Posts tagged ‘China’

Surprise!

North Korea is not a surprise, yet it captured the news yesterday, whether true or not. Sooner or later they were going to get there and like Trump the President, who they are is no surprise from who they have been. China and the United States, the two parties that could have solved this together, have failed to, looking to their own selfish needs and kicking the can down the road. The can has now arrived. No more road to kick down. And North Korea is no Soviet Union of old. Mutually Assured Destruction (MAD) may not force people to be rational. I have argued for years that North Korea is a living hell on earth and that China and the United States could not or would not force regime change was a political and moral failure. Now we have saber rattling with a moron for President.

Make no mistake, the United States could not solve this without China. And China in its own self-serving needs for trade and a firm border to keep immigrants out and buffer to US backed South Korea, could not bring itself to deal with a painful problem. And too many times we have thrown our hands up and just said well, maybe the government will fall. In North Korea, falling means taking everyone with you. That is the critical understanding we have failed to understand. So now we have entered very dangerous times because we refused to do the hard things when we needed to. Now the hard thing is unimaginable. And we have a moron for President.

Oh, and global warming is happening faster and may be more drastic than anticipated. Surprise! Not. We have known about global warming since the 1980’s. We have seen our impact on the planet, not just its weather, but its species for hundreds of years and we do nothing. Oh there are little movements around the edges, but business must come first. Now we are faced with the reality of once again kicking the can down the road, and the road is coming to an end. No more kicking. But like the North Korea problem, we have a moron for a President (not to mention a whole Party in charge of the country whose litmus test is not believing in science).

There has been some debate about whether the latest government report on the rapid increase in the impacts of global warming might force the moron President to change his stance. Sometimes I wonder what planet these people are on. Donald Trump got here illegally by laundering money for the Russians and he certainly colluded with them in the election. The investigation is tightening and he needs his base to terrify Republicans into not impeaching him when the other shoe drops, as it most certainly will. So he is not going to change on global warming, and we are going to see it it full force, and like the Korean thing, the outcome will be disastrous.

Meanwhile in the world of economic inequality, the inequality grows. And sooner or later the markets will come crashing down because the part of the pie that goes to the majority of consumers will be too small to sustain it. The markets are at record highs this week, believing that our moron President will cut regulations and taxes so they can further increase their profits with no concern for the damage they are doing. We have legitimized economic inequality by believing a high tide lifts all boats, except it hasn’t, and we have also kicked this can down the road, and sooner, rather than later, the market is going to crash.

Are you sensing a trend here? We Americans, who can do anything, have done nothing. When things got hard, we went looking for easy simple answers that ignore reality. Enter the Republican Party, facilitated by the Democrats, who know how to pander to Americans looking for the easy answer. Ronald Reagan, the prince of government is the problem, told us to be selfish and seek out gains for ourselves and everyone would prosper. Kiss “ask not what your country can do for you, but what you can do for your country” goodbye. We got tax cuts pay for themselves and the private sector will solve all problems. Driven our roads lately? We are starting to look third world. But don’t forget their main message, investing in government through taxes is a waste of money. Now look at us.

We are reaching a point where ignorance is considered a virtue (remember the rural wisdom of Sarah Palin?),where the ignorance of the base chose a leader that could finally push us over a cliff. We are approaching a critical turning point in the history of our world, conservatism has run its course and almost destroyed us, and we have a moron for President. I don’t think we can wait four years. If Trump continues his “fire and fury” (remember how well shock and awe worked out?) rhetoric, we may not have to worry about global warming as the aftermath of a nuclear war could be much worse. But if we somehow get through this, will we have learned our lesson? Or will we go looking for the next easy answer and not doing the hard things that make life and our country great? I am not optimistic after watching the last 50 years.

