I agree in the principles you're outlining and I think it's disgusting and another great example of the completely useless and inept governmental leadership. But, all of that said, I'm just saying that it's a relatively minor effect in the big picture. Someone in Europe will still buy our currency even though we have a bunch of boneheaded congressman. However, they may not buy if our interest rates are too low,etc.
First of all, most of our trading partners still have tariffs and other forms of protectionism (which is why they are growing at our expense!). Secondly, LET them follow suit! Maybe then we'll start producing some of what we consume and we can deregulate our free market and have a division of labor that regulated by only our government, instead of a shared division of labor where the Chinese communists, European socialists, and South American fascists break the rules! Unless we find a way to create better paying jobs (which protectionism DID do and WILL do again) we will need enormous social safety nets and high taxes. Tariffs would allow our trading partners to finance our federal budget! I'd much rather tax FOREIGN corporations than domestic corporations and workers.
It's sensible what you wrote but isolationism has never really worked in the long term. With tariffs it's clear there will be less trade with other nations and that will lead to less competitive companies, less technologies. So in time you will look like the soviet union and their totally undeveloped sectors because they never faced any outside competition in those. Or North Korea. Protectionism could work if applied in a smart way, like you said, other governments already do that anyway, yet we still but their junk! But what does the US have to export that other nations can't substitute.
Sharply increase rate means nothing if the fed continue to run the printing press at full speed. Just look at post war Germany, the interest rate is high, but inflation is much higher.
Excellent Commentary, Eveningtrader .................................................................................. You are absolutely correct. However in the real world, here is how it works. The Fed makes an announcement to the world that it is raising rates to 7% fed funds. The Fed makes an announcement to the world that it is no longer going to print more money. Which statement would cause the biggest reaction ? The statement of 7% gets the prize hands down. Why? Because there is an immediate, real reward that can be put in a bank. Very simple.
I could not disagree more about it being "minor". It's the essence of what will lead to the financial destruction of the US unless there are MAJOR changes... none of which are on the horizon at this time.