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The Wrongologist

Geopolitics, Power and Political Economy

Monday Wake Up Call – April 9, 2018

The Daily Escape:

Canada Warbler

Are you worried yet? Last week ended with the stock market falling off the cliff. The Dow was down over 700 points, but recovered slightly to lose “just” 572 points. Trump caused this by seemingly being pissed that the Chinese would fight back after his in-your-face tariff announcements.

Now, the Dow Jones average is down 9% from its January high.

And the administration couldn’t seem to get its messaging straight. Former TV pundit Larry Kudlow, now Trump’s economic advisor, told reporters on Wednesday the threat of trade sanctions was only a negotiating tactic. A rally of more than 3% followed. But Trump upended that notion on Thursday, ordering a review of even larger tariffs. So, on Friday, Kudlow said the opposite, claiming he had just heard about the additional $100 billion in tariffs Trump announced on Chinese imports.

From Bloomberg:

The Republican president’s renewed ramblings on trade dominated US equity markets this week, with a tweet-induced swoon on Friday leaving the S&P 500 Index 1.4 percent lower than where it started on Monday.

And there goes Trump’s reputation as the stock market president. A retired former colleague of Wrongo’s at the big NY bank is all over Facebook touting the Donald’s success at driving the stock market, but this chart from Bloomberg shows he’s wrong. It compares Trump’s first 444 days with the first 444 days of other presidents:

So, what to do? Do investors ride the roller coaster that is the Trump approach to trade, and watch Mr. Market deal with it by hammering their 401k? Or do they jump into cash and lock in a loss? From Benjamin Studebaker:

Theoretically, a full blown trade war with China could be really damaging. If the US and China were to stop trading tomorrow, the total value of US-Chinese trade lost would be about $648.5 billion. That’s about 3.5% of US GDP and 5.7% of China’s.

US inflation would increase, since American consumers will try to substitute more expensive goods for those they can’t import from China. Chinese unemployment would rise, as non-Chinese firms relocate from China to other developing countries to evade the tariffs.

The US wouldn’t be hurt as badly, because after a while, firms would find new locations to operate from. But the trade war won’t create many new American jobs – the offshore firms would either stay offshore, or they’d automate production in North America. The Chinese would be more lastingly damaged, as there isn’t a consumer market large enough to replace America’s.

That’s what Trump means when he says that trade wars are “easy to win” for the US. We can damage China more than China can damage us. Studebaker concludes:

But make no mistake–such a trade war would be highly disruptive. In 2009, the US economy contracted by 2.8%. A full blown trade war would blow this figure out of the water. It would be political suicide for the administration.

Trump’s stated goal is to get China to negotiate to protect US intellectual property rights. This is why his proposals have been relatively small – he’s not looking to break Beijing, just to bring it to the table.

If Trump can get China to make a deal with him, he can pass this off as a major foreign policy achievement. And because the stock market has been in panic mode, any positive result could make Trump look good in the eyes of his supporters.

OTOH, his supporters, like my former Bank colleague, think everything Trump does looks good.

Maybe the trade war won’t happen. But, maybe Trump should remember what Luke Skywalker said in the Last Jedi:

This is not going to go the way you think…

The “Art of the Deal” guy should know there are two sides to any negotiation.

So, wake up, Mr. Market! Stop jumping off a cliff with every tweet. To encourage you, here are Elvis Costello and the Attractions with their 1978 hit “Pump It Up”. Maybe it will give Mr. Market an idea about the right direction for the stock market:

Sample Lyrics:

Pump it up, until you can feel it

Pump it up, when you don’t really need it

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

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Sunday Cartoon Blogging – April 1, 2018

Hopefully, none of you brought any of these cute little babies home for Easter. Wrongo’s parents once brought home some baby chicks for the holiday. The family dog ended their stay very quickly. Just don’t do it!

