this post was submitted on 08 Apr 2025
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James Meadway: Here’s one key thing you should know about Trump’s shock to the world economy: it could work (www.theguardian.com)
submitted 1 week ago by HaraldvonBlauzahn@feddit.org to c/europe@feddit.org
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Here Meadway draws parallels between Trumps tarrifs and Volcker's interest rate shock in the 1970ies. Is this justified considering the world economy has a totally different structure today?

There is another argument that what Trump actually wants is a reactionary economic policy more similar to the 19th century where interests of small, wealthy, powerful groups were dominant over the well-being of normal people. For how much of a difference that can make, Germanys rapid economic development which was then to a large part attributed to Ludwig Erhard, Germanys minister for economic affairs from 1949 to 1963.

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[–] talkingpumpkin@lemmy.world 4 points 1 week ago (1 children)

There are precedents. In October 1979, Paul Volcker, newly appointed as chair of the Federal Reserve, drove up interest rates to a remarkable 13% in a bid to tackle inflation, later raising them to 17%.

Back then the problem was rampaging inflation and the (by-the-book) cure was raising interest rates to drive it down.

Nowadays US inflation is not an issue (IIRC it's like 2% or 3%) and tariffs are gonna bring it up in a confused effort to... rebuild a manufacturing industry? (I'm not sure that's the goal - it's hard to say what "great again" means precisely).

In what way would 1979 be a precedent?

Anyway... yes, assuming Trump's goal is to have more manufacturing in the US, tariffs will "work" - the point is how much that's gonna cost (in quality of life, not dollars) and who's gonna pay that price.

[–] PhilipTheBucket@ponder.cat 1 points 1 week ago

yes, assuming Trump’s goal is to have more manufacturing in the US, tariffs will

Destroy domestic manufacturing by enacting insane tariffs on the raw materials it depends on, without any nontrivial increase in manufacturing to counterbalance the pain, even in the long run.

This type of command economy “might makes right” stuff can fail catastrophically. As recently as the 1990s, there were people starving in North Korea by the hundreds of thousands (at least) because someone decided that enforcing his will was more important than listening to people who even on the most rudimentary level knew what they were doing.