EXIT TRUMP, ENTER BIDEN: CAN AMERICA MAKE A COMEBACK?
Can Biden mop up Trump’s disastrous legacy and enable America to make a comeback? Many see him as a savior, as coming to the rescue of a broken America. Make everything right again. A big task. As we all know, Trump skipped Biden’s inauguration, the first outgoing leader to do so since the 19th century, and in fact, the inauguration was radically different from any recent ones. The New York Times had to dig back into history to wartime stories in order to find similar crowdless, clouded inaugurations. It found three cases: in 1945, at the end of World War II, Franklin D. Roosevelt’s fourth inauguration was “a spartan affair”; in 1861, on the verge of the Civil War when Abraham Lincoln was the target of an assassination plot; in 1865, coming out of the war when smallpox was raging.
This singular attempt of the NYT gives one a sense of how profoundly America feels wounded: Trump’s legacy is similar to a war. It tore apart the country and destroyed America’s image abroad.
Unsurprisingly, Biden in his inaugural speech, noted grimly that the pandemic, notoriously mismanaged by Trump, had already killed 400,000 Americans, as many as World War II.
Read the rest of the article on Impakter, click here.
An article published on Impakter that I am particularly proud of: I got compliments from a great professional journalist Judy Bachrach who is also a contributing editor at Vanity Fair, the author of bestselling “Glimpsing Heaven” and professor of investigative journalism at John Cabot University. Here is the first part (concerning the U.S. and Trump); the second part is about Europe (and Salvini):
Populists make empty promises. They exploit people’s discontent, raise expectations but cannot deliver solutions. They claim to represent the “will of the people”. Yet they spread lies and accuse leaders of other parties, particularly progressive ones, to be the root cause of all the problems people face. Populists thrive on divisiveness and partisanship in both America and Europe. And it is happening in the world’s oldest democracies, places that should have been inured to the populists’ siren songs.
Two recent cases are emblematic of what is going on.
Case # 1: The United States
Consider America. Trump constantly attacks the “failing New York Times” for spreading “fake news”:
He flatly overlooks the fact that the New York Times has never been more successful, with extraordinary financial results and a fast-growing audience – Forbes estimates NYT’s online subscriber base to be its biggest value driver, and forecast this growth to pick up in the coming years and reach 4.5 million by 2022. A remarkable performance at a time of great difficulty for the industry battered by digital publications and online news.
But Trump, like all populists, has an Achilles’ heel: He can’t deliver on his promises. And he never will. Because his promises are nonsensical, none of them can resolve the problems they are meant to address.
What is happening now with his promised border wall is only the start. He incautiously caused the shutdown of government, sending home 800,000 government employees without pay. And he is doubling down on his mistake, with false accusations at the Democrats when everyone knows that the Democrats have nothing to do with it.
Trump, and he alone, is the cause of the mess. And if the shutdown lasts a year or more as Trump says he’s ready to do, don’t go ask all those employees sitting at home how happy they are with him or what they think of his MAGA policies.
But what about employment and Trump’s promise to create more blue-collar jobs to revive the rust belt? The just published employment data was fantastic, almost double what economists had predicted, shattering Wall Street forecasts of doom: 312,000 jobs were created in December, bringing total employment gains in 2018 to a three-year high of 2.64 million. The Labor Department adjusted its figures for October, raising them from 237,000 to 274,000 and for November, from 155,000 to 176,000.
Cherry on the cake: the average wage rose 11 cents, or 0.4%, to $27.48 an hour. OK, 0.4% doesn’t sound like a big deal, but it’s an average and it means some people did get ahead. And if the employment rate crept up to 3.9 percent from a 49 year low of 3.7 percent, that’s a small creep and it was because more people, attracted by a booming economy, entered the workforce.
So has Trump delivered on his promise? First, it’s too soon to tell. The impact of whatever Trump did will take some years to show up. No political measure is ever instantly translated into measurable economic effects.
Second, we need to remember that Trump in his first two years has only really achieved two things:
(1) deregulation of the environment, paralyzing the Environmental Protection Agency – a boon for the fuel and coal industry and steel; and
(2) an unprecedented tax break for Big Business and the One Percent – at the expense of the middle class and the lower blue-collar working class.
Both measures will need time to impact the economy in full, but we already see early signs that can tell us which way things will be going.
