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Smoot-Hawley ~ Don Stott

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Smoot-Hawley
Author: Don Stott | Publish Date: 10/14/2019


On June 17, 1930, President Herbert Hoover signed into law, the Smoot-Hawley tariff, which raised import duties an average of 59% on more than 25,000 agricultural commodities and manufactured goods. Remember, a year earlier, the Great Depression began with the stock market crashing, and huge amounts of unemployment. The market crashed again when Smoot-Hawley began, and more than 60 countries retaliated with restrictions against whatever products would inflict the worst losses on Americans…typically products very different from those affected by Smoot-Hawley. The economic damage became virtually world-wide, but especially in the United States’ neighbor, Canada. The tariff on halibut was doubled, and the tariffs on potatoes, milk, cream, buttermilk, skimmed milk and butter were all radically increased, thus penalizing and outraging the populations of Quebec and Ontario. The western portions of Canada were provoked buy increased duties on cattle, fresh meats, wheat and other grains. British Columbia and Alberta were infuriated by increases in tariffs on apples, logs, and lumber.

Italy’s principal exports to America, included raw cotton, wheat, copper and leathers, which all had tariffs doubled or more. They retaliated by more than doubling the tariffs on American cars, which sales immediately dropped by 90%. Italy increased tariffs on American radios by more than 500%. Spain increased tariffs on American cars by 150%, which shut American cars out of the Spanish market. France restricted import of more than 3,000 items with quotas, and Austria cut imports from the United States with a tax on American cars, and even a licensing scheme to basically cut American movie imports. The Swiss did the same, and not only did they end imports of American products, but the tariffs on Swiss watches made them evaporate from American jewelry stores. Foreign currencies were difficult to obtain thanks to a revival of “exchange controls,” and this caused Americans traveling abroad to stop, virtually altogether.

Smoot-Hawley not only caused great unemployment in America, reaching 25%, but the same thing happened to European economies, who also suffered by a lack of exporting to America. Germany adopted a severe economic policy, which in turn, possibly contributed to the rise of Hitler, and bringing on World War Two.

Out of work Americans defaulted on mortgages, as did farmers who couldn’t export their crops and meats. Seven million were unemployed. Hoover then started a slew of bureaucracies to try to stem the depression, such as the “President’s Emergency Relief Organization,” the “Federal Home Loan Bank System,” and the “National Credit Corporation,” which was supposed to make strong banks support weak ones. Then there came into being, the “Federal Trade Commission,” and the “Reconstruction Finance Corporation”, and in 1932 the “Emergency Relief and Construction Act,” and the “Revenue Act,” which became the biggest tax increase in American history, placing national sales taxes on gasoline, tires, autos, electric energy, malt, toiletries, furs, jewelry, and other articles, plus admission and stock transfer taxes, and taxes on bank checks, bond transfers, telephone, telegraph, and radio messages. Personal income and corporate taxes were raised, and of course consumers had no money to buy much of anything. Tax revolts became very common, and when FDR took over from Hoover, he had a real mess with which to deal.

Roosevelt continued Hoover’s practices, but found it easy to install America’s first socialistic system, with Social Security. None of either Hoover’s nor FDR’s disastrous laws and bureaucracies worked. Unemployment continued, and even Roosevelt’s “CCC” or the Civilian Conservation Corps worked, although it was responsible for lots of beautiful post offices and government buildings being constructed. The “CCC” didn’t lower the unemployment rate, it only increased the national debt. Andrew Carnegie built hundreds of libraries with his money, not taxpayers’. Roosevelt finally got us out of the Great Depression with World War Two, which put everyone to work, but in just 3 ½ years, America’s dollar value shrunk by 50%, and it has continued to slide ever since with inflation. What to do? Simple. Save in real money in the form of gold and silver.

Is Donald Trump copying Smoot-Hawley? No, because China then was a primitive, backward, poor, starving nation, with no manufacturing or prosperity of any kind. Trump may have said a few things on the spur of the moment, and done a few tariffs which were and are deleterious, but he’s the first president to face China’s wholesale theft of American trade secrets, patents, and manufacturing abilities. When China first lured away our jobs, the average wage there was about $14 a month. Now Chinese wages are approaching American wages, and China is getting itself into a deep depression, and not just because of wages, but an economy which government subsidizes production, and manipulates currency. This doesn’t even include Chinese banks who make loans to anyone and in many cases never receive any repayment. I honestly believe that China is acting exactly like the Soviets did, which bankrupted them and killed Communism in the main in former Soviet countries and even in Russia itself. Time will tell.

Don Stott

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