POLI 441 Lecture Notes - Lecture 7: Smoot–Hawley Tariff Act, Pax Britannica, Massive Retaliation
22 Oct 2018
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Document Summary
Hume"s price-specie flow mech: same logic applies, still used today, trump, Us runs trade deficit since 1975, it is a macroeconomic outcome, and us benefits from dollars as reserve currency (soft power). China has large inflows, needs to send dollars outward to increase exporting competitiveness, do so through buying us bonds. But during liquidity traps, those inflows may not translate into jobs. This extra capital cannot be utilized, just going into effects of changing interest rates. On average, the purpose of trade remains consumption. In sum: trade deficits bad metric by which to judge agreements. Under pax britannica, the beginning of the 20th was very open. Britain assured the public good of stability: maintained peace, protected the seas, maintained open the market for imports, absorbing excess production. Everything changes in the interwar period, the twenty years crisis. The 1930s witness the smoot hawley tariff, and the depression.
