Economics

A Defense of the Peaceful Transfer of War-Making Power

A Defense of the Peaceful Transfer of War-Making Power

Prussian general and military theorist Carl von Clausevitz famously said that “war is a continuation of politics by other means.” I think we can reverse this: politics is war by other means. The ultimate aim of politics (in the narrow sense of the word; there’s a more elevated philosophical sense) is what Frederic Bastiat called “legal plunder.”

Other thinkers have elaborated this idea. Franz Oppenheimer’s book The State comes to mind. Oppenheimer influenced Albert Jay Nock, Frank Chodorov, Murray Rothbard, and through them the modern libertarian movement. Oppenheimer distinguished work — which he called the “economic means” — from robbery — the “political means.”

A gang can raid a group of productive people, steal their stuff, and ride off to the next community to plunder anew. Or it can stay around and keep looting the same people. Now people tend not to like this and won’t be terribly productive. So to pull this off, the gang will need to convince the people that the arrangement is for their own good. The gang will promise to protect them from other gangs (which it will surely want to do) and provide other services that will tend to keep the people quiescent. The booty they will be deprived of will be relabeled taxes.

To sell this set-up to the people, the gang will need intellectuals or priests to formulate a religion, ideology, or what-have-you to persuade the people that this is all for their benefit. Why? Because rebellion is costly to rulers. For one thing, people who are busy resisting tyranny won’t be producing stuff, which would undercut the point of politics: legal plunder. Better for the rulers, therefore, that the people (at least tacitly) consent to or acquiesce in the arrangement after being encouraged to believe that they are net beneficiaries, despite the palpable costs. Controlling education is useful in this regard.

So we might well look on politics as war on productive people by other means.

This has implications for the revered idea of the peaceful transfer of power, which is much in the news these days. The power that is to be peacefully transferred is the power to make war both domestically and internationally.

Does this mean that we ought to denigrate the peaceful transfer of power? No, of course not. Political power is properly and always an object of suspicion and (one hopes) diminution, but that is no justification for violent transfer. Violence embodies its own intrinsic evils and cannot be controlled or finely targeted. Collateral damage is the rule, not the exception. Moreover, violence will usually result in far worse state abuses — with the support of most people, who will abhor civil disorder.

When President Woodrow Wilson and his Progressive supporters pushed for U.S. entry into the Great War, Randolph Bourne broke with his former allies and eloquently opposed their crusade. What especially irked Bourne was the Progressives’ argument that entering the war would advance their reform agenda.

Bourne disagreed: “He who mounts a wild elephant goes where the wild elephant goes.” Of course, Bourne is also the one who wrote that “war is the health of the state.” Both quotations argue against violence as a means of social change. Even in the face of tyranny, we should favor a presumption of nonviolence, or what Bryan Caplan calls “pragmatic pacifism.” (Also see this.)

The methods of nonviolent resistance have long been fleshed out by Gene Sharp. (See Carl Watner’s “Without Firing A Single Shot: Voluntaryist Resistance and Societal Defense.”)

Bitcoin vs. Wall Street

Bitcoin vs. Wall Street

The big worry among the bitcoin perma-bears is the threat of government ‘making it illegal.’

The latest bogeyman on this front is none other than U.S. Treasury Secretary Steve Mnuchin. Rumors float that he’s considering outlawing ‘self-custody wallets,’ in effect confiscating the private keys of everyone’s cryptos.

In a Twitter-thread, the chief executive [of Coinbase Brian Armstrong] said that his firm “heard rumors” about the US Treasury Secretary Steven Mnuchin’s plans to introduce fresh rules for “self-custody wallets” by the end of his term.

The open nature of cryptocurrencies allows anyone to create a private wallet by downloading third-party software on their computers/smartphones or through hardware devices that store digital assets. These types of self-custodial solutions come cheaper than traditional financial services — and they ensure privacy.

Those rumors are apparently valid since Mnuchin received a letter from four Congressmen imploring him not to do such a monumentally stupid thing.

Davidson et.al. make the very salient point that a move like this would be crippling to the burgeoning cryptocurrency, decentralized finance world.