America really does have some amazingly hard working and smart individuals and we could solve these problems if we had a leader that made Americans aware of their failures and showed us a path forward.  Even the mindless base of Donald Trump might be led out of the wilderness of ignorance if they understood the challenges before us and a leader who inspires sacrifice.  But where is he/she?  Right now the one we got thinks the solution to jobs is to bring back coal which is never coming back and backed up by a pack or sience and reality deniers.  Hey! Bring on the fire and fury! All we need is a leader who can one again inspire us with, “Ask not what your country can do for you, but what you can do for your country,” and get on with it.  So far we got the moron President and his scared shitless Party.

Reality Dawns

I wonder how Tumpets are dealing with Cheeto-Heads about faces? Guess what?  Healthcare is complicated. Cuts in Medicare. Wow. Maybe we don’t need to cancel all those trade agreements, but adjust them a bit. He was going to drain the swamp and then filled his cabinet with Wall Street cajillionairs.  The wall is going to be really big, but is out of the budget picture for anytime in the near future.  Then came the isolationist’s attack on Syria. That divided the flock for sure. But guess what?  There was blow back.  Russia, his great friend who he admires, he now believes knew in advance of the chemical attack.  Putin is now pouting.  A base in Syria which Americans were stationed at was then attacked possibly by emboldened ISIS warriors.

Now comes the evil Chinese who he blamed for everything and he needs them:

Mr. Trump said he told his Chinese counterpart he believed Beijing could easily take care of the North Korea threat. Mr. Xi then explained the history of China and Korea, Mr. Trump said. ‘After listening for 10 minutes, I realized it’s not so easy,’ Mr. Trump recounted.” (Vox)

Then comes his backtracking on the evil China who was manipulating currency which he ran on vilifying them for and was a proven lie.  Well, his promise was to put them on the currency manipulator list and confront President Xi.  Well now he admits the truth, China is not a currency manipulator (and hasn’t been for years).  And now he has come to the realization that the dollar is too strong (Republicans tout a strong dollar).  It hurts our exports, but keeps prices low here (imports) and discourages tourism from around the world.  If you care about jobs, you want a less strong dollar. He finally got it.

Now comes his revelation that NATO “is not obsolete”.  What? Why the change?  Because he is finding out about the limits of power without engaging our allies.  Are Trumpets turning over in their graves (that would be their mental graves because they buried their ability for rational reasoned thought years ago).

So what is next, global warming?  I hope so.  On the foreign front reality is dawning,  Could it happen on the domestic front?  When implementing Republican ideas for creating jobs and they fail miserably, could there be change there too?  Let’s not get too hopeful as his incompetent cabinet is out there with a bulldozer.  Sessions wants to spend valuble prosecution resources on minor immigration infractions.  Forget the smugglers and major crimes, let’s get those immigrants who actually help our economy.  Meanwhile Betsy DeVos just cancelled rules to keep the institutions that manage education loans from upping their profits and screwing kids.  Meanwhile all the tax cuts and cut in regulations are not going to create jobs and will hurt the very people who voted for him.

Now we have three of Cheeto-Head’s campaign officials called out as agents of foreign governments (Carter Page, Paul Manafort, Michael Flynn).  Do we not think there is a story here?  Cheeto-Head gets all of this wrong because he was surrounded by these folks who told him , NATO not Obsoletewhat he wanted to hear.  Russians joked that Carter Page was an idiot while he had no idea he was becoming an agent of a foreign country.  One has to wonder if Cheeto-Head is in the same boat.  Eventually we will know.

So what do we have? Incoherence and chaos based upon ignorance of the world.  We all knew the stuff he is stumbling on, but we are elites and read those left wing liberal papers that don’t bend the truth.  Can he come around enough? No.  We are just seeing the glimmers of the obvious and because the bar is so low, we are hopeful and don’t see the damage he is causing.  Said another way, there is too much china in the China shop and the bull is loose.  It is not going to be pretty.

Why?

Remember that Interest rate hike by the Fed?  That was to stave off inflation.  I just got my social security and federal retirement cost of living adjustment and it was zero.  According to the Consumer Price Index, there was zero inflation last year.  Of course that may change next year as they drove up my mortgage rates with their move.  Oh, and on CNBC today where they were looking at the closing of Chinese markets and the falling of our own stock market, they are wondering if raising the interest rates was a strategic blunder.

