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Presidential elections – 2020, or does Trump have “federal reserve”?

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On July 31, the US Federal Reserve’s Open Market Committee cut interest rates – the first such move in 11 years. During the past 18 months, President Donald Trump has regularly criticized the country’s central bank for refusing to lower interest rates, calling the Fed’s policy the main reason for America’s current economic slowdown. Trump’s critics, in their turn, accuse him of trying to manipulate the Federal Reserve’s policy in a bid to secure the best conditions for his re-election 2020 re-election campaign. How can the state of the country’s economy and finances influence the choice the American voters will make next year?

The Federal Reserve’s current head, Jerome Powell, a lawyer who has been in the investment business for many years, is the Fed’s first chairperson since the 1970s, who has no professional economic education. Small wonder that he was initially viewed by many as Trump’s political appointee. Still, until this very summer, Powell kept raising interest rates instead of lowering them, as Trump demanded, thus staying the course charted by his predecessor, Janet Yellen, whom Trump strongly criticized during his election campaign. Now that the Fed has cut interest rates, however, Donald Trump is still not happy. In a recent tweet, he said that what markets really expected from the Federal Reserve was not just to cut rates, but to send a clear signal about the start of a long period of “aggressive” easing of US monetary policy primarily aimed at counteracting similar measures by “China, the European Union and other countries of the world.”

“As usual, Powell let us down,” Trump summed up.

As a businessman, Donald Trump may feel the volatility of the US economy, and be fully aware of the academic studies of the past decades, above all about the state of the national economy and the year-to-year economic indicators, which significantly affect the voters’ political preferences, including for someone, who they want to see in the White House. We are not even talking about a full-blown recession – just an economic slowdown three or six months before Election Day. The proponents of this point of view believe that, according to all objective indicators, the decline in economic growth that happened in 2016 should have become “barely noticeable for most Americans.” Still, it was noticeable enough to increase Trump’s electoral base. The very same thing could happen in 2020, since the currently high GDP growth rate may prove “unbearable” for the economy next year. Just as it happened in 2016, when the economy stopped growing by more than half compared to the very robust 2015. Right now, it is still premature to say if the US economy has reached its next peak, but many key indicators look very similar to how it was doing ahead of the 2016 presidential election. Trump’s critics could interpret the Federal Reserve’s current rate cut as an attempt to prevent a similar development and increase the incumbent’s chances for re-election.

Meanwhile, the interest rate cut could have a detrimental effect on the labor market. Even though the US economy is going strong, in a market economy you cannot keep reducing unemployment all the time. Besides, the rate of this reduction has consistently been slowing down since Donald Trump’s election. Moreover, most American economists believe that unemployment within 4 to 5 percent is “optimal” for maintaining economic growth rates. This is the de-facto “target” indicator the Fed has in mind. The modern economic theory maintains that when unemployment is too low, the central bank should raise the interest rate, not cut it. Now, however, the Fed says that it is more concerned about “stifled inflation.” This means that the US monetary authorities could now put any further decrease in unemployment to the back burner. A sharp drop in employment growth that happened a few months before the 2016 elections made many voters feel that the situation on the labor market was deteriorating. As a result, many of them turned their back on the party, whose leader was then at the White House. 

In November 2018, the US economy was going strong with the GDP growing above three percent, unemployment falling, and salaries going up. Still, the Democrats won the largest number of seats in the House of Representatives in midterm congressional elections since 1974.

Finding himself in a potentially “no-way-out” standoff with the now Democratic-controlled lower house of Congress, President Trump could theoretically use a tactic of compromises with the opposition Democrats  and even “restore shattered confidence” between the two parties. However, he opted for a confrontational scenario repeatedly trying to shift responsibility for failures in domestic politics and the sluggish pace of reindustrialization  to “obstructionist” Democrats, “opposition-minded” Silicon Valley companies, and, above all, to foul play by external forces. On August 1, the White House announced that the United States would impose an additional 10 percent tax on $300 billion of Chinese imports before the month was out. On August 5, the US Treasury officially designated China a “currency manipulator,” accusing Beijing of “undervaluing the yuan.” Trump believes that a continued easing of the US monetary policy will finally help clinch a truly “great deal” with China.