It’s a stunningly well-written letter that shows a level of understanding about crypto that one simply wouldn’t expect from a Congressman. But, hey, I’ll take the pleasant surprise.

Now, by the same token, Davidson is talking to one of the ultimate oligarchs holding one of the most powerful offices in the world. Mnuchin, like the rest of the world-be world governors, sees the threat to central-bank issued currencies and doesn’t like the competition.

So many who have argued that Bitcoin would eventually ‘just be made illegal’ have done so on, at best, sophomoric grounds, ignoring the practicality of how the internet functions, etc.

I’ve already addressed these arguments in the past, c.f. Bitcoin vs. The Man published back in August.

With Stock to Flow rising, meaning the rate of inflation is falling while the total hoarded pile is rising, marginal demand can easily push prices to levels that make even the most ardent bitcoin bull blush.

Governments are, as I said earlier, in a Catch-22. If they ban bitcoin demand goes underground, people simply buy and hold it. They acquire it however they can and new technologies come in (decentralized exchanges) come in to replace current ones (Coinbase).

If they don’t ban it then they allow the demand for it as a store of value and financial asset to flourish. It exists in a gray-area where you can use it but you really don’t want to. That allows another relief valve for capital to exit the dying debt-based system and wait for the storm to pass.

Either way, bitcoin and cryptocurrencies win.

The Davidson Four’s letter acknowledges this basic understanding. Trying to make holding your private keys to your cryptos illegal will simply drive capital away from the U.S.

Now, if Mnuchin is a good little Davos Man than that is exactly what he must do because that’s their plan, man.

If he isn’t and he’s just your garden-variety clueless regulator then making such a move would be another classic case of what I’ll now call the Melinda Gates Syndrome—We Didn’t Think Through the Economic Implications of our Actions.

The truth lies somewhere in the middle, I’m sure.

But like I said at the outset, this is all a bogeyman in the end. If Mnuchin falls into the authoritarian trap of trying to ban ‘self-custody wallets’ he will set off two firestorms.

The first is to drive even more of the existing stock of bitcoins underground, and likely into privacy coins or onto distributed exchanges where the capital will never be found nor clawed back.

That will ultimately drive the price straight through the $20,000 level and set it on a path to much higher, headline-grabbing levels.

The second will be to re-engage the normies because of this who have already began rushing into this space in a big way especially after the insanity of 2020.

So, while Mnuchin may make it really difficult for people to get their coins off of Coinbase or any other approved KYC/AML-compliant on-ramp, most people really won’t care.

And all he’s doing is making the people who are building the systems to challenge his “Authoritah!” even more well-capitalized.

So, even if the worst comes to pass what will happen will not blunt the rise of the private currency markets.

Remember folks capital flows to where it is treated best. And if Mnuchin treats U.S. savers this poorly, which I expect him to try to do, then he will ensure Davidson’s predictions come true.

It is for this reason that he won’t dare do it. Because while this is being discussed at the highest levels of government everyday another major player on Wall St. takes the plunge into the world of Bitcoin.

This week it was Mass Mutual who put in another $100 million of its treasury into bitcoin. Even J.P. Morgan strategists are admitting what’s happening here.

In a note earlier in the week they noted:

Institutional investors flocking to bitcoin could put downward pressure on gold in the longer-term, according to a group of JPMorgan strategists led by Nikolaos Panigirtzoglou.

In a Tuesday note, they said that bitcoin’s near-term price is “skewed to the downside,” while gold looks more positive. However, they see the medium- to longer-term trending in the opposite direction.

“The adoption of bitcoin by institutional investors has only begun, while for gold its adoption by institutional investors is very advanced,”JPMorgan said. “If this medium to longer term thesis proves right, the price of gold would suffer from a structural flow headwind over the coming years.”

While I’m not advocating their commentary about gold, given that J.P. Morgan is always on the opposite side of gold as a company, admitting that institutional investors are now pushing into bitcoin is significant.

Wall St. loves money. They don’t care how they make it, including allowing billions to pump into something today knowing a major rule change is incoming to dump the losses onto their muppet clients tomorrow.

