Category Archives: United States

(CNN) Trump is trapped between two impulses on Iran

(CNN) President Donald Trump is stuck in a political box — largely of his own making — on Iran, a predicament that becomes more intractable with each alarming cycle of escalation.In the aftermath of a sophisticated attack on a Saudi oilfield, Trump is being torn between two political and character traits that are starting to define his foreign policy.He’s desperate to avoid a new Middle East quagmire, but cannot bear to look weak.”I don’t want war with anybody,” Trump said Monday before returning to bombast. “We have the strongest military in the world … we’re prepared, more than anybody.

“The struggle raging inside the President helps explain the contradictory twists of a session with reporters in the Oval Office on Monday. His remarks left future US strategy opaque. They also underlined how the President’s plight is the predictable result of his own political choices.Trump says it looks like Iran was behind Saudi oil field attackPerched on his yellow armchair, next to the Crown Prince of Bahrain, Trump hardly seemed like a steely commander in chief “locked and loaded” for action — an image he had promoted in a weekend tweet that put the world on edge.”I’m not looking to get into new conflict but sometimes you have to,” he said.

The man who tweeted in 2014 that “Saudi Arabia should fight their own wars” is now being asked as President to protect a kingdom that won his favor with ostentatious flattery on his first official trip abroad.Hinting at this dilemma, Trump made clear that he had not made any promises to the Saudis, but added in a less than ringing assurance to an ally to which he has synced US foreign policy, “we will work something out with them.”Asked whether Iran was behind the attack, Trump said: “It’s looking that way.”Yet moments later, he rebuked a reporter who sought clarification, saying: “I didn’t say that.”After a day of lurching political messaging, the impression Trump sent the world was of a President playing for time, keen to preserve off-ramps for himself, and downplaying a crisis that rocked oil markets, could stunt global growth and traumatize the economy he needs to ride to reelection if it gets any worse.

Trump sends incoherent message

The White House would like you to abandon all common sense on ‘locked and loaded’The same forces that prompted the President to suddenly call off an attack on Iranian targets in June to avenge the downing of a US drone over the Gulf of Oman seem to be in play now.In other circumstances, the President might be praised for taking a prudent course in fully investigating the situation before considering military options.Yet Trump’s aggressive tweets and Secretary of State Mike Pompeo’s rush to blame Iran forfeited the benefit of the doubt.Pompeo further boxed in his boss over the weekend, tweeting that Tehran had “launched an unprecedented attack on the world’s energy supply.”Perhaps seeking to create some diplomatic space, Trump sowed confusion on Monday.

“I think I’ll have a stronger message or maybe no message at all when we get the final results of what we’re looking at,” he said. “You know there’s no rush.”The choices before Trump are unattractive — reflecting the complexity of the presidency — a reality he rarely embraces.A US official told CNN that the US has assessed that the attack originated from inside Iran. The official spoke on condition of anonymity given a lack of authorization to talk to the press.The administration has so far offered no public evidence of Iranian culpability in an attack claimed by Tehran-backed Houthi rebels in Yemen.If Iran is at fault, and Trump does nothing, he will look like a paper tiger who makes toothless military threats. Such an outcome would embolden Iran and suggest that behavior that holds the global economy hostage will be met with impunity.Republican Sen. John Thune of South Dakota said Monday that while the facts of the Saudi attacks are not yet clear, the possibility that the US could respond with force “needs to be on the table.”

“To have a credible deterrent against future bad behavior, they have to believe that’s a possibility,” he said.The President’s discomfort can be explained by the likely disastrous consequences of war with Iran.Hostilities would confound a Trump 2016 campaign trail promise to avoid foreign entanglements. US troops in the region could be sitting ducks. Allies like Israel and Saudi Arabia would be in the firing line.And then there is the economic blowback, which could imperil Trump’s 2020 reelection campaign.

Crisis dashes hopes of US-Iran talks

Trump’s warning to Iran raises fears of war — and confusionDiplomacy is going nowhere, either.The tug of war between Trump’s political and foreign policy ideals is hampering his faltering efforts to open talks with Iran.The initiative already was doomed since the President is seeking to replace a nuclear deal that he walked out on last year — apparently confirming the view of Iranian hardliners that the US can never be trusted.As he seeks reelection, Trump is trawling the globe for big PR wins — and angling for a historic meeting with Iranian President Hassan Rouhani at the United Nations General Assembly next week.That is probably politically impossible now, for both sides.Unlike North Korea’s Kim Jong Un, the Islamic Republic has no interest in photo ops that look good in campaign videos.The Iranians have made clear that their price for talks is lifting the sanctions against their country — a concession that would require Trump to offer the kind of carrot that he never tires of condemning his nemesis former President Barack Obama for offering.Some analysts believe that the Saudi attacks — if plotted by Iran — could be a signal that it has already given up on the notion that diplomacy with the US will ever result in the lifting of the sanctions that have pummeled its economy.

Proof of Iranian military action or attacks by its proxies in the region could also indicate that forces inside Iranian politics that are hostile to any dialogue have the upper hand.The very idea of a Trump-Iran dialogue also seems unlikely.After 40 years of animosity, there’s no chance that the President and the leaders of Iran are going to fall “in love,” as Trump described the blossoming with his relationship with Kim.One frustration for Trump — who believes, so far with little evidence, that his personal magnetism can forge diplomatic deals — is the remoteness of the Iranian leadership.Even talks with Rouhani — which would be the first between US and Iranian leaders since the 1979 Islamic revolution — would not get Trump in front of the man calling the shots in Tehran.Supreme leader Ayatollah Ali Khamenei sees the world through a clerical and revolutionary lens clouded by anti-US dogma. The environment in which he’s making his calculations could hardly be more estranged from Trump’s brash reality-show world.

Slim hopes of European help

Attacks have disrupted 5% of the world’s oil production. Here’s what you need to knowTrump’s unenviable position would test any US president — even one not facing the constraints imposed by the confrontational path Trump has chosen to deal with Iran.One way out could be for the President to use the attack on the Saudi oil facility as a rallying point to rebuild the international front against Iran.While European governments have been battling to save the Iran nuclear deal, clear-cut evidence that Tehran was behind the attacks could drain the political capital sustaining their efforts.Potentially, the President could use the incident to convince European leaders to sign up for the US operation in the Gulf to shield oil tankers from seizure by Iran.

Britain, nurturing its “special relationship” with the US as Brexit looms, has signed up. But France and Germany declined, amid a transatlantic dust-up over Trump’s Iran policy.A US-European rapprochement seems unlikely, however, given Washington’s attempts to undermine the European Union’s efforts to keep the nuclear deal alive.US military action, meanwhile, would likely torpedo an effort by French President Emmanuel Macron to de-escalate the situation and get Washington and Tehran back to the table.

(ZH) DOJ Accuses JPMorgan’s Precious Metals Trading Desk Of Being A Criminal Enterprise


Who would have thought that JPMorgan’s precious metals trading desk is the functional equivalent of the mafia, and that its one-time leader, Blythe Masters, was the mafia’s don? 

Well, almost everyone who didn’t mind being designated a conspiracy theorist for years. And now comes vindication, because this has just been confirmed by the DOJ, which accused the PM trading desks at JPMorgan of being deeply involved in what prosecutors described as a “massive, multiyear scheme to manipulate the market for precious metals futures contracts and defraud market participants.”

In an indictment unsealed on Monday morning, the DoJ charged Michael Nowak, a JPMorgan veteran and former head of its precious metals trading desk and Gregg Smith, another trader on JPM’s metals desk, in the probe. (Blythe Masters was somehow omitted).

“Based on the fact that it was conduct that was widespread on the desk, it was engaged in in thousands of episodes over an eight-year period — that it is precisely the kind of conduct that the RICO statute is meant to punish,” Assistant Attorney General Brian Benczkowski told reporters.

Here’s where it gets extra interesting: according to Bloomberg, the unusually aggressive language language embraced by prosecutors reminds legal experts of indictments utilizing the RICO Act – a law allowing prosecutors to take down ‘criminal enterprises’ like the mafia by charging all members of the organization for any crimes committed by an individual on behalf of the organization.

Prosecutors charged the head of JP Morgan’s global metals trading operation and two other traders with “conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity” – language that is typically used to describe a RICO charge.

This hints at the possibility of a deeper prosecution for JP Morgan. Already, 12 people have been charged in the precious metals market-rigging conspiracy.

“We’re going to follow the facts wherever they lead, whether it’s across desks here or at any other bank or upwards into the financial institution,” Benczkowski said.

It’s unclear what the DoJ is planning, but they’re clearly keeping their options open.

Circling back to the indictment, both Smith and Nowak were put on leave over the summer as the DoJ’s investigation neared its conclusion.

A third trader named in the indictment, Christopher Jordan, traded precious metals at JPM until he left in December 2009. He later traded precious metals at two other banks, Credit Suisse and First New York.

In a press release accompanying the indictment, Assistant Attorney General accused all three men of scheming to manipulate the precious metals market while potentially harming their bank’s clients.

“The defendants and others allegedly engaged in a massive, multiyear scheme to manipulate the market for precious metals futures contracts and defraud market participants,” said Assistant Attorney General Brian A. Benczkowski. “These charges should leave no doubt that the Department is committed to prosecuting those who undermine the investing public’s trust in the integrity of our commodities markets.”

