Give me
a one-handed economist! All my economists say, 'on one hand ... on the other.'
President
Harry Truman.
We open this weekend
with Reuters positing the global economies glasses are half empty and half
full. I’m in the half empty camp, with trade war Team Trump determined to empty most of the glasses before Christmas.
Without real change in Washington D.C. which is
improbable, a “black Monday, 1987” repeat lies ahead. My guess is right after
the USA mid-term elections in November, although a misstep by President Trump,
(or Elon Musk,) could all too easily bring it on sooner!
August 31, 2018 / 3:51 PM
Summer is over for investors as global worries build
LONDON
(Reuters) - Investors returning from their summer holidays in the coming days
are likely to feel a distinct chill in the air as they assess the world
economy.
Growth
globally of about 4 percent this year has raised hopes that the hangover of the
financial crisis has finally lifted, a full 10 years after the collapse of
Lehman Brothers.
But
President Donald Trump’s relentless “America First” trade push is hurting
confidence in many countries, rising U.S. interest rates are putting strains on
emerging economies and currency problems have hit crisis levels in Argentina
and Turkey.
Economic
data over the coming days is likely to show how the increase in protectionism
is affecting Asia and Europe, and the worries about trade could grow soon.
The Trump
administration will take a step toward escalating its trade battle with China
on Wednesday when it ends consultations on hitting a further $200 billion worth
of Chinese goods with tariffs.
----
Lucy O’Carroll, chief economist at Aberdeen Standard Investments, said her firm
has trimmed its forecasts and now expects global economic growth to slow to 3.2
percent by 2020 from 3.8 percent this year.
That will
reduce the need for central banks of the rich economies to raise interest
rates.
By contrast
their peers in emerging markets will be under pressure to raise rates to stop
capital flowing abroad and to shore up their currencies, possibly aggravating
the uneven pattern of economic growth around the world.
“However
it’s not all absolute doom and gloom,” O’Carroll said. “We are not forecasting
the world economy is going to go into recession in the next few years. It’s
just going to be slower growth than we’ve seen in 2017 and in 2018.”
Even in the
United States, where Trump’s tax cuts have fired up an economy that was already
outperforming its peers, some believe growth has now peaked.
St. Louis
Fed President James Bullard said on Aug. 24 that the Federal Reserve should
stop raising rates given the likelihood of an economic slowdown next year, and
only weak inflation pressure.
For now,
however, the U.S. economy looks like it will help Trump before mid-term
elections in November, allowing him to tell voters he is on track to meet his
promise of 3 percent annual growth, at least this year.
U.S. payrolls
figures on Friday are expected to show further solid job creation, even if they
might be distorted by the summer holidays, pushing wage growth back up to an
annual 2.8 percent, according to a Reuters poll of economists.
More
August 31, 2018 / 12:06 PM
U.S. to move ahead with Mexico trade pact, keep talking to Canada
WASHINGTON/TORONTO (Reuters) - Contentious U.S.-Canada trade
talks ended on Friday with no deal to revamp the North American Free Trade
Agreement after the mood soured, and President Donald Trump notified Congress
of his intent to sign a bilateral trade pact with Mexico.
U.S. and Canadian trade officials set plans to resume their
talks on Wednesday with the aim of getting a deal all three nations could sign.
After four
intensive days of talks in Washington between Canada and the United States, the
biggest sticking points were familiar ones: U.S. demands for more access to
Canada’s closed dairy market and Canadian insistence that a trade dispute
settlement system be maintained, not scrapped as Washington wants.
“For Canada,
the focus is on getting a good deal, and once we have a good deal for Canada,
we’ll be done,” the country’s foreign minister, Chrystia Freeland, told a news
conference.
All three
countries have stressed the importance of NAFTA, which underpins $1.2 trillion
in regional trade. A bilateral deal announced by the United States and Mexico
on Monday had paved the way for Canada to rejoin the talks this week.
