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 Richmans' Trade and Taxes Blog

Housing Prices in a Rational Rebound?
Jesse Richman, 2/26/2013

The most recent edition of the Case Shiller Index suggests that the U.S. housing market continues to rebound from the housing slump.  Indeed, home prices are apparently moving up at a torrid pace in some cities.  Overall, the pattern seems to be of more modest increases, but the trend has been up over the last few months almost everywhere.  This lends support to my claim last September that the end of the great bubble deflation had been reached.  In some cities prices remain at depressed levels relative to historic norms once those are adjusted for inflation.  In other cities, however, some additional declines may well occur... 


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Trade Deficits Increase U.S. Debt Vulnerability
Jesse Richman, 2/22/2013

A paper presented earlier today suggests that countries with trade deficits are substantially more vulnerable to debt crisis / inflation spirals.  Whether the U.S. is equally vulnerable to such problems remains a subject to debate though.  David Greenlaw, James D. Hamilton, Peter Hooper, and Frederic S. Mishkin write:

"Our nonlinear regression results imply that a country can quickly move from the group without problems to the group that faces nearly insurmountable problems if its debt rises significantly above 80 percent of GDP, particularly if it is running a large current-account deficit... 


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Peter Navarro and Greg Autry, Death by China--Confronting the Dragon-- A Global Call to Action (Prentice Hall, 2011) .
Raymond Richman, 2/18/2013

This book is more than a year old but it is not out-of-date. Peter Navarro and Greg Autry may be accused of China bashing but as they  write, “It’s not China bashing if it’s true”. And they have their facts right. Peter is a professor of economics and public policy at the University of California at Irvine and Greg Autry is an economist for the American Jobs Alliance and the Coalition for a Prosperous America.  They accuse China of every trade sin from marketing defective products, employing tariff and non-tariff barriers and export subsidies,  engaging in currency manipulation, attempting to monopolize rare earths, stealing American technology, and engaging in cyber sabotage. This has cost millions of American jobs and diminished American economic and military power. Both parties are guilty of paying too little attention. And the American press and  politicians are accused not only of turning a blind eye but justifying doing nothing by embracing free trade as an ideology.

If you have not been following our relations with China carefully this past decade, this book is MUST READING. ...


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Pres. Obama Policies Are Leading to the Loss of More American Jobs
Raymond Richman, 2/16/2013

Mortimer Zuckerman, editor in chief of U.S. News & World Report, in an op-ed piece in the Wall St. Journal (2-16-13) entitled “By Any Measure, the Jobs Disaster Continues”, confirms what we have been writing in this space for months namely that the press has been misreporting the unemployment data because they employ the seasonally adjusted numbers reported by the Bureau of Labor Statistics instead of the actual numbers. He writes: 

“January was supposed to have seen 157,000 jobs created…But the supposed hiring was based on seasonally adjusted numbers … The real, unadjusted figures for January show that nearly 2.8 million jobs disappeared, which happened to be worse than the 2.63 million lost in January 2012.”  

He  also points out that the statistics do not include the number of “discouraged workers who have dropped out of the labor force.” Were they included, “the formally announced unemployment rate would be around 9.8%, not the headline 7.9%.” And, “After four years America remains in a jobs depression as great as the Great Depression.”  ...


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Balancing Trade Act
Jesse Richman, 2/15/2013

Representative Kaptur of Ohio introduced H.R. 192 at the beginning of the 113th Congress.  This bill, the "Balancing Trade Act of 2013" requires the President to develop a plan to balance trade with countries that have the largest trade imbalances with the U.S.  Representative Kaptur introduced the same bill in the 112th Congress.  That version of the legislation had 6 cosponsors, and died in subcommittee. The key language of the bill is as follows:

a) Action by the President- If in 3 consecutive calendar years the United States has a trade deficit with another country of $10,000,000,000 or more, the President shall take the necessary steps to create a trading relationship with the country that would eliminate or substantially reduce that trade deficit, by entering into an agreement with that country or otherwise.

The bill would be stronger if it specifically empowered the president to take significant actions to balance trade... 


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Energy boom helped 2012 balance of trade
Jesse Richman, 2/15/2013

The boom in oil and gas production in the United States led to a modestly lower trade deficit for 2012 according to recently released figures from the BEA.  

