John Tamny has a typically well written article at Real Clear Markets about the likely move away from free trade:

In his Tract on Monetary Reform, John Maynard Keynes made the essential point that when money is debased, enterprise is discredited, and trade barriers soon reveal themselves. Having witnessed the worldwide monetary errors of the ‘20s that led to economic isolationism in the ‘30s, Keynes knew well the importance of the 1944 Bretton Woods monetary standard, of which he was a chief architect.

And with the world on a dollar standard in the ‘50s and ‘60s alongside a dollar defined in gold, trade flourished. As Stanford professor Ronald McKinnon has frequently pointed out, the Bretton Woods years fostered a great deal of economic harmony among countries, not to mention impressive rates of economic growth.

All of this is relevant to the present considering the “mood shift” against free trade in Washington. As a Wall Street Journal article from last week noted, Tuesday’s “election could put trade-liberalization on ice for a while.”

While the potential shift described above is a major mistake that will surely harm economic growth, it’s also one that shouldn’t surprise us. As McKinnon wrote in his 1996 book, The Rules of the Game, “for each cycle of currency appreciation and depreciation, there will be a tendency for worldwide trade barriers to rise.”

Most of our current economic troubles can be traced to lousy monetary policy which is reflected in the value of the dollar. John makes some other excellent points about trade and the entire article is well worth your time. Read the whole thing.

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