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

Mourning The Death Of The New World Order

Mourning The Death Of The New World Order

 I think this is behind the apparently bipartisan and intense outpouring of mourning over the death of 94 year old George H.W. Bush, indeed with some of this even being for the broader post-World War II era in which the US predominated over the world.  Bush was president when the long Cold War with the former Soviet Union came to its end with the victory of the US and the breaking up of the USSR, as well as being the last president to have been a veteran of WW II, and a highly decorated one at that, leaving only Bob Dole as a major political figure still alive who is a veteran of that increasingly distant war that ended with the US clearly on top of the world economically and politically.  While the Bush family has reportedly promised to avoid criticism of President Trump at later today’s funeral, who will attend if not deliver a eulogy, it is both the personal contrast between Bush and Trump that is propelling this high level of mourning, the general personal decency of Bush with the utter lack of any on the part of Trump, but Trump’s role in apparently pushing forward the dissolution, or at least serious weakening of that order that Bush supposedly oversaw the beginning of it at the end of the Cold War, a period when the US moved into a position of complete leadership with Francis Fukuyama even declaring that we had come to the “end of hisotry” as western-style liberal democracy seemed to sweep all before it.

For all of his personal decency and moderation, as well as his generally capable and cautious handling of foreign affaris, Bush can be criticized for many things, mostly regarding domestic matters.  He opposed the Civil Rights Act at the time it was being considered, although he later regretted that.  His campaign ran the infamously racist Willie Horton ad when he ran for president in 1988.  He ignored his own warnings about how Reagan’s claim that he could cut taxes, increase defense epending, while reducing the budget deficit amounted to “voodoo economics,” to join the Reagan admininistration as vice president and then promise “read my lips, no new taxes” while running in 1988.  Of course he damaged himself politically by violating that promise in a budget deal in 1990 that involed raising taxes, with this preceding an economic downturn that led to his defeat by Bill Clinton in 1992.

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Janet Yellen “Not Tall Enough”

Janet Yellen “Not Tall Enough”

So said Donald Trump on several occasions in connection with possibly appointing her as Fed Chair, according to an article in today’s Washington Post by Philip Rucker, John Dawsey, and Damian Paletta.  This article, along with several others, mostly covered the 20 minute interview these three had with Trump in the Oval Office.  Most of the news was wxs expected: on MbS still “maybe he did and maybe he didn’t” on his role in the Khashoggi murder; “i don’t see it” regarding evidence of a human role in global warming presented in the recently released climate change report, and California forest fires still due to poor forest management (with Interior Sec under investigation Ryan Zinke weighing in on that one about the importance of good forest management).  No, the top story was about the economy.

So Trump is blaming GM’s impending layoff of 15,000 workers on the Fed raising interest rates, no role for his steel tariffs.  Janet Yellen should probably grateful she is not in the firing line.  It is Jerome (Jay) Powell who is, with Trump declaring “So far, I’m not even a little bit happy with my selection of Jay.  Not even a little bit. And I’m not blaming anybody, but I’m just telling you I think that the fed is way off-base with what they are doing.”

Now arguably the Fed is being too vigorous about raising interest rates, and they may well slow down or even halt this if the rumblings of growth slowing become louder.  That said, if Yellen had been reappointed probably we would have seen interest rates this year, if possibly maybe not quite as rapidly as we have seen (or would have with some hawk outsider many Congressional Republicans were pushing like Jon Taylor).  But the Fed is much more of a group operation than many realize, especially given that the Chairs for quite some time have sought more or less consensus decisions, even as they are often scattered dissidents making public noises.  And this consensus has a strong element coming from the staff and their models, wirh all of this building in a lot of momentum.  Once the Fed gets itself into doing something, like deciding on the string of interest rates they have been doing, it is hard to undo that.

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Trump More Seriously Kowtows To MBS

Trump More Seriously Kowtows To MBS

 We have already seen the spectacle of Trump simply dismissing the reported CIA conclusion that Saudi Crown Prince Mohammed bin Salman (MbS) ordered the gruesome murder and dismemberment of journalist Jamal Khashoggi (“Maybe he did, maybe he didn’t”)  He has put forward silly excuses for this: low oil prices! (nonexistent) hundreds of billions of dollars of arms deals!  Key to the anti-Iranian coalition!  Oh, and also supposedly key to Israeli-Palestinian peace, this last especially ridiculous since Trump supported moving the US embassy to Jerusalem, wirh Saudi King Salman himself intervening to denounce that.  Of course most of us suspect that his willingness to spout off on all this stuff has a lot to do with money personally flowing to him and Jared Kushner, quite aside from the sword dance and orb and all that stuff they showered him with on his first foreign trip as president.  But now we are seeing a new and more disgusting level of kowtowing to MbS and the Saudis.

