(Disappearing) American Mall, the Video Game

♠ Posted by Emmanuel in at 2/18/2018 01:48:00 PM

Like (I hope) the IPE Zone blog itself, there's an amusingly droll American Mall video game developed by, of all people, Bloomberg. With consumer spending constituting the lion's share of economic output in most countries, the fate of the shopping mall format is of considerable political-economic interest. The anchor department store...the food court...the originators of these retail concepts are American through and through. Having created it, the Americans are now at the cutting edge of retail evolution in moving away from the mall in a big way. What will it hold for retail in other countries?

It's hard to tell what will happen elsewhere. Among other things, there's less of a glut of retail floor space in other countries as well as the emergence of the mall as something more than a "shopping" destination. For instance, in the highly Catholic Philippines, its largest mall features regular church services.

At any rate, enjoy the video game. It's even developed something of a following online:
Average gamers are playing about 4 minutes per session, though it’s topped one hour for some. And, for now, this is the only game in town for Bloomberg.com, but it is its most ambitious storytelling to date. (The site built The Trading Game, about picking stocks, two years ago.) The highest scorers are those who keep the mall open the longest, as of this writing more than 2,000 days. 

China's (Stock) Plunge Protection Team Rides Again

♠ Posted by Emmanuel in at 2/12/2018 02:16:00 PM
When the guy on the left is on the loose in stock markets, you need the guy on the right. Right?
Well this is rich: The People's Republic of China has been fighting the United States and the European Union at the World Trade Organization over still being designated as a "non-market economy," implying that state intervention matters a lot more in the PRC relative to allowing market forces to work things out. At the same time, Chinese officialdom appears to be doing all sorts of actions that contradict laissez-faire economic governance necessary to improve its designation.

Just as the recent US-led stock crash has laid low stock markets around the world, Chinese powers-that-be have mounted an aggressive defense of PRC-listed stocks. Demonstrating rather "non-market economy" phenomena, it's been "encouraging" [read: do it or suffer all sorts of consequences] large shareholders to buoy their stock holdings:
An affiliate of China’s securities regulator on Monday encouraged major shareholders of domestically-listed firms to increase their holdings, after Chinese stocks were mauled in a global sell-off last week.

The call represents the clearest signal yet from the Chinese government to lend support to a market rocked by recent global volatility, China’s deleveraging campaign and fears of margin calls. It also stirs memories of government intervention during China’s 2015 stock market crash, when companies were also urged to buy shares and state-backed funds were pumped into the market.

China Securities Investor Services Center, directly managed by the China Securities Regulatory Commission (CSRC), said in an emailed statement that share purchases by major shareholders could help stabilize the market and shows big shareholders stick with retail investors “through thick and thin”.
Hence, China's equivalent of the plunge protection team rides again. The ploy is designed to boost confidence among mom-and-pop investors riding through a fairly turbulent patch at the moment:
Such a practice would “bring confidence to small investors, and have a positive impact” on the market, the center said, encouraging major shareholders and senior executives of listed companies to increase shares if they have not yet done so. Chinese stocks fell nearly 10 percent last week, the worst weekly performance in two years as investors dumped shares across the board.
China's leadership is very keen on appearances, so it's no surprise that the last time their plunge protection was at it was during last year's run-up to the Communist Party Congress.

These guys run a "non-market economy." Nuff said.

UPDATE: Note that the media designation of those buoying PRC stocks in actually the "national team" as opposed to the American "plunge protection team." Regardless, the objective for either is the same. 

Canada's Trudeau: To Save NAFTA, Avoid Trump

♠ Posted by Emmanuel in , at 2/12/2018 01:57:00 PM
Trudeau's ploy to save NAFTA consists of going around Trump.
If there ever was a misleadingly titled article, consider this one from Bloomberg on Canadian PM Justin Trudeau seeing a "clear path forward" on NAFTA. You see, the path he's taken is to largely bypass the Americans actually responsible for (re)negotiating trade deals, namely Trump and his trade representative Robert Lighthizer. Instead, Trudeau has taken his case directly to [a] representatives whose constituents will lose out from NAFTA's demise and [b] companies presumably with strong lobbying arms who would also be negatively affected:
Trudeau’s government has been attempting to win support from U.S. lawmakers and businesses to keep Trump from pulling out of the North American Free Trade Agreement, as he’s repeatedly threatened to do. Canadian efforts also come amid signs U.S. Trade Representative Robert Lighthizer is growing more frustrated with the country.

