Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Book Nook -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (359)	8/20/2001 9:26:57 AM
From: Ilaine	Read Replies (1) \| Respond to of 443

Continued . . . . >> The wider the differential between American and world prices becomes, the more difficult it will be for American exporters to sell their goods in the world market. With prices higher in the United States than abroad, costs will also be higher. With lower prices in the industrial nations of Europe, their costs will also be lower. American exporters with their high costs will find it increasingly difficult to meet the competition in foreign lower-price markets. This is the two-edged sword of a high-tariff policy. With the same stroke that the tariff cuts off imports, it also in the end cuts off exports. The day of reckoning may be postponed for a time by means of foreign loans, as in the past decade. But the larger the loans become, the more inevitable the day of judgment. You cannot have your cake and eat it too, as they mistakenly believe who on the one hand seek to foster an export program, and on the other, seek to build up a high tariff wall. The Long-Run Equilibrium. The maladjustments incident to this development are, however, not of a sort that will prevail in the "long run." From the standpoint of static economics (which is concerned not with what happens between the time when a disturbing factor has entered to the time when a new equilibrium has been reached, but solely with the relationships of the new equilibrium), there is of course no problem at all. But for dynamic economics (which is concerned precisely with what happens during the interval between the interjection of the disturbance and the attainment of a new equilibrium) a vital problem presents itself. The maladjustments created by the inconsistent investment and trade policies of the United States are serious ones and the interval of time during which they will last is likely to be of considerable duration. Nevertheless it is important to see that "'in the long run," the maladjustments will disappear and a new balance will be reached on the basis of the changed data. The American tariff policy does not, in the "long run," necessarily preclude the payment of reparation, war debts, and the interest accruing from American investments abroad. We may even broaden our statement to include the present unfortunate tariff policies throughout the world. That these policies will fender the payment of international debts more difficult there can be no doubt. And they will do so for three reasons: (1) because they prevent the most economic international division of labor and so lower the real income of the whole world; (2) because of the serious maladjustments incident to the transition period; and (3) because when the new equilibrium has been reached the debtor countries will have been reduced to a lower price level. And indeed the difficulties of payment might conceivably be so increased that, from the political and budgetary standpoint, the governments in question may find it impossible to raise the required funds, while the private corporations under the stress of economic depression may be unable to meet their obligations. On the other hand it is quite possible that the continued progress of the world on the side of technology may en-able it to reach a new equilibrium, a new balance of world trade and production, in spite of these wrong governmental policies. But let there be no misconception in the United States with respect to what this new equilibrium will involve. It will involve an unfavorable balance of trade for the United States. Her im-ports of goods and services (including tourists? expenditures) will exceed her exports of goods and services. This excess of imports will not necessarily equal the annual sum owing to us, for we may continue for an indefinite period to make considerable(though not sufficiently counterbalancing) loans abroad. But the excess of imports will tend to equal this annual sum, and this sum will grow even bigger with mounting investments abroad. If now America develops an excess of imports, our creditors will of course have achieved, as they must, an export surplus. But is not this outcome entirely fanciful when all the world is faced by the American tariff wall? Is there not something inherently contradictory even "in the long run" about the payment of war loans and interest on still vaster private loans and, on the other hand, the maintenance of a highly protective and in many cases an exclusive tariff? The inpouring of gold into the United States and the consequent differential in American and world prices, tends more and more to curtail exports.* [Hansen footnote *The depression of prices abroad stimulates American manufacturers to build plants abroad in order to take advantage of the low costs. This movement counteracts the gold inflow and, for a time and to a certain degree, as a corrective precisely like foreign loans. But it only postpones the difficulty and in the end makes matters worse.]<< Continued next post . . . .