Easter falls on April Fool’s Day. We’ve been invited to a family party. We’re hoping someone’s really home when we get there. The men’s college basketball championship is sandwiched around April 1st, and Wrongo will be watching. Sadly, the UConn women’s basketball team lost in their final four for the second year in a row.

We endured another week of non-stop foolery by our elected representatives, and this week’s cartoons show just that.

There will be new census questions, but its doubtful that these will make the cut:

The new questions come with a few new tools:

The Roseanne show reboot was cause for concern by Dan:

Trump has the best irony. Trump should pay more and so should Amazon:

We didn’t hear Bob Dylan at the #March for our lives, but Congress should have:

Trump’s legal problems actually have an easy solution:

Trump’s careful diplomatic approach will certainly win the trade negotiation with China: (from the Economist)

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Saturday Soother – March 31, 2018

The Daily Escape:

 

Zion National Park – 2001 photo by Wrongo

From Alastair Crooke:

At the beating heart of Trump’s Presidency lies the notion of the “Art of the Deal”.  It is said that Trump has few convictions, but his notion of how to negotiate – with a big stick, maximum leverage, and with credible, fear-inducing ‘threats’ –  is central to his whole Presidency.

Crooke continues:

This underlying notion of the ‘deal’ is transactional in essence, best practiced as a one-to-one operation, rather than in a multilateral context.  But in the sphere of geo-politics this is not so easy….in May… Trump will put his negotiating theory to the test in a very different ambit to that of New York real estate. The North Korean summit should be held; the verdict on the nuclear agreement with Iran is due to be pronounced then; the US Israeli-Palestinian determination is scheduled to be ‘handed down’ in May; the Sunni states’ Iran containment roles [are] to be set; and any punitive tariffs on China will be decided, and enacted.

May will be an important month for America. We could see success in all, some, or none of these negotiations.

Crooke posits that the Chinese, the North Koreans, the Iranians and the Russians all have read and understand the concepts behind the Art of the Deal. They also know that the US is not really in a position to make good on the bluff, and particularly, not in each negotiation, in each part of the globe.

And despite John Bolton’s best efforts to reinforce Trump’s desire to show America as the strongest, baddest version of LeRoy Brown, all of these competitors and would-be adversaries won’t necessarily blink if Trump threatens them.

There are other problems with Trump’s Art of the Deal strategy. He’s not the only one who knows how to play high-stakes poker:  Putin and Xi did not become the undisputed leaders of Russian and China without knowing a bit about strategy and risk-taking.

And the leaders on the other side of each of these Trump initiatives are being told by their own “hawks” that one option is to out-Trump Trump, and win.

This raises the question of a diplomatic “off-ramp”. When Trump warns North Korea that the alternative to accepting America’s demands is military action, what will Trump do if Kim Jong-Un just says “no”? Or, what if Kim answers “yes, but only if America withdraws its nuclear shield from the Korean Peninsula”, or insists that American forces leave northeast Asia altogether?

What does Trump do then?

Does he go to war? The Donald can go to the well too many times with the Art of the Deal strategy.

Over the past 17 years in the Middle East and elsewhere, America’s military might has been shown to have serious limitations, despite our substantial capabilities.

Will Trump be able to bluff his way through May? And if he can’t, then what?

Relax! The good news is that we have a couple of months to figure this out.

Sounds like we need to enjoy the spring, now that it’s finally arrived. Here, the fields of Wrong have finally given up their snow. The birds are returning, and our thoughts turn to a spring clean-up of the damage brought by winter.

So, let’s procrastinate a bit by brewing up a vente cup of Dragonfly Coffee Roasters Ninety Plus Gesha Estates Panama Limited Batch #238, made with the Jose Alfredo Process. ($165/8oz.) Dragonfly claims that the taste is astounding and original, including deeply arousing notes of caramelized green apple surrounding lavish fruit notes that delicately transition the finish into rich cocoa.

Who writes this stuff?

