Sunday Cartoon Blogging – January 19, 2020

What to make of the new trade deal with China? The deal seems to restore the US-China trade relationship to where it was before Trump launched his “easy to win” trade war. Nothing that China has agreed to departs markedly from what it agreed to during the Obama administration. In 2015, Obama and Xi Jinping announced an end to cyber-intellectual property theft and embarked on a next round of negotiations over market access.

Trump’s Phase I agreement barely restores China’s agricultural purchases to where they were before 2017, even though Trump presented it as a victory. If one of your main customers boycotts you and then agrees to start buying again, but is buying fewer goods, it’s disingenuous to announce that they had promised to buy more.

After two years of mounting tariffs hostilities, the Phase I agreement has cost the US more than $30 billion in subsidies to American farmers. It has cost American consumers tens of $ billions in tariffs. It has forced some US companies to diversify their supply chains out of China at an additional cost of $ billions.

Trump and his trade sidekick Peter Navarro, fundamentally misread the relative strengths of both the US and China. They thought that Chinese exports to the US are the key driver of the Chinese economy. If that were true, tariffs would be a potent weapon.

But a recent McKinsey study shows that China has aggressively shifted from an export-driven economy to a domestic consumer-driven one. Much of any gain in Chinese exports primarily accrues to the multinational companies like Apple that source in China, and not to the domestic Chinese economy.

At best, Trump fought China to a draw. At worst, China now understands that less economic engagement with America is in its self-interest. The trade war and its new, paper-thin truce leaves America with less leverage going forward. On to cartoons.

Was Round One a win?

Why are our sports teams held to a higher standard than our politicians?

Liz ponders:

There are Senate tools that always go unused:

What to expect from Ken Starr:

Pretty sure that’s Susan Collins:

Facebooklinkedinrss

Trump Tries Extorting Iraq

The Daily Escape:

Kaskawulsh Glacier, Kluame NP, Yukon, CN – 2019 aerial photo by Picture Party

Last Saturday, the WSJ reported that the Trump administration had warned Iraq that it might shut down Iraq’s access to its account at the Federal Reserve Bank of New York (FRBNY), if Baghdad carries through on its threat to kick out American forces.

Iraq, like most other countries, maintains accounts at the New York Fed as an important part of managing the country’s finances. This account receives revenue earned from foreign trade, including in Iraq’s case, sales of oil. Loss of access to their accounts would restrict Iraq’s ability to use their funds to settle foreign transactions, or to repatriate funds needed in their domestic economy. AFP, citing an unnamed Iraqi official, reported that the balance stands at about $35 billion.

From the WSJ:

“The New York Fed provides banking and other financial services for around 250 central banks, governments and other foreign official institutions, such as the account owned by Bangladesh from which North Korean agents were able to steal $81 million in 2016, U.S. officials have said.”

The FRBNY has the authority to freeze accounts under US sanctions law, or if it has reasonable suspicion that use of the funds could violate US law.

This financial threat isn’t simply theoretical: Iraq’s financial system was squeezed in 2015 when the US suspended access to the central bank’s account at the FRBNY for several weeks over concerns the cash was filtering from Iraqi sources through loosely regulated Iranian banks and on to ISIS.

We’ve occasionally frozen foreign countries’ assets, in both the Federal Reserve Bank and in US commercial banks, typically when a country has engaged in illegal activity, or when a revolution has occurred. We did this after the overthrow of the Shah of Iran in 1979. Those funds were released by the Obama administration in 2017, when the US unfroze some $150 billion in Iranian blocked assets as part of the Iran nuclear deal.

Iraq is a weak nation with a fragile economy, so it has to take the US threat to freeze its central bank’s assets at the Fed very seriously. Freezing their account would also end any semblance of a friendly relationship between it and the US. It could also become a challenge for the US if Russia and China stepped in to rescue Iraq by weakening the role of the US dollar as the global reserve currency, that is, a currency used to settle foreign trade obligations.

America has become enamored with stopping the global free flow of funds for regimes it doesn’t like. Our sanctions regime is used so frequently that it is difficult to get an overall list of individuals and organizations that are under sanction. The US government maintains a sanctions search engine here.

