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Two Events That Will Determine Oil Prices
Two Events That Will Determine Oil Prices
Two big events over the next two weeks will determine the trajectory for oil prices in the second half of the year. One of those events will take place in Japan, the other in Austria.
U.S. President Donald Trump will meet Chinese President Xi Jingping on the sidelines of the G-20 conference next week in Osaka, Japan. Nothing less than the health of the global economy hangs in the balance.
Both leaders have powerful forces pulling them in opposite directions. On the one hand, both have a domestic political constituency invested in confrontation, or, at least, in not backing down from a trade fight. Neither wants to lose face. Trump campaigned on taking on China, and at least part of his political base may be disappointed if he comes home short of victory. In Beijing, Xi is also under tremendous pressure. The protests in Hong Kong leave him little room for error, and being seen as backing down to Trump would be highly damaging.
However, both leaders are also under pressure to end the trade war. Trump has a presidential election right around the corner, and farm country has been hit hard by sinking agricultural prices related to tariffs. China’s economy has also been hit hard by American tariffs, so Xi would likely be relieved to reach a compromise.
The stakes are high. The global economy is slowing down. Manufacturing data is weak, the auto market has slumped badly, trade volumes are sharply down globally. If the talks fail and the U.S. and China decide to escalate the pressure – Trump has threatened to hike tariffs on $300 billion of Chinese goods – a full-blown recession is possible.
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More US Warships Arrive In The Mideast Even As Trump Signals Draw Down
More US Warships Arrive In The Mideast Even As Trump Signals Draw Down
Despite Trump taking to Twitter Monday morning to question, “why are we protecting the shipping lanes for other countries (many years) for zero compensation,”and asserting further that “All of these countries should be protecting their own ships” — the US naval build-up in the Persian Gulf region continues.
The US Navy confirmed early Monday that more military ships have arrived in the US 5th Fleet area of responsibility, which includes the Persian Gulf and Middle East waters. Though not pinpointing their exact location, the additional deployment which comes in the wake of last week’s US drone shoot down by Iran, that saw Washington coming very close to launching major strikes in response, is described in Navy statements as including a major amphibious assault ship and two support vessels:
Monday’s Navy statement says the USS Boxer amphibious assault ship, along with the amphibious transport dock USS John P. Murtha and the amphibious dock landing ship USS Harpers Ferry arrived in the 5th Fleet’s area of responsibility.
The AP notes that the the USS Boxer carries the 11th Marine Expeditionary Unit and a combat helicopter squadron, and departed the US west coast at the start of May as part of a regularly scheduled deployment; however, it’s quick transition to the 5th Fleet area is in support of the USS Abraham Lincoln carrier strike group already there in response to Iran.
The new military arrivals to the region came just as US Secretary of State Mike Pompeo met with Saudi King Salman and separately with Crown Prince Mohammed bin Salman in the port city of Jeddah to tackle the escalating crisis with Iran in the Persian Gulf.
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Starvation Sanctions Are Worse Than Overt Warfare
Starvation Sanctions Are Worse Than Overt Warfare
“We are putting major additional Sanctions on Iran on Monday,” President Trump tweeted today. “I look forward to the day that Sanctions come off Iran, and they become a productive and prosperous nation again – The sooner the better!”
Iran’s economy is already floundering due to the steadily mounting sanctions that the Trump administration has been heaping upon it since its withdrawal from the JCPOA last year. Crucial goods are four times the price they used to be, sick Iranians are having difficulty obtaining life-saving medicine, and life in general has been getting much more difficult for the poorest and frailest Iranian civilians.
For this reason, it is a very safe bet that there have been Iranians who have died because of the sanctions. Being unable to obtain enough life-saving medicine will inevitably increase mortality rates, as will inadequate nutrition and care for those whose health is at risk. There’s not really any way around that, and it’s only going to get worse.
