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Seeds Sown for Major Transatlantic Trade War Starting in May

Seeds Sown for Major Transatlantic Trade War Starting in May 

Trump wants a trade treaty with the EU to include agriculture. France says no. It only takes one.

Trump has made a considerable number of trade threats only to eventually back down. Will it play out that way again?

For a number of reasons, I think Trump will act this time. First, let’s look at the threats.

Severe Pain

On February 25, Trump told the EU Play Ball or ‘We’re Going to Tariff the Hell Out of You’

“The European Union is very, very tough. Very, very tough. They don’t allow our products in. They don’t allow our farming goods in,” Trump said at a meeting with U.S. governors, according to a transcript from the White House. He added that “maybe, in certain ways,” the EU is “tougher than China.”

On March 14, Trump Warned EU of ‘Severe’ Economic Pain if No Progress On Trade Talks.

Partial Agreement Won’t Fly

On April 15, Reuters reported EU Ready to Launch U.S. Trade Talks, but Without Agriculture.

The EU approved two areas for negotiation, opposed by France with an abstention from Belgium. But agriculture was not included, leaving the 28-country bloc at odds with Washington, which has insisted on including farm products in the talks.

EU trade agreement are unanimous. Tiny countries can and have influenced outcomes. It took over a decade to get an agreement with Canada over concerns of tiny nations.

Even if US-EU trade talks take place, nothing will come of them and Trump will quickly get frustrated.

Climate Change Now in the Picture

On April 18, France has signaled it will not cooperate with Trump in any way.

Please consider the new French demand: No EU-US Trade Talks Unless Trump Supports Climate Deal.

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

Will the Trade War Lead to Real War with China?

Will the Trade War Lead to Real War with China?

Chas Freeman

Five hundred years ago, Hernán Cortés began the European annihilation of the Mayan, Aztec, and other indigenous civilizations in the Western Hemisphere.  Six months later, in August 1519, Magellan [Fernão de Magalhães] launched his circumnavigation of the globe.  For five centuries thereafter, a series of Western powers — Portugal, Spain, Holland, Great Britain, France, Germany, Russia, and, finally, the United States — overturned preexisting regional orders as they imposed their own on the world.  That era has now come to an end.

In the final phases of the age of Western dominance, we Americans made and enforced the rules.  We were empowered to do so in two phases.  First, around 1880, the United States became the world’s largest economy.  Then, in 1945, having liberated Western Europe from Germany and overthrown Japanese hegemony in East Asia, Americans achieved primacy in both the Atlantic and Pacific.  Almost immediately, the Soviet Union and its then-apparently-faithful Asian companion, Communist China, challenged our new sphere of influence.  In response, we placed our defeated enemies (Germany, Italy, Japan), our wartime allies, and most countries previously occupied by our enemies under American protection.  With our help, these countries — which we called “allies” — soon returned to wealth and power but remained our protectorates.  Now other countries, like China and India, are rising to challenge our global supremacy.

Trump, joined by other U.S. officials, receives Chinese Vice Premier Liu He in Oval Office, January 2019 (Official White House Photo by Tia Dufour via Flickr )

Trump receives Chinese Vice Premier Liu He in Oval Office, January 2019 (Official White House Photo by Tia Dufour via Flickr )

President Donald Trump has raised the very pertinent question: Should states with the formidable capabilities longstanding American “allies” now have still be partial wards of the U.S. taxpayer?  In terms of our own security, are they assets or liabilities?  Another way of putting this is to ask: Do our Cold War allies and their neighbors now face credible threats that they cannot handle by themselves? 

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

Does Washington Rule the World?

Does Washington Rule the World?

Does Washington Rule the World?

One of the most disturbing aspects of the past two years of Donald Trump foreign policy has been the assumption that decisions made by the United States are binding on the rest of the world. Apart from time of war, no other nation has ever sought to prevent other nations from trading with each other. And the United States has also uniquely sought to penalize other countries for alleged crimes that did not occur in the US and that did not involve American citizens, while also insisting that all nations must comply with whatever penalties are meted out by Washington.

The United States now sees itself as judge, jury and executioner in policing the international community, a conceit that began post World War 2 when American presidents began referring to themselves as “leader of the free world.” This pretense received legislative backing with passage of the Anti-Terrorism Act of 1987 (ATA) as amended in 1992 plus subsequent related legislation, to include the Justice Against Sponsors of Terrorism Act of 2016 (JASTA). The body of legislation can be used by US citizens or residents to obtain civil judgments against alleged terrorists anywhere in the world and can be employed to punish governments, international organizations and even corporations that are perceived to be supportive of terrorists, even indirectly or unknowingly. Plaintiffs are able to sue for injuries to their “person, property, or business” and have ten years to bring a claim.