Now, settle back and contemplate the arrival of spring by watching and listening to a video of a Bobolink, by the great Lang Elliott. The Bobolink is a member of the Blackbird family:

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

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Monday Cartoon Blogging – March 12, 2018

Wrongo and Ms. Oh So Right have safely returned to the Mansion of Wrong after our week in warmer climes. The timing of our travel was perfect! We were away during the two nor’easters that dumped 18” of snow on the Mansion, and we are back before the next snow on Tuesday. Here is a picture of sunrise on the day we pulled out of our FL rental:

On to cartoons. Trump will try to show North Korea’s Kim the art of the deal without using his hands:

This, by a right-wing cartoonist, makes Trump look like he knows something about tariffs. That’s untrue:

Trump baffles some of the base, but others get the picture:

The GOP is still in denial about Trump’s steel tariffs:

Jefferson Beauregard Sessions redefines the “Golden Door” of American immigration:

Trump’s decision to again allow importation of elephant parts shows his character:

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Will Tariffs Bring Prosperity?

The Daily Escape:

Detail of art painted on a truck, Pakistan – 2017 photo by Caren Firouz. South Asian “truck art” has become a phenomenon, inspiring gallery exhibitions.

Will new tariffs help our economy? The view of a typical Trump supporter:

Some of us are happy about these tariffs because it starts a long overdue conversation about trade: Everyone knows that the press, congress, economists, and the multinationals love existing policy, and that most of them couldn’t care less about trade imbalances. If this is the only avenue our democracy has to change trade policy, then we’re all for it.

Yet, the conventional wisdom is that Trump’s tariffs on steel and aluminum will do more harm than good. There are several concerns. To the extent we need steel and aluminum to use in our domestic production, it will cost more, and prices will have to go up, assuming that the manufacturers are unwilling to lower their profit margins. Ultimately, those increased costs hit the American taxpayer.

Another concern is retaliation. Our trade partners can block our exports, or charge retaliatory import tariffs of their own. Just 12% of US GDP are exports, so we’re less exposed to that threat than other economies that have a larger percentage of their economies dependent on exporting. However, jobs can be easily lost if China, Brazil, or the Euro Zone block some of our exports.

Trump’s rationale for new tariffs is two-fold. First there is a national security risk caused by diminished capacity in sensitive industries. Second, good jobs will come back to America if we produce more stuff.

Let’s deal with national security first. No doubt we have surrendered some of our strengths in sensitive products and technologies. But, it’s not a critical issue for steel or aluminum. We can get them from many countries that are currently our allies.

Artificial intelligence, advanced semiconductors, and software are an entirely different matter. There are legitimate national security-based rationales for restriction in those areas.

But, we are in trouble with some of the exotic steels that the Defense Department uses in weapon systems. For example, the Belgian firm Fabrique Nationale is the prime contractor for a lot of the high end small arms. Some of these specialty steels are only manufactured in annual production lots. Trump’s tariff won’t shift the production of those exotic steels to domestic sources.

So even in the few cases in which a tariff might serve a national security purpose, the Trump tariff will fail.

And while the Chinese dump steel below cost on global markets, most others (Canada, Brazil) do not, and we buy a lot more from them than we do from China. And there is no scenario whereby Canadian steel exports are a “national security” risk, Trump’s primary rationale. And the Trumpets seemingly can’t see the difference between primary aluminum (China exports nearly none) and semi-manufactured aluminum products, such as bars, plates, and wire rod, which they export a lot.

But, don’t foreign governments subsidize their steel industry? China does. However, that means that China is essentially giving us cheap steel. The question for Trump is: Will we gain enough jobs in our domestic steel industry to outweigh the losses to us in higher prices across all industries?

Maybe, but it hasn’t worked that way in the past.

Tariffs help lazy and/or incompetent businesses. Imposing new tariffs will just put off the day when the toxic combination of bad management, lack of investment, poor infrastructure, and bad government causes these protected industries to implode.

If you are a manufacturing company that is internationally competitive and well run, how would you like it if your steel and aluminum suddenly became 25% more expensive? All to protect some other lazy SOB who hasn’t invested in his plant in 20 years?

