Trump Will Reap What He Sows In Trade War
To The Reader’s Forum:
Whether President Trump is right or wrong in pursuing trade wars will be determined in time. Due to economic conditions trade wars become inevitable. Here is why.
Over-capacity, subsidies and over-production forces corporations to slash costs to maintain profitability. As profits erode due to over-capacity, corporations turn to financial engineering to boost profits. With credit cheap and profits scarce, corporations borrow to survive. As a direct result of stimulus policies, private and public debt loans expand at rates far above the expansion of the real economy. Over-capacity leads to some nations over-producing, and cheap, easy credit leads to over-consumption in other nations. This leads to distortions and imbalances, which leads to destabilizing economies.
At this point, political leaders turn to trade wars to stop the deterioration of their domestic economy. Finally, all the perverse incentives and monetary distortions catch up with each nation. Hence, trade wars ensue.
The King James Bible states, in part, “You reap what you sow.” In this case, its name is trade wars and its outcome is pain for everyone.
Rex V. Willard,