Category Archives: Economy

Things That Go Bump In The Night and Things That Are Making More Noise Than Sense

Another week of the Trumpster Fire, another week of news from a fire hose, and another week during which we, as news consumers, are required to filter wheat from chaff, and the relevant from the nearly irrelevant.  What things bumping in the night should be attended to? Which can be set off to the side and safely ignored for the moment.

Bumps With More Noise Than Significance

Preliminary public polling results.  The Press/Media is enamored of the latest rendition of The Great Blue Wave.  This is one of the least informative ways of filling one’s air-time.  First, national preference polling is interesting, but all elections are local.  While some members of the punditry are beginning to mouth the words “vote suppression,” and “gerrymandering,” not enough information and analysis has been shared about the effects of these GOP efforts to maintain control of the Congress, and of state elections. Secondly,  there are no national elections for Congressional seats — to state the perfectly obvious.  Those elections will be determined by candidate recruitment and quality, personnel and monetary resources, and campaign competence.  None of these, with the possible exception of shared mailing lists and big donors (monetary resources) is national in scope.  Third, some campaigns will be assisted by the efforts of third party groups. For example, are Union members out canvassing? Are students out doing registration drives?  Are small groups of activists providing services like rides to the polls? The extent and nature of these ancillary groups and their activities will have an impact, we just don’t know the extent to date.  None of this will be “news” to anyone who’s been paying attention to American civic life for the last few decades.

Just because it’s on the news doesn’t necessarily mean it’s important.  The occupant of the Oval Office and some members of the media are still playing the DC parlor game, “Who is Anonymous?” Or anonomus or anamonomous or whatever.  I’m still working on why this might be important.  For my money we still have staff in the executive branch who are willing to explode the national debt in service to tax cuts for the top 0.01% of American income earners, at ease with putting 12,000 children in “detention” facilities for an indefinite period, and quite pleased to allow health insurance companies to charge people with pre-existing medical conditions more for their premiums.  That these people will occasionally arise on their hind legs and proclaim the Great One has gone too far doesn’t impress me.  What would impress me?

How about more attention paid to this nugget:

“Besides family, one of the only people Trump continues to trust is Stephen Miller. “The op-ed has validated Miller’s view, which was also Steve Bannon’s, that there’s an ‘administrative state’ out to get Trump,” a Republican close to the White House said. “There is a coup, and it’s not slow-rolling or concealed,” Bannon told me. “Trump believes there’s a coup,” a person familiar with his thinking said.”

And thus our Oval Office Occupant (Or Triple Zero if spelled 0val 0ffice 0ccupant) is more heavily reliant on a blatantly racist, far right wing conspiracy fabulist, who stokes the Occupant’s most divisive tendencies?  This seems to call for more analysis, and yet the punditry still grasps the Who-Done-It? segment, or pontificates upon the “effect” of the infamous Op-Ed on the President’s “mind set.”  Clue number one a White Nationalist was influencing the 000 might have been the initial Muslim ban?  More clues — no DACA agreement  by Congressional Democrats was ever going to be satisfactory — no one ‘would care’ that there might be children separated from their parents at the southern border — it’s considered acceptable to move funds from FEMA and the Coast Guard to pay for more ICE detention facilities —  it’s supposed to be all right for asylum seeking families to be kept in these detention facilities indefinitely?

Things Not Making So Much Noise But Nevertheless Important

Health care and health insurance.  There is nothing the GOP would enjoy so much as repealing the last semi-colon and comma of the Affordable Care Act.  We’ve heard the “more competition” argument currently coming from the House Speaker before.  It doesn’t make any more sense now than it did then.  Health insurance is not a product analogous to purchasing a motor vehicle or any other consumer product.  One doesn’t choose to get hit by a bus, or hit with a cancer diagnosis, or hit with a complicated pregnancy — or even an uncomplicated one for that matter.

