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Will INSTEX Replace SWIFT Bank Exchange?

Will INSTEX Replace SWIFT Bank Exchange?

Probably not, but reportedly a “White House insider” is afraid it might.

Instex is the new exchange created by UK, France, and Germany, to be based i Paris and run by a German banker, to get around US sanctions against Iran.  Apparently it will sell Iran humaanitarian goods such as pharmacueticaals and food not subject to the sanctions, with those being paid for with Iranian petroleum that will then get sold elsewhere, none of this involving any US dollars.  It is probably too small to threaten the dominance of the international SWIFT bank exchange system, but this does open up the possibility for nations to avoid US limits on their international financial transactions, with the US having used the SWIFT system in the past to crack down on unfavored nations.

Addendum:

There is a long, front page story in the Washington Post this morning about this matter Griff White and Erin Cunningham. For starters, I can relay that “Instex,” which should probably be INSTEX, stands for “Instrument in Support of Trade Exchanges.”  Second is that the Trump’c campaign to get European, and especially German, companies to obey the anti-Iran US sanctions has beeen very agrressive and largly run out of the US Embassy in Berlin, with US Ambassador ro Germany, Richard Grenell, the point man on this.  He had received press attention and criticism by some German business people when he arrived in Berlin last May and publicly called for German businesses to withdraw from Iran.  That criticism did not slow him down one bit, and his efforts have led to some major German companies to withdraw, notably Siemans, VW, and Daimler-Benz, all of which have large-scale operations in the US.

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How To Go After The US Wealthy Reagan Style

How To Go After The US Wealthy Reagan Style

Ah yes, this is going to be another one of those ironic posts about what a big leftist liberal Ronald Reagan was compared to the current GOP gang in charge of so many of our policies, especially our tax policies. Certainly, the image of Reagan is one who cut taxes for the high-income wealthy, and in general that is the case. But there were a few items going the other way, and again, compared to current policies some combination of what came out of the two major Reagan tax cuts looks downright progressive by comparison.

Let us start with taxing wealth, with the Elizabeth Warren proposal to put a 2 to 3% annual wealth tax on those holding over $50 million. I am not opposed to this in principle, but worry that it faces very serious practical problems of implementation due to the high costs involved in simply determining the wealth of these large and complicated portfolios, especially given the hollowing out and reductions at the IRS, which would have to do all of it. As it is, whereas not too long ago 20 nations taxes wealth, that is now down to three: Norway, Spain, and Switzerland, with the latter lacking either a property tax or a capital gains tax. What have those other 17 nations done? Well, going in the opposite direction from where the US has gone under Trump with his tax “reform.” Indeed, a model might well be what we saw in the Reagan tax laws. So, one of the most important both as a redistribution mechanism taxing wealth while also raising revenue would be to return to the Reagan 1986 tax law’s taxing capital gains at the same rates as income is. The other one is also to undo the cuts in estate taxes Trump has put it and move back to what Reagan had in place after his 1981 tax law, a much more redistributive system than we see now. Both of these, especially the capital gains tax change, would be easily to implement and enforce.

On income taxes, the proposal by AOC for a top marginal income tax rate of 70% does not face the implementation problems the straight wealth tax faces. As noted, putting this only on those earning over $10 million per year should not be too damaging on various fronts, although it would probably not raise all that much revenue. It might be better to go with what came in with the 1981 Reagan tax law of a top marginal rate of 50%, but having it on a broader set of upper income people. This would arguably both raise more money than the AOC proposal while also arguably having fewer disincentive effects. So, returning to a combination of the Reagan 1981 and 1986 tax laws might be something that can be adopted, implemented, and enforced, which would both raise more revenues, and engage in wealth and income redistribution.

Barkley Rosser

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The End Of The End Of The Cold War

The End Of The End Of The Cold War

It is a sign of how wacko things have gotten that the truly most important event of the past week has simply been buried in the news by all the huffing and puffing over Trump’s shutdown ending and these revelations about VA Governor Northam. This would be decision by the US on Feb. 1 to withdraw from the Intermediate Nuclear Force (INF) treaty with Russia, followed by Russia’s doing so as well shortly thereafter. This is both historic and very serious, far more so than Trump’s wall or Northam’s photographs.