The correct response should be to find out why your product isn’t competitive, and then fix it. Much of American industry has done that, by automating, by moving abroad for cheaper labor, or to be closer to raw materials.

Ultimately, Trump’s tariffs will just postpone the day when our uncompetitive sectors must modernize, or go under.

And that result is always a net loss of jobs.

The best think tank idea is to establish tariffs (or quotas) based on the amount industries pay their labor in foreign countries vs. what US employers pay. If the foreign country’s prices are lower, than a tariff would kick in. This would help us with US firms who manufacture overseas. They would have the choice of paying higher wages to US laborers, or paying a tariff on their imports to the US.

Trump’s message is: If you want unfettered access to the US market, make it here. If the US consumer pays more, that is a price he’s willing to take to have the manufacturing base.

This is a debate worth having.

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Sunday Cartoon Blogging – March 4, 2018

We have a high surf warning here in northern Florida, and Wrongo is just a little late posting the Sunday funnies. First, a hard-to-believe-its-not-the-Onion story:

…in the Bay Area — where the nation’s preeminent local food movement overlaps with the nation’s tech elite — egg-laying chickens are now a trendy, eco-conscious humblebrag on par with driving a Tesla.

That’s right, the techbros are raising chickens:

In true Silicon Valley fashion, chicken owners approach their birds as any savvy venture capitalist might: By throwing lots of money at a promising flock…By charting their productivity (number and color of eggs). And by finding new ways to optimize their birds’ happiness — as well as their own…They keep the chicken brokers of the region busy finding ever more novel birds.

Wow, San Francisco has chicken brokers! And they are hiring contractors to build $20,000 coops using reclaimed materials or pricey redwood that matches their human homes. And they fail to realize that their chickens are eating better than the ~17% of Americans who don’t have enough to eat.

Kill them all now.

On to cartoons. Jared Kushner had a bad week:

And the son-in-law has a few new duties:

The GOP won’t let Trump go that far:

New sign at White House:

Big NCAA basketball scandal focuses on the wrong thing:

Oscars tonight. It leaves studios rethinking their marketing strategy:

 

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Saturday Soother – March 3, 2018

The Daily Escape:

Eagles Nest, Housatonic River, Litchfield County CT – 2018 photo by JH Cleary

To say that the Trump administration has become a dysfunctional mess is an understatement. Here’s one example: Yesterday, the Administration announced that it would impose 25% tariffs on imported steel and 10% on imported aluminum. Here is some detail behind Trump’s tariff announcement:

There were no prepared, approved remarks for the president to give at the planned meeting, there was no diplomatic strategy for how to alert foreign trade partners, there was no legislative strategy in place for informing Congress and no agreed upon communications plan beyond an email cobbled together by [Wilbur] Ross’s team at the Commerce Department late Wednesday that had not been approved by the White House.

No one at the State Department, the Treasury Department or the Defense Department had been told that a new policy was about to be announced or given an opportunity to weigh in in advance.

The Thursday morning meeting did not originally appear on the president’s public schedule.

The greatest danger to America is not Russia or China, it’s actually Donald Trump. When so much of your goods are imports, saying “1, 2, 3, 4, I declare a trade war” will not produce positive outcomes for the average American, who will simply pay more for their imported products. That will cause some inflation, and maybe, impact the bond markets, which hate higher inflation. It could also cause profit pressure for certain companies that rely on steel and aluminum as a basic raw material, companies like auto and airplane manufacturers.

OTOH, while elites will not like Trump’s move, free trade is not always good for Americans.

But, this guy doesn’t know what he’s doing when it comes to global trade. It isn’t a real estate deal. It involves multiple inputs and outputs across multiple industries and countries.

Not simple enough for a Stable Genius to understand.

On the road here in the south, Wrongo stopped at a McDonald’s to pick up a plain burger patty for a dog who was fussy on our trip. Wrongo asks for a plain patty, no sauce, no bun. The clerk says: “What’s a patty?