The expected early burst due to Trump’s tax break is much like a wave of fresh funding currently translating into higher overall employment and attracting new people in the labor market. Problem: It is not going into every nook and cranny in the economy, as the Republicans expected.
There is a good reason for this shortcoming. A considerable amount of the funding freed from the tax is not going into new investment, but instead going into stock buybacks to please shareholders. For now, that makes Wall Street and the One Percent very happy. But every cent and dollar going into stock buybacks means it is not going into Main Street and jobs for blue-collar workers.
The amounts diverted into stock buybacks is extensive: By end 2018, it is estimated that of the announced 1.1 trillion in buybacks, a record amount, already $800 billion have actually been purchased. Record buybacks are usually a sign that CFOs believe their stock is undervalued. But not all buybacks have happy outcomes. Consider the case of Apple that was recently badly hit by dropping sales for its smartphones in China:
Then there’s another problem: Robotization. This had nothing to do with Trump’s policies. The trend to automation started a long time before Trump reached the White House. Except for one thing, he should have foreseen the problem.
A good leader sees farther than his voting base. He should have understood that jobs in the coal and steel/aluminum industries that existed twenty years ago are no longer there because of automation. For example, Austria boasts of an almost entirely automated steel plant: It only needs 14 people to run.
The same is true for the United States, as a Brookings article abundantly documents. The last time employment peaked in the coal industry was in the 1920s. Already, by 1980, it was plunging – from 785,000 in 1920 to 242,000. And by 2015, it had lost 59% of its workforce compared to 1980 – most of the loss due not to trade but to automation.
The change from pit mining to surface mining (using explosives and considerably less labor) accelerated the move. Capital intensive highly productive technologies are already in use everywhere and it is expected that over the next 10 to 15 years, their deployment will be ramped up.
But Trump didn’t see that coming. He is not interested in either automation or the opportunities opened up by Artificial Intelligence.
As a result of his tax cut, jobs in the steel, aluminum and coal industries have rebounded, sure, but only modestly. Not enough to change the equation in the rust belt. Moreover, Big Business hasn’t changed its modus operandi, as the recent decision of General Motors to close down plants in the U.S. and send 45,000 people home shows.
Bottom line, Trump is only interested in easy-to-sell slogans, not in resolving difficult problems.
Case # 2: Europe
Consider the European Union, and take a close look at one of its best-grounded, most emblematic democracies: Italy. The country where after the disaster of World War II, a particularly representative democracy was set up with a carefully crafted Constitution, intended to avoid the dictatorship of the majority and give equal representation to all citizens, excluding none.
The rest on Impakter, click here. Let me know what you think!
The big news from the G20 meeting that just closed in Buenos Aires is the 90-day truce in the U.S.-China trade war that has rattled financial markets and threatened global growth. The smaller news is that Trump did not pull the rug under this meeting the way he had done at the last G7 meeting in Canada.
The prospect of a no-statement Summit similar to the G7 debacle had looked very real. As it turned out, the show was very different from what everyone expected, largely thanks to the strong action of French diplomacy, spurred by Macron who wanted a G20 summit statement on his favorite issues, climate change, globalization and growth. But the G20 meeting confirmed the previous G20 in Germany (July 2017): American isolationism is back.
To understand what happened, it helps to take a step back and consider what the G20 is really all about – just like the G7, acting at the margin of the United Nations.
The G20, born of a G7 meeting of finance ministers and central bankers in 1999, is made up of the world’s 19 most important countries in terms of their GDP, plus the European Union. The two giant state members are the United States ($19.39 trillion) and China ($12.24 trillion). Since the G20 was founded, both superpowers have distanced themselves from the pack as most countries’ GDP flat-lined:
In spite of the limitations of GDP as an indicator (it doesn’t capture social progress),the diagram is a striking depiction of the varying impacts of globalization, with the U.S. and China the big winners, at the expense of the rest of the world. And it shows clearly how the U.S., contrary to what Trump says, has always been “great” with the 2008 Big Recession a mere blip on its growth rate.
And it didn’t help that Europe (as a region) showed up in disarray at the meeting: The UK struggling with Brexit and not getting the expected support from Trump; Russia embroiled in an escalating fight with Ukraine; Merkel on her way out and rumored to be aiming for the presidency of the European Council; Macron battling yellow vests protests that are now in their third week and devastated Paris last Saturday.
