Tag Archives: Smoot-Hawley

SUBTLE BIAS IN THE PRESS

This example is from Bloomberg Financial and linked to by Yahoo Finance. Click the blue link if you want to read the entire article.

Representative Tim Ryan, an Ohio Democrat and co-sponsor of legislation letting companies seek duties on Chinese imports, said China is violating trade laws and the bill would give the U.S. tools to combat undervalued currencies.

“It’s now time for our country to have the guts to stand up and take a strong stand against China’s currency manipulation,” Ryan said today in testimony to the House Ways and Means Committee. Representative Dave Camp, top Republican on the panel, said he opposes the legislation.

This will be taken by most readers as straight unbiased news. But what does it really convey? It says China is breaking the law and manipulating the currency markets. A Democrat is trying to help farmers and corporations disadvantaged by this illegal activity. A Republican opposes helping farmers and business men for no given reason.

Bias is definitely evident, but it is subtle enough to go unseen by most readers. Such subtle bias is not unusual, it is the norm. It is as common as dirt. In fact it is dirt.

The facts: The Republican cited, Dave Camp, used the entire time allotted to him by the Carl Levin’s Ways and Means Committee urging the committee to take strong measures to combat China’s trade practices. Read his statement here.

The bill was broadly opposed by Republicans because it was loaded with earmarks. Earmarks are bribes  politicians give to their constituencies in return for their votes. That is a valid reason for opposing the bill. A better one is given in Random Thots article equating tariffs on China to the Smoot-Hawley bill passed in 1930 that precipitated the Great Stock Market Crash and launched the depression.


KRUGMAN CALLS FOR REPEAT OF THE SMOOT-HAWLEY ACT, THE LAW GENERALLY REGARDED AS THE CAUSE OF THE GREAT DEPRESSION

Paul Krugman has sunk to the level of complete idiocy with this latest recommendation. All through most of the 1920’s a debate was raging in Congress over the passage of a bill to put large tariffs in place, most notably on imported steel. The argument pro was to protect American industry by making imported products non-competitive. The argument con was that other nations would respond with similar tariffs on American goods and trade would cease. The law was passed, other nations retaliated by raising their tariffs on American goods, exports collapsed, the stock market crashed, the Roaring Twenties ceased, the Great Depression began.

Edited from a Wall Street publication:

So after President Herbert Hoover took office in March 1929, Congress immediately set to work on a new tariff regime. This is an important point, because you have to picture that this legislation was winding its way through committee long before eventual passage in June 1930. It is a fair statement to say that the prospects for Smoot-Hawley had something to do with the October 1929 market crash itself.

On Monday, October 28, the New York Times ran a front-page story on possible passage of Smoot-Hawley, the next day, on Tuesday the 29th, the day of the Crash, other national papers had picked up on the issue.

Now Krugman wants to do the same thing again. Of course it is not the steel industry this time. Steel was a major import in 1930, now it’s goods from China. It is forgivable for the man in the street to think this is a good idea. We’re all a bit miffed that everything seems to come from China and the world of economics is not broadly understood.

What would China do? What would American industry do? What would other nations do? We have spoken previously of the economic tenet called Rational Expectations. All players act, I should say react, in their own best interest. One rational expectation would be for China to cease funding our debt. This could cause a 200 to 300 percent increase in the currently very low rate of interest we are paying on our skyrocketing national debt.

Another expectation is China would raise its prices to recoup the tariff. U.S. manufacturers cannot produce goods as cheaply as the Chinese. If they could, they would be doing it already. The cost of everything we get from China would increase, and likely by more than the rate of the tariff itself. When Smoot-Hawley was enacted, even nations not directly affected perceived an opportunity and instituted high tariffs as well.

Einstein is usually the one credited with defining an idiot as someone who repeats the same mistake while expecting a different result. Krugman is an ideologue posing as an economist. Yes, I know he was awarded the Nobel Prize in economics. That only serves to confirm my opinion of him.