Tag: economics

Will the God-Emperor cuck on trade?

Tyler Durden suspects the globalist faction is winning in an ideological trade battle being waged inside the Trump administration:

Earlier this week, when we discussed Peter Navarro’s jarring op-ed in the WSJ in which he alleged that the persistent US trade deficit “would put US national security in jeopardy”, we said that “a better question than what is Navarro’s purpose by writing it, is why he is writing it, and does his use of a public forum like the WSJ mean that there is friction between him and Trump camp, especially since in recent weeks it appears that a core pillar of Trump’s trade policies, namely the border adjustability, appear to no longer be on the docket of actionable items.”

As it turns out, that was precisely the correct question, because as the FT reports, “a civil war has broken out within the White House over trade, leading to what one official called “a fiery meeting” in the Oval Office pitting economic nationalists close to Donald Trump against pro-trade moderates from Wall Street.”

More notably, the person at the center of this “civil war” is none other than Navarro, who as we expected is now said to be losing influence, and as a result he resorted to using the WSJ as a means to appeal directly to the general public. It may have been a prudent gamble: the WSJ op-ed may have helped Navarro salvage some of his credibility with Trump, according to the FT:

The officials and people dealing with the White House said Mr Navarro appeared to be losing influence in recent weeks. But during the recent Oval Office fight, Mr Trump appeared to side with the economic nationalists, one official said.

Facing off the “hardline group” of Navarro, and other “nationalists” such as Steve Bannon, is a a “faction” led by former Goldman COO Gary Cohn, a career globalist, who leads Mr Trump’s National Economic Council.

But what is just as important, is that if the FT is right, then allegations that Trump has “sold out” to his Goldman advisors may be premature: in fact, if anything, Trump appears to be playing off one camp, the “nationalists”, against its polar opposite, the “Goldman globalists”:

The battle over trade is emblematic of a broader fight on economic policy within the Trump’s administration. It comes ahead of a visit to Washington next week by Ms Merkel, the German chancellor, and amid preparations for a meeting of G20 finance ministers in Germany next week at which allies’ concerns over protectionism are likely to be high on the agenda.

While the White House was non-committal, providing the FT with the following brief statement:


“Gary Cohn and Peter Navarro are both valued members of the president’s economic team. They are working together to enact the president’s economic agenda, protect American workers and grow American businesses.”

… the “globalists” led by Cohn and others “have seized on Mr Navarro’s public comments — and widespread criticism by economists of his stand on trade deficits and other matters — to try and sideline him.”


That has led to discussions over moving Mr Navarro and the new National Trade Council he leads out of the White House and to the Commerce Department, headed by another Wall Street veteran, Wilbur Ross.

And, if the FT is correct, it appears that the Goldman-led faction is winning.

Can you spot the potential flaw in Durden’s reasoning. There is an alternative explanation. Isn’t it at least possible that the Financial Times is spinning things in Cohn’s favor for precisely the same reason it claims Navarro published his Wall Street Journal op/ed? It’s not as if the FT isn’t openly on the side of the globalists and free traders, after all.

And what are two things we know SJWs always do? They lie and they project. Aside from academia, what field is more SJW-converged than the media? I would not consider the FT to be either a reliable or an impartial source in this matter. You’d think people would have learned by now. Don’t ever count the God-Emperor out until he is actually, confirmably, undeniably, out.

Labor mobility destroying nations

The map above demonstrates what has happened as a result of the European Union’s establishment of a free trade zone throughout Europe. Notice that despite the absence of the promised economic growth throughout the EU, the increase in the international mobility rate has increased considerably in the last decade, even in the wealthier countries such as Germany, Switzerland, and the UK. Incredibly, some of the Balkan states have seen more than one-third of their populations abandon the country!

This conclusively proves what I have concluded with regards to the way that free trade inevitably destroys nations. The freer the trade, the more endangered the nation. How can you have a nation when its people are scattered all throughout the world, trying to find employment? It is evidence that confirms what I’d first warned about in a free trade post back in 2012. As Dr. James Miller admitted in our debate, later published as On the Question of Free Trade, labor mobility, and its societal costs, are something that no free trade-advocating economist has ever taken into account

In the former EU15, only about 0.1% of the working age population changes its country of residence in a given year. Conversely, in the US, about 3% of the working age population moves to a different state every year, These institutional and cultural differences suggest comparing internal geographical mobility in the US with the situation within EU Member States rather than between Member States.

