“Mr. Trump, Tear Down This Alliance”

Authored by Tom Luongo,

NATO is obsolete.  Donald Trump made this argument back on the campaign trail.  This week, in his typically hyperbolic manner, he dressed down the organization for its hypocrisy over its mandate, which is to counter any aggression from Russia.

 

But, the potential threat of a Russian invasion of Europe is nil.  And, literally, everyone involved in this farce of a summit knows this.  So, Trump was right to call out the hypocrisy, but wrong about how to solve it.

Attacking Germany over the Nordstream 2 pipeline is nonsense.  Trade, especially energy trade, stitches economies and peoples together.  But to Trump energy is different.  Energy is a defense issue.

As such, it should be tightly controlled and only deployed to the benefit of those he approves of (or is allied with) against those he doesn’t (China).

And this is what is fundamentally wrong with geopolitically-dominant thinking.  Everything gets reduced to the metaphoric chess board.  People stop thinking about their individual needs and can only think in terms of nations and governments.

And it makes it easy for authoritarians like Trump, Vladimir Putin, Angela Merkel and all the rest to push the public’s buttons, openly stoking people’s in-group/out-group bias against their own best interest.

This is ultimately what allows for equally odious people like Donald Trump and Angela Merkel to achieve and maintain power.  NATO is obsolete because the thinking behind why it is necessary is obsolete.

It’s not Russian aggression that everyone has to be worried about, it is the aggression of those who have to this point mismanaged everything they were empowered to take care of in the first place, i.e. the very politicians at the meeting.

The US has subsidized European social welfare states by outsourcing their defense.  We, in turn, empowered a corporatocracy built around selling increasingly unnecessary weapons back to them under the false rubric of the evil Russians.

Trump’s position about NATO members not ‘paying their fair share’ is beside the point.  NATO’s budget would be far better spent contracting Russia to build the Nordstream 2 pipeline itself than bullying Italy into buying another tank it doesn’t need.

This is nothing more than him trying to turn an obsolete NATO into yet another Keynesian job creation program.

“Buy more of our over-priced, under-performing crap like the F-35 (a plane that should be considered treason by any rational metric of the term) so we can destroy even more precious capital while everyone goes broke issuing more debt to keep the party going a little while longer.”

In Trumpspeak however, this comes out as “Jobs.  Yuge jobs!”

It would be better in the end to just give the engineers rocks to throw at windows the assembly team builds.  At least there wouldn’t be the massive waste of raw materials.  Glass is recyclable after all, though not profitably.

His real complaint, however, is on an imbalance of trade between the US and Europe.  This is something he can’t fix without giving up the very source of the power he’s wielding with reckless abandon right now, the US dollar’s status as the world’s reserve currency.

Triffin’s paradox is real for the country that issues the currency that liquefies world trade.  And for that to occur, that country must run a trade deficit to issue more currency.  Dollars go out, goods come in.

The trade deficit is an accounting anomaly, and as Martin Armstrong consistently points out, can be manipulated by the interplay between it and the country’s current account.

The question isn’t the amount of money going out it is the value for that money in the goods received for it.  In that respect, the only economic respect that matters, the US gets paid handsomely.

The endless preening and virtue signaling by dead-ender politicians trying to justify their existence while mouthing the will of the lobbyists and rentier-class financiers who stand behind him is worse than nauseating.

It is culturally and psychologically destabilizing.  Resistance to change by the bureaucracy is on daily display on both sides of the pond.  From the Peter Strzok hearings to Theresa May’s betrayal of Brexit, none of these people want their ox gored while they continue to live at the expense of others for their benefit, not those they supposedly serve.

Trump has a real opportunity to quell his critics on the left and from libertarians like me to remake the way the business of geopolitics is done when he sits down with Putin next week.  His performance at the NATO summit was, as always with him, three steps forward and two steps back.

He’s needs an unfettered five-k jog in Helsinki.

And that means cutting through the nonsense, stopping the demagoguery and getting down to the real business of putting our own houses in order.  And that means for Trump, regardless of the agreements he gets from his European counterparts, to pull the US out of NATO, to tear down this alliance that is an albatross around the neck of everyone who lives under the weight of it.

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The world’s largest shipping company Maersk, collapses in stock price as the trade war reality strikes

(courtesy zerohedge)

World’s Largest Shipping Company Collapses As Trade War Reality Strikes

While US equity markets (well a few mega-cap tech stocks anyway) have remained resilient in the context of rising protectionist fears, the world’s largest shipping company is seeing its stock eviscerated as investor anxiety over trade wars finds an outlet that makes rational sense.

A.P. Moeller-Maersk A/S may struggle to make a profit this year after the U.S. and China descended into a trade war that is already showing stress in sentiment surveys.

As Bloomberg reports, Maersk, which is based in Copenhagen, has already lost almost a third of its market value this year as investors gird for more bad news, and it is losing value in line with the collapse in the US Treasury yield curve.

Trade protectionism means less demand, and history suggests the shipping industry will struggle to make the necessary supply cuts. What’s more, Maersk is now more exposed to shipping as the former conglomerate divests its energy business.

Per Hansen, an investment economist at Nordnet in Copenhagen, says Maersk is currently “in the eye of the hurricane” when it comes to the damage that will be inflicted by a trade war.

The company said earlier in the week it will need to temporarily scale back its service between Asia and North Europe as a result.

“It’s highly likely that Maersk’s valuations could sink to its trough valuations in the coming months as investors avoid shipping stocks until more excess capacity is being removed,” said Corrine Png, chief executive officer and founder of Crucial Perspective, a Singapore-based research provider focusing on transport.

So just keep buying Amazon and Netflix, oh and for good measure, keep buying bonds.

end

The IMF warns of a sudden repricing of assets due to the trade wars and economic slowdown

(courtesy zerohedge)

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“Otherwise, the political future will only darken.”

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

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

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

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