Import Certificates

David Foster, of Photon Courier, has a post on import certificates based on an idea by Warren Buffett. I hope David doesn’t hold a grudge — he’s a frequent commenter here and I say this with all the love I can muster — but I hate this idea. I know Warren Buffett has more money than I’ll ever have and his opinions should be taken seriously — just not this one. Buffett is right about having companies expense stock options, though.

Buffett is trying to create a trade barrier disguised as a market mechanism. We already have a functioning market — some barriers notwithstanding — and no other mechanisms are needed. If anything we should be removing the existing barriers.

Not only do we already have voluntary trade amongst individuals but we have a fluctuating currency value and interest rates to handle imbalances. I’m not enough of an international finance whiz to do the math and explain why this isn’t a big deal, I just know it isn’t. Buffett seems to be arguing that we are depleting our stock of capital, but if that were the case we would have been seeing the ill effects of trade deficits long ago.

The United States has been running a trade (or current account) deficit for decades and we’ll continue to do so. We ran trade deficits throughout the 90’s and made out like bandits. Same with the 1980’s. In fact, most of the developed world will be running persistent trade deficits in the future just due to demographics.

Is there an international finance whiz out there that can carry this further? Even if I’m wrong?

No comments yet.

Leave a Comment