My fears of a collapse in global trade, the likes of which we have not seen since the Great Depression are coming closer and closer to reality.
Shades of Great Depression and Smoot-Hawley Tariff Act
Sarkozy Proposes Carbon Tax on US, Anti-Dumping Tax, Buy-EU Act
In a world gone mad, former French President and current French presidential candidate Nicolas Sarkozy says France, EU Must Respond in Kind to Trump Moves.
“Europe can no longer be weak, Europe can no longer be naive. We can’t let our industry go,” Sarkozy, the French president from 2007 to 2012 who’s looking to get back into office, said Sunday in an interview with the TF1 television station.
Europe must set up a “Buy Act” that would require foreign companies seeking public contracts to set operations in European countries, Sarkozy said.
Should Trump stick to his electoral promise of exiting the U.S. from the Paris Accord to curb carbon emissions, Europe should set up a carbon tax for U.S. products, Sarkozy also said.
The former French president also called for an anti-dumping tax in Europe. “I believe in trade but I want that, in this world, Europe rearms and defends itself.”
Collapse in Global Trade Agreements
Obama’s Trans-Pacific Partnership (TPP) is dead. Obama’s Trans-Atlantic Trade and Investment Partnership (TTIP) is also dead on arrival.
Neither of those agreements is realistically about free trade. Both contain inane provisions allowing corporations to sue governments. And TPP is mired in global warming muck.
Yet, the collapse of the agreements culminates a long period of dwindling deals of any kind.
Trump is highly likely to label China a “currency manipulator”, and US relations with Mexico are going to suffer whether of not Trump foolishly builds a wall.
Other than the wall, if indeed one is built, it’s highly doubtful anything would have been much different under a Clinton administration.
“Me Too!”
Sarkozy’s “Me Too!” retaliation comments are akin to lemmings following each other over a cliff.
I also liken this setup to a mother chastising her five year old son for some misdeed and receiving the rebuttal, “well Suzie did it too”.
Global Trade Madness
No one wins trade wars, ever. Sarkozy’s comments should be downright scary to any student of history.
Trade tit-for-tat madness is very similar to what we saw in the Great Depression when the Smoot-Hawley Tariff Act raised tariffs on 20,000 imported goods to record levels.
I am in rare agreement with Ben Bernanke who says “Economists still agree that Smoot-Hawley and the ensuing tariff wars were highly counterproductive and contributed to the depth and length of the global Depression.”
Related Articles
- Today’s Quiz: Donald Trump, Bernie Sanders, Hillary Clinton – Who Said It?
- Hillary Sounding Suspiciously Like Trump On Trade
- Trade With China: Is Obama Any Different Than Trump?
- June 25: Obama Stands by “Back of Queue” Brexit Warning; July 1: US-UK Trade Bill in Congress
Is there a single person in power, anywhere, who understands the benefits of free trade?
Worried about “Fair Trade”? Then please consider “China Doesn’t Play Fair!”
Mike “Mish” Shedlock
Sarkozy doesn’t even understand that his three demands are inconsistent with each other. And what is a global anti-dumping act; is it to stop Mars and Venus from competing?
“Europe can no longer be weak, Europe can no longer be naive”. but, then again, they’d have to vote on it and i doubt they’d ever get a consensus. lol.
A “Global Anti Dumping Act”, like all “Acts”, is a handout to lawyers (In the angloshpere) and Bureaucrats (In Europe.) In both cases, a handout to those who control policy in their respective countries.
Talking points value insistency over consistency
Why would it be foolish for Trump to build a wall? We can still let goods through…
The irony of Trump continually focused on a wall.
I don’t agree with Trump on very many things, but the wall is one idea that I have no problem. If you can’t control your border, you can’t have an immigration policy. If you have control over people entering, then and only then can you address the question of how many people to let in, and what to do with people already here.
If you try to address the latter questions, but have no control over the border, your “solutions” are irrelevant. You can say “we won’t allow anyone in”, but they can come in anyway. You can say “we will allow 1 million a year, but 2 million will come. You can say “we’ll deport 1 million people”, but 1 million will replace them.
