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 Richmans' Trade and Taxes Blog

Donald Trump closing on leaders in Republican race
Howard Richman, 2/28/2011

Republican voters may have a choice on trade this primary season. Donald Trump, the first of the undeclared Republican candidates for president to call for tariffs on China, has moved up to fourth place among Republican candidates according to the Newsweek Daily Beast Poll. Here are the Republican leaders:

  1. Romney - 19%
  2. Huckabee - 18%
  3. Palin - 10%
  4. Trump - 8%

In the general election, here's how the top four would do:...


Comments: 3

Money Supply during the Great Depression
Howard Richman, 2/27/2011

In Friday's posting, I compared the U.S. economy of 2010 to 1937, but the more accurate comparison is to 1936. As shown in the graph below, real GDP growth slowed in 1937 and it went into a double dip in 1938:


In 1936, the Federal Reserve overly expanded money supply. This resulted in increasing inflation in 1937, so  in 1938, the Federal Reserve clamped down so much on money supply that it actually caused deflation and negative growth, as shown in the chart below:...


Comments: 2

Pat Buchanan Gets the Trade Deficits Right But the Solution Wrong
Raymond Richman, 2/26/2011

It was a pleasure to read Pat Buchanan’s syndicated column entitled “A dismal decade for industry” in the Pittsburgh Tribune-Review on Saturday, February 26, 2011. In it, he cites the bad news that we have been reciting for years on the internet and in our book Trading Away Our Future (Pittsburgh: Ideal Taxes Assn, 2008) namely that the growing trade deficits have been de-industrializing the U.S., costing American workers 5 million good manufacturing jobs, worsening the distribution of income, putting us in enormous debt to countries hostile to us, and weakening the dollar.

Pat points out that in the decade between December, 2000 and December, 2010, American ran a total of $6.1 trillion in trade deficits. Since the trade deficits are a subtraction from Gross Domestic Product, our GDP would be 40 percent higher that it now is and we would have full employment not a deep recession if we had balanced trade during the past decade.

He points out, “With China, the U.S. trade deficit in advanced technology alone  in the past four years has totaled more than $300 billion.” As we have pointed out, many of our imports come from such high tech  firms as Apple, Hewlett-Packard, Dell, etc. etc. many of whom have ten times as many employees producing for them in China than they employ in the U.S. They are more Chinese than American. ...


Comments: 0

Will 2011 be another 1938 or another 1941?
Howard Richman, 2/25/2011

At the moment, the U.S. economy is poised to exit the New Depression (Richard Duncan's name for the current depression), as shown in the graph below:


But last time the U.S. economy almost got out (1937), it fell back into a double dip and didn't leap out until 1941, as shown by the graph below:



Comments: 1

Richard Duncan names the current depression the "New Depression"
Howard Richman, 2/24/2011

In a February 22 commentary (The Great Depression and the New Depression) that appeared in The Daily Reckoning, Richard Duncan, who had predicted the current depression years before it began, compared the two depressions. Here is a selection:

A worldwide economic depression began in 2008. This New Depression was caused by the same factors as the Great Depression and followed exactly the same pattern. Thus far, however, the New Depression has been milder than the Great Depression because the policy response this time has been completely different....

In both instances, a great economic boom was brought about by an explosion of credit creation; and in both instances the boom turned to bust when that credit could not be repaid. At that point, a systemic crisis brought down the international banking system. Immediately thereafter international trade collapsed.

He does not think that the depression is over:...


Comments: 0

Global panic as green energy sector collapses due to fading government subsidies
Howard Richman, 2/22/2011

John Sullivan has the story. He writes that England has decided to cut off its subsidies for wind and solar energy in April 12 and that this is just the last in a chain of countries to reduce their subsidies:

Britain’s decision is another nail in the coffin for Europe’s tottering green energy market. Last year the first of several crushing body blows was dealt to environmentalist dreams when the Spanish government retrospectively cut the value of its tariffs in its own U-turning energy review.

The devastated Spanish Solar Photovoltaic Industry Association, with mass bankruptcies on the cards, is accusing their government of utter betrayal is yet to carry out a threat to sue over the ruling....



