July

When noting the lengthy standing of the U.S. consumer sector, at close to 70% of the nation’s gross domestic product of goods and services over the last two decades, it should have called attention to the disparate nature of the current U.S. economy.

When America’s fast-growing economy, in the latter stages of the 20th century, indicated a consumer sector in the 40% range, this was considered a reasonable segment that was even then the world’s largest. But American GDP of $18 trillion plus, although impressive in its total, is far too heavily based on consumption. This is due in part to the past few U.S. Administrations being primarily sensitive to providing the American consumer with the cheapest prices the world had to offer.

What is now well known is that America’s largest corporations and conglomerates have focused on the world’s production that is either under their financial control, or available to them at cost prices, allowing for a substantial profit margin. This makes sense for such big business enterprises, since their stock market value is primarily predicated on their earnings.

The disparity of misspending by the federal government on the Environmental Protection Agency, Frank/Dodd regulations, and experimental “renewables,” while Congress had voted close to one trillion dollars to lift the U.S. economy out of the “great financial recession” doldrums, set the pattern of misspent expenditures for the next eight years.

It was also done at the expense of avoiding the nation’s badly-needed “infrastructure updating” and the closing up of American factories, that couldn’t meet foreign competition. This also resulted in nearly $2 trillion generated by American companies in foreign countries, allowing this to add to the U.S. debt, which has now climbed to nearly $20 trillion.

Although America’s advanced technology, unlimited national resources, and a residual manufacturing base continues to be reasonably productive, the $10 trillion debt generated by the Obama Administration is only a forerunner of the eventual downturn that a lack of directional change could impose on the nation’s future economy. At this time, no plans are afoot to keep this awesome debt from getting worse, and at higher future interest rates.

When Turkish voters elected to extend unlimited power to Recep Tayyip Erdogan on April 16, it ended (for now) the ups and downs of a country that had linked the Near East and Europe, ever since the uprising of the “Young Turks” in 1912.

While this event signaled the end of the mighty Ottoman Empire, which had reached its high water mark at the siege of Vienna, on September 11, 1683, its diminution had been consistent since then. The final straw of this downward disintegration was their alliance with the German and Austro-Hungarian Empires during the first World War.

As punishment by the Allies at the Versailles Peace Treaty, Turkey had been left with Thrace, a small vestige of European land, which was subsequently deeded to Greece, along with a substantial portion of Turkey’s mainland.

Only the leadership of modern Turkey’s Kemal Attaturk, who had stopped the British landing at Gallipoli during the war, and defeated the Greek army’s attempt to take over the “Versailles Peace Treaty’s” gift, kept Turkey intact throughout World War II, in a state of total neutrality.

With Mustapha Kemal as supreme dictator of modern Turkey, organizing the rebellions of the “1912" remnant to secularize Turkey into a modern nation, and resemble the Central European major nations, rather than the Islamic majority groupings of the Middle East.

Although the attempted extermination of the Christian Armenians during World War I, denied by the Turks to this very day, and an 80 million strong populace, including a 15% remnant of hostile “Kurds,” the Turks’ bloody military uprising of 1980 led to a decade-long supremacy of generals. They had jailed the same strongman that is now the undisputed dictator of Turkey.

While Erdogan had been accused of attempting to re-Islamicize the nation, he was responsible for economically strengthening a country receding into backwardness. The mid-April election, which has given him supreme power, now is totally under his control; after a “Putsch” attempt by a dissatisfied military group late last year that failed.

With the changing fluidity among the relationships of Russia, Iran, Hezbollah-controlled Lebanon, and their centerpiece Syria and Iraq, stirred up by the murderous ISIS caliphate, Erdogan is fortunate in reaching a budding relationship with President Trump; and a re-establishment of relations with Israel. Even Russia has shown no animosity toward Erdogan, despite the fact that one of its planes was shot down over Turkish territory.

But, since it’s still early in the game, expect Erdogan and his co-hosts to continue to be the shrewd “peace makers” in the middle, after taking in hundreds of thousands of Syrian refugees, and having to deal with a fractious Kurdish minority. How this all plays out will likely start being determined before 2017 ends.