Will a wall keep everyone out? Of course not, but it would give some control. Will locks on your doors to your house keep everyone out? No, but it keeps out many people that you don’t want in your home. For those that think a wall is stupid, I have to ask – do you have locks on the doors to your house? Why, or why not? Isn’t it the same thing?
.
Trump began crawfishing on his previous immigration promises before his election.
He may be another Reagan and give millions of illegals amnesty.
Living in a border state where Whites are now the minority, I am on the front lines of this HUGE problem that is not going away. If it is not fixed now, in a few decades [or less] Whites will become the minority in the entire USA.
As for the wall. I have always thought that to be symbolic.
.
” If it is not fixed now, in a few decades [or less] Whites will become the minority in the entire USA.”
Wall or no wall, the reason whites are becoming the minority everywhere outside Mormonia, has little to do with immigration policy. And is instead simply a symptom of too many whites being “fixed” as it is.
As if it was planned this way from the beginning….
For decades enemy cultural marxists who influenced and controlled media, academia and government in White nations promoted anti-family and anti-child abominations while promoting their zero-population growth agenda.
Now that the White population is not replacing itself, these same cultural marxists are promoting massive third world immigration into all White nations.
.
.
Cultural marxists have also banned discussion of their ongoing genocide of White Christian civilization by making such discussion un-PC and taboo. And in many places it’s even criminal to discuss REAL problems… thereby destroying opposition to the cultural marxists’ evil agenda.
.
LOL look at the kind of scum you host now Mish.
“Scum”… is that the cultural marxists’ new term for “deplorables” ??
They are seriously looking to take on the US in every area and use it against the UK too.
They can kill two birds with one stone with Trump as the excuse and punish the UK for Brexit whilst helping delay them having to make fundamental reforms to liberate their labour markets.
The greater the pain they feel themselves the more it will help drive integration efforts – this has been known for a while, its no accident. When it really hurts countries will beg to come together under the EU/Euro.
They need a bogeyman.
Tax blacklist – http://www.euractiv.com/section/euro-finance/interview/trumps-us-could-be-tax-haven-blacklisted-says-tax-commissioner/
“We have always been at war with Eurasia.”
Now is the time for an alternative to show itself.
1) Free trade with the UK as a proponent to all willing to take part.
2) North Atlantic Digital Market Place – massive potential for NAFTA, UK and others. Fully secured and for the open trade in digital services. This is the future direction we should look towards in many areas to bring down barriers, costs and drive digital services growth. The one area there could be true free trade.
The best way to show the error protectionism is to have a working alternative.
The EU sees itself as the largest single market on the planet and will use that to bully others. If you don’t comply to their demands expect consequences.
It will extend to carbon, tax, registered business locations and so on.
It is intending to have the 2nd largest military on the planet too.
Put it together.
The “City of London”, Messrs Rothschild & Co, Goldman Sachs et al, are all, if only for the briefest of moments, beginning to consider the possibilities that this great unwind will inevitably, and after much time & suffering by all, lead to their doorsteps. God help them if it does.
“The single largest market” hyperbole, while possibly technically and legally true, is very much neutered by massively divergent consumer preferences across the bloc, by very low desire for most workers to move, by language barriers, and by all manners of weird regulations that makes it virtually impossible for any producer of neither goods nor services to treat Europe as the de facto single market it claims to be. It ain’t no nondedscript US Suburbia from The Bosporus to Northern Ireland, to put it mildly.
Well, this is the second Great Depression.
Worldwide total private debt to GDP over 200%? Check!
Credit (slope of private debt) expanded more than GDP more than 20% per annum over trailing
five years? Check!
Banks insolvent? Check!
War mongering? Check!
Clueless CB’s worldwide? Check!
Rapid technology advancement as barriers to entry for innovators fall?
Check!
It’s not all bad. Creative destruction and all that.
So, Mish, what is the proper response to the Chinese peg? It has made Walmart and GE wealthy as it subsidizes importers to the US.. It has undercut the prices of US domestic manufacturers by roughly 25%. We have lost many jobs as a result.
