Monday, 26 August 2019

Will Trump Order Firms Out Of China?


Baltic Dry Index. 2168 +50  Brent Crude 58.78  Spot Gold $1,543

Never ending Brexit now October 31st, maybe.  66 days away.
Nuclear Trump China Tariffs Now In Effect.
USA v EU trade war postponed to November, maybe.

If all else fails, immortality can always be assured by spectacular error.

John Kenneth Galbraith.

Ding, ding, ding, seconds out. Round whatever between the USA and China. Both having gone nuclear with tariffs last week, will President Trump this week declare an “emergency” and invoke the International Emergency Economic Powers Act, to order US firms to leave China? His top aids say that he might.

Firms all across Europe and the rest of the world are all hoping desperately that he does. A straight gift to the non-American competition in China. Surely even Trade War Team Trump couldn’t be that witless?

Below, our world on the cusp of repeating the 1930s. Will President Trump go “all-in” this week?

China's yuan slumps to 11-year low, stocks fall as U.S. trade war escalates

August 26, 2019 / 5:19 AM
SHANGHAI/HONG KONG (Reuters) - China’s yuan slumped to a fresh 11-year low against the dollar on Monday and stocks fell as the Sino-U.S. trade war sharply escalated, threatening to inflict more damage on the world’s largest economies and weigh further on global growth.

In Hong Kong, a weekend flare-up in violence during anti-government protests added to pressure on share prices.

The onshore yuan CNY=CFXS fell 0.6% in early trade to 7.15 per dollar, its weakest since February 2008 and its second biggest one-day drop of the month. The offshore yuan CNH=D3 fell to a record low of 7.1850, before regaining some ground to around 7.1595.

The Chinese authorities have allowed the tightly-managed yuan to fall some 3.6% so far this month as trade tensions between Beijing and Washington worsened, sparking fears of a global currency war. It was trading around 7.1419 by 0330 GMT.

On Friday, U.S. President Donald Trump announced an additional duty on some $550 billion of targeted Chinese goods, hours after China unveiled retaliatory tariffs on $75 billion worth of U.S. goods.

“This tit-for-tat escalation shows how unlikely a trade deal and de-escalation have become,” Louis Kuijs, of Oxford Economics, wrote in a note late on Sunday.

“The impact of the new tariffs on China’s economic growth will be sizeable,” he said.

Oxford now expects China’s economic growth could fall significantly below 6% next year, even assuming more policy support measures.

The benchmark CSI300 Index .CSI300 sank 1.2% by the midday break, while the Shanghai Composite Index .CSI fell about 1%. Chinese 10-year Treasury futures CFTZ9 rallied 0.3% in early trade on Monday.
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China to fight back against U.S. tariff move: People's Daily

August 25, 2019 / 5:21 AM
BEIJING (Reuters) - China will fight back against the latest U.S. step to increase tariffs on Chinese goods, the ruling Communist Party’s People’s Daily said on Sunday amid an escalating trade war between the world’s two largest economies.

“China is confident that it will follow its own path and do its own things well, and will never waver in its stand on countering any provocations by the U.S. side,” the newspaper said in a commentary.
U.S. politicians, seeking to hamper China’s economic development, still want to use the tactics of exerting maximum pressure on China that has achieved few results, the paper said. 

The United States will not win the trade war because of the plight faced by its farmers and businesses, it said.

China said on Saturday it strongly opposes Washington’s decision to levy additional tariffs on $550 billion worth of Chinese goods and warned the United States of consequences if it does not end its “wrong actions”.

U.S. President Donald Trump announced on Friday that Washington will impose an additional 5% duty on the Chinese goods, hours after Beijing announced its latest retaliatory tariffs on about $75 billion worth of U.S. goods in the latest tit-for-tat moves in their bilateral trade dispute.

The intensifying U.S.-China trade war stoked worries about a global economic recession.

Trump Aides Say He Has Power to Force Companies From China

By Reade Pickert, Shawn Donnan, and Mark Niquette
Updated on August 26, 2019, 1:01 AM GMT+1
Two top White House officials said President Donald Trump has the authority to force American companies to leave China -- as he claims, and which trade experts question -- yet whether he invokes those powers is a another question.

Treasury Secretary Steven Mnuchin, speaking on “Fox News Sunday” from the Group of Seven meeting in Biarritz, France, said Trump would have the ability under the International Emergency Economic Powers Act, if he declared an emergency. White House economic director Larry Kudlow agreed, in an interview on CNN’s “State of the Union,” but said “there’s nothing right now in the cards” to do so. 

