0:08 - Introduction to Foreign Trade
2:21 - The Case for Foreign Trade
7:47 - Currency and Government Regulation
12:56 - The Mechanics of Transactions
16:56 - The Impact of Government Bonds
22:38 - Disparities in Global Trade
27:07 - The Fallacy of "Buy American"
31:14 - Conclusion: Economic Advantage over Nationalism
This lecture explores the often misunderstood concept of foreign trade from both a technical and an economic perspective. Beginning with the premise that the subject may initially seem mundane, the speaker emphasizes its importance in understanding the principles of freedom and how our perceptions of trade can heavily influence our economic behaviors and beliefs. The lecture contrasts typical perceptions of foreign versus domestic goods, encouraging listeners to challenge preconceived notions about the impact of purchasing decisions on job creation and economic stability.
The discussion opens with a critique of a common email narrative that suggests buying foreign products leads to job loss in the U.S. The speaker argues that the idea that purchasing non-American goods jeopardizes domestic employment is fundamentally flawed. Instead, the speaker proposes that foreign trade should be viewed through the lens of consumer choice and economic efficiency, wherein the best products, regardless of origin, should be prioritized. The analysis transitions into a broader critique of nationalism in economic discourse, purporting that dividing trade along national lines is akin to perpetuating arbitrary barriers that do not reflect the realities of an interconnected global economy.
Throughout the lecture, the speaker uses analogies from physics to illustrate how many economic truths are counterintuitive. The notion of countries as barriers to trade is dismantled as the speaker describes trade simply as interactions between individuals and businesses, mediated by currency and regulations. The role of government in creating artificial barriers, such as tariffs and import/export duties, is emphasized as detrimental to the free flow of goods and services. In this light, the lecture encourages viewers to reassess the simplistic narratives around foreign trade, arguing that they mask a deeper understanding of market dynamics.
Expanding on the economic implications of trade, the discussion takes a conceptual leap into the benefits of specialization as it pertains to national economies. The speaker draws parallels between individual specialization within a job market and how countries can also develop competitive advantages based on their unique resources and capabilities. By trading with each other, nations can optimize their economies, leading to mutual benefits gained from the efficient allocation of resources. The narrative is backed by historical examples, such as the export of agricultural products from resource-rich countries in exchange for manufactured goods.
Elaborating on the logistics of currency usage in trade, the speaker explains the inherent cycle of money within the economy. Funds spent abroad must eventually return to the purchasing country to facilitate further transactions, eliminating the common misconception that foreign purchases constitute a loss for the local economy. This detail is crucial, revealing that the separation between domestic and foreign trade is largely illusory. The phantom of currency complicates the discussions surrounding tariffs and taxes, where the burden often falls disproportionately on consumers, leading to economic inefficiencies.
Capping the lecture, the speaker critiques the emotional bias towards "buying American," stating that such preferences harm not only the economy but also the individuals they aim to support. Instead, the advocacy for economic pragmatism encourages a focus on value and quality, irrespective of geographical origin. In closing, participants are urged to embrace a more informed perspective on international trade, recognizing that economic advantage, rather than emotional appeals, should guide consumer behavior and policy decisions. Ultimately, the speaker posits that a robust understanding of foreign trade will facilitate a more stable economic environment where individuals can thrive without the disruptive burden of outdated ideological constraints.
[0:00] Good morning, everybody. Hope you're doing well. It is 8.20 in the morning on January the 31st, 2006. I hope you're doing well.
[0:08] I have two topics this morning. One is a sort of technical topic, which I think is kind of interesting. And another one is a rather more non-technical topic that's going to put me into one of my screaming heebie-jeebies, I'm sure. So we'll save the screeching till the end. Now, the first topic is something that's interesting from a sort of technical or economically technical standpoint, and what it is, is the question or the issue of foreign trade. Now, I know, I know, it sounds cripplingly dull, but it is sort of important to understand if you're going to sort of take the stand for freedom, because one of the things that I saw in an email that floated around recently, we get emails from one of Christina's cousins in, Greece, and, you know, she's, I guess, some sort of activist, but, you know, completely uninformed, right? I mean, truth is very hard, and truth is counterintuitive, and truth is often counter-sensual. I've mentioned this before. When you look at theories of physics, you know, the world looks pretty flat, but it's actually round. The sun and the moon look the same size, but they're not.
