Trump’s Shot Heard Round the Foot [feedly]

Trump's Shot Heard Round the Foot
https://www.project-syndicate.org/commentary/trump-steel-tariffs-europe-response-by-daniel-gros-2018-06

The imposition of steel tariffs on European producers was an unprovoked attack, to which the EU has vowed to retaliate. But instead of engaging in a costly strategy of escalation with their biggest trading partner, Europe's leaders should swallow their pride and indulge its president's insistence on running the US economy into the ground.

 -- via my feedly newsfeed

David Bacon: Testimony: WE CAN CHANGE AN UNJUST IMMIGRATION POLICY

Testimony given by David Bacon at the People's Tribunal at the West County Detention Center in Richmond, CA


We've heard the living experiences of people who have had no alternative to leaving home to escape violence, war and poverty, who now find themselves imprisoned in the detention center in front of us.  And we have to ask, who is responsible?  Where did the violence and poverty come from, that forced people to leave home, to cross our border with Mexico, and then to be picked up and incarcerated here?  

Overwhelmingly, it has come from the actions of the government of this country, and the wealthy elites that it has defended.

It came from two centuries of colonialism, from the announcement of the Monroe Doctrine, when this government said that it had the right to do as it wanted in all of  the countries of Latin America.  It came from the wars that turned Puerto Rico and the Philippines into direct colonies over a century ago.

It came from more wars and interventions fought to keep in power those who would willingly ensure the wealth and profits of U.S. corporations, and the misery and poverty of the vast majority of their own countries.

Smedley Butler, a decorated Marine Corp general, told the truth about what he did a century ago:

"I was a racketeer, a gangster for capitalism," he said. "I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested."

When people in El Salvador and Guatemala and Honduras and Haiti tried to change the injustice of this, the U.S. armed rightwing governments that made war on their own people.  Sergio Sosa, a combatiente in Guatamala's civil war who now heads a workers' center in Omaha, says simply, "You sent the guns and we buried the dead."

Two million people left El Salvador in the 1980s and crossed the border to the U.S.  How many more hundreds of thousands from Guatemala?  How many more after the U.S. overthrew Aristide in Haiti?  How many from Honduras after Zelaya was forced from office, and the U.S. said nothing while sending arms to the army that uses them still today against Honduran people?

The poverty that forced 3 million corn farmers from Mexico to come to the U.S was a product of the North American Free Trade Agreement, making it impossible for them to grow the maize they domesticated and gave to the world?  Now Archer Daniels Midland and Continental Grain Company use that inheritance to take over the Mexican corn market to make profits.

When the U.S. sought to impose the Central American Free Trade Agreement on El Salvador, Otto Reich, from the U.S. State Department, told Salvadorans that if they elected a government that wouldn't go along with it, the U.S. would cut off the remittances sent by Salvadorans in the U.S. so that their families at home can live.

Young people, brought from El Salvador as children, joined gangs in Los Angeles so they could survive in the city's most dangerous neighborhoods.  Then they were arrested and deported back to El Salvador, and the gang culture of L.A. took root there, with the drug trade sending cocaine and heroin back to the U.S.  We are the market, in barrios and working class neighborhoods here.

When people arrive at the U.S. border, they are treated as criminals.  John Kelly, a much more dishonest general who now advises Trump in the White House, calls migration "a criminal-terror convergence."

Yet people coming to the U.S. are part of the labor force that puts vegetables and fruit on the table, cleans the office buildings, and empties the bedpans and takes care of people here when they get old and sick.  Turning people into criminals, and passing laws saying people can't work legally, makes people vulnerable, and forces them into the lowest wages in our economy.

Knowing where the violence and poverty are coming from, and who is benefitting from this system is one step towards ending it.  But we also have to know what we want in its place.  What is our alternative to this detention center, and the imprisonment of the people inside?  To the hundreds of people who still die on the border every year?

We have had alternative proposals for many years.  One set of alternatives was called the Dignity Campaign.  The American Friends Service Committee had another.  What we want isn't hard to see.

