U.S. leading charge to close trade

Vancouver Sun ^ | Micheal Campbell

[narses]

You vastly oversimply the realities of the roaring twenties. Yes, a stock bubble was the end and proximate cause of the 1929 Crash, BUT the post WWI economy was NOT a speculative bubble. Massive productivity increases led to huge increases in income. Many people could and did afford imports. When the bubble burst, not unlike 2000, warehouses were filled with unsold goods. THAT and the "hard money" or "Gold Bug" monetary policies of the Fed coupled with the "balanced budget" thriftiness of the administration caused money supply deflation that racked the supply-demand cycle even more. Smoot-Hawley simply made selling the excess inventories overseas less likely and grossly prolonged the depression.

[Willie Green]

BUT the post WWI economy was NOT a speculative bubble...
When the bubble burst, not unlike 2000, warehouses were filled with unsold goods...

We're in agreement that there was a bubble.

Unlike the dotbombs, speculation was not in unproven business plans.
However, it did occur in the sense that investors totally ignored business fundamentals and borrowed heavily with the expectation and speculation that the good times would never end. They gambled wrong and the house of cards collapsed.

[narses]

The bubble was at the tail end of a long, secular productivity and wealth increase. It did NOT create the crisis, it simply exemplified the ultimate excesses of the era.

[maui_hawaii]

We seem to be not focused on the right strategic goals in these trade discussions (fixing the balance, i.e. more exports to China, etc.). Rather we are caught up with special interest tactical items such as an out-of-date steel industry that needs to get competitive on its own.

You are right on.

When President Bush placed steel tarriffs, and he has reiterated it several times since...

It was not just for the sake of labor. It was also NOT designed to be a permanent fix.

It was designed and stated as so, to be a timeframe for restructuring of the US steel industry.

The steel industry might have been out of date (f thats your interpretation), but the tarriffs were designed to give them a chance to get up to speed.

I see all these reports equating tarriffs to saving jobs etc. It might, but the point and purpose was to save an industry first.

Equating tarriffs with labor isn't exactly accurate. It definately has an effect, but its a secondary one.

[narses]

"...speculation was not in unproven business plans."

Yes it was. They were radio companies absent any plans, markets or business elements of any kind that went "to the moon" in 1929. Bubbles are all alike. Greed will out.

[maui_hawaii]

See post #44.

Comments?

[WOSG]

You vastly oversimply the realities of the roaring twenties. Yes, a stock bubble was the end and proximate cause of the 1929 Crash, BUT the post WWI economy was NOT a speculative bubble. Massive productivity increases led to huge increases in income. Many people could and did afford imports. When the bubble burst, not unlike 2000, warehouses were filled with unsold goods. THAT and the "hard money" or "Gold Bug" monetary policies of the Fed coupled with the "balanced budget" thriftiness of the administration caused money supply deflation that racked the supply-demand cycle even more. Smoot-Hawley simply made selling the excess inventories overseas less likely and grossly prolonged the depression.

I completely agree with that statement. The speculative excesses in 1929 were no worse than the speculative excesses in 1999 and early 2000, whether you talk of the price level of the stock market to GDP, the level of margin debt, etc. the difference since then has been the Govt response, eg Hoover raised tariffs and taxes; Bush cut taxes.

The effect of Smoot-Hawley included triggering a trade war that collapsed global trade. I showed the statistics on this: in 3 years, trade fell by 75%. Now if this trade collapse was a mere side-effect of the economy falling by 25%, it would have not been as sharp. hence, the 1930s trade collapse was a key cause of the vicious spiral in the economy.

[WOSG]

"Here in California, 25% of people can afford a home"

Yet more than 60% of families own their own home.
Funny how that works.

[Willie Green]

Yes it was. They were radio companies absent any plans, markets or business elements of any kind that went "to the moon" in 1929. Bubbles are all alike. Greed will out.

Fine. Then it WAS a speculative bubble, just like I said.
Yes, there were other contributory factors that led to creation of the bubble, but the burst and the dominoe effect are what caused the Depression.

[WOSG]

We've had plenty of bubbles and bursts and bear markets in the American stock market: 1984 tech bubble burst; 1906 collapse and panic; 1920; 1987, with the worst Ocbober on record save for 1929, and plenty of "is this the next depression" commentary - the economy kept going 3 more years; 2000-2002; the railroads in the 1870s and 1890s.