The Trump Administration's aggressive confrontation with declared U.S. enemies in the Mideast, North Korea, and Afghanistan, has contributed to a slowdown in the top heavy economic objectives that President Trump had set for the first 100 days of his Administration.

This came to light in late April when, during President Trump's meeting with China's boss Xi Jinping, an offer was made by Trump to soften America's demand for more balanced export/import equality; in exchange for greater China pressure on North Korea's nuclear development threats.

In addition, the "super bomb" drop on a major Afghan "ISIS" center, and a "Tomahawk missile" devastation of a Syrian government airport, which had launched chemical "anti-rebel" attacks, indicated a bold U.S. Government concentration on growing foreign enemy animosity.

Simultaneously, the early thrust of "Obamacare removal," a major new national tax structure, along with a massive revision of EPA mandates, and stiffer Frank/Dodd elimination of business and bank regulatory restraint, slowed in their hoped-for thrust.

This, in turn, has halted the speed with which the U.S. economy rebounded, as was expected in the early part of the year. Together with a bolder rebuttal by a more leftist Democrat Party position on open borders and diminution of sanctuary cities, these indicated a widening gap between the two major political parties.

Such negative developments seem to have temporarily slowed the implementation of increasing jobs and a reversal of a 16-year stretch of factory closings.

Although President Trump has not revised his commitment to increased domestic employment, and returned production to the American homeland, it is doubtful that most of his first year objectives will be met. This combination of foreign military confrontations and a greater difficulty in engendering a major domestic agenda has caused the International Monetary Fund to lower U.S. economic expectations to a maximum increase from the 2016 gross domestic product of barely 2.5%. This had originally placed the U.S. growth as reaching close to 3% this year.

By mid-year, the major additional expenditures on industrial expansion and major hiring of additional manufacturing jobs appeared to "be in abeyance." This also had the additional effect of reducing the many multi-billion dollars of new loans that banks, and other financial institutions had been expecting to achieve.

Also, the slowing of import/export trade, the undetermined impact of major European elections, and the possibility of additional Eurocom member reduction weakened the high-flying dollar.

With this preponderance of slowdowns experienced by the fast-moving Trump expansion program, the first year of "Trumpism" will likely fall significantly short of what the President had hoped for.

When delving back into the inconceivable historic happenings of the last century, this critical date in 1914 stands out as the dramatic world change of modern times.

That was the day that Austrian Archduke Franz Ferdinand, and his wife Sofia were assassinated by Serbian Gavrilo Princip, an operative of the secretive “Black Hand” anti-Austrian rebel organization. That set in motion a number of world-shaking events that noone could have conceived of during the early years of the 20th century. Most immediately, it precipitated an ultimatum by “Austria-Hungary” to let Austrian troops into Serbia to dismember the “Black Hand” and execute Princip.

To understand the nature of world power at that time, one must view a world controlled by European Empires, whose colonial reach dominated most of the world of this period, with the exception of a far away United States, not yet considered a first-class leadership power.

The disproportionate rest of the world was controlled by the British, French, German, Russian, Austrian, and even Dutch East Indies, whose influence on all major continents was paramount. In the case of London, Berlin, and Moscow, this was abetted by the intermarriages of their extended royalties. As the Twentieth Century dawned, any disagreements between these major powers were expected to be settled like misunderstood family affairs.

The chain of events that followed the Austrian Archduke’s assassination could not be imagined by the most creative fictional novelist. The lightning-fact action during the rest of June, and into July, 1914 were as follows:

1) The Serbs were willing to give up the assassin, but rejected Austrian troops. They pleaded for help from Mother Russia, which committed support. This caused Austrian Emperor Franz Josef to plead assistance from Kaiser Wilhelm of Germany, who gave a “blank check” to his Viennese cousin to fend off Russian aggression. Moscow, upon being notified of this development, asked for the activation of the Russo-French Alliance, which Paris was only too happy to implement, given their desire to win back the Alsace/Lorraine Province, lost to Germany in a previous war.

