View RSS Feed

Memories of the 28th Century

Trump's Depression

Rate this Entry
I was thinking about how the U.S. economy would go from the upswing that Trump takes credit for to the Even Greater Depression that his trade war will bring on.

Trump should be separated from the claims of strong economy, and he could be thrown out of office and not have a chance of re-election, and he may have undone himself with the additional tariffs. I wasn't expecting the stock market to tank for a considerable time, as it happened during the 1920's. I'm not the only one who sees parallels.*https://www.japantimes.co.jp/…/trump...isk-repeat-…/…

"Congress passed the temporary Emergency Tariff Act in 1921, followed a year later by the Fordney-McCumber Tariff Act of 1922. The Fordney-McCumber Tariff Act raised tariffs above the level set in 1913; it also authorized the president to raise or lower a given tariff rate by 50% in order to even out foreign and domestic production costs"

The power given the president to adjust tariff without congressional action had been used only rarely until trump decided to use it as a weapon in his trade war. Trading partners have reciprocated, especially the Chinese, against whom the tariff weapon has been used the most. But the trade war has only been going on for less than a year. It took about seven years from the imposition of the Fordney-McCumber tariffs to the stock market crash and the onset of the Great Depression.

Trump's depression is much like the Depression of the 1930's, because both came out of a struggle for the top spot in world financial markets, but this time it is different, because the Chinese weren't trying to gain the top position, while the UK had lost the top spot among financial markets because of all of the debt it ran up during WW I, but this time it might just be in Trump's mind that the U.S.A. has lost the top spot. And another possibility is that he is trying to hand financial primacy to Putin.

While the U.S. economy is doing well now, the trade war tariffs might impact the profitability of some segments of the economy; thus becoming a self-fulfilling delusion. Soybean grower have been hit the worst so far, but other parts of agriculture will also be hurt. it appears that consumer electronics has also been hit. In addition to the problems with China, Trump has also been throwing tariffs at Mexico as a bludgeon to force Mexico to do something about illegal immigration. Mexico is a major trade partner, and that is the main reason why Mexicans have stopped coming to the U.S.; they can find good jobs at home and not have to put up with the nasty gringos. There also were tariffs put on European goods.

Ultimately, the U.S. will be harmed by all of the tariffs, because goods will cost more, and there will less domestic production, because components will be more expensive. This will also lead to higher unemployment and lower profits, and that will add up to a serious recession.


https://history.state.gov/milestones.../protectionism
https://www.npr.org/…/stock-markets-...mid-uncertain…
https://www.parliament.uk/about/livi...iew/freetrade/


links

Excellent summary of the build up to the Depression
https://history.state.gov/milestones.../protectionism
Overview
https://www.japantimes.co.jp/…/trump...isk-repeat-…/…

https://eh.net/encyclopedia/the-ford...ariff-of-1922/

The last time the U.S. tried high tariffs
https://www.theguardian.com/us-news/...m-donald-trump

Updated 06-09-2019 at 02:05 PM by PeterL

Categories
Uncategorized

Comments

  1. MANICHAEAN's Avatar
    I really wonder with the present incumbent if he has any clear thought out strategy at all. He will, as his past record shows, turn on a sixpence if his base starts raising serious concerns.

    Intriguing comment "another possibility is that he is trying to hand financial primacy to Putin." Surely not, one would say, but with this guy there is always that small nagging doubt of his relationship with the Russian Bear. Too many reports of: Soviet banking support in the past, huddled negotiations, and deference to their leader.
  2. PeterL's Avatar
    I may have given Trump too much credit for thinking, but there might be a brain hidden away. He has made too much money from bankruptcy in the past for not to have been taught that going broke is good. I don't know what will happen or when, but the conditions have been set up for a serious recession.
  3. MANICHAEAN's Avatar
    I remember doing work on the trade cycle in the LSE back in 1963. If memory serves me correct, the recovery upwards, after an actual depression, comes when stocks are used up and have to be replenished. This gives the Keynesian boost to start it all over again.


    But I'm sure that the closer coordination & independence of Central Bank Governors today would provide the required stimulus anyway, to mitigate a rerun of the 1920's, despite Master Trump.


    By the way, you see now that our future king has attained a new regal title as "The Prince of Whales?"
  4. PeterL's Avatar
    That's how the consumer part of the recovery starts, but the problem can be with the producers, who have closed facilities, gotten rid of workers, or even gone broke; in the 1930's after the Keynesian push and FDR's programs got individuals buying somewhat, the U.S. economy was dull and listless, until war production started for export after 1938. Without a push like that recovery can take a lot longer. And sometimes there is no recovery, as hadppened with the U.S. computer industry after the dotcom bust. The computer companies recovered by sending production to lower cost countries, but the workers never got equivalent jobs.

    We will have to wait to see what happens this time around.