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 Richmans' Trade and Taxes Blog

Book Review: Edward Luce, Time to Start Thinking: America In the Age of Descent (Atlantic Monthly Press, 2012)
Raymond Richman, 8/31/2013

Edward Luce, Time to Start Thinking: America in the Age of Descent (NY: Atlantic Monthly Press, 2012)

Democrats have finally come to realize that America is in decline but they haven’t faced the fact that the policy-makers in Washington, including the U.S. Supreme Court, plus the liberal educational establishment have contributed to it. The author, Edward Luce, was a speech writer for Treasury Secretary Larry Summers during the Clinton administration and now works as the chief U.S. columnist for the Financial Times of London. The book is worth reading because the author does an excellent job of reporting what the problems are. But don’t look for solutions.

The author starts out by stating that the dominant characteristic of American policy-makers was pragmatism but “America, at least in terms of how it governs itself, is no longer very pragmatic.” Liberals are nostalgic for the 1960s when the middle class grew and “the federal government sent people to the moon.” For conservatives, “the past is wrapped up in the godly virtues of the Founding Fathers.” And that is the weakness of the book. He attributes the growth of America’s economy to Roosevelt who got us out of the depression by making war and to Democratic policies. It was  America’s weak federal governments that enabled the private sector to innovate and invest.

The book is very well-written and filled with interviews that introduces you to some of the principal actors and thinkers on all the problems accompanying America’s decline. Unfortunately, he has a liberal bias and considers all Republicans as Neanderthals. Nevertheless, government policies, whatever the source, come in for a great deal of criticism....


Comments: 0

Is it 1929 again?
Howard Richman, 8/29/2013

In today's Daily TelegraphAmbrose Evans-Pritchard explained why U.S. Treasury interest rates have been rising:

As Indonesia, India, Ukraine, Brazil, Turkey, Venezuela, South Africa, Russia, Thailand and Kazakhstan try to shore up their currencies, the effect is ricocheting back into the advanced world in higher borrowing costs. Even China felt compelled to sell $20bn of US Treasuries in July.

"They are running down reserves by selling US and European bonds, leading to a self-reinforcing feedback loop," said Simon Derrick from BNY Mellon.

This is very close to my June 26 analysis  (see Why US Interest Rates have been Rising since May 1). At that time, I quoted an article which said that Chinese banks were selling their U.S. Treasury bonds, due to a liquidity crunch in China. Apparently, the liquidity crunch is emerging-market wide....


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Real Tax Reform; Tax Corporations As Partnerships
Raymond Richman, 8/23/2013

The U.S. corporate income tax violates nearly every criterion of a good tax. It is expensive to administer and to comply with. It is not as progressive as it is believed to be. Indeed, by retaining earnings and avoiding paying dividends, wealthy shareholders avoid the high tax rates of the personal income tax.  It violates the principle that persons with equal incomes and circumstances shoulde bear an equal tax burden. It causes corporations to engage in a number of uneconomic practices.  Earnings are taxed twice once as corporate earnings and again under the personal income tax when, as, and if they are paid out in dividends. The personal income tax on dividends amounts to taxing the same income twice. Workers who pay into pension funds are not only taxed twice but the corporate tax date for most workers is higher than their personal income tax rate and they are taxed again when the pension is received and personal income tax has to be paid. It encourages corporations to engage in debt financing rather than to raise equity capital. It encourages corporations to buy back their stock instead of paying dividends, as a means of converting dividend income into capital gains. It encourages moving factories overseas, encourages imports and discourages exports costing millions of jobs. It discourages the payment of dividends and favors corporate practices such a stock buy-backs which convert ordinary income into lower-taxed capital gains.

It is believed to be progressive because corporate ownership is distributed unequally. But the incidence of the tax is in doubt. Prof. Harberger, an eminent economist, argues that corporations that export much of what they produce cannot pass the tax forward to consumers because of international competition. But corporations that sell their products domestically may be able to pass the tax forward to consumers or backward to their employees. ...


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Ten Year Anniversary of the Climate Change Paradigm Shift - Ray and I are published in today's American Thinker
Howard Richman, 8/21/2013

Here's a selection:

In recent years, more and more scientists have been exploring the new paradigm, called cosmoclimatology by Henrik Svensmark, one of its originators. In 2009, Jasper Kirkby gave a lecture at the CERN (Europe's premier research center) in which he reviewed the accumulating literature linking cosmic ray inflow variability with climate variability. One of Shaviv and Veizer's graphs was featured prominently in that lecture.

