Monday, September 14, 2009

Obama Declares War on China

This is a rant.  This is not the normal, well thought out, poetic prose, that Audacity of Logic readers usually get from a Dolley Madison post.  This is a tantrum!  You see, I am involved in International Trade, I have an Economics  Degree, I am a Customs House Broker, I am also an avid reader and history buff - as such, I am well qualified to loose my freaking mind over the latest debacle by the Union Organizer and Chief.

Would somebody PLEASE give Barack Hussein Obama a blessed history book?  On the road to quickly becoming the worst President ever, Obama sets a punitive tariff on imported Chinese tires!  Can somebody please tell this idiot that the Great Depression was only begun after the Smoot Hawley tariffs were put into place?  For those of you who don't know what that was, it was a protectionist tariff designed to increase the costs of imported goods and "protect" our industries.  (If you are so inclined I can send you a link that will show they are still on the books and reserved for countries we have embargoes against.  Thus, if you want to bring in a blanket from North Korea, even though it is illegal, you would pay the duty on the Smoot Hawley rate which is around 50%)

Protectionism DOES NOT work, in fact it always has the opposite effect and sent the world into the Great Depression.  Right now in history, our fragile economy has been allowed to operate for a few months without more HELP from the government, and is showing signs of hope.  Obama crushes the new shoot with a giant foot.  (This has to be on purpose.... No way do they not know what this will do.)

Over the weekend, our second largest trading partner is slapped with a punitive (not Constitutionally authorized) 35% punitive tariff on Chinese tires.  The Chinese of course are furious and will retaliate.

I don't even technically know what it is being called because CUSTOMS has not issued any directives to the industry to tell us what it is or how we are supposed to implement the latest from the Idiot and Chief!

 The kicker in this whole thing, is normal channels are not being followed.

Typically what happens, is someone in the industry being "hurt" files a motion in court.  A a case is opened by the ITC (International Trade Commission) and the industry is asked for input during an investigation period.  Comments from concerned parties are entertained and an investigation is launched.  There is a process, there is an acceptable way of doing this kind of thing, but of course these rules don't apply to King Barack Obama.  This due process allows people to prepare for possible cost increases in their product and to adjust prices to their customers.  This allows importers to budget their costs and adjust their forecasts.  This due process allows time for computer programs to be changed to accommodate the new laws, rates, and case numbers.  This due process prevents special interests from getting a hold of a person in power and having them willey nilley screw up trade relations with another country as political payback or favor granting.

Who knew that one day the Presidency would be bought and paid for by Special Interests?  Who knew that one day the President would be at the beck and call of the Unions?  Who knew that the Unions would one day OWN the President of the United States and be free direct policy on trade, fire CEO's and take over industries, direct stimulus, health care, and energy policy.  If you doubt me, research it!  Go to Youtube and type in SEIU and Obama.  Do some homework, you will find I am right.

The pisser of the whole thing?  YOU get screwed.  That's right folks, take it from an economics major, I don't remember much, but I sure do remember the empirical FACTUAL evidence that the only people that benefit from a situation like this are the unions and the consumers pay the price. 

So bend over America as you change that flat tire on the side of the road.  Barack Obama has a jack and he knows exactly where to put it.


  1. WOW! I don't care what you say, I really enjoyed that post. Good work Dolly, and I even learned a thing or two.

  2. The Smoot-Hawley Tariff was more a consequence of the Great Depression than an initial cause. Remember, Smoot- Hawley was passed after the stock-market crash of 1929. Historical economists, of which I am one, consider the political discussion leading up to the passing of the act more a factor in causing the crash than the actual passing of the act itself, and while there is some evidence that its eventual passage was a factor in deepening the Great Depression, it certainly wasn’t the cause. That would be far too simplistic an assumption. For monetarist authors who consider the Great Depression an effect of the monetary policy of the Federal Reserve, the Smoot-Hawley's effect on the entire U.S. economy may have been small compared to monetary policy. And, while you may be right about Obama in a general sense, your concern about Obama’s recent tariff squabble with China seems somewhat “Chicken Little-esque.”