Just two weeks later, the British jumped into this growing conflagration, as the Germans were executing the “Schlieffen Plan,” which required attacking France by marching through Belgium. Great Britain’s action was predicated on a “treaty of protection,” signed with Belgium years before.

This rapid acceleration of events between the major empires unleashed the “Guns of August,” and the multi-year stalemate that killed millions of troops and civilians on both sides before exhaustion by all belligerents terminated in the November 11, 1918 armistice; and the disintegration of the world that had previously existed.

Although the once mighty Turkish Ottoman Empire allied itself with Austria/Hungary and Germany, World War I resulted in an independent Turkish state, that won a mini-war with Greece, which had been awarded Turkey’s European holdings by the Allies’ post World War I peace treaty. Many historical experts believe that the rise of Hitler’s Germany, and the Second World War thereafter are still the ongoing results of that fateful day in 1914.

Thursday, 27 July 2017 00:13

IMF Warns Against Upcoming Tariff Wars

Written by

While the International Monetary Fund, which concerns itself with balanced support of the world’s nations, issued an optimistic outlook for all of 2017, it cautioned against the rising wave of protectionism, starting to sweep much of the developed world.

Although a positive outlook for world growth, primarily in the global emerging economies, indicated that the most solid-year since the 2011 end of the “great financial recession” was at hand, IMF managing director Christine LaGarde warned that a new wave of “protectionism” could scuttle what has started out as a promising “post-recession” comeback in 2017.

Although not singling out President Trump’s strong stand for stiff new tariffs, especially against products produced by American conglomerates with overseas low-cost locations, the IMF director focused on a new wave of international tariffs as the most negative aspect, underpinning the current global economic recovery.

The extreme version of such “populism” is often cited as the trigger that closed American ports, by activation of Congress’s Smoot-Hawley law implementation. This resulted in comparable reaction by other major world nations, which crushed world trade, and ushered in the Great Depression of the 1930's.

In a more favorable part of the IMF projection, India was at the top of the list with an all-time high gross domestic product increase of over 7.5%. China, whose economic growth has headed the list for years, dropped to the second spot, with a potential 6.5% increase, a sharp drop from 2016.

While the world as a whole is expected to exceed a 3% growth this year, the “emerging economies” are expected to exceed 4% for the first time since 2007.

The United States, committed to rebuilding its manufacturing base, is expected to reach a 2.25% level this year, over last, when it fell short of 2%. The European Community, with the loss of Great Britain, and possibly others, will face a meager 1.75% increase, as well as the “Brexit” United Kingdom and Japan downturns. Both indicate few economic growth aspects to engender optimistic 2017 outlooks.

While warnings of more severe binational trade restraints have been under discussion, no major decisions for implementation have as yet been reached.

As the second half of 2017 encompasses the end of the fiscal year on September 30, the IMF projected global economic growth of 3.4% this calendar year, and 3.26% in 2018, from 3.1% last year will have been verified, or found wanting.

Obviously, unexpected world events, not yet on the horizon, could impact current IMF projections. From an economic point of view, the most iffy factor may well be the sustenance or dereliction of the European Community of 27 nations, which represents a significant component of world trade and gross income.

While President Donald J. Trump’s major upset victory on last November 8 did much to undermine the veracity of the nation’s leading opinion polls, the recent political emergence of Christian Evangelism provides much of the unanswered question of Hillary Clinton’s political demise.

Although the “blue collar” worker states of Wisconsin, Michigan, Ohio and Pennsylvania’s fear of further job losses was attributed to the last-minute switches of these states, this is used as an excuse by both the media and the pollsters. But the reality is found in the unified outlook of foreign and domestic policies, followed by the overwhelming majority of the 65 million well-organized Evangelical churchgoers. They have been amazingly brought together by critical, global issues that are paramount in today’s national voting process for President, Senate, Congress, governors, and state legislators.