Interrupting the flow of international settlements by the US has caused competitor countries to try to establish settlements in currencies other than the dollar. To date, there hasn’t been much success. Wolf Richter reports that the US dollar’s share of global reserve currencies has fallen from 65% in 2014 to 61.8% today, with the Euro in 2nd place and the Yen in 3rd.

Will the downward trend of the dollar as a reserve currency continue? Possibly, but if the US continues to act to restrict money flows, it will occur faster and more sharply than it might otherwise.

There is a kind of desperation in Trump’s threat. We’ve spent 18 years in Iraq and it comes to this? Critics of the threat say that it amounts to blackmail, or extortion. Wrongo believes he’s recently heard this about Trump and another country, too.

Is this desperation President Trump’s, or is it a reflection of a deeper desperation on the part of the US ruling elite? Are we seeing the beginning of the end of US omnipotence through the dollar’s role as the dominant global trading currency?

Is it wrong to bring up how Republicans attacked Obama for “abandoning” Iraq even though Iraq wanted us out in 2010? The GOP saw the US leaving Iraq as a mistake. They were glad when we were invited back to help defeat ISIS. Now, the question is: Will we leave under a Republican president?

How would Trump react if a local armed resistance against a US occupying force in Iraq used force of its own to try and get their money back?

Are we really going to punish Iraq because they have asked us to leave?

Isn’t it their country?

Facebooklinkedinrss

Is Anything Besides Impeachment Going On?

The Daily Escape:

Sunrise, Churchill, Manitoba, Canada – October 2019 photo by Colin Hessel. Hat tip to blog reader Marguerite S.

While America is focused on our impeachment gridlock, we’ve missed a few things Trump has done that have far-reaching impact.

First, the US solar industry has lost 62,000 new jobs and $19 Billion in investments because of Trump’s two year-old tariffs on imported solar panels. The job loss is more than the 53,000 total number of workers employed in US coal mining, an industry Trump favors. Maybe those 62,000 people can just apply for the roughly 250 new coal mining jobs Trump created. The $19 billion in lost investment equates to 10.5 gigawatts in lost solar energy installations, enough to power about 1.8 million homes.

Despite the tariffs, global solar panel prices have continued to fall due to oversupply in China, but US solar panel prices still are among the highest in the world. That makes it more difficult for solar to compete with other forms of electricity generation such as natural gas.

Trump’s tariffs have had the greatest impact on newer solar markets such as Alabama, the Dakotas and Kansas, because they make solar uncompetitive.

Second, Trump announced revisions to the small arms export rules. The National Defense Authorization Act (NDAA) is currently in reconciliation negotiations. One of the differences between the House and Senate versions is an amendment that could loosen export controls on firearms. In November, the administration gave Congress notification of the proposed rule changes, which will go into effect on December 20th if Congress does not block it.

The US exports firearms and related technology on a large scale. From 2013 to 2017, the State Department reviewed approximately 69,000 commercial export license applications for firearms, artillery and ammunition reported at a value of $7.5 billion. Roughly two-thirds of these applications were for firearms.

Trump’s proposal would transfer control over the export of firearms and related technology from the State Department to the Commerce Department. The new rules could loosen the global trade in small arms, particularly in Latin America and the Middle East.

Export control is a complicated process with substantial paperwork designed to limit weapons or components falling into the wrong hands. The State Department currently manages this process for firearms. Moving control to the Commerce Department means that exports of these weapons will be subject to a less rigorous approval process.

Many observers, including the UN, have noted that the widespread availability of small arms is a “key enabler” of conflicts around the world. Despite calls for states to exercise tighter arm controls, the Trump administration is proposing to do just the opposite.

There are downstream effects of the proposal. It may make it easier for Latin American organized crime or terrorists in the Middle East to get guns and ammo more easily. Perhaps Trump wants to improve the Second Amendment rights of ME terrorists and Latin American gangs. Or maybe, he’s just in the tank for US gun manufacturers.

