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Jun 26, 2009

The Present Tells Us About the Depression

The Smoot-Hawley tariff of 1930 imposed tariffs (taxes) on the import of goods. Other countries imposed similar taxes in retaliation. This started a "trade war", a frenzy of higher taxes on trade that increased the problems of the Depression.

People worldwide were thrown out of work for the simple fact that they traded their production to people in other countries. Everyone became poorer as the world economy tried to adjust to this self-imposed restriction and cost.

How could they have been so stupid? Because taxes raise money for politicians, and taxes on certain imports raise profits for political supporters who make those goods locally. Politicians did not care that the imposed costs put other people out of work.

Read more ...

Level the Playing Field and Bring Down the Economy
06/25/09 - Open Market by Fran Smith

[edited] Beware of any proposal that attempts to “level the playing field.” Usually, this hobbles competition with restrictive regulations and raises costs for consumers.

The House Ways and Means committee proposes carbon taxes on imports from countries that don't control greenhouse gas emissions. This can have broad, disastrous consequences

The huge and complex Waxman-Markey energy bill will be voted on Friday. Environmental groups are eager to suppress energy use. It sets up a “cap and trade” system by setting a limit on carbon emissions and issuing tradable allowances.

Some carbon-intensive industries with high energy use understand the high costs they will have to pay and pass on to their customers. They are worried about “leakage”. Companies in other, less burdened countries would be able to offer lower prices, and those countries would be a better place to locate businesses and jobs. The solution is to also hit those imports with a hefty tax. Congress is figuring out a way to do that.

People usually think that looking at 1930 and the great depression can give us an insight into what we should do now.

Actually, it is the reverse. Our government is giving us an insight into what happened in 1930. There isn't any real care about economics or recovery. There isn't any fear of making a bad situation worse, or of taking a 2 year recession and making it a 10 year misery.

The fact then and now is captured by Rahm Emanuel, Obama's chief of staff. He said that no crisis should be wasted as a political (money acquiring) opportunity. What we have/had is an explosion of political class self-interest and a grab for money and power. The economic crisis (caused by these same politicians) is merely the excuse to enact wild theories and hand out favors during the turmoil.

There are no limits, because they can take the money now and let the accounts settle themselves later. They don't have to care what happens to the "little people" when they look out in the future from their hilltop homes. They will have gotten theirs.

What Caused Unemployment in the Great Depression?
The government caused uncertainty that delayed reinvestment, just like today.

We Guarantee It
The government is guaranteeing us into poverty. The story of the housing and economic crisis. Politicians discovered a loophole in government finances. They could borrow as much as they wanted, off budget and without debate, by granting guarantees.

Supposedly private businesses like Fannie Mae and Freddie Mac borrowed as much money as the entire national debt at the time, $5.4 trillion ($5.4 million million). The guarantees go on today. The politicians crying the loudest about the free market and lack of regulation were the ones who directed this disaster and refused restraints.

The Political Manual: Adequate Compensation
"This is not a new problem, and you owe much to prior politicians. They have worked tirelessly on methods to receive adequate compensation. You stand on the shoulders of giants. You can create any amount of mischief spending vast amounts of public funds, provided it is from the heart and not for personal gain. You are a servant of the people. Any benefit you may receive personally is coincidental."

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