When an economy begins to have problems such as those faced today by the economy
of the U.S. (and indeed, the world) people begin to remember bad economic times
when the stock markets drop several percentage points remind people of Black
1929 when the New York stock exchange dropped and seemed to lead the U.S. into
the Great Depression. The stock market crash did not cause the depression, it
was a reflection of what was already beginning to happen.
The nations of the world have always been economically interdependent. If
one economy suffers there are adverse consequences for the other nations as
well. On the other side of the coin, success in one nation can help the other
nations. So a strong economy in surrounding nations will help ease the difficulties
of a nation in economic trouble. Today international trade and corresponding
economic interdependency has reached new heights.
Since the United States is the world's largest producer and importer we are
very closely tied to other economies. If the United States experiences an economic
dislocation of similar magnitude to the Great Depression, it will almost certainly
likewise force the rest of the world into depression.
Take Mexico for example. As we know, the U.S. is Mexico's largest trading
partner. If U.S. demand for the products of Mexico were to drop 50% it would
be a small
part of U.S. imports but it would be a much larger proportion of Mexico's exports
and of Mexico's economic activity. There would be a significant increase in
unemployment in Mexico driving a greater impulse to migrate to the U.S. But
the workers from Mexico already in the U.S. would be experiencing less demand
for their work as well which would reduce the income of the Mexican families
still further. In short, there is a good chance that Mexico would experience
an even worse depression than the U.S. would.
In the U.S. resentment of "illegal immigrant" labor would increase
for a variety of reasons, many political. The increased attempts to cross the
border for work would be met with increased enforcement and anger on the part
of segments of the U.S. population, especially in those areas near the border.
Violence is almost certain to break out in several places near the border.
Individual acts of assault would be the most common but semi-organized gang
or gang-like activities could also be expected. One is reminded of Pancho Villa
and his invasion of Texas in 1916.
Note that this situation is only plausible because all nations use POMs (physical
object monies). Money factors are the predominant causes of reduced production.
People don't work if they don't expect to get paid. People don't invest if
they don't expect a profit. If nations employed barter rather than a medium
of exchange, the supply of money on either side would become irrelevant. In
the case of Mexico, barter-style trade with the U.S. as nations (not individual
consumers bartering with producers) is feasible since each produces things
the other nation wants.
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