And that’s exactly what was supposed to happen. As far as their intended purpose is concerned, the sanctions are working. They’re doing exactly what they were intended to do: hurt Iranian civilians.
How do I know this? Well for one thing America’s Secretary of State has said it openly. The New York Times reports the following:
Last week, Mr. Pompeo acknowledged to Michael J. Morrell, a former acting director of the C.I.A., that the administration’s strategy would not persuade Iranian leaders to change their behavior.
“I think what can change is the people can change the government,” he said on a podcast hosted by Mr. Morrell, in what appeared to be an endorsement of regime change.
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The Coming Sino-American Bust-Up
The Coming Sino-American Bust-Up
Whether or not US President Donald Trump and his Chinese counterpart, Xi Jinping, agree to another truce at the upcoming G20 summit in Osaka, the Sino-American conflict has already entered a dangerous new phase. Though a negotiated settlement or a managed continuation of the status quo are possible, a sharp escalation is now the most likely scenario.
The nascent Sino-American cold war is the key source of uncertainty in today’s global economy. How the conflict plays out will affect consumer and asset markets of all kinds, as well as the trajectory of inflation, monetary policy, and fiscal conditions around the world. Escalation of the tensions between the world’s two largest economies could well produce a global recession and subsequent financial crisis by 2020, even if the US Federal Reserve and other major central banks pursue aggressive monetary easing.
Much, therefore, depends on whether the dispute does indeed evolve into a persistent state of economic and political conflict. In the short term, a planned meeting between US President Donald Trump and his Chinese counterpart, Xi Jinping, at the G20 Summit in Osaka on June 28-29 is a key event to watch. A truce could leave tariffs frozen at the current level, while sparing the Chinese technology giant Huawei from the crippling sanctions that Trump has put forward; failure to reach an agreement could set off a progressive escalation, ultimately leading to the balkanization of the entire global economy.
JAW-JAW OR WAR-WAR?
Viewed broadly, there are three scenarios for how the situation might develop between now and the end of 2020, when the United States will hold its next presidential election. One possibility is that Trump and Xi will find a truce or modus vivendi in Osaka, paving the way for a negotiated settlement toward the end of this year.
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The New Tanker War – Trump Pampers the US Shale Oil Industry
The New Tanker War – Trump Pampers the US Shale Oil Industry
The situation in the Gulf of Oman is getting worse. After the attacks on two tankers, Khamenei said that he would never sit at the negotiating table with the US again.1)So Iran will continue its nuclear program till the Israeli strategists interpret its advancement as unacceptable and will have Iranian targets attacked. Up to this time a new tanker war is more likely than 30 years ago, of which Gefira warned already in autumn 2018. 2)Our forecasts proved correct.
The attacks could indeed have been carried out by Iranians, and it is quite possible that they were a provocation of the Americans. Such a hypothesis is justified by the analysis of the history of the conflict between the Great Satan and Iran. In August 1953, MI6 and CIA overthrew democratically elected Prime Minister Mohammed Mossadeq for wanting to nationalize the British Anglo-Iranian Oil Company (now BP). The company earned huge sums, of which Iran received hardly anything. The CIA’s Shah Reza Pahlavi, installed in place of Mossadeq, guaranteed the US that Iran would not cross over to the Soviet Union. With the help of the Americans3)he founded the secret service SAVAK, which suppressed the population, tortured and committed numerous murders.4)The Americans were not bothered by this for decades, but today they are outraged by the violation of human rights in Iran: indeed by the violation of their interests in the region.
The nationalization of oil production did not take place under Pahlavi. Almost half of the proceeds continued to go to American and British companies. As in Afghanistan and other countries of the world, Americans have invented their future enemies themselves.
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Trump Messaged Iran With Last Second Opening For Talks Just Before Calling Off Strikes: Report
Trump Messaged Iran With Last Second Opening For Talks Just Before Calling Off Strikes: Report
More dramatic details have trickled out this morning surrounding last night’s US military strike operations on Iran, which were reportedly called off at the last moment by President Trump even as American ships and missile batteries were in position, even including planes in the air ready for an assault.