Of course it was.  It was driven by bankers who wanted better return for their loans.  It had absolutely nothing to do with data on inflation and it will actually hurt employment, and it had everything to do with old conventional wisdom and special interests that have way too much sway over the Fed.  And at least the Chairwoman should have known better.  Oh, and it is not like the Europeans did not do the same thing last year and we learned nothing from their blunder.  The economic world we live in today is not the world the financiers and bankers know and their advice is not just worthless, it is dangerous.

And here is one more thing you can put in your pipe and smoke:  If the economy on Main Street is up, so will be Wall Street.  But it doesn’t necessarily work the other way.  When Wall Street is up, Main Street could be (and is) suffering.  Maybe we ought to pay a whole lot more attention to Main Street than Wall Street.  I think that is what Occupy Wall Street was trying to tell us.  Oh, and so has Paul Krugman for years.

Oh and one more thing, Fed, if you are listening.  Tell the bankers to shut up and establish some empirical measures for unemployment and inflation that we can all agree require action instead of being pushed by pressure from very important people who “feel” it is time to act.

Another Say What Moment

Rumor has it North Korea has a hydrogen bomb.  And we think Iran is crazy and should never have a nuclear weapon?  The North Koreans make the Iranians look like the epitome of rational behavior.  Oh, I get it.  If the Iranians get a nuke, there certainly would be an arms race with the Saudis leading the way.  But I really believe that the Iranians would get MAD (Mutual Assured Destruction*).  I don’t believe the North Koreans are even in this reality.

I would be a strong proponent of first strike on this one because sooner or later, they will use it.  They are really that crazy and that desperate.  The problem is going to be the Chinese who are not facing reality and have the real fear that a failure of the North Korean government would have a mad rush of refugees on their border.  The mind-set would be get out of North Korea while you can.  It would be nice if we could just increase our embargo on the country to hopefully collapse it, but China will block that for the same reason.

So what to do?  Well until the Chinese understand they are really at risk, that we will have to increase our own presence in the region, and Japan may want nukes of their own, there is not much we can do.  We used to have tactical nukes in the region, but that may not be enough for these countries.  North Korea is an abomination where people are held in what is worse than Dante’s hell.  The fact that we as a civilized world don’t end this abomination is a blot on our right to be a superior species.

Oh, and one other thing:  Like gun violence grows with gun availability (Google it! It is a fact), with the proliferation of nukes, the more likely we will use them.  Kiss your ass goodbye.

*I know something about MAD as it was my job to deliver it to you.  I spent some of my Air Force time in a B-52 armed with 12 nukes to make sure if they attacked us the whole world would be destroyed.  What a great job!

The Fantasyland of Republicans – Foreign Affairs

Friday I finally broke down and tried to set the record straight on what Republicans claim President Obama did with the economy, and the actual facts (An Example of the Fantasyland Republicans Live In) indicate they are living in an alternate universe (The Shape We are In, Really).  So today, since our mainstream media just prefers to be ring masters rather than purveyors of the truth, I thought I would examine the present state of foreign affairs given the disaster Republicans describe and the reality of our choices.

Let’s keep this fairly simple and lump them into the Middle East (Syria, Iran, Iraq, Afghanistan), China, and Russia.  Those appear to be our major challenges and let’s look at where we are and whether President Obama’s foreign policies have been a disaster as Republicans claim, or the result of really no good options.

Let’s start with the Middle East.  Jeb! Bush told us in the Republican debates that his brother kept us safe.  I guess he forgot about 9/11 and the 4000+ who died, or the CIA briefing prior to 9/11 warning of a terrorist attack with airplanes. It is that alternate reality thing.  Every challenge we face today in the Middle East is a direct result of our tragic decision to invade Iraq and upset the delicate balance between Sunnis and Shiites. Even Jeb! admits that we made some critical mistakes in “managing” Iraq.