[1:16] And it looks like the sun generates light. And at night, it looks like the moon generates light, but it doesn't. You know, there's lots of things that in physics just don't make any sense. It would sort of be, I guess you could say, basely, sensually self-evident that a bowling ball would fall faster than an orange. But, you know, I think it was was it Da Vinci who threw them off the top of the Tower of Pisa and actually figured it out? So there's lots of things that are true that are counterintuitive and counter to the evidence of sort of common sense and the senses. One of those is foreign trade, and it's probably worth just spending a few minutes understanding a little bit about it so that you can purposely lecture people at dinner parties the way that I do. No, I'm kidding. You've got to be nice and you've got to make it enjoyable for people as much as possible, because the truth, if it were easy, wouldn't be any fun to explore, right? The truth, if it were self-evident, we would actually be, you know, pretty much like a dog in terms of intelligence, because to a dog, I guess everything is self-evident, but, you know, mostly wrong.
[2:22] So, as far as foreign trade goes, the email that we got from Christina's cousin in Greece was something that you may have seen where, you know, I can't read the whole thing because I'm driving and I won't go into the whole thing, but it was sort of like this guy, this American guy, sits down in front of his Japanese-made television on his Malaysian-made couch, sipping his, I don't know, Korean-made beer and flipping on his German-made television and so on, and then wonders why on earth he can't get any jobs in America.
[2:59] Now, this is sort of a fascinating thing, I mean, when you think about it for a moment. And I can understand that it's like, well, if I don't buy American, then somehow I am harming America's capacity to generate jobs, and therefore I'm going to be jobless. But I got to tell you, that sounds kind of like paradise to me. You know, this email, I think it sounds like a wonderful thing. Because if I can get all of these people in these other countries to send me goods, even though I don't have a job, even though America is not producing any jobs, if all of these other countries are willing to just send us all these consumer goods, despite the fact that we have, you know, no economy, wouldn't that be fantastic? I mean, I'm not saying it would be good for them, but I mean, I'd be lovely if I could call up Hitachi and say, listen, I'm not going to be working for the next year or two. Can you send me a high-screen TV and some surround sound, quadraphonic, noise-canceling headphones and, you know, things that would be, you know, tasty to have. But of course, they wouldn't, right? I mean, they're not going to send me those things unless I'm going to send them something, because it's trade, right? Foreign trade.
[4:08] And so, it's sort of important to understand that there's no, like, as far as capitalists go, as far as the free market goes, there is no such thing as a country. There is only the minor inconvenience of currency. And that's sort of very important. Trading with somebody in Japan, aside from the overhead of currency and, of course, all the bureaucratic regulations and taxes and all of the other barriers and sort of mafia deals that are throw up to impede and profit from honest trade, countries are completely irrelevant. We don't care. We just don't care one little bit about a country. And, of course, the question is why? What does this mean? What does this matter? Well, of course, governments are always going to want to promote nationalism. My country is better than some other country because our country, of course, is defined as the geographical area that one mafia gang gets to operate in versus another mafia gang. And of course, that mafia gang is going to want to make you nostalgic and happy that they are running your lives and ordering you around and telling you what to do and taking half your money. And the other countries are not for a variety of reasons.
[5:15] But all of that is just, you know, it's just propaganda in the service of evil. I mean, it doesn't have any reality in the world. I mean, obviously, borderists don't exist in the world. Countries don't exist in the world. The only things that exist in the world are people and things, right? I mean, it's, you know, and I guess people and things and the rules of physics, I guess we can say, are evident in the world. But, you know, there is no such thing as countries. And, you know, those are just sort of fictions invented by predators to keep the sheep in an enclosure, right? I mean, countries have the same sort of role in human life as electric fences do on a cattle farm, right? It keeps people in the boundaries and makes sure that, you know, as much as possible, the sheep are not going to wander off to be shorn or eaten by some other farmer. So, I mean, that's really the only role that countries have in the world.
