Blog

“Globalization is the redistribution of American wealth to foreign countries.”@StephenM torches the elite consensus that gutted U.S. industry and betrayed the working class.

Trump’s tariffs? A long-overdue correction – and the key to revitalizing U.S. steel, the backbone of… pic.twitter.com/tuBiO0uuI4

– Laura Ingraham (@IngrahamAngle) April 4, 2025

I’ve witnessed this devastation with my own eyes in my travels the past two decades.  My wife is from Northeastern Ohio and I’ve seen the economic devastation caused by Ford and U.S. Steel plants shuttered along the lake in Avon and Lorain.  Add to that the Avon Lake Generating Station: This coal-fired power plant in Avon Lake (often associated with Avon due to its proximity) was retired by GenOn Holdings on September 15, 2021. The closure was driven by unfavorable economic conditions, high environmental compliance costs, and competition from other energy sources. A smaller oil-fired unit at the site, operational since 1973, was also decommissioned. The plant had a generating capacity of 627 MW. Following its closure, the site underwent a controlled demolition on December 19, 2024, as part of a redevelopment plan to transform the 40-acre lakefront area.

Thomas L. Friedman wrote a very good book called “The Lexus and the Olive Tree” in 1999 where he argued generally in favor of globalization (The Lexus) balanced with the caution about not risking our humanity and creaturehood (The Olive Tree).

Let’s dive deeper into Friedman’s concept of the “Olive Tree” and his cautions about maintaining a balanced approach between it and the “Lexus” in The Lexus and the Olive Tree: Understanding Globalization. This aspect of the book is central to his argument that globalization’s success hinges not just on economic integration but on preserving what makes human societies distinct and grounded.

The Olive Tree: A Deeper Look

The “Olive Tree” symbolizes the enduring, rooted elements of human life-tradition, culture, community, family, and national or local identity. Friedman draws on the olive tree’s characteristics: it’s slow-growing, deeply tied to specific soil, and produces fruit that sustains communities over generations. In the context of globalization, it represents everything that resists the rapid, borderless, homogenizing forces of the “Lexus”-the high-tech, market-driven world of innovation and global capitalism.

MAZE knocks it out of the park on a regular basis and I highly recommend following him @mazemoore.  This should be a bipartisan issue-and it once was! But now it’s not because Trump.  Trade deficit?  What’s that?  It used to be very bad.  Now it’s being described as overblown.  Entire communities would disagree if they still existed.  And the super smarty smarties play stupid about it while sniggering over the Ben Stein clip from Ferris Bueller. As great as his role as the high school economics teacher was, movie scenes aren’t arguments.

The part where you think the pastor is wrapping up, but no.

The Great Depression, beginning in 1929, was a complex event with multiple contributing factors, including the Wall Street Crash, the Smoot-Hawley Tariff Act, and the Federal Reserve’s monetary policies. Each played a distinct role in either triggering or exacerbating the economic downturn, and their interplay magnified the crisis.  It wasn’t only the crash or the tariffs or the Fed, though it was largely the Fed.  Milton Friedman’s sequential “domino” view of it is the most accurate of any I’ve ever read and I have the benefit of living history as told to me by my Granny and many great aunts and uncles I was blessed to grow up around and smart enough to listen to them teach about what it was like.

The Wall Street Crash of October 1929 is often seen as the dramatic starting point of the Great Depression. It was a massive stock market collapse driven by speculative excess, over-leveraged investments, and a bubble fueled by easy credit. Stock prices plummeted-by some estimates, the market lost $30 billion in value (equivalent to hundreds of billions today)-eroding public confidence and wiping out significant wealth. Banks that had invested heavily in stocks or lent money for stock purchases faced insolvency, triggering a wave of bank failures (over 9,000 banks collapsed in the 1930s). This financial shock disrupted lending, reduced consumer spending, and deepened deflationary pressures as businesses cut production and laid off workers. While the crash didn’t single-handedly cause the Depression, it set off a chain reaction that exposed underlying economic weaknesses.

The Smoot-Hawley Tariff Act of 1930, intended to protect American farmers and industries by raising tariffs on over 20,000 imported goods, worsened the situation by choking global trade. Signed into law in June 1930, it increased average tariffs to nearly 50%, prompting retaliatory tariffs from trading partners like Canada and Europe. U.S. exports, which had already begun to decline after the crash, fell sharply-from $5.2 billion in 1929 to $1.7 billion by 1933. This trade collapse hit American farmers and manufacturers hard, as they lost foreign markets, while domestic prices continued to deflate. Critics, including over 1,000 economists who petitioned against it, argued it deepened the economic slump by isolating the U.S. economy at a time when international cooperation might have mitigated the downturn. Its role was less about causing the Depression and more about amplifying and prolonging it.