The quip is that bear markets have predicted 9 of the last 4 recessions.

In none of those cases was the following economic conditions as bad as the Great Depression, even though the stock market collapses were as spectacular as Oct 1929.
any speculative excess alone cant create a 10 year long Great Depression. And recall that in 2000, the excesses were far beyond the excesses of 1929 in terms of valuation. Yet the economic hit from that burst bubble was relatives mild.

As I cited earlier, neo-classical economists who studied the economy over the time period estimated the shock to the system and conclused the Great Depression was far longer than explanable by these shocks. Practically all classical economist and neo-classical economists cite the tariffs, trade wars and the monetary tightening as major contributors to the contraction of the real economy in the early 1930s. Only left-wing Socialist economists like John Galbraith use 'speculative excess' as the main cause - the Socialists are wrong.

The "crackpot" theory is to assume Wall Street valuations can drastically change the real economy on their own. They dont, they merely reflect it.

[WOSG]

Its not. All forms of economic exchange are positive sum. If they werent, the trade wouldnt take place. So reducing/limiting economic exchange of any sort, whether trade, employment for money/barter, etc., reducing overall economic wellbeing. Even when one party is lying or cheating? Pretty simplistic soundng to me.

These kinds of exceptions prove the rule: It basically takes fraudulent behavior for economic commerce and interchange to not be "positive sum" for both parties.

Much Government restrictions - taxes and tariffs and regulation, etc. - is to stop economic interchange between consenting adults where both know rationally what they are doing and neither is being defrauded. Example: Minimum wage, or the law that give a monopoly to the phone company in your area. Tariffs and taxes are of a similar nature and do not at all impact such fraudulent behavior.

Those of us who believe in free market capitalism like to restrict Government regulation of the economy to those areas of fraud, deception, lying and cheating, so that all market players are honest. Government control of rational economic choices OTOH is destructive and harmful.

Again, if trade is non-economic, it doesnt take place. You dont buy things from store A in a different town if you can get it cheaper from a store B down your street. But if A is cheaper then you might not 'buy local'. Moreover, export jobs in US today, and maybe in 1930 too, are higher paying than other jobs. Can there be no consideration as to why it is cheaper?

I never preclude any investigation of causes.

Your example was of a group that broke the law. To suggest that justifies NEW LAWS reminds me too much of the gun-grabbers who keep adding new laws despite the folly of using gun laws to stop criminal violence. My simple answer is if you know of people breaking laws, dont buy from them, report them.

Nevertheless, even black markets work via self-interest where exchanges are based on rational self-interest. This includes the scalping of Bruce Springsteen tickets or the trade in Levis in the pre 1989 Soviet Union. It's a fundamental law of economics.

[Willie Green]

And recall that in 2000, the excesses were far beyond the excesses of 1929 in terms of valuation. Yet the economic hit from that burst bubble was relatives mild.

No. SEC regulations prohibit such excessive and irresponsible use of margin for investment.

Practically all classical economist and neo-classical economists cite the tariffs, trade wars and the monetary tightening as major contributors to the contraction of the real economy in the early 1930s

No, there really aren't many of those around anymore.
While you were sleeping, academia was overrun with marxist revisionists.
The "economics" departments are almost as bad as the sociology and psychobabble departments.

[sixmil]

Much Government restrictions - taxes and tariffs and regulation, etc. - is to stop economic interchange between consenting adults where both know rationally what they are doing and neither is being defrauded. Example: Minimum wage, or the law that give a monopoly to the phone company in your area. Tariffs and taxes are of a similar nature and do not at all impact such fraudulent behavior.

You're way off on a tangent, so let me rephrase. If trading partners do not follow free trade agreements, does free-trade still work? If it does work, then why do you need free trade agreements?

Those of us who believe in free market capitalism like to restrict Government regulation of the economy to those areas of fraud, deception, lying and cheating, so that all market players are honest. Government control of rational economic choices OTOH is destructive and harmful.

The friggin constitution itself gives Congress the power to collect tariffs, and specifically outlawed direct taxes like the income tax. What has changed since then that makes the income tax better than the import tax? Tell me how it is that you are being prevented from trading because f tariffs? Have you ever paid a tariff? You like filing taxes every year? Sharing your banking records with the IRS? You have really twisted definitions for the words destructive and harmful.