But by
Friday the sentiment turned, partly on Trump’s explosive off-the-record remarks
made to Bloomberg News that any trade deal with Canada would be “totally on our
terms.” He later confirmed the comments, which the Toronto Star first reported.
“At least
Canada knows where I stand,” Trump later said on Twitter.
More
https://uk.reuters.com/article/us-trade-nafta/u-s-to-move-ahead-with-mexico-trade-pact-keep-talking-to-canada-idUKKCN1LG1DM
Is there even such a thing as a 'Made in America' vehicle anymore?
One of the
most popular vehicles in the United States is a perfect example of why it would
be so hard and so destructive to impose tariffs on Canadian-made cars in the
name of protecting American ones.
The Toyota RAV4 —
the bestselling non-truck in America — is made in Woodstock, Ont. In
fact, 247,633 of them were made there last year. The process to build each one
is an intricate dance of manufacturers and suppliers in multiple countries,
with hundreds of trucks a day crossing borders back and forth between
Canada, the United States and Mexico to deliver parts.
- The engines are shipped from West Virginia and Alabama.
- The transmissions are made by a supplier in North Carolina.
- The seats are built in Elmira in southwestern Ontario. But that supplier brings in wire harnesses from Mexico and metal brackets from Kentucky.
- The sunroof and door frames are made in Stratford, Ont., with parts coming from all over North America.
More
WTO Head Warns U.S. Exit Would Mean Chaos for American Business
By Shawn DonnanIn an Oval Office interview with Bloomberg on Thursday, Trump warned that he would withdraw from the WTO “if they don’t shape up.” The president also called the 1990s agreement establishing the body “the single worst trade deal ever made.”
Roberto Azevedo, the WTO’s director general, told Bloomberg on Friday that he was already working with the U.S. and other members to address some common complaints. But he warned that a U.S. exit from the WTO would have chaotic consequences for the global economy and the U.S. itself.
“The scenarios are not going to be good for anyone,” he said. "The U.S. is about 11 percent of global trade. So leaving the organization would be a blow to the organization. But it would be a blow to the U.S. as well.”
In particular, he said, such a move would leave U.S. businesses vulnerable to commercial discrimination and new tariffs around the world if non-U.S. members were no longer bound by the WTO’s rules.
“That is the worst thing that could happen for an economy as globally connected as the American economy,” Azevedo said.
Global growth remains strong, he said. But even before the latest round of U.S. and Chinese tit-for-tat tariffs, the WTO was concerned over rising protectionism in the world and Azevedo said “a number of alarms” are sounding.
Worse, protectionist measures “are spreading very, very quickly,” he said, with the U.S. expected to move as soon as next week to impose tariffs on an additional $200 billion in imports from China. The world’s two-biggest economies have already levied duties on $100 billion worth of each others’ products since July as talks failed to resolve U.S. concerns over China’s trading practices.
---- Among Trump’s main complaints about the WTO is that it the U.S. is treated unfairly by its dispute system and loses many of the cases.
Azevedo
rejected that complaint, however, saying: "The United States is being
treated exactly the same way as every other WTO member."
As the
largest economy in the world “the reality is that the U.S. has brought more
dispute cases than anybody else” and been a target of more than any other
member, Azevedo said.
Like most
members, the U.S. had won more than 90 percent of the cases it had initiated,
he said, and lost most of the cases brought against it.
More
What an Ancient Historian Says About the U.S.-China Clash
By Alessandro Giovanni Borghese
31
August 2018, 05:00 GMT+1
Are the U.S. and China doomed to battle? Or to put it another way, are they Sparta and Athens?
That’s what’s meant when foreign affairs observers toss around the phrase “Thucydides Trap.” Thucydides (thoo-SID-i-deez) was a Greek historian in the 5th century B.C. who explained the Peloponnesian War of his day as an inevitable clash between Athens, a rising city-state, and the already established superpower, Sparta.