That leaves on the international scene the two superpowers, the US and China. Some even talk of the emergence of a G2. In a sense, when Trump dined with Xi and crafted a truce in their trade war, that was a G2 meeting.
But if one of the superpower – in this case, Trump’s America – chooses to isolate itself with trade wars and its America First agenda, then China is left free to interact with the rest of the world. Which is precisely what happened. Let’s take a closer look.
Europe and China could change the course of History as Trump’s America First policies move America to the sidelines…Here’s the opening of my new article, just published on Impakter:
Bosphorus Bridge (Turkey) linking Europe to Asia – PHOTO JORGE1767
How will the future play out? Will Europe follow America’s example and sink into nationalist populism that will inevitably tear apart the European Union and open the way to Trump’s divide-and-conquer America First strategy? Will America’s trade war with China escalate in a real war that could go global as Trump’s stranglehold on world trade tightens further? I believe there is hope that neither will happen. Instead, we might witness something utterly different and much more likely: the rise of Eurasia.
Two events these days are early signs of such a shift for anyone who cares to look. One just took place in Paris at the 100th anniversary of the end of World War I organized by French President Macron. The other, thousands of miles away in Singapore, is the ASEAN Summit, from 11 to 15 November where a major new trade deal, the Regional Comprehensive Economic Partnership (RCEP) that for the first time included China, was on the agenda.
The trip was a diplomatic disaster for Trump. He started on the wrong foot even before leaving for Paris. On 9 November, Trump, misunderstanding a Macron statement about the formation of a “true European army”, sent an insulting tweet:
Emmanuel Macron suggests building its own army to protect Europe against the U.S., China and Russia. But it was Germany in World Wars One & Two – How did that work out for France? They were starting to learn German in Paris before the U.S. came along. Pay for NATO or not!
The misunderstanding was soon clarified: Macron had referred to the announced U.S. withdrawal from the I.N.F. nuclear arms treaty with Russia as a reason for establishing an independent army, not that the U.S. was an enemy. Macron in a speech welcoming 84 world leaders to the celebration on November 11, made another statement that shook Trump who considers himself a nationalist:
“Patriotism is the exact opposite of nationalism. Nationalism is a betrayal of patriotism by saying: ‘Our interest first. Who cares about the others?’ I do defend my country. I do believe that we have a strong identity. But I’m a strong believer in cooperation between the different peoples, and I’m a strong believer of the fact that this cooperation is good for everybody.”
From the ashes of the two World Wars came hope, he said. “This hope is called the European Union, a union freely entered into, never before seen in history, a union that has freed us of our civil wars”. Trump appeared “grim” and “clapped only tepidly” afterward. Significantly he missed the opening of a 3-day conference, the Paris Peace Forum that followed the ceremony to discuss how to strengthen multilateralism.
The next day, on 13 November, Trump took again to Twitter in a series of five aggressive tweets, astonishingly rude and misinformed, including this one:
The problem is that Emmanuel suffers from a very low Approval Rating in France, 26%, and an unemployment rate of almost 10%. He was just trying to get onto another subject. By the way, there is no country more Nationalist than France, very proud people-and rightfully so!……..
Not the way to treat the leader of an American allied country. He forgets (or doesn’t know) that his own approval rating in France is abysmal (around 9%). Macron was forced to respond. France, a historic ally, is “not a vassal state” he said in an interview on French TV: “At every moment of our history, we were allies, so between allies, respect is due. I don’t think the French expect me to respond to tweets but to continue this important history.”
Now that Angela Merkel is on her way out and Brexit is wobbling to its pell-mell conclusion – barring a last-minute legal reversal or a political crisis – there is no doubt that Macron is emerging as the main defender of a United States of Europe. A Europe increasingly under assault by Trump’s America First policies.
Meanwhile, at the other end of the Euroasian continent, in Singapore, RCEP is the second major trade deal under discussion since Trump ditched the Trans-Pacific Partnership (TPP) in January 2017. A serious political blunder considering that the goal of the TPP in the Obama administration’s intention, had been to exclude China. In March 2018, the situation had been reversed and it was America that was isolated: the remaining TPP members (including Canada and Australia) signed the first major Pacific trade agreement, keeping the original TPP content largely intact but renaming it the Comprehensive Progressive Trans-Pacific Partnership (CPTPP) – to take effect soon, on 30 December 2018.
