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Bernanke starting to catch up to Evans-Pritchard
Back on December 20 2008 (Protectionist dominoes are beginning to crumble around the world), British-columnist Ambrose Evans-Pritchard explained the U.S. mercantilism going into the Great Depression, and what Great Britain did about it. Pritchard wrote:
According to Bernanke, the gold standard was supposed to prevent mercantilism, but it didn't because France and the United States violated the unwritten "rules of the game" that countries who accumulate gold have to inflate their currencies. Now China and the other modern mercantilists are violating an actual written rule of the game: Article IV of the International Monetary Fund Articles of Agreement requires that countries "avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other members."
Yet, Bernanke doesn't do anything about it.
There is a simple solution that Bernanke could recommend, should he finally catch up to Evans-Pritchard. It is kin to Great Britain's successful strategy of the 1930s. The United States could impose a scaled tariff on those countries that are practicing mercantilism. A scaled tariff is a WTO-legal tariff whose rate goes up when our trade deficit with a mercantilist country goes up, down when our trade deficit goes down, and disappears when our trade deficit disappears.
It is kin to "Imperial Preference" in that the United States would be buying tariff-free from those countries that don't practice mercantilism. But it is much better because it would also cause the mercantilist countries to take down their barriers to American products.
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