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Why U.S. long-term interest rates have been rising since May 1
Howard Richman, 6/26/2013

On or about May 1, the U.S. long-term interest rate started to rise as indicated by the interest rate on U.S. Treasury Bonds. I follow the movement of long-term U.S. interest rates on the following page:$UST10Y

The graph shows that around May 1, the 10 year U.S.Treasury bond interest rate turned on a dime. It had been going down from about March 11 (about 2.05%) to May 1 (about 1.65%). It has since headed up to about 2.55% today.

I have been trying to figure out the cause. There are several possibilities that could cause the U.S. Treasury bond rate to rise, including:

  1. Prosperity causes an increase in borrowing causing interest rates to rise. But there is no evident prosperity in the U.S. GDP data. In fact, U.S. economic growth seems to be stagnant in the 1.5% to 2% range.
  2. Growing inflation or inflationary fears cause nominal rates to rise. But the inflation rate in the United States was just 1.4% for the 12 months ending in May, according to the Consumer Price Index.
  3. Downgrading of U.S. government debt. But the recent projections show that the U.S. budget deficit this year will be far lower than last year.
  4. The Federal Reserve could be tightening the money supply. There are no Federal Reserve statistics available for the money supply of June or July, but in the three months ending in May, the Federal Reserve was still pedal-to-the-metal with an approximately 9% rate of increase in M1.
  5. Movement of foreign savings out of the United States. This appears to be the only explanation left. But who is taking money out? Not Japan. It's recent policy has been to buy U.S. assets in order to weaken the yuan

According to Lars Christensen, Danske Bank's chief emerging-markets analyst, China's big regional banks have been selling their Treasury Bonds because they are facing a short-term cash crunch. Here's a selection from a Bloomberg article about his explanation (Is China to Blame for Rising U.S. Interest Rates?):...


Comments: 0

The President's Climate Action Plan
Howard Richman, 6/25/2013

Andrew Watt (The President's Climate Action Plan -- the good, the bad, and the ugly) stayed up late last to give a quick read to The President's Climate Action Plan which was released at 6am this morning.

The main economic impact of the plan will be felt by the trucking industry. In recent years, a favorite technique of the government when it is trying to keep its budgets under control, is to pass the costs on to the private sector. It will greatly increase regulation on new trucks. Watt's writes:...


Comments: 1

Sarah Hall Ingram is being written out of the IRS scandal
Howard Richman, 6/19/2013

Sarah Hall Ingram is being written out of the IRS scandal. Take, for example, this selection from an article in today's Insurance Journal which states:

Some Republicans are also highlighting the fact that Sarah Hall Ingram, who heads the IRS health care office, oversaw the tax-exempt division when agents first started improperly targeting conservative groups. The IRS said Ingram was re-assigned to help the agency implement the health care law in December 2010, about six months before her subordinate learned about the targeting.

The height of the scandal was January 2012 when, for the second time, a BOLO (Be On the Look Out) list was instituted which specifically targeted groups whose names included words such as "Tea Party." And Ingram was Commissioner of the relevant IRS division at that very time:...


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Who ordered that targeting of Tea Party groups be resumed in May 2012?
Howard Richman, 6/17/2013

According to May 21 testimony before the Senate Finance Committee, in July 2011 IRS targeting of conservative groups for additional scrutiny was stopped, only to be resumed in May 2012. The initial targeting was blamed upon underlings in the Cincinnati IRS office. But, mysteriously, nobody at the IRS seems to know who ordered that targeting be resumed. Senator Pat Toomey (Republican, PA) questioned Acting IRS Commissioner Steven Miller about it (see the 2:07 mark):

Toomey: So we're sitting here in May of 2013. At this point, do you know who it is that initiated the policy of establishing these ideological criteria for creating this additional level of screening for applicants for C4 status?

Miller: It happened twice. The second time it happened, I don't think there is clarity on that. The first time I think there's more clarity on that....


Comments: 1

Why the IRS scandal is worse than the others
Howard Richman, 6/16/2013

In today's Baltimore Sun, former Maryland Governor Robert L. Ehrlich, Jr., (Why the IRS scandal is worse than the others) lists several reasons why the IRS scandal is worse than the others, one of which is that the IRS targeted conservative groups:

And the granddaddy of them all: irrefutable evidence the Obama IRS targeted conservative groups for special investigation smack dab in the middle of a tense presidential campaign. And at a time the president and his surrogates were running around the country complaining about the rise of the tea party and other similarly situated organizations.

This was an "in your face" operation: groups associated with the major conservative causes of the day (fiscal restraint, tax reform, marriage, pro-life) all came in for extraordinary (and highly questionable) scrutiny by certain alleged "rogue" personnel within the IRS in Cincinnati, Washington state or both. Only time and future investigation will tell how far up the chain the miscreant trail will lead, but I'm betting this was not simply a basement operation confined to "The River City."

Parenthetically, Ehrlich notes the flippant answer given by IRS Commissioner Douglas Schulman when asked about his many trips to the White House:...


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Book Review
Raymond Richman, 6/9/2013

John Stossel, No they can’tWhy Government Fails –But Individuals Succeed (New York: Threshold Editions, 2012)

This is a book all liberals should read because it challenges the myths they believe in. Many conservatives share some of these same myths. John Stossel is well-known for his Network show, Stossel, and his contributions to Fox News, He has won many Emmy Awards and is a five-time National Press Club honoree. He writes about “Fixing” the Economy, fairness myths, political correctness, education, the War on Drugs, conservationist extremes, food faddists, globalization and a host of other topics and host of other issues everyone is concerned about.

Throughout the book, he inserts a box related to the topic he is discussing, with the heading, “What Intuition Tempts Us to Believe In” and “What Reality Taught Me”. But these should be read while reading the text.  A few examples:

Intuition, “It’s good for government to encourage home ownership” and the reality “When government interferes in a market … Bad things happen.”



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Manufacturing Employment Down for Third Month in a Row
Howard Richman, 6/7/2013

According to the employment survey statistics released by the Bureau of Labor Statistics, manufacturing employment fell in May for the third month in a row, down from 11,988,000 in February to 11,967,000 in May.

The graph below shows that manufacturing employment has generally been rising from the depths of the Great Recession of 2008-2009, though the recovery has been small, compared to the number of jobs lost during the Great Recession:


The fall in manufacturing jobs is likely to become a trend due to:...


Comments: 1

Blacks Do Poorly Under Obama's Stimulus Policies
Raymond Richman, 6/5/2013

It is generally believed that blacks have fared well under Obama but the truth is that Obama’s policies have made blacks worse off.  A black scholar, Dr. Reginald Clark, points out that every racial group, except the blacks, has benefitted, however moderately, since 2009.  He writes that “since 2009 Blacks are the only group that has taken a definitive step BACKWARDS since then.” This continues to be true as the following table shows:  

                             Unemployment Rates

Census Release, May 13, 2013 

Unemployment Rates                          Apr. 2012      Apr. 2013 

Total 16 and over                                     8.1              7.5

Teenagers                                              24.9             24.1

White                                                      7.4              6.7 

Black                                                     13.1            13.2 

Asian                                                       5.2             5.1  .

Hispanic                                                 10.3             9.0




Comments: 1

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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]