According to a new Reuters report, Iranian officials say they had received a message from the White House notifying that a major attack was on Iran was imminent but that President Trump “was against war and wanted talks on a range of issues”.
The New York Times and WSJ reported of the called off attack, citing a handful of senior officials, that the president was prepared to attack a number of Iranian targets, including radar and missile batteries. However, he eventually gave the word to stand down, with the NYT reporting that Trump chose to pull US military forces back.
Oil Extends Surge After Drone Strike Fuels U.S.-Iran Tensions
Reuters says the message was delivered via Oman mediators overnight and it was revealed quickly after Trump had called of the strikes. “In his message, Trump said he was against any war with Iran and wanted to talk to Tehran about various issues,”one of the unnamed Iranian officials told Reuters.
“He gave a short period of time to get our response but Iran’s immediate response was that it is up to Supreme Leader (Ayatollah Ali) Khamenei to decide about this issue,” the source said.
And Reuters cites a second Iranian official, who said: “We made it clear that the leader is against any talks, but the message will be conveyed to him to make a decision.” The official added, “However, we told the Omani official that any attack against Iran will have regional and international consequences.”
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Blain’s Morning Porridge – June 19th 2019
Blain’s Morning Porridge – June 19th 2019
“You cannot be serious…”
Check out the new Edition of Property Chronicle: https://vimeo.com/342064460
Oh dear.. Now I am worried. The only positive I can discern is its International Martini Day – Dukes, here we come..
It was a massive Wowser WTF moment on stocks! Donald Trump says he’s having a meeting with Xi and the stock market goes into the stratosphere! Then XI confirms, and its joy unlimited across markets. New records beckon.… Joy unconfined.. What can possibly go wrong? Softbank head Son telling investors it could be worth $1.8 trillion in a few years? (Note to self – sell stocks.)
On the other side of the pond, it’s a Wow on Bunds…. Spectacular gains y’day taking the 10-year Bund rate to -0.33% after Mario Draghi talked about immediately lower rates, reopening QE and using all the unused A380s Superjumbos to drop wads of money across Yoorp. Spain bond buyers now get a gnat’s crotchet of positive yields, while Italy is just over 2%! Trump immediately tweets branding Draghi an unfair currency manipulator. Draghi looks at the miserable German ZEW and wonders why Donald doesn’t get on an do his own job… (Good to know Trump is on the ball and watching everything… everything.. (Crashing Minor Chords! Note to self – buy Treasuries and Gold).
Meanwhile, the Tories have found something to rally around… kicking Rory Stewart (which, thinking about it, has to be worth trying)… Last night’s televised debate between the candidates was truly terrible. The only positives I could garner was Boris has been stripped of his personality, and Sajid Javid came across measured and even polite. I’d vote for him, but we will never get the chance because most of us are too sensible, young, clever, to be members of the party… Meanwhile, Corbyn looks likely to accept Labour policy will pivot towards a second referendum….
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Trump Says Tanker Attack Has “Iran Written All Over It” As Tehran Slams US “False Flag”
Trump Says Tanker Attack Has “Iran Written All Over It” As Tehran Slams US “False Flag”
Iran has slammed what it’s mission to the United Nations said are “unfounded and reckless” claims put forth yesterday by US Secretary of State Mike Pompeo accusing Iran of conducting the “blatant” attack on two international oil tankers in the Gulf of Oman on Thursday. Meanwhile President Trump on Friday morning told Fox & Friends that the tanker attacks had “Iran written all over it” and dismissed Iran as “a nation of terror.”
Notably, Iranian officials have accused the US or one of its allies of conducing a false flag operation as part of the “disinformation campaign” to continue its “maximum pressure” which aims at bringing Tehran into the cross hairs of a US-led war.