This has to do with the war in Yemen.  Juan Cole reports that the US is blocking a UN Security Council resolution proposed by Britain and supposedly supported by all the other nations in it for a ceasefire around the Yemeni port of Hodeida.  This is the port through which most supplies go to the Houthi-controlled areas in the northern part of Yemen, including the nominal capital, Sana’a.  The official government, now operating out of Aden to the south, the former capiral of the formerly separate South Yemen, a Sunni govenment backed by the Saudi and UAE, has been attacking Hodeida, apparently hoping to conquer it and cut off supplies to the Houthis with the intention to starve them into submission.  Even though many in the US DOD and Congress, including many GOP senators, have become increasingly unhappy with the Saudi bombing campaign against the Houthis, and the US has apparently ceased aiding the refueling of the Saudi bombers, although apparently they do not need the US assistance on this.  Reportedly we are still providing crucial intel in support of this bombing campaign, which has led to many civilian deaths, and the population is also reportedly on the verge of famine, as well as suffering from a cholera epidemic.

The UNSC proposal is for a ceasefire around Hodeida, but MbS reportedly “threw a fit” when he learned of this proposal, which apparently includes wording that is very supportive of the Saudi-backed government in Yemen and critical of the Houthis. But MbS wants no halt to the campaign to conquer Hodeida and starve the Houthis and those in their territories.  So, Trump has kowtowed to this “fit,” and is apparently blocking the proposal, despite it coming from the British and containing anti-Houthi language.  There have been reports that MbS has said that he has Jared Kushner “in his pocket,” but it is now screamingly clear that this nauseating murderer also has President Trump “in his pocket” as well.

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Squanto — A Sad Thanksgiving Tale

Squanto — A Sad Thanksgiving Tale

I do not know how widely it is still taught or how, but when I was in elementary school in Ithaca, New York, I was taught about the “First Thanksgiving,” an event that happened in October, 1621 in Plymouth, Massachusetts, following a good harvest after the pilgrim colony, founded in 1620, had a hard year that saw half their population die (about 50 people, mostly of starvation).  It was a joint feast of the pilgrims with neighboring native Indians of the Pokenok tribe of the larger Wampanoag confederacy, led by Massasoit.  Crucial to the event was the assistance of Squanto, who taught the colonists how to grow corn (maize) and several other crops, including the use of fish for fertilizer, thus becoming the model of a “good Indian” who helped European, especially English, colonists in what would become the United States.  Much of this is true, although much is murky, such as what exactly was eaten aside from the deer brought by Massasoit’s people (probably not turkey).

The problem with the tale is more about what is left out rather than any outright falsehoods such as claims that what was eaten was what is now the standard set of dishes consumed at modern Thanksgiving dinners.  It was not even the first Thanksgiving on US soil, with previous ones in St. Augustine, Florida in 1585 and at Berkeley Plantation in Virginia in 1619, although both of these were simply major thanksgiving prayer sessions that did not involve either food or participation by neighboring native Indians, with indeed the Berkeley colony being completely wiped out by a native Indian attack in 1622 that also nearly wiped out the nearby Jamestown colony.  But there are more important things left out, with some of them disturbing and sad.

I found out about this stuff as I investigated this matter this year anticipating having Thanksgiving dinner with my niece, Erica Werner (who writes for the Washington Post), and the extended family of her husband, Bill, and their adorable two young daughters, Lucy and Olive.  As it was, both because there were too many grownups talking about this and that as well as them being clearly fully occupied with other matters, I did not get around to telling the tale there.  So I am telling it here, an addition to the old tale I and many others were taught in school at some time or other.

The most important detail is that the pilgrims were far from being the first English people to have dealings with the various tribes of the Wampanoag confederacy in what is now Massachusetts and Rhode Island (where Massasoit had his home base).  There were at least two previous attempts to start colonies in the area, in 1602 and 1605, both failed as the English insulted the natives and provoked them into hostilities, as well as failing to figure out how to produce food.  More egregious than just trying to impose Christianity and treating them as inferiors was that beyond these two failed efforts, English traders and explorers would regularly raid the tribes, outright stealing goods, and more importantly, kidnapping tribal members.  This is where the story of Squanto begins: he was kidnapped by a Captain Tom Hunt in 1614.

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MbS Guilty!

