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 Richmans' Trade and Taxes Blog

Geithner thinks his failed trade policy was a success
Howard Richman, 4/30/2012

In November 2010, when it became clear that his recovery summer had failed, Lawrence Summers resigned as Director of President Obama's National Economic Council. In contrast, Treasury Secretary Timothy Geithner still hasn't figured out that he has failed.

In a speech at the Commonwealth Club of California on April 26, Geithner claimed that the Obama administration's trade policy has succeeded, despite the 25 months of falling net goods exports with China shown in the graph below:


Near the beginning of the speech, he said:...


Comments: 1

Does global warming cause extreme weather? - we're published in today's American Thinker
Howard Richman, 4/29/2012

Here's how we begin:

Anthropogenic global warming (AGW) theory supporters are in the midst of a big propaganda campaign leading to a global "Connect the Dots" day on May 5. Their goal is to convince the public that recent extreme weather events are due to global warming and that global warming is man-made.

They are preparing public opinion for the huge economic sacrifice involved in curbing carbon dioxide emissions, a process which they will demand at the United Nations Conference on Sustainable Development from June 20 through 22.

So far, their propaganda campaign has been succeeding. In fact, the New York Times reported on April 17 ("In Poll, Many Link Weather Extremes to Climate Change") that the public now believes stuff that the scientists who adhere to AGW theory don't even claim to be true:

To read it, go to:


Comments: 2

Obama stopped the falling house prices (in Washington DC)
Howard Richman, 4/25/2012

Republicans do not give President Obama credit where credit is due. He stopped the fall off in house prices. When he took office in January 2009, house prices were falling rapidly. Both in Washington DC and in the nation they were 81% of what they had been just one year previously (after subtracting for inflation).

But President Obama almost completely halted that decline. In Washington DC, according to the Feb 2012 data released yesterday by S&P/Case-Shiller, house prices still held 96% of their January 2009 value. His success is shown in the following graph of real house prices (house prices after subtracting for inflation):



Comments: 25

Bloomberg spins falling Case Shiller numbers as a positive trend
Howard Richman, 4/24/2012

This morning, S&P/Case-Shiller released their data for February sales and resales of the same homes. Bloomberg News spins these numbers as a positive sign (Oil rises as Case-Shiller report shows improvement). Their story begins:

Oil rose in New York after home prices in 20 U.S. cities dropped at a slower pace in February, bolstering optimism that economic expansion will accelerate in the world’s biggest crude-consuming country.

Futures climbed as much as 1 percent after the S&P/Case-Shiller index of property values fell 3.5 percent from a year earlier, the smallest 12-month drop since February 2011. Crude also climbed as equities rose on better-than-estimated earnings. An Energy Department report tomorrow may show that supplies rose 2.65 million barrels, according to a Bloomberg survey.

“The housing numbers aren’t great but they have improved,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis.

The actual data is graphed below (after dividing by the CPI to subtract inflation):


About 1 year ago, we wrote a commentary for the American Thinker called House Prices in Free Fall. We predicted that house prices would continue to fall. Specifically:...


Comments: 11

Solar activity caused recent extreme weather in USA
Howard Richman, 4/22/2012

If you watch the above April 2, 2012, you-tube video (click here if you can't see it) from Piers Corbyn's, you will find at the 5:30 mark that he correctly predicted March's extreme weather in the USA:

The thirteenth to fifteenth of March, we specifically predicted this in our forecast in detail, we said there would be tornadoes and giant hail in the lower midwest. That happened.

We also said, after that there would be a big heat wave in the central and eastern parts of the USA. That happened.

And then we said that would turn into or change into something more focused on Texas with intense heat in Texas. That happened.

And then, finally, there was a cold blast just coming down from Canada in the Northeast part of America at the end of March carrying into April which we predicted.

Later in the video, Corbyn predicts more tornadoes and other extreme events coming to the American midwest between April 22-24, which precisely coincides with the huge winter storm that is arriving tomorrow, precisely the day he predicted.

He holds that the current extreme weather is due to a certain configuration which appears every 60 years, plus or minus 5 years, causing the same sort of extreme weather each time. He explains:...


Comments: 3

Book Review of Joseph E. Stiglitz, Free Fall: America, Free Markets, and the Sinking of the World Economy (NY:W. W. Norton, 2010)
Raymond Richman, 4/19/2012

Beginning with his preface, Prof. Stiglitz, author of a popular textbook for the introductory college course in economics, reveals that he confuses economics and politics. He writes: “Whenever one sees problems as persistent and pervasive as those that have plagued the U.S. financial system, there is only one conclusion to reach: the problems are systemic.”