[6:11] So, it's sort of understandable that given that we're exposed to all of this propaganda about countries, that we are going to feel that there's some fundamental difference between trading with somebody one town over and trading with somebody one country over. And, of course, the fact of the matter is there just, there isn't. There's absolutely no difference whatsoever. Whether you go 10 miles or 1,000 miles to trade your goods doesn't matter. And particularly, it doesn't matter, of course, in telecommunications, where, you know, your technical query can travel to India perfectly well, as easily as it can travel to the next town. In fact, in certain circumstances, if you're using voice over IP, it can travel even easier across the world than it can across the country. And of course, if you're dealing with computer code or video conference or knowledge transfers or, you know, anything which can be transmitted electronically from sort of faxes to emails to articles to papers to graphics to any of these things, it makes absolutely no difference where the other person is. So, as I sort of mentioned earlier, there are only two inconveniences to dealing with other countries. I mean, if you discount language, right? I mean, language is an inconvenience, but language is sort of based on culture and convenience for the people in the country. So, that's not specifically government regulated, although it would be very interesting to see to what degree, if the governments didn't run the schools, to what degree English or Esperanto would be put forward as the common language and humanity would be that much closer thereby.
[7:41] So there's language which we're not going to count because it's not primarily a government function.
[7:47] But of course, currency is a government function and regulations and taxation and import-export duties and all that, all of those are government functions and those are the only things which impede trade. So let's sort of follow the path of a dollar as it is spent so that we can sort of understand why it really doesn't matter at all whether you buy something made in Japan or something made in Minnesota or Ontario or, you know, wherever it is that you're living. So if you are a fine Japanese businessman who has a wonderful device that I want let's just say you have I don't know let's just say an iPod I don't know by the heck they're made but let's just say you have an iPod that I want and I have some noise cancelling headphones that you want I'm assuming that I have more than one because without head without decent headphones I'm sure iPods aren't that great like any other portable music device you get the headphones always suck.
[8:44] But and let's just say that we're going to make this transaction in dollars right and let's just say for the sake of convenience that both of them cost 200 so they're it's not a great ipod but they're really great headphones let's just say so if if i if we have to make this exchange in dollars and and yen obviously well and let's just say dollars if we have to make this exchange in dollars, how would it work? Well, I would buy your iPod, sorry, you would buy my iPod in Japan. So you would send me a check for $200, and I would cash that, and then I would have 200 American dollars, and we sort of, we're really simplifying this, but I mean, this is the basic of how it works. So you will send me $200, and I will cash that, and I will have 200 American greenbacks, and I will send you the iPod. Now, what am I going to do with this $200? Well, I can't spend it in Japan.
[9:45] Because Japanese businesses don't take US dollars. Now, I know that some places in Mexico and some Canada and some places around the world will take US dollars. So I mean, but I'm not going to switch it to a sort of more obscure currency. But let's just say that the Japanese in general prefer dealing with the Japanese currency rather than American currency. So if I've got these $200, there's absolutely nothing that I can do with them unless I want to frame them or sort of, I don't know, keep them in my pocket. There's nothing that I can do unless someone is willing to take them in the US. The American dollars have to end up in the US economy at some point because it's US currency. So it could be used as fiat currency in other countries and so on, but even that would only be used because somebody in the US would be willing to take it. So let's say that, for instance, you sent me the $200, I cashed them, and then the U.S. Government went bankrupt and was no longer going to honor the $200. Well, it would be a simple theft, right? I mean, not exactly a theft, of course, because it's not like you had put the $200 out there with the knowledge that the U.S. Government was going to go bankrupt. That would be the job of the politicians.