Comments: 0

G20 ministers again let China veto meaningful measures to address trade imbalances
Howard Richman, 2/20/2011

Going into the G-20 ministers meeting I pointed out that Chinese ministers would veto any meaningful attempt to adress worldwide trade imbalances. That's exactly what happened this weekend. Here's an analysis from

Although an accord of sorts was reached by finance ministers of the G20 at their meeting in Paris on Saturday, exchange rates and currency reserves, which are truly representative indicators of global economy imbalance, were blocked from inclusion by China. The deal is thus far less effective than it might have been....


Comments: 0

Did Geithner lean on U.S. regulators on behalf of the Chinese government in June 2009?
Howard Richman, 2/18/2011

One of President Obama's more inexplicable decisions was his choice of Timonthy Geithner for Treasury Secretary. About the only thing recommending him was the fact that he spoke Chinese, having been partly educated in China. His incompetence was breathtaking: 

  • In a January 2007 speech to the Council on Foreign Relations, he did not see the October 2008 financial crisis coming. In fact he said, "Improvements to risk management and to capital cushions are likely to have made the financial system more stable and more resilient."
  • When he was at the New York Fed he was part of the disastrous decision to close Lehman Brothers without protecting its creditors.

Now, according to Wikileaks cables, he possibly leaned on U.S. regulators to rule in favor of the Chinese government in June 2009. Here's a selection from the Reuters report:...


Comments: 0

France pushing G-20 deal to adress global imbalances
Howard Richman, 2/17/2011

According to a Reuters article published this morning. The G-20 will meet this weekend to discuss measures that can be used to determine whether or not there are global trade imbalances. French President Sarkozy is pushing the agenda. Here's a selection:

G20 countries will have made major progress this weekend if they clinch a preliminary accord on what measures they will use to benchmark and address mismatches in the world economy, France's economy minister said on Thursday....

Her remarks came amid concern that differences of opinion within the Group of 20 may prevent finance ministers from reaching agreement at the meeting on a five-item list of indicators on which to base judgments on whether countries should alter economic policy to redress imbalances....


Comments: 1

Morici: "Democrats will stubbornly argue the economic recovery will collapse if the deficit is cut by any more than $100bn"
Howard Richman, 2/15/2011

In a commentary that appeared this morning (Budget demagoguery; White House says deficit in current year to spike to $1.65trn - - the largest dollar amount ever) University of Maryland economist Peter Morici explains one of the reasons why Congress and the President are only proposing paltry cuts in the federal budget. He writes:...


Comments: 0

Is the 2010 Trade Report the Prelude to a Dollar Collapse?
Howard Richman, 2/11/2011

This morning, the BEA put out its first estimate of the U.S. trade deficit in 2010. In all it rose from $375 billion in 2009 to $498 billion in 2010. In the graph below, our monthly trade deficit in 2009 is shown in blue and our monthly trade deficit in 2010 is shown in red:


Meanwhile our merchandise trade deficit with China reached a record $273 billion in 2010, a full 55% of our total trade deficit (goods plus services) with the entire world. The growth in our bilateral trade deficit with China defied the fact that demand in China is rising about four times as fast as demand in the United States. In the graph below, our 2009 trade deficit with China is shown in blue and our 2010 trade deficit is shown in red:


The Chinese government keeps out American products through a wide variety of pretexts. Some of them are WTO-legal, including:...


Comments: 6

Donald Trump at CPAC
Howard Richman, 2/11/2011

Here's a video of Donald Trump's February 10 speech at the Conservative Political Action Conference. He was quite well received, except by some rude Ron Paul supporters.

At the moment, Trump is the only potential Republican 2012 presidential candidate who has a decent platform on trade. He says that he would apply tariffs to the countries that have been taking advantage of us. Perhaps he would impose our scaled tariff proposal which would bring in several hundred billions of revenue, at first. That revenue would quickly decline and be replaced by increased American incomes due to corporations building new ultra-modern factories in the United States in order to be on the right side of our tariff barriers.

He says that the Mexicans and Chinese he talks with can't believe what the United States is letting them get away with. He is correct. China not only manipulates the dollar-yuan exchange rate so that our prices are high and theirs low, but it also applies both tariff and non-tariff barriers to our products. Despite our supposed free-trade agreement, not only has Mexico started manipulating exchange rates, but it also has placed a 25% duty on U.S. cheese, a 20% duty on U.S. wine, 15% duties on U.S. fruit and fruit juices, 15% duties on U.S. pencils and pens, 10% duties on U.S. shampoo, hair spray, tooth paste and deodorant, and 10% duties on U.S. dog and cat food.