Brookings Institute experts see the new RCEP as something much bigger, “an optimistic answer to populist and protectionist trends around the globe”.
Massive, the new RCEP brings together 16 countries covering 3.6 billion people for a total GDP of some $25 trillion, exceeding that of the United States. The point is that it brings China in for the first time, together with India, Japan and South Korea. It builds on commitments already taken in the World Trade Organization (WTO). Not without difficulty of course. Of the 21 chapters of the treaty, so far agreement was obtained on only seven.
RCEP negotiations are expected to be completed only at the next ASEAN summit in Thailand in 2019. Predictably, problems range from India’s fear of being overrun with products from China, Korea and Japan to Trump’s trade wars, making some countries anxious of “losing” the American market.
How Likely is Eurasia to Replace America as World Leader?
Euroasia: A little used term for a vast continent that extends from Cape Dezhnev (Russia) in the East to the Monchique Islet (Portugal) in the West to Dana Island (Indonesia) in the South. A new geo-political entity that is not yet born. The road is rocky but if it emerges, it will be the largest ever, encompassing two-thirds of the world population.
The midterms handed the House to the Democrats but not the Senate, despite receiving some 12 million votes more than Republicans in Senate races. As a result, Trump’s ability to pursue his conservative agenda is largely crippled. But where he can count on the backing of the Senate, Trump retains full power, including the ability to nominate judges and pursue foreign policy. His hold on international trade and finance, notably through sanctions and tariffs, remains intact. With potentially devastating consequences.
The trade war on China is not about to stop but that is only the most visible part of the Trumpian iceberg. There are, as this article will show, other, more discreet elements buried under the surface, such as America’s grip over SWIFT, the payments transfer system universally used by banks everywhere.
Packing the Federal Court System with Conservative Judges
We all know how Trump packed the Supreme Court with two conservative judges, most recently with Brett Kavanaugh, a highly controversial figure. What is less well known is how Trump is also “packing” the Federal court system. As of 4 November, the Senate has confirmed 29 judges for the United States Courts of Appeals, 53 judges for the United States District Courts, all nominated by Trump. In fact, according to the Pew Research Center, Trump has successfully appointed more federal appeals court judges at the same point in his tenure than Barack Obama and George W. Bush combined:
Source:Pew Research Center. (Screenshot; note data stops at July 12, 2018 and does not include the second Supreme Court appointment made by Trump)
Expect many more nominations over the next two years. Here however I am taking a close look at foreign policy, and in particular the area that has traditionally underpinned American “soft power”: international trade and finance.
Bending World Trade and Finance to the America First Agenda
Trump has now carte blanche to reshape the rules-based world trade system to serve his America First agenda – and this is something that should deeply worry America’s allies and foes alike.
This week-end Trump is in Paris for a meeting of world leaders, invited by French President Macron to celebrate the centenary of the end of World War I. A meeting that includes Putin and that is poignantly far away from the trip taken 100 years ago by President Wilson, his idealistic predecessor, bent on rebuilding the world. The reverse of Trump’s goal which is to take it apart. And he will not stop there. Trump is scheduled to attend in November the G20 meeting (China will be there). Expect fireworks.
Will Trump change his confrontational approach to American allies, especially Europeans? Not likely. So far, he has loudly pulled out of numerous treaties (the Trans-Pacific Partnership with Asia and the equivalent treaty with Europe, the Paris Climate Agreement, the Iran nuclear agreement). Recently he has announced he will abandon the Intermediate-Range Nuclear Forces Treaty signed with Russia by Reagan; he threatens sanctions against the International Criminal Court and is pulling out of an 144 year-old postal treaty as part of his fight against China. He has repeatedly cheered Brexit, attacked NATO partners and declared that the “European Union is a foe”.
At the heart of Trump’s “art of the deal” are bullying tactics, plain and simple. And in a perverse way, they make sense.
The Strategy Behind Trump’s Bullying: Divide to Rule
Consider the world that we lived in until the 2016 U.S. presidential elections.
Read the rest on Impakter, click here. Do let me know what you think!
Previous articles about why populism is dangerous have addressed the issue of austerity (here), the public health crisis (here), the false “migrant crisis” (here), and the propensity for war (here). This article explores Trump’s midterms strategy to drive voters to the ballot on November 6: stoking up fear and anger with fabricated crises and false solutions.