Third, a new Pew survey finds that only half of American adults think colleges and universities are having a positive effect on the country; 38% say they are having a negative impact, up from 26% in 2012. The increase in negative views has come almost entirely from Republicans and independents who lean Republican:

Since Trump was elected, Republicans who say colleges have a negative effect on the country went from 37% to 59%. Over that same period, the views of Democrats and independents who lean Democratic have remained stable, and overwhelmingly positive.

Democrats who see problems with the higher education system cite rising costs most often (92%), while 79% of Republicans say professors bringing their political and social views into the classroom is a major reason why the higher education system is headed in the wrong direction. Age is an important factor: 96% of Republicans aged 65+ say professors bringing their views into the classroom is the major reason why higher education is headed in the wrong direction.

Higher education faces a host of challenges in the future: Controlling costs, ensuring that graduates are prepared for the jobs of the future, and responding to the country’s changing demographics.

Trump and the GOP’s willingness to see everything from impeachment, to solar panels, to college education as an ideological battle are making addressing America’s problems impossible.

Facebooklinkedinrss

Saturday Soother – Brexit Edition, October 19, 2019

The Daily Escape:

Autumn at Kettle Pond, Groton VT – October 2019 photo by tommmmmm

Most Americans haven’t followed closely the Brexit odyssey in the UK. Even if you know only a little, you are probably aware that the UK voted 52% to 48% in a referendum to leave the European Union (EU) in 2016. UK Prime Minister Theresa May then negotiated a divorce agreement with the EU, but that agreement was rejected three times by Parliament.

Then Boris Johnson, also of the Tory Party, became Prime Minister. He’s said the UK would leave the EU with or without an agreement on Brexit. Over the past few days, Johnson seems to have made a new deal with the EU. Here’s a capsule summary of the state of play in England from Market Watch: (brackets by Wrongo)

“Boris Johnson has signed a deal [with the EU] he said he didn’t need, creating a border he didn’t want, under the authority of a Court he didn’t accept, to be submitted to a Parliament he doesn’t control.”

While Johnson is calling this a “new” agreement, 95% of the 293-page agreement is the same as May’s. The changes mostly only apply to the controversial “Irish backstop.” In order to prevent a hard border with customs checks between Northern Ireland and the Republic of Ireland, the original withdrawal agreement stated that the UK as a whole would remain in the EU customs union.

That was a non-starter for the British Brexiteers, who turned it down under May. Under the Johnson deal, the UK will leave the customs union. This will allow the UK to negotiate its own trade agreements outside of the EU.

The catch is that while Northern Ireland will technically be out of the customs union, it will continue to operate under the EU’s customs rules. In practice, this means that goods being sent from Great Britain to Northern Ireland will have to be checked at points of entry. If there’s a chance those goods could be sent on to the Republic of Ireland, or to the EU, duty will have to be paid on them. This concession was necessary to get the Republic of Ireland to agree to the deal. Goods from the EU will pay a duty in Northern Ireland unless they are headed to the Republic.

All this might sound technical, but the deal effectively creates an economic border somewhere in the Irish Sea, separating Northern Ireland from the rest of the UK, something both May and Johnson had vowed never to do. It’s a big concession.

In UK slang, this whole thing might be called a “dog’s breakfast”. In any event, Parliament will convene at 9.30am on Saturday (4:30am EDT) to consider Johnson’s Brexit deal. This is the first time Parliament will have met on a Saturday since the Falklands War.

The session will start with questions of the Prime Minister, followed by a motion to vote on the deal, followed by possible amendments to the deal. It might take all day to actually get to an up or down vote on Brexit. Here’s a helpful diagram:

The reality is probably way more complicated than the chart. By striking this deal, Johnson has basically sold out a key ally, the Democratic Unionist Party. The DUP, which controls 10 seats in Parliament, represents Northern Ireland. It strongly opposes any political or economic separation between Northern Ireland and the rest of the UK. That probably makes the new backstop deal a nonstarter for them.

The vote will be close. Whether it passes won’t be known until the actual vote on Saturday.

The only soothing thing Wrongo sees today is that the US isn’t the only dysfunctional Western democracy. You may or may not be interested in following the Brexit happenings in real time, so Wrongo will do that for you.