The treaty was signed in 1987 between then US President Reagan and then Soviet President Gorbachev, culminating several years of negotiations. It led to the destruction of around 3600 short and intermediate range nuclear missiles, including most importantly all of those in Europe that threatened the potential outbreak of a war on that continent between NATO and the USSR. It was one of the most important moments on the way to bringing about the end of the Cold War, and indeed it is unfortunately accurate to describe the ending of this treaty as the end of that end.

I have seen a number of people speculating that this action somehow shows Trump “standing up” to V.V. Putin, being a tough guy and all that. But the nearly immediate acceptance with virtually no complaint by Putin of this move suggests otherwise. US and also western European officials have argued that Russia has been in effective violation of the INF since 2014 when it developed a new cruise missile, 97M925, that can be easily modified to make it fly in the forbidden distance ranges. Russian leaders have argued that they were not in violation given that this missile also had as its main range adjusted and therefore are not in violation and none violating the limits had been deployed. Putting such missiles with the violating ranges in deployment would directly threaten western Europe. As it is, Putin is in a position now to rapidly deploy them in a way to threaten western Europe while the US has nothing to put in place to reply to this. So, Putin gets to gain a major military edge and threaten the western Europeans while getting to blame Trump for having ended the treaty by withdrawing and allowing him to do this. The Europeans in question had opposed Trump ending the treaty, with indeed this probably being one of those things Merkel was trying to maintain influence with Trump over by not complaining too loudly about the US pressuring German companies to stop dealing with Iran.

Another factor in this matter emphasized by US leaders is that China was never a part of the agreement, and I gather has been developing such intermediate range missiles. But those were unlikely to be deployed in Europe, where the removal of such missiles 32 years ago was a triumphant movement towards the reduction of mutual tensions and towards peace.

All the way around, there is nothing good at all about this development, and it most definitely doesn’t show Trump doing something that is against the interests or desires of V.V. Putin. The outcome may well be a new arms race, which will please the military-industrial complexes in both the US and Russia, and maybe China as well. No, this is not a good development at all

Barkley Rosser

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I Support Virginia Governor, Ralph Northam

I Support Virginia Governor, Ralph Northam

Current media is denouncing VA Gov Ralph Northam with many demanding he resign now over an unfortunate incident in his youth.

I note that that the final crucial person who gave us Obamacare was the late Robert C. Byrd of West Virginia. He was in his youth a member of the Klu Klux Klan, indeed held some office in it. In the end when the ultimate votes in the Senate came, which had Republicans denouncing him over his 1940s support of the KKK, and some of them openly hoping he would die as he was in bad health and did die thereafter, Robert Byrd did show up for the ultimately crucial vote, wheeled in in a wheelchair, to cast the ultimately final crucial vote that gave us ACA/Obamacare, which despite its many flaws has improved the health of many people in America.

Regarding Ralph Northam, an extremely excellent and super competent governor of Virginia, a few days ago, affirmed the right of women to make the ultimate decisions regarding their bodies with the support of just one doctor (three are now needed), he has just been denounced on alt-right and even Hannity outlets for his defense of a woman’s right to choose. The attacks on him from the organized right on this matter have been horrendous. They have accused him of supporting “infanticide.” This charge is disgusting and false. But the GOP is trying to make his supremely responsible and medically wise view a crime. They are just hypocrites.

I will not call those now demanding Northam’s resignation over his unfortunate photo from 35 years ago hypocrites. Indeed, I sympathize, especially with African Americans, who have had to face all kinds of racism here in Virginia as in the awful violence in Charlottesville in 2017 as well as the ongoing refusal at the state level to allow local governments to remove Confederate statues and monuments. It may well be that Northam will feel in the end that he must resign for his youthful mistake. But I think it will be unfortunate as he really has been a good governor and is personally a nice guy (I have met him). The photo certainly does not represent his current views at all.

