Mercantilism is often used to refer to the views on economics, expressed as early as 1600, by which the economy, must be centrally planned, at least to a certain extent. Ideas come to mind of trade barriers, protectionism, and while “mercantilism” may well be used to describe theory that was laid to waist by Classical economics, and definitively by Adam Smith, people seem to forget that the keynesian “easy-money” policies, are essentially mercantilist. Mercantilism, as proved by classical economics, is nothing but a combination of fallacies and government appointed privileges. This was well known 200 years ago.

Sadly, Keynesianism revived the mercantilist principles, to the extent that they have now become “mainstream”. Unlike the 19th century, where classical economics dominated, the 20th century gave way to a new-found belief in magic and fairy tales.

All of today’s premier economic policies, notably monetary manipulation and floating fiat currencies, attempts to “manage the economy” via government deficit spending, and the never-ending concern over “imbalances” in trade, are straight-up Mercantilism.

The keynesian easy-money policies amount to not much more than currency devaluations, though no one will call it that today. Furthermore, we cannot rely on easy-credit to get us out of a recession. In fact, it is wrong to say that credit conditions are bad, since banks aren’t lending. the problem lies on the other side of the equation. Credit is abundant, what is lacking is real investment opportunities, because the fundamentals of our economy are not sound.

I think it’s possible that more and more of this is revealed as the year progresses, specially if it continues the way it has begun. (red numbers have dominated the stock market)

In my view, most of the media is overly optimistic with the situation in Europe and the U.S. The worst is yet to come, and maybe when it does, we will finally be ready to throw out the mercantilist views outside the realm of serious intellectual debate and outside of politics.


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