>>you now admit that "beggar thy neighbor" did not create the problem, but that instead it was debt induced deflation<<
Oh, brother. I'll do this one more time, but in deference to FL only once.
The deflation wasn't induced by debt, it was caused by having too high of a gold-foreign exchange rate. Set at the Genoa Conference in 1926, you could look it up. Read John Maynard Keyne and von Mises, they predicted it.
I can't explain it in a paragraph, it takes a really long book, dense with facts, written by a professional economist to really explain it. Try Golden Fetters, by Barry Eichengreen.
Debt isn't a bad thing in and of itself, as long as you can pay it back.
But if you are a debtor, nothing is more devastating than deflation, because you have to pay back MORE than you borrowed. If you are a business owner, you are paying it back out of your operating capital, not your operating costs, and you have to make cuts.
Simultaneous debt and deflation is very destabilizing, as Keen pointed out.
Countries lashed out to save themselves in the only way they could, by devaluing. But as one devalued, that forced the others to follow suit, which threw the balance even further out of whack. The system needs to be in equilibrium to work.
Oh, I really should explain how tariffs made things worse here. Tariffs are a way of making imported goods relatively expensive and domestic goods relatively cheap, so that manufacturers can stave off the effects of global deflation.
Retaliatory tariffs are sort of like competitive deflation, at least the effects are the same.
Now, admittedly you were talking about military isolationism, but I assumed that because you were talking about Buchanan that you also meant economic isolationism, as he preaches.
It would all come out the same in the end. If you end the Pax Americana, you end the global economy. World wide suffering would be enormous.
It would be like the fall of the Roman Empire. After that, a thousand years of darkness. |