1. Who came up with the Thucydides Trap?
Not Thucydides. He was a historian trying to explain what had already happened rather than seeking to predict future events. The modern term was coined in 2012 by Graham Allison, a professor at Harvard University’s Kennedy School of Government. Allison argued that as China becomes stronger, it will threaten to displace U.S. influence, which could result in an unhealthy rivalry leading to armed conflict.2. Does the trap explain other conflicts?
Allison counts 16 cases in the past 500 years in which rising powers threatened to dislodge dominant ones, with 12 resulting in war. In the run-up to World War I, for example, Germany sought to assert its military might over Europe and to create its own empire overseas, straining relations with the leading power of the day, Britain. Similarly, the Thirty Years’ War of the 1600s followed rising tensions between emerging Protestant powers, initially a collection of German and Dutch states, and the established Catholic one, the Holy Roman Empire.
3. Is the trap inescapable?
No. World powers can coexist peacefully. In the last century, the U.S. overtook the U.K. as the major military and political power, and the transition was fairly smooth. After Germany, which was divided after World War II, reunified in 1990, it regained significant power within Europe without sparking conflict. Even the Cold War showed how the sour rivalry between two superpowers need not escalate into full-blown war, though the U.S. and Soviet Union certainly clashed through proxies. Some analysts consider the Thucydides Trap an oversimplification of war’s causes and are skeptical of using it to understand relations between the U.S. and China.The Reference Shelf
· Graham Allison’s recent book on whether China and the U.S. can avoid the
Thucydides Trap, the editorial in which he first used the term, and a more
recent article on the matter.
· Bloomberg QuickTakes on the U.S.-China trade war, the growing Chinese
economic sphere of influence and tensions around the South China Sea.
Finally, all you need
to know about that Elon Musk, Tesla “privatisation” in a series of Bloomberg
flow charts. More to follow later via the US tort bar.
August 29, 2018, 5:00 AM EDT
Elon, What Were You Thinking?
A detailed look at the ill-fated plan to take Tesla private.
By
James E. Ellis
On
Aug. 7, a week after reporting a record loss at Tesla Inc., Chief Executive
Officer Elon Musk stunned Wall Street by tweeting his intention to take the electric car maker private.
Previous big buyouts like that of Dell
Inc. took many months to play out; Musk’s ill-fated effort to escape
public-company scrutiny lasted only 17 days. Here’s a quick look at the
whirlwind process that’s left Tesla pretty much right where it started—except
for the shareholder suits.
More
Elon Musk is more famous than ever, and maybe more dangerous
Published: Aug 31, 2018 5:30 p.m. ET Elon Musk has become the most talkative and talked-about CEO on the internet. It’s made him more famous — and possibly dangerous, to himself and to Tesla. TSLA, -0.49%His active, sometimes frenzied, social-media commentary is unlike that of his fellow corporate titans, particularly his willingness to engage with fans and detractors alike.
While his engagement with the public helped cultivate his image as a real-life Tony Stark, Musk’s willingness to take risks with his words online, to move fast and break the internet, sometimes blows up in his face.
The fumbled tweets announcing plans to take the company private, which sparked an SEC investigation, have critics on Wall Street and elsewhere wondering if such internet fame is worth the price.
In 2018, Musk’s public persona and fame seem to have taken on a new dimension.
His activity on social media -- Twitter, in particular, though his now-shuttered Instagram account also has made news -- has gone through the roof, both in terms of the frequency and volume of his posts and the number of interactions (shares, likes, replies and comments) that those posts have generated, according to a MarketWatch analysis of his tweets.
So far in 2018, Musk has racked up 21.56 million Twitter interactions from his account, versus 7.76 million in the same period in 2017, a stark contrast even accounting for a steady growth in his following and in the number of his tweets.
Related: This timeline charts Elon Musk’s dramatic rise to internet fame (or descent into internet infamy)
More
The monthly Coppock Indicators finished August.
DJIA: 25,965 +207 Down. NASDAQ:
8,110 +265 Up. SP500: 2,902 +168 Up.
All
three slow indicators moved down in March, but the S&P and NASDAQ have now turned
up. September will be critical for
confirmation of this change.
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