Trump cited the 1977 measure in a tweet late Friday, saying it gave him the power and declaring, “Case closed!”



Some China hardliners in the Trump administration have been urging the president to invoke the law on a number of fronts over the past two years. Using it as a way to curb U.S. investment into China would be extreme, though, and take aim at operations of American businesses ranging from automakers General Motors Co. and Tesla Inc., to industrial companies such as Caterpillar Inc. and retail giants including Walmart Inc.

Experts say applying the law, known as IEEPA, in this fashion was never the intent of the legislation, but it wouldn’t be the first time the administration has looked into it. Trump cited the power when he threatened in May to place levies on Mexican goods as a way to force curbs on the flow of undocumented immigrants across the U.S.-Mexican border.

The intensifying trade battle between the world’s two largest economies, and the potential for Trump to push the limits of presidential authority, has roiled markets. The Dow Jones Industrial Average fell 623 points, or 2.4%, on Friday, trimming its 2019 gains to below 10%, and pushing it lower on a year-over-year basis.
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https://www.bloomberg.com/news/articles/2019-08-25/trump-aides-say-he-has-power-to-force-u-s-companies-from-china

Quitting Chinese market will be suicide for US firms

By Hu Weijia Source:Global Times Published: 2019/8/25 21:25:29
US President Donald Trump has ordered US companies to "immediately start looking for an alternative to China." If US firms obey his dictate, such actions will have serious consequences.

China is now the biggest market for some US-based enterprises, such as US automaker General Motors (GM). The automaker's China sales came to 3.65 million cars in 2018, exceeding its total sales in the US market, where GM delivered nearly 3 million vehicles. Some statistics have shown that China's car market is even bigger than those of the US and Japan combined. GM is already facing weak sales in the US. The automaker will suffer a fatal blow if it loses the Chinese market.

GM is a big player in the US auto industry, an important component of the US economy that is particularly prominent in some Midwestern and Southern states.

According to statista.com, motor vehicle and parts dealers in the US had about 2 million employees as of March 2019. If GM's profits fall or it loses money, the whole US auto industry will be affected, the country's auto supply chain will shrink and mass unemployment will result.

In China, the vehicle industry is a fully competitive market. If GM withdraws from China, homegrown brands and   automakers from countries outside the US will fill the gap in auto sales. As long as China has the world's largest vehicle market, there will be no shortage of auto-related investment. China has the initiative in this game.

There's not much chance that GM will obey Trump's outburst. The automaker needs its factories to be close to its customers to survive in a fiercely competitive market.

To keep its foothold in China, GM has to keep producing in China - despite Trump's order.

If Trump pressures US companies to take sides between the US and China, many of them will probably choose the latter. US business groups have already expressed their fierce opposition to Trump's gyrating trade policy.

"We do not want to see a further deterioration of US China relations," Myron Brilliant, executive vice president and head of international affairs at the US Chamber of Commerce, was quoted by media reports as saying.

US companies are welcome to invest and operate in the Chinese market, but if some US companies want to obey Trump's order and join Washington's trade war, the result is bleak. A decision to give up the Chinese market is just suicide.

China-US trade war a test of endurance

Source:Global Times Published: 2019/8/24 20:27:55
After China on Friday unveiled additional tariffs on $75 billion of US goods, the US reacted vehemently. Washington announced on the same day that it will hike tariff rates on $250 billion worth of Chinese goods from 25 to 30 percent, and another $300 billion in Chinese products currently tariffed at a rate of 10 percent will be tariffed at 15 percent.

The US has clearly shown a drastic mood swing due to China's counterattacks. Since countermeasure is a common practice in tariff wars, the US' bullying attitude seems particularly ridiculous.

Such a move from the US side demonstrates its arrogance and narcissism. The US is launching a brutal trade war with caprice. After it takes action, it must be prepared for counterfire. But the US side seems unable to withstand such strikes. It obviously need to review the rules of the trade war.

We need to teach the US side some common sense about the trade war. It is an extreme gamble which will lead to a lose-lose result. Temper is useless in a trade war. No one believes that a trade war can be won by one side unilaterally. When the US advocates how many benefits the trade war can bring to itself, the entire world laughs at its overt lie.

Washington is about to impose additional tariffs on all Chinese products exported to the US. It has already played its best cards, and the latest cards have been played with emotions. Apparently, the US cannot accept such a reality: Why can China still remain firm and unshakable after the US has applied maximum pressure?

The US is far too confident. It has chosen China, the world's second-largest economy, whose market size is very close to the US', as an opponent to reset global trade rules. This is a serious strategic mistake. The current US administration misunderstands how to apply strength in modern international relations. It believes that maximum pressure is not only a way to achieve unreasonable goals, but also a shortcut to those goals.

But the reality is that the US' maximum pressure has met with setbacks in various directions. In recent years, the US has been stirring up things in diplomacy but has achieved barely anything.

China and the US are the two largest economies in the world. The overall economic strength of the US is stronger than that of China. The US may be good at fighting a "trade blitzkrieg," but when it comes to a protracted trade war, Chinese society has an obvious advantage digesting problems caused by the trade war.

The US side is increasingly feeling the burden due to the political timetable of elections and the concerns over economic recession. Its ambitions come with worries. 
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Former Fed official says Trump’s trade war with China is a ‘stagflationary shock’

By Greg Robb  Published: Aug 24, 2019 4:25 p.m. ET
President Donald Trump’s trade war with China is likely to generate a supply shock for the U.S. economy similar to the stagflation that hamstrung the U.S. economy after the 1973-1974 OPEC oil embargo, a former top Federal Reserve official said, on the sidelines of the Fed’s Jackson Hole conference.
“It’s a stagflationary shock. Hopefully a small one,” Alan Blinder said, in an interview.
Blinder was vice chair of the Federal Reserve board between 1994 and 1996.

In the 1970s, oil prices quadrupled in the wake of the OPEC ban on oil exports.

This resulted in slow economic growth and higher inflation, something central bankers had never seen before.

At first, the Fed didn’t know how to respond, Blinder said.

There are no perfect answers for policy makers. The central bank can either respond to the inflation or the stagnation, he said.

Supply shocks disrupt the efficiency of the economy,“ an economic machine that was able to produce this much output will now produce less,” Blinder said.

After a while, businesses will adjust, he said.

Blinder said he is not sure whether the OPEC embargo is a perfect analogy for the Trump trade war.

One notable difference is that when the U.S. responded to the oil embargo, “we weren’t’ making enemies, he said.

Blinder said it was hard for the Fed to guage the future given the president’s actions.

“The trend seems bad,” he said.

If it weren’t for the distortions Trump is causing to international trade, Blinder would not be worried about a severe economic downturn.
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Elsewhere, Germany reels under the bad impact of negative interest rates. Just wait till they come to America.

Germany in Uproar as Negative Rates Threaten Saving Obsession

Nicholas Comfort, Stephan Kahl and Birgit Jennen, BloombergAugust 25, 2019
Most Germans live by the credo that saving is a virtue, but the European Central Bank’s negative interest rates risk making a mockery of the national obsession, prompting politicians to seek ways to insulate thrifty citizens and keep the burden on the country’s beleaguered banks.

Finance Minister Olaf Scholz says he’ll look into whether it’s possible to prevent German banks from charging most retail-banking clients for deposits, after such a measure was proposed by the leader of Bavaria. Lenders have rejected the idea, saying bans don’t ultimately help clients and could even destabilize financial markets.

Germany’s overcrowded banking industry has long contended with sub-par profitability, but after five years of negative rates, lenders are running out of ways to offset the hit to earnings. With the country gearing up for regional elections next month, the ECB is an easy target for a country known for its risk-averse attitude to money and its habit of hording savings in checking accounts. At 2.35 trillion euros ($2.6 trillion), no other country in the euro area has a larger pile of retail deposits.

Germany’s citizens also save far more of their disposable income than most other Europeans. The country’s savings rate was around 10% in 2017, almost twice the euro-area average, according to Deutsche Bank AG. On average, Germans held more than 40% of their financial assets in the form of bank deposits in 2018.

Negative rates, which mean deposits decline over time rather than increase, “would be bad for all savers,” said Juergen Dengel, a 40-year-old civil servant from Bonn. If negative rates were introduced at his bank, he would consider withdrawing his money and using it to build a home -- even if that meant going into debt.

“This is a total political football,” said Klaus Fleischer, a professor specializing in finance at the Munich University of Applied Sciences. “People love to hear someone standing up for them when their savings melt away.”

Not everyone’s in favor of outlawing deposit charges, though. “A ban on negative rates might be attractive for savers, but then we have to also think of how we’d support unprofitable but systemically-relevant banks,” said Ingrid Arndt-Brauer, a lawmaker for the Social Democratic Party, Angela Merkel’s junior coalition partner.