Years ago, during the early stages of the gold bull market Jim Sinclair warned all of us budding gold bulls that the very people today who are making your life miserable in gold, suppressing the price and playing their games, will be the very people who make the most money off the gold bull market.

That shouldn’t matter, however. His lesson was get comfortable with that, accept that reality and don’t try to time the peaks or the troughs, because you won’t be allowed to get them anyway.

With the evolution of the cryptocurrency market into a safe-haven asset capable of absorbing billions in inflows, Wall St. will make their vig on it. And Mnuchin will not be allowed to kill that golden goose too quickly.

I think this rumor is real but I also think, at this point in time, it’s mostly just headline MOPE—Management of Perspective Economics—trying to hold the line for a few weeks/months.

Because it isn’t like Mnuchin’s expected replacement, Former FOMC Chair Janet Yellen, will be any less hostile to an asset which directly competes with the Fed’s almighty dollar.

It was just meant to spew a little CO2 on this electrical fire and slow it down help keep things from getting out of control.

One last point about all of this, the DeFi market today is quickly becoming the new junk bond market. And it’s been that very market which has helped prop up asset prices, i.e. stocks, for years in the Fed’s zero-bound regime.

The search for yield in a mandated ‘yield-free world’ eventually creates the very markets the financial repression of central banks are loathe to admit doesn’t work.

Whether you would partake in Ethereum-staking projects or even think they are anything other than scams (which, likely, most of them are), like the junk bond market, they only exist because there’s a market for them.

People are pulling their coins off of exchanges into cold storage, they are staking them in projects like Wrapped Bitcoin (WBTC) to pull a yield off their HODL’ings. It’s happening and there’s nothing the Fed and Steve Mnuchin can really do to stop it.

They can slow it down, scare people off, but after more than a decade of zero return on capital, something has to give. DeFi may take Ethereum to levels which will likely break it once the next wave of investors come into the space.

Governments are always fighting the last war, while the markets innovate and leave them breathless and confused playing catch up. Just wait until the gold bugs and the bitcoiners put down their Hatfield/McCoy feud and build a real monetary system for the digital age.

Then things get really interesting.

This article was originally featured on the blog Gold Goats ‘N Guns and is republished with permission.

Libertarian Messaging For 2021: Part 1

Libertarian Messaging For 2021: Part 1

This is a continuation of my pieces on the LP and what it would take for me to support them. The great Dave Smith made a Tweet yesterday in which he laid out what the libertarian message should be for 2021. Since he is confined to 280 characters by Twitter I thought I’d go through each and say how I would communicate them in a little detail. Here’s the Tweet. I’m only going to hit the first three points today.

Screenshot 20201204 070450 Twitter

End the lock-downs immediately and open the economy completely

Where in the hell do politicians have the right to tell you that you can’t leave your house and open your business or go to work, and if they do have this right, how do you still believe you live in a “free country?” If they do, change that right now! This is the most tyrannical period a “free people” have ever experienced in this country and that’s not being hyperbolic. After 9/11 you were allowed to leave your houses, encouraged to engage in commerce and 3,000 people were slaughtered in one day! Open your eyes to what has been done to you and take notice of how the culture has changed around you. Fear has become the front and center spirit of the zeitgeist and you are not seeing it. If you have children who are in their formative years what do you think the lasting effects of this prison of the body and mind is having on them? Why have you allowed politicians you know deep in your heart are corrupt to destroy your finances and everything you’ve worked so hard to build?

End all foreign wars

You are being ruled by blood-soaked monsters. The majority of you believe that US troops do not belong in Afghanistan, Iraq and Syria. Most of you don’t even know about the continued wars/bombing in Yemen, Libya, Somalia, Chad, Niger and so many others. Is this where you want the wealth extracted from your pay to go to? Can you even find these countries on a map? Do you trust those politicians you know are corrupt to have your best interests at heart when mounting these military actions, some of which technically could be called genocides? How does it make you feel to know that while you are having your wealth decimated by government imposed lock-downs, etc., that Boeing, Northrop Grumman and other “private” companies are getting rich off of your tax dollars because they build the bombs, planes and ordinance needed to keep these so-called military actions” going? Why is the military protecting people in other countries while the enemy at home, the government who has stopped your life because of a virus, is ignored?

