Hi Guys,
My understanding of Mercantilism and why it was employed (please correct me if I'm wrong) was as a way for countries to prepare for War. War is extremely expensive, so Governments have to hold reserves of Silver and Gold in case of it. With Mercantilism, Governments wanted to maximize the amount of Gold and Silver they held while minimizing their rival's Gold and Silver as a deterrent against War (You don't want to find someone stronger than you i.e. someone with more Gold/Silver). How accurate is it?
Now, in order to enact this, it seems like Governments limited imports while encouraging exports. I'm confused as to why this is. With exports, doesn't the gold/silver/whatever payment go to the Merchant who sold the item, and not the Government? The Government gains gold/silver from the transaction by taxing it? So, with imports, couldn't the Government tax those as well? I understand the viewpoint of in times of war, imports may not be available (due to naval blockades and things), but what other reasons are there for not wanting imports? Thanks.
The importance of hard currency. For example, early European trade with China ran into a profound problem. The Chinese didn't really want any goods that they could offer either because of distaste or disinterest, at least on a large scale. The only thing they were willing to sell tea and other goods for was silver. This resulted in an actual decrease of hard currency as a uncomfortable amount of the British economy's reserves found their way overseas with no prospect of bringing them back in future trading. Casting about for Something that the Chinese would be willing to buy in large amounts, even illicitly, they discovered that opium fit the need. Great lengths were undergone to maintain the arrangement.