Senator Richard Blumenthal- not so innocent subversion

I spoke with Senator Blumenthal for several hours on MMT just over a year ago, before he was elected Senator.

He read my book and asked the right questions.

He knows imports are real benefits, exports real costs.

He knows the trade deficit is a good thing for America.

He knows that his proposals would reduce our real terms of trade and lower our standard of living.

And he knows taxes function to regulate aggregate demand,

and that we can readily sustain full employment by keeping taxes at the right level for a given size of government.

He remarked that it was how he had learned it at Harvard in the 1960’s.

And he called me several times to discuss specific issues in detail.

With this letter he has turned subversive for presumed political gain.

I see it as a clear case of politics over patriotism.

I likewise discussed this with Senator Carl Levin, but maybe 15 years ago, who also seems to have decided to place politics over patriotism.

If I had the authority, I would prosecute for treason.

April 14, 2011

The Honorable Timothy J. Geithner
Secretary of the Treasury
1500 Pennsylvania Ave. NW
Washington, DC 20220

Dear Mr. Secretary,

We write to urge you to make fundamental currency misalignment a central issue at the G-20 meeting in Washington, DC this week. For too long, this issue has festered, harming not only American companies and workers, but also the economy of every country that meets its International Monetary Fund (IMF) commitments to allow the level of its currency to be determined by markets.

The consistent interference of a few countries in currency markets creates an uneven global playing field, perversely encouraging other countries to intervene as well. The resulting currency misalignments distort global markets, creating instability at a time when the world can ill afford it.

While multiple countries are guilty of currency manipulation, China unfortunately stands out from the rest. Its mercantilist policies occur on a grand scale. In the fourth quarter of 2010, China intervened in currency markets by purchasing $2 billion worth of foreign currency a day, adding $199 billion to its foreign currency reserves. Not surprisingly, in its recent 2011 Global Economic Outlook, the IMF calls the RMB “substantially weaker than warranted” and finds a “key motivation for the acquisition of foreign exchange reserves seems to be to prevent nominal exchange rate appreciation and preserve competitiveness.”

China’s policies work as intended: The RMB has had almost no appreciation against the dollar since May 2008. China’s illegal practices make Chinese-produced goods cheaper than similar products made in America, driving up our trade deficit with China and putting Americans out of work. The United States’ trade deficit with China reached a staggering $273 billion last year, costing our country thousands of jobs.

The IMF cites the accumulation of official foreign exchange reserves as “an important obstacle to global demand rebalancing.” Removing this obstacle should be a key U.S. priority. Ironically, China’s refusal to allow the RMB to appreciate in a meaningful way is contrary to its own best interest. Economists agree that China needs to rebalance its economy to rely more on domestic consumption than on export-led growth. This necessary rebalancing would ultimately tame Chinese inflation, improve global economic growth, and remove a key barrier to a more fruitful U.S.-China relationship.

The United States does no one a favor by downplaying this crucial issue. We urge you to work together with all countries harmed by currency manipulation to press China to allow the level of the RMB to be determined by markets, not government interventions. When everyone plays by the same rules, our entrepreneurs and workers can compete and win in the global economy.


Sen. Debbie Stabenow

Sen. Sherrod Brown

Sen. Olympia Snowe

Sen. Carl Levin

Sen. Sheldon Whitehouse

Sen. Bob Casey

Sen. Ben Cardin

Sen. Kirsten Gillibrand

Sen. Jack Reed

Sen. Richard Blumenthal