Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Book Review: Henry M. Paulson, Dealing With CHINA (NY, Hachette Books, 2015)
The book shows that Henry Paulson, former Goldman Sachs president, is a fabulous salesman, a friend of the Chinese oligarchy and helped create China as an efficient economic power. As he writes in his preface: “Today’s China is a land of superlatives. It is home to the world’s fastest supercomputer, the biggest wind-power base, the longest sea bridge. It produces and uses nearly half of the world’s coal, cement, iron ores, and steel; it consumes 40 percent of the aluminum and copper. Forty years ago most Americans wouldn’t have imagined owing China one red cent. Now it is the U.S.’s biggest creditor, owning just under $13 trillion of our government’s debt.” And “The Chinese are formidable competitors. But we should not fear competition or shrink from it.”
The first part of his book is devoted to Goldman Sachs' successful attempt to give key Chinese industries access to international capital markets. He describes his meetings with an important Chinese leader, Zhu Rongji, in charge of directing China’s economy, former Mayor of Shanghai and a protegé of Deng Xiaoping the leader of China whose reforms beginning in 1978 led to the spectacular double-digit growth of the Chinese economy during the succeeding decades. The meeting led to Goldman Sachs being appointed to take the nations’s telecom business private, and Goldman Sachs became well-known in China and the rest of Asia.
He deals with the efforts to privatize China’s state-owned oil company which was a conglomerate, including petro-chemicals, gas stations, and many other business activities, and had responsibilities for workers’ housing, health and other social services for several hundred thousand employees. It was an enormous task to create a company that met SEC requirements for an IPO. An optimist, he believed that China’s embrace of markets over central planning would inevitably lead to more economic and political freedom there. He wrote in an op-ed article published in the New York Times, “The case for permanent normal trade relations with China is the story of PetroChina repeated a hundred-fold or a thousand fold.... The individual freedom, initiative, and responsibility inherent in free markets are, by their very nature, at odds with authoritarian rule.” Time will tell. He does not mention that the U.S. and China seem to be on a collision course in the Spratlys. He writes in Ch. 6. Cleaning the Stables in Guangdong, that China had embarked on reforms but the reforms required changes that led to “waste, mismanagement, fraud, and corruption on a massive scale.”...
Sierra Raynes: Half of Republicans see foreign trade as threat to United States
Sierra Raynes had a great blog posting on the American Thinker website about a poll result showing Republican voters souring on trade and also showing the correlation between trade volume and U.S. GDP growth. Here's what she said about the poll:
And here is an excellent graph that she put together showing the correlation between trade volume (exports plus imports as a percentage of GDP) and U.S. per capita growth. It shows that the higher the trade volume, the lower the U.S. GDP growth:
She is definitely correct. But trade volume is not the culprit; trade deficits are the problem. When trade is balanced, trade volumes correlate positively with economic growth. The problem is that the U.S. trade deficit has been growing. But Raynes is also aware of this. She includes another graph which shows that U.S. trade deficits have been growing. And she writes:...
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Trade imbalances, inequality, and the political pressure cooker
Michael Hirsh has an interesting analysis in the most recent Politico entitled "Why Trump and Sanders Were Inevitable." His argument is that failed US globalization policies (I would say trade policies), rising inequality, and increasing insecurity are at the root of the rise of Trump and Sanders. A few choice quotes:
Rubio, and many establishment Republicans, are currently in the midst of an all out war to stop Donald Trump. Whether they succeed or not remains to be seen. Clinton seems to be consolidating support versus Sanders. But not matter what the Super Tuesday returns reveal, one thing is certain. This isn't the last round of the struggle to reshape America's catastrophically bad trade policies towards something more likely to promote the general prosperity of its citizens, their security, and their freedom.
On this blog we have been attempting to promote and develop such policies for a number of years. Our 2008 book "Trading Away Our Future" outlined our thinking at that point in its final chapter: "A Program For a Strong America." Since then we have added the Scaled Tariff idea promoted in our second book "Balanced Trade".