Comments: 33

How to Create Productive Jobs and Avoid Global Warming Bankruptcy
Raymond Richman, 2/9/2011

Yesterday, we suggested some measures that would promote a quick recovery. These included:

  • 1. Getting our international trade into reasonable balance by means of our proposed scaled tariffs that we would impost on China, Germany, Japan, and OPEC countries. It would create an estimated  4 million manufacturing jobs in a relatively short time. No government expenditures are involved. To the contrary, to the extent they maintain a trade surplus with us, we’ll realize billions in revenues. All we have to do is tell those countries that trade is a two-way street and that they have to increase their imports from us or we will impose the scaled tariff on all imports from them.

  • 2. Ending the foolish barriers to the drilling for oil and gas on public lands, offshore in the Atlantic and the Pacific. Besides creating a million jobs this would also diminish our dependence on foreign oil. The new oil and gas wells do not damage to the environment. Opening up public lands to drilling for oil and gas would create a million or more jobs.

  • 3. Using natural gas, thanks to the invention of the new technology of drilling from shale, natural gas has become enormously abundant. Our reserves promise to make us energy independent. It is less polluting than oil or coal. We should move immediately to convert buses and trucks to natural gas as T. Boone Pickens has urged. Doing so would open natural gas filling stations across the country and open the market for consumers to purchase natural gas powered automobiles. The increased use of natural gas promises to lower the cost of energy not only as a fuel for motor vehicles but to heat our homes, offices, and factories, and to lower the cost of electric energy to businesses.

There are other things we could do to stimulate business investment in the U.S.

  • 4. Abolish the corporate income tax. A distinguished University of Chicago economist, Prof. Arnold Harberger, now emeritus, showed recently that corporations that sell their products in the U.S. pass the tax on to consumers in the form of higher prices but they cannot do so for products sold internationally because their competitors are not subject to the U.S. corporate income tax. So the corporate income tax acts like a sales tax at home and puts American companies at a disadvantage in international markets. Moreover unlike the value-added tax, the fair tax, and other consumption taxes, corporate income taxes cannot be rebated to exporters. Most of our trading partners impose a value-added tax and rebate the tax to their exporters and impose the tax on our exports to them.

  • 5. Reduce the barriers to the erection of nuclear energy plants. Those concerned with the environment should be aware that their opposition to nuclear plants is opposition to clean energy. France gets most of its electricity from nuclear plants....



Comments: 2

A Quick Economic Recovery With Jobs, Jobs, Jobs
Raymond Richman, 2/8/2011

We have the means but not the will to recover from this recession in no time at all. What is preventing it are a President and a Congress more concerned with satisfying those who contributed to their election than the welfare of the nation. What is  preventing it are the nation’s economists who are committed ideologically to false economic theories. What is preventing it are organized groups dedicated to destroying capitalism. What is preventing it are naïve self-described idealists who believe in a false theory of man-made global warming . Oh, why—oh why can’t a majority of voters think like us. Here is our program for a quick economic recovery and we shall follow it with our reasons for believing the President, the Congress, the academic economists, and the leftists are pursuing policies detrimental to our nation’s future and why a majority  of our citizens are going along with these policies of self-destruction.

1.  Get our foreign trade in reasonable balance. How do we accomplish this? We have invented what we call the “scaled tariff” which is imposed only on those countries with which we are experiencing large chronic trade deficits. Balancing trade will put million workers back to work in a very short time, some almost immediately, because of the stimulus of simply announcing the policy. Following are our trade deficits in goods and services in 2009 and the first three quarters of 2010 with Germany, Japan, China, and OPEC (US$ millions) : ...



Comments: 0

How to Avoid the Coming Dollar Collapse
Howard Richman, 2/7/2011

There has been increasing concern in American foreign policy circles lately about the coming dollar collapse. The writers often point to "Triffin's Dilemma" as an explanation of why the crash is inevitable and why only delaying actions are possible. Here's Wikipedia's summary of that dilemma:

The Triffin dilemma (less commonly the Triffin paradox) is the observation that when a national currency also serves as an international reserve currency (as the US dollar does today), there are fundamental conflicts of interest between short-term domestic and long-term international economic objectives. This dilemma was first identified by Belgian-American economist Robert Triffin in the 1960s, who pointed out that the country issuing the global reserve currency must be willing to run large trade deficits in order to supply the world with enough of its currency to fulfill world demand for foreign exchange reserves.