[10:57] But I would have no place to spend these $200, and therefore, you know, it would be as simple I had lost an iPod, and I hadn't gained anything in return. So the $200 that you send overseas in return for a foreign good must, if they are to get anywhere in terms of value for the person that you've bought something from, they have to get back into the US economy, and they have to buy goods in the United States. There's simply no other way to use an American dollar overseas than to come back and buy something in the United States.
[11:31] And that's what I mean when I say aside from the inconvenience and overhead of currency exchanges, which are pretty simple these days. I actually, gosh, way back at the dawn of my computer career, I wrote a foreign exchange trading system for a RBC Dominion Securities, which is a trading company up in Canada. And it's pretty automated, a lot of this stuff. So it's not like you have to take your money down to the local money changers, doubtless being whipped by some devout Christian in front of the temple. You know, it's all electronic and it's all mostly automated. And, you know, to the degree to which it can be automated in terms of complying with customs and regulations and duties and excise taxes and so on, it's as automated as possible, although that's much harder. So in a sort of perfect world, let's just say that the entire process, and we're still going to talk about a free trade situation here. So this is the stateless society run by DROs and everything's managed to its sort of optimal level and there's no taxation and so on. But let's just say there are still differences in currency. You know, there may or may not be in a stateless world. We don't know. And it's maybe interesting to theorize about, but not particularly relevant to where we, the little hump that we have to get over in terms of getting rid of our existing governments might take precedence over life in a stateless society around the world.
[12:44] But let's just say that that world is in existence, and we are completely electronically transferring both the product and the money, right?
[12:56] So I am buying a downloadable executable from you, and in return, you know, we're doing a Visa, whatever, transfer, something, the PayPal transfer, something that's electronic. Well, of course, it would be completely labor-free. If you don't count the amortization of the labor, it would be required to program and set up the system of exchange. You know, I give you my visa number, you take the money out of my visa account, and I download the program that I want to run. And, you know, there's been no labor involved, no human being has touched the transaction. There's just been this sort of magical movement of digital numbers or digital bits from one place to another.
[13:36] Well, of course, this is about as easy as a transaction can get. And it would not be any easier other than the minor overhead of hooking into some foreign exchange trading system. It would be about as easy as it would be within a country. There would be maybe a half a percent or a percent over and above the trade in terms of currency exchange that would be an overhead. But of course, we're going to assume that the country that you're doing this kind of trade with has, say, natural resource costs or labor costs or some sort of costs that are lower than a 1% differential between the place that it's buying and the place it's being bought from, and therefore the trade still makes sense. So if it's 5% cheaper labor, but 1% overhead in currency exchange, you're still 4% better off, so the trade is going to occur. And of course, that trade is going to occur relatively quickly because it won't take long for those labor costs to then be to rise to cover the gap, right? Because if there's a 5% difference in labor costs in a very tight competitive market, people are going to open up factories there and then that labor cost is going to, they're going to bid up the wages of the workers and the labor costs are going to diminish. So sort of in a perfect transaction with no overhead or almost no overhead.
[14:47] You know, this is a completely easy trade. Now, of course, the money that's ended up in the, that's been taken out of the US visa account, let's say, is in US dollars and therefore has to be converted to Japanese yen to be able to spend, be spent in Japan. But of course, somebody's only going to buy Japanese yen with, there's only going to be able to buy Japanese yen and sell dollars if somebody knows that those dollars can at some point be exchanged for goods in America. I mean, there's a reason why, you know, currencies which are no longer valid can't really be sold or bought except on the sort of collector's market, but they can't be bought or sold for goods because nobody's going to honor them.
[15:24] So it doesn't matter where your dollar ends up. The only way that it's going to be transferred to anyone in any sort of economically positive term is if that person is convinced that they will be able to go and buy U.S. goods with that money. It doesn't matter if it goes through 20 people's hands. The only reason it's changing hands is at some point it has to be redeemed for U.S. Goods. Now, of course, sadly, U.S. goods can include such ridiculously predatory financial instruments as treasury bonds or this sort of stuff. So that's one thing that I've always sort of chided people on or been a little bit more aggressive than chiding them on is, oh, we want to buy Canada savings bonds or treasury bills or whatever. And it's like, well, let's say that you get, I don't know, 3% a year on a treasury bond. It's like, well, first of all, don't you have any sympathy for the poor? And second of all, don't you have any sympathy for your children? And third of all, do you really like your taxes going up? And this is always sort of startling to people because it's not that I'm so smart. It's just that they've never been taught any of these things.