Overall, the BEA reports that

"For 2012, exports of $2,195.9 billion and imports of $2,736.3 billion resulted in a goods and services deficit of $540.4 billion, $19.5 billion less than the 2011 deficit of $559.9 billion."

And digging into the 2012 numbers in more detail it becomes clear that a key reason that the deficit in goods did not increase was a 24.6 billion decrease in imports of industrial supplies and materials.  Much of the decrease is the diminished demand for energy imports... 


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More Than a Million Workers Lost Their Jobs Since Obama's Re-Election. Recession Is in Prospect
Raymond Richman, 2/7/2013

Over one and a quarter million workers have lost their jobs since Pres. Barack Hussein Obama won re-election. In the five weeks before the election, the average number of initial claims filed for unemployment insurance amounted to 347,918 per week but the average in the 13 weeks since the election amounted to 447,908. This contradicts the administration’s and the media’s reporting that the economy is growing, but is consisted with the decline in Gross Domestic Product in the fourth quarters of 2012. At the same time, Obama’s rich friends benefited from a stock market boom as a result of his easy money policies and from government subsidies. The Fed’s increase in the money supply created few if any jobs but created an asset boom, fueled by expectations of run-away inflation. 

The fact is that increased government expenditures financed by public debt creates few new productive jobs and few are lasting. As soon as government expenditures are reduced, the temporary jobs created are lost. Many of the jobs created by government deficit spending are unproductive, for example, the government subsidized jobs in wind and solar energy. Even though more than half the cost is borne by government subsidies, the favored companies are subsidized even further by tax credits and by orders to the electric utilities to buy their output even though it is more costly. In addition, the utilities must have back-up facilities for those periods in which little or no electricity is generated because of the lack of wind or sunlight. The rising cost of electricity is a burden on the economy.

Insanity has been defined as doing the same thing over and over again and expecting a different result. The President wants to increase federal government spending which he has been doing and financing by deficits for four years and which has done little or nothing to create improved economic conditions. Unemployment, including involuntary part-time employment and the number who are no longer seeking work or who have dropped out of the labor force, is higher than when he took office. Republicans on the Senate Budget Committee reported that the federal government spent more than a trillion dollars (the amount of the federal deficit last year) on welfare programs and that more than forty-seven million, a new high, were enrolled to receive food stamps. ...


Comments: 1

Is Justice Department trying to keep up US Credit Rating by intimidating Rating Agencies?
Howard Richman, 2/7/2013

Of all the rating agencies that overrated mortgage bonds in the mid 2000s, the Justice Department has singled out Standard and Poors for a court case, Standard and Poors being the only agency, so far, that has downgraded the U.S. government credit rating. Peter Morici (Fed's decision to single out Standard & Poors should raise concern) writes:...


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Google's Eric Schmidt calls for the U.S. to meet China's challenge in his new book
Howard Richman, 2/4/2013

After the Chinese government hacked Google to steal Google's proprietary code and access dissident e-mail accounts, Google left China. As economist Peter Morici noted at the time in a Seeking Alpha commentary (Google and the Larger Chinese Challenge):

To sell in China, Beijing requires foreign companies to produce in China through joint ventures and then transfer prized technologies to local partners. Now, having extracted the knowhow it needs, China is tightening the noose on foreign companies, causing them to consider withdrawing and leaving behind formidable new competitors.

Google CEO Eric Schmidt is continuing to call for a United States response to the China challenge. He served on the President's Council of Advisors on Science and Technology (PCAST) where he helped put together an exellent Report to the President on Ensuring American Leadership in Advanced Manufacturing, about how to help American hi-tech companies compete. That report made many excellent recommendations, including that the U.S. lower its excessively high corporate income tax and that the U.S. help small hi-tech firms share research facilities, a technique that was successfully pioneered during the Reagan administration.

Now, According to a pre-publication review (Exclusive: Eric Schmidt Unloads on China in New Book), Google CEO Eric Schmidt is calling for the United States to meet China's industrial espionage challenge in his new book, Digital Age, co-written by Jared Cohen, who runs Google Ideas. Here is a selection from the review:...


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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]