Thank you Mr. Smoot and Mr. Hawley

We've talked about how the U.S. was stuck to the Gold Standard and how that kept the nation at a fixed exchange rate--the result, high interest rates and a contractionary monetary policy during the worse time possible. Bet the people at the time were steaming mad at the Fed for that... Unfortunately the U.S. faced a wide array of obstacles during that time and one of the additional ones I found interesting came about due to governmental policy. It was call the Smoot-Hawley Tariff, one of the greatest "protectionist acts" in history. At the time World War I had just come to an end, and Europe went into a massive agricultural production period, which caused the price of American agriculture to decline. In an attempt to protect the American farmers, President Hoover raised the tariff taxes on the food imports from Europe. The result: Europe retaliated in cutting down so much trade with the U.S. that the fell from $1,334 million to $390 million between 1929-1932. A similar effect was seen in our exports which slowed drastically. Our trust as a nation to do good trade with other countries was severely damaged, and only prolonged the Great Depression. It's not that the Government or special interest groups weren't insincere about trying to protect the farmers of America, but this Tariff example of how the Government may not understand that protection to its citizens can result in just hurting them more.

http://americanhistory.about.com/od/greatdepression/f/smoot_hawley.htm