Make Trade Math Great Again, iPhone Example: Globalization In Reverse

Authored by Michael Shedlock via MishTalk,

Trump’s trade thesis with China misses the boat. The iPhone provides an excellent starting point for discussion.

Supply Chain Analysis

As trade barriers break up, world-wide supply chains, the real costs are higher prices and fewer choices for consumers says Greg IP, my favorite WSJ author.

Globalization in Reverse

Please consider That Noise You Hear Is the Sound of Globalization Going Into Reverse by Greg Ip. I reordered some paragraphs below.

While globalization is routinely portrayed as bad for U.S. workers, the truth is more subtle. Routine, blue-collar jobs do get outsourced but high-end research, marketing and design work gravitates to the U.S.

Canadian steel uses iron ore from Minnesota, so Mr. Trump’s tariffs hurt both. About 17% of the value of Mexican-made cars exported to the U.S. originated in the U.S., according to Bruegel, a Brussels-based think tank.

Beckett Gas Inc., family-owned manufacturer of components for boilers, furnaces and water heaters, has over the years shifted production from abroad to its Cleveland-area factories. By continuously improving its production process, it has avoided price increases and now sells all over the world.

But that arrangement has been endangered by the 25% tariff on imported steel, the dominant input into Beckett’s products. “There are only foreign competitors to what we do,” Morrison Carter, the company’s chief executive, says. Those competitors now have a 25% cost advantage.

Assembling an iPhone entirely in the U.S. out of American-made components would add up to $100 to its cost, according to a 2016 article in MIT Technology Review. This assumes, of course, Apple successfully relocates its supply chain. When, under pressure from the Obama administration, it began assembling computers in Austin, Texas, it encountered numerous quality-control and workforce headaches.

Of course, supply chains that took years to take shape won’t change location overnight. Businesses still hope the protectionist wave burns itself out, and the logic of globalization reasserts itself. But a growing number are no doubt drawing up backup plans that look a lot like Harley’s.

Spotlight iPhone

The Conversation reports We estimate China only makes $8.46 from an iPhone – and that’s why Trump’s trade war is futile.

When an iPhone arrives in the U.S., it is recorded as an import at its factory cost of about $240, which is added to the massive U.S.-China bilateral trade deficit.

IPhone imports look like a big loss to the U.S., at least to the president, who argues that “China has been taking out $500 billion a year out of our country and rebuilding China.” One estimate suggests that imports of the iPhone 7 and 7 Plus contributed $15.7 billionto last year’s trade deficit with China.

But, as our research on the breakdown of an iPhone’s costs show, this number does not reflect the reality of how much value China actually gets from its iPhone exports – or from many of the brand-name electronics goods it ships to the U.S. and elsewhere. Thanks to the globe-spanning supply chains that run through China, trade deficits in the modern economy are not always what they seem.

China’s Biggest Exports

Who Really Makes the iPhone?

Start with the most valuable components that make up an iPhone: the touch screen display, memory chips, microprocessors and so on. They come from a mix of U.S., Japanese, Korean and Taiwanese companies, such as Intel, Sony, Samsung and Foxconn. Almost none of them are manufactured in China. Apple buys the components and has them shipped to China; then they leave China inside an iPhone.

So what about all of those famous factories in China with millions of workers making iPhones? The companies that own those factories, including Foxconn, are all based in Taiwan. Of the factory-cost estimate of $237.45 from IHS Markit at the time the iPhone 7 was released in late 2016, we calculate that all that’s earned in China is about $8.46, or 3.6 percent of the total. That includes a battery supplied by a Chinese company and the labor used for assembly.

The other $228.99 goes elsewhere.

That’s it. Of the $237.45 attributed to China as an import, China gets $8.46. The result is US imports from China are overstated by $15- to $16-billion on the iPhone alone.

The Conversation concludes:

Trump’s trade war is based on a simplistic understanding of the trade balance. Expanding tariffs to more and more goods will weigh on U.S. consumers, workers and businesses. And there’s no guarantee that the final outcome will be good when the dispute ends.

This is a war that should never have been started.

Trade and Supply Chain Math

Trump understands neither trade nor supply chain math.