“There is a clear path forward and we’re working very hard together on that path,” Trudeau said Saturday in Los Angeles. He spoke alongside Mayor Eric Garcetti, one of many prominent Democrats he met with. Canada wants to “ensure that we can move forward in a way that is a win-win for all of us.”

Garcetti hailed Canadian investment in his city and said Trudeau’s trip was well-received. “This is deeply important work the prime minister is doing.”
Canada's NAFTA game plan was already spelled out sometime ago. If anything, this is not a "clear path forward" for a number of reasons. First, as I've mentioned, Trudeau's path appears more circuitous than direct through bypassing the formal counterparties to the NAFTA re(negotiations)--Trump, Lighthizer, and others in the executive branch. So, he's trying to raise support in a roundabout manner even if you can argue that Trudeau is actually appealing to those with a greater stake here--namely, NAFTA-participating regions and companies.

Second, despite me and many other trade commentators believing that only the US Congress can undo NAFTA having put in into effect, there is no guarantee that [i] Trump will not try to get out of the deal single-handedly if talks do not yield progress and [ii] Congress can successfully overrule Trump if he does announce the US is leaving NAFTA.

Trudeau acknowledges as much. From his Grand Tour of America:
At the University of Chicago on Feb. 7, Trudeau said he was “legitimately concerned about the future of Nafta...” Friday in Los Angeles, Trudeau warned he didn’t “think anyone can now entirely predict or understand” the impacts on the three countries if Nafta were to end.
To be fair, Trudeau's administration has just filed an unprecedented Pretty Much Everyone Else vs. USA case at the WTO that has soured trade relations between the two countries. For WTO cases, you typically argue for your own trade interests, not for everyone's against some big, bad country. If Trump's trade negotiators like inserting "poison pills" during ongoing NAFTA talks, then Canada's shoving some pretty unsavory stuff down US throats, too, at the WTO.

Ultimately, I don't think Trudeau buys that the path forward is clear, either.

Will Trump Ramp Up Trade War Post-Stock Crash?

♠ Posted by Emmanuel in , at 2/07/2018 03:45:00 PM
Being a disordered personality of the first order, Trump has acted as a cheereleader for both rising stock valuations and trade protectionism despite the latter being anathema to the former in the opinion of most conventional businesspersons. Insofar as American businesses with operations abroad favor a relatively open and predictable environment for international trade, further moves Trump makes to antagonize the United States' trade partners may make stocks drop even further than they have in recent days.

Speaking of which, Trump's minders (babysitters for us critics) have been able to hold protectionist policies--if not necessarily rhetoric--in check by precisely making the argument that outsized stock market gains until relatively recently have been made possible by not erecting more trade barriers. The problem is that with the stock market now tanking, it is harder to make the argument that rising stock markets and trade openness go together. Axios' Jonathan Swan writes:
  • One of the strongest arguments Gary Cohn and Steven Mnuchin have been making to Trump to persuade him not to blow up NAFTA or take hardline protectionist trade actions is 'Mr. President, the economy is booming and the stock market is setting records under your leadership. Why would you risk that with these trade actions?'"
  • "My question: if they no longer have that argument, what else do they have in their quivers to persuade Trump not to follow his most hardline instincts on trade?
Also keep in mind that, in contrast to Trump's campaign promises to reduce to the US trade deficit, it's been exploding as of late, and we can only expect it to rise further due to recent tax cuts passed that will further increase the US budget deficit and put even greater upward pressure on the external deficit:
The U.S. trade deficit jumped to the highest level in nine years, according to a Department of Commerce report on Tuesday. Despite President Donald Trump’s repeated promise to shrink trade deficits, it rose 12.1% to $566 billion during his first year in office and leaped 5.1% in December alone. 