Of course, the Chinese could voluntarily let their currency float against the Dollar and we would get more jobs and more exports. But the Chinese will not. Their very powerful “mercantilist” policies have been in place since the early 1990’s. In total, their trade SURPLUS has aggregated more than $8 Trillion Dollars, with all that implies for the loss of US jobs.
The only available response is the threat of (and if unsuccessful, the imposition of) tariffs. No one likes them, and they are destructive. But “free trade” cannot exist in a regime of managed currency spreads. (Of course, we could go to the international trade body and spend the next ten years “litigating,” these issues, but these are political bodies with no real teeth and a focus entirely on how they keep their own rice bowls full.)
Although our Fed damages the currency relationship also, the Chinese peg is far more forceful. For those of us who run companies which source subsystems around the world, the US competition is dead…how are they going to compete against a 25% price advantage?
You will know when there’s “free trade” between the US and China,….when our trade balances from natural market forces and their consequent impact on the exchange ratio.
For now, Mr. Trump is entirely correct.
Thanks for listening.
“…the Chinese peg is more forceful”.
The US sanctions the peg, no doubt was involved in organizing it.
It isn’t “The Chinese peg” but the US-Chinese peg. That it is China that has the monetary and legislative policy in place to maintain it is really besides the point. The peg is held by China re-investing surplus mostly into treasury debt and US banking, the US knows this and encourages it. In other words Chinese surplus earnings are offered a cozy US pocket – the peg is domestic Chinese where dollar earnings are confiscated by government at a fixed rate from earners for later reinvestment as per above.
The proper response to any real or imagined peg, is to quit falling for the sham that it matters, absent US policies that specifically makes it mater: Just use Gold.
The reason exchange rate “pegs” matter, is because US actors have little to no nominal flexibility. Silly Krugmanite superstitions like “sticky wages”, obsession with “consumer” price inflation etc. are taken at face value as some sort of laws of nature. A hard gold peg would finish that nonsense off immediately, as gold’s scarcity would inevitably result in nominal wages and prices dropping. Which would render any Chinese “peg” completely irrelevant, as US actors would already have the built in nominal flexibility to deal with any Chinese exchange rate in real time.
The transition will be a bit of a mess, since virtually all US actors have currently optimized for a world where their own government has effectively banned nominal flexibility, while underwriting the ban with the printing press and its taxing authority. But as with any set of policies built to prop up faults and lies, their costs will just keep growing, until they become entirely untenable. As we are seeing more and more of right now.
Governments due understand free trade. But, what self-respecting bureaucracy would advocate less bureaucracy, something that is a major requirement of free trade?
That is the poison that kills free trade. Well said, SMF.
If trade collapsed, would it force each country to produce their own goods creating many jobs in America?
Yes Seenitallbefore- that seems to be happening in Russia. Europeans bending to Obama’s demands have severely damaged trade throughout Eurasia and strengthened Chinese position immeasurably – you don’t need tariffs – just crazy out of control elites operating to their advantage and at the behest of global corporates (sometimes) but not their citizens. It is about time that politicians pay was tied to performance.
More expenditure on weaponry is also a disaster – we have to stop the central bank/squid state currency scam arrogantly loading on our backs and take back control of our own money. We all want free trade and opportunity – not petty restrictions banning of cash selectively to benefit rentiers and stacked trade agreements.
Your assumption would be relative to IF Americans WANT to work. From this last election I would suggest that there is a sizable number that do not. We have a minimum wage that IS NOT that which governments publish and enforce but the wage that is required to offset those benefits which government provides to those without jobs as an ENTITLEMENT. In some cases it adds up to close to $60k a year which is three to four times the published minimum hourly wage. We have lots of job openings today that can’t be filled because people don’t HAVE to work. We have 95 million not in the workforce that are eating. That number will only grow if we feed it. We are seemingly finding our jobs are ones that not even illegals will do…because they don’t have to either.