In doing so, the figures narrow the ‘mobility gap’ between Europe and the US. Between 2000 and 2005, about 1% of the working age population had changed residence each year from one region to another within the EU15 countries, compared to an overall interstate mobility rate of 2.8%-3.4% in the US during the same period of time.”

What this means is that US workers are about 3x more willing to change their state of residence than European workers are willing to change their region of residence within national borders, and 30x more inclined to change their state of residence than Europeans are inclined to change their country of residence, even though the US state-to-state change likely involves a bigger geographic move than the EU country-to-country one.

It should be noted that increasing this country-to-country labor mobility rate within the EU is not only a major goal of the EU economic advisers, but the explicitly stated reason for this goal is their belief that increased labor mobility is required in order to increase economic growth.

Now, let’s look at what that annual 3 percent intra-US mobility translates to in terms of the overall population. The statistics are as follows for Americans between the ages of 25 and 44:

  • East 54.3 percent
  • Midwest 65.0 percent 
  • South 47.3 percent
  • West 40.2 percent

This is why the Midwest has changed much less over the last 40 years than either the East Coast or the West Coast; more Midwesterners stay in the Midwest and maintain their laws and cultural traditions. But more importantly, note what this signifies for the USA if the apostles of free trade were ever able to achieve their goal of permitting international trade to take place on the same terms as American domestic trade in a manner that realized the anticipated economic benefits: very nearly half of all American workers would be expected to leave the USA by the average age of 35!

This vast exodus of young Americans would say nothing, of course, of the hundreds of millions of non-American workers who would be expected to enter the USA, with all of the various consequences to be expected as a result of immigration that is an order of magnitude larger than the current wave.

The logic of free trade is inescapable. It amounts to a choice between a steadily declining living standard if free trade is limited to goods and capital versus the total destruction of the nation and the replacement of a majority of its population within a single lifetime if it is pursued to the full “beneficial extent” of the concept.

The trough runs dry

The counterproductive drags on the economy are worried that their days of feeding at the federal rough are over:

Federal workers nationwide are bracing for reductions in head counts, civil service protections and salaries when President-elect Donald Trump and Congress turn their attention to government spending later this year.

Trump, who ran on a promise to “drain the swamp,” has identified hiring freezes at most federal agencies as a top priority for his early days in office. Republican lawmakers, many of whom have long advocated for reducing Washington’s workforce, are looking to cut benefits and make it easier to fire poor performers.

The threats and preliminary steps taken by Congress have created anxiety for many of the government’s 2.1 million employees.

“People don’t know what to believe, and they’re in a state of uneasiness,” said Witold Skwierczynski, a Catonsville, Md., who heads the American Federation of Government Employees council that oversees Social Security Administration field offices. “That’s the feeling I hear. People are unsettled.”

The God-Emperor Ascendant is coming and his axe is sharp indeed. For once, an increase in the number of unemployed Americans will be worth celebrating. But in the interest of fairness, every federal worker being put out to pasture should be offered an employment opportunity. After all, plenty of workers will be needed to BUILD THE WALL.

Build. The. Wall.

The House Republicans get on board with alacrity, after having the God-Emperor Ascendant put the fear of himself into them.

Republicans on Capitol Hill say they don’t need to wait for Mexico to make good on President-elect Donald Trump’s central campaign promise: building a southern border wall.

In fact, they are happy to underwrite the wall themselves, at a potential cost of many billions of dollars.

The GOP’s willingness to fund Trump’s border wall with taxpayer money could put the party’s deeply held desire to rein in government spending in conflict with its long-standing goal of cracking down on illegal immigration and toughening border security. Nonetheless, many Republicans do not see an inherent conflict.

“It would be a proposal that would cost billions of dollars to get done, but if it’s an appropriate priority for our country, it’s worth spending that kind of money,” said Rep. Luke Messer (R-Ind.), chairman of the House Republican Policy Committee.

It’s more pathetic than amusing to see the media affect to be concerned about the federal government spending between $8 and 20 billion on shutting down illegal immigration from Central and South America after they were cheerleading Obama’s $787 billion in economic stimulus.