Addendum, 3:25 PM, 2/2/19

I fear that I am increasingly leaning to Northam needing to resign, despite my generally high regard for him. He has just made a public statement that has really confused things, and I fear he may simply have fatally damaged his governorship with how he has messed this story up. He is now claiming that he is not in the photo, but says he did blacken his face once in 1984 to pretend to be Michael Jackson for a dance or skit, where he even won a prize (ugh). He also says he is not the person now he was then and is begging for forgiveness. I guess he deserves the latter, but he made a real botch of this, and I fear it will not get better. Ironically the lt. gov who would replace him if he were to resign, Justin Fairfax, is African American. Anyway, I am sorry about this whole situation, but now fear Northam simply cannot clean up the mess he has made of it.

Barkley Rosser

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Robert H. Nelson Dies: Religion And Economics

Robert H. Nelson Dies: Religion And Economics

Robert H. Nelson of the University of Maryland Public Policy Department died at age 74 on Dec. 15 while attending a conference in Helsinki, Finland.  He was the leading economist writing about the relationship between religion and economics, notably in three books: Reaching for Heaven on Earth: The Theological Meaning of Economics (1991), Economics as Religion: From Samuelson to Chicago and Beyond (2001), and The New Holy Wars: Economic Religion vs. Enviornmental Religion  (2010).  I spent several days with him some years ago at a conference on forestry issues where he was presenting his views on environmentalism as religion.  In any case, his death has me thinking about the broader issues he wrote about.  I shall note the arguments in these books along with some further observations.

His first book was essentially a history of economic thought that put a certain theological perspectve on thnkers mostly from the fairly distant past. A basic theme in all of his books is that economics is a form of secular religion that posits a material salvation in some distant future as a result of economic  growth and redistribution, a material heaven on earth.  In that book he posed two competing theological strands in the history of economic thought: a Roman (Catholic) “rationalism” and a Protestant “revelationism.”  The former started with Aristotle and included such figures as Aquinas, Adam Smith, Saint-Simon, and Keynes.  The latter started with Plato and Augustine, Calvin, Darwin, Spencer, and Marx.  A number of observers criticized this pair of categories, noting particularly that virtually the only economist in the second list is Marx (although Spencer did write on economics somewhat).  I happen to share the criticisms that it is not clear how useful or meaningful this pair of lists is, although the tradition of lining up historiccal intellectual figures as being Aristotelian or Platonic has a long history in philosophy.

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The Nobel Economists Petitiion on Carbon Tax And Dividend Plan

The Nobel Economists Petitiion on Carbon Tax And Dividend Plan

As many now know, a large group of prominent economists, led by a large group of Nobel Prize winners, has published a petition in the Wall Street Journal.  This petition declares the idea of putting a tax on carbon and then returning the receipts from it to the population on an even per capita basis to be the best and most efficient plan for dealing with global warming.  This group continues to encourage more professional economists to sign this petition.  I had previously received an invitation from Janet Yellen to do so, and today one came from Larry Summers.  I kind of doubt that either specifically directed that I receive the invitation or, less likely, actually sent the message, although I could be wrong as I do know both of them.  This petition shows how powerful this revenue neutral carbon tax fad has become.

As it is, I have not signed it, and my use of the word “fad” indicates my attitude.  I really do not get why so many proiment and clearly highly intelligent economists have signed onto this proposal as being the one and only way to deal with this problem.  Why are these people not mentioning cap and trade as an alternative (formerly known as “tradeable emissions permits”).  There are multiple reasons to believe that cap and trade is at least as good if not better than this tax dividend proposal, both in terms of effectiveness and also in terms of the politics of getting something done.

The most famous cap and trade plan was that enacted in the US in 1990 for SO2 emissions.  This plan eventually got superceded, but until that point it was universally viewed as a successful program, substantially reducing such emissions in a manner that did not trigger noticeable economic pain.  There are now a substnatial number of carbon cap and trade systems in place, with the first one out the door being that of the EU, put in place to obey the Kyoto Protocol, which actually favored such systems.  That system has faced criticism and had a major decline in its price in 2006, but has since stabilized, a fact not widely reported. Very recently the system has been put in place by the world’s largest emitter, China.  Other nations or major sub-national units adopting cap and trade for carbon include South Korea, California, and Ontario,  The closest we came ot having a national program to deal wiith carbone emissions in the US was early in Obama’s first term when he  got a cap and trade plan passed by the House of Representatives, only to have it blocked by Republicans in the Senate.