In my industry of woodworking, we are seeing substantial sales in automated machinery….simply because there is a lack of people WILLING to do the work….even in California, where there are massive numbers of illegals. If they won’t do woodworking, what WILL they do?
We subsidize people NOT to work and then try to create an economy that creates jobs. Does this make any sense? At what cost will those jobs be?
We are flooded with cheap imports and cheap labor as we see our domestic CAPABILITY to produce shrinking, and at some point those costs will begin to rise substantially as their competition fades. China has the capacity to provide goods at virtually zero cost in the short run which would destroy any remaining domestic production. Instead of accepting higher prices now in hopes of saving our domestic capacity, we will continue to consume at ever lower prices until no jobs remain, and ALL of this will be enabled by a government providing funding to offset those job loses while telling us that THIS is the golden age, the Utopia we all seek where we need not toil for our food and shelter…that we are special.
Yes, no trade between countries would force each country to make everything itself (excepting the huge black markets that would spring to life). The market for things inside each country would be smaller, and the resources needed to make those things would be limited. So, the things, themselves, would be of horrible quality if they even could be made at all. Kiss off your car and cell phone.
To find out where that would place any particular country materially, find situations where the population of a (relatively) closed economic unit is similar to the population of the country. Usually the way to do that is to find some time and place in history. For instance, the US, with 300+ million people, would have the resources able to be at an material level of, say, EuroAmerica a couple, three hundred years ago.
De-colonial Tanzania, though run by an exception to the de-colonial, “corrupt big man,” built its economy on the premise that they would be “self reliant” and produce everything internally. This was the surest way to poverty. It worked.
“Jobs” will never be a problem until the bulk of the population has everything they want that can be provided by other people. Don’t hold your breath waiting for that. But do impede the proscriptions of those who give up for lack of vision, faith and confidence in their fellow man to do productive, wanted work for others.
“Europe must set up a “Buy Act” that would require foreign companies seeking public contracts to set operations in European countries, Sarkozy said.”
Didn’t Japan used to do this? In my experience, Japan still actively favors domestic companies over foreign ones. It may still be the case that you can’t penetrate that market wi/o an in-the-loop Japanese partner.
The Donald ain’t the President yet until January. Plenty will happen before that. Most likely false flags and WW3.
Good luck.
Actually, there appears to be a good effect from Trump election already:
https://willyloman.wordpress.com/2016/11/13/trump-effect-al-qaeda-crushed-in-aleppo-western-intervention-against-russian-bombing-ends/
Did Obama and Hillary figure out that they better stop supporting the terrorists before Trump changes US policy?
We need more free trade within the country. Get rid of income taxes, sales taxes, the FDA ban on consuming any substance they didn’t approve, minimum wage, agricultural price supports, etc, etc, etc…
Meh!
The Great Depression 1.0 was less about Smoot-Hawley and more about the fact that the US was massively overleveraged and the drop-off in trade made it damn near impossible to service the level of debt that had resulted from increased protectionism. If the US business model did not depend so heavily on debt, it might weather things like protectionism rather well.
Sorry, Mish, but sometimes you have to run an economy at less than peak performance to keep the engine from burning out. The poor folks whose livelihoods will ultimately will be sacrificed to the robots need to be given a little more room for them to adapt to making the change, or they will come at us with pitch-forks.
Let’s see – the USA is the CONSUMER nation. So, WHOM will get hurt more?
Germany will NEVER be as stupid as France.
The million migrants in Germany didn’t convince you otherwise it seems…
So, will we be in a trade war when our deficit is $500 billion, $800 billion, $1 trillion, $2 trillion, or ZERO?
Or do we judge as to if we are in a trade war by if we are winning or losing? Seems to me that we have been losing for a long time unless you just believe we can print and borrow to infinity. Its seems almost coincidental that our trade deficit is about the same as our budget deficit.
Germany is an export machine. The EU internal market alone will not be big enough to support it and not, therefore, the EU.
Supply lines are very complex and a few relatively small breaks will create untold havoc. Hard to predict.
Butterfly wings etc.
Care needed with wishes made.
In other news, Gold hammered again down to 1216$, soon below 1200$. When will Mish reassess ??