William Sweeney, the Assistant Director in Charge of the FBI’s New York Field Office, added that this manipulation likely impacted “correlated markets and the clients of the bank they represented.” 

“Smith, Nowak, Jordan, and their co-conspirators allegedly engaged in a complex scheme to trade precious metals in a way that negatively affected the natural balance of supply-and-demand,” said FBI Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office. “Not only did their alleged behavior affect the markets for precious metals, but also correlated markets and the clients of the bank they represented. For as long as we continue to see this type of illegal activity in the marketplace, we’ll remain dedicated to investigating and bringing to justice those who perpetrate these crimes.”

According to Bloomberg, three other banks – Deutsche Bank, HSBC and UBS – agreed to pay $50 million (in total) to settle civil claims by the CFTC. Two former JPM employees who pleaded guilty and contributed evidence against their former colleagues that was used in the indictment.

“While at JPMorgan I was instructed by supervisors and more senior traders to trade in a certain fashion, namely to place orders that I intended to cancel before execution,” said one former trader John Edmonds during an October 2018 hearing after pleading guilty to commodities fraud and conspiracy, BBG reports.

The behavior dates back more than 10 years to 2009, according to chat logs that were shown in the indictment. The conversations exposed in the chat logs show just how blatant the manipulation was, and how little the traders did to conceal it.

One of the traders who participated in the chat shown above was Christian Trunz, who traded precious metals at Bearn Stearns before joining JP Morgan after the crisis. He told a federal judge last month that this type of behavior was openly encouraged on JPM’s trading desks for roughly a decade, and that other traders taught him how to do it. He pleaded guilty to federal fraud charges on Aug. 20, BBG reports.

Another trader said during a plea hearing that he was instructed to bid up the price of futures contracts by placing, then cancelling, bid orders (the literal definition of spoofing) that he never intended to fill.

“I was instructed that if a client wished to sell futures I should simultaneously place both bids and offers with the intent of canceling the bids prior to execution,” Edmonds said during his plea hearing.

Edmonds said the purpose was to falsely transmit liquidity and price information in order to deceive other market participants about the supply and demand so they would trade against the orders that JPMorgan wanted to execute.

“We created market activity which artificially drove the sale price up and induced other market participants to purchase at an inflated price,” he said. Edmonds entered into a cooperation agreement with the CFTC in July.

Since the crisis, regulators around the world have cracked down on manipulation in rates, forex and government bond markets, so it’s not exactly a surprise that this type of behavior was also happening in precious metals. But the brazenness with which traders engaged in such manipulation suggests that they didn’t know what they were doing was illegal or wrong, which, in at least some cases, is probably true.

The aggressiveness of this manipulation probe is notable given that the government has lost the last two manipulation cases in court. The DoJ is trying to show that it is “undeterred and are becoming more, not less, aggressive” in cracking down on market manipulation.”

Read the full indictment below:

u.s. v. Smith – Indictment by Zerohedge on Scribd

V.I. (Atlantic) The U.S. Is About to Do Something Big on Hong Kong

(Atlantic) Protests there have demonstrated the enduring appeal of American values and power. But can Washington live up to that promise?

Hong Kong protesters hold up five fingers and brandish an American flag during a march.
Protesters in Hong Kong march to the U.S. Consulate.ANUSHREE FADNAVIS / REUTERS

Hong Kong’s pro-democracy protest movement, the David to China’s Goliath, is calling out to the land of the free for help—and help may be on the way. The question is whether it will be substantial enough and fast enough, and have the support of the president of the United States.

For months now, a small but zealous contingent of American flag-waving protesters has been a fixture of the huge demonstrations in Hong Kong, including today, when dozens of people again carried the U.S. flag during a rally held in defiance of a police ban. As the struggle to resist China’s tightening grip on the semiautonomous region has intensified, protesters have appealed to the United States in larger numbers and with greater urgency. Last weekend, tens of thousands of protesters marched near the U.S. consulate in the territory, singing “The Star-Spangled Banner” and carrying signs that urged President Donald Trump to “liberate Hong Kong.” Perhaps more realistically, they also issued a practical plea: for Congress to pass the Hong Kong Human Rights and Democracy Act, which would grant the United States further means to defend the territory’s freedoms and autonomy.

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Faced with Trump’s scattershot approach to the ferment in Hong Kong, which doesn’t rank as a high-priority issue for his administration, activists are placing their faith in legislation that ultimately will only be as effective as the executive branch’s willingness to implement it.

Nevertheless, Republican Senator Marco Rubio, one of the sponsors of the bill in the Senate, is optimistic that the U.S. government will deliver on its promise. That scene near the consulate a week ago was a vivid reminder that America is still a potent “symbol of democracy and freedom” around the world, he told The Atlantic. The protesters “see a country where people vehemently disagree on public policy and say horrible things about each other, but no one goes to jail for it,” he noted.

By contrast, this past week, Hong Kong police announced that they’ve arrested nearly 1,400 people between the ages of 12 and 76 since the protests erupted this spring over proposed legislation that would have enabled suspected criminals to be extradited to the lawless judicial jungle of mainland China. Carrie Lam, the Beijing-appointed chief executive of Hong Kong, has since pledged to withdraw the law—an astounding victory for leaderless protesters going up against a powerful authoritarian state, but one that has yet to placate activists.

Read: Hong Kong shows the flaws in China’s zero-sum worldview

Rubio said he expects the Hong Kong Human Rights and Democracy Act to easily pass in Congress and be signed into law by the president. The legislation, which has bipartisan support in the Senate and the House of Representatives, has emerged as the primary vehicle through which the U.S. government is hoping to deter China from carrying out a Tiananmen Square–like crackdown against peaceful protesters and pressure it into upholding the city’s special status within China. (So far Senate Majority Leader Mitch McConnell, whose wife’s family has extensive business dealings in China, hasn’t specifically endorsed the legislation, even as he’s advocated for legislative measures to preserve Hong Kong’s autonomy. A spokesperson for Rubio, speaking on the condition of anonymity to discuss deliberations in the Senate, said the senator’s office did not view McConnell’s failure to reference the act in a recent op-ed on Hong Kong as a slight.)

Among other things, the bill would require the secretary of state to annually certify to Congress that Hong Kong, which operates its own immigration system, judiciary, and currency, is sufficiently autonomous to maintain the favorable treatment on trade and commerce that it receives from the United States. (Hong Kong, for example, isn’t subject to Trump’s tariffs on the rest of China.) It would also empower the U.S. government to impose sanctions on Chinese or Hong Kong officials deemed to be undermining that autonomy or committing human-rights abuses.

In theory, this would equip the United States with plenty of economic and diplomatic leverage to influence Chinese behavior, but in practice it would be difficult to execute. For one thing, America’s legislative machinery moves at a slower pace than the Hong Kong protests, which threaten to come to a head in a few weeks when China marks the 70th anniversary of its founding. Rubio said he could envision the Senate passing the act, perhaps by unanimous consent, in mid-October when it returns from a break, and the House passing its version in short order as well. That’s fast by congressional standards, but the Chinese and Hong Kong authorities could in the meantime take any number of actions—including measures short of a large-scale military clampdown, such as declaring a state of emergency. It’s unclear how the U.S. would respond if that were to happen.

There’s also the distinct chance that the campaign in Washington could go the way of other recent issues, such as punitive measures against Russia and Saudi Arabia, that also had strong bipartisan backing in Congress only to be hollowed out when they reached the executive branch.

Rubio said he has personally spoken with Trump about the bill and has not encountered resistance. “The White House has indicated that they would sign it,” he noted.

Yet as Trump’s former consul general to Hong Kong and Macau has observed, Hong Kong is a “second-tier” matter in the administration relative to, say, trade with China and addressing the nuclear threats from North Korea and Iran. Trump has mostly been silent on Hong Kong. When he has mentioned it, he has explicitly linked the issues of trade and Hong Kong (even as his advisers dismiss any connection), warning the Chinese government that violent suppression of the protests would jeopardize trade talks and arguing that this threat is precisely what has restrained Beijing so far. At times Trump has appeared to take China’s side, such as when he described the demonstrations as “riots.” Occasionally he has said he’s in favor of Hong Kong’s freedom. More often he’s suggested that the Chinese leader, Xi Jinping, meet with protesters, an idea Xi hasn’t shown the faintest indication of entertaining.

Rubio said he didn’t believe Trump would veto the legislation to placate the Chinese as trade talks resume, noting that he thinks the bill will pass with a veto-proof majority. (The Trump administration has made such moves in the past, such as when it reportedly postponed a tough speech on China by Vice President Mike Pence ahead of trade talks between Trump and Xi at the G20 summit in June.)

“I think the bigger concern is in its implementation,” Rubio said. “You can pass the bill, but it still requires the administration to implement it. It still requires them to conduct the annual review and it still requires them to impose sanctions on individuals, for example, police officials responsible for repression. They could theoretically sign the bill—them or a future administration —and yet not implement it.”

Rubio added that he has made the argument to Trump “that if the Chinese are prepared to break the commitments they made on Hong Kong [as part of a 1984 agreement with Britain on transferring control of the territory to China], how could we trust them to keep any commitments they make on trade or any other matter?”