[16:31] And of course, if you give the government money and the government gives you more money back later, where do you think they're getting the money from? This is not a business, right? This is not a profit. There's not innovation that improves profit. They're not reducing the labor costs or time costs of production of goods. They are the government So they are only going to give you money back if they seize that money violently from you or your children in the future.
[16:56] So you're simply paying money up front to have your taxes raised later. And of course, the taxes will be raised far more than 3% because the government takes the $100 you put in a GIC that's based on state bonds and... The government takes that money and uses it to borrow, you know, 150 bucks or 140 bucks or 130 bucks. So your taxes are going to go up catastrophically based on you giving them government the money.
[17:24] So, you know, if people do want their taxes to go up and do want their children to end up with, you know, sort of economically stunted lives, then by all means, you know, go for that 3%. But, you know, you're losing completely. Your money is just going, you might as well just make a big bonfire and send it on fire for that. And the reason why the poor, like, have some sympathy for the poor is that, you know, the rich get by on insider trading and mercantilist trade policies, right? That's sort of the sort of tripartite division of the rich, the middle class, and the poor. The rich get by on insider information on political pull and, you know, to some degree on capitalist innovation. But, you know, they also generally, as Noam Chomsky has pointed out, there's a lot of public funding of innovation, which is then taken over by the private sector for profit. So computers and the Internet and so on all started as government programs and then were all commercialized after the initial R&D had been paid for by the taxpayer. Then private entities come in and start making profit from it. Now, I don't know if that's true or not. I mean, I know it's true sort of factually. I don't know if it's true economically. But I will say that the rich do fairly well off the government, right? The middle class get shafted in the stock market and then generally herded towards things like GICs, which they don't understand. And so their taxes end up being raised on the middle class, which, you know, the rich will escape through X, Y, or Z means, offshore trust funds and all this sort of nonsense, tax breaks.
[18:52] Or if the rich are being taxed to a high level, they still have the context and the funding ability to be able to get government favors, which will far exceed, in terms of profit, the taxes that they pay. We know that because they do continue to do these sorts of things. So the middle class gets shafted into the stock market because they don't understand how the stock market is manipulated, or even if they do, they don't have the ability to manipulate it. And the poor, you know, live on, the very poor sort of live on government handouts and receive like many times back in services, what they pay for in taxes. So, I mean, the rich do pay their share of taxes, and I'm not sort of talking about any Marxist interpretation here. And they do pay a lot of taxes, but it's the middle class who are sort of living paycheck to paycheck and not getting nearly as much out of society as they put in. And it's those people who tend to sort of move towards government bonds and so on. And the poor generally don't buy government bonds, right? So the poor will end up with, you know, the taxes being raised, regulations being increased, you know, government predations, aggrandizing. And so they'll end up really shafted, right? Because they don't even get the nominal interest out of the GIC. So, okay, minor segue, official minor segue.
[20:07] So at some point, the money that goes overseas has to come back into your economy and buy things. Otherwise, nobody's going to accept it overseas. I mean, I'm not going to create my own fiat currency from the International Bank of Steff and expect to be able to buy a bunch of stuff overseas because people will say, well, that's a very pretty design, Mr. Molyneux. But I got to tell you, I don't really think that I'm going to trade anything on it because nobody else is going to accept it. So, you know, what that means is that, I can't remember which economist came up with this metaphor, but, you know, if we had a magical machine that could turn wheat into cars, right, so you've got a big hopper and you shove bales of hay in the hopper and, you know, through some horrible clanking, arcane, magical, horrible thing, out popped, you know, a month later, out popped some fully formed cars, you would probably think that to be a rather the beneficial, machine, right? That would be a pretty good... Wheat-powered car factories would be pretty cool, and you would probably invest in something like that, because to turn something as simple as wheat into something as complex as a car is a good thing, right?