Audit/End the Fed

My fellow Americans, why is an unaccountable, secretive organization in charge of the money supply when your beloved Constitution says that is the job of the Congress who, if they aren’t doing their job properly, you can fire through your vote? Do you even know what the Federal Reserve does? It literally creates money out of thin air. The more money there is, the more worthless it is. If you had what you thought was a rare book, and all of a sudden a stash of 100,000 copies were found, how much is your “rare” book worth now? That is a simple example of what has happened with Federal Reserve money creation. When the 2.2 trillion dollar CARES Act was passed earlier this year (did you vote on that by the way?), do you think that money was sitting in a vault somewhere? No, that was created with key strokes on a computer. Do you think 2.2 trillion dollars being pumped into the economy will not eventually affect the value of the dollars you hold? The Federal Reserve is the enemy of your prosperity and must be first audited, so you can see the damage they’ve done, and then ended when you come to the realization that you’ve been had!

More to come on messaging for 2021.

Suffocating Dissent Ep. 137

Suffocating Dissent Ep. 137

The Great Keith Knight joins me once again as I share how I recently made a scene at Papa Johns. We demolish the theory that masks are effective at preventing the spread of COVID-19, and use economic parallels to illustrate how COVID-19 adversely affects small businesses.

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Show Notes:

The Federalist: These 12 Graphs Show Mask Mandates Do Nothing To Stop COVID

 Liberty Weekly: Economics, Eugenics, and the Minimum Wage Ep. 14

Booms & Busts: An Analysis of Easy Money

Booms & Busts: An Analysis of Easy Money

According to the popular way of thinking, various economic data can provide an analyst with the necessary information regarding the state of the economy. It is held that by inspecting various economic indicators such as the gross domestic product or industrial production, an analyst could ascertain the state of the economic business cycle.

Following the experts from the National Bureau of Economic Research (NBER), business cycles are seen as broad swings in many economic indicators, which upon careful inspection permit the establishment of peaks and troughs in general economic activity.

Furthermore, according to the NBER experts, because the causes of business cycles are complex and not properly understood it is much better to focus on the outcome of these causes as manifested through the economic data.1Quoted in Allan P. Layton and Anirvan Banerji “What Is a Recession?: A Reprise,” Applied Economics 35, no. 16 (2003): 1789–97, https://www.tandfonline.com/doi/abs/10.1080/0003684032000152853.

If the driving factors of boom-bust cycles are not known, as the NBER underlying methodology holds, how could the government and the central bank introduce measures to counter them?

Contrary to the NBER way of thinking, data does not talk by itself and never issues any “signals” as such. It is the interpretation of the data guided by a theory which generates various “signals.”

By stating that business cycles are about swings in the data, one says nothing about what business cycles are. In order to establish what business cycles are the driving force that is responsible for the emergence of economic fluctuations needs to be ascetained.

Why We Have Boom-Bust Cycles

Contrary to the indicators approach, boom-bust cycles are not about the strength of the data as such (for instance, for the NBER a recession is a significant decline in activity spread across the economy lasting more than a few months). It is about activities that sprang up on the back of the loose monetary policies of the central bank.

Thus, whenever the central bank loosens its monetary stance, it sets in motion an economic boom by means of the diversion of real savings from wealth generators to various non-wealth-generating activities that a free unhampered market would not facilitate.

Whenever the central bank reverses its monetary stance, this slows down or puts to an end the diversion of real savings toward activities that do not generate real wealth and that undermines their existence. The trigger to boom-bust cycles is central bank monetary policies and not some mysterious factors.

Consequently, whenever a looser stance is introduced, this should be regarded as the beginning of an economic boom. Conversely, the introduction of a tighter stance sets in motion an economic bust, or the liquidation phase.

The severity of the liquidation phase is dictated by the extent of distortions caused during the economic boom. The greater the distortions, the more severe the liquidation phase is going to be. Any attempt by the central bank and the government to counter the liquidation phase through monetary stimulus will only undermine the pool of real savings, weakening the economy.