The 6 November midterm elections are seen by many as a referendum on how American citizens are ranking Trump’s performance as President. Democrats are favored to win the House and Republicans the Senate.
Surprisingly, even though the economic news are favorable, with 55% of Americans rating current economic conditions as excellent or good, the political climate is not correspondingly as good for Republicans and Trump, the latest Gallup poll shows.
Congress’ 21% job approval rating is 10 points below the average since 1974 and similar to approval ratings in the 2010 and 2014 midterms. Trump’s approval rating at 40% is well below the 52% average at midterms since 1974 and is one of the lowest ever for a president prior to a midterm election.
With such results, it is not surprising that Trump has pulled all the populist stops at his disposal: fake news, fabricated crises, false solutions. All designed to fuel emotions, stoking fear and anger to push voters to the polls. Even famous memes are used, like the Stark family motto of HBO’s Game of Thrones “Winter is coming”, to announce the reimposition of sanctions on Iran. They will take effect on Monday 5 November, the day before the elections. To make sure everyone would notice, Trump exceptionally took the trouble of pinning the tweet at the top of his thread:
This caused a storm on Twitter and HBO did not appreciate the use of its intellectual property for political purposes.
No matter that this stokes divisions. That the country is increasingly polarized. That people die while praying in a synagogue. That the public postal system is used to send pipe bombs. For Trump, it’s collateral damage of little import. The point is to win.
This is the populist strategy for maximum voter turnout: as a populist, you may hold a minority of the voters but your hold on them is stronger because they are emotionally pumped up. It’s not a question of pushing the “undecided vote” as analysts have traditionally called it; it’s a question of pushing those who already support you to actually go to the voting booths. You don’t need to convince them (that’s done). What you need to do is fire them up so that they will make the effort to vote.
Trump’s Fear and Anger Strategy
Trump is in campaign combat mode. The language on race and gender is strident, the anti-immigrant message oppressive.
The rest on Impakter, click here to read. Let me know what you think, I love to hear from you!
Populism is dangerous and has shown overtime an irresistible propensity for war. Public safety, health and the economy are at risk. But populist propaganda is hard to resist. Populist politicians thrive on fake news: it is so much easier to fuel people’s emotions if you feed them fabricated news of imaginary crises. And if you divert their attention from real economic problems with the irresistible lure of national identity politics and blaming foreigners.
Previous articles have addressed the issue of austerity (here), the public health crisis (here) and the false “migrant crisis” (here). Here we take a look at populism’s propensity for war. Historically, populist leaders have been warmongers, Hitler first among them, for waging war across national borders and Pol Pot within borders. Nowadays, exhibit A is Putin’s invasion of Ukraine’s Crimea in 2014, diverting Russians’ attention from a deepening recession. Exhibit B is Trump’s rising militarism that has just jumped to the next level with John Bolton’s visit to Moscow this week to tell Putin the U.S. will withdraw from the I.N.F. Treaty.
Mikhail Gorbachev, former president of the Soviet Union, has no doubts: A new nuclear arms race has begun, he writes in an opinion piece for the New York Times. He should know what he’s talking about. He is the man who signed with President Reagan in 1987 the I.N.F. treaty, one of the major arms non-proliferation treaties. For Europe, it is the most important since it aims at eliminating the arsenal of intermediate and shorter-range missiles.
Back then, Gorbachev was at the helm of a dying Soviet Union shaken by the fall of the Berlin Wall, and he, more than anyone, believed in a new age of peace and international cooperation. He famously talked of a “Common European Home” and hoped to bring Russia inside Europe as an equal partner.
That did not happen and the rise of Putin put paid to those hopes.
An amazing success that Trump, another Republican President, is about to reverse.
Predictably, Russia is accused of violations, the standard way to break off treaties. And yet, the Republican party was not always the party of the military-industrial complex, a notion another Republican President warned America against: It was Eisenhower, in his farewell address in 1961, who identified the threat and famously coined that phrase.
In the Trump era of America First, it’s hard to remember that just three decades ago, in the 1980s, there were politicians who had genuine liberal, progressive ideas – even in the Soviet Union that after 70 years of dictatorship looked like a hopeless case. Especially in the Soviet Union which, as events showed with Gorbachev’s Perestroika, was ready for a dramatic change, putting its Communist past and the Cold War in the dustbin of History.