We want an end to mass detention and deportations, and the closing of the detention centers.
We want an end to the militarization of the border.
We want an end to the idea that working should be a crime if you have no papers.

But we also want to deal with the root causes.
We want an end to the trade agreements and economic reforms that force people into poverty and make migration involuntary, the only means to survive.
And we want an end to military intervention, to military aid to rightwing governments, and to U.S. support for the the repression of the movements fighting for change.

If you think this isn't possible or just a dream, remember that a decade after Emmett Till was lynched in Mississippi the U.S. Congress passed the Civil Rights Act.  That same year, 1965, Congress put the family preference immigration system into law, the only pro-immigrant legislation we've had for a hundred years.  

That was no gift.  A civil rights movement made Congress pass that law.  We remember that when that law was passed we had no detention centers like the one in front of us.  There were no walls on our border with Mexico, and no one died crossing it, like the hundreds who now perish in the desert every year.  There is nothing permanant or unchangeable about these institutions of oppression.  We have changed our world before, and our movement here can do that again.

--

John Case
Harpers Ferry, WV

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Baker on crash likelihood -- No Bubbles on the Horizon [feedly]

No Bubbles on the Horizon
http://cepr.net/publications/op-eds-columns/no-bubbles-on-the-horizon

0 Comments

Dean Baker
Truthout, June 4, 2018

See article on original site

Ever since the collapse of the housing bubble in 2007–2008 that gave us the Great Recession, there has been a large doom and gloom crowd anxious to tell us another crash is on the way. Most insist this one will be even worse than the last one. They are wrong.

Both the housing bubble in the last decade and the stock bubble in the 1990s were easy to see. It was also easy to see that their collapse would throw the economy into a recession since both bubbles were driving the economy. We are in a very different place today.

The stock market is high. By any measure, price-to-earnings ratios are far above historic averages, but they are nowhere near as out of line as they were in the 1990s bubble.

The current value of the market is roughly 24 times after-tax corporate profits, based on the first quarter's data. This compares to the historic average ratio of 15-to-1. But at the peak of the bubble in 2000, the ratio was over 30-to-1.

Furthermore, the higher than normal price-to-earnings ratio can very well be justified by unusually low real interest rates. The interest rate on the 10-year Treasury bond is flirting with 3.0 percent. With a 2.0 percent inflation rate, that translates into a real interest rate of just 1.0 percent.

By contrast, when the stock market was soaring in the late 1990s, the yield on 10-year bonds was generally over 5.0 percent. Given an inflation rate also near 2.0 percent, this translated into a real interest rate of 3.0 percent. That made bonds a much better alternative in the 1990s bubble than at present.

It is true that profits are unusually high as a share of national income. This reflects a big increase in the profit share in the weak labor market following the Great Recession, and more recently the Republican tax cut passed last fall.

It can be hoped that labor regains some of its lost share and pushes profits downward. But there is no guarantee that this will happen, and stock prices that reflect current profit levels can hardly be said to be in a bubble.

House prices are also well above trend levels. Inflation-adjusted house prices are around 30 percent above their trend levels. But they are still about 14 percent below bubble peaks. Here too, the higher than normal level seems to reflect the fundamentals of the market.

Unlike the housing bubble years, rents have been rising far more rapidly than the overall rate of inflation over the last five years. This indicates that there actually is a shortage of housing pushing up house prices, not a speculative bubble.

On this point it is also worth noting that vacancy rates are relatively low at present. By contrast, in the bubble years of the last decade vacancy rates were hitting record highs even as the bubble continued to grow.

Unusually low interest rates also likely play a role in current house prices. Lower than normal mortgage rates make houses more affordable and shift the terms of the tradeoff between renting and owning in favor of owning. Through the bubble years, the 30-year mortgage rate was generally between 5.5 percent and 6.0 percent. Even with the recent rise in rates, a 30-year mortgage is still averaging just 4.6 percent.

