G7 screws the US pooch

While the world’s press is busy lapping up the anti-Trump hysteria post-G7, let’s stop and ask what did they expect? Via The Guardian:

Donald’s Trump’s chief economic adviser said the US pulled out of a G7 communique because the Canadian prime minister, Justin Trudeau, “stabbed us in the back” and accused the leader of one America’s most important allies of playing a “sophomoric political stunt for domestic consumption”.

In an extraordinary interview with CNN’s State of the Union on Sunday, Larry Kudlow, who was present for negotiations at the G7 summit in Quebec over the weekend, said Trudeau had instigated “a betrayal” and was “essentially double-crossing President Trump”.

Trudeau used a media conference on Saturday to reject a US demand for a sunset clause in the North American trade agreement, Nafta, that Trump has at different times pressed to abolish or renegotiate. The prime minister also said Canada would “move forward with retaliatory measures” in response to the Trump administration’s move to impose tariffs on aluminium and steel imports from the European Union, Mexico and Canada.

The move enraged Trump, who branded his Canadian counterpart “dishonest and weak” in a furious tweet, announcing the US would pull out of an agreed communique.

The G7 communique said the leaders of seven of the most powerful countries in the world agreed on the need for “free, fair, and mutually beneficial trade” and the importance of fighting protectionism.

The G7 ALL run trade surpluses with the US:

What did they think was going to happen as they pressed a claim for even larger surpluses via a statement of free trade? These same nations exist under the protection of US hegemony worldwide. Trump is obnoxious but he has also been very clear about what he expects in return for that protection: trade favours. That’s why Australia got off the hook. We run a US deficit.

Europe and Japan face existential strategic risks in Russia and China. Both are run by dictators intent on pressing their interests further into the democratic realm. Tearing it down if they can. This is a systemic risk to the underpinnings of liberty that makes free trade possible at all. Yet the G7 chose instead to provoke Trump. If anyone is surprised by the response then I can provide them the contact of an excellent psychiatrist.

There are many ways that the G7 could have come to the meeting with offerings to assuage the US anger represented in Donald Trump (basically its marginalised working classes) without violating the rules based order of geopolitics. Instead they chose to prod the beast in a vain attempt to appear to protect those rules. Virtue signalling in other words.

Forgotten is that Donald Trump is the symptom not the disease. The real malady is a US economy now so divided by class that it is throwing up Hail Mary politicians. Would the G7 have gotten a better hearing from Bernie Sanders? Nope. He too wants to repair the lot of American workers and would renegotiate trade to make it happen.

It’s all well and good for Davos Man to pat himself on the back for defending free trade but if in doing so he is undermining the very foundations of global liberalism then good luck with that.

Comments

  1. sydboy007MEMBER

    I’d have a bit more respect for the US cause if they weren’t so hypocritical.

    Free trade in areas they’re competitive in, high tariffs in areas they’re not.

    You can’t complain about Eu car tariffs while also have sky high tariffs on so many agricultural products.

  2. – What people forget is that by running a Trade Surplus with the US those countries are actually subsidizing the US as well.
    – The US also forces the rest of the world to subsidize the US by spending so much on those “military adventures” outside the US. And US military spending (along with its military footprint outside the US) kept growing after the year 2001.
    – Trump is indeed a symptom of a system that’s has become so corrupt that it signals the end stage of economic development. If Hillary Clinton had become president then that wouldn’t have stopped the increased corruption of the US political system. Both (corrupt) persons (Trump & Hillary Clinton) are the result of decades of “economic development”. The corruption is actually a sign of how tough busimess conditions have become. And part of this “economic development” is that the workers/employees have seen their income share of GDP shrink decade after decade.

    • That is what was baked in pushing for reserve currency to fund cold war efforts. Different world now with different dynamics yet some still want to enjoy the past.

  3. Well aren’t US deficits also a sign that the US dollar is too strong?.
    Wouldn’t it make more sense for the US (and their allies, who Trump is rapidly reducing in number) to print more of their own currency and buy Chinese yuan or alternatively agree to a fixed reverse peg that increases the value of the yuan?.
    The problem for the US is that it has poor internal social structures and hence needs higher growth via deficits so that trickle down economics keeps people happy. The other option would be to also rebalance the tax system internally (which is what Sanders was suggesting) so this is not the case, but Trump has done the opposite by skewing the system even more in the favour of the top 1% for short term gain at long term expense

    • The majority of US “taxpayers” pay no net tax. Hardly skewed in favour of the 1%. In any event, 95% of US millionaires are first generation rich. And they aren’t movie stars – they’re ordinary workers who lived on less than they earned and saved into their retirement accounts over 30 odd years. Those evil 1%ers not paying their “fair share”. You really are a dangerous sort of person.

    • “Wouldn’t it make more sense for the US (and their allies, who Trump is rapidly reducing in number) to print more of their own currency and buy Chinese yuan or alternatively agree to a fixed reverse peg that increases the value of the yuan?”

