Because We Learned Nothing From Smoot-Hawley

The Second Time As Farce

By Pejman Yousefzadeh Posted in | Comments (15) / Email this page » / Leave a comment »

In the latest bizarre proposal from members of Congress, Senators Schumer and Graham want to impose tariffs on Chinese goods in the absence of yuan revaluation.

This is a bad solution to a non-problem. As such, Congressional ideas don't get much worse than this.


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Because We Learned Nothing From Smoot-Hawley 15 Comments (0 topical, 15 editorial, 0 hidden) Post a comment »

the miniscule percentage of Americans who have a clue what Smoot-Hawley was. Wasn't the Great Depression caused by the Robber Barons oppressing the proletariat?

In Vino Veritas

Didn't Smoot lead the league in ERA while Hawley led it in strikeouts? Great one-two punch of pitchers! :P

Just as every cop is a criminal, and all the sinners saints - Sympathy for the Democrats

Smoot to Hawley to Hoover
Game over for the economy.
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If you're seeing shades of gray, it's because you're not looking close enough to see the black and white dots.

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"Within the covers of the Bible are the answers for all the problems men face." - Ronald Reagan

Pretty damn near the liberal viewpoint that the country is just sheep.

On the other hand the folks at democratic underground would probably feel your comments unusually perceptive.

I'm also bearish on how well-known or understood Smoot-Hawley is.
Don't tread on me.

monarchy more than democracy. Draw your own conclusion.

In Vino Veritas

I can understand the frustration with China not revaluing its currency or letting it float freely as the dollar, pound and Euro, for example, do. It would help if they did. I agree:

China should take off the training wheels and let its currency float and play by the same rules. But tariffs are not the answer for us or them.

However, this type of self-righteous "play fair or there'll be consequences" type of idea doesn't fix the entire trade problem. Our trade imbalance with China is only a portion of our total trade imbalance.

There is little that can or should be done about this. PERIOD.

China will continue to grow and the economy will continue to transform. There will be upward pressure on wages, meaning their consumers will want more western-made products, and things will improve vis a vis the USA.

All tariffs will do is drive up prices for consumers and keep a few jobs here (maybe) a little longer.

We simply cannot have it both ways. We cannot keep prices low and save China bound-jobs at the same time without consequnces to growth. We can't.

All pols know this. Our economy is evolving and we need to adapt to the changes and deal with the pain and not try and rekindle a by-gone era.

Don't tread on me.

Floating the Yuan would help what, precisely?
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If you're seeing shades of gray, it's because you're not looking close enough to see the black and white dots.

and it would help the trade imbalance. free floating currencies adjust values in international trade.

I simply believe that trade is more fair and economic policy easier to assess this way. Not to mention it's a healthier way for american firms and workers to compete.

As a free floater, the yuan value would be a lot higher vs. the dollar right now because the trade surplus that China has would increase demand for yuans and drive up their value as chinese goods are purchased. this conversely drives down the the value of the dollar making american goods cheaper to import. It aids equilibrium and it's more fair. It's the natural behavior of free trade.

Heavy trade imbalances are not necessarily bad but can be a symptom that something else is wrong or not kosher (like the yuan being pegged to the dollar and unable to adjust) Chronic deficits can result is accumulated foreign debt like in our case.

Don't tread on me.

but it is not free floating yet either. To use your analogy, they have the training wheels on now where they didn't even ride the bike before. Someday those training wheels will come off, but they shouldn't right now. That would be too much of a shock to the currency markets.

See Here for details about today's news affecting the Yuan's exchange rate.

The yuan rose to the highest since the end of a dollar peg in July last year after U.S. Senators Charles Schumer and Lindsey Graham delayed their decision to ask for a vote on slapping tariffs on Chinese goods.

The gains came amid speculation China will keep allowing faster yuan appreciation to help deflect further pressure from some U.S. lawmakers. Treasury Secretary Henry Paulson said on Sept. 22 that China and the U.S. had a consensus on currency changes after meeting with Chinese officials.

Just as every cop is a criminal, and all the sinners saints - Sympathy for the Democrats

isn't the yaun now pegged to a basket of currencies or something like that?

But like I said earlier, with or without the total freedom to float, I think China's consumer economy is growing rapidly. there's a already a sizeable middle class that wants finer western goods and this group will continue to grow. Wages will rise.

Don't tread on me.

To paraphrase what Milton Friedman said about our trade imbalance with Asia: America gets China's material resources; China gets promises stored on a computer--promises that make them a shareholder in the American economy. Not bad for us, all things considered.

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