So today, we’ve gotta get up early to see Members of Parliament yell at Boris Johnson, and that will take some strong coffee. Let’s brew up a mug of Kenyan Rukira coffee ($15/250g.) from the people at Portland, OR’s Coava Coffee.  The brewer says it has notes of molasses, currant, pineapple, and kumquat followed by refreshing hints of kiwi and honey. Sounds juicy!

Today we salute Elijah Cummings. He served as a Maryland Congressman since 1996, and was active until he died. He signed subpoenas from his hospital bed, and as recently as last Friday, helped to lead a Democratic caucus conference call. His death is a huge loss for his district, his state, and our country.

Here’s a quote from Cummings:

“When we’re dancing with the angels, the question will be asked, in 2019, what did we do to make sure we kept our democracy intact?”

To acknowledge him, here’s Judy Collins singing “Amazing Grace”:

Those who read the Wrongologist in email can view the video here.

Facebooklinkedinrss

Saturday Soother – September 21, 2019

The Daily Escape:

Badlands Storm, South Dakota – September 2019 photo by Bill Frazier

It’s officially the end of summer. We now move towards shorter days, sweater weather, and at least in the Northeast, raking leaves. But, in politics, few things change with the seasons.

Consider this factoid from Bloomberg about what the Trump administration has done to support farmers hurt by his China trade war:

“At $28 billion so far, the farm rescue is more than twice as expensive as the 2009 bailout of Detroit’s Big Three automakers, which cost taxpayers $12 billion.”

Remember the auto bailout? Republicans were largely against it. The government shouldn’t pick winners and losers, let Mr. Market do it. While the auto industry was bleeding jobs, the bailout saved GM and Chrysler. It also helped restore jobs. Marketplace reports that in the Great Recession, auto-manufacturing lost 334,000 jobs, and membership in the United Autoworkers Union (UAW) fell by 150,000.

Since then, as vehicle sales rebounded, those job losses were gradually reversed. In July 2016, US auto-manufacturing employment surpassed its December 2007 pre-recession level of 957,000 jobs. The UAW however, remains more than 50,000 members short of its pre-recession high.

Back to the farmers. Because of the tariff war with China, farmers will receive $19.5 billion in direct government bailout money in 2019, the most since 2005. That doesn’t include an extra $10.5 billion in federally subsidized crop insurance payments, the main vehicle of the farm subsidy program.

This is a move to protect Trump’s political advantage with his Midwest base for the coming election in 2020. But, who is benefiting? It’s mostly the corporate farms, and the largest individually-owned farms. From Modern Farmer:

“The idea is fairly clear: the larger a farm is, the more it has to lose, and thus the more money it takes to make whole.”

The Environmental Working Group (EWG) analyzed USDA data and found that 82 farmers collected over $500,000 each in 2018-2019. In comparison, the EWG found that the bottom 80% of farmers received less than $5,000 each.

This latest tranche of government money comes after the USDA changed the rules regarding who qualified. Previously, each farmer applying for assistance had to have an average adjusted gross income of less than $900,000 per year. Now, there’s no limit on the size of an applicant’s income, as long as 75% “is derived from farming, ranching, or forestry related activities.”

That opens the trough to the biggest corporate farms, to super-rich investors, and the biggest family farms. Not surprisingly, since the Trump administration’s efforts are aimed at protecting those who are among his large donors, rather than the most vulnerable farmers, there are no cries that this is “socialism” by the GOP.

Apparently, this is capitalism at its best, but what we did to save the auto industry was socialism.

On to our Saturday Soother, that interlude in the week when we try to forget what Trump may have promised to a foreign leader, or what Cory Lewandowsky did to Jerry Nadler. We focus instead on what excuses we can use to avoid the coming fall clean-up. Here, on the fields of Wrong, we are taking in our bluebird houses, the fledglings left a week ago. A few hummingbirds are still around, but will certainly be gone next week. The apple trees have lost most of their leaves, and the deer are eating the fruit that falls to the ground. We’re trying to wait until early October to turn the heat on, but the last two nights have been in the high-30s.

