Professor Elam

THe Obama Administration slapped import duties on Chinese tires over the weekend. 

Are you aware of the Smoot  Hawley tariffs of the 1930s? Those tariffs were protectionist measures that added to the global slow down in trade back then. 

Now not only do such measures slow trade but anger one of the largest buyers of our securities, China. 

China has lodged a protest at the World Trade Commission.  China has already begun purchasing shorter maturities of our debt. In addition China is cutting deals around the world in its own currencies for valuable commodities like rare earth metals. We of course are spending money on cash for clunkers. Hmm, which do you suppose is the better long term strategy?

In response to our charges of tire dumping, China is going to investigate our dumping cars and chickens, of all things, in China. This ratcheting up of dialog occurs just before the next G 20 meeting in Pittsburgh. 

Meanwhile China has become the world's largest gold producer as gold passes the $1,000 mark.