My own experience is that there are no persistent and pervasive problems. Every economic problem can be solved using the tools of economic analysis. The one that liberal economists consider persistent and like to talk about is the unequal distribution of income. Economists can explain why some households have low incomes and others high incomes, why some countries are poor and others rich, why average incomes have been rising in Communist China, why even the poor in the U.S. have incomes greater than the median income in many countries.

Stiglitz seems to have no idea. Indeed, the title of this book, Free Fall: America, Free Markets, and the Sinking of the World Economy, raises questions about his analytical capacity. The U.S. is not in a free fall, the only U.S. markets that are not free are those that government controls, and the world economy is rising, not sinking. We shall look at what he calls fundamental flaws and, subject to limitation of time and space, analyze his arguments. We shall analyze his solution, restructure the economy and impose world government.

That the Federal Reserve System has occasionally pursued foolish and costly policies cannot be denied. But since the end of the gold standard, it has provided a stable money supply that is modestly inflationary, That such foolishness is inherent in the FRS is deniable. The notion that government or global bureaucrats can do better, to which Stiglitz a former international bureaucrat, subscribes, is baseless. We subscribe to the theory that government policies are at the root of most financial crises including the one that precipitated this Great Recession....


Comments: 1

Obama's trade policy will be an issue in the coming election
Howard Richman, 4/18/2012

The failure of President Obama's trade policy is quite clear. For example, according to the latest statistics from the Commerce Department, net US exports of goods to China fell in February for the 25th consecutive month, as compared to the same month one year earlier, as shown in the graph below:

A recent Republican National Committee (RNC) campaign ad (From 'Hope' to Hypocrisy: Excuses, Excuses) points to Obama's manufacturing job losses, without mentioning that his predecessor, Republican President Bush, had just as dismal a record.

Republican candidate Mitt Romney plans to take a tougher line with China than either of his predecessors. In the February 16 Wall Street Journal (How I'll respond to China's Rising Power), he wrote:...


Comments: 0

Morici on China's announcement to widen the daily trading range of the yuan
Howard Richman, 4/17/2012

In a commentary in the Boston Herald (Posturing aside, yuan undervalued), U. of Maryland economist Peter Morici pointed out that China's decision to widen the daily trading range of the yuan means little. He wrote:

Beijing announced Sunday it was widening the daily trading range for the yuan to 1 percentage point. This news has been heralded as another indication that China is liberalizing its currency, and the yuan may now be fairly valued.

This may be dead wrong.

In May 2007, when no one would dispute the yuan was undervalued by a wide range — by my reckoning, 40 percent — China widened the trading range to 0.5 from 0.3 percent to no real effect.

Theoretically, if market pressures require, the new band should permit the currency to appreciate or depreciate 1 percent daily, but in the past official intervention has frustrated this process.

As Morici points out, China's interventions in currency markets are the real culprit here, not China's peg to the dollar. China prints yuan to buy hundreds of billions of dollars each year in order to keep the dollar's exchange rate high and the yuan's exchange rate low so that Chinese products can artificially undersell U.S. products in world markets.

Nevertheless, the Obama administration hailed the move as a step in the right direction. The India edition of the Wall Street Journal reported:...


Comments: 0

Wasting a Trillion Dollars to "Prevent" Global Warming Is Stifling Economic Recovery
Raymond Richman, 4/12/2012

Last March 29, 2012, the President of the United States told two untruths when he called on the Congress to end taxpayer giveaways to the oil industry and instead to double-down on investments in clean energy industries “that have never been more promising”.

The first untruth is that we have been giving special benefits to the oil industry. That would only be true if one includes the industry’s “social costs”, the costs of pollution from emissions from the burning of fossil fuels, but not if you also include the “social benefits” which environmental extremists always ignore. Indeed, the “social costs” have not been very costly while the “social benefits” have been enormous. The alleged social costs include health effects while the evidence is clear that we are living longer healthier lives. The industrial revolution which raised living standards throughout the world was made possible by plentiful and cheap fossil fuels.

The huge expenditures and costs placed on households and businesses by the government (EPA et al) and so-called clean air laws have had no measurable effect on climate change. Indeed, a growing number of physicists, geologists, archeologists¸ and other climate change scientists reject the “undeniable” anthropogenic or man-made global warming (AGW) theory and argue that natural forces, especially the sun’s magnetic disturbances and their effect on the amount of cosmic rays reaching the earth, are more likely the major cause of climate change. An experiment is under way at CERN, the world’s foremost nuclear laboratory to test that hypothesis. The world is spending trillions of dollars on the basis of unproven AGW theory.