So, this weekend when the Atlantic Northeast and the Pacific Northwest are both experiencing highly unusual weather, Wrongo and Ms. Right and the dogs are in the Southeast, experiencing spring-like weather. It’s time to forget Trump and his wars, real and imagined, and think spring. Sit back and brew up a hot cup of Kicking Horse’s Smartass Coffee. The brewer says: “just a bright, chocolaty concoction for the smart-thinking, deep-drinking, good-at-their-game-in-the-morning crowd”.

Obviously, not a coffee for Trump.

Now, settle back and listen to “On Hearing the First Cuckoo in Spring” by Frederick Delius. He composed it in 1912. Here it is performed by Portugal’s Orquestra Clássica do Centro in 2013:

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

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How Wrong Were Wrongo’s 2017 Predictions?

Wrongo is not a futurist, or a stock-picker with mad skills. On January 2 2017 he made a series of predictions about the year to come. Let’s see how wrong he was:

  1. There will be more global political and social turmoil:
    1.  The EU could collapse: That didn’t happen, as Macron soundly defeated LePen. OTOH, Merkel barely survived her election and May lost badly in a wrongly-played attempt to gain a super majority in the UK. Wrongo gets a “D” in this prediction.
    2. China’s economy is wobbling: and it still is, but a command economy can create its own reality. Wrongo gets a “C”.
  2. The US will continue to lose influence globally despite “Mr. Unpredictable” becoming our Orange Overlord: Wrongo gets an “A”. From Western Europe to the Middle East and Asia, there is not a single example of where Trump has put America in a position of greater influence in the past year. Except for Israel: they plan to name a train station after him.  Think about it, what great man only gets a train station?
  3. Trump arrives in the Oval Office as an overconfident leader, the man with no plan but with a short attention span, and within six months he will have his first major policy failure: Was his first policy failure the immigration ban? The North Korea diplomatic fiasco? The multiple attempts to repeal Obamacare? Walking out of the Trade Agreement, giving China a free hand in Asia? Give Wrongo an “A”, except that Wrongo added:

This will make him more subdued, more conservative and less populist thereafter.

Trump was less subdued, less populist, and clearly more conservative as he played to his base. Give Wrongo a “B”.

4. The triumvirate of Russia/Turkey/Iran will elbow the US firmly out of the Fertile Crescent, and secure friendly regimes in Damascus and Baghdad. An easy “A”. Wrongo went on to say:

This will push American influence in the Middle East back to just the Gulf States, a weakened Saudi Arabia, and an increasingly isolated Israel.

A home run for Wrongo, but not for America.

  1. Domestically, drug abuse, suicide, and general self-destructive behavior will continue to climb and become impossible to ignore: Sadly, another “A”. Trump’s declaration of the opioid crisis as a “Health Emergency” was a public relations exercise with no plan about how to truly deal with the crisis. Wrongo also said:

The growing antibiotic resistance to main stream drugs will impact health in the US.

This is very true here, as well as globally. There is no political push to force drug companies to deal concretely with this issue.

6. The Trump stock market rally has already turned into the Santa Selloff:  Give Wrongo an “F” on this prediction. While the Dow closed 2016 at 19,719, we are looking to close 2017 above 24,000, up nearly 18% in the past year.

Meta Prediction: Some people who voted for Trump have incompatible outcomes in mind, so it’s a virtual guarantee that a sizable minority are going to feel cheated when they fail to get what they were promised: This was hard to get wrong, so give Wrongo a gentleman’s “C”. Wrongo went on to say:

OTOH, when Trump fails, most of his base will blame anyone but the Donald. The question is, when disillusionment sets in, will the reaction be a turning away, or a doubling down on the anger? Wrongo thinks anger will win out.

An easy “A”.

Here is the part of the prediction that was 100% spot on:

The coming Trump administration will seem like a fractious family outing: Just under half of the family (the “landslide” segment) wanted to take a ride, but now, the whole family has to go. Those who wanted to stay home will sulk in the back seat while Daddy tells them to shut up and stop bitching.

