A big fat tariff law ( Smoot Hawley) is generally considered the precipitative act that turned a local recession into a worldwide, global depression back in the 30’s
Way to go Trump
That maybe but if we had exported our manufacturing plants to Germany, Japan and China we would have lost WW II. Thank you Smoot Hawley.
Only generally considered that by people who don't understand the GD and desire to use Smoot-Hawley as a scare tactic. Here is a great paper on the GD everyone interested in that period could benefit from. A key paragraph:
The great depression and its offspring, the New Deal, could both have been avoided if the Federal Reserve had performed the task assigned to it. All the Federal Reserve had to do to avoid the Depression and the subversion of the American constitutional order was to purchase $1 billion in government securities during the 10-month period from December 1929 to October 1930. The result would have been an increase, instead of decrease, in high-powered money, and the banking crisis that began in the autumn of 1930 would not have occurred.
The Fed's "Depression" and the Birth of the New Deal
No mention of Smoot-Hawley in that article, just discussion of Fed policies which shrunk the money supply and the New Deal.
Many people are worried that Trump's activities will result in real, objective look at the one-sided trade relationship with China.
Yea, the problem is that there is no data to back up this presumption. The increase in US trade tariffs was far greater under the Fordney-McCumber Act of 1922, and we had eight years of a pretty good economy. We had higher tariffs in 1909.
The “conventional wisdom” surrounding Smoot-Hawley is more of the rampant BS that poses as economic theory in the US. The truth is that trade collapsed in the time after S-H for the same reason that trade collapsed even *harder* in 2008 to early 2009: the collapse of the banking system worldwide. In 2008, we had loaded ships that could not leave port because the shipping company could not get a letter of credit from bankers for the purchaser of the products. So the products were not leaving ports. That’ll slow trade down a little, and it had nothing to do with tariffs. The fall-off in trade in 2008 to early 2009 was harder and faster than the fall-off following the passage of Smoot-Hawley, and we had no tariffs enacts by anyone, anywhere.
The truth is this: In the days of Fordney-McCumber and Smoot-Hawley, nations retaliated by raising or lowering their own tariffs. We had tariff acts about every eight or nine years in the US Congress, and the tariffs we’ve mentioned here actually had lower rates than tariffs passed a decade+ earlier in the Congress. Tariff rates went up and down in response to the various political winds blowing across the world markets.
Today, nations respond to world events by devaluing their currencies (eg, look at Japan’s actions on the value of their yen in the last couple of years, China’s actions over the last decade, the EU’s actions when the Euro got too strong). Instead of using tariffs to manipulate trade, nations now use their currencies.
“Free trade” is one of those fairy tales that parents tell their children when they want them to grow up to be economists and have a nice cushy job in a university with no accountability and a fat retirement pension.
And the truth of why we had a global depression in the 30’s is why we’re sleepwalking through one now: The banking system world-wide imploded. Back then, as now, the European banks were in far worse shape than US banks, and they didn’t have a central authority to manage the banking crisis. The Fed accelerated the crash of the banking system by first raising rates, then meddling in the banking sector. As Bernanke told Milton & Rose Friedman at a dinner held for the Friedmans: “You were right. We (the Fed) did it.”