“The future is Asian” – for anyone interested in trade, economics, global progress…

…Which is why I’ve been a student of economics, economic history, for sixty years.

I’m embarrassed to admit I haven’t yet read anything of Parag Khanna’s published work. Catching this 2-segment interview with Mike Walters is changing that. Getting a couple of his books from Amazon.

Economics is rarely my favorite area of science. It can be dull. Khanna’s ability to communicate on the topic in understandable English is impressive. I hope his writing is in the same vein. Meanwhile, I offer these to folks who enjoy looking beyond the narrow alleyway of typical network communications .

Trump still wrong about Trade Deficits


Trump shows Pence and Peter Navarro he can count to 10 — or 5 twice!

❝ President Donald Trump has a logically coherent strategy for achieving the goal of reducing the US trade deficit, one of his stated priorities. The problem is that his strategy is based on totally wrong assumptions about trade deficits.

❝ Two logical chains are leading the president and his team to erroneous conclusions. The first is based on the mistaken assumption that foreign barriers to US exports cause the US trade deficit. If that assumption were true, the strategy of trying to lower foreign barriers by threatening to raise US barriers would be defensible. But both theory and evidence demonstrate that barriers reduce exports and imports equally, with no lasting effect on trade balances…The second logical chain starts with the assumption that tariffs inflict more pain on foreigners than on domestic residents…But longstanding economic theory says that both the home country and the foreign country roughly equally bear the cost of tariffs. Tariffs raise costs for consumers and producers in the importing country. Moreover, there is no reason why the war must be fought only through tariffs. US businesses have considerably more direct investment in Chinese operations than Chinese firms have in US operations. On that front, the United States has more to lose from commercial conflict than China.

RTFA. For that matter, wander on through some of the goodies published by the Peterson Institute for International Economics. Unless, that is, you prefer relying to dummies like our fake president.

Trump’s ignorance is costing the U.S. billion$ in foreign investment


The cult of Trump

❝ Beyond the cost of President Trump’s trade war with longtime US friends and rivals, his policy of economic nationalism has taken a toll in another important sphere: Net inward investment into the United States by multinational corporations—both foreign and American—has fallen almost to zero. As I pointed out in a posting in Foreign Affairs this month, this shift of corporate investment away from the United States will decrease long-term US income growth, reduce the number of well-paid jobs available, and accelerate the shift of global commerce away from the United States.

❝ A few months ago, I developed in Foreign Affairs the potential emergence of a post-American world economy resulting from Trump’s aggressive bilateral bullying and abandonment of the rules-based international economic order. Today this post-American economic world, one where all investment is more uncertain and politicized—because the US government acts toward businesses as any self-enriching autocracy would—is increasingly on its way. That is apparent in business decisions about large, long-term investments, such as the building of major production facilities; foreign takeovers of, and mergers with, US companies; and investment in research facilities and workers.

Any time I note an upcoming appearance by Adam Posen on Bloomberg TV I try to remember to set the DVR to record. Often, he’s on Tom Keene’s Surveillance early morning show. That’s early morning in NYC – 2 time zones ahead of northern New Mexico. Fortunately, the Bloomberg folks are pretty smart about recognizing demand for top-shelf economists and the analysis they provide – and snip and save those episodes for their app.

Playing the trading game is too much work for an old geek retiree like me. But, I never intend to stop learning about the world around us and he’s a helluva source on the economics side.

Trump is 3 centuries behind in economics – and gets the 17th Century wrong, too!


Click to enlarge

❝ President Trump often seems as though he’s stuck in the ’80s. But maybe the better comparison is to the 1680s, not the Reagan era.

Consider his announcement Thursday of new tariffs on steel and aluminum imported from the European Union, Canada and Mexico. These countries not only supply about half of our imports of these metals; they are also among our closest allies.

Astonishingly, the White House claims that alienating these important military allies is necessary “to protect America’s national security…”

❝ In the 1680’s…there basically was no such thing as modern-day trade diplomacy; tariffs were high, and no one would have trusted anyone to stick to trade agreements anyway, since everyone was trying to maintain trade surpluses at once. Which is fundamentally impossible.

