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Krugman and the Goldbugs

Krugman and the Goldbugs

The announcement that President Trump would nominate Judy Shelton, a long-time advocate of the gold standard, for a seat on the Federal Reserve’s Board of Governors got Paul Krugman thinking: why do some economic commentators become goldbugs?

Krugman offers a rather cynical view. It is difficult “to build a successful career as a mainstream economist,” he writes.

Parroting orthodox views definitely won’t do it; you have to be technically proficient, and to have a really good career you must be seen as making important new contributions — innovative ways to think about economic issues and/or innovative ways to bring data to bear on those issues. And the truth is that not many people can pull this off: it requires a combination of deep knowledge of previous research and the ability to think differently. 

So what’s an aspiring if not so smart or creative economist to do?

“Heterodoxy,” Krugman writes, “can itself be a careerist move.”

Everyone loves the idea of brave, independent thinkers whose brilliant insights are rejected by a hidebound establishment, only to be vindicated in the end. And such people do exist, in economics as in other fields.… But the sad truth is that the great majority of people who reject mainstream economics do so because they don’t understand it; and a fair number of these people don’t understand it because their salary depends on their not understanding it.

In other words, Krugman suggests most gold standard advocates are either ignorant or disingenuous — and, in some cases, both.

According to Krugman, “events of the past dozen years have only reinforced that consensus” view that “a return to the gold standard would be a bad idea.” 

 …click on the above link to read the rest of the article…

Mr. President, This Is How To Get The Fed To Launch Quantitative Easing

Mr. President, This Is How To Get The Fed To Launch Quantitative Easing

Yesterday, after countless demands that the Fed cut interest rates, Trump finally made his first, long anticipated formal demand that the Fed should pursue “some quantitative easing“:

 · Aug 19, 2019

Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed, but the Democrats are trying to “will” the Economy to be bad for purposes of the 2020 Election. Very Selfish! Our dollar is so strong that it is sadly hurting other parts of the world…

…..The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!

The good news for Trump is that he has now fully figured out that he has the Fed in the palm of his hand, as he demonstrated just hours after Powell’s July 31 rate cut when Trump broke the US-China trade ceasefire and re-escalated trade war, in the process sending rate cut odds soaring. The flowchart logic, as shown below, is quite simple: all Trump has to do is engage in action that threatens to destabilize the global economy and Powell – as he certified during the last FOMC meeting – has to respond by cutting further, until he eventually reaches a point where QE may be the only possible outcome (as we explained previously in “How The Fed Is Now Underwriting Trump’s Trade War, In One Chart“).

Obviously extending the logic of the above diagram to its logical conclusion also lays out the path that Trump must follow if he wishes to force the Fed to launch QE. And just in case it is unclear, it involves a “gray rhino”, an economic war, and negative rates.

 …click on the above link to read the rest of the article…

Economic Storm Trump Will be Blamed For Because of Bad Advisers

Economic Storm Trump Will be Blamed For Because of Bad Advisers 

There is a very Dark Cloud hovering over the world economy and at the center of this cloud lies not just Europe, but Germany – the strongest economy holding up all of Europe. The German manufacturing sector is in freefall. Trump will be blamed calling this the result of his Trade War. It is probably too late to get him to even understand that his advisers are old-school and completely wrong with respect to trade. Their obsession with currency movements is what they taught back in school during the 1930s. My advice to China, let the yuan float and Trump will quickly see that China has been supporting its currency, not suppressing it.

Manufacturing indicators have deteriorated globally, yet in a very disproportionate manner. Trump will be blamed for this and his badgering the Fed to lower interest rates is also a fool’s game. Nobody looks at the elderly who were told to save for retirement and you will live off the interest. Their house values were undermined in the 2007-2009 New York Banker’s Mortgage-Backed scam that blew up the world economy from which we have been unable to fully recover. The younger generation cannot afford to buy a house as they are saddled with student loans thanks to the Clintons for degrees that are worthless as 65% cannot find jobs in what they have degrees for these days.

The insanity of those in power knows no boundary when it comes to stupidity around the world. All they have is interest rates and after more than 10 years of excessively low to negative interest rates failing to stimulate the economy in Europe, what do they do? They argue that all physical money must be eliminated because people are hoarding cash and thus defeat their lower interest rates policy.

