Relevant and even prescient commentary on news, politics and the economy.

The Ultimate Solution

The Ultimate Solution

Yes, Trump really said that.  The Syrian Kurds, who have been where they are about to be ethnically cleansed out of, are welcoming “the ultimate solution,” just like Jews in you know where were welcoming “the final solution.”  Of course they must accept this because they are “no angels,” “communists,” and “worse then ISIL.” So much for a “post-socialist” Bookchinite cooperative system.  But, hey, they are all so fortunate to have “the ultimate solution.”   What else is there to say?

(Dan here…Rosser updates in comments)

 Well, there is more. Trump has declared that the Syrian Kurds should be “happy” to have this “ulitmate solution” to leave this area they have lived in for 4000 years. And just to emphasize the point, Erdogan has declared that if they do not move in the next few days, he will have his troops “crush their skulls.” How happy can one get?

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An Increasingly Divergent US Economy

An Increasingly Divergent US Economy

Lots of people have been huffing and puffing about whether or not the US economy will go into a recession in the near future, with Menzie Chinn and Jim Hamilton at Econbrowser saying it is now about 50-50 whether or not the US economy will go into recession by the end of 2020.   I do not have a horse in that race, but I am struck that a new odd phenomenon has recently appeared in the US economy, a split between sectors regarding their performance that recently seems to be increasing.

The sectors are manufacturing, which has been declining now for several months and is the harbinger of recession. Meanwhile single family permits are up, and YOY permits overall are up by 8 percent that may well hold off any recession if it continues to accelerate.  It is unclear which will win out.

So the general story of manufacturing looking to decline while housing construction is likely to rise still holds for the fairly near future.

The manufacturing decline has been widely tied to the trade wars, which would appear to be at least partly responsible.  It is also the sector that through trade may be experiencing the pressures of the slowing of global growth.

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Eeeeeeeeemoluments And How Bad Bruce Springsteen Is

Eeeeeeeeemoluments And How Bad Bruce Springsteen Is

I have almost never watched through a Trump speech to one of his rallies, but I was curious what he would say at the first one after the impeachment inquiry officially started, which he held a few days ago in Minneapolis, supposedly trying to take MN away from the Dems in 2020.  I missed the opening, but listened to all of it after that.

Much of it was just boilerplate stuff he says all the time, much of it blatant falsehoods, but whart we have heard.  News reports focused on his especially nasty remarks about Ilhan Omar, who iis from Minnesota, so he made a special point about denouncing her and those supporting her pretty harshly.  But I want to mention are two odd items I saw no reports on, but that strike me as signs of Trump losing it, setting himself up for trouble in both the impeachment and if he survives that in the election next year.

The first involves the emoluments clause, something I would think he would not be saying anything about.  But he has long seemed to deal with problematic matters by essentially admitting the problems and then just doing a “So what? No big deal” line that he then tries to get established as the line for his followers at Fox News and elsewhere to spout and spread.  However, as with releasing the summary of the phone transcript with Zelensky, I think this may not work out so well for him as this is potentially another article of impeachment.

So there he went.  I do not remember what immediately preceded it, but then he said the word in this long drawn-out way as if to ridicule it: “Eeeeeeeeemoluments?  Then he said, “Whoever has even heard of this word?” (more attempted ridicule)  He then effectively admitted guilts, sort of, but clearly in a way to dismiss it.  “So what if some people I do not even know stayed in some of my hotels?”  Yes, this red shirt-wearing audience ate it up, if not perhaps as raucouslyi and enthusiastically as some other lines.  But there it was, and, of course, they ate up anything and everything he said.

 

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Closing The Open Skies

Closing The Open Skies

Trump’s stonewalling on impeachment is the top story, snore.  Lower down and more important is Trump allowing Turkey to attack the Kurds in Syria with the support of Russia. Even GOP senators do not like this and ISIS fighters may get out. But, heck, those will go to Europe, and unlike the Btis and Canadians, the Kurds did not help us out in Normandy in WW II.  And, probably most important, Trump has major business interests in Turkey.

However, much less reported (although covered by David Ignatius in WaPo today), but arguably more important than either is Trump’s decision to withdraw from the “Open Skies” agreement with Russia to allow oversight flights by each over the other to test for “doomsday weapons” development, an idea initially proposed by Eisenhower in 1956.  This continues an ongoing collapse of nuclear arms control agreements, with Trump having withdrawn from the Intermediate Nuclear Forces agreement last year, much to the consternation of most of Europe, although arguably Russia had been in violation of it for a long time.  Back in 2002 Bush withdrew from the Anti-Ballistic Missile agreement, which his people thought was a much more important thing to do than fight al-Qaeda.