Consumer protection.  While the great fire hose emits its inundation of noise about all things Trumpian, consumer protections enacted to prevent yet another Wall Street melt down are under attack.  The student loan market is being “deregulated.”  Not a good thing.  The smaller issues involved in the Dodd Frank Act have been resolved with some bipartisan legislation, but the administration wants to go further — and the assortment of Goldman Sachs alums in the administration are being ever so helpful in this regard.  Left unchecked we’re going to see another round of de-regulation, which didn’t work out so well for us the last time.  Caveat Emptor American consumer — be careful before voting for any candidate who vows to cut red tape and diminish the “burdens” of regulations — like those preventing the next melt down in the Wall Street Casino.

It’s the Stupid Economy.   Yes. Wall Street has been doing quite nicely thank you very much. I maintain my position that the worst business news is readily available on most broadcast networks.  If a person believes that the DJIA represents the state of the American economy then they’re in for more surprises like the ones which emerged in 2007-08.   Information like real median household income trends is available from FRED, but before we get too excited note median household income numbers may be obscuring other figures like wages adjusted for inflation for full time employees.   Further, what’s being added in to the mix as “income?”  All income includes everything from unemployment benefits to returns on investments.  It’s those returns on investments that have made some very nice progress over the last ten years…wages maybe not so much.  We’re on our own to dive more deeply into the wage issues and income distribution data.  There’s some good news, some bad news, and some news to think about like the 16 straight quarters we’ve had of increasing domestic household debt.  So, it’s time for the question:  Are we seeing candidates for Congress who acknowledge the need for common sense controls on Wall Street casino operations? Who are aware and concerned for wage and salary workers and their economic security?  Are we getting more noise from the highly generalized pie in the sky theoretical visionaries who want us to believe that those with great wealth are going to buy all the homes, cars, washing machines, shoes, movie tickets, and restaurant meals necessary to keep the US economy rolling on?

I could use a little more light on these subjects, and perhaps a bit less bump in the night stuff about a “crisis on the border” (manufactured by the current administration) or “The Press Is Out To Get Me,” from Orange Blossom.   And, I’m looking for Congressional and Senate Candidates who will speak to me about how to fix problems, rather than shout at me about how to fix the blame for them.  I’d like for political discourse to make more sense than noise.

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Filed under anti-immigration, banking, Economy, financial regulation, Health Care, health insurance, Heller, Nevada politics, Politics

Under The Radar: Deregulation and Setting Up the Next Big Bank Debacle

If a person were thinking that the current administration, and those politicians in Nevada who espouse Trumpism, are dangerous in terms of health care insurance affordability, women’s’ health issues, and environmental sustainability — let me offer one more thing to worry about:  Financial deregulation.

Let’s start with the nomination of Brett Kavanaugh for a position on the US Supreme Court, this would be the self-same Kavanaugh who once ruled that the Consumer Financial Protection Bureau was “structurally unconstitutional.” [Politifact]  Please recall for a moment that one of the reasons for the CFPB’s creation was the propensity in some  retail banking circles to generate consumer indebtedness (which could in turn be used as the basis for derivatives) in ways that were definitely not beneficial to both the borrower and the lender.   We know one man’s debt is another man’s asset, but when the debt level becomes impossible and default becomes probable the derivatives become unstable.  This, as the saying goes, “ain’t rocket science.”  But wait! How do we know when things are likely to become unstable?  There’s supposed to be an agency for that, the Office of Financial Research.  However, the Trump nominee to head this agency would really rather eliminate it.

But the fact that this nomination is flying under the radar is not surprising. The OFR is arguably the most important piece of the Dodd-Frank Wall Street Reform and Consumer Protection Act that is never discussed. Despite its lack of public attention, the OFR’s crucial financial stability role demands a leader willing to aggressively execute its lofty mission. Unfortunately, President Trump’s nominee to lead the OFR is more likely to defang and defund the agency than to strengthen it. [AmBanker]

The American Banker explains further:

In the lead-up to the 2007-2008 crisis, financial regulatory agencies did not have a good grasp of how risks that were building across and outside of their specific jurisdictions could threaten financial stability. Regulators were not sharing sufficient data with one another and there were significant pockets of the financial sector where data was not available to any regulator. The Dodd-Frank Act sought to address this issue, in part, by creating the Office of Financial Research.

