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The Wrongologist

Geopolitics, Power and Political Economy

Monday Wake Up Call – Trump Credibility Edition, June 17, 2019

The Daily (no) Escape:

Did Donald Trump lose all credibility last week? First, more of the “Russia, if you are listening…” in which he solicited election help from foreign governments, before backing down a little bit.

Next, hours after an attack on two tankers in the Gulf of Oman, Trump said he knew who did it:

“Iran did do it and you know they did it,”
Donald Trump on “Fox & Friends”, June 14th.

This was before experts had much evidence, let alone time for analysis. Next, US Central Command released a video which they said showed:

“Iran’s Revolutionary Guard removing an unexploded limpet mine from one of the oil tankers targeted near the Strait of Hormuz, suggesting the Islamic Republic sought to remove evidence of its involvement from the scene.”

The video is of such poor quality that it’s impossible to tell what’s really going on, where the boat came from, or who’s on board. Trump and Pompeo want us to believe that Iran cruised over to a heavily surveilled tanker in broad daylight to remove a limpet mine, placed several feet above the water line.

Also, it’s hard to believe that military photography technology has again failed just when we needed it. We’re back to blurry Brownie box camera pictures. When Russian artillery was photographed in Ukraine, we saw blurry indistinct B&W photos. When Russia aircraft were photographed in Syria, we saw razor sharp color images. Why can’t the US Navy buy a few iPhones to use in videoing the “Iranians”?

Finally, it’s interesting that America’s Enemy du Jour always does exactly what we want them to do, and just when we want them to do it!

The captain of the Japanese tanker said he was hit from the air, not by a mine. A photo of the Japanese tanker shows two holes well above the waterline. Iran might have done this, or it might have been a false flag operation.

We should remember that in the past 20 years, the US has attacked nations based on similar information to this. There are groups other than Iran that would benefit from the US stepping up its anti-Iran campaign, moving from an economic war to a military one.

But let’s widen out to strategy: While Trump and Pompeo were itching for a fight with Iran, China’s President Xi was completing a three-day visit to Moscow. He hailed China’s strategic ties with Russia. At the same time, Chinese and Russian military commanders met to discuss deepening their strategic partnership.

Then, both Putin and Xi met with Iran’s President Rouhani and expressed their full support for Iran despite the smoking tankers, or the US evidence that Iran was behind the attack. And China afforded its highest diplomatic status to Iran.

A strategically-minded US president would have turned the situation with tankers burning in the Persian Gulf to an advantage. It could have been an opportune time to engage China and Russia in a diplomatic coalition to deal with threats to commerce and free navigation in the Gulf.

Both China and Russia understand the potential impact of a Persian Gulf conflict to their economies. They probably would have listened. Our European allies are waiting for real proof of what happened to those tankers before expressing an opinion, given the state of America’s credibility. Only the UK currently supports Trump.

Another opportunity missed, thus advantage to Iran, while limiting US options.

Trump’s (and Bolton’s) policies of piling on more strategic risk without any gain is driving our allies away, and pushing our peers/competitors closer together.

Trump is increasing our risk of conflict, and the ramifications are global.

The main issue is credibility. We can no longer trust our government. When you can lie without consequence, then there is no value to discussing policy. If Trump wants a war, he’ll have one.

We need to wake up the American voters, who are the only people who can change this.

Their record to date, however, isn’t promising. Hopefully, the world won’t be in tatters before the November 2020 election.

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Trump and Bolton Screw Up Geopolitics

The Daily Escape:

Sunrise, Reflection Canyon, Escalante arm of Lake Powell, UT – 2019 photo by Aaryeh95

(Reminding readers that this is the last column until Sunday when cartoons will be back on the menu. We are attending our second college graduation of the spring.)

The Week reports that President Trump is having second thoughts about sending troops to Venezuela. He complained to aides and advisers that:

“he was misled about how easy it would be to replace the socialist strongman, President Nicolás Maduro, with opposition leader Juan Guaidó, The Washington Post reports. ‘The president’s dissatisfaction has crystallized around National Security Adviser John Bolton and what Trump has groused is an interventionist stance at odds with his view that the United States should stay out of foreign quagmires.’”

“He was misled about how easy it would be to replace the socialist strongman”! Who could’ve seen that coming? Just about everyone but Trump, and the neocons around Trump. The Neocons are batting 1.000, again proving themselves to be miserable failures at geopolitics. They continue to mess up geopolitical foreplay on the way to their real goal: Regime change and war.

By listening to Bolton and Pompeo, Trump has placed Venezuela more directly in the hands of Russia. It seems that Trump’s 90-minute phone call last Friday with Vladimir Putin was meant to talk Trump out of regime change in Venezuela. A secondary benefit for Putin may turn out to be that Trump handed Moscow a permanent Atlantic military presence in South America.

What’s the upshot? It looks like Maduro was pushed into Putin’s arms. Maybe Trump and Putin can cut a deal to sort this out without a crisis.

It looks possible that Maduro got an offer from a smarter, stronger player in the geopolitical game: Vladimir Putin. Republicans are bound to be disappointed. Blowing up Maduro’s regime was high on the Bolton and Republicans’s list.

Of course, regime change is always on their list. They want regime change in North Korea. In Syria. In Venezuela. And in Iran. It would be the perfect distraction from all the talk about Mueller and impeachment. They think war is a great campaign issue for 2020.

Now, Bolton and Pompeo have shifted their focus to Iran.

On Sunday, the National Security Council announced that we were sending another carrier strike group and a bomber task force to the Persian Gulf in response to “troubling and escalatory” warnings from Iran. Bolton discussed the intelligence, saying that Iran appeared to be gearing up for war.