It has become fashionable to dismiss the emerging "ideology" Hirsh refers to as populist. But there is room in the real response to these rising problems for effective, reasoned policies that promote prosperity, diminish inequality, and begin to restore balance to the U.S. economy. Whatever his faults and failings, Trump is right that the US must take steps to balance its trade with China. And with the rest of the world. And flawed though some of his prescriptions (and budget projections) are, Sanders is right that inequality is a problem that US leaders must begin to take more seriously.
Unfortunately, we are arguably now in an era Ray, Howard, and I predicted in our 2008 book, one in which polarization and radicalism are rising: "If Republicans were in power during the crash," we wrote...
Wealth and Income Inequality Is Not As Bad As You Think
Sen. Bernie Sanders says, “There is something profoundly wrong when the top one-tenth of one percent owns almost as much wealth as the bottom 90 percent.” He writes: “The issue of wealth and income inequality is the great moral issue of our time, it is the great economic issue of our time, and it is the great political issue of our time.” The trouble is that none of it is true except the fact that it is a political issue because leftists like Sanders make it so. The propaganda is based on calculations of the inequality of wealth which do not tell the whole story. They exclude the value of pensions, annuities, and social security. They also exclude the value of government wealth – national, state, and city parks and other land and buildings, including schools, libraries, stadiums, vehicles, streets and roads, and public transit facilities which are owned by everyone equally.
Wealth used in the measure of inequality includes the value of the assets owned by a household including stocks, bonds, and real estate, including the net value of homes. Income used in measures of equality is defined as the return one receives in the form of wages and salaries, rents, interest, profits, and returns from past savings and investments, including dividends, annuities, pensions, and social security benefits. The income measured is income before income taxes. Income after income tax as we shall note is considerably more equal than income before tax. Moreover, not all income is consumed. Consumption is a measure of what households take out of the economy, whereas income before income tax and wealth are measures of what the household has contributed to the economy. Obviously income after tax and consumption are much more equal that the distribution of household wealth.
One of the myths propagated by the left is that the inequality of wealth and income are constantly rising. In fact both rise and fall over decades they have been studied. Profs. Emmanuel Saez (UC Berkeley) and Gabriel Zucman (LSE) studied wealth inequality and produced the graph below which shows that the share of total household wealth owned by the top 0.1 percent was 25% in 1916, then it fell to 15% in 1923, rose to 25% in 1929, then began a downward trend reaching 7 percent in 1978 and rose to 22 percent in 2013. It continued to rise until 2015. The degree of inequality depends largely on the level of prices of corporate stock and real estate. The rise since 2009 can be attributed to the Federal Reserve policy of artificially causing low interest rates. The prices of corporate stock and of real estate are determined by the capitalization of their net incomes which depends on the level of interest rates. Their values increase as interest rates fall and fall as interest rates rise. And that was the FED’s policy beginning in 2009, the FED hoping that increased values of real estate and securities would cause their owners to increase consumption and investment. Unfortunately, the FED’s expectations turned out to be wrong; neither consumption nor investment increased as much as they expected, so the recovery languished. ...
Who Is a Conservative and What Are Conservative Policies?
The National Review is considered to be a politically conservative magazine. Recently (January, 2016), It published a special issue that includes 20 pieces by persons it deems are proven conservatives. I am a fan and admirer of a number of them. But none of them defines what a conservative is. In my view, a political conservative is one who believes in a limited role for government, a strict construction of the constitution, fiscal discipline, and in the free enterprise system. All political conservatives are also social conservatives to some degree. Social conservatives oppose abortion, homosexuality, sexual promiscuity, consider marriage to be between a man and a woman, and to hold some religious beliefs. Some believe that abortion is permissible early in a pregnancy, some believe that persons can be homosexuals but disapprove public manifestations of such relationships, some believe in divorce and others not, and some are atheists but hold some ethical values religions advocate. One can be politically conservative without being an ardent social conservative. Let’s take a look at why the following persons deemed to be conservative by the editors of the National Review do not consider Donald Trump to be conservative. Trump has never held public office so the views attributable to him are views he expressed as a private citizen. Let us analyze the reasons the writers give for believing Trump is not a Conservative. We believe that Trump is sufficiently conservative to be President....
Is Trump a True Conservative? -- we're published in American Thinker this morning
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Journal of Economic Literature:
Atlantic Economic Journal: