New Budget Deal Needed to Avert Cuts, Invest in National Priorities [feedly]

Things are actually getting worse, even if politics looks (from the left) a BIT more hopeful

New Budget Deal Needed to Avert Cuts, Invest in National Priorities
https://www.cbpp.org/research/federal-budget/new-budget-deal-needed-to-avert-cuts-invest-in-national-priorities

 -- via my feedly newsfeed

Capitalist Globalization Is Not Unwinding: TNCs Continue To Increase Their Power and Profits [feedly]

Capitalist Globalization Is Not Unwinding: TNCs Continue To Increase Their Power and Profits
https://economicfront.wordpress.com/2019/03/01/capitalist-globalization-is-not-unwinding-tncs-continue-to-increase-their-power-and-profits/

The Great Recession of 2008 marked the end of a lengthy period of international economic growth and rapidly increasing international trade.  Now, some ten years later, economic activity, including trade and foreign direct investment, remains far below pre-crisis levels with little sign of revival.  In fact, with growth falling in Europe and Japan, and many third world countries struggling to deal with ever larger trade deficits and worsening currency instability, the weak recovery is likely on its last legs.

Some analysts now question whether the transnational corporate created globalization system, which the United Nations Conference on Trade and Development (UNCTAD) calls hyperglobalization, is in the process of unwinding.  While real tensions, compounded by US-initiated trade conflicts, do exist, UNCTAD's 2018 Trade and Development Report provides evidence showing that the system still serves the interests of the core country transnational corporations that established it and they continue to strengthen their hold over it.

Global trends: slowing growth and international trade

As panel A in the figure below shows, the years 1986 to 2008 were marked by strong global growth and export activity, with so-called "developing countries" accounting for a significant share of both, thanks to the spread of Asian-centered, cross-border production networks under the direction of core country transnational corporations. It also shows the decline in global growth and tremendous contraction in trade in the post-crisis period, 2008 to 2016.

It is this contraction in global trade, along with the decline in foreign direct investment, that has fueled discussion about the future of the current system of globalization, and whether it is unwinding.  However, trends in the export elasticity of economic output, illustrated in Panel B, are an important indicator that the system is evolving, not fraying, and in ways that benefit core country transnational corporations.

The export elasticity is a way of measuring the effect of exports on national economic activity; the greater the elasticity the more responsive national production is to exports.  What we see in Panel B is that the export elasticity of developed countries rose in the post-crisis period, while that of developing countries continued its downward trend.  This trend highlights the fact that core country transnational corporations continue to craft new ways to capture an ever-greater share of the value created by their production networks, and more often than not, at the expense of working people in both developed and developing countries.

Transnational corporate gains

Exports are dominated by large companies, overwhelmingly transnational corporations.  As the authors of the Trade and Development Report explain:

recent evidence from aggregated firm-level data on goods exports (excluding the oil sector, as well as services) shows that, within the very restricted circle of exporting firms, the top 1 per cent accounted for 57 per cent of country exports on average in 2014. Moreover, while the share of the top 5 per cent exceeded 80 per cent of country export revenues on average, the top 25 per cent accounted for virtually all country exports.

Moreover, as we can see in the figure below, the share of exports controlled by the top 1 percent of developed country and of G20 firms has actually grown in the post-crisis period.

Studies cited by the Trade and Development Report found that concentration is even greater than the above figures suggest. One found that "the 5 largest exporting firms account, on average, for 30 per cent of a country's total exports." Another concluded that "in 2012, the 10 largest exporting firms in each country accounted, on average, for 42 per cent of a country's total exports."

The next figure looks at earnings for a group composed of the 2000 largest transnational corporations, a group that includes firms from all sectors.  Not surprisingly, their earnings closely track global trade and have recently declined in line with the downturn in world trade.  However, as the table that follows makes clear, that is not true as far as their rate of profit is concerned.  It has actually been higher in the post-crisis period.

In other words, despite a slowdown in world trade, the top transnational corporations have found ways to boost what matters most to them, their rate of profit.  Thus, it should come as no surprise that transnational capital remains invested in the global system of accumulation it helped shape.

Transnational capital strengthens its hold over the system

A powerful indicator of transnational capital's continuing support for the existing system is the steady increase, as highlighted in the figure below, in new trade and investment agreements between countries of the so-called "north" and "south."  These agreements anchor the existing system of globalization and, while negotiated by governments, they obviously reflect corporate interests.

In fact, these new agreements have played an important role in boosting the profitability of transnational corporate operations.  That is because they increasingly include new policy areas that include "increased legal pro­tection of intellectual property and the broadening scope for intangible intra-firm trade."  This development has allowed core country transnational corporations to secure greater protection and thus payment for use of intangible assets such as patents, trademarks, rights to design, corporate logos, and copyrights from the subcontracted or licensed firms that produce for them in the third world.  These new agreements have also made it easier for them to shift their earnings from higher-tax to lower-tax jurisdictions since the geographical location of services from most intangible assets "can be determined by firms almost at will."

According to the authors of the Trade and Development Report,

Returns to knowledge-intensive intangible assets proxied by charges for the use of foreign [intellectual property rights] IPR rose almost unabated throughout the [global financial crisis] and its after­math, even as returns to tangible assets declined. At the global level, charges (i.e. payments) for the use of foreign IPR rose from less than $50 billion in 1995 to $367 billion in 2015. . . . a growing share of these charges represent payments and receipts between affiliates of the same group, often merely intended to shift profit to low-tax jurisdictions. Recent leaks from fiscal authorities, banks, audit and consulting or legal firms' records, revealing corporate tax-avoidance scandals involv­ing large TNCs, have made clear why major offshore financial centers (such as Ireland, Luxembourg, the Netherlands, Singapore or Switzerland) that account for a tiny fraction of global production, have become major players in terms of the use of foreign IPR.

The growing use of this tax avoidance strategy by US transnational corporations, as captured in the figure below, highlights its strategic value to transnational capital.

Social costs continue to grow

The globalization process launched in the late 1980s transformed and knitted together national economies in ways that generated growth but also serious global trade and income imbalances that eventually led to the 2008 Great Recession.  The weak post-crisis recovery in global economic activity is a result of the fact that without the massive debt-based consumption by the US that helped temporarily paper over past imbalances, the globalized system is unable to overcome its structural tensions and contradictions.

However, as we have seen, transnational capital has still found ways to boost its profitability.  Unfortunately, but not surprisingly, their success has only intensified competitive pressures on working people, raising the costs they must pay to maintain the system.  An UNCTAD press release for the Trade and Development Report emphasizes this point:

Empirical research in the report suggests that the surge in the profitability of top transnational corporations, together with their growing concentration, has acted as a major force pushing down the global income share of labor, thus exacerbating income inequality.

It is of course impossible to predict the future.  A new crisis might explode unexpectedly, disrupting existing patterns of global production.  Or workers in one or more countries might force a national restructuring, triggering broader changes in the global economy.

What does seem clear is that current economic problems have not led to the unwinding of what UNCTAD calls hyperglobalization.  In fact, the Trade and Development Report finds that "many advanced countries have since 2008 abandoned domestic sources of growth for external ones."  The current system of globalization was structured to benefit transnational capital, and they continue to profit from its operation.  Unless something dramatic happens, we can expect that they will continue to use their extensive powers to maintain it.

 -- via my feedly newsfeed

Opioid Crisis [feedly]

Opioid Crisis
http://conversableeconomist.blogspot.com/2019/03/opioid-crisis.html

The opioid crisis seems to me one of those issues everyone knows exists, but also an issue that our political system and society really hasn't come to grips with. Molly Schnell provides a useful short overview in "The Opioid Crisis: Tragedy, Treatments and Trade-offs," written as a Policy Brief for the Stanford Institute of Economic Policy Reseach (February 2019). She writes: 

Overdose deaths have increased by more than 1,000 percent since 1980, with each of the past 28 years surpassing the last. With over 70,000 fatal overdoses in 2017 alone — an average of 192 deaths per day — drugs now kill more people than HIV/AIDS at the height of the epidemic in 1995.

When the AIDS epidemic peaked in 1995, it was (appropriately) a major center of public focus and discussion. For example, the best-selling book by Randy Shilts, And the Band Played On: Politics, People, and the AIDS Epidemic, had been published in 1987. Kushner's Angels in America had premiered on Broadway four years earlier in 1991, winning a Pulitzer and a Tony. While I've read some insightful writing on America's opioid crisis, it does not seem to have led to the same intensity of discussion.

Schnell illustrates some key patterns with this figure. The blue bars show the pattern of opioid prescriptions since 2000. Notice that the sharp rise in prescriptions is also tracked by the red line showing a rise in overdose deaths from commonly prescribed opioids. Then when the level of prescribed opoids levels out around 2010, overdose deaths from heroin start rising quickly, then followed by deaths from synthetic opioids like fentanyl a few years later.


Of course, this rise in deaths is an understatement of the costs of the opioid crisis. Addition has lots of costs other than early death.

As I've argued in the past, the opioid crisis is a problem that was created by the US health care industry. There isn't any particular reason in terms of underlying health why opioid prescriptions roughly quadrupled from 2000-2010, and since then have dropped by a quarter.  But it seemed like a good idea at the time, and now tens of thousands of people are dying every year.

The rise in overdose deaths from heroin and fentanyl shouldn't obscure that deaths from prescription opioids--over overprescribed by the health care industry and then passed along or re-sold--remain part of the problem. Schnell writes:

Non-medical use of prescription opioids remains the second most common type of federally illicit drug use, second only to marijuana, and is over 12 times more common than heroin use (SAMHSA, 2018). And while overdose deaths involving prescription opioids leveled off in 2016, they remain at four-and-a-half times their level from 2000 and account for at least 40 percent of all opioid-related mortality.

Some steps seem to have moderate but real effects. For example, when an average doctor is told that a patient overdosed from their prescription, that doctor cuts back on prescribing opioids by about 10%. Some states have mandatory "prescription drug monitoring programs." which make it harder for someone to take one prescription for an opioid and have it filled at several different pharmacies.

 Schnell writes: "Any single policy in unlikely to be sufficient to address the current crisis. Policies aimed at reducing prescriptions should be paired with broad access to treatment for those with problematic opioid use. And policies must be designed so as to not prevent providers from using opioids as a tool to help manage their patients' pain." All fair enough, btut the rising body count calls for dramatically more, and it's not clear what would work.The health care industry dramatically raised its opioid prescriptions, and in doing do has opened Pandora's box.

 -- via my feedly newsfeed

There’s a new financial transaction tax proposal in town. Here’s why that’s good news. [feedly]

There's a new financial transaction tax proposal in town. Here's why that's good news.
http://jaredbernsteinblog.com/theres-a-new-financial-transaction-tax-proposal-in-town-heres-why-thats-good-news/

The 2017 Trump tax cut committed at least two fiscal sins. By delivering most of its cuts to those at the top of the wealth scale, it worsened our already high-levels of pretax inequalities. And in so doing, it robs the Treasury of much needed revenues; based on our aging population, we're going to need more, not less, revenues for the next few years.

Now, along comes an idea that pushes back against both of these problems (and one other one!): a small tax on financial transactions (FTT). Sen. Schatz (D-HI) and Cong. DeFazio (D-OR) are planning to introduce a tax of one-tenth-of-one-percent, or 10 basis points (100 basis points, or bps, equals 1 percentage point), on securities trades, including stocks, bonds, and derivatives, one that would raise $777 billion over 10 years (0.3 percent of cumulative GDP a decade), according to CBO (by the way, 10 bps on a $1,000 trade comes to a dollar).

Numerous articles have gotten into the arguments for and against an FTT. I've got one from a few years back that covers similar ground. My colleague Dean Baker has long argued on behalf of FTTs as has Sarah Anderson of IPS. Importantly, FTTs exist in various countries, including the UK and France, with Germany considering the tax (also, Brazil, India, South Korea, and Argentina). The UK is a particularly germane example, where an FTT has long co-existed with London's vibrant, global financial market (though we'll see if Brexit changes that).

In fact, we have an FTT here too! The SEC funds its operating budget through a tiny FTT of 0.23 basis points on securities transactions and $0.0042 per transaction for futures trades.

The pro-FTT argument focuses on the reversing the two fiscal sins noted above, along with raising the cost of high-frequency trading. In a Vox interview, Sen. Schatz was particularly motivated by this latter aspect of the tax: "High-frequency trading is a real risk to the system, and it screws regular people; that's the main reason to do this. If in the process of solving that problem we happen to generate revenue for public services, that's an important benefit, but that's not the main reason to pass this into law."

Because the value of the stock holdings is highly skewed toward the wealthy, the FTT is highly progressive: The TPC estimates that 40 percent of the cost of the tax falls on the top 1 percent (which makes sense as they hold about 40 percent of the value of the stock market and 40 percent of national wealth).

Finally, on the pro-side, there's a certain justice in taxing the pumped-up transactions of a financial sector that not only played a key role in inflating the housing bubble that led to the Great Recession, but thanks to government bailouts, recovered from it well before the median household. In this expansion, corporate profits and the securities markets that rise and fall on such profitability have mostly boomed while workers' wages have only recently caught a bit of a buzz.

So, as my grandma used to say, "What's not to like?"

Opponents raise numerous concerns, some of which should be taken more seriously than others. The high-speed traders correctly note that even a small FTT would upend their business model. Unlike most such squawking of those effected by tax proposals, in this case I suspect they're right. While a dollar on a $1,000 trade doesn't sound like much, when your industry is running 4 billion trades a day, 10 bps can be a prohibitive increase in the cost of transactions.

But again, on this point, opponents and advocates agree. We just have different goals. Someone could make an argument that high-frequency trading improves capital allocation, but it would be a steep, uphill argument.

The more serious objection is that the FTT catches more than just the "flash boys" in its net, raising transaction costs for plain vanilla traders. This is, by definition, true, and because of this effect, FTTs tend to reduce trading volumes. But too often, opponents stop there, as if this is some sort of coup de grace for the tax.

That's only the case, however, if current trading volumes are somehow optimal, or if diminished volumes create markets that are too thin to reveal price signals to buyers and sellers. But in markets where half the daily trades are high frequency, reduced volume does not necessarily translate into reduced liquidity or dampened price signaling. There's such a thing, it turns out, as too much volume (you've heard heavy metal, right?).

In fact, work by economists Thomas Philipon and Rajiv Sethi have documented ways in which something unusual has occurred. As transaction costs have fallen—quite dramatically, given the rise of electronic trading and its diminished marginal transaction costs—financial markets have not become more efficient. One reason is that falling transaction costs have been offset by higher "intermediation costs," meaning the incomes of the brokers and dealers in the industry (Sethi provides compelling examples of "superfluous financial intermediation").

It is therefore plausible, as Sen. Schatz believes, that an FTT will reduce "rent seeking" in the finance sector (economese for excess profits beyond those they'd get under normal, competitive conditions), unproductive financial "innovation," and speculative bubbles.

But it is also possible that both assets and trading volumes will be more negatively affected than I and other advocates of the tax believe to be the case. Design issues can help here. Sweden's FTT worked badly as it was set at a high rate but with a relatively narrow base, so avoidance was rampant. The Schatz/DeFazio bill avoids this pitfall with a low rate and a broad base. It's notable in this regard that the CBOs revenue estimate of a plan upon which the new proposal is modeled includes the budget office's guesstimates of these dynamic responses (e.g., reduced volumes), and it still raises serious revenues.

Given the uncertainty, here's what I think should guide our thinking regarding an FTT. First, there is no perfect tax. In every case, you can come up with stories, some of which will be true (most of which will be hugely exaggerated) about some person or sector who is going to get hurt. In this case, the tax is small and there's a plausible argument that its sectoral impact could be benign or useful. Second, we need the revenues. Third, we need the progressivity.

In other words, if the Trump tax cuts committed fiscal and distributional sins, the FTT looks potentially corrective and meritorious. I'd say it's time we give it a Schat(z).

 -- via my feedly newsfeed

Randy Wray: Response to Doug Henwood’s Trolling on MMT in Jacobin [feedly]

I will have to read more on MMT to make a judgement. but the Minsky part on full employment is the only "full employment under capitalism"  theory I know (or, more correctly, half capitalism, half socialism),

Ditto everything Wray says re: Henwood

Randy Wray: Response to Doug Henwood's Trolling on MMT in Jacobin
https://www.nakedcapitalism.com/2019/02/randy-wray-response-doug-henwoods-trolling-mmt-jacobin.html

Randy Wray: Response to Doug Henwood's Trolling on MMT in Jacobin

Posted on February 27, 2019 by Yves Smith

Yves here. Wray saves one of his best lines for late in the article: "As Kelton puts it, people like Henwood think money grows on rich people." But boy, is it a hard slog to deal with people who refuse to deal with MMT in good faith.

By Randy Wray. Originally published at New Economic Perspectives

Doug Henwood has posted up at Jacobinan MMT critique that amounts to little more than a character assassination. It is what I'd expect of him in his reincarnation as a Neoliberal critic of progressive thought. (https://www.jacobinmag.com/2019/02/modern-monetary-theory-isnt-helping). It adopts all the usual troll methodology: guilt by association, taking statements out of context, and paraphrasing (wrongly) without citation.

According to Henwood, MMT is tainted by Warren Mosler's experience as a hedge fund manager. Beardsley Ruml (father of tax withholding and chairman of the NYFed, who argued correctly that "taxes for revenue are obsolete") is dismissed because he was chair of Macy's (and Director of the NYFed—Macy's still has a director on the NYFed) andbecause he argued that the corporate tax is a bad tax (his main arguments were later advanced by Musgrave&Musgrave, thetextbookon public finance, by Hyman Minsky, and by me in the second edition of my Primer).

Oh, Ruml must not know anything about either taxes or central banking because he was a corporate stooge. Never mind that he was a New Dealer who helped to organize the New Deal plans for projects all over the country. And a PhD who authored several books and who was the Dean of Social Sciences at the University of Chicago. He must be an ignoramus when it comes to taxes and central banking because he does not adopt Henwood's belief that the sovereign government of the United States must rely on the taxes that come from corporations and rich folk. Such is the depth of Henwood's argument against MMT. It amounts to little more than a series of baseless ad hominemattacks.

I used to respect Henwood in his earlier role as editor of the Left Business Observerand indeed we enjoyed a good relationship, often corresponding on progressive issues. He disappeared from the scene some decades ago and I thought he had died. However, he reappeared recently as a troll arguing in blog commentary against MMT. His rants were largely incoherent and as we say in economics, orthogonal to anything MMT actually says. He has apparently suffered the fate of many aging Marxists—after years of fighting the good fight against capitalism they realize they've accomplished little and decide to instead engage the progressives on the argument that all is hopeless.

Apparently, Jacobinassigned to him the task of destroying MMT. My name is mentioned 17 times in Henwood's article—I think that is more than anyone else. The magazine is publishing the attack without any offer of a response. That is quite typical when it comes to diatribes against MMT—dating all the way back to my first book in 1998 (Understanding Modern Money—the first academic book on MMT. The editor of the main Post Keynesian journal published a critique of the book—by Perry Mehrling, someone with no Post Keynesian credentials–without giving me an opportunity to respond in the same issue, and then declined to even let me have a response in a later issue. This is the way academics has dealt with MMT from the beginning—any critique, no matter how groundless, will be featured and no response will be allowed. And so it goes.

As Jacobindid not give me a chance to respond, I'm penning this for NEP. These are my responses and none of the other MMTers Henwood has trolled in his piece should be implicated. I'm sure that all of them—Kelton, Tcherneva, Mosler, Tymoigne, Fullwiler, Dantas, Galbraith, and Mitchell—can defend themselves ably and with more nuance and respect than I can. Me, I detest trolls and I cannot hide my distaste.

In any event, here are some of the topics I would address if I had been given a chance to respond.

1. According to Henwood, Wray does not discuss the role of private money (and financial institutions) in the private economy. Henwood claims "absent" from Wray's work "is any sense of what money means in the private economy". In fact, My 1990 book (Money and Credit in Capitalist Economies"is one of the foundational books in the endogenous money literature (that Henwood discusses favorably). My work before and after that book has focused on the private financial sector and includes hundreds of articles, chapters, and books on the topic—including a book co-authored with Tymoigne on the global financial crisis (The Rise and Fall of Money Manager Capitalism, Routledge 2014), and a recent book on Minsky's approach to finance (Why Minsky Matters, Princeton, 2015). I'd wager that there are vanishingly few authors who have written more on the private banking system than me, and along with Bill Black, few who have taken such a critical perspective of private banking as practiced.
2. In one place, Henwood seems to backtrack a bit, writing "Wray, who once wrote a book on the topic, now dismisses endogenous money as a "trivial advance" next to MMT". Yes, I do argue that in retrospect the endogenous money literature is trivial for several reasons. First, the modern endogenous money research (that began seriously around 1980) largely just recovered the pre-Friedmanian views that were common in the 1920s (and that were never lost in the UK); second the endogenous money approach was rather quickly adopted by heterodoxy; and third all the central banks of the rich, developed countries have also adopted the endogenous money approach. The policy recommendation that comes out of it is to direct central banks to target interest rates, not reserves or money supply. Central banks had usuallyadopted interest rates, anyway, outside of the relatively brief Monetarist experiment that began under Chairman Volcker—and although it is true that mainstream economists had taught that central banks could choose money targets, they recognized that if both the IS and LM curves are stable, choosing a money target is formally equivalent to choosing an interest rate target. By contrast, we have been pushing the MMT approach to fiscal finance since the early 1990s and it still remains highly controversial—and still attracts the same comments from trolls and others, like Bill Gates and Austin Goolsby who both recently announced "that's crazy!". Why? Because the implications of understanding fiscal finance are huge. By comparison, the implications of endogenous money are trivial—which is why it was relatively easy to get the theory adopted.
3. Wray supposedly "shies away from" discussing use of tax increases to counter inflationary pressures. While I am (and MMT in general is) skeptical of use of discretionary tax hikes to fight inflation, we strongly support progressive income taxes that will automatically rise in a boom. MMT also supports use of a JG to cause government spending to rise countercyclically (rising in a downturn as workers are shed from the private sector and falling in an expansion). Together, these can help to stabilize spending and income at the aggregate level. We also argue that the countercyclical swings of employment in the JG pool can act as a bufferstock to help stabilize wages. If there were a prolonged stretch of inflation we would—of course—recommend pro-actively raising taxes and/or reducing spending. We've been very clear on this. Our argument has always been that a JG and progressive tax system help to stabilize aggregate demand, wages, and prices but if that is not sufficient, government still has at its disposal the usual methods of fighting inflation—everything except using unemployment (since austerity will not increase unemployment but will instead increase employment in the JG).
4. According to Henwood "Wray has said MMT is compatible with a libertarian, small government view of the world". Yes, the descriptive part of MMT accurately describes how sovereign currency systems work, and such knowledge can be used by Austrians or Marxists to better understand the world they want to change. MMT proponents, however, are mostly progressives, who are not content with merely explaining the world but more importantly want to radically change it. Hence, we do have policy proposals—proposals that I expect both Austrians and Marxist will hate, such as the JG. As I've written before, it is strange that the far right and far left come together in favoring unemployment over employment in a JG. One of those strange but true alliances against progressive policy. Austrians oppose the JG on the basis that it expands the role of government; some of the Left opposes it because the JG ameliorates suffering, presumably reducing recruits for the coming revolution.
5. Henwood: "Wray's explanation of the Weimar hyperinflation, one of the most dazzling of all time, is odd. The deficits, Wray explained in his book, were caused by the inflation, not the other way round." Yes, that is true; Henwood adopts the Monetarist explanation that "too much money" causes inflation. He confuses causation and correlation. Severe supply constraints can push up prices, increasing the amount of money that needs to be created both publicly and privately to finance purchases. Tax revenues fall behind spending so a deficit opens up as spending tries to keep pace with inflation. The money stock is a residual and it will grow rapidly with hyperinflation. That does not mean it is the cause. Mitchell has closely examined the hyperinflation cases from the MMT perspective; the argument is not at all odd and has the advantage that it is fact-based, unlike Henwood's Monetarist linking of money and inflation that has been so thoroughly discredited that even central bankers have dropped it.
6. Henwood proclaims: "MMTers like Mitchell and Wray write as if borrowing abroad is just a bad choice, and not something forced on subordinate economies" and then goes on to argue that Mosler is "wrong" when he says that Turkey can buy capital equipment in its own currency (lira). Henwood does not understand foreign exchange markets—anyone (including Henwood) can exchange Turkish Lira for either dollars or euros in foreign exchange markets—including at airport counters around the world. Turkey can exchange lira for dollars to pay for imports of capital. (Might that affect exchange rates? Possibly. That is why floating the currency is important.) Nor does MMT argue that "borrowing abroad" is a "bad choice"—if that means issuing domestic currency debt held by foreigners. What we argue is that issuing debt in a foreign currency is a bad choice for any country that can issue its own currency. I'd go even further and argue that any country with its own currency should prohibit its government from issuing debt in a foreign currency, or from guaranteeing any such debt issued by its domestic firms. However, if private entities want to issue debt in foreign currencies, I do not necessarily advocate preventing that. What about the special case of a country that issues a currency that cannot be exchanged in forex markets (remember, Henwood wrongly proclaimed that Turkey is such a country—here I'm not talking about Turkey or any of the other many countries which do have currencies listed in forex markets; for a list of exchange rates of the 150 or so convertible currencies from the Aruban Florin to the Zambian Kwach, go here: https://www.oanda.com/currency/converter/)? I think it is most likely a mistake to issue debt in a foreign currency unless there is an identified source of the forex that will be needed to service the debt (for example, dedicated forex earned from exports). If you cannot exchange your currency in forex markets, and cannot earn forex, your best bet is international charity. Indebtedness in foreign currency will be a disaster.
7. Henwood claims: "MMTers will sometimes say they want to tax the rich because they're too rich, but Wray said at a recent conference that he sees no point in framing the issue as taxing the rich to expand public services — presumably because government doesn't need to tax to spend" and has "has written that taxing the rich is "a fool's errand" because of their political power". The first part of that is correct—we do not need to tax the rich in order to expand public services. The second is dishonest reporting. He does not include a citation but what I actually argued is that trying to reduce inequality using taxes is not likely to be successful—because the rich influence the tax code and get exemptions. Like Rick Wolff, I argue for "predistribution"—prevent the growth of excessive income and wealth by controlling payments of high salaries in the first place. Eliminate the practices that lead to inequality—such as huge compensation for top management of public companies. I do like high taxes on high income and high wealth. I have argued they should be set so high as to be confiscatory. Not at a marginal income tax rate of 70%, but at 99%. Or even 125%. Or 1000%. Take it all. I am not confident that the effective tax rate will ever be that high—due to the exemptions the rich will write into the code—but we that doesn't mean we shouldn't aspire for better. It is amusing that Henwood refers to the barriers of "political power" when it suits his purpose (for example when he talks about the political infeasibility of the job guarantee) but objects if I notice that it is politically difficult to tax rich folks. All I'm arguing is that a) we don't need tax money to pay for the programs we want, and b) high tax rates on the rich, alone, will not be sufficient in our struggle to reduce inequality.
8. He writes "Tymoigne and Wray's response to Palley barely addressed any of his substantive points" and Henwood objects to our mention of a video where Palley argued against the job guarantee because if poor people in South Africa got jobs they'd want food and that might increase imports and even cause inflation. First, we responded to Palley's critiques in 43 different places in that paper, including responding in detail to nine long quotes where we let him speak for himself (unlike Henwood, who loosely—often wrongly—paraphrases our arguments, often with no citations at all). The video is not an outlier—it is Palley's often repeated position. Given a choice, Palley prefers low inflation over jobs and income for the poor. He is perhaps the only Post Keynesian who still uses the ISLM framework augmented by a Phillips Curve. (For those who don't know what that framework is, it is the "bastardized" version of Keynesian economics that helped open the door to Neoliberalism.) I have been at meetings where Palley urged the AFL-CIO to forget about arguing for full employment because of the danger of inflation. That was not in 1974 or even in 1979 when there actually was some inflation. No, it was a generation later. Like the Neoliberals, Palley is still fighting the inflation battle decades after the danger disappeared. Henwood is free to defend that Neoliberal position if he likes, but it is disingenuous to criticize us for linking to a video where Palley makes his own case for the position he is well-known to hold.

Henwood and Jacobin align themselves against the new wave of activists who have embraced MMT and the Job Guarantee as integral to the Green New Deal program. These new progressives want to tax rich people, too, not because Uncle Sam needs the money but because the rich are too rich.

Henwood wants us to believe that Government needs inequality. We've got to cater to the rich. They get to veto our progressive policies. If there weren't rich folk, we'd never be able to afford a New Deal. We only get the policies they are willing to fund. If we actually did tax away their riches, government would go broke.

As Kelton puts it, people like Henwood think money grows on rich people.

For far too long left-leaning Democrats have had a close symbiotic relationship with the rich. They've needed the "good" rich folk, like George Soros, Bill Gates, Warren Buffet, Bob Rubin, to fund their think tanks and political campaigns. The centrist Clinton wing, has repaid the generosity of Wall Street's neoliberals with deregulation that allowed the CEOs to shovel money to themselves, vastly increasing inequality and their own power. And they in turn rewarded Hillary—who by her own account accepted whatever money they would throw in her direction.

Today's progressives won't fall into that trap. "How ya gonna pay for it?" Through a budget authorization. Uncle Sam can afford it without the help of the rich.

And, by the way, they're going to tax you anyway, because you've got too much—too much income, too much wealth, too much power. What will we do with the tax revenue? Burn it. Uncle Sam doesn't need your money.

In reality, taxes just lead to debits to bank accounts. We'll just knock 3 or 5 zeros off the accounts of the rich. Of course, double entry bookkeeping means we also need to knock zeros off the debts held by the rich—so we'll wipe zeros off the student loan debts, the mortgage debts, the auto loan debts, and the credit card debts of American households. Yes, debt cancellation, too.

The new breed of progressive politician—represented by Bernie and Alexandria—doesn't need corporate funding, either. And they certainly don't need Henwood's scolding.

 -- via my feedly newsfeed

Here is Your FedEx Tracking Number

Online FedEx Tracking Please click on the tracking number listed below to see shipping details: Tracking  738724765455 In transit Disclaimer To find the latest state of your delivery, click the tracking # above. This track status has been sent to you by FedEx. Thank you for your business. 2019 FedEx. The written content of this letter is safeguarded by copyright and trademark laws under United States and international law. See our personal privacy policy. .

Trump, Trade and the Advantage of Autocrats [feedly]

Trump, Trade and the Advantage of Autocrats
https://www.nytimes.com/2019/02/25/opinion/trump-trade-china.html

There's been some good news on global trade lately: A full-scale U.S.-China trade war appears to be on hold, and may be avoided altogether.

The bad news is that if we do make a trade deal with China, it will basically be because the Chinese are offering Donald Trump a personal political payoff. At the same time, a much more dangerous trade conflict with Europe is looming. And the Europeans, who still have this peculiar thing called rule of law, can't bribe their way to trade peace.

The background: Last year the Trump administration imposed tariffs on a wide range of Chinese products, covering more than half of China's exports to the United States. But that might have been only the beginning: Trump had threatened to impose much higher tariffs on $200 billion of Chinese exports starting this Friday.

What was the motivation for these tariffs? Remarkably, there doesn't seem to be any strong constituency demanding protectionism; if anything, major industries have been lobbying against Trump's trade moves, and the stock market clearly dislikes trade conflict, going down when tensions rise and recovering when they ease.



So trade conflict is essentially Trump's personal vendetta — one that he is able to pursue because U.S. international trade law gives the president enormous discretion to impose tariffs on a variety of grounds. Predicting trade policy is therefore about figuring out what's going on in one man's mind.

Now, there are real reasons for the U.S. to be angry at China, and demand policy changes. Above all, China notoriously violates the spirit of international trade rules, de facto restricting foreign companies' access to its market unless they hand over valuable technology. So you could make a case for U.S. pressure on China — coordinated with other advanced economies! — to stop that practice.

But there has been little evidence that Trump is interested in dealing with the real China problem. I was at a trade policy conference over the weekend where experts were asked what Trump really wants; the most popular answer was "tweetable deliveries."

Sure enough, Trump has been crowing about what he portrays as big Chinese concessions, which all seem to involve China's government ordering companies to buy U.S. agricultural products. In particular, the postponement of the trade war came after a Chinese pledge to buy 10 million tons of soybeans. This will please farmers, although it's far from clear that it will even make up for the losses they've suffered from previous Trump actions.

The point, however, is that what China is offering doesn't at all get at the real U.S. national interests at stake. All it does is give Trump something to tweet about.




Oh, and by the way: China's biggest bank, which happens to be majority-owned by the Chinese government, currently occupies three whole floors in the Trump Tower in Manhattan. It has been planning to reduce its space; it will be interesting to see what happens to that plan now.

Meanwhile, the U.S. Commerce Department has prepared a report on imports of European automobiles that, according to the German press, concludes that these imports pose a threat to national security.

If this sounds ridiculous, that's because it is. Indeed, while the Europeans aren't angels, they do abide by global rules, and it's hard to accuse them of any major trade sins. Yes, they do have 10 percent tariffs on U.S. cars — but we impose 25 percent tariffs on their light trucks, which makes us more than even.

But a department headed by perhaps the most corrupt commerce secretary in history will, of course, conclude whatever Trump wants it to conclude. And this report gives the president the legal authority to get us into a trade war with the European Union.

If it happens, this trade war will be immensely damaging. The E.U. is America's biggest export market, directly accounting for around 2.6 million jobs. Moreover, our economies are very much intermeshed — which is why even the U.S. auto industryis horrified at the possibility that Trump will impose tariffs on cars.

But here's the thing: Unlike the Chinese government, the E.U. can't order private companies to make splashy purchases of U.S. goods. And it certainly can't steer business to Trump Organization properties. As a result, the chances of spiraling trade conflict remain high.

The point is that when it comes to dealing with Trump and his team, autocracies have an advantage over democracies that follow the rule of law. And trade disputes are arguably the least of it.
 -- via my feedly newsfeed