The Middle East has always been a fairly brutal balance of Shiia and Sunnis.  We tore that balance asunder, and empowered Iran in Iraq when we remove their most diligent foe, Saddam Hussein.  There was no al Qaeda in Iraq until we created the chaos and void in Iraq by invading and horribly mismanaging that invasion.  Our decision to invade has been blamed on bad intelligence, but the Bush Administration managed the intelligence to get the answers they wanted.

Okay with a little history injected into reality, the first major claim by Republicans is that President Obama was too quick to withdraw from Iraq.  They forget George’s part in this and they forget that we don’t get to decide these things in a vacuum.  President Bush negotiated the withdrawal dates. This was a status of forces agreement (SOFA) between Iraq and the United States, signed by President George W. Bush in 2008. It established that U.S. combat forces would withdraw from Iraqi cities by June 30, 2009, and all U.S. combat forces will be completely out of Iraq by December 31, 2011  So we left as per the agreement and were out December 16, 2011.  We might have stayed longer but immunity from prosecution for U.S. troops could not be obtained from the Iraqis.

So what choices did he, the President, have?  Staying without the SOFA would have put our troops at extreme risk and subject to the Iraqi political system.  Republicans would have gone bat shit.  Iraq is an independent country and to stay would have been an invasion.  Would staying maybe have helped?  More important was it even politically feasible?

How much longer were the American people going to prop up Iraq with our blood and treasury?  With the Republican’s love for balanced budgets, what would we not pay for in America so we could fight an endless war in Iraq?  Oh, and what happened to the $26 billion we spent to train and equip these Iraqis to fight their own battles.  I won’t get into the Sunni/Shite issues internally, but it is something we simply can’t solve.  The bottom line is there was no choice really. Stay forever and referee or let them decide their own destiny.

Iran is an interesting player here in that they are our best ally against ISIS and fighting with Iraq to defeat  them, but an ally of Assad of Syria.  They also support various terrorist groups against Israel. So along comes the Iran Nuclear Agreement and all Republicans are against it, and most would tear it up.  I have addressed this before (The Iran Treaty) but suffice to say there are no viable options.

Republicans say we just need to reinstate the sanctions and negotiate a better deal.  It is fantasy.  The other five countries that made the sanctions really effective are moving ahead with relations.  It would hurt us internationally as not honoring our agreements, question our ability to lead in the world, and shorten the time Iran has to a nuclear weapon.  The Republicans just hate Obama and don’t want him to have a win. But in playing politics and creating a fantasy solution, they are putting America at risk.

Syria is another total quagmire.  Assad is a brutal dictator and there was and is an internal revolt against him.  Republicans wanted us to pour weapons into the area (still do).  Remember who we gave weapons to to get the Russians out of Afghanistan,  Yeah, that would be the Taliban.  So blow back was the biggest consideration.  Those old unintended consequences of handing out weapons.

So who are the good guys and who are the bad guys?  Note also that ISIS is one of the best equipped terrorist groups in the world and most of their weapons are American.  Thank you Iraq.  To further complicate the issue is that the Russians have been supporting Assad and have a strong presence there.  Then there was the red line Assad crossed using chemical weapons, but in lieu of a bomb strike, he gave up his chemical weapons.  Now the Russians are building an airfield to support Assad who is fighting ISIS and other rebels.

So let’s look at the Republican criticism.  First is that we should have supported the rebels, but which ones?  Saying we knew or know who is who, and we could not be sure the weapons would just end up in the hands of ISIS. See how we trained Kurds in Turkey and then the Turks gave them up to ISIS.  So it was a total crap shoot as to what would be the least worst outcome.

Next was the red line language.  Should we have bombed Assad keeping our promise and showing how tough we are?  Maybe, but it would have involved conflict with the Russians and Assad agreed to turn over his stockpile of chemical weapons (which he did), which was the issue in the first place.  Some (MCain and Graham) want us to  send in troops, but  to fight whom in this chaotic situation*?  Republicans would have you believe if we just talked tougher, none of this would have happened.

