Protectionism

First let's see what protectionism is. According to Mr. Webster it is the advocacy, system, or theory of protecting domestic producers by impeding or limiting, as by tariffs or quotas, the importation of foreign goods and services.

That sounds pretty good. It is something that will protect the jobs of our workers from goods that can be produced elsewhere and undercut the prices of our local goods. How? There are a couple of ways. The merchandise or commodity itself is in very large supply in another country and is mined or grown there very cheaply. Not much you can do about that. Or the labor costs of production are vastly less than our own workers and the product can be manufactured for less.

The average worker in the U.S. makes about $12.00 per hour while the workers in Mexico get $2.00 and the people in China average 60 cents per hour. How do you compete with them? Answer - you can't. So what do you do? If you are a shoe manufacturer in the U.S. you ask the federal government to levy a tariff (tax) on all imported shoes (or maybe just the kind you make). This sure helps that particular shoemaker who might have 300 employees making sneakers. Now the sneaker maker can keep his prices up and his workers working. That's good.

But wait a minute. There are millions of feet that need sneakers and that means millions of consumers are paying more for comparable quality sneakers. Is it fair to give special consideration to a very small group that automatically penalizes the mass of consumers?

Examine the definition of tariff again and think it through to the end. A tariff is a tax on consumers.

You are paying more for certain goods (and there are about 13,000 separate tariffs) than you should just for the benefit of a few manufacturers who cannot compete in the world market. Every country is not just a unit unto itself any more. We now have a global economy that allows specialization of products. If a company cannot compete it should not be in business and should not penalize the majority of its citizens for the benefit of a few. You, the consumer, should not have to pay more for tomatoes, brassieres and steel just so our politicians can get reelected. That is what is boils down to. Unions will promise to back certain candidates if they will vote for tariffs (tax increases) that protect incompetent manufacturers. The steel tariff is an excellent example. Bush put on a tariff when he could have given a tax break to help modernize that industry. In the long run our steel production will disappear because of continuing inefficiency. If we get into a trade war where one country trumps another with more and more tariffs it is a guaranteed loser for everyone. Visualize this as building a house of cards. You end up with a game of 52-pickup. It could go to the ultimate of deflation and depressions for all the countries of the world.

Protectionism in all of history has never worked.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

---

The Stock Trading Plan - Why You Must Have One To Trade Successfully

This is the continuing story of our two imaginary traders,... Read More

Pension Plans

If you have a pension plan at work you will... Read More

Expense Ratios

Mutual funds and brokers are always preaching not to buy... Read More

A Stock Market Investment Plan that Never Lets You Down

The bulls and bears of the stock market are both... Read More

Play another Day

Money management starts with protecting your capital, realizing profits and... Read More

Acapulco - The Stock Market Dives

There is a famous cliff on the ocean in Acapulco... Read More

Stock Market Education; Day Trading for Beginnners; How to Pick Stocks

The trading method you employ to approach the stock market... Read More

No Load Mutual Funds: Boost Your Portfolios Returns

Investors who exclusively use broadly diversified, no load mutual funds... Read More

Inertia Syndrome

When it comes to buying a stock or mutual fund... Read More

Struggling Stocks, Booming Commodities

04/28/2005NASDAQ dropped -12.5% year to date in 2005. S&P500 index... Read More

Humpty Dumpty the Stock Market Falls Down

Humpty Dumpty had a great fall and all the King's... Read More

Living Trust Investing: Income Considerations when the Grantor Dies

A common problem I often see when working with living... Read More

Quality Investment Information: Standing Firm In the Face of Opposition

THERE'S SOMETHING TO BE SAID FOR standing firm in the... Read More

Enronization

Even if you don't own any of their stock or... Read More

Finding A Good Stock

One of the things people are always asking me is... Read More

The 401(K): How The Insider Has Stolen Your Retirement!

Mutual funds were moderately successful in creating a presence in... Read More

Investment Capital Gains

Have you bought any mutual funds this year or late... Read More

Do You Know What is the Single MOST Critical Mistake in Trading the Stock Market??

Well maybe that's overstating it a little, but it's certainly... Read More

Performance Funds

Mutual funds are doing more and more to discourage investors... Read More

Mutual Fund Honor Roll ? Buy High, Sell Low by Chasing Performance

Buy high and sell low -- It's not a typo.Millions... Read More

Complacency

During the month of January the Dow Jones Industrial Average,... Read More

You Don?t HAVE To Be Trading

As a novice trader, you'll often feel the need to... Read More

How to Read an Annual Report

Every publicly traded company is required by the SEC(Securities and... Read More

On Line Stock Trading: Small Cap & Micro Stocks Go Up and Down - How Can You Profit?

Success in small cap & micro cap stock trading like... Read More

Stock Market Investing Odds

The greatest stock market myth is the idea that investing... Read More

Analyzing Growth Stocks: An Important Focus For Any Investor

Analyzing growth stocks is an important focus for any investor.... Read More

Structured Settlement; Lawyers in NY and Mutual Funds

Minority Report the movie may not be far off if... Read More

?Fears Only Enemy Is Action?

What a great statement!I just heard someone use it in... Read More

Kick The Tires

Before you buy another car you walk around the lot,... Read More

Jack and Jill

Jack and Jill went up the hill to fetch a... Read More

A Triple Dipper: How to Make 3 Profits on 1 Stock Trade

This is a rather simple strategy with which I am... Read More

The Inside Scoop on Mutual Fund Rip Offs

The bear market that showed up at the end of... Read More

Mr. Market

I constantly hear the talking heads on CNBC-TV, the radio... Read More