Monday, December 04, 2006

One Day More To Revolution

Coyote and Cafe Hayek are tag-teaming Lou Dobbs and the rest of the modern protectionists (remember when conservatives used to be in favor of the free market?). We have little to add to their insight, except paraphrasing some much-needed Bastiat.

Let's say we are from Paris. We have some fine Burgundy that it cost us 800 francs to grow, harvest, press and bottle. We ship it to London (price of shipping included in that 800 francs).

We sell it in London for 600 pounds sterling. Since we have no use for pounds back in Paris, we buy a consignment of wool stockings for those 600 pounds. We ship this back to France and sell it for 1000 francs.

France is now richer, in that the nation has gotten rid of some surplus wine and received some much needed stockings. Britain is now richer, in that the nation has unloaded some excess stockings and taken in some delicious wine. And, sweetest plum of all, we are richer for the deal.

We have also increased France's "trade deficit" with Britain by 200 francs. We imported more than we exported. Allow us a moment's peace until the horror abates.

It takes a mind of the singular genius of Lou Dobbs or Pat Buchanan to argue that a transaction which benefits everybody requires immediate government action and a precipitous halt.

Dobbs and his ilk would argue that since the excess is in the form of U.S. government securities, not actual product, that that is where the real threat lies. This changes the above argument - and the truth of the matter - not one iota.

A buyer in England, having francs that he cannot spend in London, invests them in Frankish treasury bonds. What can he do with these bonds? He can hold them until they mature for a tiny yield. He can find an eager buyer to sell them to for a larger profit. And that's it. Regardless of whether the Englishman sells his French bonds for a small profit or a large one, the government of France has already received whatever francs he paid for them. Regardless of whether the Englishman makes a mint on the deal or barely covers his cost, the government of France still owes the final holder of those bonds whatever it promised to pay. The fact that the bonds are held by an Englishman as opposed to a Frenchman should matter not one whit to the government of France, unless they have a particular antipathy towards Britain.

Substitute "China" for England and "the U.S." for France.

If someone could please tell us why any of the above is a bad thing, we'd thrill to hear it.


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