FIAT AND TARIFF ARE TWINS
J. N. Tlaga
When we were told by ladies and gentlemen of the press that effectively as
of midnight December 4, 2003, the President of US of A repealed his
21-month-old temporary tariffs on imported steel products, we took it as a
simple, incontrovertible fact.
But is this fact in fact a fact?
I'm afraid it is not.
President George W. Bush could not possibly repeal the tariffs on imported
steel because the tariffs are still there...
... and they will be there for as long as US dollar will continue to be
overvalued against other currencies.
The only difference Mr Bush's "repeal" made is that the tariffs on imported
steel are now being collected by the steel importers rather than by the
government of the United States, but they are collected just the same.
To present our point in a manner everyone can understand, let us employ the
following drama in five acts:
ACT ONE:
American Enterprise manufactures personal computers and sells them for 1000 dollars apiece primarily to Chain Stores of America. American Enterprise also sells some of its computers to Chain Stores of China for 5000 yuans apiece. (One American dollar = 5 Chinese yuans)
Meanwhile, Chinese Enterprise manufactures similar computers and sells them for 5000 yuans apiece primarily to Chain Stores of China. Chinese Enterprise also sells some of its computers to Chain Stores of America for 1000 dollars apiece. (One Chinese yuan = 20 American cents)
ACT TWO:
In order to increase Chinese export earnings, Chinese Government devalues
yuan 40 percent down, from 20 American cents to 12 cents.
In response to yuan devaluation, Chinese Chain Stores cancel their orders
for American Enterprise computers because one dollar is now worth 8.333
yuans. There is no way anyone in China will buy American Enterprise computer for 8333 yuans when Chinese Enterprise computers are still selling for 5000 yuans.
American Chain Stores also cancel their orders for American Enterprise
computers and place very large orders for Chinese Enterprise computers
because they are now selling for 600 dollars (5000 X $0.12 = 600).
ACT THREE:
Facing imminent bankruptcy, American Enterprise complains to American
Government about the unfair terms of trade.
In response to that complaint, American Government imposes 66.67 percent
protective tariff upon Chinese Enterprise computers. This 66.67 percent
tariff on 600 dollar computer offsets the effect of yuan's 40 percent
devaluation and raises each computer's cost back to the original 1000 dollars.
The net effect of the tariff on Chinese Enterprise computers is that
American Enterprise computers are not likely to lose the entire American
market to the Chinese competitor, because American Government will be
collecting 400 dollars from American Chain Stores for every computer they
will import from China.
However, the tariff on Chinese Enterprise computers will not restore to
American Enterprise the market it lost in China. As long as yuan will
continue to be pegged to dollar at 12 cents, American Enterprise computers
will cost 8333 yuans in China vis-à-vis 5000 yuans for locally made
computers.
ACT FOUR:
Chinese Government complains to World Trade Organization that American
tariff violates world trade rules.
As World Trade Organization rules against American tariffs...
... the owners of American Chain Stores organize thousand-dollar-a plate
dinners to raise millions of dollars for president's re-election...
... the press clamors for "free trade" and "unfettered trade"...
... and the president ultimately announces that the tariff is repealed.
ACT FIVE:
Facing imminent bankruptcy again, American Enterprise closes its factories
in America and reopens them in China.
American Enterprise computers can now be sold to Chinese Chain Stores for
5000 yuans and to American Chain Stores for 600 dollars, while American
Enterprise executives can have eight-figures salaries, if only because they
do not have to pay American union wages anymore.
Former employees of American Enterprise are now pumping gas, bagging
groceries and flipping hamburgers. The lucky ones, are selling and servicing
for small fraction of their former wages the American Enterprise computers
made in China.
And professional propagandists sing hymns to "free trade" and "unfettered
trade" while American Chain Stores collect 66.67 percent (400 dollars)
windfall profit on every imported computer...
... a windfall profit that was formerly collected by the American Government
as a protective tariff.
--- End of Act Five and the entire drama
With this drama in mind, no one should have any difficulty to see what is
really going on.
"Free trade" is not synonymous with the absence of tariffs.
Under "free trade", tariffs are collected by the importers instead of the
government, but they are collected just the same, for the elitist owners of
the import rackets do not pass their discounts resulting from dollar
overvaluation on to their customers, they pocket them. Wouldn't you do the
same if you were given their choice?
It is this automatic import profit that recruits and co-opts new members
into the Quisling elite of America.
It's destroy or be destroyed! When American manufacturer, cornered by the
overvalued dollar and undervalued foreign currencies, opts for destroying
his country rather than allowing himself to be destroyed, he automatically
joins the ranks of the Quisling elite of America.
Instead of invading and occupying America to force her to dismantle her
industries and then to pay tribute of two-thirds on her imports...
... the enemies of America created monetary system which forces cornered
American industrialist to do for them what invading armies could not do.
What is it that keeps this system in place?
It's the fiat money!
Under fiat monetary system, it is possible to keep world currencies in the
state of perpetual misalignment. Overvalued currency allows automatic
windfall profit to the importers. When this windfall profit is taken by the
government, it is called the tariff, and the whole economy is then labeled
"protectionist".
For as long as structural currency misalignments exist, tariffs on imports
are created automatically...
... under protectionist rule, they are collected by the government, and...
... under "free trade" they are collected by the "outsourcing" importers.
What really happened on December 4, 2003?
President Bush said to Ford Motor Company and other steel importers:
"From now on, you don't have to pay fair price for steel made in America.
You may buy your steel 30 percent cheaper abroad, and pocket the difference as your windfall profit, for US Government will no longer collect this windfall profit as a tariff."
The results:
1. The tariff is collected by the importers, but collected just the same;
2. US consumer receives no benefits from the cheaper steel, but must pay
taxes to replace to the government its lost tariff revenue;
3. Tens of thousands of steelworkers will lose their jobs and pensions;
4. Tens of thousands of already retired steelworkers will lose their
pensions when steel companies sink into bankruptcy.
Welcome to the wonderful world of "free trade"!
Is there anything that can be done to end this system once for all?
Yes! To restore honest money system.
When silver and gold serve as daily money, it is not possible to keep
currencies in the state of perpetual disequilibrium. Under honest money
system, currencies are automatically exchanged at purchasing power parity
level.
Without perpetual misalignment of currencies, there is no perpetual source
of windfall import profit.
Gold price manipulation is the key factor in the entire cabal. To keep
dollar permanently overvalued, gold must be kept permanently undervalued.
People who collect their private tariffs on America's imports, and who
export American jobs to save their own, will keep gold and silver forever
undervalued in order to keep US dollar overvalued, for without overvalued
dollar there is no import tariff to collect.
Now, you know it all.
Copyright 2003 J.N. Tlaga
December 6, 2003
jtlaga@bellsouth.net
Email this Article to a Friend 
Printer Friendly Version