[21:13] But if you look at it sort of metaphorically, this is exactly what foreign trade is. Assuming that we grow the wheat in Kansas, and we get the cars from Tokyo, then it's exactly the same. We send wheat over in a ship, and then magically, a month or so later, these cars come sailing back. So whether the machine is in America or is in sort of the quote machine of foreign trade is in Japan, it doesn't matter. It doesn't matter at all. And one of the things, of course, that makes foreign trade so beneficial is that there are differences based on sort of economic accidents and culture and history and so on. There are differences in the values and costs of various countries around the world. So, for instance, there is a strong streak of the ability to speak English in India, especially among the educated classes because of the Raj and the British rule that went on for so many decades.
[22:12] So, you know, well, if you have to choose, well, maybe we'll go with those guys, right? There's also strong engineering and computer science education in India. So if you're going to do software, you want to go speak English. Now, Brazil, of course, is on the same time zone as North America. So they're making their play for getting offshore work.
[22:31] And, you know, so there's lots of, and so the cost for these people are very low because the cost of living is low and the opportunities are relatively minor.
[22:39] So, you know, obviously there's disparities, right? Now, this is not to say that all those disparities are based on natural history or accidents of economic history. The vast majority of these disparities, in fact, I would say, well, let's just say with the vast majority, because I don't want to come up with the vaster majority. They are simply due to state regulation, right? Government predation on the population. So, you know, I mean, one of the reasons that India is so poor is that, you know, it takes five years to open a business and you have to pay thousands of rupees in bribes. And if you declare bankruptcy, you can't sort of shrug it off in the way you can in North America. If your corporation declares bankruptcy, then the debts, I believe, accrue to you personally, and you'll spend the rest of your life paying it off. So you don't have this sort of shield, entrepreneurial shield of corporate legal existence, which I'm not saying that I agree with that existence of a corporate shield, but I'm just saying that as far as the diffusion of risk goes, it's much more risky, much more difficult to start a business, you're taxed at a much higher rate. And it's very uncertain. I mean, you can't even say when you start to create a business in India that, you know, it's going to be five years going to cost you X, it could be never, it could be one year, I mean, you just don't know when you're going in. So, of course, investors who you can't give a fixed cost to are much less likely to invest.
[24:00] And so, basically, everybody stays with the big monopolistic concerns or businesses that can bypass all these regulations through existing networks of bribery and corruption. So, I mean, it's sort of one of the examples of why there's a wage disparity in India is because of the government forcing people to not do stuff or forcing them to do stuff that they wouldn't otherwise do. So those kinds of situations are very important to understand that where there are large price and wage disparities, it's almost always because of government regulation. And certainly if it lasts beyond half a generation or so, it's definitely because of government regulation, or at least a generation.
[24:39] But the fact that there are these disparities is sort of what's important, right? So Canada, up here, we are rich in natural resources. So we do trade with Japan, because Japan has very few natural resources. Japan, of course, is a net importer of things like oil and food, and wood, and so on, and metals, because it doesn't really have any natural resources. So, of course, it's heavily in sort of specialized manufacturing, knowledge workers, and so on, because they take up less space, and they can use that to trade for.
[25:08] The natural resources that are produced by other countries. So that's sort of a geographical accident that Canada has these natural resources and other countries don't. So that's all sort of very important to understand that this kind of division of labor, like the division of labor that occurs within an economy, like I'm really great at coding and you're really great at farming, so I'll write your code for running your combine harvesters and you give me some food so that I can eat so I can code some more. All of that division of labor which occurs within any sort of sophisticated modern economy definitely goes to a very large degree in the free market. I mean, I've become so over-specialized that, you know, I'm sort of like a dodo. If anything changes, I'll have a significant challenge, which is actually, that's more true in the past when I had pretty specified technical skills. And now that I've moved more into sort of management and finances, I have a little more portable, I guess you could say. So, I mean, I'm mostly specialized in Microsoft technologies. So if Microsoft were to go bust tomorrow, not that I'm counting on that, my technical skills would diminish in worth fairly quickly, but management skills are much more portable. But the division of labor that occurs within an economy absolutely occurs between.
