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News Link • China

Is China's Day Of Reckoning Coming?

•, by Tom Luongo

Mercantilism is, oddly enough, President Trump's dominant economic philosophy.  It involves protection of domestic producers through high barriers to foreign investment and a cheap currency created through counterfeiting (we call this 'inflation') to boost exports of domestic products.

The problem with mercantilism is that it ultimately, like all artificial controls on the market, destroys more capital than it accumulates.  Protected domestic producers already priced out of the global market and now protected from competition, have no reason to innovate and drive down costs.   The government transfers wealth by stealing it through inflation from the taxpayer and subsidizing these producers through inflation.

Chinese mercantilism was allowed to go on for years because the U.S. was more than willing to subsidize their policies through equally, if not, cheaper money.  We used the demand for the U.S. dollar to liquefy global trade to continually print and spend, driving up domestic prices for domestic products while sending trillions overseas to bring back rapidly depreciating consumer goods from overseas.

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