Not only is there little evidence of bubbles just now, there also is no case to be made that bubbles are driving the economy. In the late 1990s, it was clear that the stock bubble was driving the economy. Through the stock wealth effect, the run-up in stock prices led to a consumption boom that pushed the savings rate to then-record low levels. In addition, investment surged as this was a rare period in which start-ups were actually financing investment by issuing shares of stock.

When the bubble burst, investment plunged, and consumption fell back to more normal levels. This gave us the 2001 recession. While most economists see this as a short and mild recession, we actually did not recover the jobs lost until January of 2005, which at the time was the longest period without net job growth since the Great Recession.

In the housing bubble years, the consumption triggered by the run-up in house prices sent the savings rate even lower than at the peak of the stock bubble. In addition, housing construction rose to 6.5 percent of GDP, compared to an average of roughly 4.0 percent.

Not surprisingly, when the bubble burst consumption fell back to more normal levels. The overbuilding of the bubble years led construction to fall far below normal levels, bottoming out at less than 2.0 percent of GDP in 2010. This enormous loss of demand was the cause of the Great Recession.

High stock and housing prices are not driving the economy in the same way as they did in the 1990s stock bubble or the housing bubble of the last decade. Investment remains modest by any measure. Housing construction is getting stronger, but very much in line with longer-term trends.

Consumption is high as a result of stock and housing wealth. But even in an extreme case, where the savings rate rose back to Great Recession levels, it probably would not be sufficient by itself to cause a recession and certainly not a severe one.

In short, the gloom and doom stories just don't have much basis in reality. There are plenty of economic problems to concern us, but the prospect of another big crash is not one of them.

 -- via my feedly newsfeed

Idée fixe [feedly]

....ater all, as a Scottish Brexiter and former  colleague of mine said, "why would anyone want to go to France?"

Idée fixe
http://mainlymacro.blogspot.com/2018/06/idee-fixe.html

The arguments against staying in the Custom Union (CU) are pathetic. It is as if Brexiters, having chosen Brexit because of their visceral dislike of the EU's labour and environmental regulation, realised that this would have a major negative impact on trade and tried to compensate. 'Global Britain' was born. Even if you strip out the nonsensical associations with past empire, Global Britain must be one of the most ridiculous ideas to be taken seriously by the broadcast media.

According to the Brexiters, the EU prevents us doing good trade deals with other countries because of vested interests in some of the EU countries, and therefore the UK outside the CU would be in a much better position to make good deals. The first point is the EU already has trade agreements with around 50 countries, with more in the pipeline, which is a lot. Another is that third countries want trade deals with the EU much more than they would want them from the UK, because the EU is a bigger market. And finally because of its market size, the EU can set the standards with which other smaller countries have to conform. Market size brings power in any trade agreement.

If you want to see how much market size gives you power, look at what happens when Trump tries to tear up trade agreements. If you have a similar market size, as the EU does, you can retaliate with a reasonable chance of causing enough economic pain in the US to reverse the initial policy. If you are a relatively small economy, as the UK will be if it acts alone, any retaliation could be little more than a pinprick for the other side. This is also, incidentally, why arguments that we somehow had more power over the EU in the Brexit negotiations because of trade balances are ludicrous, because walking away inflicts in proportional terms so much more damage on the UK than it does to the EU.

Global Britain is so dumb a concept that you can concede huge amounts of ground and still win the argument. Suppose the UK did manage to get better trade agreements with the 50 countries the EU already has agreements with and more before the EU does. This is still likely to come nowhere near to replacing the trade we would lose from leaving the EU. The reason is that distance still matters for trade. It is one of the most robust empirical results in economics. Nor have existing trade barriers prevented Germany in particular from increasingtrade to China and other countries.

In response Brexiters always say that it is more important to export to the fast growing countries that are the emerging markets, rather than the more slow growing advanced economies in the EU. But not all countries in the EU are growing slowly: we have a fast growing one, Ireland, on our doorstep. You might respond that a country like India is a much bigger market, but the UK's exports to Ireland in 2016 were 5 times larger than those to India. The UK government have donethe calculations and suggests that successful FTAs with other countries including the US would come nowhere near compensating for lost trade with the EU.

