Smoot-Hawley II?

By Rich Kozlovich 

As I go though my files I find old stuff that's just as valid now as it was then.  A couple years ago, the Washington Post stated: 

Trump vows massive new tariffs if elected, risking global economic war.

Let's try and get this right, once, just once, please.  We're not in the midst of a Smoot-Hawley II.  The Washington Post is just as stupid about this as they are about everything else they say and promote, which is the reason they've just about to put themselves out of business losing in 2024 alone a $100 million dollars, along with subscribers on a massive level, and has laid off hundreds of employees. 

This isn't 1930 and the world's economy isn't a 1930 economy. WWII changed that forever. The fact is the world needs the U.S, the U.S. doesn't need the world. There are six foundational things that immunizes America against a trade war.

We can feed ourselves, fuel ourselves, arm ourselves, defend ourselves and create our own internal economy, and pay off our national debt. The rest of the advanced nations of the world are incapable of performing all six of those foundational tasks on their own, and all six are required.

Neither Russia, China, or the EU can perform all of those six foundational tasks. Sometime between 2025 and 2030 I'm expecting a massive worldwide economic downturn and the only advanced nation in the world capable of surviving it intact is America. If the right people are in power, America will survive it intact, and the right people are in power.

There will be no trade war because if they can't sell products to America, they'll go broke. We may suffer a bit economically, but with the right administration in control that will quickly  end any trade war.  What we're seeing is a lot of chest thumping, bold assertions, and virtue signaling.  What do we see after a few days?   Tail wagging, as they soon learn Trump isn't impressed, and he's holding all the "trump" card in this game.  Pun intended. 

Let's wake up folks, the media lies, they're arrogant, overpaid, under smart, and history is everything.   I encourage everyone to read a history book, or maybe even two.

Tariffs: We Don't Need Them, They Need Us!

Trump gets that!

By Rich Kozlovich 

Dan Mitchell is a Libertarian and one of the economic wonks at the Cato Institute, which if you read his history, it's impressive.  Dan has allowed me to publish his work for a number of years, and he's prolific.  Having been heavily involved with economic policy in America he clearly understands the ins and outs of government economics, which is an unending slight of hand game. I like much of his work, so I publish his articles.... unless I don't agree with them.   

I know, I can hear it now.   Who does this bugman think he is to disagree with a man with Mitchell's vast experience and knowledge?  Well, I will admit, much of the economics I read makes my eyes roll up into the back of my head, and truth be told, I think economists make it that complicated deliberately.  

I've been a history buff and an avid reader for all of my life, and I have some qualities I think are important in order to understand anything.  First, life is all about patterns, and the patterns of life repeat over and over again.  The natural function of the human mind is to see those patterns, but that means striving to attain as much knowledge, on as many subjects as there are, filling your mind with a lot of seemingly extraneous information.  But as your doing this your mind will unconscionably be filing, collating, and correlating that information into useful patterns, ultimately giving you worthwhile insights.  

I see patterns more quickly than most and I see things farther, deeper, and wider than most, and the fact is, most economists have no idea what they're talking about.  Here are four of my commentaries dealing with economics, I especially like number four.

1.  The E-Myth
2.  What is the Proper Definition for "Opportunity Economics"? Capitalism! 
3.  When An Accident is Waiting to Happen, It Eventually Does
4.  Preconceptual Economics

On November 6, 2024 Dan published this commentary, Trump, Part II, and much of it I liked, but I didn't publish it because he's got this Libertarian affliction about tariffs.....all being bad in the eyes of Libertarians, which as time goes by I find more and more irritating.  

Last week he posted an article that predicted Trump would lose the election, and I published it even though I thought it was an foolish prediction, and it was.  He notes:

"I’m a lousy political forecaster.  I predicted Trump would lose and he instead won a convincing victory." 

But it doesn't end there as he notes that "economists are also lousy forecasters" about economics saying:

Don’t trust economists......Sometimes a picture really does tell a thousand words. Here’s a chart, based on data from the Philadelphia Fed, showing actual economic results compared to the predictions of professional economists. As you can see, my profession does a wretched job. Comparisons based on predictions from the IMF, OECD, CBO, and OMB doubtlessly would generate equally embarrassing results.

Conclusion?  Economists either have no idea what they're talking about, they're lying, or they're smart people who were made stupid by the embrace of a foolish ideology.  

"Socialism is a philosophy of failure, the creed of ignorance and the gospel of envy, its inherent virtue is the equal sharing of misery." Winston Churchill

When you read what economists are teaching in American universities, you must conclude many of them are guilty of all three. 