And this may be just the beginning of an upward trend following Trump’s tax cuts, according to economists. Derek Scissors, resident scholar at American Enterprise Institute calculates the tax cuts may boost the trade deficit by $200 billion. A BofA Merrill Lynch Global Research report also expects the share of the trade deficit in GDP to grow 0.2 percentage points by 2020.
So, if Trump no longer buys the argument that stock market will do well because of avoiding trade protectionism that upsets the status quo, what happens? It might set the stage for more protectionism over the coming months:
The Trump administration is working on trade measures that will make the recent tariffs on solar panels and washing machines look minor by comparison. At best, these potential measures could protect the U.S. from unfair foreign competition. At worst, they could ignite trade wars that end up harming everyone.

China in particular is in Trump’s crosshairs and might well fight back against any effort to restrict its exports. “I have been told by certain officials that yes, definitely, there will be retaliation” from China if the U.S. slaps new tariffs on Chinese-made products, William Zarit, chairman of the American Chamber of Commerce in China, said at a briefing in Beijing on Jan. 30.
Couple a falling stock market with a soaring trade deficit under Trump and, however misguided his ideas are about their causes, expect the blustering fellow to make even harder moves against trade openness through China-aimed sanctions and the like.

Watch Out: 2018's World Economy Resembles 2007’s

♠ Posted by Emmanuel in at 1/27/2018 04:59:00 PM

When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing - Former Citibank CEO Charles Prince (2007)

At Davos, Barclays CEO Jes Staley expressed something that's been on my mind as of late: the world economy circa early 2018 sure looks a lot like the pre-subprime crisis / global financial crisis one. I'd even go one step further with this comparison: instead of looking like 2006, the world economy looks more like that closer to the eve of that cataclysmic event of a decade ago. Prior to the aforesaid event, there was some doubt as to whether a United States whose share of global economic activity is declining still mattered. After a localized problem in the US housing industry eventually led to problems in the broader world economy, this debate is a largely settled one: America still matters.

In this light, let us consider how the United States is doing at the current time and what its economic conditions mean for the rest of the world economy.  From the exuberance exhibited by many market participants, things are going swimmingly and may do so for the next 11 years or so. Like Charles Prince in 2007, people are in full party mode in 2018. Dance, dance, dance. It's a "nonstop euphoric cabaret." Have things improved significantly since then in its largest economy? And, have global economic imbalances righted themselves since then as to no longer pose a threat? The subtitle of this blog aside, I have strong doubts. Let us consider eight indications that matters haven't really improved:

I. A High and Rising Budget Deficit

Before Trump's election, forecasts for the United States' fiscal situation were already looking dire due to foregoing health and pensions obligations of an aging society (the so-called "mandatory" spending). Although some debate surrounds whether or not Trump's recently-passed tax cuts will boost economic growth--I have strong misgivings--the consensus is that it will only increase the United States' debt pile.

Actually, the 2001 and 2003 Bush-era tax cuts were made at a time when the US fiscal outlook was not as dire. From 1998 to 2001, the Clinton-era budget surpluses suggested that the country could begin reducing its national debt going forward, but we know what's happened since then. The difference with the Trump-era legislation is not so much its content--more of (unfunded) tax cuts absent tax reform--but its timing. Amid a worsening fiscal picture instead of an improved one largely inherited by George W. Bush, the Republican Party made a bad situation worse.

II. A High and Rising External Deficit

Dick Cheney famously said that "deficits don't matter." Despite alluding that these deficits do matter during his inaugural address, Trump has actually not done anything substantial to correct these deficits. (Starting trade wars doesn't count.) With regard to America's external deficit, it's actually become worse under Trump. Even if he continually bemoans how little the US exports relative to what it imports, they're, er, doing even more of the latter as of late.

In part, it's due to Trump not having any grasp of basic international economics. By worsening the United States' fiscal position, further government dissavings should, all else equal, result in a widening current account deficit. The most recent US trade deficit illustrates this phenomenon neatly. It's been rising as of late, with the goods deficit reaching $70B in November 2017 and a towering $71.6B in December 2017. From 2005 to 2008, the United States ran trade deficits larger than $700B annually, including services. To be fair, the US is running larger services surpluses nowadays than in 2005-2008. Even if the overall trade deficit is smaller relative to GDP as a result, the overall trajectory is the same: onward and upwards.

III. A Plummeting Dollar

Can you believe that Bush 42 officials actually stuck to "strong dollar" policy shtick? The combination of high and rising budget and external deficits would have been consistent with a weaker dollar, and that's what actually happened way back when the Euro reached higher than $1.50. Nowadays, of course, America's finance guy doesn't even bother with the pretense of having a "strong dollar" policy. Still, rhetoric matters less than actual policy, and the same dollar-toxic combination is very much in evidence.