Read: Hong Kong’s protests have cemented its identity

In Hong Kong, meanwhile, the bill is being championed by pro-democracy lawmakers and activists who have recently made trips to Washington to lobby for its passage, angering both pro-establishment figures in the territory and officials in Beijing.

China’s oversight of Hong Kong has taken a “serious deviation from the original intent of ‘one country, two systems,’” Dennis Kwok, a member of the city’s Legislative Council, told The Atlantic, referring to the framework under which Hong Kong has operated since 1997, when the territory was handed back to China. In August, Kwok and other Hong Kong lawmakers traveled to meet with U.S. counterparts in Montana, where the nonprofit that organized the delegation has an office.

The Chinese government, Kwok charged, wants to have it “both ways,” exerting ever-increasing control over Hong Kong while still benefiting economically from the unique status afforded to the city by the United States under a 1992 law known as the Hong Kong Policy Act. While Hong Kongers don’t want the act to be scrapped at the moment, if “suppression of human rights and democracy is a persistent factor, then why should people treat Hong Kong differently?” he asked.

Kwok said he understood that the American legislative process is “far from simple,” but was heartened by what he heard during his U.S. tour, which included meetings with officials from Senate Minority Leader Chuck Schumer’s office in New York and an address to the Oregon Republican Party convention in the small city of Pendleton. Across this eclectic set of interactions, Kwok said, there was a uniform message that people want to see Hong Kong “continue to be an open, successful, prosperous, international city, but they are worried about the stuff that is going on here.”

Another pro-democracy lawmaker, James To, went to Washington in May. His schedule freed up unexpectedly, he joked, because he was ousted by a pro-Beijing faction from his position overseeing the Legislative Council’s bill committee. He met with House Speaker Nancy Pelosi and Secretary of State Mike Pompeo, and returned to the United States last month with Kwok. The message he hoped to convey to U.S. officials is blunt: The “Hong Kong people are in a very dangerous situation,” he told The Atlantic. (Rubio said his office speaks with Hong Kong activists “all the time” to hear “what they think we can do to be most impactful and effective at supporting them.” He might meet with the prominent activist Joshua Wong during Wong’s upcoming trip to the United States.)

The stream of visitors to Washington and the way they’ve been received has irked Hong Kong’s pro-Beijing camp. Regina Ip, a pro-Beijing lawmaker and a member of Lam’s cabinet who also made the recent trip to Montana, was frustrated with what she saw as a new tactic by government critics to draw on overseas support. “This time there is really high-profile involvement of U.S. officials,” she said in an interview before Lam withdrew the extradition bill. “I won’t use the word interference because I don’t have hard evidence, but definitely the pressure on us is much greater.”

Read: A defining moment for Trump’s foreign policy

The domestic and international push for passage of the Human Rights and Democracy Act has only deepened this sentiment. Lam has said that the U.S. Congress should not be allowed to become “a stakeholder” in Hong Kong’s affairs and warned people not to lobby for the legislation. Officials in Beijing have spoken with even more force and a conspiratorial tone about covert U.S. meddling, demanding that the United States withdraw its “black hands” from Hong Kong while blaming U.S. politicians for pushing protesters to be “reckless” and “beautifying the violent criminal offenses as [a] fight for human rights and freedom.”

Kwok, the pro-democracy lawmaker, dismissed Lam’s comments as “standard communist rhetoric.” Lam must understand that “Hong Kong works because it is an international city … That means everyone, especially Western nations, have a stake in Hong Kong,” he said.

As Rubio sees it, the stakes are towering. The Chinese Communist Party considers Hong Kong “the front line of its battle against Western liberal democracies,” he said, and the United States needs to confront the authoritarian model China is promoting if it wishes to avoid becoming “an island surrounded by nations that have left the democratic order.” He acknowledged that the Chinese government may so value Hong Kong that it is prepared to assert authority over it at great expense, but argued that it’s still incumbent upon the United States to clarify what those costs will be. “The fact that we can’t ultimately control the outcome [in Hong Kong] entirely should not prevent us from doing something,” he maintained.

Rubio said that a red line for Congress would be a violent crackdown by Chinese forces on the protests or a loss of Hong Kong’s autonomy, which he described as already “tenuous.”

Asked whether he has a sense of the White House’s red line on Hong Kong, he responded, “No, I don’t.”

(Reuters) Trump reverses course, seeks negative rates from Fed ‘boneheads’


WASHINGTON (Reuters) – U.S. President Donald Trump on Wednesday called on the “boneheads” at the Federal Reserve to push interest rates down into negative territory, a move reluctantly used by other world central banks to battle weak economic growth that risks punishing savers and banks’ earnings in the process.

Trump, in a pair of Twitter posts, said negative rates would save the government money on its debt, which including Social Security accounts has reached a record $22 trillion on Trump’s watch. He did not address the risks or financial market tensions that central banks in Europe and Japan have confronted as a result of their negative rate policy, or the larger issue that negative rates have not secured higher growth or higher inflation for those economies.

“The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term,” Trump tweeted. “We have the great currency, power, and balance sheet… The USA should always be paying the … lowest rate. No Inflation!”

“It is only the naïveté of (Fed Chairman) Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing,” added Trump, who has repeatedly noted that rates are negative in Germany, Europe’s trading powerhouse.

The president’s comments precede a week in which the world’s major central banks, including the Fed, are expected to lower rates or otherwise loosen monetary policy in what is widely seen as a move to protect the global economy against risks partly rising from Trump’s trade war with China.

But the quarter of a percentage point cut expected by the Fed is not likely to satisfy Trump, who has called on Powell and the Fed to quickly and dramatically cut rates as a way to boost slowing U.S. economic growth ahead of his re-election bid next year.

Last month, however, Trump told reporters at the White House that he did not want to see negative rates in the United States, and analysts on Wednesday said the still-growing U.S. economy would be put at risk if the Fed pursued them.

While perhaps appropriate in “recessionary” conditions, zero or negative rates in a growing economy with record-low unemployment “may ultimately create the next financial crisis – people taking on more risk than they would otherwise because money is even cheaper,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

Trump has bragged about his use of debt as a real estate investor. As far as managing the federal government’s affairs, interest on outstanding U.S. Treasury securities will be nearly $400 billion in the current fiscal year and rise to more than $914 billion by 2028, according to the Pew Research Center. ​

Still, interest accounts for about 8.7% of all federal outlays, down sharply from the mid-1990s when it accounted for more than 15% of spending following an era of ultra-high interest rates in the 1970s and 1980s, the Pew data showed.

A White House official who asked to speak on background said in response to the president’s tweets that “the president is looking at every tool available to lower the national debt and we ask Congress to join us in cutting back on wasteful spending.”


Trump handpicked Powell as head of the U.S. central bank, but quickly soured on his by-the-book approach and insistence on Fed independence.

The president last month referred to him as an “enemy” on par with the head of the communist-led Chinese government and kept up his personal line of attack on Powell and the Fed in his tweets on Wednesday: “A once in a lifetime opportunity that we are missing because of ‘Boneheads.’”

On Friday, Powell said the Fed would act appropriately to help maintain the U.S. economic expansion and that political factors played no role in the central bank’s decision-making process.

He will hold a news conference next Wednesday at the end of the Fed’s two-day policy-setting meeting.

The Fed cut interest rates in July for the first time in more than a decade. Financial markets expect the Fed to again lower its benchmark rate, currently at 2.00-2.25%, when it meets Sept. 17-18.

Despite Trump’s name-calling, U.S. Treasury Secretary Steve Mnuchin told reporters at the White House on Monday he expected Powell’s job was safe, despite months of speculation that the president could seek to oust him.


Fed officials have downplayed the idea of setting their target policy rate below zero as politically untenable and not worth the risks. The policy is meant to account for extremely weak economic conditions by, in effect, charging banks to hold reserve deposits at the Fed.

In theory those banks would put the money to more productive uses. But it raises risks.

Banks might pay less to savers as a result, and it can make it more difficult to operate at a profit. In addition, while the Fed’s policy rate influences other borrowing costs, the interest rate on long-term government bonds Trump alluded to in his Tweet are set by larger market forces and depend mightily on perceptions about economic growth.FILE PHOTO: U.S. President Donald Trump arrives to address the 2019 National Historically Black Colleges and Universities (HBCU) week conference in Washington, U.S., September 10, 2019. REUTERS/Leah Millis

The yield on 10-year Treasury notes has collapsed by half in recent months to a near record low — a reflection of doubts about the global economy and the impact of Trump’s trade war as much as of Fed policy. Trump has cited the negative yield on Germany’s 10-year bond approvingly, but it is a product of an economy nearing or perhaps in recession.

The Washington Post, citing public filings and financial experts, reported last month that Trump could also personally save millions of dollars a year in interest if the Fed lowers rates, given the outstanding loans on his hotels and resorts.