MbS Guilty!

According to the top stories in both the New York Times and Washington Post this morning, somebody in the CIA has leaked that Mohammed bin Salman (MbS) ordered the assassination of journalist Jamal Khashoggi.  Of course no sensible observer is remotely surprised, but the Trump administration had been working mightily to deny this obvious fact, with reports surfacing that they were plotting to send Turkish cleric Gulen to Turkey as authoritarian President Erdogan has long been demanding (Gulen is Erdogan’s all-purpose scapegoat for everything) in the hopes that Erdogan would stop making it clear that MbS was guilty of ordering the assassination.  But now there is no point in that as the cat is fully out of the bag, no matter how much this leak will anger Trump (Fake CIA leak!).  Indeed, it may well have been reported unhappiness by various government officials in the face of this effort to sacrifice Gulen that triggered the leak.

What is a bit surprising is that the leak involved publicizing that NSA bugs the Saudi embassy, although I would imagine that anybody there who did not know that was stupid.  But crucial to the leak is both that MbS phoned his full brother, Khalid bin Salman, the Saudi ambassador to the US, ordering him to phone Khashoggi and tell him he should go to the Saudi consulate in Istanbul to the documents he needed to marry his Turkish fiancee, and that he would be safe in doing so, and that KbS then followed through and made the phone call. The only thing we do not know is whether KbS was in on what was going to happen to Khashoggi or not when he made the phone call.

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A Serious Centennial

A Serious Centennial

After failing to show up at a major American cemetery in France at least our president did not add to his shame by failing to show up for the big show with 60 or so other national leaders at the Arc de Triomphe for the official ceremony marking the centennial of the 11th hour on the 11th day of the 11th month of November, 1918, when the guns fell silent on the western front of World War I, officially ending it in the eyes of most historians, even though fighting would escalate in certain other important zones whose outcomes still shake the world, most notably between Greece and Turkey, with the dissolution of the Ottoman Empire coming out of that leading to many wars since, some of them gong on right now.  We get it that Trump was uncomfortable given that President Macron was lecturing against the sort of nationalism that led to WW I, with a three day forum to follow that Trump will run as fast as possible back to the US to avoid. And, hey, Macron did not even have tanks and missiles for the parade this time, which Trump really likes to see.

This important day, the first Armistice Day, which we renamed Veterans Day in the US after the War to End All Wars’ unfortunate sequel (actually  in 1954 right after the end of the “forgotten” Korean War) and have since turned into one of those Monday holidays, has turned into a curiously sad one personally.  It involves another war, Vietnam.  My cousin, Bill Atwater, died yesterday, the day before this serious centennial and also the 243rd birthday of the U.S. Marines.  Yes, Bill was a Marine and was in Vietnam where he was exposed to Agent Orange that led him to have various cancers that basically led to his death, although it was an opportunistic pneumonia that finally actually did him in.  He will be cremated with his ashes spread over the cemetery at Arlington. I had not communicated with him directly for over 20 years (did through another cousin), but he told me at his mother’s funeral that he had been spat on when he returned to the U.S.  I have more recently seen stories that such reports were exaggerated, if not outright true.  As it is, I have no way of checking on Bill’s story now, but I know  that he was a multiply wounded man.

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Is It Not The Economy, Stupid?

Is It Not The Economy, Stupid?

On many Mondays I indulge in taking Robert J. Samuelson to task after his regular Washington Post column of the day.  Today he was almost right, or if you prefer, even mostly right.  This one was titled “It’s Not the Economy, Stupid” about the outcome of the midterm election, as well as a delayed comment on the 2016 presidential election (although, of course, HRC did win the popular vote by three million popular votes, if not the electoral college).  His main argument is that in both of these elections, but especially last week’s midterms, the state of the economy was relatively unimportant.  The argument is that here is Trump with GDP growth exceeding 3%, the unemployment rate under 4%, inflation largely under control, but this supposedly good performance did not help him out much with his party taking a pretty serious hit (the size of which still being counted).  He also sees something similar in 2016, although arguably the economy was not as strongly favorable, but still quite respectable while not obviously helping the incumbent party.  Indeed, in 2016 many saw the economy as hurting the Dems, especially in the Rust Belt.

There is a lot of truth to this, with a lot more attention on ethnic and cultural issues, although it should be kept in mind that the top issue for Dems, health care, is at least partly an economic issue.  Certainly one sign of the weakness of the economic issue is the matter of the big GOP tax cut.  They were quite convinced when they passed it last December that this was their ticket to a strong showing in the midterm election.  And indeed it is almost certain that at least some of the acceleration of GDp growth can be attributed to it even if it may be setting up the economy for slower growth down the road.  So according the usual views, it should have helped the GOP. But in the end it seems to have been an electoral flop.  It has consistently done poorly in the polls, and most GOPs running for reelection in the end barely mentioned it.