The US is a huge beneficiary of China’s role in assembling the iPhone. As per Greg Ip’s article, the US benefits greatly from auto manufacturing in Mexico.

Trade Math Gone Haywire

In Trump Reverses Course, Promises “Great Trade Deal” With UK I posted this amusing chart.

The US and and UK both claim to have a trade surplus with each other. Of course, that is impossible. And it highlights how silly these discussions are. I offered this “perfect solution”.

Perfect Solution

Change the methodology such that trade surpluses and deficits cease to exist anywhere. If anyone can do that, Trump surely can.

My sarcastic comment aside, Trump’s trade math is wrong on numerous fronts. Yet, even if corrected, the US will still have a deficit.

So what?

Make Trade Math Great Again

As I suggested, let’s revise the math to make it work, declare victory, and praise Trump for his brilliance (which is all his ego demands anyway). Then we can stop the trade war madness.

Make trade math great again. That’s all it takes.

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IRS to revoke 362,000 passports from US citizens

About two and a half years ago, I told you about a particularly nasty piece of legislation that President Obama quietly signed into law towards the end of his administration.

They called it the “FAST Act”, which stood for Fixing America’s Surface Transportation.

Yet despite $300 billion earmarked for infrastructure repairs, they didn’t manage to fix very much of America’s surface transportation.

The legislation did, however, have two major effects:

1) The FAST Act authorized the US government to plunder excess capital from the Federal Reserve… which is about as stupid as thing as anyone could possibly do.

The Federal Reserve is America’s central bank; they control the value and fate of the US dollar… which is still the most dominant currency in the world.

You’d think that having some excess cash on the Federal Reserve’s balance sheet would be viewed as wise and conservative.

But not Congress.

These guys are so broke, they’ll grab every penny they can get. Even from their own central bank.

So they buried a provision into the FAST Act demanding that the Federal Reserve hand over any excess capital to the Treasury Department at the end of every calendar year.

They started doing that almost immediately, in December 2015. And in 2016. And in 2017.

This is one of the reasons why, to this day, the Federal Reserve is borderline insolvent… which hardly inspires confidence.

Now, I could go on for quite some time about what an idiotic idea this was.

But believe it or not, there was an even worse section of the FAST Act– one they only started implementing recently:

2) Section 32101 of the FAST Act required the US State Department to revoke or deny the passport of any taxpayer that the IRS deems to have “seriously delinquent tax debt.”

They define seriously delinquent tax debt as owing $50,000 or more.

Well, it took them a couple of years, but the IRS has finally started enforcing this law.

Earlier this month the IRS acknowledged that they had sent at least 362,000 names to the State Department to start revoking or denying passports.

And that’s just the beginning.

The IRS is sending these names out ‘in batches’, so there will be many more to follow. They hope to be finished by the end of the year.

Now, there are so many things wrong with this.

For starters, it’s pretty clear there’s no due process here. It’s purely an administrative matter. Which means there’s limited oversight.

Your name could accidentally end up on some list because the IRS couldn’t keep its own records straight. Or there was a problem with the data integrity. Or someone simply mismatched one John Smith for another.

The IRS literally has billions of records being managed by antiquated technology that’s prone to data breaches.

The idea that they could come up with a list of hundreds of thousands of people without making a single mistake is just farcical.

But, again, there are few real checks and balances. You end up on a list… at which point you’re arguing with an entirely different agency about why your passport has been revoked. It’s a bureaucratic nightmare.

The larger point, though, is what this really means about citizenship.

Think about it– a passport is the most common document to evidence an individual’s citizenship.

And… poof… they can take it away from you with the click of a button.

To me, if they can take something away so easily, then it wasn’t really yours to begin with.

It’s like property.

If you own your home… think again. Even if you have your mortgage fully paid off, you still have to pay property tax.

This means that it’s ultimately the government who really owns your property. You’re just renting it from them.

And if they believe (in their sole discretion) that you owe them property tax, they’ll take the property away from you.

Likewise, the enforcement of the FAST Act shows that you’re not even really a citizen. You’re just renting your citizenship from the government.

