On December 18th, Dallas Federal Reserve President Richard Fisher gave a speech before the World Affairs Council in Dallas. What is interesting about the speech is the insight it provides into the Fed's thinking regarding the recent interventions into the markets.
Additionally, history has a tendency to repeat itself and Mr. Fisher points to events that deepened the economic crises of 1873 and 1929. In both cases, country governments reverted to protectionist trade policies. The most common one many have heard of today is the passage of the Smoot–Hawley Act during the slowdown in 1930. This protectionist legislation deepened the economic contraction leading to the so called Great Depression. As Mr. Fisher states,
Additionally, history has a tendency to repeat itself and Mr. Fisher points to events that deepened the economic crises of 1873 and 1929. In both cases, country governments reverted to protectionist trade policies. The most common one many have heard of today is the passage of the Smoot–Hawley Act during the slowdown in 1930. This protectionist legislation deepened the economic contraction leading to the so called Great Depression. As Mr. Fisher states,
"As world economic growth slows and economic conditions in the United States toughen, our elected representatives and newly elected commander-in-chief must resist with every fiber of their political beings the temptation to compound our travails by embracing protectionism. For if they fail to do so, the economic situation we now are working so hard to overcome will seem like a cakewalk."
Mr. Fisher's speech is a worthwhile read. The full text of his comments can be found at this link to the Dallas Federal Reserve Bank.
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