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Weirdly Non-Monotonic Yield Curves

Weirdly Non-Monotonic Yield Curves

This is a situation that may be on the verge of disappearing and more or less normalizing, but over the last couple of months US bond markets have exhibited a weird phenomenon of non-monotonicity. It has been even weirder than what we saw during the period of negative nominal interest rates, when what we saw was interest rates on US treasury securities fell from the shortest time horizon to a low usually around the two-year time horizon, with the pattern then reverting to its usual upward slope. What has been going on recently has been a pattern of rates initially rising with the time horizon in the normal pattern, then turning around and declining, then turning around yet again and rising again. I do not know what to make of any of this. I exhibit it in a table below for the three days, January 2, January 10, and January 18 of this year.
3 mo.     1 yr.     2 yr.     3 yr.     5 yr.    10 yr.     30 yr.

1/2/19         2.42       2.60     2.50      2.47    2.49      2.66       2.97

1/10/19       2.43        2.59     2.56      2.54    2.56      2.74       3.06

1/18/19        2.41       2.60     2.62      2.60    2.62      2.79       3.09

So, at the beginning of the year the rates rose from 3 months to 1 year, with rates declining to 3 years, and then rising after that. The same pattern was still holding on January 10. On January 18 things were somewhat more normalized with the mid-range decline being a decline from the 2 year to 3 year range, but then reversing to rise in the normal way after that.

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Whatever Happened To Iran?

Whatever Happened To Iran?

Who? What? Where?

Long a headliner in the news, Iran has disappeared from the headlines, and even the inside pages. It has largely disappeared from the news, after being the big headline for a long time. This is probably good for Iran, despite its many problems.

I have made a big effort to find out its current economic status. The little data out there seems to suggest that not much is happening. GDP had been falling in the aftermath of the US withdrawal from the JCPOA nuclear agreement, which Iran had and continues to adhere to, with the official support of the official signatories, even as private companies in many of them against their governments, have pulled back from dealing with Iran under US pressure. But that is old news.

The US withdrawal from the JCPOA was provocative, and pushed many companies such as France’s Total to withdraw from dealing with Iran, along with many others. This satisfied a campaign promise of Trump’s, even as he has been lying on a 15 per day rate recently according to recent reports.

About the time of the US’s withdrawal over a half year ago, there were many reports of having a collapsing economy. There were many reports of demonstrations against the government in hardline Islamist regions over the troubled economy. Somehow these reports seem to have stopped, although I would not rule out that some may still be happening. But the world is not hearing of them, and I do not think this is due to some increased level of Iranian suppression.

No, I think Iran has halted its economic decline, not that things are great. This post is partly triggered by talking to a good friend recently returned from Iran who reports that while things are expensive, most goods are available and the economy seems to be more or less stable.

Despite this supposed intense push by the US to harm the Iranian economy, parts of that certainly in place, without publicity US policy has recently gone the other way, not so vigorously harming the Iranian economy. For starters we have that the US gave “temporary” exemptions from the renewed US sanctions against nations importing Iranian oil for 8 major such importers. The upshot is not all that much of a reduction of such exports from Iran, an obviously crucial factor.

Then we have more recent subtle pro-Iranian decisions, most importantly Trump’s announcement of US removing troops from Syria. This helps Iran, even if the removal is slowed down as seems likely. We also have SecState Pompeo pressuring the Saudis to end their boycott against Qatar, which has retained both political and economic relations with Iran, not to mention having just whupped Saudi Arabia in soccer 2-0.

So, we, or at least I, do not know what precisely is going on inside Iran, long a highly repressive regime, despite its facade ofs pseudo-democracy. They have been continuing to adhere to the JCPOA nuclear deal, even as recent reports have them possibly setting up increased uranium enrichment facilities and activities. While there have been many demos against the government over the troubled economy, it seems that these have slowed down, or at least reporting of them has.