The irony is that there will arguably be more genuine economic stimulus created by building the wall than there was from Obama’s vastly larger income redistribution efforts.

The party of Reagan is dead

The Republican party is a white populist Trump party now, so get used to it:

Donald Trump’s economic adviser Stephen Moore told a group of top Republicans last week that they now belong to a fundamentally different political party. Moore surprised some of the Republican lawmakers assembled at their closed-door whip meeting last Tuesday when he told them they should no longer think of themselves as belonging to the conservative party of Ronald Reagan.

They now belong to Trump’s populist working-class party, he said. A source briefed on the House GOP whip meeting — which Moore attended as a guest of Majority Whip Steve Scalise — said several lawmakers told him they were taken aback by the economist’s comments.

“For God’s sake, it’s Stephen Moore!” the source said, explaining some of the lawmakers’ reactions to Moore’s statement. “He’s the guy who started Club for Growth. He’s Mr. Supply Side economics. I think it’s going to take them a little time to process what does this all mean,” the source added of the lawmakers. “The vast majority of them were on the wrong side. They didn’t think this was going to happen.”

Asked about his comments to the GOP lawmakers, Moore told The Hill he was giving them a dose of reality.

“Just as Reagan converted the GOP into a conservative party, Trump has converted the GOP into a populist working-class party,” Moore said in an interview Wednesday. “In some ways this will be good for conservatives and in other ways possibly frustrating.”

Moore has spent much of his career advocating for huge tax and spending cuts and free trade. He’s been as close to a purist ideological conservative as they come, but he says the experience of traveling around Rust Belt states to support Trump has altered his politics.

“It turned me more into a populist,” he said, expressing frustration with the way some in the Beltway media dismissed the economic concerns of voters in states like Ohio, Pennsylvania and Michigan.

“Having spent the last three or four months on the campaign trail, it opens your eyes to the everyday anxieties and financial stress people are facing,” Moore added. “I’m pro-immigration and pro-trade, but we better make sure as we pursue these policies we’re not creating economic undertow in these areas.”

This is good news. Even the hardcore economic-growth-at-all-costs conservatives are finally beginning to understand that their politics are a non-starter. Moore is smart enough that he’ll likely come around completely before long.

Conservatism and Constitutionalism are both dead because both completely failed in their primary duty of protecting the nation and securing the blessings of liberty for the posterity of the Founders. That is why Trump came to power, that is why the Alt-Right is on the rise, and that is why identity politics are now the order of the day.

This is something both conservatives and constitutionalists very much need to understand. You CANNOT and you WILL NOT avoid domestic conflict, quite possibly on a civil war-scale level, by clinging to ideals that have already failed in almost every possible way. You have ONE CHANCE to avoid the balkanization scenario, and that is by adopting the Alt-Right program and aggressively pushing the God-Emperor Ascendant to adopt it. There is absolutely NOTHING about the conservative and constitutional programs that will relieve the internal stresses that are already pushing the USA to the snapping point.

Some of you whine that there are Nazis and ultras and neos and extremists in the Alt-Right. That’s right. There are. And those are precisely the radicals who will rapidly come to the fore if Trump, the nationalist elite, and the Alt-Right fail to reduce the internal stress, the globalists return to power, and the balkanization scenario begins to play out. Look at Ukraine. Look at Hungary. Look at Yugoslavia. Which of those three political entities is in the best shape, and why?

Free trade kills

As if the costs of free trade weren’t already high enough, some researchers have determined that free trade, specifically with China, is literally killing more white working-class Americans than guns and traffic combined.

Increasing competition with China for trade has been blamed for soaring death rates among white, middle aged Americans. A silent ‘epidemic’ of deaths from suicides, drug and alcohol poisoning within that faction was first highlighted last year. But scientists were baffled as to why white, middle aged Americans were bucking the national trend of decreasing death rates. Now two economists believe they have found the answer.

Justin Pierce and Peter Schott believe they can trace back the uptick in suicides, drug overdoses, and alcohol-related deaths to 2000, when President Bill Clinton decided to relax the rules on major imports.

Between 1978 and 1998, the study reveals the mortality rate for US whites aged 45 to 54 fell by an average of two per cent each year. This was reflected in other rich countries, including France, Germany, the UK, Canada, Australia, and Sweden. After 1998, these nations saw mortality rates for this group steadily continue to fall, by two per cent every year.

