The Federal Reserve increased interest rates four times in 1928 – 1929 which took money out of circulation which also decreased the ability to get loans so the economy contracted 33%. Combined with the Smoot-Hawley Tariff Increases sales were lowered which meant fewer people were needed to produce less products so there were fewer jobs. In effect government meddling and raising interest rates and raising tariff’s, (taxes), on products, cut jobs. Government caused the Great Depression.

Smoot Hawley killed lots of business which in turn cut jobs. It was wrongly based on the bad idea that government should increase taxes on Imports and Exports to protect American jobs. That forced Americans to pay more for imported goods and stopped them from selling goods to foreign customers.

Tariff’s are simply tax increases disguised as allegedly helpful cost increases to help inefficient American businesses that should be left alone. If left alone Americans would pay less for what is made in foreign countries and inefficient American businesses would be closed in favor of more efficient businesses. Americans benefit two ways from lowering taxes. What they buy is less expensive and they sell more to foreign markets because their products are priced lower than foreign goods.

Because of Smoot-Hawley U.S. imports decreased 66% from $4.4 billion (1929) to $1.5 billion (1933), and exports decreased 61% from $5.4 billion to $2.1 billion, both decreases much more than the 50% decrease of the GDP. Business was destroyed as imports and exports went from $9.8 billion to $3.6 billion, a $6.2 billion loss of revenue.

The new tariff imposed an effective tax rate of 60% on more than 3,200 products and materials imported into the United States,” quadrupling previous tariff rates on individual items. Americans who bought the foreign made goods were forced by the government to pay more money because of the tariff. Government got the tariff money. Anyone who bought a foreign made product paid the higher tax.

Unemployment was at 7.8% in 1930 when the Smoot–Hawley tariff was passed, jumping to 16.3% in 1931, 24.9% in 1932, and 25.1% in 1933.

The damage from Big Government from just these two stupid ideas was enormous. It prolonged the Great Depression. There is no way to recover money lost because of government mistakes. Once lost it stays lost.

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