Warren Dew Wrote:If you think Smoot Hawley and the resultant retaliations helped the US economy, you're ignoring all of the empirical evidence about it.I didn't say it was good for the economy. You said it destroyed the economy. I said that was horseshit. That is, there is little evidence that the tariff was a significant factor in the downturn over 1929-30. I believe it had a mildly negative impact because of this identity:
GDP = Aggregate demand - trade deficit.
Since we had a trade surplus back then, trade volume added (modestly) to GDP. So an effort to reduce the volume of trade (which is what Smooth Hawley was intended to do) would have a modest negative impact on GDP, all else being the same. Today we have a large trade deficit and so reducing trade volume will make GDP modestly larger, all else being the same. But the impact is secondary to the larger impact from tax and monetary policy. The Fed response to the Credit Anstalt collapse was a more important factor than Smoot Hawley Similarly part of our economic problems stem from the "October revolution" in Fed policy.