China: Can Smoot-Hawley only happen in the US?

China Financial Markets ^ | 02/26/09 | Michael Pettis

[familyop]

The CATO institute was also actively involved behind some of Hillary’s policies to destroy families during the ‘90s. I was a family rights activist then (including fathers’ rights). One of the closet anarchist/commie CATO witches (writer for a liberaltarian rag) even called me a “male chauvinist pig.”

[rbmillerjr]

“the Hawley-Smoot Tariff Act,...Did it work? Anyone? It did not work, and the United States sank deeper into the Great Depression.”

‘That’s incorrect. The recent anti-American propaganda was based solely on rashes of logical fallacies and has been debunked. See the evidence in comment #13 and comment #15.’

Can you explain your reasoning? I’m not following the connection.

[dennisw]

Wow! You had even worse experience with CATO. I’ve despised them for years once I figured out they are libertarian shills for the corporations that sell out America for higher profits

Selling us out is very profitable. Just look at WalMart

The big money figured out they could become much richer turning America into a pathetic consumer economy from the producer oriented economy we used to have

[Ken H]

My comment was directed at China, but fair enough. I'll look at the numbers and the counter-arguments on the thread. I'm not ideologically against regulations of foreign commerce, including tariffs, that encourage manufacturing. Such a use is in keeping with the original understanding of the Commerce Clause:

2. The power has been understood and used by all commercial & manufacturing Nations as embracing the object of encouraging manufactures. It is believed that not a single exception can be named.

James Madison to Joseph C. Cabell, 18 Sept. 1828

http://press-pubs.uchicago.edu/founders/documents/a1_8_3_commerces18.html

[familyop]

Thank you for the quote. I’m not quite sure as to what the solution is. Some countries have natural resources that others don’t, but for some other products, alternatives to tariffs that I know of are

* Restricting trade with nations that have far lower currency values. Such currencies are often fixed in a number of ways by traders on both sides (theirs and ours).

* Restricting trade with nations that persistently violate human rights, as such nations (communist, fascist,...) are potential enemies. We shouldn’t be funding enemy military buildups—especially by way of hundreds of billions in “bailout” money going to them through American businesses.

* Restricting if not stopping US companies from owning and operating foreign manufacturing plants. Some relatives of executives of those companies are active in radical environmentalism for the purpose of regulating small US competition down.

We’re only beginning to see some of the economic consequences to doing so little about it now, and probably other, more severe consequences are on the way.

[familyop]

"Can you explain your reasoning? I’m not following the connection."

The Smoot-Hawley Tariff Act received its final signature toward the end of 1930, if I remember correctly. That's only maybe a little more than two years before the GDP increased and unemployment went down. That wasn't really a long time before production and employment increased.

Granted, we can't say the same for the tax increases toward the end of the '30s. Those caused harm to the economy.

The mcmansion and derivatives debacle was devised to fill the production vacuum that we see from the lack of manufacturing in the USA (in this case, not including foreign manufacturing by US companies).

Here's a tiny part of what's going on now. $152 billion of your tax dollars were recently sent to AIG in London. After that, some say that the money disappeared. Others said that it went to China. That is part of the current system of international corporate socialism, and that is not capitalism.

[Star Traveler]

I was thinking something simple... like doing our own manufacturing... :-)

[Star Traveler]

You said — “I would love to see that happen!”

Well, it would happen, if it were not for those so *vehemently opposed* to the U.S. doing their own manufacturing (and I’m talking about so-called “Americans”) and them *demanding* (somehow telling us it’s better for us) to send all manufacturing everywhere else in the world *except* here in the United States.

I’ve got to wonder if these kinds of people are really Americans...

[Wyatt's Torch]

So because:

- GDP declined from 91.5 billion in 1930 to 68.4 billion (-25.2% of 9.2% CAGR) and did not reach the 1930 level until 1936

and

- Unemployment went from 8.9% in 1930 to 24.9% in 1933 and did not reach 1930 levels until 1942

The Smoot-Hawley Tariff act passed in 1930 was not to blame?

Can’t wait to see that explanation.....................................

[Wyatt's Torch]

Smoot-Hawley was signed June 17, 1930.

[Star Traveler]

You said — “Pat Buchanan was right about this years ago and I supported him for years. He is very bad on Israel and the Jihad.... But right on most else”

Yeah, I’ve stayed away from Buchanan because of him being such a Jew/Israel hater. I just don’t want to deal with someone like that...

[Pelham]

“The Smoot-Hawley Tariff act passed in 1930 was not to blame?

Can’t wait to see that explanation.....................................”

The banking system was a much larger factor than foreign trade, at least in the United States.

During the years 1930-33 one third of the American money supply evaporated as thousands of banks collapsed. There was no FDIC to make depositors whole and Fed failed to keep the money supply from collapsing.

In contrast foreign trade comprised less than 5% of American GNP during those years. Smoot-Hawley impacted some of our trading partners in a big way, but as far as the US goes Smoot Hawley pales in comparison to the monetary contraction.

[Wyatt's Torch]

I agree about the monetary contraction. The Fed did the wrong thing and did not supply sufficient liquidity. That is one thing that Bernanke is doing right. Smoot-Hawley also served to further restrict liquidity exacerbating the monetary contraction.

[Pelham]

Smoot-Hawley couldn’t really affect liquidity, liquidity is strictly a banking/ credit market phenomenon. It could affect GNP by interfering with trade. Smoot-Hawley mostly harmed foreign concerns that sold to Americans, and at the next remove harmed American industries that those foreign firms would then have purchased from. But we are talking at most 5% of the American GNP. The negative effects of Smoot-Hawley were borne more by foreign firms than by American firms.

[familyop]

"Can’t wait to see that explanation....................................."

The answer should be obvious to anyone who has managed to run a manufacturing business, but I won't bother. ...tired of the BS and ready to take action.

Go ahead. Finish shutting down and preventing what little production remains in our USA. That's what we're preparing for anyway. Just don't expect us to buy much more from overseas, and don't expect to get back into our country after leaving it.

[familyop]

Make that anyone who has decided to start a manufacturing business, planned an overview of it, designed it (floorplanning, etc.) and run it until making a profit.

[Mad Dawgg]

"Smoot-Hawley was signed June 17, 1930."

Yes but even before the Bill was signed many of our foreign trading partners retaliated with tariffs on our goods.

"Retaliation began long before the bill was enacted into law in June 1930. As it passed the House of Representatives in May 1929, boycotts broke out and foreign governments moved to raise rates against American products, even though rates could be moved up or down in the Senate or by the conference committee. By September 1929, Hoover's administration had received protest notes from 23 trading partners, but threats of retalitory actions were ignored.