His article goes on to offer five suggestions on how the GOP can fix government, and it's clear some of his suggestions are good ones, until he comes to number three, saying: 

I am terrified about the prospect of more protectionism. If Trump merely targeted China, it might be possible to justify his actions because of national security. But he wants to be “Tariff Man” for all cross-border commerce. Didn’t work for Hoover. Won’t work for Trump."

What he's citing is the Smoot/Hawley Tariff bill, and he's not alone in that, as John Hinderaker called Trump's efforts, Smoot-Hawley II saying:

I don’t suppose many people care, but Donald Trump’s latest venture into trade policy is idiotic. Trump’s tariff plan is so dumb that for once, the Washington Post is actually right: “Trump vows massive new tariffs if elected, risking global economic war.” ........ Protectionism has never been politically unpopular. Trump apparently is going for the lowest common denominator, appealing to the least informed voters. I guess we shouldn’t be surprised.

Why do I object to that? Because when Hoover signed the Smoot/Hawley Tariff bill in 1930 the world's economy was far different than today.   Entirely too many think in terms of the Smoot-Hawley tariff, which triggered a trade war that was an important instrument in starting the Great Depression, as the lesson we need to take seriously today.  Wrong!  

America's economy and the world’s economies in 1930 were far different then than now. We needed them and they needed us in proportion.   Now?   We don’t need them, they need us, and the point that we have a major trade deficit with these nations makes us stronger in such a battle is critical. If we stop buying their products they collapse.  

We have five criteria that makes us the winner in any trade war.   

1. We can feed ourselves
2. Fuel ourselves
3. Arm ourselves
4. Defend ourselves 
5. We can create our own internal market.
   

We don't need them....they....need ...us!  

To save our allies after WWII, economically and militarily, we created the Bretton Woods hegemony, where we opened our markets to our allies and we protected them militarily since they were totally broke even before the war's end.  The only time in world history where a nation created an hegemony that was for the benefit of others.  As a result capitalism became redefined as meaning America would go on forever letting our trading partners impose tariffs and trade protections while not protecting American workers and our industrial base with tariffs.      

A philosophy that predicated one of the worst economic and political decisions ever made by a President of the United States, Nixon opening China up to world trade, and western civilization has been funding it's own destruction ever since. 

Those days are over!

One last point.  Dan admits Libertarians like him who are all in on open borders but have no idea what to do about the consequences of open borders.   in so many ways, and so very often, are just like economists.  They have no idea what they're talking about.  

Update, 10:55 AM:   This just appeared at American Thinker, Trump’s tariffs will contribute to the US economic boom, November 7, 2024 by Howard Richman,

U.S. stock markets anticipate Trump’s upcoming economic boom, but few economists realize that it will be partly due to his tariff plans.  Among those few are Peter Navarro, Trump’s adviser and author of 20 economics books; Art Laffer, America’s premier supply-side economist; and Oren Cass, author of several recent commentaries.

Trump’s tariffs (coupled with his reduction in the corporate income tax for American producers) would encourage businesses to build new factories in the United States.  In his commentary “Trump’s Most Misunderstood Policy Proposal,” Cass pointed out that Americans, not foreign workers, get the wages when products are produced in the United States.  He also pointed out that manufacturing drives long-term growth:.....

Michael Barone: Trump on trade — better than Smoot-Hawley

by Michael Barone | Mar 8, 2018

President Trump’s announcement he is imposing tariffs on steel and aluminum imports from other countries, including close allies with economies interlinked with ours — notably, Canada — has aroused little enthusiasm and much criticism. It evidently prompted the resignation of Gary Cohn as head of his National Economic Council.

It has also prompted free trade-minded Republicans in Congress to propose repeal of Section 232 of the 1962 trade act, which delegates to the president the power to adjust trade restrictions and impose tariffs.

It’s not clear exactly what trade restrictions Trump is poised to impose and whether negotiations with Mexico and Canada will end the North American Free Trade Agreement. One possibility is that the self-styled master of the art of the deal is using steel and aluminum as leverage to get Canada to agree to his terms on NAFTA............To Read More........

The World As I See It: Trade Wars

By Rich Kozlovich

I'm finally glad to see a few who are willing to acknowledge a trade war isn't the disaster the media is declaring, nor are the threats by foreign powers worth toilet paper.  Entirely too many think in terms of the Smoot-Hawley tariff which triggered a trade war that was an important instrument in starting the Great Depression.   But America and the world’s economies were far different then than now. We needed them and they needed us in proportion. Now - We don’t need them - They need us, and the point that we have a major trade deficit with these nations makes us stronger in such a battle is critical. If we stop buying their products they collapse.

