Tariffs, Saving, and Investment

I haven’t written much about tariffs, because so many other economists are doing such a great job. Tariffs are easy: The right answer is unilateral free trade. Tariffs are hard: The rest is explaining why 100 objections are wrong. I’ll get there. One aspect is less clear than the others: the whole business about saving, investment, “reserve currency” and so forth. Most economists reacted in horror at CEA chair Stephen Miran’s essay claiming that US reserve currency status — that we can print money, send it abroad and other countries work hard and send us stuff in return — is a burden for the US. Actually there is a kernel of logic here, and a great danger, though tariffs will do absolutely nothing to rectify the situation at least without huge economic cost. Start with Greece, a good source of cautionary fables. In 2001, Greece joined the euro. By doing so, it foreswore inflation and devaluation should it borrow too much and not be able to repay. European financial markets (especiall ... Read full article.