When Tina Met Fred

Once upon a time there was a Giant Tarantula named Tina, and she was having a problem with local insects. They kept sneaking into her lair and eating the eggs she laid. Tina realized that these pests threatened to wipe out the tarantula population by scarfing down all the eggs before the baby tarantulas hatched. So, she went looking for a solution…

Tina found Fred the Frog… who was having his own trouble.

Fred’s frog brethren kept getting gobbled up by local snakes.

Tina realized that Tarantula Town and Frogville might work in a symbiotic partnership to protect each other.

“Look, I would normally eat frogs, too,” Tina told Fred. “However, in this case, I think we might be able to help each other.”

“How so?” a weary Fred queried.

“You and your frog friends come and live in Tarantula Town, and you guys get to eat all the insects you want, and in return we will make sure that not a single snake gets anywhere near you, because the snakes know that we looooove a good snake barbeque in Tarantula Town.”

Fred thought for a moment, then ribbitted his approval.

And so began a unique, symbiotic relationship: Frogs protecting tarantulas protecting frogs.

And all was good.

Until one day, when the newly elected leader of the tarantulas decided on his own that the tarantulas, given their size relative to little frogs, could renegotiate a better deal. He announced that, henceforth, the tarantulas could eat 25% of the frogs.

The frogs rightly balked.

“Have you lost your friggin’ mind!” the frogs sang out in unison.

“I am Tarantula King! What I say is the law. So do as I command or be banished from Tarantula Town and face the world without our great protection. Protection that some are saying is the best protection they have ever seen!”

The frogs didn’t give it a moment’s thought.

They raised their webbed feet and flipped a webbed middle finger to the Tarantula King, and then they all hopped away.

Without a wall of frogs to stop them, the insects returned to devour all the tarantula eggs, and Tarantula Town ceased to exist.

And with no ally to ward off the snakes, Frogville quickly became a ghost town.

The moral of the story: Play stupid games, win stupid prizes.

In other news…

Donald Trump has imposed a 25% tariff on all cars and trucks that are not made in America. Same for auto parts that are not produced in the good ol’ US of A.

Whether the country is friend or foe doesn’t matter. Make Cars Expensive Again!

The problem with this strategy is self-evident: Friend and foe are already threatening counter tariffs and are looking to work together to preserve their own self-interests.

Which led King D to post in the middle of that night:

Disregarding the fact that the EU is not a country, what we have here is a classic case of the (not yet) famous Tarantula/Frog Paradox, in which friends end up as enemies because of egregiously shortsighted stupidity on both sides.

They’re both shooting at each other by shooting at each other through their own foot.

Not for nothing, but this tit-for-tat, my-daddy-can-beat-your-daddy historical ignorance was one of the factors that turned a nasty recession into the Great Depression, as the US implemented the tariffs in the Smoot-Hawley Act, which then led to counter-tariffs… which led to the vast destruction of wealth and livelihoods across the globe… which gave rise to economic nationalism… which helped precipitate WWII.

This is how Maclean’s magazine reported on Canada’s reaction to Smoot-Hawley:

In 1930, a fairly large group of economists and financial types criticized the tariffs by predicting they would turn a recession into a full-blown depression. Henry Ford called it an “economic stupidity”; more than a thousand economists signed a letter opposing it, and Thomas Lamont, a J.P. Morgan partner and financial advisor to the president, blamed it for sparking nationalist sentiment all over the world. Its opponents feared that the Act would erode goodwill and provoke retaliatory tariffs, spreading protectionism around the world. That did indeed happen: Germany, for example, attempted to turn their economy into autarky, closing it off as the country strove for self-sufficiency.

I’ve written it before, and I’ll write it again: Tariffs—selective, targeted and in moderation—can be beneficial. But tariffs that are broad-based, egregiously large, and used as a cudgel when other countries rightly seek to protect their self-interests… those tariffs promise to cause a series of unintended consequences on consumers, businesses, and governments globally.

The moral: Load up on gold. Now.

Bitcoin too.

Same with Swiss francs.

Governments are playing stupid games.

The people, sadly, are going to win the stupid prizes.