Again, since the central bank’s policies set the boom-bust cycles in motion, these policies are what leads to economic fluctuations.

Whenever the central bank changes its monetary stance, the effect of the new stance does not assert itself instantaneously—it takes time.

The effect starts at a particular point and shifts gradually from one market to another market, from one individual to another individual. The previous monetary stance may dominate the economic scene for many months before the new stance begins to assert itself.

Economic Slowdown versus Recession

As a rule, the symptoms of a recession emerge after the central bank tightens its monetary stance (there is a time lag). What determines whether an economy falls into a recession or just suffers an ordinary economic slowdown is the state of the pool of real savings.

As long as this pool is still expanding, a tighter central bank monetary policy will culminate in an economic slowdown. Notwithstanding that various non-wealth-generating activities will now suffer, overall economic growth will be positive, the reason being that there are more wealth generators versus wealth consumers. The expanding pool of real savings reflects this. As long as the pool of real savings is expanding, the central bank and government officials can give the impression that they have the power to undo a recession by means of monetary pumping and artificially lowering interest rates.

In reality, however, these actions only slow or arrest the liquidation of activities that emerged on easy monetary policy, thereby continuing to divert real savings from wealth generators to wealth consumers.

What in fact gives rise to a positive growth rate in economic activity is not monetary pumping but the fact that the pool of real savings is still growing. The illusion that through monetary pumping it is possible to keep the economy going is shattered once the pool of real savings begins to decline. Once this happens, the economy begins its downward plunge, i.e., falls into a recession.

The most aggressive loosening of money will not reverse the plunge. In fact, rather than reversing the plunge, loose monetary policy will further undermine the flow of real savings and thereby further weaken the structure of production and thus the production of goods and services.

In his writings, Milton Friedman blamed central bank policies for causing the Great Depression of the 1930s. According to Friedman, the Federal Reserve failed to pump enough reserves into the banking system to prevent the collapse in the money stock.2Milton Friedman and Rose Friedman, Free to Choose: A Personal Statement (Orlando, FL: Harcourt, Inc, 1980), p. 85. The collapse in the money stock according to Friedman was the key factor in plunging the economy into economic depression.

For Friedman, the failure of the US central bank was not that it caused the monetary bubble during the 1920s but that it allowed the deflation of the bubble.

An economic depression, however, is not caused by the collapse of the money stock, as suggested by Friedman, but rather by the collapse of the pool of real savings. The shrinkage of this pool is set in motion by the preceding monetary pumping of the central bank and by fractional reserve banking.3Murray N.Rothbard, America’s Great Depression (Kansas City: Universal Press, 1972), p.153. The monetary pumping sets in motion an exchange of nothing for something, i.e., consumption without preceding production—this undermines the pool of real savings.

Moreover, a fall in the pool of real savings triggers declines in bank lending out of “thin air” and thus in the money stock. This in turn implies that previous loose monetary policies cause the fall in the pool of real savings and trigger collapses in economic activity and in the money stock.

Declines in the prices of goods and services follow declines in money supply. Most economists erroneously regard this as bad news that must be countered by central bank policies. However, any attempt to counter price declines by means of loose monetary policies will further undermine the pool of real savings. Furthermore, even if loose monetary policies were to succeed in lifting prices and inflationary expectations, this could not revive the economy while the pool of real savings is declining.

Lastly, it is erroneous to regard a fall in stock prices as causing recessions. The popular theory argues that a fall in stock prices lowers individuals’ wealth, which in turn weakens consumers’ outlays. Since it is held that consumer spending accounts for 66 percent of GDP, this means that a fall in the stock market plunges the economy into a recession.

Again, we hold that it is the pool of real savings and not consumer demand which permits economic growth to take place.

Furthermore, the prices of stocks mirror individuals’ assessments regarding the facts of reality. Because of monetary pumping, these assessments tend to be erroneous. However, once the central bank alters its stance, individuals can see much more clearly what the facts of reality are and scale down previous erroneous evaluations.

While individuals can change their evaluations of the facts, they cannot alter the existing facts, and the latter influence the future course of events.