 …click on the above link to read the rest of the article…

Trump’s Blockade Begins: Venezuela Says Food Shipment Blocked In Panama Canal

Trump’s Blockade Begins: Venezuela Says Food Shipment Blocked In Panama Canal

Venezuela’s Vice President Delcy Rodriguez has denounced what state media is describing as a ship seizure by the US in the Panama Canal Wednesday.

The ship is reportedly packed with 25 thousands tons of Soya and was entering the narrow vital central America waterway, when its progress was halted in an event which Maduro government officials have condemned as a “serious aggression” that impedes the country’s “right to food”. 

Panama Canal. Image source: Shutterstock

Though in the initial hours of Wednesday’s allegation major international media outlets had yet to confirm the claim, Rodriguez tweeted a statement, saying, “Venezuela denounces before the world that a boat that holds 25 thousand tons of Soya, for food production in our country, has been seized in the Panama Canal, due to the criminal blockade imposed by Donald Trump.”

“Venezuela calls on the UN to stop this serious aggression by DonaldTrump’s govt against our country, which constitutes a massive violation of the human rights of the entire Venezuelan people, by attempting to impede their right to food,” the vice president added.

Venezuela exige a la ONU detener esta grave agresión del gobierno de @realDonaldTrump contra nuestra Patria que constituye una violacion masiva de los derechos humanos de toda la población venezolana al pretender impedir su derecho a la alimentación.

State media subsequently explained that the undisclosed owner of the vessel was informed by the insurance company that it must cease moving the cargo through the canal.

The serious allegation comes after on Monday President Trump signed an executive order imposing a full economic embargo against Venezuela after a week ago the White House began signaling the US would seek to “quarantine” and fully “blockade” the Maduro regime if the socialist leader doesn’t immediately hand over power of his own accord. 

…click on the above link to read the rest of the article…

Trump Imposes Total Economic Embargo On Venezuela

Trump Imposes Total Economic Embargo On Venezuela

Late Monday President Trump signed an executive order imposing a full economic embargo against Venezuela after a week ago the White House began signaling it could seek to “quarantine” and fully “blockade” the Maduro regime if the president doesn’t immediately hand over power of his own accord. 

The executive order freezes all government assets in the United States and prohibits all transactions by any Venezuelan officials, in what constitutes the first major expansion of sanctions targeting a nation in the western hemisphere in over three decades. 

File image via Time

The order focuses on human rights abuses and Maduro’s continued “usurpation” of power as necessary to enact the full embargo, and places the Latin American country on par with Cuba, Syria, Iran and North Korea. Though Trump recently signaled he was “bored” with meddling in Venezuela after a failed military coup earlier this year, the executive order is the latest in a string of measures intent on regime change. 

“All property and interests in property of the Government of Venezuela that are in the United States … are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in,” the executive order says. Americans are further prevented from doing business with Venezuela’s government or officials, effective immediately.

Though it falls short of an outright trade embargo, it does dramatically escalate US efforts to force a Maduro exit in favor of US-backed opposition leader and self-proclaimed “interim president” Juan Guaido. 

Via The Wall Street Journal

A recent Bloomberg report also indicated Trump admin discussions have involved the possibility of imposing a complete blockade on the country by sea, enforced by US Navy ships. 

 …click on the above link to read the rest of the article…

Fourth Turning Economics

Fourth Turning Economics

“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – The Fourth Turning – Strauss & Howe 

Image result for total global debt 2019

The quote above captures the current Fourth Turning perfectly, even though it was written more than a decade before the 2008 financial tsunami struck. With global debt now exceeding $250 trillion, up 60% since the Crisis began, and $13 trillion of sovereign debt with negative yields, it is clear to all rational thinking individuals the next financial crisis will make 2008 look like a walk in the park. We are approaching the eleventh anniversary of this crisis period, with possibly a decade to go before a resolution.

As I was thinking about what confluence of economic factors might ignite the next bloody phase of this Fourth Turning, I realized economic factors have been the underlying cause of all four Crisis periods in American history.