In 2011, Kirkby and his colleagues conducted an experiment at the CERN which provided a mechanism that could explain Shaviv and Veizer's correlation. They found that ground-level cosmic-ray concentrations can increase the rate that cloud condensation nuclei form by a factor of between 2 and 10. Thus cosmic rays can cause clouds to form which can reflect sunlight away from the Earth, cooling the planet.

Over the last decade, many studies have correlated cosmic ray inflow with Earth temperatures whether the scale is hundreds of millions of years or hundreds of years. On shorter time scales, it turns out that high levels of solar activity (i.e. sunspots) are correlated with global warmth partly because an active sun blocks out cloud-initiating cosmic rays.

To read it, go to:


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US long term interest rate up due to sales of dollars by foreign investors
Howard Richman, 8/19/2013

Just recently, the U.S. long-term interest rate resumed its rapid climb, which had begun on May 1 as shown in the following graph of the U.S. Treasury bond yield:$UST10Y

In an August 19 commentary in Market Watch, Carla Mozee attributes the rising U.S. long-term interest rate to selling of U.S. Treasuries by Chinese and Japanese investors. Mozee writes:


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Ten year anniversary of the climate change paradigm shift
Howard Richman, 8/16/2013

Science advances by paradigm shifts. My one-time co-researcher, Nobel Prize winning economist Herb Simon, once explained it to me. The new paradigm begins with a new overall curve. Further research builds upon that curve by mapping the phenomena responsible for fluctuations from the curve. That's the normal scientific process. But establishing a new big curve requires a paradigm shift.

Such a paradigm shift occurred a decade ago, when Israeli astrophysicist Nir Shaviv and Canadian geologist Jan Veizer published the ground-breaking study that laid out the chief cause of climate change -- cosmic rays. The graph below shows the curve that they discovered. The original is found and explained on Nir Shaviv's Science Bits blog at


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U.S. Oil and Natural Gas Reserves Growing Rapidly
Howard Richman, 8/14/2013

On August 1, the Department of Energy released its annual report on U.S. oil and natural gas reserves. This year's report shows the change in reserves during the 2011 calendar year.

As shown in the graph below, during 2011, U.S. oil and gas reserves continued to rise along about the same trajectory that they rose during 2009 and 2010. The following graph shows reserves each year since the beginning of 2000:


At the beginning of 2012, U.S. oil reserves were 29 billion barrels while U.S. natural gas reserves were 348.8 trillion cubic feet, the equivalent of 66 billion barrels of oil....


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Abolish the Corporate Income Tax; Tax Corporations Like Partnerships
Raymond Richman, 8/12/2013

Both the Democrats and Republicans have proposed tax reforms. By and large, the Democratic proposals simply deny the rich deductions the remaining taxpayers can take. Republicans on the other hand appear to be opposed to any but consumption taxes. Neither party seems to be aware that over the centuries economists have developed a set of principles of taxation to aid in determining what tax is best to finance a given set and level of expenditures.

Some accepted principles of taxation are the following:

  1. In selecting a tax, the cost of administration and compliance should be taken into account.
  2. Classes of taxpayers who receive specific benefits from government expenditures should ordinarily be charged for such services, e.g., this justifies registration fees for real estate and motor vehicles, and court costs of private litigation, taxes on motor fuels to pay the cost of building and maintaining roads and bridges, etc.
  3. Taxpayers in equal circumstances should be taxed equally.
  4. The economic effects of a tax must be taken into consideration, with the negative effects of taxes minimized.
  5. The tax burden should be distributed progressively subject to the qualification that the social benefits of reduced inequality of income should at the margin never exceed the costs of diminished incentives to save and invest.

Here is what the Democratic proposals look like. According to the Center for American Progress, a self-described progressive group, the President has proposed that the 2014 federal budget include:...


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June Figures give a Glimpse of a World with Less Currency Manipulation
Jesse Richman, 8/11/2013

In late June, Howard Richman posted an insightful analysis of shifts in bond prices which connected these shifts to fiscal tightening in China as regional banks faced a credit squeeze ( Howard concluded that the move to repatriate billions invested in U.S. bonds had led to significant changes in bond prices.

A side effect was that these sales worked counter to the effects of the Chinese currency manipulation...


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Balanced Trade: Why Protectionism and Free Trade Failed, and Why Reciprocity Should Replace Them
Jesse Richman, 8/3/2013

In the course of its history the United States has pursued a mix of three approaches to trade policy: protectionism, free trade, and reciprocal trade.  Protectionism worked when the U.S. economy was small and rivals were less inclined to retaliate.  Free trade failed in the face of mercantilist exploitation.  The solution is... 


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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]