So, the budget was cut by 25% and the staffing levels by 38%.  This really isn’t conducive to sharing sufficient data and making data available to regulators.   If this is beginning to sound like telling the CDC it can’t investigate and collect data on gun violence in this country because then we might have more relevant statistics in order to understand the problems, that’s because it is.  So, let’s not collect data because then we’d find out things some folks would be happier if we didn’t know.

Then there are the more blatant attempts to roll back the Dodd Frank provisions, for example, see Investment News from last March.  On compliance teams from last May.  And, the JOBS Act 3.0 is just about a death knell for consumer protections, as of August 7 2018.

But wait yet again! There’s more.  There’s that matter of $1.4 trillion — that would be trillion with a T — in student debts in this country a larger portion of which Wells Fargo would really like to access. [Bloomberg] And, yes, this would be the same Wells Fargo which agreed on August 2, 2018 to pay out $2.09 billion in fines for a decade old mortgage loan scheme. [HuffPo]  This, while Secretary of Education, our Yacht Collecting Betsy DeVos, is proposing a rule which would cut student loan debt relief by some $13 billion. [LATimes]  [NYTimes]  So, if a person were scammed by, say, Corinthian, [WSJ] or The Fly By Night School of Urban Hang Gliding, or … Trump University [NBC] … good luck with that?

Did we take our eyes off the major players from the 2007-08 debacle?  Kindly review the “Malaysian Problem” re-emerging at Goldman Sachs.  Or, are we paying attention to what’s happening with a Goldman Sachs whistleblower case of possible wrongful termination which bubbles to the surface every so often? Stick a pin in the name Lars Windhorst for future reference? Why is Goldman Sachs moving jobs out of New York and into Utah? [BusinessInsider]  Cut costs? Yes, but why move back office compliance jobs to “remote” areas?

Then there’s the CFPB’s inexplicable turn to weakening the rules made with regard to loans made to members of the American Armed Forces. [NYT]  This reporting from NPR is pretty chilling:

“NPR has obtained documents that show the White House is proposing changes that critics say would leave service members vulnerable to getting ripped off when they buy cars. Separately, the administration is taking broader steps to roll back enforcement of the Military Lending Act.

The MLA is supposed to protect service members from predatory loans and financial products. But the White House appears willing to change the rules in a way that critics say would take away some of those protections.

“If the White House does this, it will be manipulating the Military Lending Act regulations at the behest of auto dealers and banks to try and make it easier to sell overpriced rip-off products to military service members,” says Christopher Peterson, a law professor at the University of Utah, who reviewed the documents.”

Bank deregulation didn’t work.  It didn’t work in the 1920s; it didn’t work in the 2000s; and, it’s not going to work now.  Notice, please, how when Republicans like Senator Dean Heller refer to Dodd Frank and other financial reform legislation they get vague and highly general. They speak of “onerous” regulator burdens, which are “job killing,” and don’t promote “free enterprise.”   These politicians need to be nailed down with specific questions, such as:

(1) Should the Federal Government collect data about banking trends and risk management and share this with relevant regulators?

(2) Should the Federal Government promote safe lending practices including the regulation of payday loans and similar loans made to members of the US Armed Forces?

(3) Should the Federal Government be taking a more critical look at the levels of student indebtedness, and at the accountability of the institutions offering student loans?

It’s hard to focus on some of the important news involving financial regulation, consumer protection, and other topics whilst we’re being fire-hosed with a daily inundation of surreptitious tapes, the latest cabinet level scandal du jour, and the musing of the misogynist in chief.  However, these are topics on which we should hold candidates accountable in November.

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Filed under banking, Economy, financial regulation, Politics

Dear Orange Blossom, Perhaps if you understand titties you can comprehend why we don’t tick off our milk and cheese buying partners?