And if they believe (in their sole discretion) that you owe them income tax, they’ll take it away from you.

Source

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Amazon’s European Workers Strike On “Prime Day” As Bezos’ Net Worth Tops $150 Billion

Three months after Jeff Bezos was booed by disgruntled Amazon employees in Germany demanding higher pay and better working conditions, Amazon’s European workers are boycotting the company ahead of Amazon’s global “Prime Day” to highlight the poor conditions that fulfillment-center staff have endured for years.

On Monday, a growing number of online workers, but also gamers, and shoppers planned to boycott Amazon over its treatment of low-level workers, who have criticized the company’s tough working conditions on multiple occasions Forbes reported. To get the company’s attention on these issues, organizers hope their boycott will make a dent in Amazon’s bottom line on July 16, 2018, better known as Amazon’s “Prime Day”, one of the retail-and-technology giant’s busiest sales days of the year.

This will hardly come as a surprise: after all, most of the roughly half-million blue-collar, part-time employees at Amazon don’t make six figures while spending their workdays writing code, and instead unload trucks, drive forklifts and walk miles collecting products to fill orders—all for around the same pay as workers in other companies’ warehouses. Due to their menial, repetitive task, they are also rapidly being replaced by robots.

Last Tuesday, Amazon workers in Spain launched a general strike that is expected to last through Monday. Workers at other European Amazon facilities have reportedly joined the walk-out, including groups in Italy, France, England, Germany, and Poland, with a German labor union confirming its members with Amazon will strike on Prime day.

To be sure, this won’t be the first time the online retailing giant’s European workers have express displeasure: in the past several years, workers at Amazon fulfillment centers have repeatedly protested against the company’s long hours, tough working conditions, and high-pressure “rush” periods, as around Prime Day and Black Friday.

In 2017, Amazon workers in Germany and Italy staged a strike to coincide with Black Friday, when they say short-term workers are forced to work long, grueling shifts without adequate compensation or conditions, among other complaints.

Amazon workers in the U.S. have also reported brutal working conditions in recent years, including the need to endure high temperatures, spend unpaid time in security lines, and even skip bathroom breaks, although have been far less enthusiastic to pursue actual work strikes, perhaps due to the fear of being promptly replaced.

In response to the protesters’ latest round of complaints against the company, an Amazon spokesperson told the Observer, ”We don’t recognize these allegations as an accurate portrayal of activities in our buildings.”

What is interested is that this time, unlike previous similar strikes, the idea of boycotting Amazon on Prime Day and beyond has been gathering significant steam online. According to the Daily Dot, “The #AmazonStrike hashtag on Twitter, and numerous posts on Tumblr, have led the charge among internet users who are supporting employees who have held strikes against the retail giant in the past.”

A number of gamers and journalists are also expected to participate in Monday’s boycott, which calls for supporters to avoid using or visiting any of Amazon’s services or sites, from shopping to streaming.

Paradoxically, that show of solidarity also includes the popular live-streaming video platform Twitch which Amazon acquired in 2014. GameRevolution reported that some journalists and gamers plan to boycott the platform on Monday “in solidarity with the striking Amazon workers.”

Austin Walker, editor-in-chief of Waypoint, Vice Media’s gaming division, commented on Twitter, “Some folks put the news about a transnational Amazon strike in front of us yesterday, glad to hear about it. As a heads up, we’ll be skipping our stream on Prime Day (the 16th) in solidarity.”

As Forbes adds, Amazon founder Jeff Bezos and the world’s richest man, has been the target of criticism for years regarding his business practices at Amazon and other ventures, from workers as well as the media, and even – in some cases – from both. Last year, a WaPo reporter – which is owned by Bezos – wrote an op-ed for the Huffington Post about how fair pay for Amazon workers — not high-profile philanthropy — should be the primary goodwill strategy for Bezos, his boss.

WashPo staff reporter Fredrick Kunkle explained last September,

Amazon’s history of dodging taxes, its mistreatment of workers, and its ruthlessness toward even the smallest competitors have been well documented. It put ambulances outside distribution centers rather than install adequate air conditioning. It broke up a union organizing effort by closing the call center and dismissing everyone who worked there. The New York Times documented its punishing work environment in a front-page exposé. The company’s actions, as Forbes put it, hark back to an earlier time when workers were treated as ‘replaceable cogs in the machine.’

What happened next? Within days, the Post had disciplined Kunkle, which his union argued may have been illegal.

Nonetheless, Kunkle had some good observations:

Bezos should remember that his vast wealth came in part from labor, and he should do more to share that wealth with workers. As the owner of an institution that’s critical to democracy, he should go out of his way to set a tone of progressive stewardship toward employees in all his businesses.

Instead, Bezos has shown that he views his employees as parts in a high-tech machine, that income inequality is someone else’s problem, and that modern corporations owe little more to their employees than a paycheck.

Well, he is right, and it is a very successful machine, because moments ago Bezos net worth just topped $150 Billion. According to Bloomberg, Bezos has now topped Gates in inflation-adjusted terms.

The $100 billion mark that Gates hit briefly in 1999 at the height of the dot-com boom would be worth about $149 billion in today’s dollars. That makes the Amazon chief executive officer richer than anyone else on earth since at least 1982, when Forbes published its inaugural wealth ranking.

And visually:

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Larry Fink: Next Round Of China Trade War Could Send Stocks “10%-15% Lower”

US stocks have continued to outperform the rest of the world as US markets appear to have more or less come to terms with President Trump’s aggressive trade agenda. But the head of the largest investment firm in the US doesn’t expect this aura of invincibility to last much longer if Trump launches the next round of trade war with China.

During an interview with Bloomberg published shortly after the company released its Q2 earnings, BlackRock CEO Larry Fink said US stocks could drop between 10% and 15% if the Trump administration moves ahead with tariffs on another $200 billion of Chinese imports. While US investors have eagerly bought every trade related dip so far, Fink said the fallout from a worsening trade war could harm the US economy, which has outperformed its biggest rivals as the “global synchronous recovery” narrative has all but collapsed.

Still, while conditions in the market have certainly grown “more uncertain,” Fink said, it’s also possible that concerns about growth are overblown and that US stocks could continue powering higher.

FINK: “The question I’m raising is ‘is this 1994?’ when the markets were very concerned about growth and the Fed eased when it should have tightened and then we had a five year bull market. The market might be wrong right now, the economy could continue to grow, the trade problem isn’t that difficult…if that’s the case we’ll wake up a year from now and markets will be up,” Fink said.

At the same time, there’s the possibility that the burgeoning US-China trade war could sink stocks and growth.

FINK: “The market’s having a hard time digesting the whole change in globalization and trade…the foundations of international trade are being raised and being questioned.”

Trade fears have already prompted some investors to hit “pause,” even as deal-making continues at a record pace and corporations have continued propping up their shares. Stocks are also threatened by the fact that investors can earn a return simply from holding cash for the first time in a decade.

Asked why he doesn’t believe we’re already in a trade war, Fink responded that the tensions between China and the US could be better described as a “trade spat” or a “trade skirmish” because the anticipated impact on global GDP is still relatively minor.

INTERVIEWER: “You don’t consider this a tariff war?”

FINK: “It’s a minor trade war…We’ll see what happens with the next $200 billion proposal that the US has done with China. Right now it’s talk. Let’s see if there’s a resolution on that.”

Fink is already seeing the first signs of investor skittishness, as BlackRock reported Monday that investors pulled $22.4 billion from BlackRock’s equity products during the second quarter. Inflows into those same products totaled $17.8 billion. Meanwhile, the company’s total AUM as of June 30 was $6.3 trillion, with a total net inflow of $20 billion during the quarter.

Fink’s not the only investor worried about the possible impact of the trade war on the US economy. As Guggenheim’s Scott Minerd recently pointed out, the “consequences” of the global trade war are already showing up as the US economy prepares to enter the “ninth inning”…

JPM

… and if a sudden spike in inflation prompts the Fed to raise interest rates more quickly, the central bank could shock the economy by effectively pulling the brakes on lending and credit at the worst possible time. The economic fallout could confirm traders’ fears that the next Fed rate cut could come as soon as 2020, if not sooner.

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Stocks Slide After US Launches WTO Challenge Against 5 Nations

The United States has launched five separate complaints at the World Trade Organization against Canada, China, the European Union, Mexico and Turkey, in response to retaliatory tariffs those countries and groups have launched against American products.

The potential escalation of tensions appears to be weighing on stocks…

Trannies are underperforming…

As CBC reports, the United States Trade Representative Robert Lighthizer said in a statement Monday that recent tariffs implemented by the U.S. on foreign steel and aluminum are “justified under international agreements,” but retaliatory measures from other countries in response are not.

“Instead of working with us to address a common problem, some of our trading partners have elected to respond with retaliatory tariffs designed to punish American workers, farmers and companies,” Lighthizer said.

The dollar is bouncing on the news…

 

 

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US Housing Bubble Enters Stage Two: Suddenly-Motivated Sellers

Authored by John Rubino via DollarCollapse.com,

Housing bubbles proceed in fairly predictable stages.

Stage One is long and (initially) slow, fueled by excess central bank money creation or foreign demand or some other source of liquidity that encourages large numbers of people to buy houses. At first, sellers remember the peak prices from the previous bubble and aren’t willing to sell at anything less than that (in finance-speak, they’re “anchored” at the highest price they could have gotten last time around). So demand initially outstrips supply, causing home prices to rise, slowly at first and then explosively as increasingly-desperate buyers become willing to pay any price while mortgage lenders, seduced by fat fees and confident that they can securitize and offload any kind of dicey mortgage, lower their standards to include pretty much the whole of society.

Stage One usually ends with price spikes in the hottest markets so extreme that they generate headlines. Like these:

Phase Two of a typical US housing bubble begins when sellers read these headlines and note that prices are now above what they could have gotten in the last bubble. With the memory of how badly, during the subsequent bust, they’d wished they’d sold at the peak still reasonably fresh, they realize that they’ve been given a second chance to cash out, move to a cheaper, less-frenetic place, and coast on their real estate riches. So they call a realtor and list their house. As do a bunch of their neighbors. Supply, out of the blue, jumps.

That may be what’s happening now:

The housing shortage may be turning, warning of a price bubble

(CNBC) – The most competitive, tightest housing market in decades may finally be loosening its grip, and that could put pressure on overheated home prices. The supply of homes for sale in the second quarter of 2018, the all-important spring market, rose at three times the rate of the same period in 2017, according to Trulia, a real estate listing and research company.

The inventory jump was the largest quarterly improvement in three years and could be signaling a slight thaw in today’s housing market. But it is just a start.

“This seasonal inventory jump wasn’t enough to offset the historical year-over-year downward trend that has continued over 14 consecutive quarters,” according to Alexandra Lee, a housing data analyst for Trulia’s economics research team.

The supply of homes for sale is still down 5.3 percent compared with a year ago. Still, all real estate is local, and some markets are seeing greater relief. Thirty of the nation’s 100 largest cities, including New York City, Miami and Los Angeles, now have more supply than a year ago.

Of course, the increase is a double-edged sword. Supplies are increasing because sales are slowing, and sales are slowing because prices are so high. In New York City, the median household must spend 65 percent of its income to buy a home, according to Trulia. In Los Angeles, it takes 59 percent.

“Among these unaffordable metros, San Diego posted the largest inventory growth—22 percent year-over-year,” wrote Lee. “Compare that with the same quarter last year, when that Southern California metro registered a 28 percent inventory decrease.”

Mortgage applications to purchase a newly built home plummeted nearly 9 percent in June compared with June 2017, according to the Mortgage Bankers Association. This suggests lower new home sales going forward, despite higher price

Stage Two’s deluge of supply sets the table for US housing bubble Stage Three by soaking up the remaining demand and changing the tenor of the market. Deals get done at the asking price instead of way above, then at a little below, then a lot below. Instead of being snapped up the day they’re listed, houses begin to languish on the market for weeks, then months. Would-be sellers, who have already mentally cashed their monster peak-bubble-price checks, start to panic. They cut their asking prices preemptively, trying to get ahead of the decline, which causes “comps” to plunge, forcing subsequent sellers to cut even further.

Sales volumes contract, mortgage bankers and realtors get laid off. Then the last year’s (in retrospect) really crappy mortgages start defaulting, the mortgage-backed bonds that contain their paper plunge in price, et voila, we’re back in 2008.

How far away is the climax of Stage Three? It’s too soon to tell, with just one quarter of trend-reversal data on-hand. But if you’re thinking of selling (or if you own a lot of bank stocks or are thinking of shorting such stocks), now might be a good time to start paying attention and taking the appropriate steps.

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‘Concerned’ Rand Paul Isn’t Sure How He’ll Vote on Kavanaugh Confirmation

Citing Supreme Court nominee Brett Kavanaugh’s record on privacy issues, Sen. Rand Paul (R–Ky.) said Sunday that he has yet to decide if he’ll vote to confirm the judge.

“I’m concerned about Kavanaugh,” Paul said on Fox & Friends, alluding to the judge’s views on the Fourth Amendment, which protects American citizens from “unreasonable searches and seizures.” Paul explained that since President Donald Trump “did such a great job” with his first Supreme Court pick, Neil Gorsuch, he is keeping an “open mind” regarding Kavanaugh. But the Kentucky Republican is “worried” and “perhaps disappointed” that Kavanaugh may “cancel out Gorsuch’s vote on the Fourth Amendment.”

Paul referenced a 2015 ruling from the U.S. Court of Appeals for the D.C. Circuit that affirmed the National Security Agency’s right to collect telephone metadata without a warrant. In his concurring opinion, Kavanaugh wrote that “the Government’s metadata collection program is entirely consistent with the Fourth Amendment” and that “critical national security need outweighs the impact on privacy.”

“I disagree completely,” Paul said. “And I think if we give up our liberty for security, we may end up with what Franklin said, and that’s neither—neither liberty nor security.”

Paul said he’s “willing to meet” with the judge to see how he would rule on other issues. “There are 10 rights…10 amendments listed in the Bill of Rights, and so the Fourth Amendment’s one of them,” Paul said. “So we’re already down one, let’s see how he does on the other nine.”

Paul is not the only libertarian-leaning lawmaker to express concern over Kavanaugh’s record on the Fourth Amendment. Minutes after Trump announced Kavanaugh’s nomination, Rep. Justin Amash (R­–Mich.) called the judge a “Disappointing pick,” adding that “We can’t afford a rubber stamp for the executive branch.”

But Paul’s view is particularly important given the GOP’s slim 51–49 majority in the Senate. If every Democrat votes against Kavanaugh, Republicans can only afford one defection. And if Sen. John McCain (R–Ariz.), who’s being treated for brain cancer in Arizona, can’t make it to D.C. for the vote, Republicans might need their entire caucus, including Paul, to support him.

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EU’s Tusk Warns Trump Trade Wars “Often” Turn Into Real Wars

Just before President Trump was set to hold his first ever official summit with Russian president Putin, the EU and China sat down for their own “pro-trade” meeting, during which European Council President Donald Tusk urged Trump, Putin – and China – to work with Europe to avoid trade wars and prevent conflict and chaos.

Speaking before Trump and Putin were due to meet in Helsinki, Tusk appealed for leaders to avoid wrecking a political and “economic order that nurtured a peaceful Europe and developing China”, according to AP.

European Council President Donald Tusk

Tusk held a news conference with China’s Premier Li Keqiang, following an annual EU-Chinese economic summit also attended by the president of the European Commission, Jean-Claude Juncker. They met amid mounting acrimony over Trump’s tariff hikes on goods from China, Europe and other trading partners.

And in a startling warning, the former Polish prime minister went on to make the clearest warning yet that trade wars can turn into hot wars: “It is the common duty of Europe and China, America and Russia, not to destroy this order but to improve it, not to start trade wars which turn into hot conflict so often in our history.

Quoted by AP, Tusk then appealed to governments to “bravely and responsibly” reform the World Trade Organization by updating its rules to address technology policy and state-owned industries, areas in which Beijing has conflicts with its trading partners including Europe. Trump has repeatedly criticized the WTO as outdated and has gone outside the body to impose import controls, prompting warnings he was undermining the global system.

“There is still time to prevent conflict and chaos,” said Tusk. “Today, we are facing a dilemma — whether to play a tough game such as tariff wars and conflict in places like Ukraine and Syria, or to look for common solutions based on fair rules.”

Tusk’s statement follows a similar warning from last week, when the Polish bureaucrat slammed Trump’s criticism of European allies and urged him to remember who his friends are when he met Putin. Trump enraged and strained relations with Europe after he imposed tariff hikes on steel and aluminum from the EU as well as Canada and Mexico. The European trade bloc responded with import taxes on $3.25 billion of U.S. goods.

* * *

Meanwhile, China’s premier Li – speaking in his new and delightfully ironic role as defender of the global free trade system – said China and the EU agreed to take steps to “safeguard free trade” and the global multilateral regulatory system. Which is ironic as China has some of the most draconian protectionist measures of any nation today.

“Given the complicated and fluid international landscape, it is important for China and the EU to uphold multilateralism,” said Li.

Even more ironically, Beijing tried, and failed, earlier this month to recruit European support in its dispute with Washington, when Europe flatly turned down Beijing’s offer for a Grand Alliance against the US. European leaders have criticized Trump’s tactics but share U.S. criticism of China’s industrial policy and market barriers.

In other words, EU admits that Trump is right, just disagrees with his unique… presentation style.

Asked whether China used Monday’s meeting to try to form an alliance with the EU against Washington, Li said the dispute was a bilateral matter for Beijing and the United States to solve.

“Our summit is not directed at any third party,” Li lied.

Meanwhile here is the truth: according to an EU report last month, Beijing imposed more new import and investment barriers in 2017 than any other government, making a mockery of China’s grand pretense to be some grand defender of “free markets.”

Chinese leaders have tried to defuse foreign pressure by promising foreign companies better treatment without changing their industrial development strategies. Translation: China will be delighted to steal the IT and process of any company that begins production in China, something which Tesla is currently considering.

On Monday, reporters were invited to watch part of a meeting between Li, the premier, and executives of European companies including Airbus and BMW AG in an apparent show of openness.

Li assured the companies Beijing would protect patents and copyrights. When a BMW executive said joint a German-Chinese agreement this month to cooperate in developing intelligent vehicles would benefit from the early release of standards by Beijing for the technology, Li asked whether he was concerned joint formulation of those standards would undermine his company’s intellectual property. The executive said no.

“I want to hear if any big company here would like to make a complaint here on the theft of intellectual property,” said the premier. “I don’t know where my measure should target at if you don’t let me know.”

And while none of the executives raised concerns about intellectual property during the portion of the meeting reporters were allowed to see, that was the only thing on everyone’s minds and yet when Trump voices that concern in a less than diplomatic manner, he is slammed by all sides.

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IMF Warns Of “Sudden Repricing” In Asset Prices As It Trims Global Economic Outlook

The Washington-sponsored IMF is out with its latest set of guesses at global growth, warning that amid rising tensions over international trade, the broad global expansion that began roughly two years ago has plateaued and become less balanced.

The IMF still expects tax cuts to lift U.S. economic growth to 2.9 percent this year, up from 2.3 percent in 2017; but, citing proliferating trade conflicts, IMF chief economist Maury Obstfeld warned that “the risk of worse outcomes has increased” for the world economy.

The IMF reiterated its warning about the damage from a trade war, saying the outlook is “more fragile” and “under threat.”

“If current trade policy threats are realized and business confidence falls as a result, global output could be about 0.5 percent below current projections by 2020,”

It kept its forecast for 2018 global growth unchanged at 3.9 percent for now, but downgraded many major countries.

While the U.S. escaped thanks to a fiscal boost, the IMF cut projections for the euro area, Germany, France and the U.K. after weak — weather-related — first quarters and also lowered its outlook for Japan.

As always, The IMF says that Federal Reserve policy is central to global financial developments. Given strong US employment and firming inflation, the Fed is on track to continue raising interest rates over the next two years, tightening its monetary policy compared with other advanced economies and strengthening the US dollar.

Were the Fed to tighten faster than is currently expected, however, a broader range of countries could feel more intense pressures.

But the risk that current trade tensions escalate further – with adverse effects on confidence, asset prices, and investment – is the greatest near-term threat to global growth.

Financial markets seem broadly complacent in the face of these contingencies, with elevated valuations and compressed spreads in many countries.

At the same time, however, high levels of public and private debt create widespread vulnerability.

Asset prices are no doubt buoyed, not only by easy financial conditions, but by the generally still satisfactory global growth picture.

They therefore are susceptible to sudden re-pricing if growth and expected corporate profits stall.

Supporting growth into the medium term—where trend growth rates are forecast to be lower for advanced economies and many commodity exporters—requires that policymakers act now to raise growth potential and resilience through reforms, while re-building fiscal buffers and guiding monetary policy carefully to keep inflation expectations well anchored on targets.”

Additionally, the Washington-based global financial institution warned governments that income inequality should become a priority.

“Otherwise, the political future will only darken.”

Adding a jab at Trump’s “America First” world view:

“While rising to these challenges, countries must resist inward-looking thinking and remember that on a range of problems of common interest, multilateral cooperation is vital.

Finally, we note that the fund did not directly address what might happen when the US imposes full sanctions and secondary sanctions on Iran in November.

So, what to do with this new information from The IMF? Simple – Buy FAANG Stocks…

 

via RSS https://ift.tt/2LmQS58 Tyler Durden

Florida Police Chief Charged with Arresting Random Black Men to Improve His Department’s Record

|||Jay Weaver/TNS/NewscomAn investigation into a false arrest has uncovered a former Florida police chief’s scheme to boost his department’s clearance rate by arresting innocent people.

The authorities are charging former Biscayne Park Police Chief Raimundo Atesiano and two officers, Charlie Dayoub and Raul Fernandez, with conspiracy to violate civil rights. According to the U.S. Department of Justice, Atesiano’s department arrested a 16-year-old citizen for a series of burglaries, without evidence, all “to maintain a fictitious 100 percent clearance rate of reported burglaries.” If convicted, the trio faces a maximum sentence of 11 years in prison.

At least one other arrest is now being investigated as well. In 2014, Erasmus Banmah, 35, was charged with five vehicle burglaries in one day. Those charges were dropped after police did not cooperate with prosecutors.

Former Biscayne Park village manager Heidi Shafran ordered an internal probe of the department in 2014 in response to allegations about the department’s racial bias. The probe’s results, published in the Miami Herald last week, indicate that Atesiano directed his officers to pin crimes on random black men to boost the department’s clearance rate. As Officer Anthony De La Torre described the method to an investigator, “If they have burglaries that are open cases that are not solved yet, if you see anybody black walking through our streets and they have somewhat of a record, arrest them so we can pin them for all the burglaries.” De La Torre said the tactic was used so the department would have “a 100% clearance rate for the city.”

As reported:

During [Atesiano’s] roughly two-year tenure as chief, 29 of 30 burglary cases were solved, including all 19 in 2013. In 2015, the year after he left, records show village cops did not clear a single one of 19 burglary cases.

Arrest records also reportedly show that black males were arrested in nearly all of the 30 burglary cases in 2013 and 2014.

The probe contained similar accusations from four officers about arresting innocent residents, though De La Torre was the only officer to mention a racial aspect to the scheme. The officers, who make up a third of the force, said the instructions came from the top down. The report concluded that the department was run like a frat house.

In another part of the report, Officer Thomas Harrison accused former Captain Lawrence Churchman of using homophobic, racist, and sexist language in the workplace. At one point, Churchman allegedly said he didn’t want “any niggers, faggots, or women bitches working at Biscayne Park.” Churchman was suspended alongside Cpl. Nicholas Wollschlager, who was also accused of ordering suspicious burglary arrests and of drinking on the job. (Wollschlager was later rehired.)

Atesiano stepped down in 2014, just days after Shafran told him to cooperate fully with the investigation. The department is now being run by a new chief, Luis Cabrera, who has made an effort to show transparency by auditing the evidence room.

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