As with all dominant unifications that rise quickly and powerfully, these require a charismatic leader, who is able to bring diverse elements together, under religio/cultural beliefs. This has happened in the case of “Christian Evangelism,” whose powerful organizers have been the Reverend Jerry Falwell, followed by his son, Jerry, Jr., after his father’s untimely death 10 years ago . Having the privilege of becoming Jerry, Sr.’s intimate friend in the late 1970's, when he founded the Moral Majority, I was amazed by his total devotion to the “State of Israel, and Jews everywhere,” as a main staple of his published belief system.

As the founder of a major educational institution, Liberty University, in Lynchburg, Virginia, he preached unification with the “people of Jesus” and made that a commitment by the University’s graduates.

Even more amazingly, he was successful in reinforcing the Southern Baptists, the core of his movement, to love and respect Judaism, and especially, the “State of Israel.” In personal conversations with him over the 30 years of friendship, and supporting his religious unification efforts between the suspicious Baptists and the wary Jewish Community, I found him to be an incredible unification voice.

This is a position that has been adopted by the overwhelming majority of Christian Evangelists, whose overweening 86% vote for Trump was responsible for the GOP victory, that would likely have gone Democrat without Falwell’s success. His unified political stance in pro-Israel foreign policy, and a revival of sociological issues, helped to militate against the desecration of law and order, as well as all aspects of ultra-liberalism. These ideals are being effectively preached by thousands of pastors throughout the nation; especially in the increasing number of “swing states,” where Christian Evangelism is making the difference.

President Trump will be the first to admit that he could not have won without Jerry Falwell, Jr.’s blessing, which came early in his campaign. But what makes this more than 20% of American voters commit heavily in favor of the GOP, could have lasting consequences; as their geo-political, as well as strong religious stance, will weigh continuously even more heavily in future elections.

Of all the positive changes promised by the Trump Administration, the re-employment of millions of former U.S. workers, pushed to the sidelines by Obama’s climatology regulatory/anti-fossil fuel approach, may be headed off by a new anti-employment antagonist-technology.

While “Making American Great Again” focuses on bringing back manufacturing job opportunities, along with the “brick and mortar” of new factories, the biggest anti-employment cloud may well be the “high-technology” breakthrough. Just as the 1980's witnessed the lightning fast switch from printed matter to digital, the current decade is at the embryonic level of “tech-robotic” prominence.

While Jeff Bezos’ “Amazon,” and its assault on conventional retail, is already among the world’s leading corporations, it is only the forerunner of life changes that will affect all Americans, and many of those in the rest of the world.

Drone-delivered daily goods, driverless cars, and the “age of robots” may only be the forerunner of changes yet to come. It will certainly prove to be a major obstacle in putting the current millions of unemployed back to work.

The hundreds of thousands, if not millions, that manned the automotive assembly lines of yesteryear will not be coming back. In fact, bringing back low-cost goods from around the world to the U.S. will have to compete with America’s internal “revolution,” that will make “hands-on” employment even more difficult to come by.

Consequently, the current Trump Administration will have to concentrate on the utilization of steering its “manpower growth” into “job arenas” that will fit into the technological world that is awaiting the sophisticated manufacturing sector in the new era now underway.

This is already startng with the realistic brain-trust that President Trump has assembled to develop training programs preparing potential employees for the new mechanical world. It’s a lesson that has been practiced by China, which has realistically steered the world’s largest population into “segments of future potential,” rather than reinventing past practices.

That is why China, under its current “XI-Jinping” ironclad dictatorship is rapidly closing the gross domestic growth gap (GDP) with the U.S., despite a population that is 4.5 times the size of its American counterpart.

As these aforementioned changes continue on a dizzying path, America’s ability to accept such future developments realistically, will determine whether the U.S. will have emerged from the economic downward spiral of the past 16 years.

While President Trump’s shopping list of economic initiatives will attempt to undo the U.S. economic downward slump of the past eight years, the onerous weight of a $20 trillion Treasury debt could scuttle the positive initiatives now afoot.

Ironically, the Obama $10 trillion of debt, that doubled the rest of all previous 43 Presidents’
accumulated Treasury debt, was prevented from ruining the U.S. economy; since it was coincident with the span of the lowest interest rates the nation has ever faced in modern times.