      The USD would just end up back in Treasuries – net effect zero except the whole system would be made even more unstable.

  4. And as for that rant by Robert De Nero last night – a man; an actor, who has spent a lifetime pretending to be someone else, because otherwise his life would be so uninteresting to us – hasn’t it dawned on him and his ilk yet that Donald Trump isn’t acting; pretending to be someone he isn’t – he’s just being a genuine reflection of himself. As you write, he’s not the problem but a symptom of the disease….

      • drsmithyMEMBER

        It’s me and the US population versus you.

        Well, actually, most of the US population voted for Hillary.

        Unfortunately for you – and despite the best efforts of the Murdoch press – there also seems to be a strong contigent of people remaining in Australia who don’t have a problem with pooftas, women with opinions and a fair go.

      • If you have a cold and get cured, your symptoms disappear.

        Let me know when the symptoms (marxist queer feminist blah whatever) disappears. So far I see a President who has squandered the most productive period of a President’s time. Midterms approach, and then campaigns for 2020. Tick tock.

      • “Well, actually, most of the US population voted for Hillary.”
        Actually you mean the New York, Washington and California voted for Hillary and the rest of the US voted for Trump!! But of course in your book the superior people in New York and California should be the ones to make all the rules and the rest should be just their serfs – bit like your attitudes to Australia – should be ruled by the superior people in Sydney Melbourne and Brisbane. The rest are just a bunch of stupid regional morons and, well, rural country people who should not be allowed to exist at all.

      • drsmithyMEMBER

        Actually you mean the New York, Washington and California voted for Hillary and the rest of the US voted for Trump!!

        No, I mean Clinton won the popular vote.

      • It gets plenty of perks. After all, Australia and others have followed them into various military debacles across the world and purchase their overpriced military hardware to the tune of hundreds of billions of dollars.

        America is one of the worst offenders in the industrialised world when it comes to protective measures. Source.

        For example, it subsidies it’s agriculture to the tune of $20 billion dollars or 73% of producer returns. Source.

        I don’t know why you are carrying the can for a hypocritical blowhard like Trump.

    • This Trump Trade G7 drama is all excellent news.

      The only country who can really dismantle the post WW2 system of control is the country that built it.

      If the US has decided it no longer wants its middle class and working class to the pay the price of being global hegemon there is not much anyone can do about it.

      But the best way to do that is to start restricting unproductive capital inflows aka access to US treasuries rather than the proxy of restricting trade. Start by issuing some tranches limited to and registered to US citizens…..US Home Bonds….and that will send a signal, then start expanding issuance.

      That will drive discussion of a global trade settling mechanism along the lines of Bancor.

      And if Trump doesnt want to drive the debate the G7 should.

      This is the debate we need to have.

      Free trade is dead but fair trade, unmanipulated by unproductive capital flows, is another thing altogether.

      • Free trade has literally pulled billions of people around the world out of poverty.

        The Scandinavian countries have some of the most free economies on Earth but still have extensive social services.

        Perhaps, instead of free trade being the problem, it is poor governance.

      • There is nothing free about Free Trade and never has been.

        Which Scandinavian countries are you talking about?

        Norway? Which has one of the largest sovereign wealth funds in the world for the express purposes of distorting the exchange rate?

        You sound like you support fair trade where trade is not manipulated but that is very different to what is called “Free Trade”.

        Fair trade requires NO international agreements. Why because removing tariffs/quotas etc on imports and restricting unproductive capital inflows that distort trade are unilateral actions.

        Only “Free” trade requires the rip offs that Australia has signed.

      • Ronin8317MEMBER

        Re:bobalot. What pulled China out of poverty is not free trade, but mercantilism. If China did not restrict foreign good and capital import, they would still be very poor like African countries.

      • “What pulled China out of poverty is not free trade, but mercantilism.”

        I thought it was mostly yank c-corps exporting information and yobs to fellate market tastes so equities would s’xplode, trickling down on everyone, of course bigger SD do get more of that rain. Yet like most stimulant fueled addicts the BSD will always need more until their dopamine receptors are fried, hence 450 billionaires in the old USA and falling living standards for the rest.

        Dons cod piece whilst straddling aircraft carrier ….. mission accomplished….

      • oo7…

        You might find interest –

        “In the current monetary system almost all money is created by commercial banks via the creation of loans, thus the key question is whether money should continue to be a prerogative of the (mainly) private banking system. For these plans the simple answer is no. What these reforms propose is to remove the ability of banks to create money by separating money and credit, thereby creating a public money system distinct from the private, market allocation of savings and loans. In brief, a bank’s reserve ratio (i.e. public money over current accounts) must be 100%. Alternatively, current accounts are removed from banks and placed at a public institution or in a separate special bank. Central independent institutions (set up by a central bank or the government) would then directly control the quantity of money in circulation. In these systems banks have to borrow from creditors before being able to lend it out and would not enjoy special public sector support in the event of failure.

