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Free Trade, Free Market & Austrian Economics = PROSPERITY

Posted 8/6/2019

The simplest argument demonstrating the absurdity concerning tariff barriers was devised by Henry George, who observed during peacetime nations-imposed tariffs on themselves in order to keep out foreign goods, while in wartime nations-imposed naval blockades on other countries in order to prevent them from receiving foreign goods. If the protectionist arguments were correct, wouldn’t naval blockades make the enemy country prosper?

Canadian Union leaders in the mid-2000s finally admitted NAFTA benefited Canadians. When you increase your market, you increase your product sales, resulting in an increase within your labour force. Yet, many unions still espouse free trade is bad for Canadian jobs.

 

Trade barriers are detrimental between countries, but worse between our respective nation’s provinces or states. Our respective governments need to eliminate all barriers.

 

Import tariffs are taxes on consumers whom wish to purchase those imported products. It is not a tax on foreign corporations as most believe.

 

Tariffs don’t create employment they rearrange it. When one market expands, another must shrink. If you only have 10,000 workers, your workforce has not expanded but rearranged.

 

Protectionist assume foreign corporations are idiots. Idiots willing to work hard and deplete their scarce resources to make products for wealthy consumers from other nations, all in exchange for foreign currency.

 

What makes a nation’s citizens richer or poorer is how much they can produce with their own resources and labour, and how much they consume by either purchasing output from domestic producers or by trading surplus production with foreigners.

 

When your nation’s government interferes with free market outcome by imposing a new tariff, it hurts not only foreign countries but also your nation’s population.

 

A free market economy allows supply and demand to determine commodity and consumer prices. Voluntary action that determines what goods are produced and what goods are sold. Governmental control of an economy distorts the economy as they usually make decisions for political reasons rather than economic considerations.

 

Free market works for employment, to the goods we sell and purchase. It’s a direct correlation between price, supply and demand and voluntary exchange of cash for the goods. The pursuit of profit drives innovation, business formation and economic growth. Essentially a free market does not allow the government to spend other people’s money to drive the economy. Our corresponding governments over regulates the free market and under-regulates its own entities.

 

Outsourcing jobs has a good and evil side to it. Outsourcing produces cheaper goods, but production jobs are moved elsewhere.

 

Outsourcing is advantageous if goods are exchanged equally but trade deficits are devastating. It becomes a real problem when governments initiate tariffs, fees, and taxes, which are relegated onto the consumer, who has already seen a devalued dollar and increased inflation.

 

Outsourcing is really disadvantageous when your nation’s currency is sent overseas and borrowed back by the government. There is a failing, especially if you cannot repay the loan. Eventually, when your nation’s economy collapses, those foreign entities will return with our cash, and purchase our native land and our nation’s businesses.

 

Keynes Economic Theory advocates - contrary to the classical view, and to the intentions of the federal reserve - that it should use the money supply to stimulate when the economy slowed, thus turning contractions into expansions. This resulted in inflation throughout the world in order to keep up with the agreed currency ratios to US dollar. Kennedy advocated Keynes in the 60s, which now unfortunately has become the norm. Prior to Kennedy, for 300 plus years, the classical or Austrian view was accepted. Now under leftist government rule classical economics is ignored.

 

The opposite should be done, expand money supply during an economic expansion, but contract during times of contraction. Credit would be allocated more efficiently

 

Ludwig Von-mises (Austrian Economist) - recessions correct artificial bubbles.

 

There is no incentive to save when your dollar devalues with little or no interest rates. It entices you to spend it quickly rather than have it devalued. Those in retirement feel the burden more so. Savings that should last 20 years last only 5.

 

Fewer savings (governments and individuals) means fewer reserves for projects or emergencies. Eventually, businesses will cut back, lay employees off. If you believe this cannot happen, think of the market crash in 1929.

 

Recessions should be deflationary. Falling prices re-balance the system and help cushion the blow with high unemployment. During recessions government should, must spend less, not more. Stimulus spending does not work; ill-advised stimulus spending deceptively props up a weak economy and thus creates a larger fall. Stimulus spending forces the feds to print more money which devalues the dollar further, increasing inflation. This regrettably is the exact opposite to what we need. It does not create employment, and it hurts those unfortunate souls who are unemployed the most for consumer good’s prices remain high.

 

Deflation: efficiency used to drive prices down. Now government driven inflation forces prices to rise.