Let’s warm up today by brewing up a hot, steaming cup of Ethiopia Sidamo Gora Kone ($19/12 oz.) from Sacramento, CA’s Temple Coffee Roasters. The roaster says it has a sweet-savory structure with a crisp, lightly satiny mouthfeel. You be the judge.

Now settle back and listen to a musical selection for the change of season. Here is “Autumn” a petit adagio from Alexander Glazunov’s “The Seasons”. The music was written as an allegorical ballet, but we’re going to listen to a symphonic treatment. It was composed in 1899, and first performed as a ballet by the Imperial Ballet in 1900 in St. Petersburg, Russia. Here, it is played by the Czech Radio Symphony Orchestra of Bratislava conducted by Ondrej Lenard:

Those who read the Wrongologist in email can view the video here.

Facebooklinkedinrss

Saturday Soother – Trump Mexican Tariff Edition, June 1, 2019

There’s No Escape Today:

More tariffs! This from CNN:

“President Donald Trump threatened on Thursday to impose new tariffs on Mexico if the country does not step up its immigration enforcement actions, combining his boiling border-related frustrations with his preferred method of punishing foreign countries.

Trump said in a White House statement that the first round of tariffs would begin on June 10 at 5% ‘on all goods imported from Mexico.’ The statement said Trump would carry out his threat under authority from the International Emergency Economic Powers Act and that he would lift tariffs only ‘if the illegal migration crisis is alleviated through effective actions taken by Mexico.’

The statement warned further that if Mexico does not act as Trump demands, tariffs would go up to 10% by July, 15% by August, 20% by September and reach a permanent level of 25% by October.”

Mexico probably does need to do more to stop migrants crossing their country.

OTOH, they like America, have rules that safeguard migrants. It’s doubtful that the Trump administration has studied those rules or cares about them, any more than they care about ours.

According to Forbes, The US imported $346.5 billion in goods from Mexico last year and for the first three months of 2019, they increased 5.4%. At that rate there would be $365 billion imported in 2019. At a 5% tariff, companies would have to either raise prices or take an $18 billion hit to profits. And it is companies and eventually consumers that will pay these new Trump tariffs, not the exporting country as Trump consistently misrepresents.

This is why the DOW fell 355 points on Friday.

Trump used the International Emergency Economic Powers Act as his legal basis to place tariffs on Mexico. It’s a Cold War-era law that actually vests the presidency with absurdly broadly defined, near-dictatorial powers in many areas. But, prior presidents, even Reagan and Bush 43, never conceived in their wildest dreams of using them except in an ACTUAL emergency. And they didn’t.

Trump doesn’t care, he sees a hammer, and decides that it isn’t for driving nails; it’s for breaking Mexican kneecaps. Matt Yglesias explains that there’s an easy climb down for Trump in this. Migration from/through Mexico is very seasonal, peaking in the spring, and declining sharply in the summer.

Trump will probably pretend to get some concessions from Mexico and declare victory in a couple of months. His moron supporters will surely applaud that.

At some point, Democrats will have to frame these and Trump’s other tariffs for what they are: a national sales tax on imports. Dems need to start explaining to the public that these tariffs are a national sales tax on everything from Mexico, including cars and components for US car manufacturers. Maybe saying this:

“Trump is making Americans pay a sales tax on imports until illegal immigration stops. How will Americans paying higher taxes force Mexico to stop illegal immigration?”

That’s how it should be framed.

Enough! We’ve been Mueller ’ed and Trump ’ed all week, and it’s time for your Saturday Soother!

On the first day of June, Wrongo hopes that you are in short sleeves, and thinking of getting outdoors, and that doesn’t mean shopping at the mall.

Let’s start by brewing up a vente cup of Hawaii Kau Champagne Natural from Paradise Roasters ($19.95/12 oz.). This coffee tied for the highest rating in Coffee Review’s May 2019 tasting report of Hawai’i-grown coffees. They say that its tropical and floral aromas lead into a sweet and complex dessert-like cup.

Paradise has experimented with yeast fermented coffees that produce a more intense and complex flavor than traditional methods. It evokes Champagne, fruity but dry, and not effervescent. They only roast this coffee on one day: June 3rd, 2019. So you have been alerted to act fast.