(CNBC) Trump wants US companies to leave China. Here’s what it could mean for Chinese businesses


  • Wei Jianguo, a former vice minister at the Ministry of Commerce, told CNBC on Sunday that while the Chinese side awaits a fair and equal trade deal, the country has made preparations to counter any negative impact from trade tensions.
  • Analysts noted that one consequence of the trade tensions may be that Chinese companies gain greater market share, at the expense of U.S. businesses.
  • While there are challenges to conducting business in China, leaving the market is not the answer, said Jake Parker, vice president of China operations at the U.S.-China Business Council.
Premium - Chinese denim factory

A Chinese denim factorySTR | AFP | Getty Images

BEIJING — As trade tensions rise, American firms are facing an increasingly complex environment in China, while Chinese companies are looking for ways to adapt — all that may present new opportunities for Chinese businesses, analysts say.

On Friday, China announced plans to impose additional duties on $75 billion worth of American goods on Sept. 1 and Dec. 15. In response, U.S President Donald Trump tweeted later that day his administration would also raise tariffs on $550 billion of Chinese imports.

The latest round of tariff announcements in the last few days means that by the end of the year, essentially all Chinese goods exported to the U.S. will be subject to duties.I’m convinced the China-U.S. trade tension … is a long-term situation.Wei JianguoFORMER VICE MINISTER, CHINESE MINISTRY OF COMMERCE

Although that adds to the burden on Chinese companies, which already face pressure from a slowdown in the domestic economy, data and other analysis indicate businesses in the mainland are finding ways to remain resilient — even if it sometimes means absorbing the costs of tariffs.

“I’m convinced the China-U.S. trade tensions is a long-term situation,” said Wei Jianguo, a former vice minister at the Ministry of Commerce. He told CNBC on Sunday that while the Chinese side awaits a fair and equal trade deal, the country has made preparations to counter any negative impact from trade tensions.

“We are not afraid,” Wei, who is currently vice chairman and deputy executive officer at Beijing-based think tank China Center for International Economic Exchanges, said in a Mandarin-language phone interview translated by CNBC.

He laid out four ways in which China is bolstering its own businesses. They are:

  1. Increasing government support;
  2. Opening channels to other international markets through programs such as free trade zones and the Belt and Road Initiative — a Beijing-led massive infrastructure project;
  3. Developing a higher-quality operating environment for state-owned and foreign enterprises; and
  4. Implementing policies such as tax and fee cuts.

WATCH NOWVIDEO01:47There aren’t good alternatives to Chinese suppliers: eLumigen

The world’s two largest economies have been embroiled in an escalating trade conflict for more than a year. While the dispute initially focused on the large U.S. trade goods deficit with China, the discussions have widened to complaints including unequal foreign access to the massive Chinese market and forced technology transfer.

What it means for China businesses

The latest retaliatory tariffs mark a reversal from an agreement between Trump and Chinese President Xi Jinping at their meeting in late June, when they agreed not to levy duties on goods from each other’s country.

“That breach, and the limited movement from the US in relaxing restrictions on Huawei, means that Xi has effectively given up on efforts to curry favor with Trump,” Michael Hirson, practice head, China and Northeast Asia, at consulting firm Eurasia Group, said in a note Saturday Beijing time.

“China’s leaders have likely not made a definitive decision yet to rule out a trade deal with Trump until after the US election, ” Hirson said. “However, they are increasingly skeptical about Trump’s viability as a negotiating partner and (are) no longer willing to make significant concessions to appease him.”In the short term, increased U.S. tariffs will have a negative impact on the profitability of Chinese enterprises. In the long term, if the China-U.S. trade tensions continue, they will impact the structure of the global industrial chain.Wang ZheSENIOR ECONOMIST AT CAIXIN INSIGHT

U.S. stocks plunged Friday, with the Dow Jones industrial average falling more than 600 points.

If investors are concerned about the impact of escalating trade tensions to American corporations, Chinese companies may start finding more business opportunities.

“In the short term, increased U.S. tariffs will have a negative impact on the profitability of Chinese enterprises,” Wang Zhe, senior economist at Caixin Insight, said last Monday in written commentary to CNBC.

“In the long term, if the China-U.S. trade tensions continue, they will impact the structure of the global industrial chain,” Wang added, according to a CNBC translation of the Chinese-language comments. “Of course, this will also force domestic companies to change their production methods and promote transformation and upgrading (of their operations).”

Analysts noted that another consequence of the trade tensions may be that Chinese companies gain greater market share, at the expense of U.S. businesses. Already, data and company reports indicate how Chinese companies are shifting agricultural purchases away from the U.S. to other countries, especially those in Latin America.

“For companies with sales exposure, they are absorbing some of the tariff cost or trying to pass it on, but they are losing business to competitors from other countries — something that is already happening,” said Jake Parker, vice president of China operations at the U.S.-China Business Council. “Ability to pass along those costs will depend on margin, availability of alternative sources, and supplier contract terms.”

Trump urges US firms to leave China

On Friday, Trump said in a tweet that U.S. companies “are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA. ” It was not immediately clear under what authority or how the president could implement such orders.

Donald J. Trump@realDonaldTrump · Aug 23, 2019

Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far….

Donald J. Trump@realDonaldTrump

….better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing..56K3:59 PM – Aug 23, 2019Twitter Ads info and privacy33.8K people are talking about this

“If it does however result in US companies, to one degree or another, vacating the China market that would presumably open opportunities for Chinese companies to fill the void,” Stephen Olson, research fellow at the nonprofit Hinrich Foundation, said in an email Sunday.

More significantly, he said “such a move would be an unprecedented rupture in the trade and economic relationship between the two largest economies in the world” that would create uncertainty that’s bad for both Chinese and U.S. companies.

While there are challenges to conducting business in China, leaving the market is not the answer, said Parker.

“It is important to keep in mind that US business has been a positive example for progress in China … American companies bring ideas, values, and examples that are pervasive, consistent catalysts for progress,” said Parker. On the other hand, if U.S. companies left China, they would miss out on a major global growth opportunity.

“The only way to resolve the many challenges US companies face operating in the China market is for the two sides to continue negotiations and find a compromise that removes tariffs and sets the relationship on a more stable, predictable and constructive trajectory.”

China firms looking for ways to adapt

Trump’s administration has centered on tariffs as the primary tool of action in the trade dispute. But it’s not clear how effective they are in getting China to budge.

Analysis from Chris Rogers, researcher at Panjiva, the supply-chain research unit at S&P Global Market Intelligence, found that prices for some categories of goods — such as chemicals and furniture — dropped, as tariffs were applied.

”(Some) Chinese companies are cutting some of the prices at which they sell to the U.S.,” he said in a phone interview earlier this month.

Year-over-year change in US import prices from China by industry

Source: Panjiva, the supply-chain research unit at S&P Global Market Intelligence. Calculations based on figures by the U.S. Bureau of Labor Statistics.

Wei said Sunday that some Chinese companies were absorbing the cost of the tariffs, but not many. Rather, he said most businesses were waiting for some resolution in the trade talks.

Last week, Parker from the U.S.-China Business Council, also said that most companies were still evaluating how long tariffs will be in place before making significant business changes.

“Companies with supply exposure to tariffs are considering their options,” he said in an email Aug. 20. “Some are moving their sourcing. Some are maintaining their current supply chains and either deal with a cut in margins or pass on as much of the tariff cost as they can.”

The U.S. and Chinese trade delegations remain in communication, China’s Ministry of Commerce spokesperson Gao Feng said Thursday. The two sides held a high-level phone conversation on Aug. 13 and planned to hold a similar call within two weeks, ahead of an expected in-person meeting in September, Gao said last week.

(Economist) Donald Trump and Hassan Rouhani talk about talking to each other


The prospect of an Iran-US summit is the most tantalising outcome of Emmanuel Macron’s diplomacy in Biarritz

THE G7 SUMMIT drew to a close on August 26th in the French seaside town of Biarritz amid improbable displays of goodwill and bonhomie. President Donald Trump declared the meeting a “true success”, and claimed that “nobody wanted to leave”. President Emmanuel Macron, the French summit host, thanked the American president profusely for enabling a “real partnership” between the two countries. The conflict and theatrics that the French had feared might split the G7 and wreck the meeting failed to materialise.Get our daily newsletter

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Perhaps the most startling, and spectacular, outcome was Mr Macron’s announcement that a face-to-face meeting between Mr Trump and Iran’s President Hassan Rouhani could take place in the “coming weeks”. On August 25th, the French president had pulled off what looked suspiciously like a stunt when he invited Muhammad Javad Zarif, the Iranian foreign minister, to Biarritz for meetings outside the G7 format. Yet a day later, there was Mr Trump, standing beside the French president, acknowledging that “if the circumstances were right” he would “certainly agree” to such a meeting. “I have a good feeling,” Mr Trump declared, saying the Iranians wanted to meet because they were “hurting badly” as a result of American sanctions.

Mr Macron’s diplomatic team has been working for weeks on ways to try to ease tensions with Iran, and to find some way to preserve the principles embodied in the Joint Comprehensive Plan of Action (JCPOA), if not the accord itself. Signed in 2015, the JCPOA limited Iran’s nuclear programme, pushing back its ability to “break out” as a nuclear-weapons power in exchange for the partial lifting of sanctions. Mr Trump withdrew from it last year, and embarked on a policy of “maximum pressure” to cripple Iran’s economy.