 

Consumer items price increases are not driven up by high employment (thanks in part to government jobs) combined with higher demand. Governments, with no need for personal incentives to take risks and make a profit, have become a model of inefficiency. Higher prices are due to government spending, inducing inflation combined with a devalued dollar. Thus, stimulus packages do not strengthen a weakened economy.

 

Government-backed loans offer a safe falsehood. Defaults by people (with no savings) whom took out loans from lenders (with no savings) backed by a government (funded by tax payers realizing decreased value of their wages) which also has no savings is a slippery slope.

           

In order to lend, someone has to save. High interest rates and scarce credit is detrimental to debt laden economy.

 

The longer you eat for free, the harder it is to feed yourself when free food stops coming. - Peter Schiff

 

How do Canadians pay off our $3.23 trillion debt (Public - $1.2 trillion[1] and personal $2.029 trillion[2]) with a total M3 money supply of $2,290 billion[3] of which only $70 billion (2014)[4] is legal tender in circulation?

 

What would happen to the Canadian economy if all Canadians simultaneously stopped borrowing and instead saved?

 

Canada is part of a world debt-based monetary system controlled and managed by bankers rather than sovereign governments.[5]

 

Canada can run a net trade deficit if foreigners are willing to invest in its financial assets (such as buying stocks or bonds from corporations in the country running the trade deficit). But even here, what is really happening is that Canada with running the trade deficit is effectively borrowing against its future production.

 

An economy can’t grow because people spend. People spend because an economy grows. Handing out money certainly encourages people to spend. But it does nothing to increase supply, which is the true engine of growth. - Peter Schiff

 

Consumer spending, not governments should drive interest rates. When consumers stop spending, interest rates naturally lower. Entrepreneurs will borrow, with the intention of long-term gains. Eventually, spending will increase as currency supply shrinks, there by drawing interest rates higher.[6]

 

Governments require more patience to allow sustainable economic growth before implementing socialistic policies. Everyone’s income can grow larger over the years when everyone is more physically productive because of the growing stockpile of capital goods.

 

Free markets encourages everyone to work, encourages you to save for the items you wish to purchase. In a free society, you are your own master in the wage you earn, how you earn. If you don’t want to work, that is your responsibility to feed yourself, not your neighbours and not mine. And it sure is not my responsibility to supply your drug habit with needles, nor for me to provide you with free birth control, nor a free Obama phone.

 

Free market and trickle-down works. They work all too well. Why do you think government regulates us, tax us, raise taxes, create new taxes?  Free market works.

 

Many wrongly believe boom-bust periods in the free market system are always inevitable, and we need government intervention. This is false, a purely free market system prevents augmented boom-bust cycles. The money is simply redeployed from one sector to another.

 

Most of these augmented cyclical problems have been created and exasperated by our governments, rather than allowing free market weathering the storm and correct itself naturally.

 

Whereas, most government social programs, don’t dampen the problem, they exasperate the problem. Besides creating generations of new citizens reliant on government social programs, existing citizens no longer save for tough times. Socialists argue, we never were allowed to save, we were slaving for the `man’ with underpaid wages. My rebuttal, we never had a free market economy to work with because of our interventionist leftist government. Besides, what amount do you perceive as a fair wage?

 

I would like to share a positive message on the Canadian and U.S. economy, but all I can part is the truth. Our economies are not sound. Talk to your neighbour, to see if they are feeling the prosperity. Individuals that are saving, are better off than those who aren’t.

 

Just because stocks prices are rising or home values increase does not mean your savings are growing. Those inflationary bubbles may burst and be worthless.

 

Free market, smaller less intrusive government is our country’s’ best answer for sound fiscal responsibility. This leftist mentality that our government needs to spend more, concerns me;

Consumption is not wealth creation. Prosperity is trade surpluses and being creditors.



[1]              https://en.wikipedia.org/wiki/Canadian_public_debt

[2]              Financial Post, March 15, 2017. <http://business.financialpost.com/personal-finance/debt/household-debt-creeps-up-to-a-fresh-record-with-canadians-owing-2-trillion-by-the-end-of-2016/wcm/72a57a5c-4ba4-4b32-b0e7-46c0b4b8dae6>

[3]              https://tradingeconomics.com/canada/money-supply-m0

[4]              Bank of Canada annual report 2014, page 58

<http://www.bankofcanada.ca/wp-content/uploads/2015/03/annualreport2014.pdf>

[5]              http://www.vivelecanada.ca/article/142841587-the-crime-of-the-canadian-banking-system

[6]              Lessons for a Young Economist, by   Robert P Murphy, page 374

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