Help me. We all know that Russia is also more friendly with Tehran than we are. And Putin has already achieved near-total victory in Ukraine and Syria, and possibly has already bagged Venezuela. We were never going to be buddies with Iran, but will Tehran now move completely into Russia’s orbit?

To date, it looks like the worst thing Donald Trump has done is to hire John Bolton as his National Security Advisor. Of course, Bolton’s track record as a war-monger preceded him, so what’s happening now was predictable. The Neocons, including Bolton, want a war with Iran, to remake the Middle East.

Their project to remake the ME saw America destroy Iraq and Afghanistan. It fueled American regime change aspirations in Syria. It brought about the destruction of Libya. It’s also underway in Yemen.

What the Neocons are doing helps a new alliance to form. Its key members are China and Russia, but Iran is a part of it as well. The Chinese Belt and Road Initiative (B&R) is meant to create routes to Europe and a Chinese-led trade zone. It is meant to bypass sending ships through the straits of Malacca (which the US can shut down any time to strangle China’s trade). It looks like the land parts of the B&R will move goods more quickly to Europe, but not as cheaply, as sea transport.

So the question is: Can Bolton talk Trump into war with Iran? Will Trump lead us into a fatal miscalculation? Trump is walking a tightrope without a net.

Even without a war, the US’s continued abuse of its privileged position in the world payments system to sanction countries like Iran and Venezuela implies that China and Russia will develop an alternative payments system. It’s inevitable.

It’s only a matter of time before international payment alternatives become viable enough that major countries will simply ignore US sanctions.

The US looks to be the big loser in the geopolitical game of chicken that Trump is playing.

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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.

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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. With the stock market, no matter what you plan on investing in, there are always risks. Before you do decide to get into this industry though, it is important to understand that there are some things you should know about stocks. It only makes sense to do your research into this before committing to anything. The volatility of the stock market makes it essential that you swallow your ego and seek professional guidance based on thorough and extensive research. Stocktrades can be of service to anyone looking to up their game and make sure their choices are as safe as possible. You’ll never be able to have a 100% success rate, with the risks summed up by recent events involving the President. 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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Trump’s Cabinet Moves Signal Danger Ahead

The Daily Escape:

Impalas sharing a drink – Via

A few additional thoughts about the falling dominoes in Trump’s cabinet that were triggered by Tillerson’s firing. There are rumors that Gary Cohn will be replaced by Larry Kudlow, and that National Security Advisor HR McMaster may be replaced by John Bolton.

So, think about the new line-up. Kudlow is economic czar. CIA Director Pompeo becomes Secretary of State. Gina Haspel, who oversaw the secret CIA torture prisons in Thailand is promoted to Director of the CIA, and John Bolton turns up as National Security Advisor. These people, along with Nikki Haley at the UN, who this week threatened another cruise missile attack inside Syria, are among the worst possible choices for their respective jobs.

Unless we exhume and reinstate Dick Cheney and Donald Rumsfeld.

Wrongo had direct experience with Kudlow during the Reagan administration, when Kudlow was associate director for economics and planning in the Office of Management and Budget (OMB) under David Stockman. Wrongo was at the big NY bank, and was lobbying for approval of a new line of business that was a stretch under the Glass-Steagall regulations at the time. In our one meeting, Kudlow was a pompous asshat. He lectured us about “trickle-down” economics, and how the country was in the midst of a conservative cultural revolution led by St. Ronnie.

We couldn’t get away from him fast enough. BTW, we did get the exception to the regulations, without any help from Kudlow. Perhaps it is useful to remember that Kudlow has no training in economics, although he plays one on TV. Also, he was fired from Bear Stearns for his $100,000 per month cocaine habit. And that’s in 1994 dollars. Real economist Brad DeLong says appointing Kudlow is like appointing William Shatner commander of the 7th Fleet.

If all of these moves come to pass, Trump will be surrounded only by true believers. Any Generals that are left, except for Mattis at Defense, may act as if they are true believers, as well.

Think of these moves as the first step in a new neo-con takeover of our national security strategy:

  • There will be no normalization of our relations with Russia
  • There will be a confrontation with Iran
  • The effort to destabilize Syria will continue
  • China will be confronted, first on trade, and second, on their growing regional aspirations
  • Nothing will come from any discussions with North Korea

Trump’s neocon cabinet now will have the means both to support Israel’s ambitions in the Middle East, as well as their own desire for Washington’s military hegemony in the world. They will use the “Russian threat” as a justification of more defense spending and even more militaristic actions abroad.

This is an extremely dangerous agenda. Russia’s new weapons as announced by Putin last week seem to suggest that they may have some military superiority over the US. Certainly, that may embolden China and Iran to move closer to the Russians.

If the administration persists in making charges and threats against Russia, Iran, and China, those nations must eventually react. They may become allied militarily, anticipating a possible war against the current US regime.

If, as Haley has threatened, the US were to again strike Syria, Russia has to choose whether to let it pass (as it did when Trump fired 50 cruise missiles previously), or to respond. If the US misjudges its attack, and Russia responds with actions that kill US military personnel, then the US regime faces the same choice, to let it pass, or not.

Any time we (or the Russians) are forced to consider retaliation, there is a clear cost to not retaliating, as well as a strong inclination to not just turn the other cheek.

Trump’s new cabinet line-up can lead us into a profoundly dangerous situation.

And it will be driven by a tiny minority: A neocon cabinet. Plus the Israelis who ardently desire the US to take on Iran. And elements of the US military/security complex, who feel we must be the biggest, baddest asshats in town.

We are sitting in the middle of the most reckless behavior in modern history.

Where are the voices against this?

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