Re: Fed chief warned on inflation target
Alfred Eckes devotes an entire chapter to defending the Smoot-Hawley Tariff in his book, "Opening America's Market: U.S. Foreign Trade Policy Since 1776." If I remember correctly, Eckes argues that it was in some ways a tariff reduction, but that, in any case, it had little to do with causing or worsening the Great Depression. As the quote from Shiller suggests, the U.S. had significant tariff protection for its industry in the late 19th and early 20th centuries.
Announcement
Collapse
No announcement yet.
Fed chief warned on inflation target
Collapse
X
-
Re: Fed chief warned on inflation target
Originally posted by jkOriginally posted by FinsterWant import prices to rise? Tax them. It's not as if the government isn't running deficits. Even if it wasn't, you could use the revenue to cut taxes on domestic production (income taxes) and make trade freer right here at home where we need it most. This would allow you to keep employment strong without cutting wages, and even increase after tax pay, making the American worker better off, not worse. Domestic production would increase, since the rewards for producing would increase. The cost of consuming foreign production would increase, helping to balance the current account deficits that threaten our economic future. You'd also decrease dependence on foreign oil. You'd decrease dependence on foreign funding for our deficits. As our deficits have gotten progressively worse, it’s the policy option that we haven’t tried.?
Smoot-Hawley is the same tripe that gets trotted out every time someone questions the globalist agenda promoted by the Wall-Washington Axis of Profit. It did NOT cause the Great Depression. According to Alan Greenspan (yes, the same one who ran the Fed for nearly twenty years), it was the Fed. He wrote in 1966 (http://www.321gold.com/fed/greenspan/1966.html):
... When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's...
Yale University professor of economics Robert Shiller has specifically addressed the putative connection between Smoot-Hawley and the Great Depression and totally debunked it. From Irrational Exuberance, pages 84-85:
... It is conceivable that the Smoot-Hawley tariff might have been expected to hurt the outlook for U.S. corporate profits. One could have thought that it might have been expected to benefit corporations, many of whom actively sought the tariff … other economists, including Rudgier Dornbusch and Stanley Fischer, pointed out that exports were only 7% of the gross national product (GNP) in 1929 and that between 1929 and 1931 they fell by only 1.5% of 1929 GNP. This hardly seems like the cause of the Great Depression. Moreover, they pointed out that it is not clear that the Smoot-Hawley tariff was responsible for the decline in exports. The depression itself might be held responsible for part of the decline. Dornbusch and Fischer showed that the 1922 Fordney-McCumber tariff increased tariff rates as much as the Smoot-Hawley tariff, and the Fordney-McCumber tariff was of course followed by no such recession...
Leave a comment:
-
Re: Fed chief warned on inflation target
Originally posted by WDCRobIn the hypothetical event the US attacks Iran, would there be a net flight to the dollar, or away from it? Where would gold be the next day? Would the Fed react overnight?
Pick another similar major event where the US gains international condemnation for its actions if you think Iran is completely impossible.
Leave a comment:
-
Re: Fed chief warned on inflation target
In the hypothetical event the US attacks Iran, would there be a net flight to the dollar, or away from it? Where would gold be the next day? Would the Fed react overnight?
Pick another similar major event where the US gains international condemnation for its actions if you think Iran is completely impossible.
Leave a comment:
-
Re: Fed chief warned on inflation target
Originally posted by WDCRobI'm curious about whether the collective wisdom of iTulip thinks an all out attack by the US on Iran would trigger this panic?
Leave a comment:
-
Re: Fed chief warned on inflation target
Originally posted by FinsterDepreciating the currency decreases real wages and makes labor cheaper. But just for the workers being paid in that currency. Foreigners' real wages are unaffected, so the depreciating currency appears to domestic consumers as "rising import prices".
In the run, it's a self-destructive policy. First of all, it's dishonest,
since it relies on the Keynesian ruse of trying to fool people into thinking their wages are holding up when they're being cut. Second, it penalizes saving because the saver's dollars depreciate, and penalizing saving is not exactly what our consumption-heavy economy needs.
Third, the amount of currency depreciation to rectify global imbalances is enormous, and the amount of inflation that would be required to deal with them with currency as the only tool would be catastrophic for the middle class.
Want import prices to rise? Tax them. It's not as if the government isn't running deficits. Even if it wasn't, you could use the revenue to cut taxes on domestic production (income taxes) and make trade freer right here at home where we need it most. This would allow you to keep employment strong without cutting wages, and even increase after tax pay, making the American worker better off, not worse. Domestic production would increase, since the rewards for producing would increase. The cost of consuming foreign production would increase, helping to balance the current account deficits that threaten our economic future. You'd also decrease dependence on foreign oil. You'd decrease dependence on foreign funding for our deficits. As our deficits have gotten progressively worse, it’s the policy option that we haven’t tried.
Leave a comment:
-
Re: Fed chief warned on inflation target
Originally posted by EJ"Ka" is happening in the housing sector of the finance economy. However, until a finance market "event" occurs that starts a selling panic in one of the many leveraged asset markets, we will not see a classic "Ka" asset deflation event, nor a dramatic Fed response.
Leave a comment:
-
Re: Fed chief warned on inflation target
Originally posted by bartThat's the area which I was trying to address. If the dollar dropped 20%+, it would make little overall difference except in a very few segments.
It could be used for expectation control though, and I suspect that's what EJ is driving at... but I'm not at all certain.
Turning to another line of inquiry, can someone please address why we should be hoping for a "soft landing" in the first place? How did we leave terra firma to begin with?
