Category Archives: Trade

All along the watchtower: The follies of history, by Pepe Escobar

The US wants to bring China to heel; there’s no way China is going to allow that to happen. From Pepe Escobar at asiatimes.com:

All along the watchtower: The follies of history

Bayon temple, Angkor World Heritage site in Siem Reap, northern Cambodia. File pic by Bruno Morandi, Robert Harding Heritage / AFP
The ultimate American imperial dream is to engineer a Chinese vassal state

There must be some kind of way outta here
Said the joker to the thief
There’s too much confusion
I can’t get no relief

Business men, they drink my wine
Plowmen dig my earth
None were level on the mind
Nobody up at his word

-Bob Dylan, All Along the Watchtower (immortalized by Jimi Hendrix)

Nothing beats the beguiling, stony smiles at the Bayon temple near Angkor Wat in Cambodia’s Siem Reap to plunge us back into history’s vortex, re-imagining how empires, in their endless pursuit of power, rise and fall, usually because they eventually get the very war they had sought to avoid.

The Bayon was built as a state temple at the end of the 12th century by the undisputed superstar of Khmer empires, Jayavarman VII. Its magical narrative reliefs convey a mix of history and mythology while depicting daily life in Khmer society.

We still don’t know today the identity of the faces shown on the temple’s giant stone carvings. They could be a representation of Brahma, or of Jayavarman himself – a practicing Buddhist. What we do know is that the glorious Khmer empire – incomparable in art and architecture, and even benign in the sense that the mandate for power was based on the king’s relationship with the gods, started to fade after the 15th century, dismembered by war against the Thai and later the Vietnamese.

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The “Trade War” Is Over, Trump Just Doesn’t Realize It Yet. By Lance Roberts

It’s hard to beat an opponent who’s playing the long game when your time horizon is next year’s election. From Lance Roberts at realinvestmentadvice.com:

On Tuesday, the markets bid higher following a statement from the U.S. Trade Representative’s office that tariffs will commence on September 1st, but that some products will be delayed until December 15th. To wit:

“…some tariffs will take effect on Sept. 1 as planned, ‘certain products are being removed from the tariff list based on health, safety, national security and other factors and will not face additional tariffs of 10 percent. Further, as part of USTR’s public comment and hearing process, it was determined that the tariff should be delayed to December 15 for certain articles.”

The only part the algos heard was “tariffs delayed,” which sent them into stock panic buying mode.

However, stocks crashed again on Wednesday as the yield curve inverted, sending “recession fears”through the markets.

Of course, since President Trump has pegged the success of his Presidency on the rise and fall of the markets, on Wednesday, as “tweets” about a “trade talks continuing” failed to lift the markets, he resorted to more direct measures to manipulate the markets: Via CNBC:

“Trump held the call with J.P. Morgan Chase CEO Jamie Dimon, Bank of America’s Brian Moynihan and Citigroup’s Michael Corbat, according to people with knowledge of the situation.”

This, of course, was reminiscent of the call made by Steve Mnuchin, U.S. Treasury Secretary, during the market rout last December. But most importantly, this is about the upcoming election:

“Trump has been reaching out to corporate leaders this week amid his concerns that a slowing U.S. economy could impact his reelection chances, according to a Thursday piece from the Washington Post.”

Hopefully, he will listen to them.

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Trump’s Farm Bailout Flows To “City Slickers,” a D.C. Lobbyist and ‘Farms’ on Golf Courses, by Tyler Durden

Anybody who is surprised by the above headline, or thought that it wouldn’t happen under Trump, probably shouldn’t be on this website. From Tyler Durden at zerohedge.com:

About 9,000 “city slickers” living in luxurious neighborhoods of the nation’s largest cities received a farm bailout from the Trump administration to minimize the impact of the trade war with China, an updated Environmental Working Group (EWG) analysis of Department of Agriculture data shows.

The EWG analysis of USDA data revealed that “many recipients live not in farm country but in the nation’s 50 largest cities or in other decidedly nonrural locations.”

Urban recipients of the bailout include members of farm families, landowners, and investors. These people provide land, capital, or equipment for farms and make high-level decessions for operations.

EWG said bailout recipients include 70 people in San Francisco, 65 residents in New York City, 63 residents in Los Angeles, 61 residents in Washington, D.C., and 19 Miami.