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US Policy On Iran After The Midterm Elections

A curious coincidence is that the US midterm elections happened one day after the US reimposed its second round of illegal economic sanctions on Iran, with the focus on oil, shipping, and banking, along with some other sectors. Despite all but a handful of governments around the world supporting Iran in this matter (despite apparently two attempted assassinations of opponents of Iran’s government in European nations recently) against the US out of a hope to keep Iran following the JCPOA nuclear agreement as it has by all reports been doing, the impact of the midterm elections is probably to reinforce support for Trump’s policy, even as mostly he lost support in the election. The reason is that the most important location for serious critics of a president’s foreign policy usually come out of the Senate, not the House of Representatives or governors. So, even though the Dems have taken the House and gained governorships, the GOP gained in the Senate, and some of the GOPs leaving included the few Trump critics, notably departing Foreign Relations committee Chair, Robert Corker of TN. This is the case, even as those GOP gains may only amount to a net two (Dem Sinema now ahead in AZ) or even only one (Nelson in FL may yet pull it out too).

Yet another reason the gains by Dems will probably not lead to much more pressure on Trump on this is that many Dems at least somewhat support his policy, especially those strongly influenced by the Israeli government. Thus in today’s Washington Post, a lead editorial (presumably by neoconnish Fred Hiatt) said there may be reasons for imposing some sanctions because of “malignant” policies by Iran, notably supposedly supplying missiles to the Houthis in Yemen, plus the Syrian government, and Hezbollah in Lebanon (there are doubts on the extent of all this), even as WaPo opposes the US withdrawing from the JCPOA and is highly critical of Saudi Arabia due to the murder of their journalist, Jamal Khashoggi, probably on orders of KSA Crown Prince MbS, a main enemy of Iran. Indeed, members of both parties in the Senate have become unhappy with the Saudi war in Yemen and may move to cut US military support of the Saudi war effort there. But this will probably have little to no effect on the reimposed economic sanctions on Iran.

As it is, the ultimate impact of the new sanctions is quite complicated with various cross-cutting effects that are already damaging the Iranian economy, but may end up having less impact than Trump would like. The most important part of the sanctions involves Iran’s oil exports, which US officials claim they would like to see go to zero. Early forecasts had those falling to about a third of the about 2.8 million bpd of a few months ago, which anticipation helped push oil prices up substantially, with Brent crude topping $80 per barrel while West Texas intermediate crude topped $70 per barrel. But the Trump administration has granted temporary waivers to 8 countries allowing them to continue importing Iranian oil for a while, supposedly to avoid excessive disruption of global markers (while not officially announced, the Japan Times claims the 8 waivered nations are China, India, Japan, South Korea, Taiwan, Turkey, Italy [only EU nation on list]. and UAE [yes, that big anti-Iran oil exporter imports oil from Iran]). As it is, with surging oil inventories in the US, prices have fallen sharply in the last two weeks, with Brent down to nearly $70 and WTI to nearly $60 , with some commenters today claiming that oil is turning into a “bear market.” While this clearly allows Iran to export more oil than previously thought for now, the price decline will hurt Iran.

A fundamental clash in this is between governments and the businesses based in their nations. Only a handful of national governments officially support Trump in this policy, basically the odd group of Saudi Arabia, Israel, UAE, Bahrain, and apparently Egypt, with a few others sort of semi-supportive, such as Jordan, if with little enthusiasm. Russia, China, Turkey, and the major EU nations all oppose Trump’s policy. While businesses in Russia in particular go along with their government’s view, nearly all of those that are reasonably large in the EU nations are obeying the demands of the US government to cut back business relations with Iran, with poster boys for this being Total and Peugeot from France out of fear of losing markets in the US or facing sanctions from the US government. All of this has led to efforts in both China and the EU to set up alternative payment systems to avoid using US dollars and going through US-controlled financial intermediaries, a big conflict over this involving the SWIFT payment system, which the US would like to prevent Iran from using while the major European nations oppose this move by the US. As it is, given the ongoing efforts by they EU nations to help Iran out, it seems especially unwise of Iranian intel agencies to be attempting to assassinate people in France and Denmark as they have reportedly done, albeit unsuccessfully so far.