All this is all before we think about the Irish border. It is patently obvious that if the UK leaves the EU's CU and Single Market for goods there would have to be a 'hard border' either on the island of Ireland or within the UK. Instead of acknowledging this obvious fact, Brexiters have gone to incredible lengths to invent mad schemesthat purport to avoid this inevitability. The way this sometimes seemsto work is that policy entrepreneurs from places like the Legatum Institute feed schemes to ministers, and them after announcing them they ask civil servants to gather evidence.

The Brexiters do all this nonsense because they know even a soft Brexit like the Jersey option does not give them the freedom to 'complete Thatcher's project' they crave. Which brings me to Theresa May. She is very much the wrong person to have been in the right place at the right time. Any Prime Minister worthy of that office should have quickly realised that a hard Brexit would involve economic costs that no PM should inflict on the economy. Another way of putting it is that the Brexit people voted for - taking back control and being at least no worse off in economic terms at the same time - was an impossibleproject. That realisation should have governed how she approached Brexit from the start. She should have said that she accepted the referendum vote, but she would not implement any deal that would do significant economic harm to the country. No one would have criticised her for such an endeavour.

The task of her premiership should therefore have been to gradually marginalise the Brexiters. They were always going to cry betrayal, so best to ensure that this happened slowly (to avoid giving them the ammunition to create a leadership election) from the moment she became PM. The way to do that was to refuse to trigger Article 50 until a clear negotiating strategy was in place and tested using a realistic view of what the EU would do. Assessments should have been made before, not after, negotiations started to ensure the right strategy was in place. To do that she had to ensure the Brexiters were involved in the process, but not in control.

A process like that would have quickly established that leaving the CU and elements of the Single Market was incompatible with avoiding a hard Irish border. Of course Brexiters would dispute that, but she should have already known the rather loose relationship with the facts that many Brexiters have: for example some continue to this day to claim that the EU erects high barriersto exports from Africa. Anticipating the Irish border issue would mean that most ministers would have quickly realised that only some kind of soft Brexit was possible. There might even have been preliminary discussions with senior EU politicians about whether the Jersey option was acceptable. The UK's bargaining power, with A50 untriggered, would have been much greater.

Theresa May chose to do the complete opposite of all that, perhaps because she could not contemplate having to take on the Brexit press. She appointed Fox, a Brexiter, to a post that depended on the UK leaving the CU. She drew red lines that were impossible without a hard Brexit. And of course she triggered Article 50 without having done the necessary analysis and with no clear strategy in place. If there was any method in what she did, it seemed to be to appease Brexiters and their press at all costs. And one thing we do know about Theresa May is that once she has chosen a course of action, she sticks to it until it becomes untenable and possibly even after that.

Andrew Rawnsley callsher a Zombie PM. But I think his analysis, of why a PM that is so bad at choosing sensible strategies and so inflexible and so hopeless at fighting elections is still with us, skirts around the answer. The party is hopelessly split over Brexit, and while the majority of MPs have no time for Rees-Mogg, he is currently favourite among the members who are mostly Brexiters and have the final say. As I have said before, so much has been written about the 'hold' that Labour party members have over their party, but Conservative party members have saddled the country with one of the most inadequate Prime Ministers it has ever known.

May has handled Brexit terribly, but she has enough political instinct to understand why she is still leading her party. As long as the Brexit negotiations continue, most Conservative MPs may feel too nervous to risk a new leadership election. Equally if she is challenged by the Brexiters she may well win. That knowledge gives her every incentive to bring about the perpetual Brexit that I talked about here. A Zombie PM carrying out a Zombie policy, that could haunt this country for many years to come. [1]

[1] Can Zombies haunt? I'm afraid my knowledge of horror movies is deliberately thin. I was originally going to call this post Idioteque,because it was the thought that came into my head while trying to think of a title (maybe I should blameSteve Bullock). Luckily I later realised the word I was probably searching for. Or maybe not?