----Double Whammy

Negative rates are a double whammy for lenders. Euro-area banks pay more than 7 billion euros a year to deposit funds overnight with their central bank, while at the same time their income from lending is eroded. That has helped push the share prices of many European lenders to record lows and has left Germany’s Deutsche Bank and Commerzbank AG reeling from falling revenue and shrinking profitability.

Banks across Europe already pass on negative rates to corporate clients and aren’t ruling out doing the same to retail customers. In Germany, the issue has exploded onto the front pages of the country’s largest tabloid, with Bavarian Premier Markus Soeder even calling for a ban on deposits of up to 100,000 euros.

“These suggestions show how far the undesired side effects of the ECB’s negative rates stretch,” Germany’s banking lobby said in a statement, referring to the central bank’s deposit rate of minus 0.4%. Still, banks cannot ignore the market as a whole when setting their conditions -- even when rates fall below zero, the group said.

Some German retail banks already charge customers for holding as little as 100,000 euros in deposit accounts, though they have have yet to extend the policy to the bulk of their customers.
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"In economics, hope and faith coexist with great scientific pretension."

John Kenneth Galbraith.

Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

Today, is President Trump the new Hoover?

Opinion: The Trump era could wind up like the 1930s

By Paul Brandus  Published: Aug 23, 2019 12:45 p.m. ET
After nearly a decade of good times, things, all of a sudden, looked wobbly. The stock market fell sharply. The president—a wealthy man who had never been elected to office before, but was very sure of himself, thank you very much— reassured Americans that all was well and the future bright.

Even so, the president thought one thing was needed to make things better: tariffs on America’s trade partners. Many economists and lawmakers argued against this, saying it would hurt trade, kill jobs and slow, if not contract, the economy. The president dismissed their reasoning, and into place the tariffs went.

As economic uncertainty mounted, many investors moved into gold, which was perceived as a safe haven (so much so that the Treasury feared it might run out of bullion).

And even though the economy had previously been good, many Americans feared immigrants were coming to take their jobs and sought to keep them out. Sure, Europeans were generally OK, particularly if they were from places like Norway, Sweden and Germany—in other words, if they looked “American.” The mood towards others was far less hospitable, and efforts were made to bar entire ethnic groups.

More ominously, the anti-immigrant mood dovetailed with a resurgence by white supremacist groups like the Ku Klux Klan, which widened its hateful, racist agenda to include (along with blacks, of course) Jews and Catholics. Elites—well-educated Americans who lived in urban areas—were also despised. Klan membership soared to an estimated 2.5% to 6.5% of the population. Think about that. If that was today, that would mean some 21 million Americans in the KKK.

In short, it was a hateful, divisive, dangerous time—even though the economy had been good.

If the past is prologue, then the situation that President Trump finds himself in—and our country finds itself in—increasingly resembles what we’ve seen before. Don’t get me wrong: This isn’t 1929. But there are worrisome signs. Hate crimes are on the rise: The FBI reported 7,175 hate crimes in 2017—a 17% jump from 2016. Among a sizable minority of Americans, there’s an anti-immigrant frenzy, the likes of which hasn’t been seen in this country since the 1920s. Emma Lazarus’s poem on the Statue of Liberty—“Give me your tired, your poor, your huddled masses yearning to breathe free”—that was just meant for Europeans, the White House now claims. It’s another reminder, and a dangerous one, that history can be whitewashed for the ignorant.

----We’re told that the economy is the best it’s ever been. Yet stocks have cooled: the S&P 500 SPX, -2.59%  stands where it did in January 2018. The economy is growing, but it’s slowing rapidly. Job growth is slowing— the Labor Department said the economy had about 501,000 fewer jobs as of March 2019 than first estimated, based on its surveys of business establishments. Half a million—and even before this, monthly job growth had shifted into a lower gear.

The new data clearly shows that the economy didn’t get the giant boost that President Trump promised his tax cuts and his deficit-busting spending would provide. So what do we have? Low interest rates, a monstrous deficit—up 27% in just a year and back in $1 trillion territory—and a soaring national debt. It has jumped over the $20 trillion, $21 trillion and now $22 trillion mark on his watch, and is now bigger than the U.S. economy itself (though it’s fair to point out that the debt is divided into two tranches: about 3/4 is held by the public and about 1/4 is intragovernmental debt). In the fiscal year that ends Sept. 30, interest on all this red ink will be nearly $400 billion. Next year taxpayers will fork over even more.