We have four criteria that makes us the winner in any trade war.   

• We can feed ourselves
• Fuel ourselves
• Arm ourselves
• Defend ourselves

We don't need them....they....need ...us!  To save our allies after WWII economically and militarily we created the Bretton Woods hegemony, where we opened our markets to our allies and we protected them militarily since they were totally broke even before the war's end.  The only time in world history where a nation created an hegemony that was for the benefit of others.  As a result capitalism became redefined as meaning America would go on forever letting our trading partners impose tariffs and trade protections while not protecting American workers and our industrial base with tariffs.

That day is over!  

If tariffs are so bad, and will destroy the world's economy, why then do they all impose them on America?  Since the end of the cold war we have little need to be pandering to their prancing and moral pontifications, and America finally has a President that tells the media they can go and be hanged.  These distractions merely avoids answer this question  - will tariffs hurt the American economy? 

As for foreign leaders who publicly proclaim their distaste for Trump - that's not only immaterial, it's a game changer.  If they really believe he's an incompetent buffoon - We win!

I think that's public buffoonery on their part.  I think they're scared of him.  In private I think they see a cunning, smart, fearless adversary.  Just as the Soviet Union saw that in Reagan.  Tough and fearless, no matter about their public pontifications.

Do we need allies to win a trade war?  Sure, but it's like the Kevin Costner's "Field of Dreams" movie - "If you build it they will come".  If we start it allies will come!  I disagree with any evaluation that corporate America will not support a trade war because of immigration issues, nor will the Deep State be a problem.  They will have to fall into line or be "Trumped".  If you want to be the big kid on the block you have to smack someone once in a while, and I think that's soon in the offing.

There's talk that a trade war can't be effective without a cohesive plan, but with something this complicated and unpredictable that seems to me to be laughable. If that's true, and I think it is - why bother having one. 

Every military strategy ever devised was perfect.  Until they met the enemy and they had a perfect military strategy also, and it always turns out neither was perfect.  But the one who won was the one who adapted quickly and changed to meet unanticipated challenges.  It's my estimation Trump most likely excels in that better than any world leader in existence, and has the foundational resources to make it happen which are - we can feed ourselves, fuel ourselves, arm ourselves and defend ourselves without support from any nation on Earth.  None of the industrialized world can make that claim.  In one or more of those criteria - they all fail, and those failures makes them highly vulnerable to any economic downturn or change.  They need us and we don't need them.  We win!

As for Canada:  Without America our 'friends' to the North would be a third rate country, and cold to boot.  Even with their unending petty, childlike and envious anti-American resentment they'll fall into line - kicking and screaming - but they'll do it.  Especially since they have a spoiled brat who's an economic incompetent, dumb as dirt far leftist loon as their Prime Minister, who's even flakier than was his father. They'll do it in because they'll have to.

As for forging baby step alliances with foreign powers - that's a waste of time.  They'll just slow down the process of getting things fixed, and I agree a global recession is coming no matter what Trump does.  The fragility of the world's economy is clear, it's real, and the collapse is  inevitable due to the massive debt load the world's nations have accrued.   The world is broke.  And the only nation on the planet that's capable of sustaining a worldwide economic collapse is the United States because America is a natural capital generator with the government holding 150 trillion dollars in assets, and once again - we can feed ourselves, fuel ourselves, arm ourselves and defend ourselves.

Worldwide economic collapse isn't our real problem. We'll take a hit, but we will not only survive, we’ll be stronger when it's over. Our greatest fear is the societal Balkanization being caused by leftist victimization schemes which are a deliberate attempt to destabilize American society. This is what we need to fear!

No force in the world is as destructive to America as is the progressive, leftist, liberal, socialist, communist movement that's been fermenting in this nation for over a hundred years. Which one is worse? Take your pick - they're interchangeable.

Our real war isn't an economic war, it's a cultural war, and I hope traditional values win, because if we win the cultural war the economic war will take care of itself. But the book is still out on that, and I have fears of a civil war between Americans who hate America and American’s who hate them for hating America.

The world is approaching a Seldon Crisis, and there’s no plan, and there's no shared vision. But no matter what anyone thinks about Trump, I can’t imagine anything worse than having Hillary in charge at any time, let alone during a crisis.