Sometimes the connections and level of proof required by a US court to take action are tenuous, and that is being polite. Suits currently can claim secondary liability for third parties, including banks and large corporations, under “material support” of terrorism statutes. This includes “aiding and abetting” liability as well as providing “services” to any group that the United States considers to be terrorist, even if the terrorist label is dubious and/or if that support is inadvertent.

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

Gold is money, everything else is credit

Gold is money, everything else is credit

People have been obsessed with gold since the beginning of civilization. Both the Egyptians and ancient Greeks valued the precious metal as a status symbol. The more gold you had, the higher you ranked in the natural order of things. In more recent times, gold rushes in Alaska and South Africa have caused major frenzies while changing lives.

People have a natural affinity for shiny things, which makes them desire gold and silver for its beauty. Especially gold, which is a simple, fairly boring metal that can be melted and formed into any desirable form. In many struggling countries, such as India, even the poorest citizens crave gold jewelry.

Prior to paper currency, the actual precious metal was used in trade. A certain amount of gold was assigned a certain value and used in exchange for some other commodity. Since gold and silver were easy to carry, the system worked well, involving the trade of equal commodities.

When governments began to mint currencies, gold and silver became natural choices. Their very rarity, especially gold, gave them an inherent value. People could trust the value of gold and silver. Slowly, however, beginning in the 1930s, world governments were no longer linking their currency to gold. The US dollar stopped being backed by gold in the 1970s. Instead of being backed by true value, word currencies became pieces of paper.

The role of gold changed from a trusted trading currency to a safe investment haven. Investors rely on the fact that while the value of paper currency will fluctuate, gold and silver will hold their value. Precious metals require no guarantees. As currencies lost their gold-backing, global central banks began purchasing and hoarding gold as a reserve currency whose value has been recognized throughout history.

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

Will Globalists Sacrifice The Dollar To Get Their ‘New World Order’?

Will Globalists Sacrifice The Dollar To Get Their ‘New World Order’?

Trade is a fundamental element of human survival. No one person can produce every single product or service necessary for a comfortable life, no matter how Spartan their attitude. Unless your goal is to desperately scratch an existence from your local terrain with no chance of progress in the future, you are going to need a network of other producers. For most of the history of human civilization, production was the basis for economy. All other elements were secondary.

At some point, as trade grows and thrives, a society is going to start looking for a store of value; something that represents the man-hours and effort and ingenuity a person put into their day. Something that is universally accepted within barter networks, something highly prized, that is tangible, that can be held in our hands and is impossible to replicate artificially. Enter precious metals.

Thus, the concept of “money” was born, and for the most part it functioned quite well for thousands of years. Unfortunately, there are people in our world that see economy as a tool for control rather than a vital process that should be left alone to develop naturally.

The idea of “fiat money”, money which has no tangibility and that can be created on a whim by a central source or authority, is rather new in the grand scheme of things. It is a bastardization of the original and much more stable money system that existed before that was anchored in hard commodities. While it claims to offer a more “liquid” store of value, the truth is that it is no store of value at all.

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

Canada Pauses Reporting Trade Data, Blames US Shutdown

Statistics Canada said today the release of their monthly trade statistics will be delayed indefinitely due to the current shutdown of the U.S. government.

“Trade statistics without Canada’s exports to the United States have limited use as a current economic indicator, as these exports represent approximately 75% of Canada’s total exports.”

The U.S. shutdown “has a direct impact on Statistics Canada’s ability to compile, produce and publish Canadian international merchandise trade data, as Statistics Canada will not receive data on Canada’s exports to the United States for the duration of the shutdown”

Publication of December 2018 trade data won’t occur as scheduled on Feb. 5, 2019.

The agency says it will delay the release of trade statistics “until the USCB resumes normal operations and a new joint release date is negotiated with the USCB as per the data exchange agreement”

The question is – why should a US shutdown affect Statistics Canada’s ability to track its own imports and exports? Is there some ‘negotiated’ agreement between the trade partners to ensure that the data is manipulated just right (so as to avoid the glaring errors that are so evident between China and Hong Kong for instance).