But, in the US, mortality rates rose by half a per cent a year. The authors wrote: ‘No other rich country saw a similar turnaround.’ They estimate that had the white mortality in the US rate held at its 1998 value, 96,000 lives would have been saved between 1998 and 2013. And had it continued to fall as it had between 1978 and 1998, 488,500 deaths would have been avoided from 1999 to 2013.

This figure is comparable to the number of deaths caused by the Aids epidemic in the US.

While death rates related to drugs, alcohol and suicides have risen for middle-aged whites across the board, the largest surge are seen among those with the least education. A shock rise in mortality rates for middle-aged, white Americans has been driven by a rise in suicides, drug and alcohol poisonings and liver disease. In 2011, poisonings overtook lung cancer as a leading cause of death in this group and suicides is poised to do so, Princeton researchers said For those with a high school degree or less, deaths caused by drug and alcohol poisoning rose four fold, suicides increased by 81 per cent, and deaths caused by liver disease and cirrhosis jumped 50 per cent.

All-cause mortality rose by 22 per cent for this least-educated group. Among those with some college education, researchers noted little change in overall death rates. While among those people who achieved a bachelor’s degree or higher, death rates fell.

Free trade was already dead from an economic and nationalist perspective. This should make it clear that there is no longer a moral case for free trade. It is both deeply inequitable and deplorably immoral; it is simply another form of the historical predation of the elite upon the peasantry. And it is, therefore, a significant and growing factor in the cliodynamical stresses that are leading towards the ultimate dissolution of the United States.

Steve Keen on the fallacy of free trade

Brainstormers will remember Steve Keen, the brilliant iconoclast who is breaking new ground in the field of economics. In Forbes, he points out that Trump’s heretical anti-globalism is actually more economically sound than the fallacy of Ricardian free trade:

Globalization and Free Trade are good.

This belief is shared by almost all politicians in both parties, and it’s an article of faith for the economics profession.

You are right to reject it.

It’s a fallacy based on a fantasy, and it has been ever since David Ricardo dreamed up the idea of “Comparative Advantage and the Gains from Trade” two centuries ago. The best way to prove that (apart from looking at the bitter experience of the millions of once-were-factory-workers who voted for you) is to apply real-world scepticism to the original argument in favour of free trade.

When Ricardo wrote, England was the global economic superpower, and Portugal was its main rival. Ricardo was in favour of abolishing the “Corn Laws” that placed tariffs on grain imported from Europe. His opponents argued that, if the tariffs were abolished, Portugal would undercut England in all industries. Ricardo came up with an example that accepted that Portugal was better at producing everything than England was, but still “proved” that free trade was better than protection for both countries.

He assumed that England would need 100 workers to produce a given amount of cloth in one year, and 120 workers to produce a given amount of wine in a year. Portugal could produce the same amount of cloth in a year with just 90 workers, and the same amount of wine in a year with just 80 workers. So Portugal (read China for today) was absolutely better at producing everything than England (read the USA), but relatively better at producing wine.

Ricardo argued that free trade could nonetheless benefit both countries, if England devoted all of its workers to producing cloth, while Portugal turned all its workers into wine makers, because the total amount of wine and cloth produced by the two countries would be higher. They could trade the two commodities, and everyone would be better off than if trade didn’t occur. So specialization allows “gains from trade”. Drop the tariff barriers, and everyone will win—even the inhabitants of the weaker economy.

The argument might sound convincing, until you ask a simple question: “So how do you turn a wine press into a spinning jenny?”. Answer? You don’t.

Ricardo’s model assumed that you could produce wine or cloth with only labour, but of course you can’t. You need machines as well, and machinery is specific to each industry. The essential machinery for making wine can’t be used to make anything else, if its use becomes unprofitable. It is either scrapped, sold at a large loss, or shipped overseas. Ditto a spinning jenny, or a steel mill: if making steel becomes unprofitable, the capital involved in its production is effectively destroyed.

Ricardo ignored this little detail in his example, pretending that goods could be produced using labour alone. Later economists have made Ricardo’s example more complicated, and included the need to have machines as well as labour to make output. But they have been even worse than Ricardo, because they pretend that you can shift a machine (they call it “capital”) from one industry to another without loss.

That is simply nonsense.