Now, move outside, assuming you live in a part of the world that isn’t suffering from rain or tornadoes. Put on your wireless headphones, and listen to a Philadelphia-based Irish band, BarleyJuice, play their tune, “Weekend Irish”:

Sample Lyric:
And the blood runs deep,
When the booze is cheap,
Long as you ain’t got an agenda to keep,
You can be a Weekend Irish, hey!
Aye, aye, we’re the Weekend Irish

And we’ll raise a hand,
To the motherland,
Best part of being an American,
To be a Weekend Irish

Those who read the Wrongologist in email can view the video here.

The Wrongologist does not condone identity politics, unless it involves weekend singing, dancing and drinking.

Facebooklinkedinrss

Monday Cartoon Blogging – May 13, 2019

Too much commencement fun has led to Sunday’s cartoons arriving on Monday.

Enforced Mother’s Day is the law in Georgia:

The Duke and Duchess of Sussex had a baby. Americans are envious:

Trump’s right to confront China. Too bad he’s using the wrong weapon:

Another cover up for the Orange Overlord:

Trump’s hiding a few things by using his tax forms to cover up. You can’t unsee this:

If its comfort food you’re after, Joe’s for you:

Facebooklinkedinrss

Monday Wake Up Call – February 11, 2019

The Daily Escape:

The Piedmont Kilns, Wyoming. They were built in 1869 to supply charcoal for the iron smelting industry in Utah. Part of a ghost town, three remain.

A wave of bankruptcies is sweeping the US Farm Belt, and Trump’s trade disputes are adding to the pain. The primary cause is low commodity prices that American farmers have experienced for the past few years. Throughout much of the Midwest, US farmers are filing for Chapter 12 bankruptcy protection at levels not seen for at least a decade.

From the WSJ:

“Bankruptcies in three regions covering major farm states last year rose to the highest level in at least 10 years. The Seventh Circuit Court of Appeals, which includes Illinois, Indiana and Wisconsin, had double the bankruptcies in 2018 compared with 2008. In the Eighth Circuit, which includes states from North Dakota to Arkansas, bankruptcies swelled 96%. The 10th Circuit, which covers Kansas and other states, last year had 59% more bankruptcies than a decade earlier.”

Those states accounted for nearly half of all sales of US farm products in 2017, according to USDA data. Since 2000, China’s share of our agricultural exports has increased from two percent to about 19% in 2017. China has become our largest agricultural trading partner.

The rise in farm bankruptcies tracks a multi-year slump in prices for corn, soybeans and other farm commodities caused by a world-wide glut. Prices for soybeans and hogs further declined after Mexico, along with China, retaliated against US steel and aluminum tariffs by imposing duties on our AG products, and then slashing purchases.

Farmers generally supported Trump’s tariffs when he started the trade war in 2018. China’s retaliation was to virtually cease purchasing American agricultural products. As an example, China moved the sourcing of soybeans from the US to Brazil. When a low margin business like farming loses 20% of sales, only those who aren’t in debt can survive. And most US farmers owe quite a bit to their bankers.

The Trump administration recognized the potential problem, and approved funding to bridge farmers across the decline in Chinese purchases, but the trade war has gone on for longer than anticipated.

Now, bankruptcies are way up, and exports to China are way down:

Source: Econbrowser

Unfortunately, we keep importing from China. But in the past year, the Chinese have stopping buying as much of our goods. Clearly, the bull our farmers got isn’t in their barn, but in the White House.

Republicans are saying that the surge in farm bankruptcies isn’t Trump’s fault, that the problem with the farm product glut started years ago. But, if Republicans want to give Trump credit for the good employment numbers, and a still-robust stock market, they have to blame him for the bad as well.

Time to wake up America! Disruption without a strategy brings chaos. And think back to the SOTU, when Trump said how he stood between us and socialism. But Trump’s picking winners and losers with his trade wars. He’s using tax-payer money to subsidize farmers damaged by his self-imposed trade wars. That sounds eerily like socialism to Wrongo.

Wake up to the fact that farmers are pawns in Trump’s capricious tantrums against China. Those who have played chess know that most of your pawns are gone by the end of the game.

Facebooklinkedinrss