Historically they can’t quite agree…

The founder of the World Economic Forum shares what he sees as the biggest threat to the global economy

The founder of the World Economic Forum shares what he sees as the biggest threat to the global economy

  • Economist Klaus Schwab is the founder and executive chairman of the World Economic Forum which will be holding it’s Annual Meeting in Davos, Switzerland January 22-25, 2019.
  • Schwab explains the theme of this year’s meeting, “Globalization 4.0: Shaping a New Architecture in the Age of the Fourth Industrial Revolution.”
  • When asked if we were currently in a trend of deglobalization he said no, “we have to make a differentiation between globalization, which is a fact, and globalism.”
  • He says the biggest threat to economic stability is the imbalances in the world.
  • Schwab says he believes trade imbalances are a problem. He is not an unconditional advocate for free trade, which he says is great but only if there is equality.

Sara Silverstein: This year’s theme for 2019 for the meeting is Globalization 4.0 and shaping the architecture of the Next Wave of Globalization which is the industrial revolution, the fourth industrial revolution, which you’ve literally wrote a book on. Can you tell me what makes up the fourth industrial revolution?

Klaus Schwab: We are living in a time of multiple technological innovations. I just mentioned artificial intelligence, blockchain, you could add and add, and all those technologies together will fundamentally transform the world, not just business models but economies, society, politics and so on. So when we speak about globalization 4.0, we want to address the global architecture which is needed in this new context of the fourth industrial revolution.

Silverstein: And what was the issue with the last wave of globalization?

Schwab: We see it already now so so many issues like inequality, trade wars, and I could go on and on. The danger is that we deal with those issues, we address those issues with patchwork policies.

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

China Trade Data is Nail in the Coffin of Global Economy

Chinese exports and imports even though China’s trade balance with the US rose.

Eamonn Sheridan at Forex Live has some interesting comments on China’s December Trade Balance.

The export figures are a focus and they are poor indeed. But save some space in the barf bag for the import results, they are terrible – huge miss on these.

Demand in China has been showing evidence of slowing. This is a nail in the coffin.

December 2018 Data – Yuan Terms

  • China trade balance comes in at CNY 395bn, expected CNY 345bn, prior was CNY 306bn
  • Exports 0.2% y/y, expected 6.6%, prior was 10.2%… BIG MISS
  • Imports -3.1% y/y, expected 12.0%, prior was 7.8% … even bigger miss

December 2018 Data – US Dollar Terms

  • China trade balance USD 57.06bn, expected $51.6bn, prior was $44.7bn
  • Exports -4.4% y/y, expected 2.0%, prior 5.4%
  • Imports -7.6% y/y, expected 4.5%, prior was 3.0%

Tariff Man

Brad Setser on Twitter
Brad Setser on Twitter

Chinese Investment in the US Slumps to 7-Yr Low

Including $13bn in US asset divestitures by Chinese investors, China’s net US investment actually shrank by $8bn in 2018.

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

Money: How Its Past Predicts Its Future

Money: How Its Past Predicts Its Future

btc_gold1.PNG

What is money, where does it come from and more importantly where does it go?

At first glance, it might appear inexplicable and bizarre that our governments and our rulers have managed to keep their stronghold over the monetary system for 2000 years, especially when one thinks about the countless ways in which they abused that power and used their monopoly to the detriment of their own citizens. It was a mass delusion that facilitated this, a blind belief that they, and they alone, can be trusted with this vital task while looking out for our best interests as well. However, now, as mistrust against our rulers is justifiably deepening, it is becoming increasingly clear that only we as individuals can ensure our best interests and it is only a matter of time before the entire ill-founded edifice comes crumbling down.

To answer all these questions about money, we need to first understand its history — keeping in mind that those who don’t know history are condemned to repeat it. Everything started when people settled down and instead of living off nature they started adding value to it; this was the beginning of private property rights. In addition, men started to realize that some people are better at performing specific duties than others and thus set into motion what we today understand as the division of labor. This increased economic output and in general terms, everyone became better off. This transition in how work was performed in an economy made trade between individuals a necessity. Thus barter, or the exchange of real goods and services against other real goods and services, became commonplace. Barter also had its disadvantages, because it required what is known as a “double coincidence of wants” in order to function.

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

If We Can No Longer Tell the Truth, We’ve Failed

If We Can No Longer Tell the Truth, We’ve Failed

The Gulag Archipelago is not a distant memory; it lives on in every modern state, cloaked with modern-day technologies and the well-worn tools of suppression.