“The US and its regional allies must stop warmongering and put an end to mischievous plots and false flag operations in the region,” Iran’s mission to the United Nations said.
Issued late Thursday, the statement said further: “Warning, once again, about all of the US coercion, intimidation and malign behavior, Iran expresses concern over suspicious incidents for the oil tankers that occurred today.”
“The US economic war and terrorism against the Iranian people as well as the massive military presence in the region have been and continue to be the main sources of insecurity and instability in the wider Persian Gulf region and the most significant threat to its peace and security,” the statement continued.
Iran’s foreign minister also later described the US accusations as “sabotage diplomacy” following his previous comments posted to Twitter saying “Suspicious doesn’t begin to describe what likely transpired” — especially given Iran’s president and the Ayatollah were hosting Japanese Prime Minister Shinzō Abe to mediate nuclear deal matters and sanctions relief at the very moment the attack took place.
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Cover-Ups and Truth Tellers
Cover-Ups and Truth Tellers
In a May, 22, 2019 appearance in the White House Rose Garden, President Donald Trump declared that “I don’t do cover-ups.” Various news outlets immediately started to enumerate a long list of bona fide cover-ups associated with the president.
What can one say about this bit of Trumpian nonsense? Can you accuse a person of lying who actually seems not to know the difference between truth and untruth? Trump’s inability in this regard is demonstrated daily, and The Washington Post fact checker puts the running count of presidential lies at 10,111, with no end in sight. When it comes to reality, the president appears to be a malignant version of Walter Mitty.
Trump delivering State of the Union address, Feb. 5, 2019, in Washington, D.C. (White House/ D. Myles Cullen)
Unfortunately, Trump’s behavior is but the tip of the iceberg when it comes to cover-ups. One can surmise that just by virtue of being the head of the U.S. government, the president — any president — must be directly or indirectly associated with hundreds of such evasions. That is because, it can be argued without much paranoia, that every major division of the government is hiding something —particularly when it comes to foreign activities.
Of course, being cover-ups by the government may make them appear acceptable, at least to a naive public. Many of them are rationalized as necessary for the sake of national “security.” And, of course, everyone wants to be “secure,” accepting the notion that “people sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.”
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Escalating Trade War Signals More Pain For Oil
Escalating Trade War Signals More Pain For Oil
Trump backed off his proposed trade war with Mexico in the face of intense pressure from business groups and even his own party, but his faith in tariffs remains unbowed. In fact, Trump may have internalized a lesson that presents further risks to the global economy and to oil markets.
“If we didn’t have tariffs, we wouldn’t have made a deal with Mexico,” Trump said on Monday. “We got everything we wanted.”
The proposed 5 percent tariff on Mexico was suspended because Trump said that the Mexican government agreed to a series of demands to tighten up migration through the country. However, press reports suggest that some of the provisions in the deal, such as Mexico agreeing to buy agricultural goods, are a mirage, while others, such as expanding border security, were agreed to months ago.
Leaving those pesky details aside, Trump was triumphant. Indeed, even though the White House saw pushback from business groups and the Republican-controlled U.S. Senate, in Trump’s mind the whole episode seems to have reaffirmed his strategy.
With the U.S.-China trade war unfinished, the U.S. President feels emboldened to take a hardline on Beijing.
“The China deal’s going to work out,” Trump said in an interview on CNBC. “You know why? Because of tariffs. Because right now China is getting absolutely decimated by companies that are leaving China, going to other countries, including our own, because they don’t want to pay the tariffs.”
Moreover, he says that the tariffs to date have been successful. “We’ve never gotten 10 cents from China. Now we’re getting a lot of money from China, and I think that’s one of the reasons the G.D.P. was so high in the first quarter because of the tariffs that we’re taking in from China,” he told reporters on Monday.
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What Comes After Trump – World War III?
What Comes After Trump – World War III?