It was a zero-sum view of the world. Nothing was win-win, everything was win-lose, and everyone was suspicious of everyone else…

❝ Like an 18th-century mercantilist, Trump perceives no mutual gains from trade. In any transaction, he sees only a winner and a loser. And the winner is determined by who has the trade surplus…

❝ Even 18th-century mercantilists knew that if you were trying to use tariffs to boost your trade surplus, you wanted to tax imports of finished goods, not the inputs that your domestic industry needs to make those high-value, finished-good exports.

Trump still hasn’t figured this out. In protecting U.S. steel and aluminum, he is threatening the much larger manufacturing industries that purchase these materials to make, and then sell, high-value exports such as cars and appliances.

Sufficient ignorant and bigoted Americans voted for Trump to get him into office – even though he lost the popular vote. They probably deserve the fruits of what they’ve sown. They are likely to move an economy with solid results from the political economy used to bring us out of the almost-Great Depression of a decade ago – straight into a recession. The natural result of the policies leaking from the brain of a half-baked fake president and his convocation of proto-fascist gnomes.

RTFA by Catherine Rampell – and weep.

Bloomberg: — An Economics Heathen Wins the Economics Nobel

Given how many psychologists and economists have already won the Royal Swedish Academy of Sciences Sveriges Riksbank Prize in Economic Sciences 1 — Daniel Kahneman (2002), Robert Shiller, Eugene Fama (2013) 2 — it seems contradictory to suggest that the Nobel Committee is finally recognizing the impact of behavioral psychology on economic decision-making by handing its 2017 award to Richard H. Thaler.

Counterintuitive as that history may make this proposal, it is consistent with the history of the Nobel Prize. It is, after all, funded by money made in dynamite. If any group wants its legacy to be that organizations, governments and companies need to pay more attention to how humans operate in the real world, it’s this one.

Officially, the Riksbank prize was for Thaler’s work on “the consequences of limited rationality, social preferences, and lack of self-control, [showing] how these human traits systematically affect individual decisions as well as market outcomes.”

Unofficially, Thaler, perhaps more than anyone else, is best described as the father of behavioral economics. The repercussions of his work in helping organizations better understand human behaviors — and why traditional economics has failed so badly at this — are hard to overstate.

RTFA. Go read Thaler. If you’re anywhere near Dartmouth, try to find where Professor Danny Blanchflower is drinking tonight!

Thanks, Barry Ritholtz

The West’s coal giant is going away


Click to enlargeAlex/Creative Commons

❝ The smokestacks of the Navajo Generation Station rise 775 feet from the sere landscape of the Navajo Nation in northern Arizona, just three miles away from the serpentine, stagnant blue wound in sandstone known as Lake Powell. Red rock cliffs and the dark and heavy hump of Navajo Mountain loom in the background. Since construction began in 1969, the coal plant and its associated mine on Black Mesa have provided millions of dollars to the Navajo and Hopi tribes and hundreds of jobs to local communities, as well as electricity to keep the lights on and air conditioners humming in the metastasizing cities of Phoenix, Tucson, Las Vegas and Los Angeles. Yet they’ve also stood as symbols of the exploitation of Native Americans, of the destruction of the land, and of the sullying of the air, all to provide cheap power to the Southwest.

But coal power is no longer the best energy bargain. And…the plant’s four private utility owners, led by the Salt River Project, voted to shut down the plant at the end of 2019, some 25 years ahead of schedule. When the giant turbines come to a halt and the towers topple in the coming years, the plant will become a new symbol, this one of a transforming energy economy and an evolving electrical grid that is slowly rendering these soot-stained, mechanical megaliths obsolete.

❝ Salt River Project officials have been very clear…They note that it’s now cheaper for them to buy power for their 1 million customers from other sources than it is to generate power at Navajo, thanks mostly to low natural gas prices. A November 2016 study by the National Renewable Energy Laboratory found that the Central Arizona Project pays about 15 percent more for electricity from the power plant — of which it is part owner — than it would if it bought power wholesale from the Mead trading hub located near Las Vegas.

❝ None of this will change even if President Donald Trump rolls back the Clean Power Plan or other regulations put in place by the Obama administration. In fact, if a drill-heavy energy policy is put into place, it will increase natural gas supplies, thus increasing the spread between natural gas and coal.

It’s a sign of the times. We will continues to see pimps like Trump – owned body and soul by the US Chamber of Commerce – run their collective mouths, beat the drums of war and obedience, demand resurrection of backwards methods that will only serve to further slow our national economy.

Science and technology will continue to forge ahead.