge the values of their currencies. China, by not having free trading currency, directly is the worst at this. But the USA manipulates the price of GOLD so they too are guilty, but to a lesser extent. Gold has remained around 1200 an ounce while they have doubled the money supply through printing 1.5 trillion extra dollars a year. So after 12 years they double the money supply and we find that prices via inflation go up 50-75% each 12 year period. Yet, the price of gold remains at 1200 an ounce. What the heck? Well it appears that they have structured the market so they can short the price of gold futures to almost an infinite number of puts. Until they absolutely lose control, gold will stay where it is.

But at least their is relative price discovery via open markets for say the dollar vs. Euro. Right now a dollar is worth less than a euro. It used to be worth more. These bounce around freely in open exchange. So let’s add that to our Tariff Penalties, if they don’t participate in the international currency markets, then add 50% tariff. That seems like a bargain to the manipulators.

Conclusion:

Unfortunately America is being run into the ground through absolutely horrific spending on warfare and welfare. And Trump hasn’t helped this.  The best we can hope for is to fix the budgets and hope to inflate away our overspending as tax and tariff revenues increase.

Running the nation on Tariffs is something that worked and fully funded our nation BEFORE the welfare state. It’s something we need to look at again.