Unfortunately, the Obama presidency engendered an unparalleled reduction of manufacturing jobs, closing of factories, and the indefinite postponement of an overdue national infrastructure. Therefore, much of the trillions available to the Obama Administration was utilized for Medicaid, and various unemployment programs. These prevented a major employment deflation from becoming an undue economic weight on America’s near 330 million population. In fact, the resultant lower prices were appreciated by much of the nation’s all-time high consumer sector.

While President Donald J. Trump is attempting to “right” the listing ship of state, by a combination of executive orders, de-regulation, more equitable trade deals, and an up-to-date tax structure, this will be faced with increasing interest rates, that will likely double, if Trump is reelected for another four years in 2020.

The heavy “shopping list” that the Trump Administration is attempting will likely face the headwinds of strong interest rate increases. These will make the Trump years much more expensive for the American public. This factor is just the opposite of the post-Jimmy Carter years of Ronald Reagan, which faced many of the headwinds that President Trump is attempting to soften.

But where President Ronald Reagan’s post-Carter years featured a dramatic decline from all-time high inflation, Trump’s burden will largely be compounded by the previously mentioned re-inflation. This is surely waiting in the wings.

While predecessor Obama’s oppressive added regulations, and indiscriminate climatological and production-reducing inhibitions have kept new economic recession at bay, President Trump will have to reset his most optimistic objectives; as both domestic and foreign policy problems pile up on him.

This reverse from the “rags to riches” of the Reagan years, and the ten trillion dollar bequest to keep unemployment disaster from sinking the concurrent eight-year ship of state during the Obama Administration, will make the Trump leadership the most difficult task ever attempted.

The reallty of a prospective 1500 mile wall separating America’s southern borders from illegal penetration by Mexicans and Central Americans crossing into the U.S. without fulfilling the legal process of immigration, would become increasingly counterproductive. Here are the reasons:

  1. Such a formidable wall would permanently stand as a reminder that Mexicans and other Latinos “sneaking” into the U.S. are not there to support America’s economic growth, but represent a potential danger to the American nation’s security and well-being.
  2. This mighty wall would further physically emphasize the belief that such massive intrusion from the South would present the U.S. with increasingly counterproductive consequences. While presenting a physical monument to further “Southern invasion,” it would generally depict Mexicans and other Latin Americans as an unwanted addition to a fast-growing U.S. population that already encompasses Mexican-Americans as a sizable productive population addition.
  3. Despite the problem of successive Mexican six-year presidencies, unable to cope with corruption and mismanagement at the highest levels, the U.S. southern neighbor has aggregated a gross domestic product well in excess of over one trillion dollars, and a substantial annual increased growth, based on the nation’s strong work ethic, represented by its varied businesses’ value added.
  4. The main flaw emanating from south of the border, is the criminal element that controls one of the world’s worst and largest drug cartels. But that is more the result of demand by such a counterproductive trend. This broke out in earnest after the ill-fated U.S./Indo-China civil war intervention of the 1960's and early 1970's, creating a dissolute younger generation.
  5. While America’s Asiatic minority will surpass that of Latinos in its growth position in future years, a “Mexican wall” would be a constant reminder of the “undesirability” of those breaching America’s southern borders.

It should be emphasized that much of the disorder blamed on the illegality of our good neighbors from the South has been encouraged by “sanctuary cities,” and states, which have encouraged unconstitutional “extra-legal” behavior by any and all flocking into the U.S., no matter what may be a previous criminal background.

Hopefully, a stronger U.S. government, carrying out its legal responsibility by eliminating the unconstitutional incitement of “sanctuaries,” and maintaining a well-manned staff of ICE operatives, along both North and South American borders, will obviate the necessity of a permanent wall.

With the end of the Russo/US Cold War in 1990, and the rise of Vladimir Putin as a more conventional dictator, not espousing any particular “isms,” Putin’s strategy resembles that of the “tsars,” like Peter the Great, centuries ago. Their objectives were based on replacing the Islamic Ottoman Empire, by dominating Eastern Europe and opening the Mediterranean to Russian influence. The basis for this new/old Russian strategy is best manifested by three major factors so far:

  1. Faced with Gorbachev’s strategic mistake of divesting Ukraine, Belarus, the Caucasus, and several Islamic Republics in ending the Soviet Union, Putin has retaken the Crimea, threatened Eastern Ukraine and Georgia, as well as Russian-peopled Estonia. Russia’s growing military power is back on the march.
  2. While the Soviet Union’s former Poland, the Baltic and Balkan satellites, as well as East Germany are no longer under Soviet influence, Russia’s widespread matrix of oil and natural gas pipelines continues to exert economic pressure.
  3. The establishment of Russian Mediterranean naval bases in Syria, Latakia and Tarsus have given Putin’s Russia a “warm water” outlet, never before accomplished, even by the medieval tsars.

Putin’s current strategy of exerting influence over Iran, Syria, and diminished Iraq, plus terrorist-controlled Lebanon have now laid the groundwork of a new “East-West” confrontation with the U.S., and its Sunni Arab allies, as well as Saudi Arabia and Egypt.

In effect, this has also taken pressure away from Israel. That nation no longer has to fear a united militant Arab/Islamic front. However, new international dangers are abounding:

With Trump-led USA discarding the Obama-esque appeasement tactics, a showdown with a Russian-backed Iran is sure to manifest itself. At the very least, this will require U.S. money, material, and military advisers to stand up against the ruthless attacks sure to be unleashed by the Russo/Iranian/Syria cabal, and its declared expanded political control.

This will feature a unique defensive combination of Saudi Arabia,, Egypt, and Israel ready to stand up against the Russo/Iranian/Hezbollah combination prepared to extend its mischief throughout the oil-rich Middle East.

With the U.S., and its now newfound energy independence supporting its Mideast allies, the upcoming antagonism will find neither side with the ability to use energy sources as a serious economic weapon, against the other. However, peace and tranquility in the Mideast seem to be more distant than ever, with a tinderbox of fiery clashes ready to break out at any time.

With the global shipyard business experiencing a multi-year drought, ship owners and builders, alike, are putting their hopes on an anticipated surge in future substantial natural gas shipment expansion.

With shipbuilders cutting more than 20,000 jobs in the last year alone, future natural gas, plus West Texas Intermediate oil shipments are indicating a turnaround in 2018, and thereafter. Contracts for vessels to transport liquified natural gas are picking up amid an absence of shale gas in the U.S. Also increasingly stringent global curbs on pollution are pushing utilities and transportation operators even harder toward clean burning fuel, wherever it is located.

Liquid natural gas (LNG) is made by cooling natural gas until it becomes a liquid. This can be carried over long distances in specially built ships with insulated tanks. Annual global LNG production capacity is expected to increase 39%, to 377 million tons by 2019, from 272 million tons last year. Shipments of LNG could rise as much as 5% a year from 2015 to 2030, according to Royal Dutch Shell PLC estimates.

To move such mountains of fuel will necessitate 180 more vessels. This would benefit shipbuilders with LNG expertise, according to experts. This means that segment will benefit substantially from orders to be expected as early as the middle of this year’s third quarter.

Asia is the largest destination for LNG, with much of it bound for China and India. China’s gas demand is expected to more than double to 450 billion cubic meters, by 2030, according to Shell’s LNG outlook. Earlier this year, China said it plans to halt, delay, or eliminate 50 gigawatts of coal-fired powered projects, as part of its move to clean the smog-choking cities from Beijing to Xi’an.

The world’s three biggest shipyards, all based in South Korea, control as much as 80% of the LNG tanker market. But the entire industry will benefit substantially from this growing demand of natural gas. This couldn’t come at a more propitious time for South Korean shipyards that have had to cut back production and slash employment. In a sense, the upcoming wave of incoming orders, expected soon, could be lifesavers for some of the most concentrated shipyards in the world.

To them, the anticipated tidal wave of orders are coming at a time when access to staying in business and maintaining access to debt coverage, will depend on such orders manifest before the end of the year.

Page 1 of 3