Dear Pootus, I am taking a page from the good people at the EU who decided that the way to explain trade policy to you was to provide colorful cue cards.  I will not burden you with graphs (and those tricky x and y axes), nor will I encumber you with charts, which you might have to interpret in light of some very common tricks producing “Gee Whiz Graphs” and other illusions.  Let’s just keep this simple.  If you understand the concept of titties, then you should be able to comprehend the idea of international commodity trading — like milk and milk products.

milk cow 1  Step One: COW 

Notes for your experts who can explain more if you feel the need.  The milk comes from the COW, more specifically from the FEMALE.  This happens BEFORE the milk is in the carton in your refrigerator, or the cheese (made from milk) is inside the fridge too!

milk cow 2 Step Two: Female Cow

The titties portion of the female cow is where the milk comes from.  It is called the udder.  There are many cows, and therefore many udders.  Many udders make lots of milk.  Notes for your experts who can explain more if you feel the need.  There are approximately 8.75 million milk cows in the United States.  Female cows — the ones with the udders — produced about 17.2 billion pounds of milk in June 2018.  This is the highest productivity rate since 2003.  You might wish to take credit for all the milk being produced from all those udders — more than under any other President EVER!  Not that your presidency has anything in the world to do with cow productivity, but since you delight in taking credit for everything else that happens — even if it doesn’t — on your watch, why not take credit for milk production?

milk cow 3 Step Three:  Milk Comes From Cows

There is a surplus of milk on the market.  As of last May dairy farms were getting hammered by low prices for milk because there was too much of it on the market.  Therefore, you might want to be very careful about crowing about those production numbers?  Notes for your experts who can explain more if you feel the need.   There were things dairy farmers wanted your administration to do. For example, they suggested putting a floor on milk prices at $20 per hundred pounds.  They suggested stabilizing volatile markets.  They suggested government purchases of milk for public food pantries.  (That’s NOT panties for the udders, that’s pantries for people who need food assistance.) [USAT]

milk cow 4 cheese Step Four: Cheese and other products come from milk.

In order for the dairy farmers to stay in business someone needs to buy the milk produced by their cows.  Some of the milk is purchased for domestic consumption. That means “here at home.” Some of the milk is purchased by our trading partners.  Notice that one of our major trading partners for exported cheese is Mexico. In fact, US Export Data shows Mexico as the Numero Uno buyer for cheese exported from the United States.

Am I getting the message across to you yet?  When all those titties (udders) produce all that milk, the milk must be sold for the dairy farmers to make a profit.  Cheese is made from milk, and Mexico, South Korea, Japan, Middle East/North Africa, Australia, Central America, SE Asia, Canada, and China are our biggest buyers for cheese products.

Have you suggested setting a floor on milk prices?  No?  Or, stabilizing volatile markets (including the international ones)? No? Or creating new markets for American milk and cheese products? No?  Or, supporting the USDA food assistance programs like public food pantries? No?  So, what have you been doing?  Oh, that’s right — slapping tariffs on our trading partners…

“In the past few months, Trump’s administration has proposed steel and aluminum tariffs, and increased tensions with trade allies in Europe, Asia, and North America. This week, reports of a White House proposal that would call on the United States to disregard World Trade Organization rules are making lawmakers on both sides of the aisle fret that the United States could be staring down a trade war — one that is likely to hit the agricultural industry the hardest. On Thursday, Mexico announced 15 to 25 percent retaliatory tariffs on dozens of US goods, mostly on agricultural products — including cheese.”  [Vox 7.5.18] (emphasis added)

One more time: Milk comes from cows; cows have udders; too many udders are producing too much milk; too much milk is being stored as cheese (because it doesn’t spoil like fresh milk); there are not enough buyers for our cheese; and, therefore, the price of milk and cheese decline.  When the prices decline below the break even point the dairy farmer is out of business.   When the farmer is out of business he can no longer buy the Red Hats you had manufactured in China.  NOW, are you getting the point?

I cannot, for the life of me, figure out a way to make this any simpler for you.  I will now return to writing posts for the adults in the room.  Thank you for your limited attention.

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Filed under Economy, Farm Subsidies, trade deficit

Our Weekly Fresh Horrors

Gee, what fresh horror would make for a nice blog post today?

#1. We could start with this analysis of Orange Blossom’s perfectly inane trade policy, as expounded by conservative economist Walter Block in the not-so-failing New York Times:

“The negative consequences of a trade war will soon be felt, if they aren’t already. Even if the United States avoids trade conflict with Europe, tariffs on steel and aluminum from China, Mexico and Canada will raise domestic prices, hurting consumers. And the administration is likely to find itself subsidizing voters who purchase these items or who are hurt when other countries slap tariffs on American goods in retaliation — mainly farmers, manufacturers and builders.”