The second untruth is that investments in clean energy industries “have never been more promising.” The truth is that neither wind nor solar will be economical for decades if not a century or more. Neither is reliable and both need to have back-up generating facilities and neither is competitive with nuclear, natural gas, coal, and water power. The President mentioned algae as a source and even the Obama-supporting press laughed at that. All the alternative so-called renewable sources have serious social costs. Wind mills are noisy and are destructive to birds and solar is more expensive and requires huge amounts of acreage. Their growth is limited in any case and both are inherently unreliable. They will always require government subsidies and will never pay their own way. The evidence is clear that so-called renewable energy plants, wind and solar, are unsustainable. The fact is that every wind and solar plant has needed subsidies equal to or greater than half its cost. ...


Comments: 9

China posts March trade surplus
Howard Richman, 4/10/2012

The Wall Street Journal headlines the article (China Posts Surprise March Trade Surplus). But it was no surprise to us. In the March 24 American Thinker (Falling Yuan Latest Failure of Obama's Trade Policy), we pointed to scattered news reports that China was stocking up on soybeans, copper and oil in February and argued that China's trade surplus was just due to China building up foreign raw materials inventory a little earlier than usual. We wrote:

The media justifies the Chinese government's decision to bring down the yuan-dollar exchange rate by citing reports that China ran overall trade deficits in January and February. During the first quarter of each recent year, usually in March, the Chinese government encourages its many enterprises to build up their inventories of foreign raw materials. As a result, China occasionally runs monthly trade deficits. The only thing new this year is that the inventory build-up came a bit earlier than usual.

Here is the Wall Street Journal's take on why China ran a "surprise" surplus in March:...


Comments: 3

The strange notion that U.S. trade is balanced
Howard Richman, 4/6/2012

In the April 5 Forbes Magazine (The Gold Standard and the Strange Notion of "Balanced Trade"), commentator Nathan Lewis argues that despite the fact that U.S. trade deficits were running at a $631 billion per year rate in January, despite the fact that the U.S. trade deficit with China alone was $282 billion per year in 2011, that there is no such thing as imbalanced trade.

He is correct that imbalanced trade is balanced by flows of savings in the opposite direction. He writes:

In actuality, all trade is balanced. Let’s say you are a businessman or investor. You want to trade something for something else. For example, you want to trade goods, services or assets for money (sell something), or you want to trade money for goods, services or assets (buy something).

Probably you are doing both of these at the same time, so in effect you are trading the things you sell for the things you buy, with the money acting as an intermediary. You probably end the process with roughly the same amount of money that you started. Money itself is an asset, of course.

OK Mr. Businessman, have these trades ever been “imbalanced”? Did you ever give goods and services and get nothing in return? At least not on purpose, right?

If that did occasionally happen, what you have in effect is an obligation for your counterparty to deliver something in the future, which is a type of asset, so even then you receive something in return. This would show up on the Current Assets portion of your balance sheet as an Accounts Receivable or something of that sort.

When trade is out-of-balance, the country exporting more than it imports does get something in return. The 16th century mercantilists got gold in return. The modern mercantilists get iou's, usually interest-paying bonds, in return. In effect, the modern mercantilists are lending money to their victims.

But Lewis shows his complete and utter lack of understanding of modern mercantilism when he sees nothing wrong with this bargain. If he wants to educate himself, we urge him to read our refereed-journal article on the subject (The Scaled Tariff: A Mechanism for Combating Mercantilism and Producing Balanced Trade).

Some economists think that these mercantilist loans benefit the victims. However, any benefit is just short term. At the same time that they give the victims more consumption, they take away investment opportunities in the victims' trading sectors. The result is that the victims get to live beyond their means for a short time, but they lose their industries....


Comments: 0

Mexico getting set to impose high tariffs on U.S. chicken legs - final decision by August
Howard Richman, 4/3/2012

According to The Poultry Site, Mexico is getting set to impose tariffs on U.S. chicken legs with the final decision on the tariffs to be made by August. Here is a selection from the story:

Early in 2011, three Mexican poultry companies petitioned the Mexican government to begin an anti-dumping investigation of imports of chicken leg quarters from the United States, frivolously claiming that US companies were exporting leg quarters to Mexico at below-market prices.

The Mexican ministry recently announced its preliminary results; with proposed duties on US poultry ranging from 64 per cent to 129 per cent. Although these duties have not yet been applied, under Mexican law, a final decision will have to be reached by August.

This action is based on the "average cost of production" and assumes that every part of the chicken should be priced the same, e.g., that the chicken feet have the same value as the chicken breast.

Mexico is copying China's tactics for growing its economy at U.S. expense. Referring to China's ludicrous claim that the U.S. is dumping chicken feet on the Chinese market at a price lower than they are sold in the United States, The Poultry Site continues:...


Comments: 0

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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]