The Federal Reserve apparently thinks otherwise though. According to Powell, two of the three reasons for the rate cut have to do with the Trump administration’s trade policy, which has been disruptive for the world economy and caused “tensions in trade relations.” According to experts, the Federal Reserve is thus letting Trump know that he should reduce uncertainty and tension in international trade, namely to reconsider the policy of trade wars – something so many of his voters are so fond of. Many economists and business people in the United States agree with the Fed because the introduction of new duties on a long list of Chinese imports has resulted in higher retail prices, the loss of tens of thousands of jobs and has made many US industries less competitive in the world. US companies heavily dependent on the sale of their product in China have fallen victim to this conflict. The sense of uncertainty is also “working” against Trump who has locked horns with the Democrats, who now have a majority in the House of Representatives. Finally, China is already using retaliatory measures against companies located in the US states, which constitute Donald Trump’s electoral base. Trump’s actions may seriously undermine his chances of re-election in 2020.

The third reason for the rate cut is the Fed’s concern about the relatively low inflation. The nature of inflation is one of the biggest problems of economic theory because fears of rock-bottom inflation, fraught with deflation (a decrease in the general price level of goods and services due to excessively tight money supply) largely dictated the Federal Reserve’s monetary policy during the 1990s and early-2000s. This is what many experts see as one of the main causes of the 2008 financial crisis. On the one hand, with the interest rates now being where they are, it is premature to talk about the possibility of a new uncontrolled surge in borrowings, similar to the one that preceded the 2008 meltdown. On the other hand, some economists worry about the potential for growing risks in the US economy, if the Federal Reserve continues slashing interest rates. Critics of low rates have traditionally pointed to their direct relationship with the emergence of financial “bubbles” on the markets, which precipitated America’s slide into a recession in 2001 and 2007.

Finally, skeptics warn that official statistics about the state of the US economy make many people feel overly optimistic about the future. Meanwhile, indicators of leading companies’ performance show that their operating profits have stopped growing for quite some time now, and that their main income comes from exchange rate fluctuations and capitalization growth. Meanwhile, the US’ foreign debt keeps going up reaching a whopping $22 trillion, and the budget deficit is creeping up to $800 billion. This means that even the current GDP growth of almost 2.5 percent may not be enough to rectify the situation. “Under such circumstances, a single “spark” can send the fragile economic balance up in flames, and there is a sufficient number of such sparks around,” said Yelena Chizhevskaya, vice president of the RFI Bank for Mobile and Electronic Commerce.

From the domestic political point of view, if the Fed’s actions lead to a significant weakening of the dollar – and a number of experts are already talking about the start of the “bear cycle” of the US currency – this could result in a drop in incomes of US households in the walkup to the 2020 presidential elections.

Right now, America’s robust economic performance remains a major factor behind Donald Trump’s hopes for re-election in 2020. However, there are many signs of a possible decline, and a sharp one at that, in US economic growth rates “by the second half of 2020.” By the time the Americans go to the polls, their moods may be way less optimistic than they are today. Finally, President Trump, who pictures himself as the greatest “realist” of the modern West has been increasingly getting a taste for blackmailing and pressuring his opponents and nominal allies alike. Meanwhile, many economists now fear that the Trump administration’s “chaotic” and “provocative” actions may put the United States on a course to a new recession. If so, next year we may see unfolding a struggle for the post of the leader of one of the world’s greatest powers that could prove even more uncompromising than what we saw happening four years ago.

From our partner International Affairs

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Americas

Poll Shows Trump’s Israel Policy Is Opposed Even by Republicans

Eric Zuesse

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On Monday, November 18th, Reuters headlined “U.S. backs Israel on settlements, angering Palestinians and clouding peace process” and reported that, “The United States on Monday effectively backed Israel’s right to build Jewish settlements in the occupied West Bank by abandoning its four-decade-old position that they were ‘inconsistent with international law,’ a stance that may make Israeli-Palestinian peace even more elusive.” This article made clear that, of all entities Reuters could contact about the matter, only U.S. Secretary of State Mike Pompeo thought that these illegal settlements are legal, and even Pompeo was offering no other reason than that “‘The establishment of Israeli civilian settlements is not, per se, inconsistent with international law,’ Pompeo told reporters at the State Department, reversing a formal legal position taken by the United States under Carter in 1978.” It was merely his dictat, as authority for this major U.S. policy-change. 

