The Fourth Turning: Trump's Tariffs and a 2nd Great Depression..??
Does Smoot Hawley ring any bells?
Just a few days ago in my post Our March to Fourth Turning Crises and Bloodshed Continues.., I indicated that we’re due to enter a acute phase of our Fourth Turning crisis period and that it may include wars, financial crises and other calamities.
Well, I didn’t know that Trump would roll out a very aggressive tariff plan aimed mostly at China and Asia (and others), and it’s kicked-off a massive stock and commodity market sell-off. I had wondered if widespread tariffs would be a repeat of the Smoot Hawley tariffs of 1930. It crossed my mind. Now, I’m getting a little concerned that it may be a case of history repeating. The big sell-offs in the markets, the huge crack-up in the price of oil and commodities are saying “recession” or “depression.” It’s early, I know.
It’s the commodity price crashes that I’m noticing the most. Yes, OPEC increased production quotas, so there’s that. Interest rates on gov’t bonds are crashing hard. It’s just started, so there may be a sharp turn-around next week. We’ll have to see how next week plays out. There IS panic in markets on Friday morning, so that may signal a “capitulation” but, as a retiree, I had to disgorge plenty of risk in my portfolio to stop the bleeding. It’s still hasn’t stopped as everything is being panic-sold. Ironically, that’s probably the time to start buying.
When foreign countries, and their leaders, begin to reduce their tariffs and “make deals” with Trump, the market crash will stop. I think that will happen. I think a leader in Vietnam just offered to reduce tariffs on US goods to ZERO. We need more of that.
Financial crises, wars, upheavals and all kinds of turbulence are in our very near future. Martin Armstrong is saying war in Europe in May. That may spike gold prices. He’s said “beware May.” Ok, and it’s only April 4th. Oh boy.
What president Trump has done is like he said in his speech from the Rose garden yesterday.
“Going back five presidents, we have lost 6 1/2 million manufacturing jobs. Republican president and democrat presidents did nothing to stop it. In fact, they cheered on globalization. What we are doing is to help Main Street not Wall Street.”
To put this in perspective, that’s the population of North Dakota / South Dakota / Wyoming
Alaska / Vermont / Delaware.
Martin Armstrong straightens me out regarding Smoot Hawley tariffs on agriculture products and that they were not likely to be the largest, singular cause of the Great Depression, when he says:
"While all we hear is how the Smoot-Hawley Tariff caused the Great Depression, that was total fiction. Here is a chart of US tariffs since 1784. The Smoot-Hawley tariff was on Agriculture in 1930. The Socialist economist omitted the sovereign defaults of 1931, which included Canada, Europe, South America, and much of Asia.
The causes of the Great Depression have been debated for decades. The problem with all of the analysis is this same attempt to reduce the cause to a single event. In school, we read The Great Crash by Galbraith. He was a socialist, so he blamed the corporations and never bothered to mention the Sovereign Defaults of 1931, for that would have accused the government instead of the private sector. Then there is the argument that the tariffs at least “contributed” to the Great Depression, if they were the leading factor, again disregarding the Sovereign Debt defaults.
Smoot-Hawley wasn’t signed into law until June 17th, 1930, when stocks had already taken a nosedive from the September 1929 high. Cato Institute’s Alan Reynolds argued that Smoot-Hawley was an ongoing drag on the economy and that it was, in fact, a substantial contribution to the stock market, arguing that traders saw it coming and acted in anticipation. The argument on the one hand correctly states that traders acted in anticipation. Still, it incorrectly adopts the position that BUT FOR the tariff issue, the stock market would have continued higher anyway?
Moreover, the pretense that somehow the Smoot-Hawley Tariff created or contributed to the Great Depression, ignoring the European Sovereign Debt Crisis, is really a specious argument."