[26:16] Economies, right? So between countries. So countries can specialize based on accidents of history and, you know, geography and so on. Countries can specialize just as individuals do and just as certain areas within the economy does. So, I mean, New York obviously doesn't specialize in farming. New York specializes in swearing. No, actually, New York specializes in knowledge worker stuff, right? So entertainment and financial finances, and also because it's a port, of course, they do traffic in goods and so on. And so, you know, even within a country, people specialize, areas specialize based on geography. You know, Minnesota's big on farming because it's, well, Minnesota, so only farmers would want to live there. No, because it's flat and it's got good soil and so on. And that's why New York doesn't and Los Angeles don't because, you know, you can't grow anything in the area of Los Angeles anymore, I think, except tumors.
[27:08] So that's sort of important to understand that when you're looking at something like foreign trade, you know, the sort of buy American, I mean, is complete nonsense. If you buy American only, you are taking away jobs from Americans because you are placing an artificial premium on something called it was made in this country versus it was made in some other country, which means that you're buying things in an inefficient way. Right? So if the sweater from Japan costs 20 bucks and the sweater from the States costs 25 bucks, then all you do, I mean, you can give your 25 bucks to the guy who makes a sweater in the States, but all you're doing then is you're not giving five bucks the difference, right? You're not giving five bucks to somebody who makes a bunch of pens or, you know, whatever you want to buy for five bucks. You're not doing anything better for the economy by giving 25 bucks to the guy who makes the sweater in the States versus 20 bucks to the guy who makes a sweater in Japan.
[28:05] Because, of course, the guy who makes a sweater in Japan is just going to go and spend those 20 bucks back in the States again. But all that's happened is that you don't have that five bucks left over to buy some other thing. So you're just destroying American jobs if you don't buy the cheapest and best goods that you that you you please. It doesn't mean cheapest, right? It could be that you want quality and maybe the Japanese product is of higher quality. Well, if you don't buy to your best taste, right, to whatever your highest values are, then you are harming jobs in America. You are not. You're sending the wrong signals to people to invest. So there's going to be malinvestment. You certainly can't guarantee that people will continue to buy American. So you're going to create unstable job situations for people, which is pretty bad, right? I mean, you don't want to do that to your fellow countrymen, even if you are a nationalist.
[28:53] So if I say, well, I want to buy American, so I'm going to buy nothing but American sweaters, And let's say that I convince everyone else in America to do that, then, you know, everybody's going to start investing in sweater factories and everybody's going to get good at knitting and, you know, all this sort of stuff. And then all that's going to happen is that something's going to change, right? So, I don't know, you'd be able to download and print off sweaters from the internet or, there's going to be a recession and then people are going to say, well, nice though it is to buy American, I'm now going to have to switch to Japanese sweaters because, I mean, I like to be patriotic and I like to wear my pushpin US flag, but the fact of the matter is I simply can't afford the domestic sweaters anymore. So you certainly, if you come up with something unstable as buy American against your best economic interest, even if you do succeed in that, all you're going to do is cause people to invest in the wrong industries, right? And that's going to be a huge waste of capital, right? That money could have been invested in an industry that America could be good at, you know, like making weapons. So you could, you're not doing anybody any favors by creating a sort of buying American campaign and, you know, choosing to buy American with some sort of warm, cuddly feeling over buying to your economic advantage, because that's going to send the right signals to the American economy. And if everybody's buying to their economic advantage, and you can always count on economic advantage in a way that you can't count on things like Buy American.