Those who are familiar with my articles would be aware that I am not given to catastrophism or alarmism. But perhaps the time has come to reflect on who will be president after Trump (whether after this or the next term) and what this will mean for relations with Russia and China.
What will the United States’ relations with Russia and China be like when the 46th president of the United States takes office in 2025? This is a question that I often ask myself, especially in light of Trump’s political choices regarding international arms-control treaties (INF Treaty), nuclear proliferation, economic war with China, a financial crisis that is artificially postponed thanks to QE, out-of-control military spending, an increasingly aggressive NATO stance towards the Russian Federation, and continuous provocations against the People’s Republic of China. Where will we end up with after another five years of provocations? For how much longer will Putin and Xi Jinping maintain the “strategic patience” not to respond to Washington with drastic measures?
Let us imagine we are in 2025
The four current global hot spots – Iran, Syria, Venezuela and DPRK – have maintained their resistance to Washington’s diktats and have emerged more or less victorious. Syrian territory in its entirety is now under the control of Damascus; Iran has established enough deterrents not to be attacked; Pyongyang continues in its negotiations with Washington as the reunification of the two Koreas continues along; the Bolivarian revolution still lives on in Venezuela.
Putin is preparing to leave the Russian Federation as president after 25 years. Xi Jinping could see his mandate expire in a few more years. Washington is about to appoint a new president, who in all probability will be the opposite of Trump, in the same way Obama was the opposite of Bush and Trump a reaction to Obama.
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Top Iranian Diplomat: US Cannot ‘Expect To Stay Safe’
Top Iranian Diplomat: US Cannot ‘Expect To Stay Safe’
Iranian Foreign Minister Mohammad Javad Zarif made a series of threats over ongoing tensions in the Persian Gulf amid a visit by Germany’s top diplomat who sought to diffuse the situation.
On Monday, Zarif threatened that the United States”cannot expect to stay safe” after initiating an economic war against the Islamic republic in the wake of President Trump’s decision more than a year ago to withdraw from the 2015 nuclear deal, along with tough sanctions targeting Iran’s oil sector.
“Mr. Trump himself has announced that the U.S. has launched an economic war against Iran,” said Zarif according to the Associated Press, adding “The only solution for reducing tensions in this region is stopping that economic war.”
“Whoever starts a war with us will not be the one who finishes it,” he added.
For his part, German Foreign Minister Heiko Maas insisted his country and other European nations want to find a way to salvage the nuclear deal, which saw Iran limit its enrichment of uranium in exchange for the lifting of economic sanctions. But he acknowledged there were limits.
“We won’t be able to do miracles, but we are trying as best as we can to do prevent its failure,” Maas said.
However, Europe has yet to be able to offer Iran a way to get around the newly imposed U.S. sanctions. Meanwhile, a July 7 deadline — imposed by Iran — looms for Europe to find a way to save the unraveling deal. –Associated Press
Anger over Israel
At one point during the meeting, Germany’s Heiko Maas angered the Iranian diplomat while discussing Israel.
“Israel’s right to exist is part of Germany’s founding principle and is completely non-negotiable,” said Maas, adding “It is a result of our history and it’s irrevocable and doesn’t just change because I am currently in Tehran.”
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Energy Dominance or Flatulence? Shale Drillers Bleed Cash
Energy Dominance or Flatulence? Shale Drillers Bleed Cash
All of President Trump’s foreign policy can be summed up by two themes, making the world safe for Israel and controlling the price of energy.
He calls the latter “Energy Dominance.” And to those who still believe Trump has a plan, these two things are the only ones consistently in evidence.
His reactions to things contrary to his plan, however, are purely limbic.
These two themes converge completely with Iran. Trump wants Iran neutered to force Jared Kushner’s now-delayed again, “Deal of the Century” onto the Palestinians while also taking Iran’s oil off the market to support surging U.S. domestic production in the hopes of taking market share permanently.
Everything Trump does is in support of these two themes while throwing some red meat at his base over China, Mexico and the border.