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Punishing the World With Sanctions, by Philip Giraldi

Without much success, the US government keeps ramping up sanctions to bend other nations to its bidding. From Philip Giraldi at strategic-culture.org:

Sanctions are economic warfare, pure and simple. As an alternative to a direct military attack on a country that is deemed to be misbehaving they are certainly preferable, but no one should be under any illusions regarding what they actually represent. They are war by other means and they are also illegal unless authorized by a supra-national authority like the United Nations Security Council, which was set up after World War II to create a framework that inter alia would enable putting pressure on a rogue regime without going to war. At least that was the idea, but the sanctions regimes recently put in place unilaterally and without any international authority by the United States have had a remarkable tendency to escalate several conflicts rather than providing the type of pressure that would lead to some kind of agreement.

The most dangerous bit of theater involving sanctions initiated by the Trump administration continues to focus on Iran. Last week, the White House elevated its extreme pressure on the Iranians by engaging in a completely irrational sanctioning of Iranian Foreign Minister Mohammad Javad Zarif. The sanctions will have no effect whatsoever and they completely contradict Donald Trump’s repeated assertion that he is seeking diplomacy to resolving the conflict with Iran. One doesn’t accomplish that by sanctioning the opposition’s Foreign Minister. Also, the Iranians have received the message loud and clear that the threats coming from Washington have nothing to do with nuclear programs. The White House began its sanctions regime over a year ago when it withdrew from the JCPOA and they have been steadily increasing since that time even though Iran has continued to be fully compliant with the agreement. Recently, the US took the unprecedented step of sanctioning the entire Iranian Revolutionary Guard Corps, which is part of the nation’s military.

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The Great Switch: Old Ways Fade and are Irrecoverable, by Alastair Crooke

The US wants to continue to push around the world as it has been doing, but the world is pushing back, and the US doesn’t really have a Plan B. From Alastair Crooke at strategic-culture.org:

Conflict is popping up everywhere: A major portion of the Turkish army stands ready to invade parts of Syria (though invasion may have been averted for now); PM Modi may just have ignited the next round of Kashmir wars with Pakistan with his Hindu ‘nationalist’ putsch to annex Muslim majority Jammu-Kashmir; Japan has started a mini trade war with South Korea; Turkey is bracing for a face-off with Greece and Cyprus over energy exploration in the East Mediterranean; the Yemen war is heating up with the war increasingly being fought inside southern Saudi Arabia; the US-Iran and the Syria conflicts simmer, and Hong Kong has boiled-over into violence.

What is going on? Is there some unifying thread connecting this sudden outbreak of widespread global tension? Of course all these conflicts have their separate background contexts. But why so many at the same time? Well, in a word, it’s all about change — about the recognition that we are at the cusp of major changes. The world is beginning to pre-position.

Take, for example, the about-turn by the UAE (heretofore, a major agitator for an Iran confrontation) reaching out to Iran. Much of this Gulf State fervour for confrontation with Iran arose on the rebound from the Obama move to normalise with Iran (through the JCPOA). The Gulf States feared losing the umbrella of the US protection which, it was believed, inoculated these monarchies as much from repression of their internal reformists, as from Iran. Then, with the arrival of President Trump, the opportunity seemed to present itself again to lock-in that US ‘guarantee’ by inciting the new President, already obsessed with his notion of Iranian ‘malignity’ into action.

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Trump’s Great Gamble, by Patrick J. Buchanan

In Patrick Buchanan’s formulation, imports are bad, exports are good, and any time a country exports to you more than you export to it, they’re taking advantage of you. Thus, China runs a trade surplus with the US and will use that as a springboard to overtake us as a world power. From Buchanan at buchanan.org:

President Donald Trump’s reelection hopes hinge on two things: the state of the economy in 2020 and the identity of the Democratic nominee.

The further left the Democrats go to select their candidate, the greater the probability Trump wins a second term.

Thus Trump got good news this week.

The verbal flubs of Joe Biden reached critical mass. They are now so numerous and egregious they have begun to call into question whether Biden, who turns 77 in November, is really up to a year of campaigning, followed by four years of leading the nation in the world.

Nor is it only Trump saying this now.

The Biden staff appears to be agonizing over the endless reruns of Joe’s gaffes on cable TV. And a media that sees Biden as the best hope of bringing down Trump is showing signs of alarm.

A valid question arises, not only for Democrats:

Does the Biden we have lately seen in debate and on the stump look like a focused leader who could be confidently entrusted with the most powerful office on earth until January 2025, which would be the end of his first term?

What are the odds that, if he won the presidency, Biden could be a two-term president, until 2029, and not a visibly lame duck from Day One?