The last thing addicts want to hear is the truth: the only thing more terrifying than the truth is the possibility that they will lose access to whatever they’re addicted to: smack, Oxy, coke, alcohol, sex, porn, power, etc.

If we fail to tell addicts the truth, we fail them and ourselves. As long as co-dependents remain complicit in the addict’s destructive state, as long as those who know better keep silent because they don’t want to deal with the trauma, the addict is free to maintain the illusion that he/she is in control, that his/her secret is safe, etc., and manipulate those around them with lies and victimhood.

Not wanting to deal with the trauma of forcing those in denial to face up to reality is understandable: who wants to deal with the shock, denial, anger and depression that characterize facing up to a terrifying truth?

But we fail ourselves if we’re too weak to speak the truth and grind through the denial, anger and depression. If we opt for the easy way out, we’re just like the addict, who is also opting for the easy way out, i.e. finding refuge in the labryrinthine Kingdom of Lies.

The status quo is a Kingdom of Lies. “Raw data”, i.e. facts collected without regard to future interpretaion, are “processed” into the “right kind of data,” i.e. data that supports the status quo interpretation, which is that everything’s just fine thanks to the wise leadership of our self-serving elites.

The deeper you dig into the statistical foundation of GDP, the unemployment rate, trade deficits, etc., the more questions arise about the accuracy and agenda behind the headline numbers.

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

Some Confucian Calm, Please!

SOME CONFUCIAN CALM, PLEASE!

The United States and China look like two punch-drunk prizefighters squaring off for a major championship fight. They have no good reason to fight and every reason to cooperate now that both their stock markets have been in turmoil.

Six hundred point market swings down and then up look like symptoms of economic nervous breakdown.

Factions in both nations are beating the war drums, putting presidents Donald Trump and Xi Jinping under growing pressure to be more aggressive.

Trump shoulders much of the blame for having started this unnecessary confrontation by imposing heavy duties on Chinese goods. The US president has turned the old maxim on its head that nations that trade heavily don’t go to war. The US and China, both huge trading partners, appear headed to military clashes, or even full scale war, if their governments don’t come to their senses soon.

Trump was clearly trying to bully China into major trade concessions and better commercial behavior. He is right about this. I’ve done business in China for over 15 years and seen every kind of chicanery, fakery and double-dealing imaginable. China learned from the French that the First Commandment is ‘Thou Shalt Not Import.’

The Japanese are no better. I recall Japanese health authorities telling my pharma firm that all our tablets had to be triangular shaped to make them nearly impossible to swallow.

Theft of technology is indeed rampant, as Trump asserts. But has he looked into CIA and NSA’s techno spying recently? They ransacked the Soviet Union during its last dying days. Much of our postwar missile technology was developed by German scientists spirited off to the USA. After the Sputnik launch in 1957, I recall seeing a German cartoon showing a Soviet and US satellite in orbit next to one another. One whispers to the other, ‘Now that we’re alone, let’s speak German!’

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

As Trade Talks Begin, US Infuriates Beijing With Latest Navy Operation In South China Sea

As a US delegation led by senior trade officials arrived in Beijing on Monday to begin the first round of in-person talks to resolve the burgeoning US-China trade war, the US has reportedly carried out its latest ‘Freedom of Navigation’ operation in the South China Sea – though at least this time there wasn’t a near-collision with a Chinese ship.

Since President Trump’s inauguration, the US has stepped up its ‘Freeops’ as the US Navy seeks to contain China’s growing military ambitions in the Pacific. But since the trade war began, the US has demonstrated a keen sense of timing, contributing to China’s decisions to cancel security conferences and reconsider coming to the table to talk on trade.

Nine Dash

But this time, the controversial maneuver seemingly doesn’t bode well for the fate of a lasting US-China trade compromise. According to the Wall Street Journal, the US-guided-missile destroyer the USS McCampbell patrolled within 12 miles of the Paracel Islands in the South China Sea on Monday. In particular, it came within a few miles of three islands: Tree, Lincoln and Woody.

China sent its own ship to try and deter the McCampbell, but ultimately decided to file an official complaint. According to Bloomberg, China urged the US to halt “provocative actions” in the South China Sea. “The actions by the U.S. fleet have violated Chinese law and related international laws, and undermined the peace, security and good order in the relevant waters,” Chinese Foreign Ministry spokesman Lu Kang told a briefing Monday in Beijing. “China strongly opposes the actions.”