[30:15] So, you know, there's just no way that that's going to create a stable situation, which is going to result in sort of long-term proper investment. And we're not just talking capital, of course, we're talking people's livelihoods, right? I mean, to have to change one's career is, as I've mentioned in another podcast, the biggest financial catastrophe that can occur. So if you're giving wrong investment signals by creating artificial incentives like buy American you are not just causing capital to be invested but people are going to spend you know thousands of dollars on factory sorry sweater manufacturing factory school things and you know they're going to learn how to do these you know manage and run the sort of sweater factory business and then when that goes out they're completely shafted right so they've still got 20 or 30 years to go or 25 years to go in their career and they don't actually have any sweaters to make anymore, so they have to go and retrain, which is, as I mentioned before, a complete economic catastrophe. And that's really not what you want to do for your fellow, you know, fellow anybody, right?
[31:14] So, you know, you always want to buy based on economic advantage and don't come up with artificial things like Buy American and just add a compassion for people so that you don't sort of send them down the garden path as far as economic incentives go.
[31:27] So, in summation, and I guess I can use the phrase in summation, which I rarely use because I actually just stopped off to get a muffin, so I had a moment to organize my thoughts, which, of course, is a fairly radical notion for me. But, you know, in summation, you know, viewing a foreign trade as any sort of substantially different from domestic trade is, you know, it's mere prejudice. It is an artificial preference for one set of predatory thugs over another in terms of the government.
[31:55] So, you know, don't sort of, don't fall into it. Don't get suckered in by this sort of nonsense propaganda about, you know, our gang is better than your gang kind of thing. And make sure that if you're talking to people about it, just say, you know, ask them, you know, you can put them in that sort of theoretical position. Just say, okay, well, you know, just this is sort of my understanding of it. And again, you know, to sort of give you the tips of conversation that I've come up with sort of for better off or worse, you know, to say that, you know, this is sort of my understanding of it and I could be wrong. And, you know, that's always true, right? So, I mean, that's a fairly good thing to say because you could always be wrong. I mean, I certainly can be.
[32:35] And, you know, just sort of say, well, this is sort of my understanding of it, you know, that if I buy something overseas with an American dollar, somebody is only going to buy it if they can use that dollar back in sort of my country, right? And people will always say, well, but as an overhead and blah, blah, blah. It's like, well, sure. That's why, you know, if there's an overhead where it's not profitable, then people aren't going to do it. Right. So that's only an overhead if you can get, you know, your leather coat manufactured by people in China for, you know, one tenth the cost.
[33:02] And then you say, or you can say, once you establish that point, you know, although I think that that, you know, 10 times differential in cost is pretty bad. You know, it's pretty bad for American workers. And I strongly oppose, you know, stuff like, you know, violent unionism, sort of state-backed unionism and regulations and, you know, ridiculous levels of environmental protection and all this sort of stuff. So, you know, you want to try and keep American labor as efficient as possible so that it can genuinely compete with all this sort of third world labor. And of course the third world governments are completely evil for keeping their people in squalor right which as i've mentioned before to some degree i'm sure they're kept in power by you know governments and large corporations that really like having people in squalor so that they get cheap labor rates and so on which is of course not to their economic advantage in the long run because you want people to become as smart and educated in economics at all times so that they can generate great things for you from an economic standpoint and trade with you more effectively.
[33:57] But, you know, again, not the fault of the corporations. It's really the fault of the governments. So I hope that that sort of makes some sense to you. It's a complicated topic, and I'm certainly not saying that I've done anything more than touch on the surface of it. But, you know, as far as this kind of economic prejudice goes, it really is something we have to outgrow so that we can create a more stable work environment for our brothers and sisters in the economy so that people aren't constantly having to retrain for new things because public whim changes. Whereas if you buy an economic advantage, it's something you can always count on and a more stable economic life is then available for everyone, which is a wonderful thing. Retraining is terrible and losing your skills is awful and not being able to break the future is even worse. So buy an economic self-advantage to whatever you can and you will be doing the best thing that you can for everyone that you know. Thanks again for listening as always and I will talk to you soon.
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