I am still waiting to hear what they would do now (Except for Linsey Graham who is clear we need to fight the war over there).  So lot’s of criticism, based mostly on an oversimplification of the complications and potential blowback, and then no specifics on what they would do going forward.  Do we really want to be involved in another Iraq and fight the Russians too?

Okay let’s move out of the Middle East and look at some of our other problems.  No matter what we do in the Middle East, it will be a mess and we will own it.  And keep in mind our invasion of Iraq started this whole unraveling.  So let’s talk about Russia.  Russia invades Crimea and if we would have rattled more sabres, they would have not done that according to the Republicans.  Is Crimea in our national interest and is it worth a ground war with Russia?  The same can be said about Ukraine.

So lets send in tons of weapons according to the Republicans.  Just how much blood do we want to be responsible for?  Could this escalate to involve more than just Ukraine and Crimea?  The option to this is to put sanctions on the Russians which we and the Europeans did.  And while Republicans again claim that if we had just been tougher with the Russians, they would not have dared do this, they ignore Russian nationalism as they beat their own nationalistic chests.

And of course the real issue is what do they offer as a way forward that our European partners will go along with?  Russia is facing major economic problems with the crash of oil prices and what they might do could be scary.  But let’s talk tough and maybe start another war in Europe.  It is not so simple is it? They seem to forget that NATO has to play.

Finally China. The Republican’s view of China is that somehow they have rigged the system against us and are taking advantage of us.  So we should use tariffs, bluster, and China bashing.  Scott Walker, the governor of Wisconsin, suggests we cancel the planned visit to America by Xi Jinping, China’s leader. The Donald tells us that U.S. markets seem troubled because Mr. Obama has let China “dictate the agenda.”  We have no idea what that means. Maybe he is talking about China’s undervalued currency, that does not exist anymore.

Chris Christie tells us that the reason U.S. markets were roiled by events in China was U.S. budget deficits, which he claims have put us in debt to the Chinese and hence made us vulnerable to their troubles.  The trouble with that is we have been buying back our debt, Japan owns more of our debt than China, and no one can explain how that debt impacts our own markets since interest rates have stayed at almost zero.  The real issue that caused the markets to fall was the fear of falling demand in China that would impact the world economy.

As Paul Krugman points out, “‘Obama is endangering America by borrowing from China’ is a perfect political line, playing into deficit fetishism, xenophobia and the perennial claim that Democrats don’t stand up for America! America! America! It’s also complete nonsense, but that doesn’t seem to matter.’  The reality is that China is trying to keep its economy strong and a strong Chinese economy makes our economy strong.  We should be wishing for their success, not trying to create a Chinese Cold War.

So when you look at the world and our choices, real choices, it is really not so simple and President Obama has tried to walk a careful road with a very bad hand dealt to him by Republicans.  But they have created an alternate reality where George Bush kept us safe, and all we need to do is act tough and everyone will fall in line.  Well, to be believable, that toughness has to be carried through with actions, and just how many wars do you really want to be in, going it alone?  

So elect Republicans and believe their simple minded view of the world and our options.  Just be on notice that this time your kids just might have to pay the price for this alternate reality.  It was a false reality that Iraq had WMD and it would be a cakewalk.  Now we want to buy into their fantasyland again?

The Fed, the Interest Rate, and Republicans (or Economic Conservatives)

Why is the Fed (Federal Reserve) so hot-to-trot to raise the interest rate?  Because besides printing money (expanding the money supply) it is the only other control they really have.  Econ 101 tells us that the fed tries to keep the economy on an even keel with not too much inflation (and wild spending), and not too high unemployment.  A heated up economy means too much spending and usually low unemployment so raising the interest rate reduces the money supply, people reign in spending, and the economy slows down, but that also may impact employment.  When there is too much demand, prices increase, thus inflation.  The usual goal for the economy has been 2% inflation, using the interest rate as the moderator.

