fbpx Accept-Encoding: deflate, gzip

One of the cornerstones of Trumps planned recovery hinges on a domestic manufacturing renaissance. As we collectively choose to purchase an equivalent domestically made product over its foreign counterpart. This brings me to the foundation of considerable economic theory, the idea of “rational self interest”. Put another way it means that people spend money and deploy resources, capital etc. in the most advantageous and beneficial way possible. From a common sense and logical perspective this makes perfect sense. However in practice this theory fails miserably as humans are emotional creatures who tend to buy first and rationalize later. So, in order for this plan to work people will have to voluntarily choose a higher priced domestically produced product over a cheaper foreign equivalent. A difficult choice to make when earned income remains hard to come by and your average American is struggling to make ends meet. Something illustrated quite clearly in the trade data and for many decades. This line of reasoning also becomes the foundation for the tariffs argument, the implementation of which will render domestically produced products cheaper and help drive inflation in an environment of falling prices brought on by a deflationary credit bust. A warped line of reasoning at best and one with a proven track record of failure as the Smoot-Hawley Tariff act of 1930 demonstrated.

error

Enjoy this blog? Please spread the word :)