USS

The Paracels are claimed by Vietnam and Taiwan but have been controlled by China since the Communist Nation seized them from Vietnamese forces in 1974. Further alarming the US, Beijing has upgraded several military outposts in the Paracels and deployed jet fighters to at least one, according to satellite images and US officials.

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

Global Economic Slump Imminent As Korean Exports ‘Canary’ Crashes

In the latest sign that the slowdown in China and the global trade war is weighing on global commerce, South Korea’s exports fell  in December. The 1.2% YoY decline was dramatically below the +2.5% YoY expected and missed even the most pessimistic forecast (which was still a rise).

Korean exports were hit by falling memory-chip and oil prices and cooling demand from China and imports also disappointed, rising 0.9% YoY.

“The (annual) decline came about a month earlier than I thought, but I expect Korean exports to be weak throughout the first half of this year, posting low single-digit growth at best,” said Lee Seung-hoon, an economist at Meritz Securities.

South Korea is the first major exporter to report trade data each month, so provides an early reading of global trade; and as the world’s leading exporter of computer chips, ships, cars and petroleum products, December’s data is a major red flag for the global economy.

As the chart below shows, Global equity market earnings growth (and contraction) is extremely tightly correlated to Korean export growth (or contraction)…

So maybe global stocks are on to something with their recent collapse as they increasingly price in an earnings recession.

America’s Technology and Sanctions War Will End, by Bifurcating the Global Economy

America’s Technology and Sanctions War Will End, by Bifurcating the Global Economy

America’s Technology and Sanctions War Will End, by Bifurcating the Global Economy

“The true reason behind the US-China ‘trade’ war has little to do with actual trade … What is really at the basis of the ongoing civilizational conflict between the US and China … are China’s ambitions to be a leader in next-generation technology, such as artificial intelligence (AI), which rest on whether or not it can design and manufacture cutting-edge chips, and is why Xi has pledged at least $150 billion to build up the sector”, Zerohedge writes.

Nothing new here: yet behind that ambition, lies another, further ambition and a little mentioned ‘elephant in the room’: that the ‘trade war’ is also the first stage to a new arms race between the US & China – albeit of a different genre of arms race. This ‘new generation’ arms-race is all about reaching national superiority in technology over the longer-term, via Quantum Computing, Big Data, Artificial Intelligence (AI), Hypersonic Warplanes, Electronic Vehicles, Robotics, and Cyber-Security.

The blueprint for it, in China, is in the public domain. It is ‘Made in China 2025’ (now downplayed, but far from forgotten). And the Chinese expenditure commitment ($ 150 billion) to take the tech lead – will be met ‘head on’ (as Zerohedge puts it), “by a [counterpart] ‘America First’ strategy: Hence the ‘arms race’ in tech spending … is intimately linked with defence spending. Note: military spending by the US and China is forecast by the IMF to rise substantially in coming decades, but the stunner is: that by 2050, China is set to overtake the US, spending $4tn on its military, while the US is $1 trillion less, or $3tn … This means that sometime around 2038, roughly two decades from now, China will surpass the US in military spending.”

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

“Jarring” FedEx Outlook Cut Suggests “Severe Global Recession”

FedEx shares tumbled 7% after what Morgan Stanley called a “jarring” cut to its annual forecasts, suggesting global growth is slowing far more than most expect, and prompting expectations of an “uber-dovish hike” by the Fed.

The global logistics bellwether slashed its outlook just three months after raising the view, reflecting an unexpected and abrupt change in the company’s view of the global economy amid rising trade tensions between the U.S. and China. Not only were the cuts were deeper than the Street expected according to Morgan Stanley analyst Ravi Shanker, but everyone is pointing to the following comment from the press release: “Global trade has slowed in recent months and leading indicators point to ongoing deceleration in global trade near-term.”

Needless to say, with little in terms of warning, Morgan Stanley was shocked by the magnitude and severity of the cut, and suggested that this implies a “severe global recession” is unfolding:

“We recognize that global growth has slowed but we are very surprised by the magnitude of the headwind, which is what might be seen in a severe recession,” Shanker wrote. “We believe global growth concerns are also likely to get worse before they get better next year, which could mean more of a drag on FY20 EPS.”

Quoted by Bloomberg, Shankar also said that the Express unit is also likely to remain an overhang, Shanker said, as FedEx management didn’t provide an outlook for fiscal 2020 or its timeline for improving the cargo airline, which has been hit by worsening economic conditions in Europe.

FedEx shares tumbled 7% on Wednesday morning, the lowest intraday price in about two years and the 10th decline for FedEx in 11 days.

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

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