Hours before Mr Trump spoke at the G7, Mr Rouhani signalled that his administration was also willing to talk. “If I know that by meeting someone, the problem of my country will be solved, I will not hesitate,” he said in a speech. At the time, his words seemed a defence of Mr Zarif, whose trip to Biarritz was poorly received by conservatives at home. Kayhan, a choleric newspaper close to the supreme leader said it projected “weakness and desperation”. But his comments also suggest he would be open to a personal meeting with Mr Trump.

If a Trump-Rouhani summit came off, it would be the first between American and Iranian leaders since the Islamic revolution in 1979. Mr Rouhani did not even meet Barack Obama, who spent much of his second term pursuing better relations with Iran, culminating with the JCPOA. (They did manage a brief phone call in 2013.)

But Mr Rouhani would have to overcome objections from the supreme leader, Ali Khamenei, and the powerful Islamic Revolutionary Guard Corps, who oppose engagement with America. When Japan’s prime minister, Shinzo Abe, brought a message from Mr Trump on a visit to Tehran this summer, Mr Khamenei deemed it unworthy of a reply. Over the past few months those hawkish factions have pushed a more aggressive response to Mr Trump’s anti-Iran campaign. Oil tankers have been seized and sabotaged in the Persian Gulf. America and Iran have shot down each other’s drones, and America nearly carried out airstrikes in June.

Beyond the symbolism of a summit, though, it is unclear what a meeting would achieve beyond the bargain struck under the JCPOA. The Trump administration wants Iran to halt all uranium enrichment (which Iran insists is needed to make fuel for nuclear-power reactors), withdraw its troops from Syria and end support for regional proxies like Hizbullah, a Lebanese militia-cum-political party. Iran will agree to none of that.

Mr Rouhani’s allies counter by citing the example of Kim Jong-un: in a series of meetings, the North Korean leader wooed Mr Trump, who now gushes about “falling in love” with the North Korean dictator. His charm offensive lowered tensions with America—and he made no real concessions in return.

Apart from raising the hope of averting a shooting war between America and Iran, the G7 summit also offered some prospect of easing the trade wars that Mr Trump so enjoys waging.

There was an agreement, at least in principle, to ease trans-Atlantic tensions over a new French tax on tech giants, which disproportionately affects American firms. Last month Mr Trump had criticised Mr Macron’s “foolishness”, and promised to retaliate with restrictions on imports of French wine. In Biarritz, however, the French president announced a deal with Mr Trump: France would abolish the tax as soon as an international equivalent was in place; money paid by firms to France would be deducted from their obligations under the future tax regime and any excess reimbursed. Mr Trump did not protest.

On the bigger dispute over trade with China, Mr Trump also ended the G7 summit on a constructive note. After days of tit-for-tat announcements of trade tariffs, which sent markets reeling, Mr Trump said the Chinese had contacted the Americans and they “really do want to do a deal”. This was a “very positive step”, Mr Trump said, so helping to lift markets in Asia and Europe. Whether the American president sticks to this line remains to be seen. Just three days previously, the same Mr Trump increased tariffs on over $500bn of Chinese goods.

America and Japan also announced a deal on their own trade spat, but gave few details other than that it would cover agriculture, industrial tariffs and digital trade. Mr Trump seemed pleased, mainly because Japan will provide “support” for its farmers to buy more American corn, which is piling up as a result of the dispute with China.

There were also small steps to help stop fire spreading in the Amazon, including a pledge by G7 members to contribute $20m to that end. A tiny sum, in view of Mr Macron’s belief that the fires amounted to an international crisis. But given the many political sparks and fires he may have dampened, the French president nevertheless had good reason to be pleased with his work.

(ZH) US To “Drown The World” In Oil

(ZH) The U.S. could “drown the world in oil” over the next decade, which, according to Global Witness, would “spell disaster” for the world’s attempts to address climate change.

The U.S. is set to account for 61 percent of all new oil and gas production over the next decade. A recent reportfrom this organization says that to avoid the worst effects of climate change, “we can’t afford to drill up any oil and gas from new fields anywhere in the world.” This, of course, would quickly cause a global deficit, as the world continues to consume around 100 million barrels per day (bpd) of oil.

Global Witness notes that the industry is not slowing down in the United States, notwithstanding recent spending cuts by independent and financially-strapped oil and gas firms. If anything, the consolidation in the Permian and other shale basins, increasingly led by the oil majors, ensures that drilling will continue at a steady pace for years to come.

It isn’t as if the rest of the world is slowing down either. The global oil industry is set to greenlight $123 billion worth of new offshore oil projects this year, nearly double the $69 billion that moved forward last year, according to Rystad Energy. In fact, while shale drilling has slowed a bit over the past year amid investor skepticism and poor financial returns, offshore projects have begun to pick up pace.

But that trend might turn out to be just a blip. The U.S. is still expected to account of the bulk of new drilling and the vast majority of new production, with much of that coming from shale. Already, the U.S. is the world’s largest producer of both oil and natural gas. And the pace has accelerated in recent years. In 2018, U.S. oil and gas production increased by 16 and 12 percent, respectively. According to the EIA, the U.S. surpassed Russia in terms of gas production in 2011, claiming the top spot, and it surpassed Saudi Arabia in oil production last year.

Going forward, new production from the U.S. will be eight times larger than the next largest source of growth, which is Canada. In fact, the U.S. will add 1.5 times more oil and gas than the rest of the world combined, according to Global Witness.

But because so much drilling in the U.S. is concentrated in a few areas, individual U.S. states on their own tower over the rest of the world. If Texas were a country, it would account for the most new oil and gas production in the world. Between 2020 and 2029, Texas could account for 28 percent of all additional output, Global Witness says.

Canada and Pennsylvania tie for second and third with 7 percent each. Then comes New Mexico at 5 percent of the growth and North Dakota at 4 percent. Oklahoma, Brazil, Colorado, Russia and Ohio are all tied at 3 percent a piece.

In other words, 7 out of the top 10 sources of new oil and gas production globally over the next decade are U.S. states.

“If things don’t change, by the end of the next decade, new oil and gas fields in the US will produce more than twice what Saudi Arabia produces today,” Global Witness said in its report.

This presents a massive challenge. “To avoid the worst impacts of climate change, our analysis shows that global oil and gas production needs to drop by 40% over the next decade. Yet, instead of declining, US oil and gas output is set to rise by 25% over this time, fueled by expansion in new fields,” the report warned.

(FoxNews) China announces it seeks ‘calm’ end to trade war, as markets tank and currency hits 11-year flatline


Gregg Re

China signaled on Monday it was now seeking a “calm” end to its ongoing trade war with the U.S., as Asian markets crumbled and China’s currency plummeted to an 11-year low following the latest tariffs on $550 billion in Chinese goods announced last Friday by the Trump administration.

Trump said Monday that officials from China called U.S. officials and expressed interest to “get back to the table,” The Wall Street Journal reported. He called the discussions a “very positive development.”

“They want to make a deal. That’s a great thing,” he said.

News of the possible opening in negotiations came shortly after President Trump threatened to declare a national emergency that would result in American businesses freezing their relationships with China. Trump’s tariff barrage on Friday was a response to China imposing its own retaliatory tariffs on $75 billion in U.S. goods.

At the Group of Seven summit in France on Sunday, White House officials rejected suggestions the president was wavering and insisted that his only regret was not implementing even more tariffs on China. Trump wrote on Twitter that world leaders at the G-7 were “laughing” at all the inaccurate media coverage of the gathering.

In response, Chinese Vice Premier Liu He told a state-controlled newspaper on Monday that “China is willing to resolve its trade dispute with the United States through calm negotiations and resolutely opposes the escalation of the conflict,” Reuters first reported, citing a transcript of his remarks provided by the Chinese government. Liu is China’s top trade negotiator.

A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Monday, Aug. 26, 2019. (AP Photo/Ahn Young-joon)

A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Monday, Aug. 26, 2019. (AP Photo/Ahn Young-joon)

Speaking at a technology conference in China, Liu added: “We believe that the escalation of the trade war is not beneficial for China, the United States, nor to the interests of the people of the world.”


“We welcome enterprises from all over the world, including the United States, to invest and operate in China,” Liu said. “We will continue to create a good investment environment, protect intellectual property rights, promote the development of smart intelligent industries with our market open, resolutely oppose technological blockades and protectionism, and strive to protect the completeness of the supply chain.”

Asian shares tumbled early Monday, with Japan’s benchmark Nikkei 225 started plummeting as soon as trading began and stood at 20,234.87 in the morning session, down 2.3 percent. Australia’s S&P/ASX 200 slipped 1.5 percent to 6,427.20. South Korea’s Kospi lost 1.7 percent to 1,916.14. Hong Kong’s Hang Seng dropped 3.3 percent to 25,309.37, while the Shanghai Composite was down 1.2 percent at 2,862.87.

Donald J. Trump@realDonaldTrump

In France we are all laughing at how knowingly inaccurate the U.S. reporting of events and conversations at the G-7 is. These Leaders, and many others, are getting a major case study of Fake News at it’s finest! They’ve got it all wrong, from Iran, to China Tariffs, to Boris!63.7K12:10 AM – Aug 26, 2019Twitter Ads info and privacy31.5K people are talking about this

The yuan also slipped to 7.1487 to the dollar, weeks after the Treasury Department formally designated China a currency manipulator. The Treasury Department said it will work with the International Monetary Fund to try to rectify the “unfair competitive advantage created by China’s latest actions.”

