New Tariff Act Has Already PASSED!
One of the great mistakes made BEFORE the Great Depression became the "GREAT DEPRESSION", was the Smoot-Hawley Tariff Act. The concept was so simple, raise prices on imported goods and this would benefit domestic producers. The inevitable reaction from other countries was to do the same thing to us, and we ended up with retaliatory tariffs enacted around the world. Trade dropped precipitously and jobs were lost. We've been told that our leaders have learned this lesson. In fact, its one of the few economic accurate economic lessons you still learn in public schools.
Unfortunately we did NOT learn the lesson. Smart people, like Ben Bernanke, think they can continue debasing our dollar. In their view, this will boost consumption AND the export of goods, because a weaker dollar makes our products less expensive and imported goods more expensive. PURE GENIUS - without enacting a tariff, which ONLY helps domestic producers a weaker currency will help both domestic producers AND exporters.
Well, it hasn't taken long for the rest of the world to figure this out, and now the world is on the 21st century version of the tariff acts - a race to devalue currency's. Some examples include Brazil's recent attempt to devalue their currency, skillfully disguised as an attempt to "shore up the dollar", which we all know is hogwash because Brazil could spend every real they have and not make a dent in the dollars value.
Another small player, Latvia, is expected to devalue their currency by 15% . England's pound is in a free fall as they attempt to boost exports into the Euro Zone. But these examples are but small players in the world economy, the big players are China and Europe, and we've already seen one shoe drop. China has NOT delinked their currency to the dollar. So the only big player left is Europe. Blighted by the fascist power grab in the 1930's due in part to currency devaluation, Europeans are nervous about devaluing the euro, but the pressure is getting to them as their domestic producers are feeling the pinch of cheap US & Chinese goods.
Amazingly, Japan is NOT going for a cheap yen, which is a complete reversal from their planned economy for the last forty years. I predict, if Japan can stay the course for 12 - 18 months, their economy will be the FIRST to truly recover from this world wide recession (China never having been in a recession will not achieve it's pre-2008 growth levels until they end their currency's link to the dollar).
Paradoxically, the real winners will be those few countries who don't devalue their currency. For one, energy is a completely different game. The USA used to be the biggest petroleum exporter in the 1930's, but we live in a different world today, where we import 70% of our oil. Oil was only just discovered in the Middle East in the 1930's. This will lead to a huge squeeze on consumers - who make up 70% of our economy, but not nearly as much in the 1930's. For country's with strong currency's, they will be getting their energy significantly cheaper than the USA, and thus have a huge competitive advantage.
Here we are, 70 years after the end of the Great Depression, making the same EXACT mistakes our great grandfathers did, but attempting to argue it is different this time. It is not, and the worst is yet to come.