Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Time to Eliminate the IMF, the World Bank, and the WTO
On this site, October 29th, I reviewed Benn Steill’s book on the Bretton Woods conference where the World Bank and the International Monetary Fund were created. At the conference, Dr. Harry Dexter White, representing the United States, later shown to have been a Soviet agent, and John Maynard Keynes, the eminent economist, battled to achieve a post-war world of financial stability. White’s views prevailed and now we are burdened by the two international institutions mentioned above which have no justifiable excuse for continuing to exist. In fairness to White, Keynes’s proposals had they been adopted would have been equally bad. The trouble is that once created, like most bad legislation, they are incredibly difficult to get rid of. They develop constituencies which seem able to prevent their repeal.
The global sentimentality which motivated Woodrow Wilson to found the League of Nations and Franklin Roosevelt to establish the United Nations, the World Bank, and the IMF, has badly served the USA. This is true as well of many other global institutions such as the World Trade Organization and many international treaties where the U.S. is a signatory. These organizations go out of existence. They no longer serve any useful purpose if they ever did.
Take first the IMF. The IMF was created to provide financial stability, to prevent countries from manipulating their foreign exchange rates to gain a competitive advantage in international trade, a favorable balance of trade, which stimulates their economies while weakening the economies of its trading partners. A good example of that is the enormous trade surplus of China with the United states, but China is not the only country enjoying a chronic trade surplus with the USA, Japan post WWII engaged in similar practices and has enjoyed a chronic trade surplus with the USA. Germany and others have chronic trade surpluses with the U.S. The IMF has done nothing to prevent any of this from happening. Neither has the World Trade Organization. ...
Weekly Unemployment Insurance Claims Week Ending October 26
The weekly unemployment insurance weekly claims report is in our opinion the most timely indication of changes in the state of the economy. We consider a reduction in the claims filed below 300,000 to be positive for the economic future. We called your attention to that fact when that occurred a few months ago. It has since returned to levels in the mid-300s, which we view as economic stagnation. Unemployment, including those who left the labor force and those working part-time is as great as it has been since 2009. We favor giving greater weight to the unadjusted data since we know no reason for seasonally adjusting weekly data. The first few paragraphs of today’s report reads as follows:...
Why China PNTR turned out to be a disaster
Here is testimony by former Assistant U.S. Trade Representatitve Robert E. Lighthizer on how the predictions of U.S. economic benefit from China joining the WTO went so wrong. Thanks to Bob Hall for circulating this.
Why Holder Didn't Prosecute Jon Corzine
And while we are on the subject of Holder's selective prosecutions, this from the Huffington Post:
And this from Real Clear Politics:...
Why Holder Didn't Loot Goldman Sachs
It is hard to prove that Attorney General Holder's shakedown of JPMorgan for $13 billion was politically motivated. The timing suggests political motivation, in that JPMorgan CEO Jamie Dimon had spoken out against Obama's "anti-business" economic policies during the 2012 election campaign. But timing doesn't prove causation.
The circumstances suggest political motivation, in that the charges mostly stem from shady practices at two failed financial institutions that JPMorgan bought to prevent a chain reaction of defaults, at the request of the Bush administration. But Holder's punishment of public-spirited take-overs, also, doesn't prove political motivation.
The size of the settlement, the largest ever extracted by the government from an American business, and the diversion of $4 billion into a political slush fund suggest political motivation. But, again, they do not prove it.
The strong evidence of political motivation comes from Holder's selective prosecutions. According to an August 10, 2012, press release by Michigan Democratic Senator Carl Levin, JPMorgan's fellow major bank Goldman Sachs was caught red-handed by his investigative committee in mortgage fraud. Here's a selection:...
Book Review: Benn Steil, The Battle of Bretton Woods, John Maynard Keynes, Harry Dexter White, and the Making of a New World Order (Princeton, N.J., Princeton University Press, A Council on Foreign Relations Book, 2013)
Two international institutions, the World Bank and the International Monetary Fund, were created at a conference of the nations allied in the war against Hitler Germany, Fascist Italy, and feudal Japan called by the United States at Bretton Woods New Hampshire in the midst of WWII. The principal negotiators, notwithstanding the multitude of countries in attendance, were Harry Dexter White, an under-secretary of the U.S.arry Treasury Department, and John Maynard Keynes, the great English economist, representing Great Britain. The purpose of the conference was to create a world monetary system that would promote free trade and a system of stable monetary exchange rates to prevent the manipulation of exchange rates for foreign trade gains. Both the principal negotiators sought, in the International Monetary Fund, an institution that would ensure that exchange rates would not be manipulated for competitive trade advantage. They succeeded in creating the IMF but it never measured up to this expectation.
The Roosevelt administration had to overcome the isolationist proclivities of most Americans as represented by the opposition to lend-lease of Republican Senator Taft and Democratic Senators James Byrnes and Harry Byrd. Sen. Taft was prescient in denouncing membership in the monetary fund as “like pouring money down a sewer.” White and Keynes clashed as the former successfully pushed for an end to the policy of “imperial preference” by which Britain secured privileged trade access to the markets of its colonies and dominions. Steil describes it as a ploy to ensure that “war-ravaged Britain would remain wholly dependent on American succor to pay for imports vital to its survival.” The British had been anxious to see themselves as partners with the Americans in creating the ground rules for the postwar order but the Americans kept reminding them that “there was no room in the new order for the remnants of British imperial glory.”...
