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Variable Single-Country Tariffs Are the Key to U.S. and Eurozone Recovery
Raymond Richman, 4/23/2013

As John Maynard Keynes urged at conferences to create a brave,new world during WWII, balanced trade is the KEY to world economic stability. Balanced trade is the key to U.S., European, and world economic recovery. The massive unemployment in the U.S. and Southern Europe , Brazil, and others cannot be corrected by austerity alone. A world gold standard without the right of each country to employ flexible tariffs will not produce economic recovery nor will any other currency standard.

Austerity in Greece, Italy, Spain,, Portugal, France, and the U.S. will not produce economic recovery nor will vast government expenditures do it, nor will monetary policy. The Keynesian multiplier is a fiction. Government spending creates the illusion of recovery and not real recovery. Austerity in Southern Europe kid not work. Huge budget deficits and quantitative easing in the U.S. produced no genuine recovery. Nothing will work except relatively balanced trade and relatively balanced budgets and monetary discipline, i.e. creation of sufficient money to accommodate stable growth. The economic history of the past decade in the U.S. and the Eurozone have proven that.

The failure of the “new deal” in the 1930s and the budget deficit and the policies of the past decade under Presidents George W. Bush and Barack Obama have proven the non-existence of a Keynesian multiplier. Nearly all the increase in GDP was the net increase in government spending. Prof. Valerie Ramey of the University of San Diego has shown that increased spending by government is accompanied by diminished spending in the private sector. The failure of Pres. Obama’s economic stimulus plan of 2009 and the subsequent U.S. budget deficits are evidence of the non-existence of a multiplier.

The quantitative easing of Dr. Bernanke has contributed little but a rise is asset prices. Not even in conjunction with a trillion dollar annual budget deficit did it provide any reduction in unemployment, which remains at about fifteen percent including those employed part-time and those not looking for work and without counting the millions who have departed from the labor force. In the Eurozone austerity policies have produced only unemployment for all practical purposes. The problem is made worse everywhere by vast foolish environmental policies, e.g., subsidized hybrid and electric autos, subsidized wind and solar energy, subsidized research to prove man-made global warming, et al.

A rigid monetary standard like the Euro that does not permit countries experiencing unbalanced trade to impose tariffs is not sustainable as the events in the Eurozone demonstrate. To try to solve the problem of a country shortage of Euros by austerity only produces mass unemployment.

As for the U.S., neither profligate spending nor quantitative easing has made a dent in unemployment. Our policies should strive for balanced trade by means of single country variavble tariffs (called “scaled” tariffs” in our earlier writings), a reasonably balanced government budget, and a disciplined monetary policy (increasing the money supply at the level of the desired rate of economic growth).

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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]