What should we teach our future American business owners?

Article by: Tronald Dump, ‘Merican’ president predicted in illuminati prophecy for 2020 apocalypse, Know Nothing Digest guest writer.

American business owners should understand these basics of monetary policy history in order to interact with the global business community on equal footing with their global peers.  Knowledge of what the gold standard was or what fixed rates are or relate to and why one would want to know, will help American business owners understand when exploitable opportunities are likely to exist in the markets they operate in.

During the late 1800s Britain was the most influential nation in the international banking community.  Britain tied the pound sterling closer to gold than silver at that time and the international fixed currency rates were tied to a gold valuation standard from around 1870 through 1920.  Discovery of gold in California and Australia secured the use of gold as the currency valuation-peg metal of choice because of gold’s rarity and adequate supply.   The influence of Britain on the international business community lead to the prestige of gold as a foreign currency valuation stabilization peg.  The process of payments under the gold standard was so complex that it puzzled even leading economic minds at Harvard in the 1930s.  Exogenous shocks lead to the discontinuation of the gold standard just after the first world war.

Fixed interest rates are defined as loans where the interest rate on the loan doesn’t fluctuate during the fixed rate period of the loan.  These reliable, fixed interest rates inspire confidence among lenders and encourage borrowing among entrepreneurs and subsequent market growth activity.  Understanding the Gold Standard Era and the Bretton Woods “Era” policies is important for American business owners to take part in today’s public debate over fixed rates and trade barriers that direct the construction of monetary policy.  Many business owners are voters who have been misinformed by political campaigns seeking to bring back the gold standard or to disseminate the distrust of the global banking community.  American business owners would do well to know that Bretton Woods isn’t where the illuminati lives.  The international money system underwent additional periods of change from the 1920s to the end of the 1930s, leading to the Bretton Woods conference, which lead to the International Monetary Fund.  The move away from the gold standard into the fixed exchange-rate system took the currency exchange market through disequilibrium and past the Bretton Woods Era with the guidance of Richard Nixon in the 1970s.  The overview of this global shuffle of currency exchange regulations loosened the exchange controls that inhibited international trade following country realignment activity post World War II.

It is important to understand that a tariff, in international trade, is defined as a tax on importing goods and services into a country.  International business persons will interact with tariffs in every country they conduct business in, except for Macau and Hong Kong, but their country status is ambiguous.  Understanding tariffs requires considering the gains and losses from putting up barriers to free trade between your country and other countries that your country engages in trade with (Pugel, p.137, 2016.)  Economists generally agree that less barriers to trade is better for the global economy, but policy makers often have other objectives.  Protecting certain sectors of the economy from foreign competition is often an attempt by politicians at maintaining support from their base; not an attempt at maintaining external balance of payments (Pugel, p,561, 2016.)  These protectionist measures, our economists assure us, are not sustainable over time, and American business leaders find time and again that this is in fact the case.  An open, free trading economy with a floating currency peg is more resistant to external exogenous shocks.

Independent market forces induce exchange rate fluctuations a great deal at times, and this inspires governments to engage in proactive policy measures to stabilize exchange rates.  Governments frequently restrict who has permission to do business in their domestic market, and how their country engages in trade through trade barriers and tax incentives.  Governments craft policies to manipulate access to foreign exchange markets through imposing capital controls (among other actions) limiting or requiring approval for payments related to certain international financial activities (Pugel, p. 465, 2016.)  These essential aspects of international economics will arm American business owners with knowledge that has the capacity to positively influence America’s position in today’s global economy.

Sources cited:

• Pugel, T., 2016, International Economics 16th edition

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