Now one other thing from Econ 101.  Inflation is not necessarily a bad thing.  It keeps people from socking away their money and not investing or spending it.  If it is going to depreciate through inflation, then better to put it into something that will inflate along with inflation.  Now the other side of that coin is deflation where prices fall, incomes fall, and there is less spending in the economy, but your money is a good investment, read recession big time as everyone socks away money and does not spend it on things that will be worth less tomorrow.

Okay so back to the Fed.  When the housing bubble collapsed and almost $8 trillion dollars was lost in home equity, everyone stop spending (and borrowing).  So the Fed started lowering the interest rate to stimulate the economy. Hopefully people/businesses would borrow and spend. They also started printing money (a euphemism for quantitative easing*) for increasing the money supply hoping people would spend.  They did not and we have reach a point called the zero lower bound where the interest rate has to go negetive (they pay us to take the money) for it to do any good.  But it is not having much effect.  

So the economy is limping along slowly improving, and unemployment is slowly coming down.  But inflation is almost non-existent because wages have not increased and real demand in the buying economy (middle class) is very tenuous.  So why not leave things as they are?  The feat is that raising them now might further slow down the economy.

Well there is a down side to low interest rates.  One is that the high rollers can borrow at very low rates to speculate on financial instruments, which some have done.  It hurts savings as low interest rates result in low returns and push people into more speculative equity stocks.  Bond traders hate them because bonds (and their low return) are expensive** and push people into the equity market.  And while some conservative economists*** have been screaming inflation is just around the corner, it hasn’t happened because demand is weak.  The low interest rate and printing of money has not caused wild spending.

But the Fed would like some wiggle room.  What happens if as some suspect, the world economy is slowing down.  The Fed is out of tools to further try to stimulate our own economy except more quanitative easing and that has only been marginally effective (see footnote).  The only other tool is the one Republicans prevent us from using, stimulus deficit spending.  So if the economy looks like it is okay, the Fed would like to try slowly moving up the interest rate if it won’t collapse the economy, to return lowering it to their arsenal if things turn bad.  

So why did the Fed blink?  Well Janet Yellen (Chairmen of the Fed) explained it quite well.  The world economy looks to be weakening (demand is falling, especially in China for commodities (raw materials) and that may foretell another slow downs that would be made worse by raising our interest rates.  So for now we are going to leave things alone.  But if the rest of the world is slowing down, and we do not have enough middle class demand to maintain or grow our economy, what is the real fix?  Demand.

Now this is where Republicans get the economic world wrong.  They believe in supply.  If you supply it, they will buy it, and off goes the economy.  But businesses are sitting on tons of monitary reserves and qualtitative easing has only incentivized banks to speculate in financial speculation, not invest in new buinesses. Supply would work fine if there was pent up demand, and the ability (money) to vent it.  But there isn’t. The Republican’s whole economic philosophy is based upon a supply side mechanism called trickle down, allowing the rich to keep their the majority of their profits (low taxes and a tax code that subsidizes them) will cause them to be reinvested in the economy, hence creating jobs and why Republicans call the wealthy job creators.  Except it hasn’t worked.  Never has actually.  The demand is marginal and nobody is going to invest until they see reliable demand for goods and services.

And there is a multiplier effect here.  As the rich get richer, there is less and less for the middle class to spend.  It is called economic inequality and what Bernie Sanders is all riled up about.  All that money going to the wealthy is making them richer, and very little of it finds its way into the hands of the middle class to be recycled in the economy. This is actually a world phenomenum with the biggest player right now China.  In order for China to sustain their economy, they are going to have to be less focused on creating demand by infrastructure improvements (government stimulus), less exporting, and raise the wages of their own people to create internal demand.

The same applies here except we have not been doing the stimulus thing.  The whole basis of Bernie Sander’s presidential campaign is to change our economic system so the middle class keeps a fair share of the profits to then create the demand that will sustain our economy.  Oh, and in our case, with interest rates at almost zero, we should be borrowing and creating good jobs through infrastructure investments to prime the pump.

