Smoot-Hawley Must Ride Again

Bring on this iteration of Depression’s version of the Smoot-Hawley Act; just raising the cost of tires 150% for the Average Joe by enormous tariff increases wasn’t enough to get the job done.

Not even I, dear reader, chained by love twelve, fourteen, and more hours a day to my magical window to the world, a cyborg of mind and machine, can keep up with all of the stupidities, deliberate destruction, insider deals, power plays, empire-building, and redistribution of wealth into the hands of the least able and most corrupt going on in Washington, Chicago, New York, the “great” banking houses, new additions to the slime pool, and foreign capitals, so I cannot put my finger on a sponsor or a bill number at this time.

I know only that there will be another Smoot-Hawley because there must be a new round of high tariffs and protectionism. This is one of the universal decrees of history and only the details change, and then only slightly.

Those of you who keep in the loop with the Whiskey Bar’s Ranch Correspondent–particularly through private and group correspondence–know that more and more I am to be found in Philosopher mood than Analyst fervor these days; analysis tells us what is wrong and what may come to pass. Philosophy tells us why it is wrong and how it is wrong, and offers faint possibilities of identifying key factors which can skew the classic equations of oppressors occasionally.

Why must there be another Smoot-Hawley, an action that seems devastating to the point of suicidal in a nation that has destroyed its industrial base through catering to the prophets of Baal, Unions, and crooked politicians? Because that is the last major source of rapine and manipulation left to the in-crowd around classics such as debasing the currency, setting the Sheriff of Nottingham on the people, and King John conspiring with the nobles. They have mortgaged the future, devoured the stored goods of the past, turned much of the seed corn into Ethanol, and are busy reducing as many as possible to the sick concept of “economic justice” where no man may have more than another–except the elite, of course. Forget good King Richard; he isn’t around this time, and neither is Richard of Locksley or even an Ivanhoe.

If you are surprised…why? I told you months ago what must come to be because it is the same war we fought 160 years ago for the same reason. Beneath what may have appeared to be colorful banter I was quite, quite serious, my dears. It is quite bad enough being Designated Cassandra without being dull about it, too, but I never joke about the evil loose in our world again.

In the late Eighteen Fifties, as now, politicians faced the same problems (of their own making) and had the same limited range of solutions. Congress was–as is usually the case–under the control of the power brokers and opportunists. As usual, it had been too free-handed with tax revenues. As usual, the true producers had ignored the snares set to bind them. “We’ll just work a little harder.” “They’ll never pass that; the people won’t stand for it.” “Any Johnny Reb can whup six to ten Yankees.” Sure, kids, you keep on thinking that and think about how more heavily we are taxed, millions of pages of restrictions that cause our businesses to fail, and how worthless our beleaguered fiat currency is.

There were only two solutions: close the United States out at the Mississippi and rape those in captivity at their leisure, or inflate their way out of the problem. The latter course was chosen, as it always is, because it offers more opportunities for enrichment. The immediate problem was to raise revenue to maintain control and line pockets further, and our founding fathers, in their great wisdom, had limited fund-raising to taxes and tariffs on goods. Life is far simpler for King John these days. In that halcyon time Uncle Sugar was not able to impound over a third of a man’s wages before they were handed over. A man’s wages could not be touched at all. Consequently, the “solution” was to raise import and export duties, thus robbing those who wished to sell products in the USA and those whose livelihoods depended upon exporting crops.

Do not be naive and bleat about “the industrialized North;” there are always little “arrangements” to be made, the kind that are expressed these days as “excepting corporations doing business in American Samoa,” so that Nancy Pelosi’s power base of the Star Kist empire is not subject to inconvenience and sees the wisdom of supporting her always, or the special favors being arranged for Monsanto, the connection there being how Representative Rosa DeLauro’s husband keeps Kobe beef on the table, and guarantee enormous bonuses slipped quietly in a budget bill so that politicians can rail against them dramatically later–and courts agree they must be paid. The fuss over raw milk–far, far safer and more nutritious than the odd fluids hawked by Borden–is designed to ensure that you either buy milk and other products from Agribiz or you do without; it is to deny you the right to possess your own cow…and your own garden…and your own chickens, beef, and sheep. The sheer cruelty and audacity takes my breath away, the concept of denying as basic a right as ever existed, that to hunt, gather, and engage in agriculture, and doing it in the name of “safety.” Starving to death is a very unsafe activity. The trick is that the restrictions will not harm the big fellows at all but will make it impossible for small farms and individuals to sell or even use what they raise.

The situation only appears to have changed due to FICA and a host of “taxing authorities,” fees, fines, sales taxes, federal and state income taxes, head taxes, and so forth. Funds have dried up significantly (tax revenues were down 17% earlier this month and I anticipate on the order of 22% losses by January) in a time when both New York and California are openly bankrupt and most other states are teetering on the edge of being unable to meet unfunded mandates and deliberate vote-buying schemes and graft. The system is floating momentarily on a flood of fiat money not even the government pretends to believe is other than very transitory. Timmy Geithner’s ugly product isn’t quite “use it once and throw it away,” but the gilt comes off each new issue very quickly and reduces the value once stored in older currency. The “Bernanke” ($100 bill) of today does not buy what an Andrew Jackson did a quarter of a century ago.

We are gearing up for the Tax and Tariff War Between The States all over again, with precisely the same causes and actions. No, of course I do not know if some portion(s) of these “united” states will attempt to withdraw from a contract that benefits only one side, although quite a few are rattling the Tenth Amendment. I do not recommend it, because this time all of the troops are under the control of Washington, as well as control of communications, utilities, transportation, the courts, the media, and the treasury. Open rebellion, no matter how justified intellectually and under the Constitution, would very probably end as Pancho Villa’s final irregular cavalry charge into a nest of the new Thompson machine guns did.

The great “moral” camouflage fluff this time is socialized medicine, amnesty, racism, domestic “terrorists” and the machinations of foreigners turning out “man-made disasters,” and the general moral degeneracy of producers. Same old war, same old issues, same old outcome, and time to hide the smoked hams and plow horses because this time the March to the Sea will be a matter of closing the interstates. Starve those rebels into submission and destroy everything under the slogan of “Never again!” Dictatorship will prevent the threat to freedom posed by “dissidents,” Obama and Janet Napolitano are the ones who define dissidence and “civil unrest,” and the Supreme Court just ruled that those who rebel against the USA are stripped of basic rights (“torture being an accepted part of…”) and “personhood.” You will have neither rights nor Constitutional protections if you protest if Washington declares there is a war, martial law, or that you are guilty of sedition.

What happens when people are forced to act to their own detriment? Eventually they go out of business, move, or are crushed. How does gpvermemt stop them? Close the borders. (Penalties for investing currency outside the nation, penalties for emigrating, literal demands that anyone seeking to leave must have a Passport–a “privilege,” not a “right”–or a “Trusted Traveler Document.”) You mandate an annihilatingly expensive new “health care” program with fines and jail sentences. By what economic insanity can having some portion of medical expenses paid ever be considered worth as much as 20% of a family’s income? I am forced to pay for Medicare, and in this, the year I have been most ill in my life, the actual outlay for my “free” medical insurance is still $400/office visit plus a co-pay. I would be far better off simply paying the doctor $100 in the first place, but that option is denied to me. Those who are old or have chronic conditions may need coverage against myriad problems, but the average family neither needs nor can afford any such thing. We may insure against our car needing a new motor, but we do not seek insurance to cover fill-ups and oil changes. Socialized medicine is not about “health,” it is simply a very imaginative grab for power and funds to keep the national socialists in power.  Announce a host of new taxes and increase fees, fines, and requirements for “stamps.” The outrage over the Stamp Act wasn’t against raising postage; it was about requiring the sort revenue stamps which seal my cigarettes and bottles of Maker’s Mark.

What will be the outcome of increasing taxes and government “giveaways” in a time of falling employment and expansion of the “entitled class,” in a similarly foolish and shakey world eager to destroy our fairy gold and exploit our dependence upon foreign goods? Gloom, desolation, and increasing loss of liberty culminating in a world of food shortages and repressions. All the while those who grow rich shrieking “climate change” labor relentlessly to finish bleeding out the corpse of America for the “benefit” of third world nations and tax us relentlessly to force a 17% reduction in our standard of living lest the dreaded Carbon Footprint Monster destroy the polar ice caps, a much bigger piece of nonsense than asserting the existance of the Yeti and the Little People. Al Gore is the Abominable Snowman, and it pays very, very well. Today here are many new devices of economic depression and a population brain-washed by “free” public schools and the MSM, but Smoot-Hawley, whatever it is called at any given time, is a tried and true method of putting the hands of some into the pockets of others to the detriment of those not filling their coffers or increasing their power. It will prove irresistible.

The most immediate action you can take is to inspect your portfolio carefully and analyse your business needs. Are there duties/taxes/tariffs which could be levied which would make your business more expensive to conduct? Can you stock amply parts made abroad? Are there political costs which could damage the ability of an investment to remain perceived as profitable? Current P/E values are such that I can’t think of a single traditional sector–commodities do not count in this area–where any company is likely to provide a genuine ROI. Just as silver is valued, traditionally, at between 16:1 and 30:1, making it a magnificent choice at 65:1, just so we do not buy shares in companies that at best will return a tiny fraction of the cost in the best of years.

If you can’t eat it, store dense amounts of current value in it, or protect yourself with it in some way or another, don’t buy it. Not for your stockmarket portfolio, and not in your personal lives.

What you snatch from the spreading fires may have to last you a very long time.

Linda Brady Traynham

December 29, 2009

The Daily Reckoning