One poll was recently taken of Americans on the matter. It was done by Scarborough Research, a joint venture by The Nielsen Company and Arbitron, and its sample size was unusually large for such a poll and employed rigorous sampling techniques. Thus, its findings should be considered to be close to the reality. Here is a summary of that poll’s methodology and findings. [I add my explanations in brackets].

The survey was carried out September 12 – October 9, 2018 online from a nationally representative sample of Nielsen Scarborough’s probability-based panel, originally recruited by mail and telephone using a random sample of adults provided by Survey Sampling International. The national sample was 2,352.

Q57. As you may know, the United States has been acting as a mediator between the Israeli government and the Palestinian Authority, with the aim of reaching an agreement in the IsraeliPalestinian conflict. Whether or not these efforts succeed, there is a question about what kind of future for Israel and the Palestinians the U.S. should be supporting over the long term, and many analysts feel that time is running out for some options. Here are four possible approaches that are frequently discussed. Please select the one you think the U.S. should support.

Rep Dem Ind Total 

1. A two-state solution: Israel and a Palestinian state side by side. The Palestinian state would be established on the territories that Israel has occupied since 1967. 24% 48% 31% 36% [That’s 24% “Rep”; 48% “Dem”; 31% “Ind”; 36% “Total.”]

2. A one-state solution: A single democratic state in which both Jews and Arabs are full and equal citizens, covering all of what is now Israel and the Palestinian Territories.  33% 36% 38% 35%

3. Annexation without equal citizenship: Israel would annex the Palestinian territories, but keep a majority-Jewish state in the expanded territories by restricting citizenship rights of Palestinians. 14% 3% 4% 8%

4. Maintain the occupation of both the territories Israel has captured in 1967 and the Palestinians inhabiting them indefinitely. 18% 5% 13% 11% 

Refused 11% 8% 14% 10%

[71% support either a two-state or a one-state solution (a sort of democratic solution). 19% support either “Annexation without equal citizenship” or Israel’s permanent militarily imposed “occupation of both the territories (West Bank and Gaza).” On this question, only 19% support Trump’s Israel policy, but 25% of Republicans do. However, 67% of Republicans don’t.]

One of the issues of tension between the United States and Israel has been its construction of Israeli settlements in the territories occupied by Israel in the 1967 war. These settlements are considered illegal by most of the international community and have been opposed by every U.S. administration, both Republican and Democratic. The Israeli government has continued to build settlements. … How do you believe the U.S. should react to new settlements?

1. Do nothing: 38% 17% 33% 28%

2. Verbally criticize: 30% 22% 27% 26%

3. Economic sanctions: 17% 41% 22% 17%

4. More serious action: 9% 15% 11% 12%

[Trump’s “Do nothing” is supported by 28% of American voters. That even includes only 38% of Republicans. 56% of Republicans want some type of at least criticism against Israel.]

Consequently: Trump has now gone far out onto a far-right limb here in his policies toward the state of Israel and its dictatorship over Palestinians (the people who are the descendants of what were the vast majority of Israel’s population until the ethnic cleansing that slaughtered and displaced them).

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The Intellectual Doomsday Clock: 30 Seconds to Midnight?