Yet, if Biden stumbles and falls before next spring, which seems more of a possibility than two months ago, it is almost certain the Democratic candidate and party platform will be outside the American mainstream.

Consider what the Elizabeth Warren-Bernie Sanders-AOC Democrats have on offer: A Green New Deal with government jobs for all. Net-zero carbon emissions. “Medicare for All,” including migrants here illegally. Free tuition at state schools. Forgiveness of most or all of $1.5 trillion in student debt. A trillion dollars of infrastructure. A $15 minimum wage. Reparations for slavery.

All this is being promised while the nation is running a $1 trillion deficit and facing trillion-dollar deficits through the first term of the next president.

And the national debt is already larger than the GDP.

But if the Democrats’ performances this summer were heartening for the president, what happened Wednesday must be causing palpitations.

The Dow Jones average plunged 800 points, capping a loss of 7% of its value in weeks. Capital is flooding out of equity markets into the shelter of bonds.

And worldwide, the news is not good.

The German economy, the world’s fourth largest, contracted in the first quarter. Factory output in China, the world’s second-largest economy, is growing at its slowest pace in 17 years.

Britain, another of the 10-largest economies, is about to crash out of the EU by Oct. 1. Hong Kong, its political crisis unresolved and the protests ongoing, is projecting zero growth.

The U.S. economy remains the strongest in the world, but U.S. growth in the second quarter was 2.1%, tepid compared to the 3.5% growth in the spring of 2018.

On top of this disquieting news on the economic front, Trump’s disapproval in the Fox News survey released Wednesday rose to 56%, a 5 percentage-point jump in his disapproval from July.

That the president laid Wednesday’s market swoon at the doorstep of the Federal Reserve suggests that Fed Chairman Jerome Powell is being set up to take the fall if the economy goes south in 2020.

And going south is a distinct possibility. Bank of America Merrill Lynch puts the odds on a recession next year at 1 in 3.

From the media and political reaction to the Dow plunge, there is nothing Democrats would relish more than seeing the Trump boom, which has reduced unemployment to record lows, end in a recession, negating his greatest political argument and asset.

And if America can be talked into a recession, rely on the Beltway political and media elites to try to bring it off.

Which brings us to the China trade impasse, which involves a historic gamble by Donald Trump.

Trump seeks to throw out a free trade policy that, rooted in 19th-century ideology rather than U.S. national interests, threw open U.S. markets to the world and produced, over three decades, $12 trillion in trade deficits and a loss of 70,000 factories and 5 million manufacturing jobs.

Like the Russian army carting off German factories after World War II, the Great Arsenal of Democracy was looted by its postwar allies and adversaries alike.

The weapon Trump is using to stop this looting is tariffs, a price of admission into the U.S. market to replace the free passes foreign nations and transnational companies have had to produce abroad and sell into the USA.

Trump is using tariffs to coerce China to stop cheating on the trade rules we have established and to grant us the same access to her markets as producers in China have to the American market.

And he is betting his presidency he can pull it off.

 

 

Endgame for the Fed? by Ron Paul

Is the same end coming for the US dollar that has befallen every other unbacked fiat currency, and by implication does it mean the end of the Fed? From Ron Paul at ronpaulinstitute.org:

The Federal Reserve, responding to concerns about the economy and the stock market, and perhaps to criticisms by President Trump, recently changed course on interest rates by cutting its “benchmark” rate from 2.25 percent to two percent. President Trump responded to the cut in already historically-low rates by attacking the Fed for not committing to future rate cuts.

The Fed’s action is an example of a popular definition of insanity: doing the same action over and over again and expecting different results. After the 2008 market meltdown, the Fed launched an unprecedented policy of near-zero interest rates and “quantitative easing.” Both failed to produce real economic growth. The latest rate cut is unlikely to increase growth or avert a major economic crisis.

It is not a coincidence that the Fed’s rate cut came along with Congress passing a two-year budget deal that increases our already 22 trillion dollars national debt and suspends the debt ceiling. The increase in government debt increases the pressure on the Fed to keep interest rates artificially low so the federal government’s interest payments do not increase to unsustainable levels.

President Trump’s tax and regulatory policies have had some positive effects on economic growth and job creation. However, these gains are going to be short-lived because they cannot offset the damage caused by the explosion in deficit spending and the Federal Reserve’s resulting monetization of the debt. President Trump has also endangered the global economy by imposing tariffs on imports from the US’s largest trading partners including China. This has resulted in a trade war that is hurting export-driven industries such as agriculture.

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