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Here is a thought experiment
1000% tariffs on the world
What would happen if the USA goes super extreme and impose a 1000% tariff on the whole world?
Would that finally hurt the world because they have treated the USA unfairly?
Lets thing this.
All trade to the USA will stop.
When you go to Wallmart the shelves will be empty.
When you want a good car, you won’t see any foreign brand. Everybody drives a Ford. A black one.
You want an Iphone. Not available.
The USA will ony have its own home built stuff. A lot of services. A lot less manufactured products.
If you need any minerals, you won’t have it.
The deficit on the balance of trade will be gone. Imports gone to zero.
As the USA cannot benefit from the world, it now has to produce everything internally.
Production costs will go up. Inflation will go up.
Try to produce a refrigirator, a car, and iphone yourself.
Consumption will go down, as prices increase. And there will be unemployment.
Remember East Berlin. A closed economy. Remember North Korea?
The wealthy citizens in the USA will find a way to drive a BMW. But at an incredible cost. Average Americans cannot buy essentials.
The wealth of the nation, it is measured in the number and variety of goods and services you can buy to improve your lifestyle will decrease.
Now you become sick. You go to a hospital. You need to produce all those equiments yourself. The Siemens latest model to check your heart? Not available.
Now snap out of this Hell.
You have been living in the American Dream.
That dream has been built on everything the world sends you.
Now lets move to currency.
How are you going to close the deficit on your public budget? Who is going to buy your US bonds you create to pay for your expenses?
China, Japan, Europe? Since you don’t import their stuff and trade with them, they don’t get your paper dollars so they can buy your bonds. Invest in your real estate!
Do you start to get how insane this is? Tax yourself out of trading with the world?
You have been getting the BEST deal possible! Because you can print the dollar!
China can’t.
Japan can’t.
You have not been treated unfairly!
The world has been sending you all its stuff for paper.
Lets max it out: 1000% tariff on the world.
Runy
Host Island Wealth