What’s changed?
http://3.bp.blogspot.com/-qYph7xMYRF8/Vg6YFN7ceZI/AAAAAAAAC0o/LoJeedgdGuM/s1600/Memes%2BRajoy%2B2.jpg
If the eventual mind blowing unravel of the EU and their criminal enterprise makes its way to the doorsteps of “The City of London”, “The Rothschilds & Rockefellers, and their “minions”, Goldman Sachs et al, there is going to be HELL TO PAY. And who knows, maybe a good all out war with Russia might have refocused everyone’s attention elsewhere….at least the ones who were left alive.
Not only the collapse of global trade, but the collapse of many governments… all part of the fall of globalist Babylon.
.
Justice for Assange:
The UN Working Group on Arbitrary Detention has found that Julian Assange is being arbitrarily and unlawfully detained by Sweden and the United Kingdom; and that he must be immediately released and compensated. The Working Group spent sixteen months investigating the case before issuing the Opinion. The process was adversarial: the UK and Sweden took part by making submissions to the Working Group.
https://justice4assange.com/
Free trade does not get you votes. As long as a sizeable section of people can be appeased to garner votes or you can spin it as if it is in the interest of the country (protecting jobs as in steel tariff) , no country is bothered about free trade.
“Other than the wall, if indeed one is built, it’s highly doubtful anything would have been much different under a Clinton administration.” Mish is one of the few commenters to understand this. Trump and Clinton were never far apart; Trump won’t get half of what he has promised, and Clinton would have been DOA in four years of gridlock.
Mish, you might find this take interesting on why the left is hysterical about the election:
https://drhurd.com/2016/11/13/hysteria/
yes – very good article
Thanks
If we all improve ourselves just a little (thoughts, words, deeds) the change will be profound.
“The answer is not out there. It’s within ourselves, not in the group or the government. It always has been, and it always will be. The only government that helps us is the one guaranteed to protect and preserve our sovereignty over our lives, our individual rights, our property rights and, at least implicitly, our individualism.”
Update:
Chaos Ensues As Europe Splinters In Response To Trump: UK, France, Hungary Snub EU Emergency Meeting
http://www.zerohedge.com/news/2016-11-13/chaos-ensues-europe-splinters-response-trump-uk-france-hungary-snub-eu-emergency-mee
Mish, maybe you are being too pessimistic…Trump is a businessman and very pragmatic. Even if he gets any parts of his agenda done—it will be good for the people and business. Look, after all the screw ups of Obama, Bush, Clinton, financial deregulation ……how could he do any worse?
You lack imagination
Actually, Smoot Hawley did little,… because all the damage had already been done when it was passed; it simply became the political scape goat. So Ben Bernanke is once again absolutely full of shit. You need to be more careful when you feel compelled to lie next to snakes Mish.
Europe, like so many other parts of the world, seem never to learn from their mistakes. In my mind ‘we’ are at the top of this list. The Europe fill most of the rest of the list.
“My fears of a collapse in global trade, the likes of which we have not seen since the Great Depression are coming closer and closer to reality.”
Cycles repeat. Depressions are when things collapse. Stock bubbles, housing bubbles, financial bubbles.
Mish,
When it comes to free trade you sound a little like the Keynesians of the stimulating effect of government spending. Please direct me to posts where you address the flip side of free trade. Specifically the loss of manufacturing and skilled trades jobs to overseas. That 50’s something guy in the Midwest who voted for Donald Trump couldn’t care less about the Chinese people subsidizing his solar panels.His manufacturing job is in Mexico and he can’t afford to convert to solar on what he makes in his new service industry job if he has one.
I have written numerous articles on the stupidity of fair trade.
search my blog for the term
American job loss to the third world was just the canary in the coal mine. Those who covet cheap labor have brought the third world to America which has destroyed American neighborhoods, schools, society…. and will forever destroy North America’s White racial and Christian cultural foundation. No leader has overtly stood up against this. All government leaders have sold their souls, their inheritance and their posterity for temporary worldly gain.