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The Repo Ruckus

The Repo Ruckus

This is now about three weeks old news, but it is increasingly clear that it is not clear why it happened or if it will happen again.  There was an outbreak of completely unexpected volatility in the repo market, where in the past the Fed had carried out open market operations, although that had largely passed.  Indeed in more recent years when the Fed has intervened in markets it has been in the reverse repo market.  In any case, interests rates shot up as high as 9 or 10 percent at one point, with the federal funds rate also getting out of its allowed range on the upside, although not by that much.  The New York Fed pumped about $400 billion into the market to stabilize it, so there was no immediate fallout from this, and if it happens again, probably the Fed can do it again. Nevertheless, this is a sign of things going on in the markets that are poorly understood, and John Williams, the New York Fed president has come under criticism for not providing any clear explanations.

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Why Is Iraq Blowing Up Now?

Why Is Iraq Blowing Up Now?

Yes, Iraq.  It has not made front page headlines with so much else going on, but over the last several days there has been an escalating series of protests against corruption in various parts of Iraq and culminating yesterday in Baghdad with one being met by soldiers firing openly upon the demonstarters with the result being about 104 dead and 6,100 wounded.  The government of Adel Abdul al Mahdi appears in danger of facing a no confidence motion and falling as it has lost the support of fellow Shia leader al-Sadr, who has a large faction of supporters in the parliament and how apparently is supporting the demonstraters.

Corruption has become an increasingly widespread problem around the world, so much so that we increasingly take it for granted and remain unimpressed by it.  And we are tired of hearing about Iraq, a nation we made a mess of, are now mostly not much bothered with, and especially since it appears that ISIS has been largely defeated.  Indeed, opposition to the deep government corruption there laid low while the war against ISIS was on.  But now with its defeat, many want something done about it.

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Peoples’ Republic of China Reaches Age 70

Peoples’ Republic of China Reaches Age 70

While most US media  claims China (PRC) has the world’s second largest economy, that is only true as measured in nominal terms.  Measured in real PPP terms, Chinese GDP surpassed that of the US in 2015 and continees to move further ahead of it (and is likely to pass it in nominal terms very soon), despite gradual deceleration of the Chinese GDP growth rate.  Furthermore, PRC seems to be taking global leadership in crucial 5G technology.  In the last 70 years the PRC has gone from a poor nation wracked by regular famines to a solidly middle class nation with vastly reduced poverty and no famines for many decades (although there was an especially severe one in the late 1950s that killed millions in the early part of the regime).

I would like to put this anniversary into a broader historical perspective, in particular from a traditional Chinese view.  That is that while there have been exceptional periods, most of Chinese history has been driven by dynasty cycles, with the average life of a dynasty being about 300 years, as with the Tang, Song, Yuan, Ming, ans Qing (the Han lasted 400 years, some others for much shorter periods).  The classic pattern has been for the first century to be dynamic, with proper Mandarin civil service exams associated with a competent bureaucracy and effective management of the agro-hydraulic infrastructure, with a growing economy.  The second century involves a flattening out and slowing of growth.  In the third century corruption of the exams rises as does general corruption and stagnation as the incompetent bureaucracy mismanages the infrastructure and the broader economy, with all this leading to the Malthusian disasters of war, famine, and pestilence, and the eventual collapse of the dynasty.

 

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The New US-Japan Trade Agreement

The New US-Japan Trade Agreement

Lost in the shuffle this past week was one piece of good news for Trump: a tentative trade deal with Japan that he and Japan’s PM Shinzō Abe signed in New York on the sidelines of the UN General Assembly meeting.  While it is largely a favorable deal, it does not do too much and leaves the most difficult issue to be resolved by later negotiation, namely regarding the auto industry.

Trade restrictions are lowered on a variety of agricultural goods, including pork, beef, wheat, corn, and some fruits the US exports (but not soybeans), and on a few Japan exports including green tea,   persimmons, and soy sauce.

In the industrial area, restrictions are lowered on machine tools from Japan and some scattered others.  Restrictions are also lowered on digital products going both  ways.  I do not know how much this will increase trade flows overall each way.