The JPMorgan Shakedown Slush Fund
In my last blog post, I reported Attorney General Holder's shakedown of JPMorgan Chase for $13 billion. I supposed that Holder was punishing CEO Jamie Dimon for criticizing the Obama administration's "anti-business" economic policies during the 2012 election campaign.
I missed a possible second political purpose. According to University of Maryland business economist Peter Morici:
Like me, Morici described the settlement as a "shakedown":...
Holder shakes down JPMorgan
On the heels of IRS targeting of Tea Party groups, we have another example of the "Chicago Way" in action. The New York Post reported on Sunday:
The shakedown was completed personally by Attorney General Eric Holder. According to newsmax.com:
Some financial analysts argue that the shakedown was unjustified. The supposed crimes by JP Morgan resulted from portfolios of failed banks that JP Morgan had taken over at administration request. JP Morgan and Wells Fargo were the two well-managed major banks that didn't need government help during the fall 2008 financial meltdown.
The attack on JP Morgan could be payback for things that Dimon, a former Obama favorite, said during the 2012 election season. According to newsmax.com:...
How the Republicans Could Have "Won" the Partial Government Shutdown
The Republicans could have won had they concentrated on the so-called “government shutdown” and, early on, had raised the debt limit temporarily. In any case, the shutdown was only a partial shutdown. It furloughed only employees not covered by the federal Antideficiency Act, which permits certain essential government functions to keep operating in the absence of authorized legislative funding. Had the House raised the debt ceiling before shutting down any government agencies, Americans would not have even noticed the partial shutdown. The Republicans missed the public relations gain they could have gotten if they had pointed how partial the shutdown was. But the threat to permit no new government borrowing scared the public to death.
The public could have been shown how little they were affected by the partial shutdown. The veterans showed at the WWII memorial that the President unnecessarily barricaded entry to public monuments and parks to make the public believe that the shutdown seriously affected government operations when it actually eliminated the inessential and some of the fraud, waste, and abuse in the federal budget.
As for the debt ceiling, it should not have been imposed in the first place. ...
European Right May End the Southern European Depression
In August 2012, we made the case (Deficit Spending Doesn't Work; Balancing Trade Does) that the trade deficit countries of the Eurozone were locked in the trade-deficit caused depressions predicted by John Maynard Keynes about 80 years ago in his The General Theory of Employment, Interest and Money. He argued:
The following graph, which we published back then, illustrated the relationship between trade balances (current account balances) and unemployment rates. It showed that those countries with trade deficits have high unemployment rates and those with trade surpluses have low unemployment rates:
Now, a little over a year later, the same five countries still have high trade deficits, and their unemployment rates have all gone up, as shown in the table below:...
On June 19, I noted on this blog that frequent White House visitor Sarah Hall Ingram was knee deep in the IRS scandal, which probably meant that White House staff were involved. My suspicions were supported by an e-mail that was revealed by Rep. Darrell Issa while questioning Ms. Ingram at the October 9 hearing of his House Oversight Committee. Watch the above video to see Rep. Issa's discussion with Ms. Ingram.
According to The Daily Caller, this email shows that Sara Hall Ingram shared confidential taxpayer information with White House staff:
Issa, in his questioning of Ingram, suggested that there is an alternative explanation of the e-mail. The alternative is that the IRS was abusing the redaction process in order to hide information from Issa's committee.
Issa's committee will be questioning IRS officials in order to discover what lies hidden in the redacted parts of the e-mail. If it turns out that Ingram was revealing confidential taxpayer information, then Hall was clearly violating that information by sharing it with the White House.
For some background, here's what I wrote back in June (Sarah Hall Ingram is being written out of the IRS scandal):...
China and Japan are both worried about the current upcoming fight over the U.S. debt limit. According to the Independent:
If the United States doesn't, what would happen?
Japan is also concerned. It is threatening to slow or stop its purchases of U.S. Securities. Financial Times reports:...
Make the Shutdown of Undesirable Federal Departments and Agencies Permanent
A Continuing Resolution is an abomination. The House of Representatives under the Constitution of the US was established by the first article of the Constitution. The Constitution provides that “All Bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.”
The Senate under Harry Reid has been acting unconstitutionally as it pretends to have equal authority on spending and revenue matters with the House of Representatives. If that were so, why does the Constitution give exclusive power to initiate revenue measures to the House, the federal body closest to the people?
Senators in the original Constitution were “chosen by the Legislature” of each state. The Senate was intended to act on behalf of the States to prevent the federal government's encroachment on its powers and legislation harmful to the States. While the 17th Amendment provided for the popular election of Senators there was no change in the powers of the Senate. The States’ legislatures in passing this amendment abandoned the ability to prevent the encroachment of the Federal Government on the powers of the States. Witness the establishment of the Federal Departments of Housing and Urban Development and Education; formerly the exclusive concern of state governments.
The House passed a budget each year for the past five years but the Democratic Senate refused to consider them – which was unconstitutional behavior. The House has been sending bill after bill on the budget and the Senate has been tabling them without consideration. The Senate has been in effect vetoing the budget bills of the House of Representatives.
Journal of Economic Literature:
Atlantic Economic Journal: