[Personal Note: For most of the last two weeks, I’ve been in the hospital with a kidney infection / kidney stone (3 inch diameter). I’m on the mend and the stone itself should be removed next week. Meanwhile, I’ll start to get back to posting as usual. –Bob]
Following the presidential election this week, the new President of the United States will face an economic slump. Long before the covid-19 lockdowns, economic and financial developments threatened to undermine both the US economy and the dollar.
The similarities between the situation today and the end of the roaring twenties, and the depression that followed, are enormously concerning. Both periods have seen a stock market bubble, fuelled by bank credit and an artificial monetary stimulus by the Fed. Both periods have experienced an increase in trade protectionism: In October 1929, the month of the crash, after debating it for months Congress finally passed the Smoot Hawley Tariff Act, raising tariffs on all imported goods by an average of about 20%. In 2019, US trade protectionism against China put a stop to the expansion of international trade. These facts, which should continue to concern us, have been buried by the immediacy of the coronavirus crisis, which is an additional burden for the global economy today compared with the situation ninety years ago.