    Author James Altucher summed this up quite nicely just the other day:
    Everyone is going crazy about the 35% tariff President Obama is placing on tires coming out of China. But we need to relax. This is not a trade war.
    First off, this is not a replay of the 1929 Smoot-Hawley Tariffs which launched a global trade war which helped pushed us (and then the world) into the Great Depression. Back then, the United States had the biggest trade surplus in the world. Now we have a trade deficit. In other words, we are the customer. And the “customer is always right” applies to macro-economics as much as it applies to micro-economics.
    Part of our concern is that China has been dumping product in the U.S. and has already been fighting an unfair trade war. Obama is sending a warning shot, but this is by no means a war. First off, by
    keeping the yuan pegged (as opposed to the Euro or Yen, which float freely) China has already been unfairly pricing their goods vis-a-vis ours and others. Second, with exports down in August 23% for China, it’s likely that just to keep current employment levels up they would have to start dumping goods (tires) on our economy, causing our workers to lose jobs unfairly.
    And let’s not forget: The tariff imposed by Obama goes from 35% to 10% in three years. Again, this is a simple warning shot. It’s not a war. A war would entail tariffs on many more goods and something much more restrictive than a tariff that essentially disappears in 3 years.
    Finally, everyone is saying, “China could dump dollars”. Ha! This is unrealistic:
    A) They have too many of our dollars. Heck, with $2 trillion sitting in their banks they have more dollars than we have. Bernanke is almost as much the Chinese Fed Chairman as much as he’s the U.S. one. China cares more about the value of the US dollar than we do. We’re happy to devalue it and make our goods cheaper to the rest of the world.
    B) The U.S. consumer is now saving money. In recent auctions they are buying more T-bills than China.
    Everyone needs to back off on the word “war”. Its not a panic situation but a chess game. For me, I’ll be a buyer on any dips this might cause in the market.


    The above link to the WSJ expresses my concerns in a calmer way and I believe gets to the heart of the matter.

    Dear Anonymous - thank you very much and I truly enjoyed your post. Like I said in the introduction, much more of a rant and a tantrum than a well thought out, reasoned, and soundly supported argument. I haven't studied the subject on a serious level for two decades, but remember two things distinctly: the graphs that showed the effects of tariffs both non-tariff and tariff and that the beneficiary of tariffs was inefficient industry and that the consumer paid for it in the end. The other is the fact that Smoot Hawley was supposed to fix things, but had the opposite effect.

    I indeed agree with your assessment in many ways, but I must comment on the recent situation with the T-bills. It is my understanding that we are monetizing our debt by selling the T-bills to "private" investors and then immediately the Fed is repurchasing them. Correct? This has the effect of appearing to sell the T-bills to the public when in fact that isn't really the case. Right?

    Also, the method for which the tariff was imposed is rather disturbing. As I outlined, procedures were not followed. With the connections the President has with the Unions and his vocal support of them, you have to question why he does what he does. In all matters, this President is putting forth an agenda that is completely out of step with our historical heritage, positions, policies, and rules of law.

  4. Actually, Smoot-Hawley was initially successful. Production, factory payrolls, construction, etc., all saw a dramatic increase. However, there were larger economic woes on the horizon, like when Kredit-Anstalt Bank of Austria failed. The global climate of the time made the shortcomings of Smoot-Hawley glaringly apparent.

    As for the Fed monetizing our debt by playing with T-Bills, you are probably right. But, it’s happened before and will, I’m sure, happen again. We are supposed to have an audit of the Fed soon. It will be interesting to see the results.

    As for your concerns about Obama’s manipulation of procedures, his relationship with the unions, etc., I’m sure people were voicing the same concerns about Herbert Hoover prior to, and after, passage of Smoot-Hawley. Then, as now, it still comes down to the golden rule: Those with the gold make the rules.

  5. Anonymous - you are always welcome on this site. Your insight is truly appreciated. Should you like to contribute, just let me know.



Free Hit Counter

Copyright © 2009 - 2012 The Audacity of Logic