Move Some Money Out of America

April 30, 2025

The Junkers destroyed Germany. Things didn't turn out so well for them, either.

For centuries, the Junkers had it all. They were the aristocrats who owned most of the farmland in Prussia, the region centered around modern-day eastern Germany.

As with the landed aristocracy of England, peasants did the work to farm the Junkers' land, while the Junkers took most of the gains and passed the land down through the generations.

With land and money came power.

You may recognize the name Otto von Bismarck... a Junker who became chancellor of Germany. Or Paul von Hindenburg, who came from the Grand Duchy of Posen to lead the Imperial German Army during World War I.

These leaders weren't exceptions. For generations, the Junkers enjoyed unparalleled sway over the German government.

When the Junkers wanted something, they got it.

And in the 19th century, they wanted free trade.

At the time, international trading was on the rise... But it wasn't popular with everyone. Across the globe, certain groups saw increased competition for their products from foreign competitors. Protectionist sentiment grew.

According to economic historian Alexander Gerschenkron, the Junkers held "nothing but scorn and hatred for the protectionist doctrines" of some Germans.

After all, they controlled large swaths of Europe's best grain-producing farmland. They could grow more grain than Germany needed. Thanks to improved transportation and greater industrialization, free trade meant they could easily export the surplus.

Crowded countries with less space to grow grains were the Junkers' natural customers. For example, England began to get much of its wheat and rye from Prussia.

The principle of free trade is that it breaks down international barriers for greater economic efficiency. Some economists describe three main inputs to a trading framework: land, capital, and labor. Most places have a surplus of some of these inputs and a scarcity of the other. If you own the scarce input, you can clean up.

For decades, the Junkers were happy with free trade because they'd become part of the broader European market. Europe had a scarcity of land. And the Junkers owned a big piece of it.

But as global trade shifted, the Junkers began to rethink their economic principles.

By the late 1880s, countries like the United States, Canada, Argentina, New Zealand, and Russia had increased their food exports to Europe.

And while the Junkers had a lot of land by European standards, it was nothing compared with the vast farmlands of the American Midwest or the Russian steppe.

In a global market, they no longer controlled a scarce input. Free trade was no longer helping them export grain. It was marginalizing them.

So they flipped sides. After arguing for free trade to aid their exports, the Junkers changed course and favored protectionist tariffs.

By 1902, they pushed a series of tariffs on many goods, including imported grain. They'd lost their export market anyway, but at least trade barriers would let them inflate domestic grain prices.

That was great for the Junkers... But the results were painful for everyone else in Germany.

All Germans paid significantly higher prices for food, given they could only buy from the Junkers. And the effects trickled down into the rest of German agriculture. For example, peasants who raised cows and pigs couldn't get the same cheap grain as nearby countries. So buying grain from the Junkers priced Germany's livestock out of the international markets.

It gets worse... Some political scientists linked the Junkers' expensive grain to an urban-rural divide in Germany in the early 20th century. This dynamic helped fuel the rise of German fascism – a chain of events that went poorly for the country.

And after World War II, most of Prussia became part of communist East Germany, which stripped most Junkers of their land.

While some individuals can still trace their roots to a Junker ancestor, the Junkers ceased to exist as a group.

Folks... this is how protectionism goes...

Protectionist policies benefit one small, powerful interest group and leave millions of others poorer.

Even if the individual effect is small – say, slightly higher prices on all goods – the net result is always negative. In this case, the protection of prices for the powerful Junkers cost every other German, to a vastly greater sum. That would have been true even if they hadn't helped spark World War II.

Looking back on this period of German history, historian William J. Bernstein calls the Junkers' tariffs an "unmitigated disaster."

Modern-day politicians haven't learned from the Junkers' experience.

Of course, President Donald Trump has put his tariff plans for U.S. trading partners into action. He followed up with some pauses and exemptions... and some folks still see the tariffs as more of a negotiating tactic than a policy.

But between what tariffs Trump implements in the future and what he has already said and done, it's clear that the status quo will not stand. And that means we have to prepare for a new global economic order – one where the U.S. is no longer the center of international trade.

I always preach portfolio diversification... holding gold, cash, and bonds, as well as stocks. But most folks only own stocks from the country in which they live. So owning stocks outside of your home country is another important way to properly diversify your portfolio.

Today, I do see the need to own international stocks given all that is happening to our country.

Other than offering diversification, they trade for a much cheaper price. Take a look at this chart which compares the S&P 500 Index with the MSCI ACWI ex U.S. Index...

A graph of stock market AI-generated content may be incorrect.

As you can see, foreign stocks have a much lower price-to-earnings ratio than U.S. stocks today.

I suggest you take a look at your own portfolio to make sure you have enough exposure to international stocks. And if you don't, then I suggest you check out this month's issue of Income Intelligence...

In it, my team and I discovered a great opportunity to move some of our money out of America. We bought a diversified fund of cheap, leading international businesses. The fund even pays a 5.3% dividend, more than double that of the average company in the S&P 500.

Income Intelligence subscribers can see our latest recommendation here.

And if you're not already a subscriber, click here to see our latest deal.

What We're Reading...

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team
April 30, 2025