Dr. Matthew Crosston

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As someone who has dedicated his entire professional career to higher education, to engaging young minds and striving to advance new thinking across a whole host of critically important global issues, it is with great sadness that I write this article. Not only do all of the scientific surveys point to a coming calamity, my own career provides extensive anecdotal confirmation of the sad reality that we are, as a human society, pushing ourselves down into an intellectual abyss from which we might not be able to emerge. Perhaps most disturbing of all, this pushing momentum is not done by accident. Rather, most of society today seems hell-bent on orgiastically rejoicing in our diminishing skills and our dismissal of ‘smartness.’ Refined thinking, nuanced analysis, and subtle reasoning are now the supposed domain of out-of-touch elite, of people who do not know about reality and are therefore happily removed from the debate/discussion stage. This is not the same kind of anti-elitism we have seen in decades past. This is not simply a fight between the benefits of ‘book learning’ versus ‘experiential wisdom.’ This is more about total war being waged against the intellectual process itself with adjacent side-battles against research, open-mindedness, and scientific thinking. It is not about the quality of the journey of intellectual engagement. It is about the attempt to annihilate discussion in total, surrounding ourselves with our own anti-intellectual camps of sycophantic chatter amounting to nothing. It is not about inquiry leading to epiphany. It is about the biased construction of self-affirmation. We are a society of self-delusional dullards. May this be a not-so-subtle early warning to stop our own dumb and dumber destruction.

Source: axios.com

The above chart is fairly self-explanatory. The chief aspect to focus on is how most Democrats will actually use this as supposed ‘proof’ of their open-mindedness and ability to think more independently, far more so than the other two representative groups covering most of society in America. While I can grant it is horrifically appalling to see percentages amongst Republicans to go all the way to 92% and even “independents” proving they are not so independent at all by going up to 4/5 of their numbers, the surveys still show one out of every 2 democrats, slightly more than that actually, are in the exact same boat as the other members of society. Why does this matter? It matters because on one very crucial aspect this chart explains the secret ingredient that currently powers the base rationalization and self-justification most people use to fuel their purposeful refusal to seek out alternative arguments, embrace people with differing viewpoints, and understand the crucial humility needed in the world of politics and social order, that being there are very few, if any, questions that have one single undebatable answer that should rationally end all further debate. When you can reject all of these things, it allows you to be content with rejecting even the search for multiple sources, the comparative analysis crucial to any real truth-finding, and the rational thinking that creates true deep thought and nuanced intellectualism. The rejection of the impartiality of news sources as an entity de facto turns into behavior that rejects the need to be discerning about sources overall. If the sources are all tainted, then why do we need them at all? All we need is our own thinking, backed of course by the resident echo chambers we create by surrounding ourselves only with like-minded people. As long as the people I spend most of my time with (and that is increasingly becoming a measure based on ‘virtual exposure’ rather than ‘face-to-face living engagement’) agree with me, why do I need to care about other fools with different opinions?

Source: realclearscience.com

The above chart clusters Republican (red) and Democrat (blue) representatives on a spectrum of ideology (defined by how often they vote with the rest of their party) then links opposite party members according to their votes together. The links grow larger and darker the more often representatives vote across party lines. In this case, that symbolizes the positive representation of independent thinking and the ability to make decisions NOT according to knee-jerk party lines or blind ideological allegiance. The graphs’ evolution over time is simply remarkable in that not only does the prevalence of cross-party line votes diminish radically over the decades, the behavior by 2011 de facto evaporates while adhering staunchly to party ideology. Exclusionary thinking becomes intensely concentrated and exclusive. It is also disappointing to note that this fascinating study ended in 2011: one year before the second term of President Barack Obama and fully five years before the controversial first term of President Donald Trump. It is not scientifically radical to say the ideological tendencies in American partisanship have only worsened since that 2011 end-of-study date. In fact, heading into 2020, most political discussions in America no longer even include the possibility of any cross-party thinking, let alone behavior. The idea itself is dismissed as being symbolic NOT of independent thinking but of social betrayal that should be shunned and punished.