To suggest that justifies NEW LAWS reminds me too much of the gun-grabbers who keep adding new laws despite the folly of using gun laws to stop criminal violence.

Changing tariff rates is making new laws? Those laws are already on the books.

Nevertheless, even black markets work via self-interest where exchanges are based on rational self-interest. This includes the scalping of Bruce Springsteen tickets or the trade in Levis in the pre 1989 Soviet Union. It's a fundamental law of economics.

Where this came from I don't know. You don't understand my argument, and I half believe you don't understand your own either. Are you suggesting that raising tariffs will create a black market for Chinese goods? Good God, we are not talking about cigarette taxes here.

[sixmil]

"Here in California, 25% of people can afford a home"

Yet more than 60% of families own their own home. Funny how that works.

Perhaps you missed the verb tense, but this suggests that people USED to be able to afford to buy houses here. That is no longer the case regardlesss of the reason. My point is that immigration has made housing more expensive, even though the open borders crowd keeps telling us that housing should cost less since they are made by cheap mexican labor.

[sixmil]

56.9% of Californians live in owner occupied housing, NOT 25%. Too low, but far from your number. The issue is NOT the hispanic population but rather the excessive regulatory costs of the socialist government. Blame the politicians, not an entire ethnic class.

"Here in California, 25% of people can afford TO BUY a home." Maybe I should not have been so terse, but I assumed that it was understood if you literally can not afford a home, then you don't live in one. You don't even need to take my word for it, just look at the average home price and the average salaray. The average salary will not find a lender willing to loan the average home price. Immigration has driven up the demand for housing, guess what happens to the price then.

[narses]

Poor latino immigrants are NOT the villain, obscene Green laws and socialist regulation have driven prices out of reach. The answer is to do as I did, leave the rotten socialist People's Republik of Kalifornia.

[garandgal]

Your screen name mentions my favorite long gun, but who knows if that is the correct usage or translation.

Correct...I collect WWII stuff! Hubby collects the soldier memorabilia; I collect homefront.

[.cnI redruM]

A lot of what has happened to the steel industry has happened domestically. Compare the amount of steel in a vintage 1967 car to the amount of steel in a 2003 car. Compare the amount of steel in 1967 office building to the amount of steel in one built in 2003. Cheaper, lighter materials are replacing steel and will continue to do so. A tariff will not save the steel industry. It will only be used as a justification to kick American products out of the markets of foreign countries.

[maui_hawaii]

Given I haven't done any historical consumption of steel studies, so I don't know.

Apparently someone is using the stuff. Whether its overall more or less today than in 1967...I would have to see the decline or rise spelled out for me.

[maui_hawaii]

A tariff will not save the steel industry. It will only be used as a justification to kick American products out of the markets of foreign countries.

Here is a philisophical question for you. Answer these in order if you will.

Many say steel is outdated, outmoded, and an industry that we simply can live without. Yes or no?

It is the buggy whip industry of today.

It is inefficient. And if it can be beaten by foreign competition we should let it happen. Yes or no?

Your assertation in your post above says " It will only be used as a justification to kick American products out of the markets of foreign countries. "

If our companies lose out completely (aka the buggy whip) we, in the end won't be sending anything to foreign countries. If we are not competetive we lose. Period. Your argument seems to be that you are trying to save foreign markets for US steel (prevent retaliation etc). Right?

If you say we simply do not need steel anymore, and the steel industry as a whole is useless... is that your position?

If so, I and most people disagree with you.

Now if someone presented a 2-3 year restructuring plan that allows US companies to restructure tell me why you would not go for it.

Its not a permanent move. It would be a move to allow temporary restructuring, so that in the long term (20 years plus) we can compete for markeshare.

If we do not do that restructuring, we lose both foreign and domestic markets. Period. Not for this year or next, but for good.

What good has that done us or anyone?

In the end, the goal is for US companies to compete head up with everyone.

Do you think the market will just take care of itself? Is that it? Kind of Liberatarian economics?

Ok, but keep in mind, Chinese companies (for one) are not allowed by their government to go out of business. If we do outcompete them, and we do win marketshare, they still exist because they are not allowed to go bankrupt. That is what we are competing against.

If we can have a 2-3 year plan, and STILL come out competing with and/or beating them over the next 20-30 years...in our markets and abroad. Why not?