So to make a long story short, Janet is keeping the interest rate low because things could get worse if she raises them and the world economy is very iffy.  If they don’t and we continue on a slow growth, she will try to ease it up later.  But if we really want to see our economy grow, we need to start listening to Bernie and do some strategic infrastructure investments, damn the deficit.  Republicans would rather die first and they may kill all of us in the process.

*Quantitative Easing is really fairly simple.  The Fed starts “printing money” (actually electronic bank transfers) to buy back its loans so that banks reserves will grow in the hope that they will start loaning out money increasing demand for goods and services.  It has had limited effect because businesses are sitting on oodles of cash with little reason to expand.

**When interest rates are low bond prices are high to compensate for the low rate of return.  Generally Bond prices are inversely proportional to interest rates.

***Some of what Paul Krugman refers to as fresh water economists (University of Chicago) think this low interest rate is highly artificial and we need to return to normal interest rates.  But the economic inequality may be defining the new normal where demand is always low and low interest rates may, in fact, be the new normal.

Update:  From Paul Krugman who has seen many bankers in a rage the Fed did not raise the rate:

“In particular, commercial bankers really dislike a very low interest rate environment, because it’s hard for them to make profits: there’s a lower bound on the interest rates they can offer, and if lending rates are low that compresses their spread. So bankers keep demanding higher rates, and inventing stories about why that would make sense despite low inflation.”

In other words, they don’t give a shit about unemployment or how it hurts the middle class, just how it affects them and they have the ears of many important people, sadly.

Three Things

The first is the market is totally irrational.  Now we are up because China has dropped its interest rate to try to stem the bleeding in China.  It should be apparent that share prices are a figment of most investor’s imagination.  You are willing to pay a certain price on your perception of how you think that stock and the economy will do.  So there are moves in China and the herd stampedes.  Is that rational?  Maybe, maybe not.  Consider how the false fear of debt effects many people’s perception of the economy and then ask yourself if moves in the market place are rational at all.

We certainly are a global economy and if things are slowing down in Europe, China, and emerging markets, they could certainly affect our economy here.  But most of the stampede was due to perceived China markets falling (all the other stuff thrown in like the Fed and interest rates are simply political pile ons).  So here is what should really worry you.  Based upon the moves China has made so far to control their economy and move it to a more domestic consumer based economy, you should be very frightened about their ability to control it in the future.

The second thing is fairly simple.  With the market crashing and uncrashing and political (and endless) speculation about whether Joe Bidden will enter the race, heard anything about Hillary’s emails?  Right now the Republican clown show is arguing among themselves about “anchor” babies after making amazingly stupid remarks about China and the market fluctuations.  This a deep and experienced field? For clowns I guess.

The third thing connected to the second is that you have noticed that the name of the game in the Republican clown show is to get attention by saying something outrageous.  Have you noticed that the more untrue it is, the more attention they get?  And the press seems paralyzed to include a fact check with their coverage of these clowns.

Our Absolutely Dismal News Media

Chris Christie was on the Morning Show and was blaming President Obama for the market drop saying something to the effect of, “The debt is the problem.  See China owns a lot of our debt so when their markets are in trouble, it impacts our markets.”  Somebody want to explain that to me?  Did anyone fact check or question that?

First, how can you blame Obama for the debt if it was the problem?  Their boy George ran it up with tax cuts to the wealthy, and a war in the Middle East.  The deficit is now coming down at record rates.  So how again is this Obama’s fault?

Second, if China’s currency is devaluing how does that have anything to do with the debt they hold, except to make it worth more to them as a wise investment?  Oh, and Japan holds more of our government debt than China and China has been selling off U.S. debt (we are buying it back) since January to devalue their yuan.  Isn’t that what the Donald wanted?  How does that have anything to do with the stock market?  The stock market is supposedly reacting to weaker markets overseas and “correcting”.  How is that related to debt.  I guess it sounds good to the rabble and TV news media hosts who are too timid or ignorant of the facts to questions these buffoons.