“The gloves are coming off on both sides and as such yuan depreciation is an obvious cushion against US tariffs,” Mitul Kotecha, an economist at Toronto-Dominion Bank, told Bloomberg News.

There are several reasons why China’s central bank would want to allow the yuan to drop, including to help struggling local exporters who want their products to be less expensive for international purchasers. People’s Bank of China Governor Yi Gang, however, has insisted China does not “engage in competitive devaluation.”

On Sunday, Treasury Secretary Steven Mnuchin told reporters that if “China would agree to a fair and balanced relationship, we would sign that deal in a second.”

Stephen Innes, managing partner at Valour Markets in Singapore, compared the difficulty of assessing the volatile market situation to reading tea leaves.

“Nobody understands where the president is coming from,” he said, adding that the best thing Trump can do for market stability is to “keep quiet.”

“The problem that we’re faced right now is that we are making a lot of assumptions ahead of the economic realities.”

A computer screen shows images of Chinese President Xi Jinping, right, and U.S. President Donald Trump as a currency trader works at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul. (AP Photo/Ahn Young-joon)

A computer screen shows images of Chinese President Xi Jinping, right, and U.S. President Donald Trump as a currency trader works at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul. (AP Photo/Ahn Young-joon)

The market is now dominated by fears of a portending U.S. recession, although the American economy is actually holding up, and much of the U.S. economy is made up of consumption, Innes said. If interest rates come down, he added, consumer spending is likely to go up, working as a buffer for the economy.

“What the market’s really waiting for is for them to drop interest rates,” Innes said. “Right now, we are still sitting on that uncertainty.”

Meanwhile, Sen. Lindsey Graham, R-S.C., said on Sunday that Democrats should not criticize Trump for taking on China over trade as they have complained for years about Beijing’s policies but done nothing. Senate Minority Leader Chuck Schumer, D-N.Y,  for example, has urged Trump to fight China aggressively.

“Every Democrat and every Republican of note has said China cheats,” Graham said on CBS News’ “Face the Nation.” “The Democrats for years have been claiming that China should be stood up to, now Trump is and we’ve just got to accept the pain that comes with standing up to China.”

U.S. markets have also taken something of a beating. The Dow Jones Industrial Average plunged more than 600 points Friday after the latest escalation in the trade war between the U.S. and China rattled investors. The broad sell-off sent the S&P 500 to its fourth straight weekly loss.

The tumbling began after Trump responded angrily on Twitter following China’s announcement of new tariffs on $75 billion in U.S. goods. In one of his tweets he “hereby ordered” U.S. companies with operations in China to consider moving them to other countries — including the U.S.


Trump also said he’d respond directly to the tariffs — and after the market closed he delivered, announcing that the U.S. would increase existing tariffs on $250 billion in Chinese goods to 30 percent from 25 percent, and that new tariffs on another $300 billion of imports would be 15 percent instead of 10 percent.Video

“Starting on October 1st, the 250 BILLION DOLLARS of goods and products from China, currently being taxed at 25 percent, will be taxed at 30 percent,” Trump wrote on Twitter. “Additionally, the remaining 300 BILLION DOLLARS of goods and products from China, that was being taxed from September 1st at 10 percent, will now be taxed at 15 percent. Thank you for your attention to this matter!”.

Zhu Huani of Mizuho Bank in Singapore said what he called Trump’s “tariff tantrum” was setting off “the sense that tariffs could continue to rise,” with the “the unpredictability of timing and extent of these trade actions risk accentuating the paralysis of business decisions and big-ticket business spending.”

“No matter which way you cut the cake, it is nearly impossible to construct a bullish, or even neutral scenario for equity markets today,” said Jeffrey Halley, senior market analyst at Oanda.

Trump also said Friday morning that he was “ordering” UPS, Federal Express and Amazon to block any deliveries from China of the powerful opioid drug fentanyl. The stocks of all three companies fell as traders tried to assess the possible implications.

The president has also raged against Federal Reserve chairman Jerome Powell for his continued refusal to cut interest rates, at one point saying: “My only question is, who is our bigger enemy, Jay Powel (sic) or [China’s] Chairman Xi [Jinping]?”

That outburst came after Powell, speaking to central bankers in Jackson Hole, Wyo., gave vague assurances that the Fed “will act as appropriate” to sustain the nation’s economic expansion. While the phrasing was widely seen as meaning interest rate cuts, he offered no hint of whether or how many reductions might be coming the rest of the year.


Some analysts, however, are confident the Federal Reserve will lower interest rates this year.

A quarter-point rate cut reduction in September is considered all but certain.

(SCMP) Hong Kong’s currency peg to the US dollar isn’t an Achilles’ heel – it’s an Achilles’ shield

(SCMP) Hong Kong’s currency peg to the US dollar isn’t an Achilles’ heel – it’s an Achilles’ shield

  • The peg, which prevented a complete economic wipeout in 1983, has been described as a ‘deadly weakness’
  • But in truth it is an automatically self-correcting mechanism that today’s Hongkongers can be thankful for, writes Tom Holland
The architects of the currency peg were aware that it would be impossible for Hong Kong to allow the free movement of capital while at the same time operating both a fixed exchange rate and an independent monetary policy. Photo: Roy Issa

The architects of the currency peg were aware that it would be impossible for Hong Kong to allow the free movement of capital while at the same time operating both a fixed exchange rate and an independent monetary policy. Photo: Roy IssaApparently, Hong Kong has an “Achilles’ heel”. According to one Zhou Luohua, vice-president at the Chongyang Finance Research Institute of Beijing’s Renmin University, the city’s deadly weakness is its currency peg to the US dollar.

In an article in the South China Morning Post last week, Zhou argued that the peg left Hong Kong’s economy extremely exposed to falls in local stock and property prices.Because of the constraints of the peg, the Hong Kong Monetary Authority (HKMA) is not free like other central banks to pump unlimited liquidity into the local financial system.

“If asset prices are plunging, it would trigger an exodus of funds at the same time, translating into a double hit for the Hong Kong economy,” Zhou warned.

Now, the Chongyang Finance Research Institute sounds at first like a reputable academic institution. However, a quick look at its website might cause you to question that assumption.

The real danger behind US currency manipulation charges against China

Last week, for example, one of Zhou’s senior colleagues dismissed Hong Kong’s protesters as “confused”. Saying he has visited Hong Kong “several times”, he declared that “the idea that this is all about democracy is nonsense”.SUBSCRIBE TO THIS WEEK IN ASIAGet updates direct to your inboxSUBMITBy registering, you agree to our T&C and Privacy Policy

“Most people are more interested in the back sports pages of newspapers than they are in the front political parts,” he claimed, adding that local discontent was motivated by Hongkongers’ material greed.

However, just because one of his colleagues spouts such idiocies is no reason to dismiss Zhou’s warning out of hand. So let’s unpack his argument that Hong Kong’s currency peg to the US dollar is a fatal flaw to see if it stands up to examination.

Zhou is correct to say that the HKMA cannot support local asset markets with unlimited quantities of liquidity.

For Hong Kong as an international banking centre, free capital flows were essential. Photo: Bloomberg

For Hong Kong as an international banking centre, free capital flows were essential. Photo: BloombergShare:

This is by design. The architects of the peg were perfectly aware that it would be impossible for Hong Kong to allow the free movement of capital while at the same time operating both a fixed exchange rate and an independent monetary policy.

For Hong Kong as an international banking centre, free capital flows were essential. Indeed, free movement of capital is why the city is today a major international financial centre, while Shanghai is not.

So, the choice was between a fixed exchange rate and an independent monetary policy.

Well, Hong Kong operated an independent monetary policy before 1983, and as a result it had to allow the Hong Kong dollar to float. It was an unhappy combination. When the Sino-British negotiations leading up to the handover looked as if they were running into trouble, confidence in the city’s future collapsed, and so did the currency’s exchange rate.

Why the extradition bill protests won’t burst Hong Kong’s property bubble

Between January and September 1983, the Hong Kong dollar lost a quarter of its value against the US dollar. It was only the October decision to reverse course, sacrifice monetary independence and fix the exchange rate that restored confidence and prevented a complete economic wipeout. It was a decision today’s Hongkongers can be thankful for. If the city still operated a floating exchange rate, it is likely that increasing fears of intervention by mainland security forces over recent weeks would have triggered a fresh slide in the Hong Kong dollar, inviting a maelstrom of speculation that would have led in turn to a full-blown currency crisis.

As it is, the city’s financial markets and economy have remained remarkably stable. The exchange rate remains fixed. The stock market is in positive territory year-to-date. Property prices are within 1.2 per cent of their all-time high. And the local jobless rate is at just 2.9 per cent – effectively full employment.

If capital flows out of Hong Kong, Hong Kong-dollar liquidity dries up, and local interest rates rise until they reach a level that attracts capital back again. Photo: Winson Wong

If capital flows out of Hong Kong, Hong Kong-dollar liquidity dries up, and local interest rates rise until they reach a level that attracts capital back again. Photo: Winson WongShare:

But what about Zhou’s warning that a steep sell-off in Hong Kong’s asset markets could lead to destabilising capital flight, and that because of the peg the local authorities would be powerless to prevent the outflows inflicting catastrophic damage on the city’s financial system and economy?