A final point is that it is extremely unlikely that this policy by Trump will lead to Iranian leaders kowtowing to him and entering into any negotiations. If anything, they might get pushed into pulling out of the JCPOA or create trouble for their enemies in various ways. OTOH, it may be that the sanctions will not lead to as harsh impacts on the Iranian economy as forecast, whether this is due to the Europeans and Chinese setting up alternative payments systems, or due to Iran wriggling out of the sanctions whether due to waivers or through such maneuvers as barter transactions involving oil or the use of “ghost ships” that do not use any radio communications, something reportedly already going on. We shall see how this all turns out, but for now Trump probably has gotten a modest boost of support for his policies within the US as a result of the midterm elections, much as I am not pleased to see this.

Barkley Rosser
Econospeak “US Policy On Iran After The Midterm Elections”

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Trump Says Dems Support Venezuelan “High Taxes And Open Borders”

Trump Says Dems Support Venezuelan “High Taxes And Open Borders”

The  average tax rate in Venezuela is 25%. The average tax rate in the US is 26%.  Sorry, Trump, this is yet another lie by Trump, but what else is new on this?

I do not know the details of Venezuelan of immigration policies, but at this point in time the issue  in Venezuela is not immigrants freely arriving and causing economic problems, but just the opposite: people leaving in massive numbers leading to crises in all the neighboring countries of Venezuela.
So, bottom line: Trump not for the first time is totally full of it on all of this.
But now it is time to deal with the political-economic problem of Venezuela, a matter that may lead to some regular readers of this blog to differ with me.

Indeed, Venezuela has turned into a political-economic disaster: extreme hyperinflation with a plunging real output, with massive outmigration, so massive that the receiving nations (Columbia, Brazil, Guayana, Ecuador), have had serious public complaints.

So GOP standard stories have now focused  on Venezuela as the supposed world model of “socialism.”  Oh gag on many issues. I have from the moment Hugo Chavez came to power I never supported him, a military guy who had attempted a failed coup.  I shall not name prominent economists who now are fumbling with the current awful situation.

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Failed Perceptions Of Economic Reality  

Failed Perceptions Of Economic Reality

It is long  viewed that what the electoral populace thinks of the state of the economy is an important factor in how they vote and electoral outcomes.  Prior to 2000 the state of the economy as measured by real per capita  GDP growth explained presidential election outcomes except in cases where there was a war (!940) or there was a party split (1912).  Personal scandals also played roles, with Ford’s defeat in 1976 at least partly due to his pardoning of Nixon.  2000  and 2016 had personal scandal issues involved in outcomes that went against the state of the economy (although 2016 a closer call on that), although in both of those elections we had the electoral college installing a president not favored by the national popular vote.

Midterm elections are not so closely tied to economic conditions as they have certain patterns based on the president and when he was elected, with midterms generally not favoring presidents. Nevertheless, economic conditions do play a role, with Reagan taking a big hit in 1982, even as he won big two years later when the economy turned around.

So now we have the economy doing well in terms of GDP growth, a 4,2% growth quarter followed by a  3.5% one, looking better than many forecast, despite some negative signals such as recent bad performance of the stock market. How will all this play out in the upcoming midterm elections?

To be honest, I do not know.  But it strikes me that most of the electoral populace is not in touch with actual current economic reality. It goes on both sides. So, the side that I tend to favor tends to understate the returns people received from the GOP tax cut.  Now I did not and do not support this tax cut for various reasons, but indeed it did hand out money to the vast majority of the population.  But now by nearly 2 to 1, the US populace says they got nothing from it, and they oppose it as mostly giving money to the rich and adding to the budget deficit. All the latter is correct, of course, so it the populace are not complete fools. But in fact most of them did get some gain from this tax cut. But then, back in 2009-10 when Obama gave most of the population a tax cut, most of them did not notice  it and were unaware they had gotten it.  The hard fact is that people only notice big changes in their take home income, and neither Obama’s nor Trump’s tax breaks were big enough for most people for them to notice it.

Needless to say, while many did not notice the  tax cut  Trump gave them, those favoring Trump are not noticing that the vast majority of the US population has not seen increases in real per capita income.  Trump’s tax cut for the majority of the population was too small to overcome the hard fact that real wages have remained largely stagnant.  GDP growth has been high in the last two quarters, but is declining, and  for a variety of reasons is likely to continue downwards.  The recent volatility of the stock market shows these concerns, ranging from Trump’s trade wars, creeping inflationary trends, and rising interest rates, not to mention bad markets and slowdowns abroad.

Barkley Rosser

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