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The Circle Bastiat

Protectionism by any other name

Anyone remember Smoot-Hawley? The 1930 tariff act attempted to support the US economy but instead worsened the Great Depression. Is America repeating history?

By Mark ThorntonGuest blogger / October 25, 2010

Union defense workers protest outside N.H. Senator Judd Gregg's Manchester office. Gregg supports free trade and opposes protectionism. Protectionist tactics protect American jobs in the short term, but can cause economic devastation in the longer term.

John Nordell / The Christian Science Monitor / File

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An additional round of “quantitative easing” by the Federal Reserve, or QE2, has been debated by the news media, financial analysts, economists, Sunday morning talking heads, and even Federal Reserve District Presidents. Would it be good or bad? Is it necessary? Will it prevent deflation or lead to hyperinflation?

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The main point that should be emphasized is that this is all part of central bankers around the world substituting their beggar-thy-neighbor policies for outright outright protectionists measures by legislatures. The central bankers are all trying to drive down the exchange rates of their currencies in order to boost exports and economic growth. If this continues QE2 may someday be known as Smoot-Hawley 2 after the disastrous Tariff Bill of 1930 which made the Great Depression much worse.

The attacks on Chinese monetary policy could lead to disastrous results.

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