It is true that large-scale capital flight could push local interest rates to frightening levels. During the Asian crisis in 1997 and 1998, the one-month Hibor rate, to which most mortgages are now linked, twice rose to 20 per cent. But on each occasion, the spike lasted only a few days – not long enough to inflict serious pain on borrowers – and local interest rates soon subsided back into line with US rates.

That’s the point. The mechanism is automatically self-correcting. If capital flows out of Hong Kong, Hong Kong-dollar liquidity dries up, and local interest rates rise until they reach a level that attracts capital back again.

China’s sinister plan to buy Eastern Europe is exaggerated

Right now, that level wouldn’t have to be very high at all. With US$16 trillion of global bonds currently offering negative yields, the 10-year US Treasury bond paying just 1.6 per cent, and investors around the world desperate for yield, it is highly likely that even in a major asset market sell-off, local interest rates would have to rise to no more than 4 per cent or 5 per cent to attract net inflows of funds once again. The HKMA’s stress tests indicate that the local financial system would take such an increase in its stride, with minimal knock-on effects.

Of course, if the People’s Liberation Army were to roll into Hong Kong guns blazing, all bets would be off. Confidence in the city would crash, and so would the local financial system in the unlikely event it remained open.

But that would be the least of anyone’s problems. A Tiananmen-style suppression of the city’s protests would force the world’s other major economies to cast China out of the global trading system. China’s economy would crash, and the rest of the world would enter a deep depression as globalisation unravelled.

That’s the doomsday scenario, and Beijing’s instinct for self-preservation will ensure it doesn’t happen. Barring that, Zhou is wrong: Hong Kong’s currency peg to the US dollar is not a weakness, it’s a strength. ■

(Economist) America angers China with a sale of fighter jets to Taiwan


China’s fury is certain; its retaliation unpredictable

FOR TAIWAN, there is nothing like an American president who is not squeamish about outraging China. Even before he took office, Donald Trump stirred indignation in Beijing by taking a congratulatory phone call just after his election from Tsai Ing-wen, the president of Taiwan. (China saw this as a breach of the “one-China principle”, under which it demands that countries that maintain formal diplomatic ties with it do not also have them with Taiwan, which it views as part of China.) America recently allowed Ms Tsai to visit New York for one of the longest stays ever granted to a Taiwanese president, and sold Taiwan tanks and anti-aircraft missiles worth $2.2bn. But this week Mr Trump thrilled Taiwan with a step that China will see as an even bigger affront.

On August 18th Mr Trump decided to sell Taiwan 66 new F-16 fighter jets. The sale, worth $8bn, still needs congressional approval. But leading Republicans and Democrats alike have championed it, seeing Taiwan as a bulwark against Beijing’s expansion in the Asia-Pacific.

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The new fleet of F-16s will boost Taiwan’s ageing air force, but hardly tip the military balance against China’s increasingly powerful armed forces. The real power they embody is that of a psychological shock for the one-party state across the strait. The last time America sold fighter jets to Taiwan was in 1992.

Taiwan first asked America for more F-16s in 2006, under the previous president from Ms Tsai’s Democratic Progressive Party, which typically has especially testy relations with China. His successor, Ma Ying-jeou, of the more China-friendly party, the Kuomintang (KMT), reiterated the request. But China persuaded the administrations of both George W. Bush and Barack Obama to refuse. During Mr Obama’s presidency in particular, China portrayed a potential sale of F-16 planes as crossing a red line. It never tires of reminding America that in 1982 it promised to reduce arms sales to Taiwan.

Ms Tsai, who is campaigning for re-election in early 2020, was delighted with the news. Her campaign presents her as a foil to an ever more repressive, assertive China. Her KMT challenger, Han Kuo-yu, whom critics accuse of being too cosy with China, also applauded Mr Trump’s decision and pledged to deepen military ties with America if elected. Arthur Ding, of National Chengchi University, thinks the deal, despite its hefty price tag, will fly swiftly through the sometimes combative legislature.

China was not so happy. A spokeswoman for the foreign ministry said on August 16th that American arms sales “severely violate the one-China principle”. But it is not clear if it plans anything more than a rhetorical response, such as suspending military exchanges with America. The impact on other disputes between the two countries—over trade, for example—is also uncertain.

(GUA) Venezuelan leader Nicolás Maduro confirms months of secret US talks

(GUA) ‘Various contacts’ made, says embattled president, amid reports he is negotiating a way to stand down

Venezuela’s president Nicolas Maduro with national assembly chief Diosdado Cabello, who has reportedly been speaking to Trump advisers.
 Venezuela’s president Nicolas Maduro with national assembly chief Diosdado Cabello, who has reportedly been speaking to Trump advisers. Photograph: Manaure Quintero/Reuters

Nicolás Maduro has confirmed top Venezuelan officials have been talking to members of Donald Trump’s White House, after reports his second-in-command had been negotiating his downfall with the United States.

“I confirm that for months there have been contacts between senior officials from Donald Trump’s government and from the Bolivarian government over which I preside – with my express and direct permission,” Venezuela’s authoritarian leader said in a televised address on Tuesday night.

“Various contacts through various channels,” Maduro added.

Maduro’s remarks came after two reports in the US media claimed Diosdado Cabello, one of Venezuela’s most powerful and feared men, had been engaged in “secret communications” with Trump officials.

On Sunday Axios claimed that in recent months Cabello, the 56-year-old head of Venezuela’s pro-Maduro constituent assembly, had been communicating with Trump’s top Latin America adviser, Mauricio Claver-Carone. Some Trump officials reportedly considered that a positive sign suggesting Maduro’s circle was “gradually cracking”.

The Associated Press claimed Cabello had met someone “in close contact with the Trump administration” in Caracas last month and that a second meeting was envisioned. The US reportedly hoped engaging with Cabello would intensify an internal “knife fight” supposedly raging at the pinnacle of Maduro’s administration.

Observers of Venezuelan politics greeted those reports – apparently designed to destablise Maduro’s crisis-stricken administration by stoking paranoia within his inner-circle – with scepticism.

Christopher Sabatini, a senior fellow for Latin America at the Chatham House thinktank, said: “I think what the US is trying to do is some sort of psy ops thing, trying to rattle people within Maduro’s administration.”

But on Tuesday Maduro confirmed contact with the US, which he painted as proof that he had been seeking ways “for president Donald Trump to truly listen to Venezuela and the truth of the 21st century Bolivarian revolution”.

Earlier in the day Trump told reporters: “We’re talking to various representatives of Venezuela. I don’t want to say who, but we are talking at a very high level.”

Geoff Ramsey, a Venezuela expert at the Washington Office on Latin America, described reports there had been talks between Cabello and Trump officials as “a very positive sign”.

“It suggests an understanding at the top level of [Maduro’s] government that this is unsustainable,” he said of Venezuela’s ongoing economic, political and humanitarian meltdown.

“I think what these people are looking for is some kind of guarantee [from the US] that they are not going to end up in a jail cell in Miami,” Ramsey added.

Maduro has been fighting for his political life since January when a young opposition leader, Juan Guaidó, declared himself Venezuela’s rightful president and received the backing of more than 50 governments, including the US and UK.

More than four million Venezuelans have now fled their oil-rich but economically devastated nation, according to the UN’s refugee agency, with at least 1 million people leaving since last November alone.

(EUobserver) US warns Greece on Iranian oil tanker

(EUobserver) The United States has warned Greece not to give harbour to an Iranian oil tanker suspected of smuggling oil to Syria in defiance of EU sanctions, saying it would treat the act as support for terrorism. The ship was previously seized by the British navy and detained in Gibraltar, but Gibraltar let it go despite US pressure, while Iran has denied any wrongdoing.

(SCMP) Was China’s Arctic push behind Donald Trump’s wish to ‘buy’ Greenland?


  • Greenland is gaining attention from global super powers including China due to its strategic location and its mineral resources
Icebergs float behind the town of Kulusuk in Greenland. Photo: AFP

Icebergs float behind the town of Kulusuk in Greenland. Photo: AFPUS President Donald Trump’s reported wish to buy Greenland may have been rejected by Denmark, but it underscores the rapidly rising value of the massive, ice-covered island due to global warming and to China’s drive for an Arctic presence.

The accelerating polar ice melt has left sparsely populated Greenland, a self-governing part of Denmark, astride what are potentially major shipping routes and in the crosshairs of intensifying geopolitical competition between superpowers.

It also has untapped natural resources like oil, minerals and valuable rare earth elements that China, the United States and other major tech economies covet.

A Chinese government-backed group’s offer last year to build three new international airports on Greenland sparked alarms in Copenhagen and Washington.

The Chinese plan was finally nixed in exchange for Danish funding and a pledge of support from the Pentagon.

US defence report flags China’s expanding military reach in the Arctic

Trump’s idea to buy Greenland, reported by The Wall Street Journal on Friday, “is not a serious proposal,” said Heather Conley, a specialist at the Centre for Strategic and International Studies in Washington.SUBSCRIBE TO SCMP TODAY: INTL EDITIONGet updates direct to your inboxSUBMITBy registering, you agree to our T&C and Privacy Policy

But, “The administration has awoken to the Arctic as a geostrategic issue,” she said.