The Federal Reserve’s monetary policy, however, bears significant blame for both the onset and severity of the Depression. In the late 1920s, the Fed kept interest rates low, fueling the stock market bubble with cheap credit. After the crash, it failed to act decisively as a lender of last resort. Instead of injecting liquidity into the banking system, the Fed tightened monetary policy, raising interest rates in 1931 to defend the gold standard amid fears of capital outflows. This contraction reduced the money supply by about a third between 1929 and 1933, intensifying deflation (prices fell 10% per year on average) and strangling economic activity. Bank runs accelerated as panicked depositors withdrew savings, and the Fed’s inaction allowed the financial system to implode. Economists like Milton Friedman later argued that this policy failure turned a severe recession into a catastrophic depression.

In contrast, the Wall Street Crash was a sudden, visible trigger-a symptom of deeper imbalances-while Smoot-Hawley was a misguided legislative response that aggravated the slump by shrinking trade. The Fed’s actions (and inactions), however, were systemic, directly undermining the money supply and banking stability, which were critical to recovery. The crash sparked the fire, Smoot-Hawley fanned the flames, and the Fed starved the economy of oxygen when it needed it most. Together, they transformed a manageable downturn into a decade-long global calamity.

As much credit as the Fed gets when they seem to manage the interest rates appropriately by balancing looser money by lower interest rates and tighten money to control inflation by raising interest rates, it’s difficult for me to do so because the Fed shouldn’t exist.  If I had the magic wand of Constitutional Restoration of the Republic, the first thing I’d do is repeal the 17th amendment, then end the Fed, and THEN repeal the 16th amendment.  Let’s wrap up this thing with a look at one of the horribles the Fed has done in recent years, Quantitative Easing.

Quantitative easing (QE) is a monetary policy tool used by central banks, like the Federal Reserve, to stimulate the economy by injecting money into it and not by properly managing interest rates. They do this by buying up financial assets, usually government bonds, which increases the money supply and lowers interest rates unnaturally. The idea is to encourage borrowing, spending, and investment to kickstart growth, especially during crises like the 2008 financial meltdown or the COVID-19 pandemic. But how did this play out for the middle class?

Let’s break it down.

On one hand, QE helped stabilize the economy after major shocks. Post-2008, it kept credit flowing and prevented a deeper collapse, which could’ve wiped out more middle-class jobs and homes. Lower interest rates made mortgages and car loans cheaper, so if you were in the middle class with decent credit, you might’ve refinanced your house or bought a new vehicle at a better rate. Employment eventually recovered too-by 2014, U.S. unemployment dropped from its 10% peak in 2009 to around 6%, and kept falling in later years. For the middle class, that meant more job security and income stability over time.

But here’s the rub: QE also juiced up asset prices. Stock markets soared-the S&P 500 tripled from its 2009 low by 2019-and housing prices climbed, especially in urban areas. If you owned stocks or a home, you might’ve seen your wealth grow. Problem is, the middle class doesn’t own as much of that stuff compared to the rich. In the U.S., the top 10% hold about 70% of stock market wealth, while the middle 50% own less than 15%. Homeownership helps, but many in the middle class were still renting or underwater on mortgages post-2008, missing out on the boom. So, QE disproportionately fattened the wallets of the already wealthy, widening the gap.

Then there’s inflation. QE didn’t spark the runaway consumer price inflation some feared-CPI stayed tame, averaging 1-2% annually in the 2010s. But asset inflation hit hard. Housing costs outpaced wage growth, making it tougher for younger middle-class families to buy homes. Wages themselves barely budged-real median household income in the U.S. stagnated around $60,000 (in today’s dollars) from 2008 to 2016, only picking up later.

So, while QE appeared to be keeping the economy afloat, it didn’t translate into fatter paychecks for most middle-class workers.  Another angle: cheap money from QE fueled corporate borrowing. Companies took on debt to buy back stocks or automate, not always to hire more people. Again, there’s that ol’ debil of productivity focused management. Middle-class jobs in manufacturing or retail kept shrinking, replaced by gig work or low-wage service roles. The “wealth effect” the Fed hoped for-where rising asset values make people spend more-mostly benefited those with assets to begin with, not the average Joe living paycheck to paycheck.

In short, QE was a lifeline for the economy, and the middle class got some indirect perks like lower borrowing costs and job preservation. But it also amplified inequality, pumped up living costs without matching wage gains, and left many feeling squeezed. The middle class didn’t tank, but they didn’t exactly thrive either-more like they treaded water while the top swimmers lapped them.

So that said, I don’t want to hear anymore weeping about the Wall Street after those crack addicts got high on Quantitative Easing while the asset inflation continued to crush the middle class and perpetuate stagnant wage growth and hiring. When inflation went over 9% thanks to Democrat spending during the Biden (or whoever) years, I got a 1.1% “raise” from my then employer. Gee. Thanks.

To close, if we’re interested in stimulating both investment and the middle class then get serious about it and cut the damned Capital Gains tax. Take it down to single digits. If your tax policy taxes fruit, don’t also put a tax on new branches.  The middle class benefits much more from a Capital Gains tax cut combined with income tax cuts.  While the Congress considers the reconciliation bill to extend the tax cuts, they should also expand the tax cuts as a companion to the tariffs.