It was never his intention to leave Syria back in December, really. Look how easy was it for John Bolton and the Joint Chiefs to convince him to stay because how else would we cut Iran’s exports to zero if we didn’t stop the land route through Iraq?
This is why we’re still harboring ISIS cells in the desert crossing around Al-Tanf at the Jordan/Iraq/Syria border, to stop Iranian oil from coming into the country.
This feeds right into hurting all of Syria’s allies to strengthen Israel’s position.
To paraphrase the song from Aladdin, “It’s stupid, but hey, it’s home.”
If the average Trump voter truly understood the lengths we are going to starve the Syrian army from having enough energy to finish wiping out the Al-Qaeda-linked groups in Idlib and Homs provinces they would burn their MAGA hats and stay home next November.
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Gold Makes Its Grievances Heard
Gold Makes Its Grievances Heard
Gold is getting its revenge. Try as he might Mr. Tariff Man can’t dominate all the headlines all the time. Everyone once in a while something more important than the Trump Man-Baby Show should take center stage.
Gold has moved more than $50 in just under three trading sessions, blowing past near term resistance and, more importantly, reminding everyone just how quickly the reserve asset of the world economy can call bullshit on the proclamations and machinations of the morons who think they run the world.
You always know when you’re reaching the end of a bear market.
Last week I tweeted out:
I think we’re reaching Peak Gold Bearishness. If the dollar is an attractive safe-haven asset, which it isn’t, just a necessary evil after a decade of ZIRP, then of course this will weigh on gold. That doesn’t mean demand isn’t there.https://seekingalpha.com/news/3467311-gold-longer-attractive-complacent-market-says-wells-fargo-analyst#email_link …25:22 PM – May 28, 2019Twitter Ads info and privacyGold no longer attractive in complacent market, says Wells Fargo analystGold prices no longer look attractive based on the way the metal has reacted to recent economic events, says Wells Fargo’s John LaForge, noting that gold’s complacent reaction to market volatility isseekingalpha.com
When an analyst at Wells is looking at the day-to-day ticker of gold looking for silly and binary safe haven arguments to warn people off of gold, I know we’re nearly there.
This isn’t a complacent market. In fact, as I’ve pointed out in the past, it’s an incredibly volatile one.
You don’t have to be a whiz with numbers, or worse a quant working for a central bank, to see the differences here.
And the reason for this massive increase in volatility across all asset classes is Trump’s insistence on tariffs being the cure all for what ails America’s trade ‘imbalances.’
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The road to modern wars
The road to modern wars
President Trump pursues a policy combining military threat with economic warfare and his aim is to restore American hegemony especially in view of the rising contender: China. Beijing has been acquiring technological knowledge and started expanding beyond the borders, having easier access to Central Asia and the Pacific than Americans.
In 2015, when Trump stood for election, we wrote: “Trump’s war rhetoric is very popular with his audiences and is a step beyond Obama’s statement about American exceptionalism. In New Hampshire, Trump nearly declared war on China as he stated: ‘Take a look at China what they have done, they have taken our money, our jobs, our base, our manufacturing, and we owe them 1.5 trillion dollars that’s like a magic act, they have taken everything, and we owe them money.’ Mr Trump did not tell his audience that bringing back jobs comes at a cost. China’s GDP per capita is around 7,500 dollars, while the GDP per capita of the US is about 55,000 dollars. The China rhetoric is unambiguous; China stole what belongs to the US, and there is no need to repay US debt owed to China. The world should brace for Mr Trump as the 45th president of the USA.”
President Trump wants to dictate to the whole world, but, taking into account the fact that the United States is now in conflict with Cuba, Venezuela, Iran, Syria, Russia, China and North Korea, a big war is not to be expected any time soon, so much so that the military interventions in Afghanistan, Iraq, Pakistan, Yemen and Libya appear to be inconclusive. Washington has an arsenal of other measures and these include:
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