Just as in 2008, the dollar is going where economic theory suggests it should--downwards. (Note that others also highlight increased global capital flows as a reason for dollar weakness. That the dollar strengthened in the wake of the global financial crisis is consistent with this interpretation.)

IV. A Rising Oil Price 

Since oil is denominated in dollars, demand for its should increase as the currency depreciates and others can buy more of the stuff for less with their respective currencies. The average price of a barrel of oil averaged over $100 in 2008; this time frame is one of continually rising oil prices as well vis-a-vis a plummeting dollar. It's not so much that high oil prices "caused" a global financial crisis, it's that it fits in with the current pattern of the world economy circa early 2018. That is, commodity prices are being buoyed by a weak greenback.

V. A Soaring Stock Market

Many adopted a sanguine outlook on asset valuations--like equity shares--during a time when the United States had the aforementioned high and rising twin deficits as well as a weak dollar. The premise of this exuberance largely resembles that of a decade ago. In fact, the then-US Treasury secretary cited global conditions that were better than ever right before things headed south:
Just how red-hot is the current worldwide expansion? "This is far and away the strongest global economy I've seen in my business lifetime," U.S. Treasury Secretary Hank Paulson declared on a recent visit to Fortune's offices [July 12, 2007; my emphases].
Maybe deficits don't matter. Maybe economic fundamentals don't matter, either. Just be mindful though of when folks were last saying the same sorts of things.

VI. A Movement Towards Financial Market Deregulation

Despite savaging bankers during his campaign, Trump has been as friendly to banks as you could possibly imagine, from cutting their taxes drastically to beginning to roll back crisis-era regulations meant to lower the possibility of another global financial crisis. With the pro-regulation Janet Yellen out of the way, the stage is set for further rollbacks on regulations set by the Federal Reserve.

VII. Dissavings-Fueled Household Consumption
In a truly "healthy" economy, additional household spending is funded by additional earnings. People spend more because they earn more. However, what if much of this spending is the result of dissavings? Obviously, there is an ultimate floor here since folks cannot deplete their savings forever to spend. In the run-up to the crisis, household savings were razor-thin, even becoming negative during some months. Is the story any different in 2018? I am afraid that it's not. The savings rate Stateside has just fallen to its third-lowest on record:
Overall, economic growth climbed by 2.6 percent on a quarterly basis at the end of 2018, data released Friday showed. The expansion was driven in large part by personal consumption, which picked up substantially in the fourth quarter -- a move that came as the savings rate slumped to 2.6 percent as a share of disposable income, its third-lowest on record.
Around 70% of American GDP is composed of consumer spending. If increases in consumer spending as of late have been driven by dissavings--other commentators note that the amount of increases in consumer spending has been approximately matched by falls in savings--then household consumption will inevitably fall back absent real income growth to continue elevated spending levels.

VIII. Growing Household Indebtedness

The last piece of the puzzle is overall household indebtedness. To no one's surprise, the United States' total household debt has eclipsed its pre-financial-crisis era highs reached in the third quarter of 2008. To be sure, the form of debt is rather different this time around: instead of housing loans during the subprime mess, the worrisome components this time around are student loans, auto loans, and credit card debt to a lesser extent. The intuition, however, is the same: monies going towards servicing these debts reduces disposable income in a consumer-driven economy. So, as these debt levels rise even further, consumer spending would be expected to take a concomitant hit.
---

One saying is that something unsustainable has to, by definition, stop. Another saying goes the higher they rise, the more they have to fall. I have a bad feeling we're about to reach the sudden stop, and that the higher people push things without justification, then the dislocations that will result from returning asset valuations and the rest back to more reasonable levels will be larger.

It's hard to say that it's *only* a US phenomena here insofar as (1) the rest of the world is still funding American profligacy and (2) the rest of the world still relies on the United States as the consumer of last resort. Colloquially speaking, what happens economically in America does not stay in America. In all these respects, the world economy today is similar to the pre-crisis one, and sensible sorts will at least take caution in its possible implications.

1/30 UPDATE: The US household savings rate keeps dropping. For December 2017, it's reported to have fallen further to 2.4%. I really do worry about how America's fate often has negative implications for the rest for the world.

1/31 UPDATE: Also see this summary of risk factors identified by the World Economic forum. Many are similar to those identified above. 

It's About Time: US Admits Weak Dollar Policy

♠ Posted by Emmanuel in at 1/24/2018 05:52:00 PM

A suitably Lilliputian currency c/o the Munchkin [sic] man.
OK, OK so it's Steven Mnuchin, not Steven Munchkin. However, this unfortunate naming semblance is rather appropriate for a United States rapidly receding in influence in the international political economy. Since the time of Robert Rubin as Treasury secretary--when Bill Clinton was president--it's been customary for US officials to proclaim how their country pursued a "strong dollar policy." Sure, some treasury honchos have been more reserved in saying it. Regardless of how various aspects policies affecting the dollar's value--fiscal, monetary and trade policy among other things--went, though, it was never refuted outright despite the greenbacks mixed fortunes since 1995:
Since August 1995, the strong-dollar policy has consisted exclusively of periodic statements by government officials — mainly the Secretary of the Treasury, occasionally the Chairman of the Fed — insisting that the US continues to pursue a strong-dollar policy.
I suppose it was only a matter of time before we encountered a US Treasury Secretary explicitly espousing a weak dollar policy. Trump is profoundly unconcerned about foreigners, so it's his secretary who's now admitted to outright screwing over those holding US currency in a rather glib manner. At Davos, then, meet the Munchkin man...er, I mean Mnuchin:
A day before Trump’s scheduled arrival in the Swiss ski resort of Davos for the World Economic Forum’s annual meeting, Treasury Secretary Steven Mnuchin endorsed the dollar’s decline as a benefit to the American economy and Commerce Secretary Wilbur Ross said the U.S. would fight harder to protect its exporters.

"Obviously a weaker dollar is good for us as it relates to trade and opportunities,” Mnuchin told reporters in Davos. The currency’s short term value is "not a concern of ours at all,” he said. "Longer term, the strength of the dollar is a reflection of the strength of the U.S. economy and the fact that it is and will continue to be the primary currency in terms of the reserve currency," he said.

The greenback, extending its 2018 slide after Mnuchin spoke, is now at its lowest in three years as measured by the Bloomberg Dollar Index. Investors have sold the currency in part because of concern over Trump’s protectionist push highlighted by this week’s slapping of tariffs on solar panels and washing machines.
This verbal intervention on Mnuchin's part is unlikely to make others happy, especially if "America First" involves pushing the dollar down in an act of competitive devaluation. If the United States has actually been pursuing the opposite "weak dollar" policy for a long time, it's only now that the pretense has been so brutally dispensed with.

We're really, really far from Robert Rubin now, not only in temporal terms but also the ability of the United States' money man to inspire investor confidence in the dollar, which was already waning before the Munchkin Man delivered the coup de grace. Sure, debasing your currency may lead to short-term gain, but a country as heavily indebted as the United States should really be more concerned about how such gimmickry will affect others' willingness to buy and hold dollar-denominated assets in the longer term.

How Will China Retaliate Against US Trade Penalties?

♠ Posted by Emmanuel in , at 1/23/2018 04:57:00 PM
Here are the washing machine tariffs just imposed by Trump.
Together with the rest of the world, I've long been waiting for the real Donald Trump--as his Twitter handle describes--to show up in the international trade arena. There is much on his plate at the start of 2018, from deciding of courses of action to take on the dumping of several products as well as determining the future of US trade agreements like NAFTA and the Korea-US Free Trade Agreement (NAFTA)--both of which are under discussion with American counterparts.

On Monday, we got our first installment of the trade-hating Trump as the US Trade Representative (USTR) unveiled fairly substantial tariffs on imported goods US manufacturers made complaints about--namely, solar cells and washing machines. Tariff rates of up to 50% are nothing to sneeze at. To be sure, these are not exclusively China-exported goods. Other affected countries like Mexico and South Korea are expressing discontent. (Quite a few Korean-brand washing machines made in Mexico are destined for the US market.) Actually, China is not among the largest exporters to America of washing machines. That said, trade observers have little doubt which country was in the USTR's crosshairs when announcing these tariffs to stop a "surge" of dastardly imports:
The Chinese Commerce Ministry on Tuesday expressed "strong dissatisfaction" over the move, saying it "aggravates the global trade environment."

The tariff of 30% on foreign solar panels is a blow for China, the world's biggest supplier of the products. Beijing has been widely accused of heavily subsidizing its domestic solar industry and flooding global markets with cheap panels...

The Chinese Commerce Ministry called the U.S. process that led to the tariffs "an abuse" of the trade measures available to the Trump administration. In its investigations, the U.S. International Trade Commission determined that imports of solar panels and washers had hurt American companies.
Once more, consider the loaded term "trade war." To correctly be described as such, we need a couple of things to happen. First, there needs to be tit-for-tat retaliatory action by the concerned parties. So, how can China get back at America? Let's just say there are countless ways, beginning with actions on US goods as the obvious targets:
China hasn’t been shy about threatening U.S. corporate interests. A Communist Party newspaper warned in late 2016 that a trade war would have economic consequences. "Boeing orders will be replaced by Airbus," the Global Times said in an editorial. "U.S. auto and iPhone sales in China will suffer a setback, and U.S. soybean and maize imports will be halted."

The list of primary targets include U.S. exports to China of airplanes by Boeing Co., Apple Inc. products and soybean, says Michael Every, head of financial market research at Rabobank Group in Hong Kong.

"Chinese think-tanks are likely scrambling to identify the industries in the President’s support base that will lose out the most should it come down to a bare-knuckle fight," says Pauline Loong, managing director at research firm Asia-Analytica in Hong Kong. Boeing, the largest U.S. exporter, has long been a key bellwether for trade relations. Xi gave Boeing a $38 billion order on a 2015 plant visit in Seattle.
Keep in mind that many of the buyers of American goods are inevitably state-owned enterprises given their sheer number and centrality in China's economy. Additionally, even privately-owned Chinese firms can be leaned on more readily by the authorities to stick to the party line on not complaining about retaliatory actions pursued by the government even if these actions go against private firms' economic fortunes.

Another way China can go about exacting punishment that Western observers haven't talked about by and large is to discourage Chinese tourists from visiting your country. See the case of South Korea and China's displeasure over it deploying American-made missile defense systems (THAAD).
Out of those nearly 76 million foreign visitors to the US in 2016, fully half came from Canada and Mexico. China accounted for just 3 million. But then look at the spending: those Chinese tourists spent US$33 billion – almost as much as Canadians and Mexicans combined.

If the 3 million Chinese who visited the US in 2016 spent US$33 billion, the arithmetic is clear: for every 1 million Chinese that choose not to travel to the US, but to travel elsewhere, that implies a US$11 billion annual loss in tourism revenue to the US economy.
The Chinese can easily pick and choose how to retaliate against American--or, perhaps more accurately, Trumpian--protectionism. My impression is that the Chinese are shrewd rather than stupid; they know which industries to target to get back the most at Trump voters to inflict maximum pain on the person they consider their chief antagonist here. The excuses for taking action are many, but (public) safety has been a perennial PRC favorite, especially for food imports. Failing to comply with PRC licensing requirements is another.

The tourism route is particularly interesting since service exports like it are where the United States has a surplus to help make up for its chronic goods deficit. A benefit of running a state where firms are more mindful of the will of the state is that trade measures are more easily facilitated. So, the Chinese authorities could easily pressure package tour operators like the case of South Korea into getting rid of the US as a travel destination.

It's really up to the United States how much farther they want to ratchet up this trade skirmish, with Trump's decision on other products pending like steel and aluminum which are being considered on "national security" grounds.

The US has mounted its opening attack and established its positions. Meanwhile, the Chinese are monitoring how far the Yanks will go before deciding how to push the foreign devils back. In trade war as in conventional war, I am afraid there are no real "victors."

Captain Caveman Meets Jetsons? Trump@Davos

♠ Posted by Emmanuel in , at 1/21/2018 12:13:00 PM
Unga bunga...build the wall...it's all the same.
A few days ago--before the US government shutdown became inevitable at least--Donald Trump was announced as an attendee at the annual Davos shindig of global movers and shakers. Obviously, the leader of the world's wealthiest country hobnobbing with the elites of this world makes sense. However, once you factor in the attitudes and behaviors of Trump, things become rather more interesting. What exactly do Trump and Malala Yousafzai have in common...except that he'd want to ban the Muslim woman from America like all the rest?

In most ways, Trump espouses views opposite of the cosmopolitan (the proper Bannonite-Trumpist insult is "globalist") Davos crowd: Trump is parochial instead of global in his outlook on politics and economics as well as bigoted instead of multiracial in terms of cultural disposition. His social attitudes are, of course, also decidedly prehistoric in championing white, male supremacy on a regular basis. If you grew up watching Hanna-Barbera cartoons, you will know exactly what I mean when I say Trump is Captain Caveman to the regular Davos attendees who are--or at least claim to be--more progressive like the futuristic Jetsons.

So this is the setup we have for Trump attending Davos--or at least until the government shutdown put some uncertainty as to his attendance:

Donald Trump was set to be the first U.S. president to attend the World Economic Forum in Davos, Switzerland, in nearly two decades, but the government shutdown might have scrambled those plans. White House budget chief Mick Mulvaney said Saturday that Trump's plans to travel to Davos next week are up in the air while Congress scrambles to strike a deal to fund the federal government."We're taking Davos, from the president's perspective and the Cabinet's perspective, on a day-by-day basis," Mulvaney told reporters during an impromptu briefing.
With a theme of "Creating a Shared Future in a Fractured World" [this is too funny for an event Trump will attend], this year's event would certainly generate considerably more interest from the attendance of the person doing more than his fair share of the fracturing by withdrawing from or threatening to withdraw from any number of trade arrangements; denying the shared menace of climate change; proposing to wall off the United States from foreigners; and generally withdrawing his country from institutions of global governance.

Old school European internationalists are also set to attend to counteract Trumpism. I believe that this part is the interesting one since Trump's absence would given them sole voice, albeit at an event that US audiences usually ignore:
European leaders will be out in force at the World Economic Forum in Davos this week to defend multilateralism before U.S. President Donald Trump arrives to deliver his “America First” message...

The charge will be led by French President Emmanuel Macron, the new star of European politics, who in an audacious move, has invited many of the business leaders who will be in Davos to the Palace of Versailles on Monday to press them to invest in France.

When he speaks in Davos on Wednesday, the former investment banker will offer his own “diagnosis” of globalization and set out a vision for addressing widening inequalities, global warming and the rise of nationalism, his advisers say. “I don’t think Macron will be able to resist being the counter-Trump,” said Robin Niblett, director of the Chatham House think tank in London. Macron will be joined by German Chancellor Angela Merkel, returning to the world stage after months of political limbo at home
In years past, the French have often been those critical of global economic elites. Neoliberalism and all that jazz. With Trump and Macron--a former investment banker, mind you--the United States and France appear to have switched places with the former now led by a self-styled protectionist and the latter by an unabashed internationalist.

Times change. While Trump likes the opportunity presented here to poke a finger in the eye of the so-called globalists as he is wont, it may yet backfire: his prehistoric views may further alienate very influential people around the world just as the United States' international reputation is in the dumpster thanks to him. Showcasing ignorance proudly is Trump in excelsis. Then again, being "America First" is a play to domestic audiences first and foremost, so even if he offends his hosts and their progressive sensibilities, it may not matter to Trump for as long as it plays well to his political supporters espousing similarly Trumpian views.

But will he be able to attend? The dynamics of the government shutdown--whether it approaches resolution, as well as its optics--should the president be seen as fleeing the arena when the action is at its peak--will help determine his presence or absence. As they used to say on TV, stay tuned for the continuing misadventures of Captain Caveman, I mean...Donald Trump.

Of Sh--holes & Trump-Era USAID

♠ Posted by Emmanuel in , at 1/15/2018 02:08:00 PM
No matter how offensive Trump's opinions of developing countries is, it's probably for the best that the developing world understand the viewpoint held by the leader of the United States. Let's face it: racism is the reason why many Americans voted for Trump in the first place. Trump may claim not to have said the term, but few believe him. So, what's the American institution that's supposedly dedicated to help other countries develop do? The United States' reputation worldwide is going to receive a Trump-sourced battering. The impression made is that Americans pretend to help, but actually couldn't care less if you rot in hell. (Just don't send anyone over.)

Given his druthers and, by extension, most of his supporters, Trump would rather defund the US Agency for International Development (USAID). Actually, he's been trying to do exactly that as his more sane advisers warn him against doing so. The likely result of this tug-of-war is that USAID will remain in existence, but by significantly smaller funding. While they're at it, Trump's reluctance at giving money away to these hopeless countries can perhaps better match his internal conflicts. On one hand, his white supremacist leanings (and base) have no intention of giving white people's money to colored people. Even if the amounts which actually go to American aid are very small compared to what most these ignoramuses believe, the very idea goes against their way of thinking. On the other hand, even Trump needs to maintain a veneer of international respectability by trying to "help" less fortunate countries. He even claims to be a "Christian," after all [more laughter].

What's the solution for Trump playing to both racist and internationalist views? The above is the best guess. It's just too bad they're probably not honest enough to adopt such Trumpian wording reflecting how the American leader views the rest of the world and, by extension, the executive agencies he leads like USAID.

IMF: From ‘Washington Consensus’ to ‘Soak the Rich’

♠ Posted by Emmanuel in at 1/14/2018 02:34:00 PM
Even the IMF has moved on from the 80s-vintage "Washington Consensus." Trump, however, still adores it.
In many ways, Donald Trump is a throwback to the past. Unfortunately, he wishes to bring back a lot of what was regrettable and not desirable about the past: militarism, racism, sexism, etc. Even in the international economic realm, he's a throwback to the 80s (your choice: 1980s, 1880s, 1780s or even before that) in bashing massive trade deficits with Japan, wishing for the "return" of American manufacturing, re-prioritizing the burning of fossil fuels over renewable energy sources and so on.

Instead of acting on his populist campaign promises to reduce inequality, Trump has actually brought about a lot of the things which reinforce it: Giving corporations massive tax cuts which working-class citizens will have to pay for in the future, gutting healthcare benefits provided by the state, selecting an education secretary whose cause is eviscerating public education in favor of private education...the list goes on and on.

Strangely enough for us at the IPE Zone, one of the international financial institutions that has long championed Trumpified, inequality-increasing policies no longer seems to be doing so. The IMF once pushed "Washington Consensus"-style policies that were said to worsen inequality by assuming that wealth will inevitably trickle down after liberalization, deregulation and privatization. These were, of course, massively controversial policies. I have colleagues who've made entire websites devoted to criticizing the IMF over such policies taht are still going strong. Sure, inequality may increase in the short run, the theory went, but in the long run more would benefit. The implication is that inequality itself should not be the focus of policy attention.

Actually, what Trump actually does nowadays--pursue policies widening inequality even further--is contrary to modern IMF policy prescriptions (at least in writing). Has this onetime bastion of economic orthodoxy gone all Marx on us? On fiscal policy, a report which came out late last year explained:
Rising inequality and slow economic growth in many countries have focused attention on policies to support inclusive growth. While some inequality is inevitable in a market-based economic system, excessive inequality can erode social cohesion, lead to political polarization, and ultimately lower economic growth. This Fiscal Monitor discusses how fiscal policies can help achieve redistributive objectives. It focuses on three salient policy debates: tax rates at the top of the income distribution, the introduction of a universal basic income, and the role of public spending on education and health.
Does the IMF really advocate "soak the rich" policies now? In so many words, yes, via the euphemism "progressive taxation" which it now regards as a positive with few caveats by deriding its opposite:
A substantial share of the differences in inequality across economic groups and over time can be attributed to differences in redistributive fiscal policies. In advanced economies, direct taxes and transfers reduce income inequality on average by about one-third, with three-quarters of this reduction achieved through transfers. In developing economies, fiscal redistribution is  much more limited, reflecting lower and less progressive taxation and spending and greater reliance on regressive indirect taxes.
You can read the rest, but the implications are clear: IMF member states should make inequality reduction a core concern in the interests of generating growth regardless of whether it's equitable or not. Taxing the rich more is part of the policy prescription package [gulp!]. By contrast, Trump is "Washington Consensus" in full pomp. The point is that if even a supposedly ideological and insulated institution can change, it remains to be seen if Trump can. After all, he is still, like Steve Spears who I have a much higher opinion of, stuck in the 80s.