Source: dailymail.co.uk

This final chart is the cherry on top of the stupid sundae. It shows the clear and inevitable path that global IQ is taking from 1950 all the way to 2110. Some may say that a decline from an average of 92 to a new average of 84 is not much given it is covering 160 years. Some might even be motivated to invoke the old “Malthusian Dilemma” to criticize the data, pointing out that such long-term extrapolations are only based on current trends remaining immutable and cannot, therefore, take into account what future counter-measures might be taken by society to right the wrong indicators. I would like to be a member of the Malthusian camp, quite honestly. In its own way, this article is an effort to kick-start those supposed Malthusian strategies, bringing future resolutions to our ‘stupid problem’ sooner to the forefront rather than later. But all of this is wishful thinking. It is not hard science. My hopes, in fact, are based on the opposite of what the data shows, what society currently rejoices in, and what so many individual people profess as being an advancement in ‘popular intelligence.’ As long as our global society, led most decidedly by the most powerful and influential country on earth, continues to revel in anti-intellectualism as proof of its own grassroots intelligence, as long as people rationalize away critical reasoning and analytical thinking as just so much elite ivory tower snobbery, then the only path we craft for ourselves as a society is one of blissful ignorance, confrontational delusion, and self-righteous obliviousness. The only society to emerge from this path is a dead society. A society of stagnation and regression. The intellectual doomsday clock is at 30 seconds to midnight. The ability to shift the ticking second hand backwards, back to enlightenment and dynamic knowledge engagement, may already be gone. May the Malthusian Army appear soon.

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U.S.-Turkey relations: From close friendship to conflict of interests

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Relations between the U.S. Turkey have strained since the failed July 2016 coup in Turkey. Now, the most important reasons for the tension is Washington’s strong opposition to Turkey’s plan to buy S-400 missile system from Russia and Turkish military invasion into northern Syria.

Although Turkish President Recep Tayyip Erdogan’s visit to the U.S. on November 13 was intended to resolve the two countries’ disputes and open a new horizon in economic and trade relations, differences still remain. 

Though after the meeting at the White House, Trump made some pledges, including increasing trade ties to $100 billion, it takes a long time to fulfill these promises.

Contrary to such pledges, the Pentagon announced that it had replaced all F-35 fighter parts made by Turkey.

While the Turkish and U.S. leaders were meeting, F-35 production program executive Lt. Gen. Eric Fick said at a congressional hearing that Turkey would be completely phased out until March.

At the moment the U.S. has narrowed the number of parts down from 1,000 to 12.

Undersecretary of Defense for Acquisition and Sustainment Ellen Lord affirmed to Rep. Donald Norcross, D-N.J., that as of Wednesday, Turkey’s exit from the program was not expected to cause any F-35 production delays.

The U.S. government believes Ankara’s move to buy S-400 missile system from Russia is not in line with NATO policies. Washington also sees Turkey’s decision as a threat to U.S. F-35 fighters. However, Ankara has announced that it will go ahead with its decision to buy the missile system.

Erdogan said it is not a right policy to ask Ankara to deprive itself of the Russian S-400 missile defense system.

Erdogan’s remarks came in response to some reports that Trump had requested Turkey to cancel the purchase of S-400 system, a defense system that has been deployed in some parts of Turkey since July 2019.

But after Trump and Erdogan’s meeting, the Turkish president claimed that the U.S. president had a positive view on buying the missile system.

Though Trump may seek to strike a deal with Erdogan on the S-400 missile system and F-35 fighter aircraft, based on his own businessmen approach, Ankara’s military intervention in northern Syria and its insistence on buying the S-400 system are at odds with Washington. For this reason, the House of Representatives has passed two resolutions against Turkey.

On October 30, the House approved a resolution against Turkey recognizing the Ottoman massacre of Armenians in 1915. 305 representatives voted in favor of the resolution, with only three opposing it. It also passed another resolution calling on Trump to impose sanctions on Turkey over military operations in northern Syria. The resolution was also adopted by 403 votes in favor and 16 against, a move that rose Turkey’s anger.

After Erdogan’s meeting with Trump, attended by some Congress representatives, senior Republican Senator Lindsey Graham and chairman of the Senate Judiciary Committee vetoed the resolution recognizing the massacre of Armenians by the Ottoman Empire. 

Earlier, Senate Majority Leader Robert Menendez had called for the resolution to be approved. Lindsey Graham noted that he had listened to Erdogan’s speech at the White House and criticized a House resolution that recognized the Armenian genocide. 

Menendez argued that “U.S. policy must be unanimous and honest in the face of human rights violations, crimes against humanity, ethnic cleansing, and genocide” and sent it to the Senate for approval.

There is a difference between the White House and Congress in how to deal with Turkey. Also, there is a difference between Republicans and Democrats despite Trump’s promises to Erdogan.

From our partner Tehran Times

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