Meanwhile, once we are out of the driveway, it dawns on everyone that Daddy hasn’t decided yet where to go. Everyone pipes up with suggestions, but Daddy again tells everyone to shut up, because it’s his decision alone…Daddy won’t reveal the destination, but insists everyone will love it once they get there, even those who wanted to stay home, those who wanted to go to the beach, and those who wanted to head over the cliff like Thelma and Louise.

2018 predictions will come in the New Year.

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Trump Plays “Let’s Make a Deal” With China

The Daily Escape:

Georgian Sheep returning for the winter from the high mountains. Mixed among the sheep are Georgian Shepherd dogs who are the same size and color, who protect the flocks from wolves – photo by Amos Chapple

Donald Trump is in China for a two-day visit, and North Korea (NK) is certainly on the agenda. While in Seoul, Trump urged “responsible nations” to unite and stop supporting NK:

You cannot support, you cannot supply, you cannot accept…every nation, including China and Russia [must] fully implement recent UN Security Council resolutions on North Korea.

Trump praised China for taking some steps against NK, but urged them to do more, as administration officials believe the border between China and NK still remains a trade corridor. From Trump:

I want to just say that President Xi — where we will be tomorrow, China — has been very helpful. We’ll find out how helpful soon…But he really has been very, very helpful. So China is out trying very hard to solve the problem with North Korea.

What Trump and his administration need to figure out is a new strategy for NK. It is doubtful that China would cut off NK, because it fears that if the Kim regime collapses, millions of NK refugees will stream across the border into China.

Mike Chinoy, an expert on East Asia policy at the US-China Institute of the University of Southern California thinks that the US has dug a hole with China that is very hard to climb out of:

Trump has mortgaged the whole US-China relationship to get the Chinese on board with the North Korea plan…He is now coming at it from a position of weakness.

Here is another idea. William S. Lind suggests that if we look at the big picture, it is obvious that NK might become a greater threat to China than it is to us:

North Korea is unlikely to launch a nuclear attack on the United States. However, if North Korea retains its nuclear weapons, it is likely to lead South Korea, Japan, and possibly Taiwan, Australia and Vietnam to go nuclear themselves. From the Chinese perspective, that would be a strategic catastrophe.

He makes the point that China has never sought world domination, in fact, it wants to maintain strategic distance from its neighbors. However, maintaining that distance requires a buffer zone around China, which historically China has sought, and is seeking now in the South China Sea.

Lind suggests that if the states on China’s periphery had nuclear weapons, China would be unable to keep a buffer zone of weak neighbors that it can dominate. Even Vietnam could stop China cold if they had nukes. The states bordering China, instead of serving as a buffer, could become existential threats sitting right on her frontier.

Lind’s idea is that Trump should make the case about the need to restrain North Korea’s nuclear program, but instead of threatening with trade or sanctions if China refuses, he should say:

If North Korea retains its nukes and delivery systems, we can no longer advise our allies in Asia not to go nuclear.

However, that would be a transformational change in the bedrock US principle of nuclear non-proliferation.

Lind explains that while Beijing does not care about the threat NK nukes pose to the US, they fully understand the strategic threat of nuclear weapons pose in the hands of America’s regional allies.

Wrongo doesn’t have much time for Mr. Lind, who has advocated that police in the US carry rocket-propelled grenades, and who has said that the “next real war we fight is likely to be on American soil.”

The idea of proposing doubling the membership in the nuclear club goes against American values, despite its source, might give the US some additional leverage with China.

But, China already knows all of this, so would it achieve much?

What China can do is push North Korea to the negotiating table. But, President Trump has not only to be willing to negotiate, he has to give a carrot to China. That would be to partner with them in a South Asia trade deal. China can’t be bullied by Mr. Trump into bullying NK. Trump will need “strategic patience” to get a deal that involves China, Russia, Japan, and, of course, both North and South Korea.