The theory ignores the reality that, when foreign competition undercuts the profitability of a domestic industry, the capital in it can’t be “transformed” into an equal amount of capital in another industry. Sometimes it’s sold at a fire-sale price, often to overseas buyers. Most of the time, as ex-steel-mill workers throughout the Midwest know, it simply turns to rust.

Ricardo’s little shell and pea trick is therefore like most conventional economic theory: it’s neat, plausible, and wrong. It’s the product of armchair thinking by people who never put foot in the factories that their economic theories turned into rust buckets.

So the gains from trade for everyone and for every country that could supposedly be shared more fairly simply aren’t there in the first place. Specialization is a con job—but one that the Washington elite fell for (to its benefit, of course). Rather than making a country better off, specialization makes it worse off, with scrapped machinery that’s no longer useful for anything, and with less ways to invent new industries from which growth actually comes.

Excellent real-world research by Harvard University’s “Atlas of Economic Complexity” has found diversity, not specialization, is the “magic ingredient” that actually generates growth. Successful countries have a diversified set of industries, and they grow more rapidly than more specialized economies because they can invent new industries by melding existing ones.

So, globalization isn’t merely a societally destructive infringement on national sovereignties, and entirely dependent on substituting debt for economic growth, it builds huge economic inefficiencies into the global trade system.

If you’re still a free trader after everything you’ve seen, after everything you’ve read from Ian Fletcher, Steve Keen, and me, it is apparent that at this point, you’re simply clinging to economic dogma you don’t really understand.

Gosh, a lot of people would like to kick him

Captain Underoos is delusional enough to think that he had a chance to win the Republican nomination in 2016:

The 2012 Republican presidential nominee said he often asks himself why he did not run again and expressed regret for not doing a “better job” communicating his conservative economic message to the public.

“I get asked on a regular basis, ‘Boy, why aren’t you running this year?’ I ask myself that now and then too. But I did that once,” Mitt Romney, a former governor of Massachusetts, said at the U.S. Chamber of Commerce Legal Reform Summit this week in D.C.

Romney said the general public might have gotten the wrong impression about his economic plans.

“People on the other side of the aisle have made that a centerpiece of their campaigns, which is the idea of income inequality and the lack of progress for middle-income families, and it’s something which, gosh, I kick myself as a Republican nominee for president for having not done a better job communicating this,” he said.

“When you speak, as you do in a primary, to people who are strong Republicans and conservatives, you begin to speak in shorthand because they’ve heard the kind of remarks that I’d make, they’ve heard it time and again, and they sort of understand what you mean. So when I’m talking about making America the most attractive place in the world for entrepreneurs, and when I want to make America a terrific place for small business and big business, when I want to see corporations thrive and grow in America, what my primary audience hears is something which they can connect with,” he added.

The reason Romney didn’t run again is because a) no one except Wall Street and the Fortune 1000 supported his globalist economic plans and they are supporting Hillary anyhow, b) he’s a terrible and incompetent candidate, and, c) he would have gotten fewer votes than Jeb Bush.

No Americans trust the globalist Republicans anymore or are buying their immigrant-in-a-poker program. Trickle-down economics trickled down only to the H1Bs and immigrants. The ironic thing is that Mormons may be the only portion of the electorate dumb enough to collectively a) reject racial identity politics while simultaneously b) practicing aggressive religious identity politics.

You can get offended by my observation if you like, but you can hardly deny it. Taken as a political demographic, Mormons won’t vote for white American interests, but they’ll vote for a Mormon every single time.

Interview with an economic hit man

John Perkins is interviewed by Sarah van Gelder:

Sarah van Gelder: What’s changed in our world since you wrote the first Confessions of an Economic Hit Man?

John Perkins: Things have just gotten so much worse in the last 12 years since the first Confessions was written. Economic hit men and jackals have expanded tremendously, including the United States and Europe.

Back in my day we were pretty much limited to what we called the third world, or economically developing countries, but now it’s everywhere.

And in fact, the cancer of the corporate empire has metastasized into what I would call a failed global death economy. This is an economy that’s based on destroying the very resources upon which it depends, and upon the military. It’s become totally global, and it’s a failure.

van Gelder: So how has this switched from us being the beneficiaries of this hit-man economy, perhaps in the past, to us now being more of the victims of it?

