An economics lesson from ‘Ferris Bueller’s Day Off’
“In 1930, the Republican controlled House of Rep, in an effort to alleviate the effects of the… Anyone? Anyone?… the Great Depression, passed the…Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act which, anyone? anyone? Raised or lowered?… Raised tariffs, in an effort to collect more revenue for the federal gov’t. Did it work? Anyone? Anyone know the effects? It did not work, and the US sank deeper into the Great Depression.” Thank you Ben Stein for trying educate millions of students and others on this important subject of economics in “Ferris Bueller’s Day off.” Over 7 days right before and after the Smoot-Hawley act was passed in mid June 1930, the DJIA fell 15% but got most of the decline back by late July before falling more than 30% into year end. Let’s hope the just announced tire tariff on China and their possible response is just a one off spat but global stocks are down as a result.
September 14th, 2009 at 9:36 am
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September 14th, 2009 at 11:02 am
This would be more useful if it focused on the facts of the tire case. I’ve read several articles on the subject in the press, and not a single one of them even mentioned the basic facts of the case. How is the reader supposed to judge for himself whether we have a case of protectionism or a case of the first American President willing to stand up to Chinese dumping?
Personally, I don’t believe that “free trade” means they get to dump their products on our markets even as they erect barriers of various sorts to our products. Free trade is a two way street, and if a trading partner isn’t playing fair, then it stands to reason that we should take our marbles and go home until he agrees to live by the rules.
September 14th, 2009 at 11:59 am
[...] consequences of the famed Smoot-Hawley act of 1930, which pushed U.S. tariffs on foreign imports. Over at The Big Picture, he writes: Over 7 days right before and after the Smoot-Hawley act was passed in mid June 1930, [...]
September 14th, 2009 at 1:53 pm
[...] consequences of the famed Smoot-Hawley act of 1930, which pushed U.S. tariffs on foreign imports. Over at The Big Picture, he writes: Over 7 days right before and after the Smoot-Hawley act was passed in mid June 1930, [...]
September 14th, 2009 at 1:58 pm
What the mainstream media fails to mention is that the imported Chinese tires (approx. $1.6B per year) only supply the lower end of the value chain, i.e., repair shops that provide bargain tires to bargain hunters. The real money is made in OEM (read, car makers) and OEM replacement markets. Essentially, the US manufacturers made a conscious decision to forsake the lower end of the value chains. Yet the Obama Administration pretends they know about the business strategy better than the industry. The Obama tariff is dumb in every sense except in appeasing the labor union (repaying the debt of getting elected with union endorsement). We Americans should never aim to compete with the rest of the world on lower end of the value chain in any product. Our society benefits fundamentally from aiming for and achieving leadership position in the high-end of the value chain.
September 14th, 2009 at 2:35 pm
@F411
Since you’ve read everything, hopefully you read that there really are no cheap tires manufactured in the US and no firms are going to suddenly build a new plant to make cheap tires for a 3-year tariff. The short term effect will be importing cheap tires not from China—but from Brazil or elsewhere. And what cheap-tire inventory exists in the US will all be increased in price by a few bucks per tire.
End result—price increases for Americans buying cheap tires. The type of people buying cheap tires at WalMart will feel the pain. The tire companies in the US will make more money, their unions will demand more concessions and in 3 years when the tariff ends, the companies will go bankrupt since they “owe” the unions so much. Then, we’ll bail out the tire manufacturers—probably just in time for an election cycle.
September 14th, 2009 at 7:19 pm
[...] -”Over 7 days right before and after the Smoot-Hawley act was passed in mid June 1930, the DJIA fell 15% but got most of the decline back by late July before falling more than 30% into year end. Let’s hope the just announced tire tariff on China and their possible response is just a one off spat but global stocks are down as a result.” –Peter Boockvar, writing for The Big Picture. [...]
September 15th, 2009 at 10:02 am
“case of the first American President willing to stand up to Chinese dumping?”
Why do you think the head of the NEC and leading economist in Obama’s white house is Larry Summers?
Strong dollar is and has been out national policy since Rubin in 1994. Do you not really understand why out government has and continues to take such extraordinary financial steps to maintain it?
The tariff is throwing a bone to unions for political support.
The US policy is still all about trying to maintain artificial global dollar hegemony through manipulation of spot prices via highly leveraged futures markets. How do you do that – promoting massive unregulated, globalized of financial markets.
Strong dollar policy = explosive financial growth with the wholesale and permanent export of US manufacturing jobs from the rust belt. This is what the Obama administration is adamantly trying to maintain- Wall Street’s financial, and thus dollar, control over the world.
http://www.atimes.com/atimes/Global_Economy/JF18Dj02.html