The US does not determine all that happens in Iran, but it seems that currently the US has an inconsistent verging on incoherent policy regarding Iran. But for Iran, this turn from full hostility, combined with a possible upturn in world oil prices, may explain an unreported stabilization in Iran.

Barkley Rosser

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Getting Ever More Surreal

Getting Ever More Surreal

I am referring to a comment Sean Hannity made on his show earlier this evening in his monologue. The reports tht  President Trump was under  investigation by FBI Counterintelligence as being a possible “Russian asset” supposedly taking orders from Vladimir Putin has pushed uber Trump defender Hannity to ever more surreal forms of defense, in this case one especially bizarre given the cloase association in Trump’s early career between him and Roy Cohn, the lead attorney for the late anti-communist scourging Senator Joseph McCarthy of Wisconsin.

This new more surreal position has Hannity after declaring that “the walls are closing in” on former FBI Director James Comey over his supposed role in this investigation, although apparently it was the circumstances around Trump’s firing of Comey that initially triggered this reported conterintelligence investigation, Hannity then compared Comey to the late anti-communist scourge, J. Edgar Hoover, FBI director for 48 years.  In particular he pinpointed Hoover’s investigation of the late Henry Wallace in 1948 for his reputed ties to the Soviet Union, highlighting that Wallace had served as vice  president during FDR’s third term (and was pushed out of that position to be be replace by Harry Truman in FDR’s fourth term by conservative Democrats worried about his perceived to be friendly attitude to the Soviet Union).  In 1948, when Hoover was making his investigation and allegations, the Cold War was starting, and Wallace was the candidate for president of the Progressive Party, running heavily on a platform of opposing the Cold War (and certainly the anti-communist positions of McCarthy).  The sight of Hannity of all people praising and defending Wallace against the supposedly evil Hoover was quite a spectacle.

As it  is, I am sympathetic to the view that Wallace was unfairly treated and smeared.  Also, the Progressive Party and Wallace supported many, well, progressive policies that were and remain reasonable, such as national health insurance.  All of that adds to the irony of Hannity now defending him as he has no use for such policies.  The exact nature of Wallace’s relations with Soviet leaders and of the connection between the Progressive Party and CPUSA remain controversial to this day, but but ceetainly Wallace opposed the incipient Cold War and publicly supported Soviet positions in 1948.  I do not know if it was possible to avoid the Cold War or not, and it is impossible to know what would have happened if Wallace had won, especially given that he came nowhere near dong so.  As it was, Hoover was correct that Wallace was very friendly with various Soviet leaders and agreed with their views, for better or worse.

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Slavery in the US

Slavery in the US

An issue so far not openly addressed in this “Partial Shutdown” situation is that those who have been deemed to be “essential,” are now working without pay, even though we all believe that they will eventually receive their overdue backpay. I really do not know the law that says that these people must work without being paid within a reasonable time period of their work, but my basic view of this is that people being forced to work without being paid in a clearly established time period are slaves. And this is the status of those US federal workers now being forced to work without pay. They are slaves.

A ludicrous effort by Trump to minimize the damage of his idiotic partial shutdown has been his sporadic efforts to deal with consequences of his worthless shutdown. So, we have rich cronies of his who have found themselves inconvenienced for hunting in US natural preserves. Trump has ordered that the federal employees who oversee this particular matter must show up for work to make sure that this handful of wealthy Trump cronies can hunt in US natural preserves, without pay. These federal employees must be slaves to these spoiled brat pals of Trump.

We must recognize what is going on here, although nobody prior to me now has called it for what it is, this is slavery. Trump has been ordering all sorts of fed employees to show up and perform their duties without pay as an accumulating pile of interests get to him complaining about not getting their government services.

Of course, slavery leads to shirking, unless Massa wields a whip, which I think is not seriously there, so we have already seen lines at LaGuardia airport as TSA employees call in “sick.” Everyday this condition of slavery persists, the calling in sick of the slaves will increase.

We adopted an amendment 154 years ago that abolished slavery in the United States of America. It is about time this amendment was enforced.

Barkley Rosser

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