 -- via my feedly newsfeed

Bernstein: Catching up with the lynx [feedly]

Catching up with the lynx
http://jaredbernsteinblog.com/catching-up-with-the-lynx/

Over a WaPo today: As you'd expect, I'm not at all happy to see the rollbacks in financial market regulations. But, given our ability to willfully forget the last financial meltdown, they're far from unexpected. One of my key points here is that the powerful, rich finance lobby faces little in terms of countervailing pushback. That is, this isn't good D's outnumbered by bad R's. Note also recommendation for a small tax on financial transactions. I plan to amp that up in coming weeks.

The strong jobs report at the end of last week confirmed that the job market remains on track. There was even a pop in middle-wage workers' paychecks. Here's some noodling on three things that could throw the recovery off track: Fed mistake, trade war, and supply constraints. I think the last one poses the biggest risks.

Note that I left out bursting finance bubble from the list of recovery de-railers. That's because I don't see near-term evidence of excessive speculation and under-priced risk. My concerns in this space are longer term.

Finally, while I don't think Trump's trade war is our biggest risk (unlike the respondents to this Twitter poll), I do think there's risks from his chaotic trade policies becoming unbound. Heretofore, they've been more bark than bite, but as the protectionists become empowered, I don't expect their actions to actually help working people. Instead, I expect them to needlessly piss off allies, dampen exports, raise prices on imports, and hurt workers in domestic industries that use the taxed metals as inputs. And there are millions more of those workers than there are in domestic steel and aluminum production.

"…these tariffs and their phony national security rationale won't come close to helping most workers displaced by imbalanced trade. They won't lead to investments in new, potentially competitive industries, like green battery production or other renewable technologies. They won't create significant job opportunities in places that have been left behind, even at our current low unemployment . They won't provide the apprenticeship, earn-while-you-learn program needed to train a displaced coal miner to be an MRI technician. They won't roll back the wasteful, regressive tax cuts that robbed the Treasury of the resources to invest in public goods, from infrastructure to human capital."

 -- via my feedly newsfeed

U.S.-China Trade Talks End in an Impasse [feedly]

U.S.-China Trade Talks End in an Impasse
https://www.nytimes.com/2018/06/03/world/asia/us-china-trade.html
By Keith Bradsher

June 3, 2018

BEIJING — The United States and China ended trade talks in Beijing on Sunday without any announced deals and with Chinese officials refusing to commit to buying more American goods without a Trump administration agreement not to impose further tariffs on Chinese exports.

"If the United States introduces trade measures, including an increase of tariffs, all the economic and trade outcomes negotiated by the two parties will not take effect," China said in a statement distributed by the state-controlled news media.

The apparent impasse left the Trump administration with the issue of what to do about China's industrial policies. It also left unresolved an awkward issue for both sides: the Chinese telecommunications company ZTE, which had violated sanctions against North Korea and Iran.

President Trump had sent to the talks what was essentially an export promotion team led by Commerce Secretary Wilbur Ross and including senior officials from the Treasury and from the Agriculture Department. Conspicuously absent were top officials from the Office of the United States Trade Representative, which has threatened to impose 25 percent tariffs on $50 billion a year in Chinese goods, in addition to the tariffs already imposed on $3 billion a year in Chinese steel and aluminum exports.

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Mr. Trump had underlined his administration's plans to confront China on trade when he wrote on Twitter while the American team was in Beijing, "When you're almost 800 Billion Dollars a year down on Trade, you can't lose a Trade War!"

But at the end of the negotiations, Beijing officials refused to pledge any additional purchases from the United States without an American agreement to resolve broader trade issues.

If the United States imposes the tariffs, China has previously said, Beijing would retaliate by blocking an equal value of soybeans and other goods from the United States. That would amount to more than one-third of Chinese imports of American goods.

In addition to the tariff dispute, Chinese officials have expressed deep concern about ZTE, a 70,000-employee telecommunications company that has largely shut down operations in the past month after an obscure American government agency, the Bureau of Industry and Security, ordered United States companies to stop selling crucial microchips and software to ZTE for seven years.