Perhaps the color coded cue cards were insufficient to explain BASIC economics to our special Orange Blossom during his meetings with EU officials.  Is there an emoji for putting both of one’s hands palm forward into one’s face? I could use one right now.

#2.  Also from the New York Times — the Feds announce they’ve met the deadline for reuniting children with their migrant parents. However, there’s this little Oops paragraph in the article:

“But in a day that saw government officials and community volunteers scrambling to bring families together, multiple reports of failed reunifications raised questions about whether the deadline had in fact been met. Further confusing the issue was a change in the way the government tallied its progress, with the latest report counting children rather than parents, a reversal from prior reports.”

So, if they can’t reunify families, then they simply reclassify the children and/or parents to say they aren’t eligible for reunification!  Whee. How convenient.   Yes Sir, I could say I really stuck to my pledge to make healthier eating choices — IF we don’t count the two chocolate chip cookies, the can of Pepsi, the chips, the cheeseburger, the … you get the idea. There are still some 700 children not reunited with family.  And when the ADL is putting out warnings about what happens to children separated from parents, as in what happened during the Holocaust, maybe we should be paying attention.  I really do need that double face-palm emoji thing.

#3.  The Ruskies are still here. As in still attacking our American electoral system; as in attacking the McCaskill Senate campaign in Missouri.  They also appear to have attacked two other campaigns. This isn’t “history,” this is current events.  There’s more at “The Hacking of America,” on Slate.   The article isn’t exactly pleasant reading, but it’s recommended as a reminder that God helps those who help themselves, and DHS is talking about new initiatives with 90 day timelines.   90 days?  What happened to getting a start on this, say some 1 year, 188 days, and 2 minutes (as of now) ago?

#4.  Special concern for the people in the Redding, California area.  The news on that fire front is horrible. Up here in cheat grass country we lucked out during the Holloway Complex Fire in 2014.  There’s nothing quite so chilling as the sound of a local deputy on a bull horn announcing a preliminary notice of an evacuation order.  I don’t wish it on anyone.  Please, California neighbors, stay safe!

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Filed under Economy, elections, Immigration, Politics

Meanwhile Back With My Soy Beans and an Orange Blossom Who Can’t Shoot Straight

So, here’s from the Farm Report:

Soybeans are lower, breaking the support line from their three-day rally overnight. Traders will continue to scour today’s export data for clue on how foreign buyers are responding to the bargains created by Chinese tariffs. Sales are expected to rise after disappointing results last week. Vegetable oil markets in Asia were lower today, losing around a fifth of a cent per pound.  September soybean oil futures in China fell to 36.844 cents and September palm oil futures in Malaysia were at 24.473 cents.

and on soy beans in particular

If production doesn’t swell too much, November futures may try to hold the $8 level into the August report. USDA put the bottom of its average cash price for the 2018 crop at $8, a level already reached in many local markets around the country. It’s still a $2 climb back to profitability. But most growers appear to have priced a good chunk of their expected production when offered a good price this winter and spring.

Hold this thought — $8.00 per for soy bean farmers or — it’s a really bad year down on the farm. “USDA’s July 12 monthly report put a number on the lost revenue farmers face: $325 million in new crop sales. That number is based on the amount the agency lowered its price range for crop, 75 cents a bushel.” [WSR]  Soy bean prices are about $8.55, nearly a ten year low. [CNN money]

All right, it’s not that I am in the soy bean business. It’s not that I expect ANY reader of this blog to have any more connection to soy beans than the occasional purchase of soy milk.  It’s that the little beans are a metaphor, an anchor, a data point, to watch the inexplicable economic idiocy of the current administration ensconced in the Oval Office.

Those slap dash, ham-fisted, wild west, off the cuff, distributive bargaining ploy, grandiose threats and counter threats being on offer from the mis-administration in lieu of any real coordinated trade strategy and policy have real world consequences for real world people — people like Iowa soy bean farmers who can’t take the hit if soy bean prices drop below $6.00.  Did we notice all those “ifs” and assumptions in the USDA pricing report?  Like automobile manufacturers in South Carolina who don’t have to take a hit if moving export production to friendlier climes will put money back into their bottom lines.  Like household appliance manufacturers who thought tariffs were such a lovely idea when they were on Samsung and LG, but on steel and aluminum not so much.