Now, History’s dustbin is about to be emptied on the world stage, bringing the Cold War back. Firebrand John Bolton, Trump’s National Security adviser (appointed last April) is having his moment of glory.
A former U.S.Ambassador to the United Nations (under Bush), Bolton has always hated international treaties in general and the United Nations in particular. His fondest memory, he recalls in his 2007 memoir, was to pull the U.S. out of the International Criminal Court treaty. No matter the Court presented no particular danger to American sovereignty and that it was a major step forward for international law and justice. Bolton is an uncompromising hawk. For him the world is a jungle, justice is for sissies and the U.S. needs to be top dog.
Now he is pushing Trump to withdraw from all international treaties – including further blocking the ICC and even moving out of some minor treaties like the Universal Postal Union, a 144 year-old postal treaty run by the United Nations, accusing it of letting China ship goods at an unfair discount. That was done last week.
The fact that the ICC, as per its mandate, cannot prosecute any American without the consent of an American court is not mentioned by John Bolton or anyone in the Trump administration. They all prefer to present the ICC as illegitimate and a threat to American sovereignty. They do not accept the simple fact that the ICC is a UN body and therefore not illegitimate; and that it is never a threat to a country that respects international law and justice. And America used to be a paladin of justice but with populists in power, that has changed. Trump’s priority now is moving out of nuclear arms treaties – and that fits in nicely with his military build-up strategy.
Let’s tick off the ways Trump has gone about re-militarizing the U.S.:
Pumping up the defense budget to a historic high of $717 billion, even though America has always spent more than the rest of the world combined on military expenditures; of special note: $21.9 billion for the Department of Energy’s nuclear weapons programs that includes research and testing;
Getting out of the 2015 deal to limit Iran’s nuclear activities;
And now systematically pulling out of all remaining non-proliferation arms deals.
To be fair to Trump, the U.S. had already pulled out of the Antiballistic Missile Treaty in 2002. That was done by the Bush administration without a good explanation, much to the dismay of the Federation of American Scientists, an association created in 1945 by the scientists who built the first atomic bomb. Their 2001 letter of protest to Congress ended with the following words that apply equally well to all the treaties that Trump is seeking to undo:
“America has always sought to lead the world by example. Yet if other countries were to follow the example we have just set, the framework of international law would disintegrate. President Bush has just released NMD’s first shot, and it has landed squarely in the heart of American security.”
Bolton’s trip this week in Russia was clearly intended to lay the ground to kill off the I.N.F. arms treaty, much to Putin’s barely concealed amusement. Watch him smile:
See the video (it’s fun to watch) and read the rest on Impakter, click here.
This 2018 session of the UN General Assembly gave us a special show: Trump vs. Macron. I just published an article about this, here’s the opening:
The fight between US President Trump and French President Macron at the United Nations General Assembly hit headlines around the world. It was a classic clash of values, openness and multilateralism promoted by Macron vs. unilateral nationalism, the “doctrine of patriotism” touted by Trump. Here are the highlights:
But the real differences in the style of the two leaders exploded at the UN Security Council on 26 September, this year exceptionally chaired by Trump.
He started with a long speech that was singularly devoid of specifics but included an unexpected attack on China, accusing the Chinese to interfere in the upcoming midterm elections – unexpected because it was totally off-topic, the agenda of that particular UN Security Council being the question of nuclear proliferation and how to address it (including the question of Iran and the sanctions the US are placing on anyone trading or investing in Iran). Here is Trump’s long-winded, meandering opening of the Security Council session:
Did Bob Woodward wildly exaggerate and fabricate findings or is the Trump White House, and more importantly, the president himself, wildly dysfunctional?
An answer in partisan mode is no answer at all. Here, as a friendly outside observer (disclosure: I am European), I will try to clear up the issue.
The book, in a sober style, convincingly depicts an administration in the midst of a “nervous breakdown”, with aides running to contain damage. He reports this unforgettable comment from Reince Priebus: “When you put a snake and a rat and a falcon and a rabbit and a shark and a seal in a zoo without walls, things start getting nasty and bloody. That’s what happens.”