This article was originally featured at the Ludwig von Mises Institute and is republished with permission.

The Myth of Nordic Socialism

The Myth of Nordic Socialism

Socialism has failed repeatedly. Wherever you look—Cuba, Venezuela, India, France—the system has caused economic turmoil, stagnation, and even violence and oppression. But fear not, we are told—that was socialism simply “not done properly.” True socialism, however, can be seen in the Nordic countries, such as Sweden, Denmark, Finland, Norway, and Iceland. Progressives’ fascination with so-called “Nordic socialism”—and their desire to replicate it in America—rests on two premises. First, that they are indeed socialistic. Second, that they owe their prosperity to socialistic aspects of their economies.

The claim that the Scandinavian/Nordic countries are socialist is patently absurd. Most of those countries had lower corporate tax rates than the United States (up until recently, when the 2017 tax bill was passed). Secondly, according to research conducted by the Heritage Foundation, most Nordic countries have as much economic freedom as the United States—some in fact have more, such as Iceland and Denmark. Nearly every Nordic country has greater property rights than the United States, higher levels of business freedom, monetary freedom, and even trade freedom.

There was arguably a time when some of these countries were socialist. For example, from the 1970s to the 1990s, Sweden’s economy was characterised by high regulations, limited business freedom, and onerous taxation. Between 1975 and 1990, although the Swedish population grew, net private sector job growth was zero. The public sector just continued to grow more and more. However, this was simply unsustainable, because, as the economist Henry Hazlitt explained, when you increase public sector capital, it is often offset by a reduction in private sector activity, due to higher rates of taxation. This all changed in the 1990s, when the labour market was deregulated, since then the private jobs’ market has boomed, as demonstrated by the graph below.

Other Nordic Socialism ChartSince that time, Sweden has introduced a plethora of free-market reforms—not just in economics, such as the abolition of their dreaded wealth tax in 2007 and the privatization of major industries—but also in areas such as education. Since 1992, every child in Sweden has enjoyed what is known as “school choice,” where they get to choose their own school, privately or publicly run, and government money follows them (not the other way around). Healthcare is also an area of the Scandinavian economy which is becoming increasing more private-sector based. In recent years, private health insurance has become increasingly more popular in the Nordic countries, due to the growing dissatisfaction with the inefficiencies associated with government-run healthcare: according to a 2009 survey, half of Danes believe that medical waiting-times are too long, and only a third disagreed.

Nevertheless, the Nordic Socialism supporters point out, the Scandinavian nations do have many socialistic elements to their economies, such as high levels of spending, high income taxes, and large welfare states. But can they owe their high living standards to these factors? The problem is, they had such long before these policies were implemented. Between 1870 and 1960, Sweden had the fastest per capita income growth in the world (when it was a truly liberal country, in the process of industrialization). Since the institution of bureaucratic policies, however, this growth rate has slowed, and Sweden now ranks thirteenth. This applies to many other metrics we use. In 1960, Norway had the highest life expectancy in the world—and all its Scandinavian neighbours were in such a category. Since that time, the Nordic countries’ rankings have actually declined. This is demonstrated in the graph below.

Noridc Socialist ChartThese positive social outcomes had developed long before the creation of the welfare State in the 1960s.

It is perfectly considerable that Scandinavians owe their prosperity to certain cultural values—namely, the Protestant work ethic. It may be one of the reason that the median income for Scandinavian Americans is nearly a fifth higher than the national average, and why their poverty rate is half the national rate. Low rates of single motherhood, and high employment rates for single mothers may also be a reason for Scandinavia’s low poverty rate (something which may be attributed to cultural norms and values), as single motherhood is a powerful predictor of poverty, both in the U.S. and many European countries.

Socialists may be obsessed with the idea of Nordic socialism. But it just simply isn’t the case that socialism is what has made Nordic countries great.

How Trump’s China Trade War Failed

How Trump’s China Trade War Failed

President Trump was elected on an anti-trade agenda in 2016, and promised that tariffs and protectionist measures could restore the US manufacturing sector. After winning the White House, the president imposed tariffs on hundreds of billions of dollars worth of Chinese goods meant to discourage imports in pursuit of this goal. He has described himself as a “tariff man” and said that “trade wars are good and easy to win.”