We have a *President who can’t get to “yes.”  He couldn’t get to “yes,” on a health care bill and ended up with a bill he didn’t want.  He couldn’t get to “yes” on a DACA bill, and no one’s ended up with anything at all.  He couldn’t get to “yes” on immigration policy, and ended up with a court order to reunite families in which he, in all likelihood, cannot make yet another deadline.  He can’t get to “yes” on NAFTA terms with Mexico and Canada.  He can’t get to “yes” with Asian regional trade and commerce agreements.  He just can’t get to “yes.”

My way or the highway distributive bargaining works when I want to purchase a vehicle and there are 15 dealerships in a 50 mile radius.  As noted before, the bottom line is the “walk away” point. However, there is no other China, no other Mexico, no other Canada, no other European Union, no other United Kingdom, no other Germany, no other Japan, no other France, no other Brazil.  There is no Walking Away point because there is no other place to walk to.

The price of soy beans (or cars, refrigerators, beer cans, or washing machines) cannot be determined by simply yelling at the dealer, threatening to bludgeon him with penalties,  loudly pronouncing another salvo of letters to the editor about their poor service, and later threatening to sue for ‘false’ something or another.  We have a global economy based on supply and demand principles which Orange Blossom pretends to understand, but which he provides scant evidence thereof.

And NOW he wants to weigh in (at over 239 pounds) on what the Federal Reserve should be doing with interest rates!  [CNBC]

Will someone, anyone, please take him down to that portion of the White House where the last evidence of the fire set by British troops on August 24, 1814 remains, lock him there, quietly close whatever doors are behind him — or at least make him SHUT THE H___ UP?

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Filed under Economy, Politics

Orange Blossom’s Special: Or How To Bargain Against Your Own Best Interests?

Remember when Orange Blossom told us Russia is our “competitor,” and we looked at the GDP comparisons of our real competitor (China) and our 11th ranked “competitor” in terms of GDP — the Russian Federation?  Then there was the time DB went off on “distributive negotiations vs. integrated negotiations,” and allowed as how the integrated form was just a bit too deep for our Siberian Candidate?  If we put these two concepts together there’s more cause for alarm in regard to our dealing with global trade matters, some of which flow nicely over into global security concerns.

We also need to recall Senator McCain’s observation that the Russian Federation is a gas pump masquerading as a country.  Thus:

“Compared to Canada and Australia, Russia’s export mix isn’t nearly as diversified: About half of its exports in terms of value are a combination of oil and natural gas. (Russia sits atop the third-largest oil reserves in the world, the number one natural gas reserves.) It should come as no surprise, then, that its currency is highly influenced by Brent oil. Where oil went starting in July 2014, so went the ruble.”  [USfunds]

That direction would be down.  Notice the date: 2014.  By December 2014 Russia was in a recession. [CNN money]  As of August 2016 Russia was in the throes of an 18 month recession. [CNN money] It’s not until May 2017 that the World Bank was ready to declare Russia waa in “recovery” mode.

“Growing macro-stability, driven by the government’s policy response package of a flexible exchange rate policy, expenditure cuts, and bank recapitalization – along with tapping into the Reserve Fund – has helped facilitate the adjustment of an economy hit by the double shocks of low oil prices and restricted access to international financial markets. The positive terms-of-trade effect from rising oil prices, coupled with more stable macroeconomic conditions, are expected to drive Russia’s economic recovery going forward.” May 23, 2017 [ WorldBank]

Now, let’s dive into the polite verbiage in this paragraph.  It’s ever so polite.  The second thing the Russians had to do was “make expenditure cuts,”  — can we say “austerity?”  By 2016 the Russian government was well into “austerity:”

Russia is preparing to slash government spending across the board over the next three years as it struggles to bring down a budget deficit swollen by lower oil prices and recession. Deep cuts are looming for health, education and even defence — which is slated for a swingeing 27 per cent reduction in expenditure next year, according to a draft budget that the government submitted to parliament late on Friday. [FinancialTimes]

