Preparing for Trump | A Mercantilism Checkpoint
“Mexico needs to produce more than it consumes”
-Mexican Fin. Min. Ramírez
What is This?
A guide for contextualizing Donald Trump’s plans for keeping America great and protecting our core interests in a divided world.
Checkpoint on mercantile behavior as a starting point for understanding Geopolitical implications of Trump’s Presidential plans for a self-sufficient Fortress-like America
Those plans are embodied in recent seemingly throw-away statements aspiring to annex Canada, buy Greenland, reclaim Panama, and to eventually reconvert Brazil after making landfall in Argentina last year
1- Mercantilism Revisited
For the past three years, and perhaps more, almost every governmental behavior and policy change has been explained by one overriding concept, Mercantilism.
Now is a good time to restate what Mercantilism is
Getting a textbook definition out of the way: Mercantilism emphasizes the importance of a favorable balance of trade and strong governmental control over economic activities to increase national power and wealth.
Mercantilism is a transitional economic ideology first implemented post Feudalism’s collapse and until recently had been shrinking in use as a more Globalist type of trade flourished.
Now it has become useful again as globalized economies struggle to remain somewhat friendly toward each other as globalism recedes. Mercantilism has a stigma attached to it.
2- Don’t Use The M-Word
The legacy press will (still) not dare use that word, for it incorrectly connotes Bullionism1. But we did and continue to write about it in this space as objectively as can be done. To that point, several previous works on the topic are at bottom including our January of 2022 public declaration of it as the returning economic model governing Global trade.
So, what is it at its core?
3- What is Mercantilism?
Mercantilism for purposes here, is a trade philosophy that permits global trade in a less cooperative world. It came about as the world started to rebuild into nation-states after roman empire collapse.
Following the fall of Rome, Europe was divided into local and regional political and economic entities, each politically functioning and economically surviving in high degrees of isolation from each other. This was feudalism, a result of the first time globalism collapsed. However, that began to change in the 15th century
From: How Mercantilism Brought Europe’s Fragmented Economy Together
However, beginning in the fifteenth and sixteenth centuries, forces came into play that began to reverse this. Kings and princes were determined to concentrate power in their own hands as “absolute” rulers, which meant reducing the power at the local and regional levels.
Mercantilism developed in the emerging nation-states under the kings, especially in France, Spain and Great Britain, as a set of economic tools to assist in bringing about the centralisation of political power and control.
Thus, Mercantilism is the name given to a system of trade where trust between trade partners is greater than what Feudalism’s collapse (little trust) was, but less than under Globalism.
As such it is considered a transitional economic ideology2.
Gold or some other hard currency is used to preserve receding trust (dropping down from Globalism), or protect growing trust (rising from post-Feudal times).
Mercantilism is an approach to commerce that, as a result of the above, understands by necessity sometimes the whole is not greater than the sum of the parts.
Using Globalism as reference point for comparison, Mercantilism:
- emphasizes return of capital over Globalism’s return on capital,
- prefers cash-flow over future earning prospects
- prioritizes reliability and security of supply chains over optimization of them.
- prefers self-sufficiency over codependency
- Looks at VaR more and statistical probabilities less
- No longer assumes global abstractions are going to suffice in a crisis
- prefers spot markets are more important than futures markets
- Utilizes Bilateral trade over Multilateral trade
As a result of these concepts, ( and still using Globalism as the reference point)we are getting manifestations in physical and financial markets like:
- Reduction in trade complexity under globalism to reflect reduced interdependency
- Onshoring/Friendshoring of Supply-Chains
- Onshoring/Friendshoring of Payment-Chains commensurate with Supply-Chain
- Protectionism of resources, and industries deemed key
- Less financial leverage
- An assumption that there will be less investment by foreigners in your country
- Foreign investment will be more persuaded by synergistic and asset secured FDI style equity rather than straight Debt to come on board
- Current Account balancing over Balance of Payments which offsets Current with Financial
Be self sufficient
Export more goods than you import
Nurture trade partnerships based on mutual economic *need*, not necessarily ideological similarity
Know the difference between need and desire in commerce
Position for fragmentation, market share will be up for grabs.
Learn comparative advantage stuff.
Own the gold and silver for above board trade
4- What Causes Mercantilism to Manifest?
It is important to understand that some of Mercantilism’s main characteristics: an unwillingness to look for ongoing value beyond the current transaction, an ability to thrive in state-enforced monopolies and regulations, and its export-oriented preferences were all features structurally determined by broader forces at play.
Mercantilism is a reaction to mistrust and embodies the means needed to survive the collapsing supply and payment chain complexity concurrent with de-globalization.
Mercantilism in the end is the coping mechanism businessmen and the nations they work in use to survive political idiocy.
5- What else is Mercantilism?
It is an approach necessitated by the absence of long term credit as a manifestation of weak trade partner trust.
Prefers Gold and other SOVs like Bitcoin that have no nation-state allegiance (or controllability) as settlement mediums.
Due to mistrust, commitment timeframes are shorter and the pie is viewed as the sum of its parts, putting less value on things like intangibles and abstract values
Manifests in an absence of rolling/revolving long term credit due to protectionism and some distrust.
6- About Globalist Hate
Neokeyensians hate Mercantilism and view it as shortsighted and a regression from Globalism. They are wrong.
Mercantilism was a manifestation of trust growing as Feudal times ended. It is currently a fall back as Globalism recedes now.
Specifically, Mercantilism in its current resurgence, is a response to shrinking globalism now. In the past, it was Capitalism’s training wheels out of Feudalism’s collapse (no trust) and into globalism (complete trust)
Back then, it was a stepping stone towards Globalism. Right now it is all that stands between the world risking World War and a possible neo-feudalistic state. It is an economic line in the sand for nations who wish to exist while hopefully working problems out with unhappy global neighbors.
Continues here unlocked
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