Then, in a tweet nearly three weeks ago, Mr. Trump said that the Commerce Department should reconsider American sanctions on ZTE, without any obvious Chinese concession in exchange. The arrival of Mr. Ross and his team in Beijing had fostered optimism in China that the issue could be settled without any big moves by Beijing.



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"Chinese officials know these talks are precarious, but may underestimate the domestic political cost Trump now sees in lifting the ZTE ban without major concessions from China," said Andrew Gilholm, the director of China analysis at Control Risks, a political and security consulting firm. "If the ban stays, Beijing's retaliation will definitely go up a gear."

Chinese state media have glossed over why the United States sales ban was imposed: ZTE's ties to North Korea and Iran. The company's links to North Korea in particular are politically inconvenient for China because Beijing has claimed that China's enforcement of international sanctions against North Korea helped pave the way for the coming summit meeting in Singapore between Mr. Trump and North Korea's leader, Kim Jong-un.

State news outlets have portrayed the ZTE decision as having been made by Mr. Ross's Commerce Department, and they have suggested that it is merely a bargaining ploy as part of trade negotiations. But though the Bureau of Industry and Security, a law enforcement agency, is legally part of the Commerce Department, it has considerable autonomy.

Agents of the bureau carry badges and guns, and the agency has played a central role for decades in trying to prevent Iraq and Iran from obtaining nuclear weapons technology.

Further trade frictions between the United States and China could also create difficulties for Vice Premier Liu He, a close ally of President Xi Jinping. Mr. Liu, an economist, is seen as one of the few moderates in a Chinese government increasingly dominated by advocates of greater state control of the economy.

"Trump's strategy does no favors for the moderates like trade negotiator Liu He who are eager to take China down a more manageable path of market and financial reforms, and such reforms would indeed be good for U.S. commercial interests," said James Zimmerman, a partner in the Beijing office of the law firm Perkins Coie and a former chairman of the American Chamber of Commerce in China.


-- via my feedly newsfeed

Comments on May Employment Report [feedly]

Comments on May Employment Report
http://www.calculatedriskblog.com/2018/06/comments-on-may-employment-report.html

The headline jobs number at 223,000 for May was above consensus expectations of 185 thousand, and the previously two months were revised up by a combined 15 thousand. Overall this was a strong report.

Earlier: May Employment Report: 223,000 Jobs Added, 3.8% Unemployment Rate

In May, the year-over-year employment change was 2.363 million jobs. This is solid year-over-year growth.

Average Hourly Earnings

Wage growth was about as expected in May. From the BLS: 

"In May, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $26.92. Over the year, average hourly earnings have increased by 71 cents, or 2.7 percent."

Click on graph for larger image.

This graph is based on "Average Hourly Earnings" from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) "Hourly Compensation," from the BLS's Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.7% YoY in May. 

Wage growth had been trending up, although growth has been moving more sideways recently.

Prime (25 to 54 Years Old) Participation

Since the overall participation rate has declined due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate decreased in May to 81.8%, and the 25 to 54 employment population ratio was unchanged at 79.2%. 

The participation rate had been trending down for this group since the late '90s, however, with more younger workers (and fewer 50+ age workers), the prime participation rate might move up some more.

Part Time for Economic Reasons 

From the BLS report:

"The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged at 4.9 million in May. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."

The number of persons working part time for economic reasons has been generally trending down, and the number decreased in May. The number working part time for economic reasons suggests a little slack still in the labor market. 

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 7.6% in May. This is the lowest level for U-6 since 2001.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more. 

According to the BLS, there are 1.189 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.293 million in April.

This is the lowest level since June 2007.

The headline jobs number was solid and the previous two months were revised up slightly. The headline unemployment rate dropped further, to 3.8%, and U-6 is the lowest since 2007. For the first five months of 2018, job growth has been solid averaging just over 200 thousand per month.

 -- via my feedly newsfeed