This is good news especially for many farmers, a main concern of Trump’s although not soybean farmers, with, if anything, they possibly suffering from the lowering of barriers on soy sauce from Japan, which will hit Kikkoman in southern Wisconsin.

Of course autos are a very large item involving trade between the two countries, and there is no change on that one.

The final irony, of course, is that most of this, especially in the agricultural area, was part of the TPP that the US withdrew from.  So basically this resembles the USMCA NAFTA replacement largely and simply putting in place the changes with other nations that would have happened anyway if the US had not withdrawn from the TPP. In short, it is undoing Trump’s own handiwork from early in his administration, although that point is not being emphasized.

Barkley Rosser

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Op ed on Country Music

Country Music

I have been watching Ken Burns’s “Country Music”  series on PBS.  May not watch too much more of it as I am not that interested in more recent country music, although I like some of it.

So the big story of this series is how much of supposedly “white music” is of African-American origin.  I had long been aware of how the banjo was of African origin, the core country instrument beside the “fiddle,” aka “violin,” which is of European origin.  But it shows that most of the important early Country music people had serious interactions with black musicians, relying on them for finding music as well as helping them developing their own styles.  These figures include A.P. Carter, the founder of the Carter family, Jimmie Rodgers, Hank Williams, Johnnie Cash, and others.

All of this clearly rebukes the Country Music Association’s rejection of this year’s massive hit, “Old Country Road,” as being officially “country music.”  Despite the fantasies of ignorant current racists, country music and rhythm and blues and, jazz, not to mention rock and  roll, have always been curiously hybrid forms of music.

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The Strike On Saudi Oil Facilities

The Strike On Saudi Oil Facilities

This is going to be a tentative post because there is much that remains unclear. What I am going to do is to make it clear that stories that are being told by US authorities and largely repeated by the MSM with little critical commentary is highly questionable.

As it is, it looks like the economic impact of the knocking out of about 60 percent of Saudi oil processing capacity by an attack by 20 drones will not amount to too much. The Saudis have now announced that they should have 70 percent of their damaged production capacity back in operation within a week or two. While crude oil prices initially surged 20 percent up, they have largely fallen back toward where they were before the attack. This is a massive contrast with how all this used to be back in the 1970s when, for example, crude prices would triple or even quadruple with a supply disruption from the Persian Gulf, with dramatic stagflationary effects on all the oil importing national economies. This does not look remotely likely to happen.

The matter that remains very much in the air, with a threat of war breaking out worse than it is already happening, involves the source of the attack on the facilities in Khurais and Abqaiq. SecState Pompeo outright said the attack came from Iran. Supposedly US intelligence agencies are supporting this, although there seem to be doubts. Buried deep in the press reports are caveats suggesting that maybe not quite all the attacks came from there. Of course, it is essentially impossible to evaluate these claims as we know these agencies have their secret methods and sources they are not leaking. But then we see both the Saudis and President Trump holding back from fully going along with this report.

So why might this be wrong? Well, at least one alternative version appears to have been decisively repudiated. That is that the attack came from Shia militias in Iraq. This theory was put forth by Bibi Netanyahu of Israel, perhaps as a desperate part of his reelection campaign, with it looking like he has not done well in that election, although the full outcome is still not known. But this apparently blatantly ridiculous report may be the beginning of the end of people taking publicly announced Israeli intelligence reports as things to be taken seriously.

However, the more serious alternative to Iran as a source is the Yemeni Houthis. Almost certainly the drones were from Iran, although even that is not definitely certain. In any case several statements have come supposedly from US intel agencies that the Yemeni Houthis could not have done this, even though they themselves have been loudly claiming that they did it, while the Iranians are loudly denying that they did it. Supposedly this all distraction from the role of the Iranians. But Juan Cole has pointed out things that the media are simply not reporting things that suggest that indeed the Yemeni Houthis appear to have the capability. In particular in May the Houthis launched a drone attack on an oil pumping station at al-Duadimi, well over 800 miles from Sana’a. The sites struck in this attack are only another 100 miles further, and the Shehad 129 Iranian drone supposedly can travel a full 1100 miles. Why are we seeing no reports of this in the media?

As it is, it may be that both the Saudis and even Trump may be aware of this matter that has not been well publicized. If so, no wonder they are not fully signing on to saying it was Iran, quite aside from a reluctance to get into a new war there. Whatever has really gone down, let us hope at least there will be no new war.

Barkley Rosser

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