Trump is not the first US president to consider such an offer – the Truman administration reportedly offered Denmark US$100 million for Greenland’s purchase after World War II.

In 1917 Denmark sold off the then Danish West Indies islands for US$25 million to the United States, which renamed them the United States Virgin Islands.

Greenland has been essential to US defence since that war when it was a base for monitoring Nazi ships and submarines passing through the “Arctic Avenue”, the sea gateway to the north Atlantic.

In 1943 the US Air Force built its farthest-north airbase at Thule, Greenland.

Thule Airbase in Pituffik, Greenland. File photo: AFP

Thule Airbase in Pituffik, Greenland. File photo: AFPShare:

Thule was crucial in the cold war, a first line of monitoring against a potential Russian attack.

With a population of 600, the base today is part of the Nato mission, operating satellite monitoring and strategic missile detection systems and handling thousands of flights a year.

“The early warning radar system in northern Greenland helps protect North America and is a key part of our missile defence apparatus,” said Luke Coffey of The Heritage Foundation.

The Arctic is the next geopolitical hotspot that the US wants to freeze China out of

“Luckily the US is able to ensure and meet its security interests by maintaining this airbase in northern Greenland. There’s no requirement to buy Greenland to keep America safe.”

Conley said that after the cold war ebbed in the 1990s, Washington stopped thinking about the Arctic.

Yet as the polar ice sheet began to shrink, the Russians became more active and China has moved to establish itself in the region.

US Secretary of State Mike Pompeo underscored the revived US interest in a speech in May in Finland, where he slammed China and Russia for “aggressive behaviour” in the Arctic.

“The region has become an arena of global power and competition” owing to vast reserves of oil, gas, minerals and fish stocks, he warned.

“Just because the Arctic is a place of wilderness does not mean it should become a place of lawlessness,” he said.

But Washington has not taken many concrete actions, Conley said. Pompeo only offered that the State Department would position a diplomat in Greenland’s capital Nuuk for six months of the year.

“The rhetoric and the reaction – there is a very big gap,” she said.

Russia seeks Chinese support in developing Arctic shipping routes, promising long-term gas supplies in return

With no geographical claim to the region, but whose massive commercial shipping industry would benefit from new polar routes as the ice melts, China is the newcomer whose presence could shift the balance.

It began sending scientific missions in 2004. In the past several years, a Chinese company has gained mining rights for rare earths, partnering with an Australian company in the Kvanefjeld project.

In January 2018 Beijing unveiled its “Polar Silk Road” strategy to extend its economic footprint through the Arctic.

To gain favour in Nuuk, Chinese have wined and dined government officials, said Coffey.

“China’s role in the Arctic has been more about expanding its economic influence, soft power,” said Coffey.

“Ice melting is part of the interest, it is opening up new economic opportunities, but it’s also opening up challenges. The US is aware of that,” he said.

The end of the Arctic as we know it

In a sign of Washington’s rekindled interest, US President Donald Trump will go to Denmark in September, and Vice-President Mike Pence will visit Iceland.

But Conley says more assertive moves are needed.

“I think we have a remarkably strong position now in Greenland. Denmark is an incredibly strong military partner to the US,” she said.

“But if we are interested in potentially being an alternative to Greenland looking towards China for investment, are we going to put US investment there? I’ve not seen any of that.”

(SCMP) Japan overtakes China as the biggest creditor to the US, as Japan’s June Treasuries holdings jump to a 30-month high


  • Japan increased its holdings of US bonds, bills and notes by US$21.9 billion to US$1.12 trillion, the highest level in more than two and half years
  • China’s ownership rose for the first time in four months to US$1.11 trillion, up by US$2.3 billion
A yen note is seen in this illustration photo taken June 1, 2017. Photo: REUTERS

A yen note is seen in this illustration photo taken June 1, 2017. Photo: REUTERS

Japan surpassed China in June as the top holder of US Treasuries as the trade war between the world’s two largest economies intensified.

Japan increased its holdings of US bonds, bills and notes by US$21.9 billion to US$1.12 trillion, the highest level in more than two and half years, according to data released by the Treasury Department on Thursday. Meanwhile, China’s ownership rose for the first time in four months to US$1.11 trillion, up by US$2.3 billion.

The last time Japan held the position as America’s largest foreign creditor was May 2017. The nation has added more than US$100 billion worth of Treasuries at a fairly steady pace since October 2018. Treasuries have become more attractive as the globe’s pool of negative yielding debt grows, according to BMO Capital Markets.

While benchmark 10-year US yields have plunged to the lowest level since 2016 in recent months, the rate on 10-year Japanese government bonds is currently negative 0.23 per cent.

“The buying we have seen from Japanese investors is really a reflection of the globally low and negative yield environment,” said BMO strategist Ben Jeffery.

A cautious months-long calm in the US-China trade war was interrupted in May when talks between the two sides broke down. In June the US raised tariffs on US$200 billion of Chinese goods to 25 per cent from 10 per cent.

While Trump and Chinese leader Xi Jinping agreed to a ceasefire in late June, that only lasted about a month before the US president announced that on September 1 he’ll impose a 10 per cent levy on virtually every import from China not yet subject to duties.

This week, Trump partially backed down by delaying the 10 per cent charge on certain items, including mobile phones and laptops, until December 15 to stem the impact on holiday shopping. Beijing says it still plans to retaliate.China’s US debt hoard has come under increased scrutiny in the trade dispute amid speculation that the Asian nation could sell Treasuries in response. Earlier this month, the US formally labelled China a currency manipulator after the yuan weakened past 7 yuan per dollar.

(CNBC) Trump says he talked to Apple CEO Tim Cook about tariffs and Samsung


  • Trump said Cook made a “good case” that it would be difficult for Apple to pay tariffs, when Samsung does not face the same hurdle because much of its manufacturing is in South Korea.
  • “I thought he made a very compelling argument,” Trump told reporters Sunday.
  • The president said on Friday he was having dinner with Apple’s CEO. 
GP: President Trump Participates In American Workforce Policy Advisory Board Meeting

U.S. President Donald Trump speaks with Tim Cook, chief executive officer of Apple Inc., during an American Workforce Policy Advisory board meeting in the State Dining Room of the White House in Washington, D.C., U.S., on Wednesday, March 6, 2019.Al Drago | Bloomberg | Getty Images

President Donald Trump said he talked to Tim Cook about tariffs and Apple’s South Korean competitor Samsung.

Trump said Cook made a “good case” that it would be difficult for Apple to pay tariffs, when Samsung does not face the same hurdle because much of its manufacturing is in South Korea.

“I thought he made a very compelling argument,” Trump told reporters Sunday. The president said he was having dinner with Apple’s CEO on Friday. 

Trump has ordered 10% tariffs on an additional $300 billion in goods imported from China. Originally, all of those tariffs were scheduled to go into effect on Sept. 1, but Trump delayed some of the import duties until Dec. 15 over concerns about how they would impact the holiday shopping season.

“It’s tough for Apple to pay tariffs if it’s competing with a very good company that’s not,” Trump said.

The tariffs delayed until December include consumer electronics such as cell phones. Apple’s stock closed up 4% on Tuesday after Trump made that decision. 

Apple is expected to release its new version of the iPhone in September.

(GUA) Donald Trump reportedly wants to purchase Greenland from Denmark

(GUA) US president has ‘expressed interest’ in the icy territory, according to the Wall Street Journal, but the Danes have yet to weigh in

Icebergs in Greenland. Trump is said to be exploring the idea with ‘varying degrees of seriousness’.
 Icebergs in Greenland. Trump is said to be exploring the idea with ‘varying degrees of seriousness’. Photograph: Mstyslav Chernov/AP

Donald Trump is fond of bragging about his conspicuous wealth and buying power, plastering his name over buildings and gilding the elevators of Trump Tower. But his latest reported aspiration is on the extravagant side, even for him: to purchase Greenland from Denmark.

According to the Wall Street Journal, the US president has “expressed interest” in buying the expansive icy territory and has asked his aides to explore the possibility. He has even sought the view of the White House counsel, though the Journal noted his inquiries came “with varying degrees of seriousness”.

News that Trump had set his sights on acquiring a meaty chunk of the Kingdom of Denmark set Twitter aflutter on Thursday night. Pundits tried in vain to find a real estate valuation for the 811,000 square miles on Zillow, while others attempted to calculate Greenland’s worth in pickled herring.

Despite the levity the idea has provoked, it is not entirely in the realm of fantasy. In 1946 US President Harry Truman tried to buy Greenland from Denmark for $100m but was rebuffed. There was a more successful precedent dating back to 1917 when the US acquired the Danish West Indies, rebranding them the US Virgin Islands.

The US military already has a major airbase on Greenland, on the north-west of the island. The base has 600 personnel and is important in the country’s global radar system.

Trump travels to Denmark next month in his first official visit to the kingdom, though Greenland is not thought to be on the agenda. The Journal reported that the president raised the issue at a dinner last year in which he said he had heard Denmark was finding its financial support to the self-governing territory burdensome.

Floating the thought of the US buying the island, he asked the other guests: “What do you guys think about that?”

What Denmark thinks about that is in itself not at all clear. The Guardian asked the Danish embassy in Washington for a comment but did not receive an immediate response.