Debt levels in eurozone, G7, US and Germany

The specific details of each crisis change, but economic catalysts have initiated all previous Fourth Turnings and led ultimately to bloody conflict. There is nothing in the current dynamic of this Fourth Turning which argues against a similar outcome. The immense debt, stock and real estate bubbles, created by feckless central bankers, corrupt politicians, and spineless government apparatchiks, have set the stage for the greatest financial calamity in world history.

 …click on the above link to read the rest of the article…

Top Scientist Says He Quit USDA Because Trump Admin Tried to Bury His Study on Climate and Nutrition

Top Scientist Says He Quit USDA Because Trump Admin Tried to Bury His Study on Climate and Nutrition

Rep. Chellie Pingree tweeted, “Once again, the Trump admin is silencing our scientists.”

Lewis Ziska

Plant physiologist Lewis Ziska quit the U.S. Department of Agriculture Friday. (Photo: Peggy Greb/USDA Agricultural Research Service via sciencenewsforstudents.org)

The exodus of federal scientists in the era of President Donald Trump continued Friday as 62-year-old plant physiologist Lewis Ziska left the U.S. Department of Agriculture “over the Trump administration’s efforts to bury his groundbreaking study about how rice loses nutrients due to rising carbon dioxide in the atmosphere,” Politico reportedMonday.

“There was a sense that if the science agreed with the politics, then the policymakers would consider it to be ‘good science,’ and if it didn’t agree with the politics, then it was something that was flawed and needed to be done again.”
—Lewis Ziska, ex-USDA scientist

Ziska—who worked at USDA under five presidents, both Republicans and Democrats—charged in an interview with Politico that he left the department’s Agricultural Research Service (ARS) because the USDA tried to block the public dissemination of his research on how the human-caused climate crisis’s impact on rice could threaten the nutrition of 600 million people. The studyPolitico reported, was internally cleared at the department and peer reviewed prior to its publication in the journal Science Advances last year.

USDA, in a statement to the outlet, said that “this was a joint decision by ARS national program leaders—all career scientists—not to send out a press release on this paper” based on scientific disagreement, and the decisions involving the study weren’t politically motivated.

Ziska, however, said that “this isn’t about the science. It’s about something else, but it’s not about the science.”

 …click on the above link to read the rest of the article…

Tomgram: Andrew Bacevich, Future History

Tomgram: Andrew Bacevich, Future History

In Donald Trump’s go-back-to-where-you-didn’t-come-from America, where the fear of immigrants (as well as their grotesque mistreatment) still seems on the rise, just wait. There’s so much more to come. Climate change has barely begun to hit this planet big time and yet, while there’s much writing about the grim circumstances (including gangs, drugs, and violence) that continue to send desperate Central Americans north to the U.S. border, global warming is also a growing factor in the equation. If the weather destroys the possibility of growing your food, you’ve got to do something else or go somewhere else. In the coming decades, count on one thing: thanks to the way we’re changing our very planet, ever more people are going to be uprooted from their homes and sent wandering in desperation across this globe of ours. And if you think about it, since Donald Trump is so desperately intent on aiding and abetting the intensification of global warming via fossil-fueled projects of every sort, he should really be considered the ultimate “invader” of this country. Given what we know about the reactions of those not forced to flee to those who are — to, in fact, a planet already filled with the displaced and refugees escaping violence on a scale not seen since the end of World War II — expect things to grow worse. More heat, more upheaval, more wars, and whatever turns out to follow the “populist right” on an increasingly unnerved planet, along with potentially 250 million or more displaced people by perhaps mid-century. Given the backstory so far, it’s not likely to be pretty.

 …click on the above link to read the rest of the article…

US Navy Shoots Down Iranian Drone Over Strait Of Hormuz: Trump

US Navy Shoots Down Iranian Drone Over Strait Of Hormuz: Trump

President Trump announced on Thursday that the amphibious assault ship, the USS Boxer, shot down an Iranian drone in the Strait of Hormuz in a defensive action.

Replying to @tictoc

MORE: Trump said that the Iranian drone’s actions were “the latest of many provocative and hostile actions by Iran”

Operators of the drone refused calls to stand down, after which it was “immediately destroyed,” when it came within 1,000 yards of the ship according to the president, “threatening the safety of the ship and the ship’s crew.” 