Yes, even the vaunted military budget of  the Russian Federation was under the hammer in late 2016.  And did we catch that part about “restricted access to international financial markets?”  We now introduce the Magnitsky Act!  First enacted in 2012, and then there’s this bit: “Since 2016 the bill, which applies globally, “authorizes governments to sanctioof n human rights offenders in Russia, freeze their foreign assets, and ban them from entering the signing country.”  Why does the Kremlin care so deeply about the Magnitsky Act? See Slate, see The Atlantic, see the San Diego Union Tribune.   The oligarchs already had problems “accessing” financial markets, and the Magnitsky Act topped off the sundae.  And as for bank bailouts… the US has nothing on what the Russians had to do with their bank “recapitalization.” [Reuters 2015] [Reuters September 2017] [Moody’s 2018]

So here we are.  We have a gas pump masquerading as a country, with a GDP of $1.283 trillion.  Okay it’s not exactly fair to compare US states with entire countries, but who’s playing fair?  Our entire “gas pump masquerading as a country” has a smaller GDP than three individual US states.

state gdp Ouch.

Here we go again.  Mr. Orange Blossom Siberian Candidate, masquerading as  a US president, has been noticeably eager to avoid applying those sticky sanctions against the Russian oligarchs (of the Magnitsky Act variety) and had to get hog tied by a veto proof majority bill applying sanctions.  All bright smiles and twinkly eyes about a distributive bargain in which he gives up those icky sanctions (and facilitates access to financial markets) in exchange for ________________??  In which he slaps trade penalties on our real competitor (China) in exchange for _____________________??  In which he wants to make big deals with a nation with a very narrow economy (did I mention gas pump disguised as a country?)  With which he wants to conduct distributive bargaining while one economy is the largest on planet Earth and the other is smaller than three individual states part of that biggest economy on planet Earth?

So we’re going to get brassy with our top three trading partners, China, Canada, and Mexico [Forbes] and then get obnoxious with the Japanese (did we keep them in the loop when dealing with North Korea?), followed by calling the EU a “foe,” (GDP $17,308,862 million), insult Germany, France, and the UK, while ignoring India and Italy. Oh, and that thing about slapping tariffs on South Korean refrigerators … well, now Whirlpool is upset because those tariffs they applauded on the fridges just got really complicated when the Orange Blossom Special slapped on steel tariffs. [WSJ] [Bloomberg]  Oh well, DB’s been bouncing up and down for a while now complaining that integrated bargaining, nuanced negotiation, and multi-faceted layers of critical analysis and evaluation weren’t something often associated with the Orange Blossom Special.

And, the worst of it all seems to be that OBS never seems to actually GET anything.  We’ve got a big nothing-burger from North Korea, trade dispute referrals from Canada, Mexico, and China, nothing out of the renegotiation of NAFTA, nothing from EU/Japan trade deals, nothing from Australian/Japanese/Chinese regional trade deals.  Nothing so far.

If China is our true competitor, then why are we driving Chinese buyers into Russian soy bean markets?  (See, I told you I could get my soy beans into almost any post!)  If we want to compete with China, then why are we encouraging them to negotiate deals with the European Union?  Don’t WE want the business?

When a country doesn’t carefully evaluate who are its competitors, who are its friendly competitors, who are its adversaries, and who are its enemies; and, then doesn’t engage in the integrated bargaining necessary to cope with the ramifications and results of trade and economic negotiations the results are messy at best, and dismal at worst.  The Orange Blossom Special is off the rails, chasing the Gas Pump into a swamp, and one more metaphor and I will have rendered this paragraph as incomprehensible as Trump Administration Trade Policy.

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Filed under Economy, Politics

And Then Helsinki Happened

Nothing happened yesterday in Helsinki, Finland, which offered anyone any hope for a more peaceful world, a world wherein the behavior of Russia will be restrained from — shooting down civilian aircraft, from invading neighboring nations, from attacking the democratic institutions of free nations, from poisoning and killing people in the United Kingdom, from supporting other egregious regional dictators, from assassinating journalists, from fomenting disorder in western democracies and western democratic institutions both economic and military.