Among the revealing anecdotes:
Gary D. Cohn, former Goldman Sachs President then working for Trump as Chief Economic Adviser, removes a letter from Trump’s desk in the Oval Office to stop him from signing it – a letter that authorized withdrawal from the trade agreement with South Korea; Cohn said afterwards that he did it “for the country”, as the trade agreement vitally underpins US-South Korea cooperation, a pillar of US policy to contain North Korea;
Chief of Staff Kelly exploding in a meeting: “We’re in crazytown, I don’t even know why any of us are here. This is the worst job I’ve ever had”;
an exasperated Jim Mattis, the defense secretary, after a discussion with Trump last January about the nuclear standoff with North Korea, tells colleagues “the president acted like — and had the understanding of — a ‘fifth or sixth grader.’”
This particular depiction of Trump’s White House found an unexpected echo – really a confirmation – in the anonymous op-ed published by the New York Times just a few days before Woodward’s book came out, with the striking title: “I’m Part of the Resistance Inside the Trump Administration”. It is from a White House senior official and there are many theories as to who did it. The latest from Ann Coulter claiming Jared Kushner did it. But at the time of writing, still no one really knows.
What is most unsettling about Trump is not so much his level of understanding about issues, bad as it is, but his systematic misperception of reality.
Just published on Impakter, my take on the Turkish Lira crisis currently roiling the markets:
Turkey’s Lira crisis: Is it a strictly Turkish problem or is there a risk of contagion? The answer to that question is complex and requires taking a close look at what happened and at Erdogan’s role which is central. Including looking at his past, considering the whole arc of his career, from Istanbul mayor to autocratic president.
The Lira, weak since the start of the year, went into freefall by August 13, following two hostile American policy moves. One was sanctions hitting two Turkish government officials, the Justice and Interior ministers, on August 1. The other was a Trump tweet announcing steep tariffs on steel and aluminum on August 10:
I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!
Both moves surprised international investors. They hit an important NATO ally like Turkey that is host to a major American base and put at risk other areas of U.S.-Turkey cooperation like the war in Syria, drug fighting or anti-terrorism. They arose from a dispute over the release of an American evangelical pastor, Andrew Brunson, whose cause is championed by Vice President Pence. Turkey is accusing pastor Brunson of espionage and terrorism in relation to the failed 2016 coup attempt.
This is not the first time that Turkey is impatient with the United States. In 2017, the Turks sent seven requests for extradition of Fetullah Gullen who presently lives in the United States. A one-time Erdogan ally, he has turned into his foe. As head of FETO, he is accused of orchestrating the 2016 coup.
By August 13, at the close of markets, the Lira had lost an unprecedented total 40% of its value since January. The already fragile economy looked ready to collapse, with inflation poised to surge. On August 14, the Lira marked a short gain while the rupee collapsed further. The US continued to demand the release of pastor Brunson from house arrests but Erdogan speaking in Ankara today threatened to boycott American electronic goods: “If they have iPhones, there is Samsung on the other side, and we have our own Vestel here.”
Turkey’s Lira crisis is a currency crisis like no other, with a strange twist: The Turkish Central Bank is unwilling to face the problem head on with a raise in interest rates – the classic way to defend a currency under attack.
It seems the Central Bank is under pressure from President Erdogan not to raise rates that would hurt his voters, particularly small businessmen. Capital controls are also ruled out.
Over the weekend, Erdogan has gone a step further. He’s announced he wouldn’t accept an international bailout, something Germany had intimated might be possible if Turkey agreed to restore independence to its Central Bank.
Instead, at the time of writing (August 14), the Central Bank had only pursued relatively modest liquidity measures to buffer the Lira. Things like asking Turkish citizens to sell their dollars and buy the Lira and easing bank rules. It has vowed to provide banks with all the liquidity they need – whether it can effectively do so remains to be seen.
As a result, the Lira keeps falling with President Erdogan remaining defiant, calling it an “economic war” unleashed by America:
The Lira crisis is rippling across the world. Emerging markets are roiled, India’s rupee, the South African rand, the Argentina peso, the Russian were all hit, and Europe is threatened, starting with its weakest member, Italy, with the largest debt burden (over 130% of GDP). Some observers warn of a domino effect. Italian treasury bonds took an immediate hit, the spread with the German bonds widening again. Add to the mix major European banks excessively exposed to the Turkish Lira, particular Spanish banks.
To understand what happened, one needs to take a step back in History. Turkey has come a long way since the times of Ataturk and Erdogan at first was a positive force, until he wasn’t, as explained in this excellent video:
See the video and read the rest on Impakter, click here.