Trade Myths: Globalization and the Trade Balance Fallacy

Myth 1: Imports kill jobs; Myth 2: Exchange rates drive trade; Myth 3: A trade balance is a national matter; Myth 4: A trade deficit is bad: Myth 5: Foreigners finance America's trade deficit — These commonly held concepts of trade balances are based on 15th-century accounting techniques. Politicians misled by these outdated ideas have made cheap, vote-grabbing protectionist policies that reduce to saving jobs by fighting unfair imports. One result of such sophistry has been two senseless world wars. The paradigm has to move in to the 21st century: a first step is to include multinational corporations' incredibly successful overseas activities when calculating trade balances. Enzio von Pfeil invented this approach in 1987 and has been applying it publicly in his research and in the press since. His key message is that if politicians keep using simplistic protectionist policies, they are courting retaliation in the countries where they operate, thereby nurturing terrorism as well as threatening the very existence of their own corporations operating abroad. If such politicians are threatening these multinationals' overseas operations — why are these companies financing the campaigns of these politicians? Born in Namibia and raised in America, Germany and England, Enzio von Pfeil studied under Friedich von Hayek and got his Ph.D. in economics, then worked for the world's three leading banks of their day. Formerly chief regional economist for leading London-based investment banks in Hong Kong, von Pfeil is now an independent investment adviser and a regular contributor to Bloomberg Television UK, Bloomberg Television Deutschland, and to CNBC Asia. His investment advice is constantlyupdated at www.EconomicClock.com.