Oh, and from Beat the Press this Morning:

First and most importantly, the stock market is not the economy. The stock market has fluctuations all the time that have nothing to do with the real economy. The most famous was the 1987 crash which did not correspond to any real world bad event that anyone could identify.

Even over longer periods there is no direct correlation between the stock market and GDP. In the decade of the 1970s the stock market lost more than 40 percent of its value in real terms, in the decade of the 1980s it more than doubled. GDP growth averaged 3.3 percent from 1980 to 1990 compared to 3.2 percent from 1970 to 1980.

For a little better explanation of what might be going on, try Neil Irwin at the Upshot.

TPP

That would be the Trans Pacific Partnership treaty that the Obama Administration is negotiating in secret.  Heard an informative debate on the subject?  More importantly why should you care, and most Americans don’t.  I would bet you could not find one out of ten who have heard of it.  But if you have been listening to the debate you probably heard something like this:

It will greatly facilitate our trade and level the playing field with China versus It will cost American jobs and give corporations more power than governments.  You don’t understand the agreement and are just flat wrong versus It will overrule environmental protection and local laws.

Okay, made up your mind?  I think most are making up their minds based upon whose side you are on.  Elizabeth Warren is against it and George Will is for it, so the usual suspects are lining up along those lines.  Mark Bittman has written a piece in the NYT about his interpretation of what it will do and that should scare you.  But what are the facts?  We don’t know because it is being negotiated in secret and President Obama wants fast track approval of this when it is complete.  That means just an up or down vote in the Senate, no amendments.

Now I understand why it is being negotiated in secret, after all the only way the Founders could arrive at our Constitution was to do a similar thing so that short-term politics could not derail the process.  But then the states got to add the Bill of Rights when the finished product was revealed. So why is the President asking for only an up or down vote?  It feels like a giant piston being rammed down our throats.  And on business and the banks, our President has shown himself to be too cozy with the status quo.

This really is a very important treaty and it needs to be looked at in the light of day.  Right now I have no idea who to believe other than George Will and the Republicans generally get just about everything wrong, and they are sure not interested in the middle class.  But that has to be put aside and not judge this on personalities, but on the actual terms of the agreement and what they might mean.  There is no way Congress should agree to fast track this thing until we know what is in it and all voices are heard.  Yes, politics is messy business and it is hard herding  cats, but trust me, you will like it won’t fly with something this important.

Connecting the Dots on the Economy

Here are some headlines I ripped from the front page of the New York Times today. Let’s see if you can connect the dots:

  • Mario Draghi Says ECB Will Do What We Must to Stoke Inflation
  • China, In a Surprise Move to Prop Up Economy, Cuts Interest Rates
  • Falling Wages at Factories Squeeze Middle Class

Got it? The European Union under the tutelage of Germany has been enforcing contractionary policies (like raising taxes and interest rates to “be financially prudent”) and their economy is facing deflation, falling wages and prices that could start a spiral that further depresses their economy. Mario gets it and wants to use stimulus to increase consumption.

China has a very tight fist on labor (few real moves toward increasing wages and consumption) and their economy is slowing down. So they want to lower interest rates to spur borrowing and investment (read jobs). Really, and if the worlds economy is slowing down and you don’t increase wages, who is going to have money to buy things? Unless you let wages rise in your own country, demand will falter.

Meanwhile here in the United States workers are being squeezed by businesses to be more competitive overseas (where markets are contracting) and by Republicans who want to cut everything and think a minimum wage is heresy. Their real income is falling and their buying power is stagnant. Connected the dots yet?

To quote from Paul Krugman, your spending is my income, my spending is your income. If we collectively don’t spend, our income decreases. If the pie is being cut into ever small pieces for the workers and wealth is being concentrated in a few, there is less spending. Less spending causes less demand, and we enter a recession. If you can understand this simple connect the dots exercise, you are no longer a Republican.