Perkins: It’s been interesting because, in the past, the economic hit man economy was being propagated in order to make America wealthier and presumably to make people here better off, but as this whole process has expanded in the U.S. and Europe, what we’ve seen is a tremendous growth in the very wealthy at the expense of everybody else.

On a global basis we now know that 62 individuals have as many assets as half the world’s population.

We of course in the U.S. have seen how our government is frozen, it’s just not working. It’s controlled by the big corporations and they’ve really taken over. They’ve understood that the new market, the new resource, is the U.S. and Europe, and the incredibly awful things that have happened to Greece and Ireland and Iceland, are now happening here in the U.S.

We’re seeing this situation where we can have what statistically shows economic growth, and at the same time increased foreclosures on homes and unemployment.

van Gelder: Is this the same kind of dynamic about debt that leads to emergency managers who then turn over the reins of the economy to private enterprises? The same thing that you are seeing in third-world countries?

Perkins: Yes, when I was an economic hit man, one of the things that we did, we raised these huge loans for these countries, but the money never actually went to the countries, it went to our own corporations to build infrastructure in those countries. And when the countries could not pay off their debt, we insisted that they privatize their water systems, their sewage systems, their electric systems.

Now we’re seeing that same thing happen in the United States. Flint, Michigan, is a very good example of that. This is not a U.S. empire, it’s a corporate empire protected and supported by the U.S. military and the CIA. But it is not an American empire, it’s not helping Americans. It’s exploiting us in the same way that we used to exploit all these other countries around the world.

It’s all about the debt. And debt that can’t be repaid has to be written off, somehow.

Deutsche Bank is in trouble

In case you hadn’t noticed, we’re very far from being out of the 2008 crisis. The bandaids are leaking. Heavily.

Update: In an emailed statement, the German finance ministry told Bloomberg that the report on Deutsche Bank by German weekly Die Zeit “is incorrect” adding that “the federal government isn’t preparing any rescue plans. There are no grounds for such speculation.”

  • GERMAN FINANCE MINISTRY DENIES DIE ZEIT REPORT ON DEUTSCHE BANK
  • GERMAN GOVERNMENT ISN’T WORKING ON BANK RESCUE PLAN: MINISTRY

Only two more denials until it is unofficially confirmed.

It’s all about Deutsche Bank this morning again, where after last night’s vigorous denial by CEO John Cryan, who told Bild that the troubled German lender is not seeking a government bailout and that it’s balance sheet is solid, earlier this morning Germany’s Zeit reported that the German government is working on a contingency plan for Deutsche Bank. The German outlet writes that possible scenarios apply in case Deutsche Bank AG needed capital injection to cover litigation costs and include the option of German government taking a stake.

Contingency plan envisages possible sales of Deutsche Bank units, with the option of state guarantees to back the transactions if needed. One worst-case scenario involving the government taking a 25% stake would apply only in extreme emergency. All options are contingency planning and German govt hopes Deutsche Bank won’t need any state aid.

Queried by Reuters, a Deutsche Bank spokesman referred to an interview Chief Executive John Cryan gave German daily Bild on Wednesday and denied the report. “At no point did I ask the chancellor for support. Neither did I suggest anything like that,” had told Cryan Bild in response to a different report that said he had asked German Chancellor Angela Merkel for her support with a $14 billion U.S. demand to settle claims it missold mortgage-backed securities. Such a request would be “out of the question for us,” Cryan said, adding that he could not understand how “anyone could claim that.”

Despite the preemptive denial, Zeit said that the German government is still hoping Deutsche Bank will not need state support and only scenarios for a potential rescue are being discussed so far.

In related news, it is calculated that the insanity can last somewhere between eight and 68 months longer before it all crashes down.

The ECB and the BOJ, the two central banks most actively monetizing debt currently, have 8 and 26 months respectively, if they do no changes to their programs. However, if incremental easing is layered on, like expanding the scope of their bond buying programs or purchasing equities even more aggressively, the total rises substantially. The final answer: 68 months, or just above 5 and a half years,  in the case of the ECB, were it to steamroll all political opposition and monetize virtually every possible bond (and 20% of the equity market), and 48 months, or 4 years, in the case of the BOJ. 

How very strange! One would have thought those one million new immigrants would have been good for the German economy….