Via Jennifer Jacobs, Bloomberg

Trump has called on “other nations to protect their ships as they go through the Strait. 

Downed Iranian drone from 2015 incident

 

The comments come as tensions between Washington and Tehran remain high over a spate of attacks on cargo ships, the downing of an American drone and the British seizure of a tanker carrying Iranian oil. Earlier in the day, the U.S. condemned Iranian naval activity in the Persian Gulf and demanded the Islamic Republic release a small tanker and its crew that its forces seized this week. A State Department official who asked not to be identified discussing the issue cited the Islamic Revolutionary Guard Corps’ “continued harassment” of vessels in and around the Strait. -Bloomberg

Oil futures jumped a bit on the news, climbing 34 cents a barrel to reel in some of the day’s 2.6% loss. 

As we noted earlier in the day, Iran’s Islamic Revolutionary Guard Corps (IRGC) said it has seized a foreign vessel with 12-crew members carrying one million barrels of oil. In an official Iranian media statement, the country’s military asserted the tanker was caught “smuggling” the fuel through the Strait of Hormuz

…click on the above link to read the rest of the article…

De-Dollarizing the American Financial Empire

De-Dollarizing the American Financial Empire

Guest: Michael Hudson

Economist Michael Hudson continues his discussion of Super Imperialism: The Economic Strategy of American Empire with a focus on US monetary imperialism; President Trump’s demand for lower interest rates undercuts America’s requirement for foreign investment to fund its domestic and balance of payments deficit, increases the carry trade and turns IMF and World Bank policies on the US; analysis of US economic domination of the world from its position as the world’s largest creditor post-WWI; analysis of US economic domination of the world from its position as the world’s largest debtor after the 1971 close of America’s gold window; emergence of the dollar-debt standard; how war has bankrupted the US; the difference between imperialism and super imperialism; US bribes foreign governments; China’s banking system; China and Russia stockpile gold as the world breaks out of dollar domination.

Weekly Commentary: History Rhymes

Weekly Commentary: History Rhymes

President Trump and President Xi are meeting in Osaka as I write. We’ll know much more in the morning. Pre-meeting reports had the two sides agreeing to a “truce.” Heading into the meeting, President Trump said progress was made in Friday trade talk preparations, as he seeks to “even it up” on trade. I’ll assume both sides would prefer to convey a constructive meeting and a positive framework for restarting trade negotiations.

Having attained a head of steam, a positive outcome could provide additional juice to the equities rally. Sovereign bond markets, enjoying even stronger momentum, may have to think twice. Is the market’s 100% probability for a July rate cut justifiable in the event of market exuberance in response to improved prospects for a successful completion of trade negotiations?

There was definitely some push back to market expectations for an imminent start to a rate cut cycle. At least a few Fed officials are not oblivious to the risk of bowing to rate cut pressures:  

June 25 – New York Times (Jeanna Smialek): “Jerome H. Powell, chairman of the Federal Reserve, said… that the central bank is weighing whether an interest-rate cut will be needed as trade risks stir economic uncertainty and inflation lags. But he made clear that the institution considers itself independent from the White House and President Trump, who continues to push publicly for a rate cut. Mr. Powell said the case for a rate cut has strengthened somewhat given that economic ‘crosscurrents have re-emerged, with apparent progress on trade turning to greater uncertainty and with incoming data raising renewed concerns about the strength of the global economy.’ But he stopped short of saying a cut was guaranteed, noting that the Fed would continue to watch economic events unfold and would avoid reacting to short-term issues.”

 …click on the above link to read the rest of the article…

Two Events That Will Determine Oil Prices

Two Events That Will Determine Oil Prices

offshore rig

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.

 …click on the above link to read the rest of the article…

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.

USS Boxer Amphibious Assault Ship. Image source: US Navy

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. 

 …click on the above link to read the rest of the article…

Starvation Sanctions Are Worse Than Overt Warfare

Starvation Sanctions Are Worse Than Overt Warfare

Image via Wikimedia Commons

“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.

 …click on the above link to read the rest of the article…

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.

 …click on the above link to read the rest of the article…

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