In a June 2010 paper (How Dangerous Is U.S. Government Debt? The Risks of a Sudden Spike in U.S. Interest Rates), CFR's Francis E. Warnock argued that we are now nearing the endgame in which the flight from the dollar produces a dollar collapse. In fact, he even claimed that we almost experienced that crash in 2009:...


Comments: 5

American output increased at a 3.2% rate in the fourth quarter, but real American income only increased at a 1.3% rate!
Howard Richman, 2/4/2011

On January 28, the Bureau of Economic Analysis (BEA), released preliminary GDP numbers which stated that although American production grew at a 3.2% rate in the fourth quarter, real American incomes only grew at a 1.3% rate. The difference was the price of imports. Import prices rose at an 18.9% rate.

Specifically, nominal GDP grew by at a 3.4% rate, while inflation in the prices received by American producers grew at a 0.3% rate. Meanwhile, prices paid by American purchasers grew at a 2.1% rate making the growth in American purchasing power just a 1.3% rate....


Comments: 1

U.S. Manufacturing Employment Rose in January
Howard Richman, 2/4/2011

According to the latest statistics released this morning by the Bureau of Labor Statistics, unemployment declined from 9.4% in December to 9.0% in January.

Part of the improvement came from the increase in manufacturing employment, which rose by 49,000 up to 11,617,000 in January from 11,568,000 in December. The chart below shows manufacturing employment over the past decade (seasonally adjusted):...



Comments: 0

Obama picks a progressive lawyer for top economist -- we're published in today's American Thinker
Howard Richman, 2/3/2011

Here's how we conclude:

We are a nation blessed by God with almost unlimited resources and a Constitution that encourages and protects the right to innovate. If we pay for Social Security out of the general budget because it is "progressive," if we let China manipulate our trade, because cheap imports from China are "progressive," then we condemn ourselves to a future of unstoppable budget and trade deficits. On the other hand, if we balance budgets and trade, our economic future is unstoppable.

When the book about President Obama's presidency is written, it will be noted that he did not have the discernment to distinguish competent from incompetent advisors. The Director of the National Economic Council does not have to be an economist, but he/she should not have such glaring gaps in economic understanding.

To read it go to:


Comments: 0

How is QE2 doing so far?
Howard Richman, 2/2/2011

Last fall, Federal Reserve Chairman Ben Bernanke launched QE2 (Quantitative Easing 2) in order to stimulate U.S. economic growth. Now that the preliminary fourth quarter 2010 data is in, it is possible to start evaluating how he is doing. His apparent goals, as I noted in a November 19 commentary (Will QE2 End in Disaster?), were to cause inflation in order to suppress private savings and increase consumption and to weaken the dollar in order to increase U.S. exports and reduce U.S. imports. I wrote:

QE2 is designed to reduce American private savings and also to cause private foreign savings to flee from the United States. Its goal is to increase inflation from its current 1% to at least 2% or 3% while keeping short-term U.S. interest rates close to 0%, producing an “inflation tax” upon private American and foreign savers.

Bernanke hopes that reducing private American savings will increase American consumption and that sending private savings abroad will improve America’s trade balance....

Inflation, Savings and Consumption

One of Bernanke's goals was to increase inflation to 2%, which he confirmed in a November 19 speech. With U.S. short-term interest rates close to 0%, the increased inflation rate would place a 2% inflation tax on short-term savings. This would cause the savings rate to fall, which in turn would cause consumption to increase.

He has been succeeding at increasing inflation. The Consumer Price Index climbed from a 1.1% rate in September to a 1.5% rate in December, and the Producer Price Index climbed from a 0.4% rate in September to a 1.1% rate in December. The only anomaly is the BEA's GDP deflator which decreased from a 2.08% rate in the third quarter to a 0.33% rate in the fourth quarter.

The effect on savings was as predicted. The U.S. savings rate fell from 5.9% of after-tax income during the third quarter to 5.4% in the fourth quarter. This, predictably, increased consumption.

Dollar Strength and Trade Balance

Another of Bernanke's apparent goals was to weaken the dollar. But the effect has been mixed, as shown in the chart below:



Comments: 3

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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]