June 18, 2017

MAC - Expert References

In response to my comment on the WSJ article, One More Reason for the Productivity Slowdown? Credit Conditions (WSJ, 2017/06/12/),  Bob Bronson of Bronson Capital Markets Research asked for an "expert reference" to the Market Access Charge (MAC).

This post provides a list of key explanatory posts on the MAC appearing on this website plus selected references made by other economic experts to the MAC since the beginning of this year.

Key Explanatory Notes on the Market Access Charge

This website provides over 50 posts on the MAC's design, the reasons the MAC is needed, and the MAC's probable benefits for America. Of these, the most useful and most frequently visited are the following:
How the MAC Would Help Restore American Manufacturing
http://abcdnow.blogspot.com/2016/05/how-mac-would-help-restore-american.html
Currency Manipulation or Currency Misalignment
http://abcdnow.blogspot.com/2016/03/currency-manipulation-or-currency.html
Make the Better Way Even Better
http://abcdnow.blogspot.com/2017/01/make-better-way-even-better-add.html
Of these, the first provides the best overall view of the MAC's purpose, design, and implementation.

Expert References

Since the beginning of 2017, the following references to the MAC by other experts are particularly relevant:

2017.01. Robert E Scott. Growth in U.S.–China trade deficit between 2001 and 2015 cost 3.4 million jobs. Here’s how to rebalance trade and rebuild American manufacturing. Washington: Economic Policy Institute.

 “John Hansen (2016), another distinguished economist, has proposed the imposition of an adjustable “market access charge,” a tax or fee on all capital inflows that would reduce the demand for dollar-denominated assets and hence the value of the currency. By revaluing the currencies of surplus countries, the U.S. trade deficit could be reduced by between $200 billion and $500 billion dollars, raising demand for U.S. exports. (Rebalancing the dollar would also help exports in the services and agriculture sectors.)”
(http://www.epi.org/publication/growth-in-u-s-china-trade-deficit-between-2001-and-2015-cost-3-4-million-jobs-heres-how-to-rebalance-trade-and-rebuild-american-manufacturing/)

2017.02. Jeff Ferry. Fixing the Bloated Dollar. Washington: Coalition for a Prosperous America.

"... Joe Gagnon ... is intrigued by another, even more radical proposal, called the Market Access Charge or MAC.  The MAC is the brainchild of economist John Hansen, now retired after a career at the World Bank. Hansen’s vision is for a charge, starting at 50 basis points (half of 1%) on inflows of foreign capital into U.S. financial assets. The one-time charge upon entry would be levied not on the interest but on the principal invested into U.S. assets. There would be no political debate required over which nations pay the MAC. They all would. The revenue flowing to the Treasury would be counted in billions of dollars.
The advantages of the MAC are that it is relatively easy to administer and it is highly likely to drive down the dollar. Most important, it demonstrates to the world that the U.S. is serious about making sure that its currency serves the needs of its domestic economy instead of the other way around.
(www.Prosperousamerica.Org/Fixing_The_Bloated_Dollar).

2017.06. C. Fred Bergsten and Joseph E. Gagnon, Currency Conflict and Trade Policy: A New Strategy for the United States. Washington: Peterson Institute for International Economics.

“The United States could impose a transactions tax or a “market access charge” on new purchases of US assets by currency manipulators.”
(https://piie.com/bookstore/currency-conflict-and-trade-policy-new-strategy-united-states).

2017.06. Daniel DiMicco, Brian O’Shaughnessy, and Michael Stumo. CPA Testimony for NAFTA Negotiations. Washington: Coalition for a Prosperous America.

"First, and most importantly, a capital flow management tool called the Market Access Charge (MAC) should be implemented to push the US dollar towards its trade balancing equilibrium rate, increasing U.S. exports and reducing imports. CPA’s recent analysis, using the IMF Fundamental Equilibrium Exchange Rate (FEER) method, corrected to target a zero current account balance in 5 years, shows the dollar is about 25.5% overvalued today."
(http://www.prosperousamerica.org/cpa_testimony_nafta_negotiations)

2016.06. Bob Tita, "How to Revitalize U.S. Manufacturing," Journal Report: Future of Manufacturing, pp 1-2. New York: Wall Street Journal.

Although it did not appear in 2017, this expert reference to the MAC is well worth noting as it appeared in the Wall Street Journal. In the article, Mr. Tita noted:

"Lowering the value of the dollar is difficult, especially as long as foreign investors keep pumping their dollars into U.S. investments. John Hansen, a former economic adviser for the World Bank, has a solution that he says could keep a strong dollar from further swelling the trade deficit and discourage high-frequency, speculative trading by foreign investors in U.S. financial markets.
The idea: market-access charges. A base-rate charge of 0.5% could be applied on all foreign-originated inflows of money into U.S. investments. The rate would gradually climb to about 2%. Further increases would be linked to increases in the trade deficit, which is about 3% of U.S. GDP. If the deficit remains unchanged even with the fee, Mr. Hansen anticipates 0.25% increases in the fee every six months. When the deficit retreats, the fee would fall. The fee revenue could be used for government-funded research to help manufacturing."
(http://www.wsj.com/articles/how-to-revitalize-u-s-manufacturing-1465351501)



America Needs a Competitive Dollar - Now!

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