It is a common error: the tendency to inflate the ability of government to shape the world according to its liking. Politicians and their critics both are guilty of this. In truth, government cannot outsmart the market, and it is far less powerful than the laws of economics and the buying and selling decisions of consumers and entrepreneurs. Llewellyn H. Rockwell, Jr., explains how and why this is so, and what it means for our future.
The exchange rate is a measure of the relative value of these two currencies, not the value of the dollar or the euro per se. Perhaps the value of dollar and the euro have risen lately but the euro a bit more. Richard Johnsson believes that both have lost in value since mid-2001, only the euro has lost less than the dollar.
In a wide-ranging interview Sudha Shenoy comments on her decision to become an economist, the influence of Rothbard and Kirzner, the politics of Hayek, current trends in global trade, US protectionism, the bad turn in economic theorizing, and the need to resolve the conflict between Islam and the West.
As with the EU, Mercosur, NAFTA and other regional trading arrangements all vying for supremacy, and mercantilism entrenched at the heart of the dispute settlement system, the WTO is anything but committed to unfettered trade between individuals across national borders. Grant Nulle explains how and why.
Balance of payments numbers such as those the US currently has would have broken many other currencies and would have triggered severe financial crises in other countries much earlier. But the US is different. It holds a privileged position within the international monetary system and its path to ruin may be longer and smoother than that for other nations. Nevertheless, there is a limit.
The case for free trade has been made for hundreds of years, and yet the fight for the right to buy and sell outside the borders is never ending. The situation is complicated by a major confusion that exists among free trade advocates. Many believe that world trade, because it is a good thing, ought to be sanctioned, managed, and otherwise regulated by the government or a coalition of governments.
The critics of free trade persist in their insistence that permitting individuals in this country the freedom to invest where they please undermines the effectiveness of the U.S. economy and ultimately leads to a lower standard of living. The implication: Americans are better off only if everyone else in the world is poor. This flies in the face of sound economics.
The merchant class has been the most reviled in the history of political thought. Their very existence sticks in the craw of those who, like Marxists and modern-day militarists, believe that history should be about great conflicts, and winners and losers. Why? Because the merchant class views history in a more mundane way: as a series of small steps by which people are provided the goods and services they need to overcome the great economic problem of scarcity.
Why is the dollar falling? Many commentators blame the balance of payments deficit. In fact, writes Frank Shostak, this has nothing to do with it. The main influnce on exchange rates is the purchasing power of money, which is mainly determined by supply and demand. The dollar is falling because the Fed has been pumping money.
To read the works of Bastiat is to read economic clarity and logic at its finest. However, numerous examples of the same "broken window fallacies" Bastiat debunked some 150 years ago can be found today in abundant supply. While these neoprotectionist arguments are cloaked in modern language, their core sophisms remain unchanged.