Herbert Hoover was warned about tariffs and didn’t listen. Trump—who promised us that “trade wars are easy to win, believe me” (he now denies saying this) didn’t listen either. We’re now bogged down in a nasty battle with a country whose economy, is by some measures bigger than ours. The cost to you this year: $600, says a JP Morgan Chase report out this week. It adds you’ll take a $1,000 hit next year if Trump makes good on his threat to hit China (in other words you) with tariffs on another $300 billion worth of goods.
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Nothing is so admirable in politics as a short memory.

John Kenneth Galbraith.

Technology Update.
With events happening fast in the development of solar power and graphene, I’ve added this section. Updates as they get reported. Is converting sunlight to usable cheap AC or DC energy mankind’s future from the 21st century onwards?

Can't get thinner than this: Synthesis of atomically flat boron sheets

Date: August 23, 2019

Source: Tokyo Institute of Technology

Summary: Scientists have found a simple method for producing atomically thin layers of oxidized borophene, a promising 2D boron-based nanomaterial that could serve in a variety of fields.

Since its rediscovery and characterization in 2004, graphene has been the focus of countless research efforts across multiple fields. It is a very versatile material consisting of a two-dimensional (2D) carbon network; in other words, it comprises a thin sheet of carbon that has a thickness of one atom. Graphene is not only stronger than the strongest steels, but also has a myriad of interesting chemical, electronic, and mechanical characteristics that has left scientists wondering if similar 2D networks of other materials could have such useful properties.

One novel 2D material that was recently reported is borophene, an analogue of graphene but consisting of boron atoms instead of carbon atoms. However, as one would expect for 2D sheets of any material, the synthesis of borophene has proved to be challenging. Researchers either require the use of a substrate to make borophene more stable or coupling boron with hydroxyl groups (OH-), which causes the structure to not be atomically flat.

In a recent study conducted at Tokyo Institute of Technology, a research team including Tetsuya Kambe, Akiyoshi Kuzume and Kimihisa Yamamoto was successful in synthesizing atomically flat oxidized borophene sheets through a simple solution-based method. First, they synthesized stacked layers of borophene oxide through a fairly simple process using a potassium borohydride salt (KBH4). An X-ray analysis revealed the 2D-layered structure of the material, in which layers of boron atoms forming a hexagonal 2D network with oxygen atoms as bridges were intercalated with layers containing potassium atoms. Then, the subsequent necessary step was to find a way to exfoliate atomically thin layers of the borophene oxide network. The researchers achieved this by putting the material in dimethylformamide, which is a commonly used organic solvent. Various types of measurements were carried out to verify the structure of the exfoliated sheets, including electron microscopy, spectroscopy, and atomic force microscopy. The results confirmed that the proposed method was effective for producing the desired atomically flat oxidized borophene sheets.

Finally, the researchers performed resistivity measurements to analyze the conducting properties of stacked borophene sheets and found an interesting characteristic referred to as anisotropy. This means that the sheets exhibited different types of conductivity depending on the direction of the current flow. The material behaved like a semiconductor in the inter-plane direction, whereas it exhibited metal-like behavior in the in-plane direction of the boron network. The mechanisms behind these two types of conducting behaviors were elucidated as well. "It is important to note that our boron sheets can be handled easily at ambient conditions," remarks Dr. Kambe, indicating that this pioneering research could be the basis for finding potential applications for borophene.

Finding facile methods for the synthesis of borophene and borophene-based compounds is crucial to conducting further research on this interesting material and its potential uses. 

"Like graphene, borophene is expected to have unique properties, including extraordinary mechanical characteristics and metallic behavior that could be exploited in a variety of fields," states Dr. Kambe. Hopefully, future findings and developments on 2D materials will enable us to employ their exotic properties and tailor them to suit our needs.
"Tariffs don't work. If anything, they hurt the economy because if you're a typical American worker, you have a finite amount of income to spend. If you have to spend more on the necessity products that you need to live, you have less to spend on the services that you want to buy. And you definitely don't have anything left over to save.”

Gary Cohn.  President Trump's former director of the National Economic Council.

The monthly Coppock Indicators finished July

DJIA: 26,864 +53 Up. NASDAQ: 8,175 +65 Down. SP500: 2,980 +53 Up. 

The S&P and Dow remain up, but in very unconvincing fashion. The NASDAQ remains down.  Like the Fed, I would await a better data driven signal.

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