There may be a “deal” to be made, but does the Deal-maker-in-Chief has the ability to make it?

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IMF Reports US Standard of Living is Falling

The Daily Escape:

Haleakala Crater, Maui

Is it the best of times or the worst of times? This is no longer a partisan discussion. We have an economy in the midst of a long expansion, the third longest since 1850. The statistics say we are close to full employment. But, our mortality rate is moving in the wrong direction, and we have an opioid epidemic that is serious enough to cause jobs to go unfilled. The NYT reports that in Youngstown Ohio, middle class factory jobs go begging:

It’s not that local workers lack the skills for these positions, many of which do not even require a high school diploma but pay $15 to $25 an hour and offer full benefits. Rather, the problem is that too many applicants — nearly half, in some cases — fail a drug test.

The Fed’s regular Beige Book surveys of economic activity across the country in April, May and July all noted the inability of employers to find workers able to pass drug screenings.

So the best of times? Probably not. Bloomberg reports that the International Monetary Fund (IMF) looked at the US economy. This is what they see:

For some time now there has been a general sense that household incomes are stagnating for a large share of the population, job opportunities are deteriorating, prospects for upward mobility are waning, and economic gains are increasingly accruing to those that are already wealthy. This sense is generally borne out by economic data and when comparing the US with other advanced economies.

The IMF then goes on to compare the US with 23 other advanced economies in the Organization for Economic Cooperation and Development (OECD) in this chart:

The chart is a bit of an eye test unless it’s viewed on a big monitor, but its overall point is that the US has been losing ground relative to its past OECD reports by several measures of living standards. 35 countries make up the OECD. The members include all of Western Europe, Russia, Japan, Australia, and several developing nations like Korea and Panama.

This from Bloomberg:

And in the areas where the US hasn’t lost ground (poverty rates, high school graduation rates), it was at or near the bottom of the heap to begin with. The clear message is that the US — the richest nation on Earth, as is frequently proclaimed, although it’s actually not the richest per capita — is increasingly becoming the developed world’s poor relation as far as the actual living standards of most of its population go.

This analysis is contained in the staff report of the IMF’s annual “consultation” with the U.S., which was published last week. The IMF economists haven’t turned up anything shocking or new, it’s just that as outsiders, they have a different perspective than what we hear from our politicians and economists.

For example:

Income polarization is suppressing consumption…weighing on labor supply and reducing the ability of households to adapt to shocks. High levels of poverty are creating disparities in the education system, hampering human capital formation and eating into future productivity.

What is to be done? Well, the IMF report concludes:

Reforms should include building a more efficient tax system; establishing a more effective regulatory system; raising infrastructure spending; improving education and developing skills; strengthening healthcare coverage while containing costs; offering family-friendly benefits; maintaining a free, fair, and mutually beneficial trade and investment regime; and reforming the immigration and welfare systems.

In other words, they suggest substantial reform. It’s doubtful that America can take care of these things anytime soon.

The subtext to most of their suggestions is that other affluent countries have found ways to improve in these areas, while the US has not. We don’t have to look too far into the past to see when those countries were modeling their economies on ours. But today, on all sorts of issues, like taxation, labor markets, health care, and education, the opposite is now true.

One major difference between the US and the rest of the developed world is ideological: Voters and politicians in the US are less willing to raise taxes to finance a better life for our citizens.

Other wealthy countries have figured out how to raise revenue, provide quality education, help the the unemployed, reduce poverty, and keep their citizens healthier than America has.

We must catch up, or admit our time as the world’s indispensable economy is over.

Today’s music (dis)honors the turmoil in the White House. See ‘ya Mooch! Remember that in just six months, Trump has gone through two National Security Advisers, two Chiefs of Staff, two Communications Directors, two Press Secretaries, and two Directors of the FBI.

Here is “Disorder in the House” by the late Warren Zevon and Bruce Springsteen:

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

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