Free Trade Blog

In todays's modern world, almost no country has the ability to be self-sustaining. Not only does this mean increased amounts of work required, but people would also need to be specialized enough to complete jobs they normally would not do in order to produce everything needed. Additionally, producing everything domestically, while creating jobs at home, would also drive up the prices of most goods because domestic production would be more expensive. Luckily, most countries are not forced to experience this issue because they participate in trade with a multitude of other countries. Simply put, trade makes countries richer by enabling them to use time and resources wisely to specialize in the production of goods that they can make most efficiently. Countries decide what to produce based on comparative advantage, meaning they choose to specialize in whatever they are able to make the best and most efficiently. Trade also contributes to lower prices for many goods, particularly imported, because other nations have different work regulations and less costs go into making the item, so the overall price is cheaper as long as no tariffs are imposed. This eventually leads to a higher standard of living because consumers have increased purchasing power, similar to as if their incomes had increased. Trade is clearly beneficial to developed countries, but what most fail to realize and actually argue against is the fact that trade also helps poorer countries. Engaging in trade gives these poorer countries, which usually do a lot of manufacturing with cheap expenses, access to foreign markets and opens the door to trade with other countries, often times richer ones with money to spend. While there are some disadvantages associated with trade, its benefits clearly outweigh the cons. It has positive impacts on wealthy countries, poor countries, many industries, and many consumers. Right now, trade is helping many countries flourish and maintain a high standard of living but if more bans were imposed, we would see a decrease in both these things.

Flaws With The Gold Standard

Members of the  Republican Party have been considering returning to the gold standard in order to back our currency. For decades this was how our monetary policy was; however, a return to the gold standard would have many more negative consequences than good. Returning to the gold standard would render the central bank powerless to control inflation and recessions. By backing the dollar with gold, interest rates will automatically go up when the resource is scarce, and of course they would go down with a greater supply. Therefore, the Fed wouldn't be able to regulate interest rates along with the state of the economy because they would be dictated by the amount of gold we have. This inflexibility disregards the Fed's ability to control inflation and the state of the economy. Currently, it is able to keep inflation in check by increasing interest it pays on reserves, increasing the money supply, and dictating how much banks can lend out. Additionally, under the gold standard prices were easily and frequently subject to change due to changes in the balance of trade or gold supply. With our current monetary system, the price level has been far more stable. For example, prices between 2008 and 2012 experienced 23 times less variance than prices with the gold standard. If the US were to return to the gold standard it could be disastrous. Gold is not abundant enough to be a medium of exchange for this country. Going back to it could cause massive deflation because the money supply would be greatly decreased, not to mention the fact that the economy would nearly collapse because of the high levels of household debt. The US' economy has been much stronger since adopting a fiat currency. This has resulted in more stable prices and the Fed has the power to control inflation, increase the money supply, and promote economic growth when necessary. Returning to a gold standard would undo all of this and only hurt the economy. It is a thing of the past and best left there.