How is this rhetoric holding up?

Well, a new Wall Street Journal data analysis sheds light on the trade war’s results so far. They aren’t pretty.

“President Trump’s trade war against China didn’t achieve the central objective of reversing a US decline in manufacturing, economic data show,” reads the report.

“Another goal—reshoring of US factory production—hasn’t happened either,” the Journal continues. “Job growth in manufacturing started to slow in July 2018, and manufacturing production peaked in December 2018.”

This graph shows pretty clearly that Trump’s tariffs did not successfully promote employment in the manufacturing sector. Much of the manufacturing job gains that did occur during the president’s tenure happened before the tariffs even took effect.

Fee ChartThis news is dismaying, but it’s hardly surprising.

Economists overwhelmingly agree that tariffs, which are basically taxes on American consumers, don’t work. In a 2016 survey of economists, zero agreed that adding tariffs on certain goods would successfully encourage domestic production. A whopping 93 percent disagreed or strongly disagreed, while 7 percent did not answer.

“Tariffs that save jobs in the steel industry mean higher steel prices, which in turn means fewer sales of American steel products around the world and losses of far more jobs than are saved,” famed free-market economist Thomas Sowell explained in one example of how tariffs backfire.Populist-sounding politicians can boast about ‘protecting American jobs’ and seem to the untrained eye to be telling the truth.

“The benefits of a tariff are visible,” Nobel laureate Milton Friedman similarly noted. “Union workers can see they are ‘protected.’ The harm which a tariff does is invisible. It’s spread widely. There are people that don’t have jobs because of tariffs but they don’t know it.”

This is why populist-sounding politicians can boast about “protecting American jobs” and seem to the untrained eye to be telling the truth.

Yet as economists agree, the problem with tariffs generally speaking is that they kill more jobs than they create. For every job that is “protected” by a tariff, other jobs are lost in related industries that use the targeted good as an input and see their costs raised. But even within the manufacturing sector, these tariffs failed.

Why? It’s simple: The tariffs helped some manufacturers by hurting others via raised prices, and (predictably) triggered retaliatory tariffs from China that together outweighed any benefits.The problem with tariffs generally speaking is that they kill more jobs than they create.

“An industry-by-industry analysis by the Federal Reserve showed that tariffs did help boost employment by 0.3%, in industries exposed to trade with China, by giving protection to some domestic industries to cheaper Chinese imports,” the Journal reports.

“But these gains were more than offset by higher costs of importing Chinese parts, which cut manufacturing employment by 1.1%,” the analysis continues. “Retaliatory tariffs imposed by China against US exports, the analysis found, reduced US factory jobs by 0.7%.”

Many Americans of good faith might be earnestly surprised by how tariffs have failed to restore the manufacturing sector. But students of economics shouldn’t be.

This article was originally featured at the Foundation for Economic Education and is republished with permission.

News Roundup

News Roundup 2/23/21

US News Texas police arrested a man for walking in the street during the Texas freeze. [Link] The Los Angeles school district will cut the number of police officers in schools by a third. The cuts will allow $25 million to be redirected towards support services....

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Tommy invited Coop onto the show to discuss the parallels between modern culture, relativity, objectivism, and how nations enter the period of their ultimate demise. https://traffic.libsyn.com/secure/strangerencounterspodcast/coopfinal.mp3

Red, White, and Clear; An Interview With Me

Last Friday Mike Korbel asked me to be a guest on his podcast, The Invictus Mind. I’ve known Mike a few years and happily agreed to appear. We have a laid back informal chat about the growing technocratic state and how people may find avenues to free themselves from...

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Enoughalreadyproof

Enough Already: Time to End the War on Terrorism

by Scott Horton

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No Quarter: The Ravings of William Norman Grigg

by Will Grigg

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Fool’s Errand: Time to End the War in Afghanistan

by Scott Horton

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Coming to Palestine

by Sheldon Richman

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The Great Ron Paul

by Scott Horton

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What Social Animals Owe to Each Other

by Sheldon Richman

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