Leave a comment:
-
Re: Fed chief warned on inflation target
Originally posted by FinsterThird, the amount of currency depreciation to rectify global imbalances is enormous, and the amount of inflation that would be required to deal with them with currency as the only tool would be catastrophic for the middle class.
It could be used for expectation control though, and I suspect that's what EJ is driving at... but I'm not at all certain.
Leave a comment:
-
Re: Fed chief warned on inflation target
Originally posted by bartCan you develop the part about "limit unemployment growth by allowing import prices to rise via dollar depreciation" further? Why would generally rising import prices limit overall unemployment?
In the run, it's a self-destructive policy. First of all, it's dishonest, since it relies on the Keynesian ruse of trying to fool people into thinking their wages are holding up when they're being cut. Second, it penalizes saving because the saver's dollars depreciate, and penalizing saving is not exactly what our consumption-heavy economy needs. Third, the amount of currency depreciation to rectify global imbalances is enormous, and the amount of inflation that would be required to deal with them with currency as the only tool would be catastrophic for the middle class.
Want import prices to rise? Tax them. It's not as if the government isn't running deficits. Even if it wasn't, you could use the revenue to cut taxes on domestic production (income taxes) and make trade freer right here at home where we need it most. This would allow you to keep employment strong without cutting wages, and even increase after tax pay, making the American worker better off, not worse. Domestic production would increase, since the rewards for producing would increase. The cost of consuming foreign production would increase, helping to balance the current account deficits that threaten our economic future. You'd also decrease dependence on foreign oil. You'd decrease dependence on foreign funding for our deficits. As our deficits have gotten progressively worse, it’s the policy option that we haven’t tried.Last edited by Finster; February 20, 2007, 11:12 AM.
Leave a comment:
-
Re: Fed chief warned on inflation target
Originally posted by grapejellyDon't worry about it: dollar depreciation is accompanied by increased generation of credit which finances asset bubbles. This is almost inevitable today...I nominate commodities and tangibles as the next "Great Asset Inflation" pick.
Leave a comment:
-
Re: Fed chief warned on inflation target
Don't worry about it: dollar depreciation is accompanied by increased generation of credit which finances asset bubbles. This is almost inevitable today...I nominate commodities and tangibles as the next "Great Asset Inflation" pick.
Leave a comment:
-
Re: Fed chief warned on inflation target
Originally posted by lewmaneric,
I might have missed it in a previous post but in your opinion do you think the "ka" phase has already begun or has yet to ?
The way I look at it, while inflation indexes (either CPI as doctored by BLS or "true" CPI computed by the likes of ShadowStats) haven't shown much sign of disinflation, it has been happening in various asset classes (housing prices and most commodities have been falling since last yr ; bond prices even earlier since 03)
it seems to me that the "ka" phase has already started happening. I think when the last major asset class (stocks) starts to fall, the "ka" phase would end (or beginning to end), that would probably have a sizable psychological impact on consumers (as it did in 2000/2001); next consumers close their wallets and as the signs of a potential recession show, and the FEDs once again turn on the spigot, the "poom" phase will begin.
when the FEDs reinflate in 2001, commodities/housing/bonds responded almost immediately and stocks also but with an almost 2 yr delay; the big question is what would be the asset class that will benefit the most ?
Lewman
Leave a comment:
-
Re: Fed chief warned on inflation target
Recall that our CPI is a blend of slow inflating traded goods–low cost due to low cost foreign labor and Asian currency pegs–and rapidly inflating non-traded goods and services, especially tuition, medical care, and insurance. If a "compression" of these could be achieved, CPI inflation will remain more or less the same, without radical reconstitution of the indexes.
Dollar depreciation allows the industrial economy to expand, by increasing import costs and the relative cost-competitiveness of domestically produced goods, and by making domestically produced goods more price competitive on foreign markets. This comes at the expense of the finance economy, due to rising interest rates, as foreign lenders demand compensation for the higher dollar inflation premia.
Jobs lost in the finance economy could be compensated for by job growth in the industrial economy.
A lower trade deficit reduces the need for new borrowing to fund it.
Existing debt can be paid off quickly with depreciated dollars.
Problem: The finance economy is now significantly larger than the "real" economy. Job creation in the industrial economy won't be enough to generate sufficient surplus to pay the interest on the debt we already owe, never mind the new debt we need to take on to fund continued fiscal deficits. We need a new asset bubble.Last edited by EJ; February 20, 2007, 09:06 AM.
Leave a comment:
-
Re: Fed chief warned on inflation target
eric,
I might have missed it in a previous post but in your opinion do you think the "ka" phase has already begun or has yet to ?
The way I look at it, while inflation indexes (either CPI as doctored by BLS or "true" CPI computed by the likes of ShadowStats) haven't shown much sign of disinflation, it has been happening in various asset classes (housing prices and most commodities have been falling since last yr ; bond prices even earlier since 03)
it seems to me that the "ka" phase has already started happening. I think when the last major asset class (stocks) starts to fall, the "ka" phase would end (or beginning to end), that would probably have a sizable psychological impact on consumers (as it did in 2000/2001); next consumers close their wallets and as the signs of a potential recession show, and the FEDs once again turn on the spigot, the "poom" phase will begin.
when the FEDs reinflate in 2001, commodities/housing/bonds responded almost immediately and stocks also but with an almost 2 yr delay; the big question is what would be the asset class that will benefit the most ?
Lewman
Leave a comment:
Leave a comment: