D.C. Judge Rules Against Trump In Tax Records Tussle With Democrats

Some potentially bad news for the President this afternoon after a federal judge ruled the Democrat-led House Oversight and Government Reform Committee have the power to demand Trump’s tax records from his accounting firm, Mazars USA LLP.

As Bloomberg reports, U.S. District Judge Amit Mehta in Washington rejected Trump’s claim that Congress wasn’t entitled to the documents because they weren’t intended for a legitimate legislative purpose.

In a 41-page-long opinion, Mehta found that “President Trump cannot block the subpoena to Mazars.”

“Courts must presume Congress is acting in furtherance of its constitutional responsibility to legislate and must defer to congressional judgments about what Congress needs to carry out that purpose.”

“These are facially valid legislative purposes, and it is not for the court to question whether the Committee’s actions are truly motivated by political considerations,

The ruling is likely to be appealed.

 

via ZeroHedge News http://bit.ly/2Jv9xys Tyler Durden

New York Bank Stocks Under Pressure From New Democrat-Backed Rent Legislation

Banks based in New York are seeing their stocks tumble as a new note from Wedbush has highlighted that New York Democrats “pose a risk to loan growth and credit”, according to Bloomberg.

Newly elected Dems are eyeing rent control laws that are set to expire on June 15. Republicans had previously controlled New York’s Senate in the past, allowing them to block Democratic efforts to change the laws. Now that Democrats are in “complete control” of the state government, they have “introduced nine bills on rent regulation that clearly favor the tenants,” according to the note.

The windfall for tenants could, in turn, put pressure on the lending business. 

Wedbush analyst Peter Winter wrote:

 “There’s potential risk brewing to the multi-family lending business in New York. The risk comes not from a credit perspective, as these loans are conservatively underwritten, but rather from potentially weaker loan demand and less refi activity. That would hurt prepayment income, which in turn would hurt net interest margin.”

Names like New York City Bancorp and other New York-exposed banks were under pressure on the news.

In its note, Wedbush also pointed out the top 5 banks that would have exposure to such legislation: NYCB, Dime Community Bancshares, Signature Bank, Investors Bancorp and Sterling Bancorp. Wedbush also downgraded Signature Bank to neutral from outperform. 

Bloomberg also noted that the KBW regional bank index fell as much as 2.7% to its lowest levels since early April. The pressure on the index was led by Signature Bank. The broader KBW bank index fell 2.2%, dragged down not only by NYCB, but also by SVB Financial Group, KeyCorp and Comerica Inc.

It had been previously reported about a week ago that New York property owners and the banks that lend to them were opposing Democratic lawmakers seeking more protections for tenants.

In March, we published an article noting how “Rent Control” actually harms those it seeks to protect. 

via ZeroHedge News http://bit.ly/2ElaepU Tyler Durden

“Us” Versus “Them”

Authored by Jim Quinn via The Burning Platform blog,

“I’ll show you politics in America. Here it is, right here. “I think the puppet on the right shares my beliefs.” “I think the puppet on the left is more to my liking.” “Hey, wait a minute, there’s one guy holding out both puppets!”” –Bill Hicks

Anyone who frequents Twitter, Facebook, political blogs, economic blogs, or fake-news mainstream media channels knows our world is driven by the “Us versus Them” narrative. It’s almost as if “they” are forcing us to choose sides and believe the other side is evil. Bill Hicks died in 1994, but his above quote is truer today then it was then. As the American Empire continues its long-term decline, the proles are manipulated through Bernaysian propaganda techniques, honed over the course of decades by the ruling oligarchs, to root for their assigned puppets.

Most people can’t discern they are being manipulated and duped by the Deep State controllers. The most terrifying outcome for these Deep State controllers would be for the masses to realize it is us versus them. But they don’t believe there is a chance in hell of this happening. Their arrogance is palatable.

Their hubris has reached astronomical levels as they blew up the world economy in 2008 and successfully managed to have the innocent victims bail them out to the tune of $700 billion, pillaged the wealth of the nation through their capture of the Federal Reserve (QE, ZIRP), rigged the financial markets in their favor through collusion, used the hundreds of billions in corporate tax cuts to buy back their stock and further pump the stock market, all while their corporate media mouthpieces mislead and misinform the proles.

There are differences between the parties, but they are mainly centered around social issues and disputes with little or no consequence to the long-term path of the country. The real ruling oligarchs essentially allow controlled opposition within each party to make it appear you have a legitimate choice at the ballot box. Nothing could be further from the truth.

There has been an unwritten agreement between the parties for decades where the Democrats pretend to be against war and the Republicans pretend to be against welfare. Meanwhile, spending on war and welfare relentlessly grows into the trillions, with no effort whatsoever from either party to even slow the rate of growth, let alone cut spending. The proliferation of the military industrial complex like a poisonous weed has been inexorable, as the corporate arms dealers place their facilities of death in the congressional districts of Democrats and Republicans. In addition, these corporate manufacturers of murder dole out “legal” payoffs to corrupt politicians of both parties in the form of political contributions. The Deep State knows bribes and well-paying jobs ensure no spineless congressman will ever vote against a defense spending increase.

Of course, the warfare/welfare state couldn’t grow to its immense size without financing from the Wall Street cabal and their feckless academic puppets at the Federal Reserve. The Too Big to Trust Wall Street banks, whose willful control fraud nearly wrecked the global economy in 2008, were rewarded by their Deep State patrons by getting bigger and more powerful as people on Main Street and senior citizen savers were thrown under the bus.

When these criminal bankers have their reckless bets blow up in their faces they are bailed out by the American taxpayers, but when the Fed rigs the system so they are guaranteed billions in risk free profits, they reward themselves with massive bonuses and lobby for a huge tax cut used to buy back their stock. With bank branches in every congressional district in every state, and bankers spreading protection money to greedy politicians across the land, no legislation damaging to the banking cartel is ever passed.

I’ve never been big on joining a group. I tend to believe Groucho Marx and his cynical line, “I don’t care to belong to any club that will have me as a member”. The “Us vs. Them” narrative doesn’t connect with my view of the world. As a realistic libertarian I know libertarian ideals will never proliferate in a society of government dependency, willful ignorance of the masses, thousands of laws, and a weak-kneed populace afraid of freedom and liberty. The only true libertarian politician, Ron Paul, was only able to connect with about 5% of the voting public. There is no chance a candidate with a libertarian platform will ever win a national election. This country cannot be fixed through the ballot box. Bill Hicks somewhat foreshadowed the last election by referencing another famous cynic.

“I ascribe to Mark Twain’s theory that the last person who should be President is the one who wants it the most. The one who should be picked is the one who should be dragged kicking and screaming into the White House.” ― Bill Hicks

Hillary Clinton wanted to be president so badly, she colluded with Barack Obama, Jim Comey, John Brennan, James Clapper, Loretta Lynch and numerous other Deep State sycophants to ensure her victory, by attempting to entrap Donald Trump in a concocted Russian collusion plot and subsequent post-election coup to cover for their traitorous plot. I wouldn’t say Donald Trump was dragged kicking and screaming into the White House, but when he ascended on the escalator at Trump Tower in June of 2015, I’m not convinced he believed he could win the presidency.

As the greatest self-promoter of our time, I think he believed a presidential run would be good for his brand, more revenue for his properties and more interest in his reality TV ventures. He was despised by the establishment within the Republican and Democrat parties. The vested interests controlling the media and levers of power in society scorned and ridiculed this brash uncouth outsider. In an upset for the ages, Trump tapped into a vein of rage and disgruntlement in flyover country and pockets within swing states, to win the presidency over Crooked Hillary and her Deep State backers.

I voted for Trump because he wasn’t Hillary. I hadn’t voted for a Republican since 2000, casting protest votes for Libertarian and Constitutional Party candidates along the way. I despise the establishment, so their hatred of Trump made me vote for him. His campaign stances against foreign wars and Federal Reserve reckless bubble blowing appealed to me. I don’t worship at the altar of the cult of personality. I judge men by their actions and not their words.

Trump’s first two years have been endlessly entertaining as he waged war against fake news CNN, establishment Republicans, the Deep State coup attempt, and Obama loving globalists. The Twitter in Chief has bypassed the fake news media and tweets relentlessly to his followers. He provokes outrage in his enemies and enthralls his worshipers. With millions in each camp it is difficult to find an unbiased assessment of narrative versus real accomplishments.

I’m happy he has been able to stop the relentless leftward progression of our Federal judiciary. Cutting regulations and rolling back environmental mandates has been a positive. Exiting the Paris Climate Agreement and TPP, forcing NATO members to pay their fair share, and renegotiating NAFTA were all needed. Ending the war on coal and approving pipelines will keep energy costs lower. His attempts to vet Muslims entering the country have been the right thing to do. Building a wall on our southern border is the right thing to do, but he should have gotten it done when he controlled both houses.

The use of tariffs to force China to renegotiate one sided trade deals as a negotiating tactic is a high-risk, high reward gamble. If his game of chicken is successful and he gets better terms from the Chicoms, while reversing the tariffs, it would be a huge win. If the Chinese refuse to yield for fear of losing face, and the tariff war accelerates, a global recession is a certainty. Who has the upper hand? Xi is essentially a dictator for life and doesn’t have to worry about elections or popularity polls. Dissent is crushed. A global recession and stock market crash would make Trump’s re-election in 2020 problematic.

I’m a big supporter of lower taxes. The Trump tax cuts were sold as beneficial to the middle class. That is a false narrative. The vast majority of the tax cut benefits went to mega-corporations and rich people. Middle class home owning families with children received little or no tax relief, as exemptions were eliminated and tax deductions capped. In many cases, taxes rose for working class Americans.

With corporate profits at all time highs, massive tax cuts put billions more into their coffers. They didn’t repatriate their overseas profits to a great extent. They didn’t go on a massive hiring spree. They didn’t invest in new facilities. They did buy back their own stock to help drive the stock market to stratospheric heights. So corporate executives gave themselves billions in bonuses, which were taxed at a much lower rate. This is considered winning in present day America.

The “Us vs. Them” issue rears its ugly head whenever Trump is held accountable for promises unkept, blatant failures, and his own version of fake news. Holding Trump to the same standards as Obama is considered traitorous by those who only root for their home team. Their standard response is that you are a Hillary sycophant or a turncoat to the home team. If you agree with a particular viewpoint or position of a liberal then you are a bad person and accused of being a lefty by Trump fanboys. Facts don’t matter to cheerleaders. Competing narratives rule the day. Truthfulness not required.

The refusal to distinguish between positive actions and negative actions when assessing the performance of what passes for our political leadership by the masses is why cynicism has become my standard response to everything I see, hear or he read. The incessant level of lies permeating our society and its acceptance as the norm has led to moral decay and rampant criminality from the White House, to the halls of Congress, to corporate boardrooms, to corporate newsrooms, to government run classrooms, to the Vatican, and to households across the land. It’s interesting that one of our founding fathers reflected upon this detestable human trait over two hundred years ago.

“It is impossible to calculate the moral mischief, if I may so express it, that mental lying has produced in society. When a man has so far corrupted and prostituted the chastity of his mind as to subscribe his professional belief to things he does not believe, he has prepared himself for the commission of every other crime.”– Thomas Paine

Thomas Paine’s description of how moral mischief can ruin a society was written when less than 3 million people inhabited America. Consider his accurate assessment of humanity when over 300 million occupy these lands. The staggering number of corrupt prostituted sociopaths occupying positions of power within the government, corporations, media, military, churches, and academia has created a morally bankrupt empire of debt.

These sociopaths are not liberal or conservative. They are not Democrats or Republicans. They are not beholden to a country or community. They care not for their fellow man. They don’t care about future generations. They care about their own power, wealth and control over others. They have no conscience. They have no empathy. Right and wrong are meaningless in their unquenchable thirst for more. They will lie, steal and kill to achieve their goal of controlling everything and everyone in this world. This precisely describes virtually every politician in Washington DC, Wall Street banker, mega-corporation CEO, government agency head, MSM talking head, church leader, billionaire activist, and blood sucking advisor to the president.

The question pondered every day on blogs, social media, news channels, and in households around the country is whether Trump is one of Us or one of Them. The answer to that question will strongly impact the direction and intensity of the climactic years of this Fourth Turning. What I’ve noticed is the shunning of those who don’t take an all or nothing position regarding Trump. If you disagree with a decision, policy, or hiring decision by the man, you are accused by the pro-Trump team of being one of them (aka liberals, lefties, Hillary lovers).

If you don’t agree with everything Trump does or says, you are dead to the Trumpeteers. I don’t want to be Us or Them. I just want to be me. I will judge everyone by their actions and their results. I can agree with Trump on many issues, while also agreeing with Tulsi Gabbard, Rand Paul, Glenn Greenwald or Matt Taibbi on other issues. I don’t prescribe to the cult of personality school of thought. I didn’t believe the false narratives during the Bush or Obama years, and I won’t worship at the altar of the Trump narrative now.

In Part II of this article I’ll assess Trump’s progress thus far and try to determine whether he can defeat the Deep State.

via ZeroHedge News http://bit.ly/2HwSYjv Tyler Durden

Bernie Sanders Has a Strange Affinity for Strongman Daniel Ortega. He’s Not the Only Democrat Who Does.

Give The New York Times credit for publishing, over the weekend, a long investigative piece about the strange enthusiasm of Democratic presidential candidate Bernie Sanders for the communist strongman Daniel Ortega, who ruled Nicaragua in the 1980s and is in power there again today.

It bears remembering, though, that the group of Democratic presidential candidates who might be described as Ortega groupies extends well beyond the self-described socialist senator from Vermont.

One of the newest additions to the Democratic presidential field is the mayor of New York, Bill de Blasio. The Times reported back in 2013 that during the 1980s, de Blasio “helped raise funds for the Sandinistas in New York and subscribed to the party’s newspaper, Barricada, or Barricade.”

Sanders visited Nicaragua in 1985; de Blasio went there in 1988.

The Times reported that in the late 1980s, when Ortega was in power, de Blasio “oversaw efforts to solicit and ship millions of dollars in food, clothing and supplies to Nicaragua.” The Times reported in 2013 that de Blasio “to this day…speaks admiringly of the Sandinistas’ campaign.”

Then there’s the man polls indicate is the front-runner for Democratic presidential nomination, Joe Biden. A former aide to George W. Bush, Peter Wehner, has written in the Wall Street Journal that “In the early 1980s, the U.S. was engaged in a debate over funding the Contras, a group of Nicaraguan freedom fighters attempting to overthrow the Communist regime of Daniel Ortega. Mr. Biden was a leading opponent of President Ronald Reagan’s efforts to fund the Contras.”

The voting records bear that out. On October 3, 1984, Biden voted to prohibit the Reagan administration from spending money against Nicaragua from the intelligence budget. The amendment was rejected, 42-57. On June 6, 1985, the Senate approved an amendment offered by Georgia Democrat Sam Nunn to release $38 million in humanitarian aid to the Contra rebels fighting Ortega’s Sandinistas. The amendment passed, but Biden was one of 42 Senators who opposed it. Both votes wound up on the annual scorecards of Americans for Democratic Action, a liberal interest group.

Biden voted again in March 1987 for halting aid to the Contras. In 1986 Biden wanted to require the Reagan administration to negotiate with Ortega’s government before sending any money to the contras.

Somewhat comically, Biden fetched up in December 2018 with a piece in Americas Quarterly headlined “The Western Hemisphere Needs U.S. Leadership.” Now, Biden concedes, “Instead of respecting the will of their people, the governments of Nicolás Maduro in Venezuela and Daniel Ortega in Nicaragua have confronted peaceful protesters with force, even armed vigilantes. They have limited the freedoms of expression and assembly necessary for political dialogue and arrested their political opponents.”

In fairness to Biden, one can be a critic of a regime, a leader, or its polices while simultaneously thinking that it is unwise for the American government to provide financial support to a group dedicated to overthrowing that regime. Just as President Trump is hesitant to move militarily against Iran for fear of repeating the Iraq War, politicians in the 1980s were hesitant to back anticommunist forces for fear of repeating the Vietnam War.

For Democrats hoping to run against President Trump in 2020, though, the Ortega story is a complexifier. It makes it harder for Democrats to criticize Trump for cozying up to North Korea if the Democrats themselves were cozying up to Ortega. It makes it harder for Democrats to criticize Trump as an isolationist who is abandoning U.S. interests and principles overseas if the Democrats themselves wanted to cut loose the Contras and consign the people of Nicaragua to a communist authoritarian strongman.

The real resonance, though, has less to do with Daniel Ortega and Nicaragua as a foreign policy case about the merits of American intervention, and more to do with the threat of Ortega-style policies here in the United States. Reasonable people may disagree about how involved America should get in rescuing Nicaragua from socialism. What’s troubling, though, is the idea that a significant wing of the Democratic party might want to emulate precisely the policies—redistribution, central planning, disrespect of property rights—that have left Nicaragua as the poorest country in Central America.

If President Trump wants to illuminate the point, he might offer the Nicaraguan strongman a visa to the United States. Let Ortega campaign alongside Sanders, de Blasio, and Biden in New Hampshire, South Carolina, Pennsylvania, Wisconsin, and Iowa. Let the 2020 Democrats compete for the Bolshevik comandante‘s endorsement.

Ira Stoll is editor of FutureOfCapitalism.com and author of JFK, Conservative.

from Latest – Reason.com http://bit.ly/2YK20zn
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Bernie Sanders Has a Strange Affinity for Strongman Daniel Ortega. He’s Not the Only Democrat Who Does.

Give The New York Times credit for publishing, over the weekend, a long investigative piece about the strange enthusiasm of Democratic presidential candidate Bernie Sanders for the communist strongman Daniel Ortega, who ruled Nicaragua in the 1980s and is in power there again today.

It bears remembering, though, that the group of Democratic presidential candidates who might be described as Ortega groupies extends well beyond the self-described socialist senator from Vermont.

One of the newest additions to the Democratic presidential field is the mayor of New York, Bill de Blasio. The Times reported back in 2013 that during the 1980s, de Blasio “helped raise funds for the Sandinistas in New York and subscribed to the party’s newspaper, Barricada, or Barricade.”

Sanders visited Nicaragua in 1985; de Blasio went there in 1988.

The Times reported that in the late 1980s, when Ortega was in power, de Blasio “oversaw efforts to solicit and ship millions of dollars in food, clothing and supplies to Nicaragua.” The Times reported in 2013 that de Blasio “to this day…speaks admiringly of the Sandinistas’ campaign.”

Then there’s the man polls indicate is the front-runner for Democratic presidential nomination, Joe Biden. A former aide to George W. Bush, Peter Wehner, has written in the Wall Street Journal that “In the early 1980s, the U.S. was engaged in a debate over funding the Contras, a group of Nicaraguan freedom fighters attempting to overthrow the Communist regime of Daniel Ortega. Mr. Biden was a leading opponent of President Ronald Reagan’s efforts to fund the Contras.”

The voting records bear that out. On October 3, 1984, Biden voted to prohibit the Reagan administration from spending money against Nicaragua from the intelligence budget. The amendment was rejected, 42-57. On June 6, 1985, the Senate approved an amendment offered by Georgia Democrat Sam Nunn to release $38 million in humanitarian aid to the Contra rebels fighting Ortega’s Sandinistas. The amendment passed, but Biden was one of 42 Senators who opposed it. Both votes wound up on the annual scorecards of Americans for Democratic Action, a liberal interest group.

Biden voted again in March 1987 for halting aid to the Contras. In 1986 Biden wanted to require the Reagan administration to negotiate with Ortega’s government before sending any money to the contras.

Somewhat comically, Biden fetched up in December 2018 with a piece in Americas Quarterly headlined “The Western Hemisphere Needs U.S. Leadership.” Now, Biden concedes, “Instead of respecting the will of their people, the governments of Nicolás Maduro in Venezuela and Daniel Ortega in Nicaragua have confronted peaceful protesters with force, even armed vigilantes. They have limited the freedoms of expression and assembly necessary for political dialogue and arrested their political opponents.”

In fairness to Biden, one can be a critic of a regime, a leader, or its polices while simultaneously thinking that it is unwise for the American government to provide financial support to a group dedicated to overthrowing that regime. Just as President Trump is hesitant to move militarily against Iran for fear of repeating the Iraq War, politicians in the 1980s were hesitant to back anticommunist forces for fear of repeating the Vietnam War.

For Democrats hoping to run against President Trump in 2020, though, the Ortega story is a complexifier. It makes it harder for Democrats to criticize Trump for cozying up to North Korea if the Democrats themselves were cozying up to Ortega. It makes it harder for Democrats to criticize Trump as an isolationist who is abandoning U.S. interests and principles overseas if the Democrats themselves wanted to cut loose the Contras and consign the people of Nicaragua to a communist authoritarian strongman.

The real resonance, though, has less to do with Daniel Ortega and Nicaragua as a foreign policy case about the merits of American intervention, and more to do with the threat of Ortega-style policies here in the United States. Reasonable people may disagree about how involved America should get in rescuing Nicaragua from socialism. What’s troubling, though, is the idea that a significant wing of the Democratic party might want to emulate precisely the policies—redistribution, central planning, disrespect of property rights—that have left Nicaragua as the poorest country in Central America.

If President Trump wants to illuminate the point, he might offer the Nicaraguan strongman a visa to the United States. Let Ortega campaign alongside Sanders, de Blasio, and Biden in New Hampshire, South Carolina, Pennsylvania, Wisconsin, and Iowa. Let the 2020 Democrats compete for the Bolshevik comandante‘s endorsement.

Ira Stoll is editor of FutureOfCapitalism.com and author of JFK, Conservative.

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Tech Wrecks, Semis Slammed As Trump’s Trade Turmoil Hammers Huawei

It just got real in the trade war…

 

China started ugly but was rescued back to merely unattractive…

Huawei bonds plunged…

 

European markets were ugly with Italy leading the way…

European technology stocks had the worst day since Apple’s revenue warning in early January as the Huawei hammering rippled through markets…

But Europe also suffered as Deutsche Bank hit new record lows…

 

The Nasdaq led today’s declines in US markets (thanks to blowback from Trump’s Huawei move and Google’s decision)…

Futures show the action really accelerated during European hours as Google and others cut ties from Huawei…

Trannies managed to get back green briefly (and Dow tried desperately)…

 

S&P’s Buy-The-F**king-Open pattern continues…

 

Dow futures seem to have found support around 25,500-600…

 

Small Caps broke below their 100-DMA (already below the 50- and 200-DMA)

 

As Tech wrecked…

Semis sucked…

 

Sprint spiked on FCC T-Mobile approval headlines then dropped on DOJ un-approval rumors…

 

Tesla stock tumbled below $200 for the first time since Dec 2016 (bonds collapsed to record high yields)…

And TSLA CDS spiked…

 

Credit and equity protection costs were notably higher… (the former blowing out more)…

 

Despite equity weakness, bonds were also sold today with the curve around 2-3bps higher in yield (except the long-end outperformed)…

NOTE – the selling started the moment US cash equity markets opened.

The yield curve was yanked steeper today, drastically avoiding the inversion signal…

 

The dollar slipped lower on the day…

 

Yuan was higher on the day but well off the overnight spike highs…

 

Colombia’s Peso was pummeled to Feb 2016 lows…

 

Cryptos were weaker today but held on to their gains over the weekend…

 

Bitcoin reached a new cycle high overnight but gave back some during the day, sliding back below $8000…

 

WTI managed to hold on to gains today thanks to three surges off the lows…

 

Silver outperformed gold on the day…

 

Finally, the outlook for U.S. companies doing business with China is growing more gloomy…

via ZeroHedge News http://bit.ly/30uBs6V Tyler Durden

“The Markets Implications Are Enormous”: Trade War With China Is Not About Trade But About Geopolitics

Forget soybeans, auto imports, iPhones, crude oil, and cheap Chinese gadgets. Also forget tariffs, duties, and subsidies. Even forget weapons.

The real reason behind the US-China “trade” war has little to do with actual trade, and everything to do with what China’s president, Xi Jinping, said when he visited a memory chip plant in the city of Wuhan in early 2018. In a white lab coat, he made an unexpectedly sentimental remark, comparing a computer chip to a human heart: “No matter how big a person is, he or she can never be strong without a sound and strong heart”.

Because – as we explained last December  – what is really at the basis of the ongoing civilizational conflict between the US and China, a feud which many say has gradually devolved into a new cold war if few top politicians are willing to call it for what it is, are China’s ambitions to be a leader in next-generation technology, such as artificial intelligence, which rest on whether or not it can design and manufacture cutting-edge chips, and is why Xi has pledged at least $150 billion to build up the sector. China’s plan has alarmed the US, and chips, or semiconductors, have become the central battlefield in the trade war between the two countries. And it is a battle in which China has a very visible Achilles heel.

But what if the “trade”conflict with China is about more than even technological development? If, as Bank of America assumes, the US-China trade war is about geopolitics and not just economics, the as the bank notes, the “implications for markets are enormous.”

Below are several excerpts from BofA commodity and derivative strategist  Francisco Blanch on the true implications of what is shaping up as the biggest civilizational conflict in modern history, which is coming at a time when “America is not as great as it used to be”

Greatness is a relative concept, measured often against oneself but also against others. In that regard, America has facilitated the rise of China by turning free trade into a global public good. Yet trade theory suggests that hegemons can maximize their income by applying optimal tariffs under certain conditions. The astonishing irruption of China in global commerce following her entry in the WTO has deeply transformed the global economy. For starters, America’s share of global trade has rolled down for two decades to make room for a rapid rise in Chinese exports and imports (Chart 1). Importantly, China’s economy is now close to (in USD) or even bigger (in PPP) than America’s, depending how you measure it (Chart 2).

As Blanch puts it, in economic terms, China is the rising power and the global hegemon is finally starting to feel the heat. As a result, the strategist has taken an in depth look into the issues and found that several historical conflicts between an established and a rising power were preceeded by major trade disputes.

The first key point is that China’s geopolitical ascent and resulting trade conflict, comes as incomes have stagnated in the past decades:

As Blanch notes, it has taken some time, and a major shift in domestic politics, for US foreign and trade policy to catch up with the geopolitical challenges of a rising China. Following the Global Financial Crisis, Washington had too many problems to focus on China’s growth. Plus the Chinese were the driving force behind global GDP and debt creation after 2008 (Exhibit 1) in a world hungry for growth. The European sovereign debt crises of 2011 and 2012 made Chinese economic activity an even more important pillar of the world economy. Neither the US nor other world leaders had the appetite or the domestic support to confront China’s trade practices back then. But now the paradigm has changed. Incomes have been stagnant in real terms in the US for decades and voters are demanding a different course for policy (Chart 3).

In contrast to stagnating US wages, Chinese real incomes and wages have been rising at one of the fastest rates in the world for five decades now. In that sense, Chinese policymakers and business leaders seem to have delivered for their people what democratically elected politicians in the West have not.

But while the US may have lost the worker prosperity and wage growth title to China, the US still leads the world in trade and profits.

Indeed, America is also experiencing a renaissance of its own at the moment (largely thanks to a fake bull market now well into its 10th year). Buoyant equity markets, the longest economic expansion in history, and the lowest unemployment rate in 48 years have emboldened US policy makers to tackle China. One key issue that has captivated voters is the narrative that American workers’ income is going overseas. This world view largely ignores the effects of technology. But in politics perception is reality. So the ongoing breakdown of global supply chains is just the start of a long trend, in BofA’s view. In any case, America’s economic power is still unmatched. Even if followed by China, the US still produces the vast amount of corporate profits in the world. No other country comes close (Chart 4.). Similarly, as BofA notes, the US leads the world by share of global trade ahead of China, with Germany in a relatively close third position (Chart 5).

Additionally, last year the US has become energy independent

Discussing the timing of a trade war many have said was long overdue, the BofA strategist writes that “in some ways, President Trump has picked a good time to start his trade battle”: America is in a position of strength and there is bipartisan consensus that China is getting too close for comfort. Another important point to understand is the structure in the foreign trade balances of both China and the US. Energy has been a crucial driver of foreign policy decisions in Washington for a long time. The new angle here is that America’s reliance on foreign energy has drastically reversed in the past ten years (Chart 6), opening the door to a renewed battery of sanctions and tariffs against US foes. Energy independence has also given Washington the confidence that the US economy will be roughly insulated from global oil price swings. Meanwhile, China’s foreign fuel dependency has increased in USD terms as the economy expanded (Chart 7), creating a major Achilles heel for the rising power.

So how did China achieve such fast growth in only a few decades?  Simple: as Blanch answers, the biggest driver behind China’s growth was American imports. BofA explains:

China’s spectacular economic ascendence can be traced to a number of factors. Massive domestic savings and huge capital accumulation, coupled with rapid urbanization and fast rising exports, have all been key drivers of China´s growth. Policy makers in China have also been exceptionally adept at implementing multi decade plans and building infrastructure at a staggering speed. Why is the White House so focused on China? In part, America’s current account balance has been the mirror of China’s for the last 20 years (Chart 8). But even as America has improved its trade balances with the rest of the world helped by an energy renaissance, the annual US trade deficit with China has worsened from 84bn in 2000 to 420bn at present. As such, the drop in US energy imports was replaced with manufactured imports from China in the past decade (Chart 9.).

No one in Washington seemed to notice until voters sent a loud and clear message.

Another reason behind China’s blistering ascendancy was its technology and “intellectual property.” The reason is that for most of its history, China forced foreign companies to transfer technology by setting up Chinese-controlled joint ventures in its domestic market. These rules, coupled with the promise of access to one of the world’s largest domestic markets, encouraged US corporations to transfer technology and turn a blind eye on intellectual property rights violations. Partly as a result of that, BofA notes that China has caught up with the US in terms of patents applications per head in the past decade (Chart 10). And while China is only filing about half the patent applications per head that America delivers, given its population size, China is now the world leader in total patent applications (Chart 11). This extraordinary surge in patent applications, Blanch notes, has surely risen eyebrows in DC.

The third key reason for China’s ascent has been its enormous foreign commodity purchases, which is due to its dependency on foreign raw materials. China is the world’s largest commodity importer and this dependency is reflected in the relative weight of raw materials in its goods imports (Chart 12). As BofA notes, China is the world’s largest importer of oil, coal, iron ore, copper and soybeans, and this massive dependency on foreign raw materials “has become a growing weakness. This is particularly true now that China’s strategic competitor has become the largest producer of energy in the world.” In contrast, China does not import many services from around the world, neither in the financial or telecommunications sectors.

China’s growth has also been boosted on the export side, specifically thanks to a huge surge in manufacturing exports and a very large increase in raw material imports, which has created both a trade partner, but also a major “strategic competitor” to the US. But contrary to the market’s, or at least Trump’s, perception China’s dependency on international trade has been dropping as a share of GDP (Chart 14). And since know that Chinese export growth in the past two decades was very strong, it follows that the falling export dependency is largely the result of China’s GDP growing so quickly. As such, China’s reliance of foreign trade today is only somewhat larger than America’s. Note that the US enjoys one of the lowest foreign trade dependencies as a share of GDP in the G20, only slightly above after Argentina and Brazil (Chart 15).

This means that both the US and China could be labelled large, closed economies in international trade jargon. Germany would be on the opposite end of this spectrum. In practical terms, this relatively low trade dependency suggests that a protracted trade war would not likely have devastating consequences for neither China nor the US. Unlike Germany, both have large, deep domestic markets they can rely upon.

Meanwhile, as China’s global trade standing grew, China’s policies encouraged the rapid development of manufacturing at home (much to Germany’s chagrin). As a result, Chinese exports are primarily concentrated in the manufacturing goods sector (Chart 16). China has been so effective at squeezing out manufacturers that it has ended up in a position of weakness, with limited ability to retaliate against the United States in a trade conflict. This strategic vulnerability is also visible on another angle of the trade war: the telecommunications sector. Even though China is not a large services exporter, most of Chinese services exports originate from the communications sector (Chart 17).

It is therefore not surprising, BofA notes, that the two largest Chinese companies operating in this sector, Huawei and ZTE, have become targets of US government action in recent months. By lifting tariffs on Chinese manufactures and imposing restrictions on the telecommunications sector, the White House has effectively encircled China’s main sources of foreign exchange. The implication is that China’s limited dependency on US goods and services has become a liability, rather than an asset. Now China has limited leverage to retaliate against the US on trade.

Finally, as BofA recaps the backdrop of the biggest civilizational clash, perhaps in history, demographics are becoming a headwind for China: “Another factor that may have propelled Washington to take a more aggressive trade stance with China now rather than later is demographics. For the most part, working age population is contracting in developed markets and expanding at a healthy pace in emerging markets. In this respect, both the US and China are the exceptions to their respective OECD and non-OECD peers. China’s labor force peaked last year and its population is set to peak by 2030 (Chart 18). In contrast, the aging population problem in Developed Markets is mostly confined to Japan and Europe, while the US actually has still a growing population of working age (Chart 19).”

Why is this important? Simply said, because with diverging demographic trends and a larger economy, “a modest slowdown in the rate of Chinese economic growth could enable the US to retain its title as the world’s largest economy and military spender for decades to come.” Put differently, the faster China turns into Japan, the less of a geopolitical challenge it would pose to the US.

In part 2, we will look at the three other key aspects of the US-China geopolitical conflict: how long will the “trade war” last, what are the likely outcomes, and how will they affect global capital markets.

via ZeroHedge News http://bit.ly/2VG9VvH Tyler Durden

DOJ Gives McGahn Immunity From Nadler Subpoena

The Department of Justice has given former White House Counsel Don McGahn immunity from having to testify in front of Congress amid allegations that President Trump instructed McGahn to shut down the Mueller probe. 

Earlier this month, McGahn refused to turn over requested documents after he was instructed by the White House not to comply with a subpoena issued by House Judiciary Committee Chairman Jerry Nadler (D-NY) requesting documents and testimony. Nadler threatened to hold McGahn in contempt of Congress. 

In a letter to Nadler, White House lawyer Pat Cipollone said that he had been advised by the DOJ’s Office of Legal Counsel that “Mr. McGahn is absolutely immune from compelled congressional testimony with respect to matters occurring during his service as a senior adviser to the President,” according to ABC News‘s Catherine Faulders. 

Developing… 

via ZeroHedge News http://bit.ly/2YDdGnk Tyler Durden

Is Joe Biden The Democrats’ “Tranquilizer”?

Authored by James Howard Kunstler via Kunstler.com,

A mental health assessment of the Democratic Party suggests that identity politics had lately turned into an identity crisis. Years of staying woke finally produced hallucinations and violent outbursts. It was time to medicate the patient. Enter, stage right, the Tranquilizer, smiling Uncle Joe Biden, the perfect agent to quell an acute case of adolescent rebellion.

Mostly, the rank-and-file don’t seem to know what to make of Uncle Joe’s arrival on the scene. It’s as if they popped .5 milligrams of Xanax a half an hour ago and all the intersectional strife that seemed so urgent last month just up and flew out of the room, like so many leaf-nosed bats from a frightful cave of winds. The chemical rush Uncle Joe provides is reflected in his impressive polling numbers, lately cresting near 40 percent against his closest pursuer, Bernie Sanders — the reincarnation of my 10th grade math teacher, and hence a figure of horror and loathing — at about 18 percent in the polls. The rest of the presidential pack just slogs down-low through the sucking muck of single digits. Many of these are women candidates in a party determined to produce the first president of the female persuasion. What’s up with that?

The salient psychodramatic feature of the Democrats’ relationship with Mr. Trump is that he represents Daddy’s in da house, a situation so alarming as to provoke a nearly three-year-long fugue of patricidal fury among his detractors. In fact, he’s an order of magnitude worse than Daddy… he’s more like Ole Massa… living in that big White House… lumbering out the south portico in that terrible capitalist business suit… the very cutting edge of oppression and misogyny. Of the Democratic women running for president, so far only Elizabeth Warren has gone after Mr. Trump with any real passion — and then, like some stereotypical housewife trying to brain him with a frying pan. It just bounces off his thick skull, and he moves on.

I call Mr. Trump the Golden Golem of Greatness for a reason (several really) but mainly for his seemingly implacable demeanor. He’s exactly like that folkloric figure from the mists beyond the Pale of Settlement, an animate hunk of impassive clay communing with spirits of the dead, blundering blindly about the land, scaring little children and turning the peasants’ blood to ice-water. You might even say he was conjured up by the very deacons of Wokesterism who now tremble at his every thundering footstep.

Uncle Joe Biden is surely the antidote to all that. He served four years under the Wokester Deacon-in-Chief, Mr. Obama, and cheerfully endured his ritual castration, rendering him harmless to all who must-be-believed, and other sub-categories of the aggrieved and oppressed. At 76, he is way older than anyone (anyone serious, that is) who ever ran for President before, perhaps bordering even on feeble, and that’s another plus: he couldn’t hurt a fly. At least not here in the States. He has no plans, apparently, to try to make America great again — but he still has a hearty appetite for international adventuring that might redound to the benefit of the US War industry and their handmaidens on K Street and Capitol Hill.

And, of course, Uncle Joe goes through these palliative motions of bringing tranquility to the Democratic scramble, his smile fixed, teeth gleaming, hair perfect, hand a’pumping, as ever more information emerges about the spectacular effrontery of his international money-grubbing while vice-president.

He did what in Ukraine in 2014.

And Uncle Joe’s son, Hunter, walked away with how many millions of dollars after being appointed to the board of Ukrainian gas company Burisma Holdings?

Uncle Joe even bragged to the Council on Foreign Relations about how he browbeat Ukrainian President Petro Poroshenko into firing their equivalent of Attorney General, who was about to look into this fishy Burisma deal.

And then there was the even bigger windful after Uncle Joe paid a call on China and Hunter’s shadowy company, Rosemont Seneca, landed a private equity deal (whatever that means) from an equally shadowy company fronting for the Chinese government.

All of which means that Uncle Joe Biden’s career as the Democratic tranquilizer may have about the half-life of that Xanax tablet.

The four pillars of the legacy media — The New York Times, The WashPo, CNN, and NBC — don’t want to touch these stories, but they are already out there, and nobody can stuff them back under the carpet, not even the mighty censors of Twitter and Facebook.

via ZeroHedge News http://bit.ly/2w9clsb Tyler Durden

Once Again, the Mongols Motorcycle Club Can Legally Keep Its Patch

Meth dealing. Money laundering. Murder.

These are just a few of the crimes for which members of the Southern California-based Mongols Motorcycle Club have been arrested. But regardless of the crimes they stand accused of committing while wearing the Mongols patch, Central District of California Court Judge David O. Carter recently thwarted yet another attempt by federal law enforcers to confiscate the bike club’s brand.

During a sentencing hearing on Friday for racketeering charges against the entirety of the Mongol Nation, Carter ordered the club to pay a fine of $500,000 and serve five years probation. When prosecutors also asked Carter to forfeit the Mongols’ trademark for their patch, which bears a figure on a motorcycle resembling Genghis Khan, Carter ruled against the request.

The feds have been after the Mongol patch for years, arguing that displaying the logo is as dangerous as the crimes committed by the club members. As previously reported at Reason, the long legal fight brings together free speech violations, asset forfeiture, and intellectual property. When prosecutors received pretrial authority to go after the patch in 2008, law enforcement confiscated jackets and other items bearing the imagery despite not filing charges for a crime.

Prosecutors briefly enjoyed a win when a California jury decided in January that they could take the trademarked patch away from the group. This decision was eventually overturned by Carter in February. He concluded that the seizure of the trademark violated the First Amendment right to free expression and the Eighth Amendment protection from excessive punishment.

from Latest – Reason.com http://bit.ly/2Jxglvp
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