What does Putin want? Does he want to take back control of the Baltic nations? To make further incursions into Ukraine? To increase the influence of the faltering Russian economy?  To fly the Russian flag — physically and metaphorically over the world camouflaging the fundamental weakness Reagan recognized; Russia as a third world nation with a first world military.  Whatever Putin wants, whatever goals he wishes to achieve, he has a willing tool — a useful idiot? an unwilling accomplice? a willing foil? — in the President of the United States of America.  We can rationally assume Mr. Putin wants more than just a press conference with an obsequious President.

There will be many commenters who can provide context and additional information about the geo-political ramifications of the Debacle in Helsinki, some have already weighed in.  I’m going to retreat to my comfort zone — my soybeans if you will — and look at the debacle from that narrower perspective.

Russia’s economy isn’t even in the same ball park with the United States and China.  The US has the world’s largest GDP,  (pdf) China has the second, then it’s downhill.

GDP ranking 2017

Notice that Russia isn’t in the top five, it isn’t even in the top ten; it’s number 11 on the 2017 wold bank rankings.  If we were looking to obvious alliances to maximize economic benefits the US and China have the most to gain by cooperating.  We have the top two economies, by far and away the most powerful economic engines in the world.   Yes, we have differences — intellectual property rights issues in particular — but given the inter- connectivity of modern manufacturing, logistics, and capital, cooperation will get both countries ahead of what they could accomplish singularly.  So, what does the current mis-administration do? Assault the EU and slap trade penalties on China.  So, this is reported this morning:

President Trump is inciting a trade war, undermining NATO and painting Europe as a foe. It’s no wonder, then, that the European Union is looking elsewhere for friends.

On Tuesday in Tokyo, it signed its largest trade deal ever, a pact with Japan that will slash customs duties on products like European wine and cheese, while gradually reducing tariffs on cars. The agreement will cover a quarter of the global economy, and is the latest in a string of efforts either concluded or in the works with countries like Australia, Vietnam and even China.

Now, look back up to the ranking list.   Then, the article continues:

While the president was threatening to rip up the North American Free Trade Agreement, the European Union was putting the final touches on a free-trade pact with Canada. It took effect late last year.

Europe also reached a deal in principle with Mexico to update an existing free-trade agreement, one that should be finalized by the end of the year. Accords with Vietnam and Singapore are going through the final stages of approval.

Lovely, nothing like spurning all the girls at the dance and then wondering why one is  rapidly becoming the world’s wall flower.  So, we’re throwing in our lot with the Russian economy? Why?  The *President may call Russia a competitor, but I can call my dachshund a rottweiler too, all to the same effect. [WBUR]  And, there’s this observation to contemplate:

Two other GDP comparisons are illustrative of Russia’s economic weakness. Its GDP is barely more than that of South Korea, yet South Korea’s population is slightly more than one-third of Russia’s. In effect, the South Korean people are three times as productive as the Russians.

The GDP of the European Union (EU), which Russia is aggressively trying to undermine, is 11 times greater than Russia’s GDP even though the EU has only three-and-a-half times as many people as Russia. Like the South Koreans, the EU population is three times as productive as the Russians.

[…]

In international trade, Russia does not amount to much other than as an energy exporter and, increasingly, selling wheat to China. Ranking just 16th among the world’s exporters, in terms of dollar value, Russia’s impact on global trade is minuscule compared to China or Germany despite its substantial oil and natural gas exports.

On a per-capita basis, Russia is even more deficient as an economic competitor. In 2017, Russia’s per-capita GDP was under $11,000, less than one-fifth of U.S. per-capita GDP and on a par with Turkey and Romania.

Russia’s economic shortcomings long predate the sanctions imposed on it by the United States and other countries. Its economy is hardly a first-class performer for its citizens due to its weakness. In fact, they are not faring well.

In short, Senator John McCain was correct in observing that Russia is a gas pump masquerading as a country.  If someone can take a look at that GDP ranking list and explain to me — in rational terms — why the US would pick fights with Mexico and Canada, with the European Union, with the UK, with China, and then cuddle up to a “gas pump masquerading as a country,” please do so!

In addition to statements being constitutionally deplorable, militarily insane, and morally reprehensible, Orange Blossom added a large dollop of unadulterated economic IDIOCY.

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