        Clearly the crisis called for a policy response with respect to the structure of the financial system … But here we argue that, for all their good intentions, full-reserve banking plans have serious shortcomings which derive from their assumptions about money and about the financial sector. Even if it were feasible for the state to establish control of the money supply, there would be little scope for credit intermediation or maturity transformation. Were banks to find it profitable to continue to trade, they would come to resemble investment trusts and fund managers or even money shops. More importantly, the impact of these proposals on the financial system and on the overall economy might result either in a stagnant economy or in the growth of the unregulated provision of money in the private sector; full reserve banking might not in fact prevent a resurgence of financial instability.”

        Sheila Dow, Guðrún Johnsen and Alberto Montagnoli.

        https://larspsyll.wordpress.com/2018/06/09/the-swiss-vollgeld-referendum-on-june-10/#comment-38273

        Its never as easy as some would like to think… eh. See Marriner Eccles and his observation regarding the political enemies of full employment.

        It is curious that some, say like economic libertarians, on on hand used to like to decant the Rothschild meme about controlling a governments currency, but then, forward doing just that.

      • Skippy,

        What has one of your standard issue private bank apologias got to do with Trump?

        Your desperate attempts to characterize any reforms that limit the powers of your private bank chumps as “libertarian” are getting nuttier by the day. Sure most of your banking buddies usually call reform of their lurks “rank socialism” but you are not fooling anyone with your clumsy attempts at ad hominem.

        Are you seriously trying to convince people that your private banking chums are acting in the interests of the general public and not just the 10%.

        There is nothing wrong with rooting for the rent seekers but you should own it.

      • Talk about standard issue reply’s oo7….

        Everyone not on the same boat as you is a bankster apologist, never mind anything else. Furthermore you can’t even respond to the concerns above with anything, not just as you say, because it could jeopardize the veracity of your claims or its factual state.

        Don’t know what your drama is with economic libertarians, it is the foundation to neoliberalism and has some easily identifiable aspects. Its just stating the bloody obvious.

        Did you read the link, did you have a chance to look around and see all the other stuff going on. You know like core foundations to economics during the neoliberal period being taken to task with more that just rhetorical posturing. You see that is where change will really occur because it sets the stage for everything else, including banks.

      • “..You see that is where change will really occur because it sets the stage for everything else, including banks…”

        Including banks.

        So you finally concede that the current role of banks reflects the rise of neoliberalism?. Yet you still refuse to accept the need for reform of that role nor that the role of private banks is critical to the project of neoliberalism.

        And you insist that ANYONE seeking to reform that role must be a libertarian.

        That is absurd and standard issue excuse making for private banks.

        All you (and your cut and paste links) ever do is assert that the role of private banks is not a problem DESPITE all of the evidence to the contrary.

        And when you have been run to ground, you then claim that unless private banking is responsible for EVERY problem it cannot be a problem.

        I dont understand why you get upset being called an apologist for private banks as that is all you ever do.

    • I tend to agree, however it is becoming obvious that China’s Yuan is slowly becoming a globally significant currency while running a trade surplus the whole time. Asset accumulation in foreign lands is replacing foreign debt accumulation. Similar game but one that’s likely to prove a whole lot more dangerous when countries decide they’ve had enough of competing with foreigners buying their domestic assets (think Chinese buying Australian houses) . This is a hot button issue in Australia which would not be possible if foreigners were not faced with the problem of finding Australian assets (that suit their investment needs and definition of investment). Australian bonds do not appeal to Chinese businessmen, so they find some other Asset that do appeal to their investment bias. (pity it breaks some local laws, FIRB etc) .
      As a consequence of this China itself can create debt itself at an alarming rate while Chinese businessmen accumulate global assets, not quite what Triffin had in mind but basically the same game played a little differently.

      • How did it work out with plaza, live by the sword thingy….

        flawse….

        Not saying its set in stone down from the mountain but please do provide some form of argument which can be evaluated.

  5. Do nothing diplomats are praying that the fcuks up this North Korea deal because it would highlight their ineptitude taking years to get exactly nowhere.

    I wonder if Trump could have stopped the Vietnam war if he were President back then? The years it took to resolve the shape of the negotiating table in Paris, is that a true story, FFS.

    Go the Donald and get the job done on putting your constituents first.

  6. ResearchtimeMEMBER

    Good one by AEP German car industry fears double shock of Trump tariffs and a Brexit breakdown (https://www.telegraph.co.uk/business/2018/06/11/german-car-industry-fears-double-shock-trump-tariffs-brexit/)

    key points:
    (i) The German car industry is now seriously alarmed after the bad-tempered collapse of the G7 summit in Canada… It is calling for the total abolition of EU import tariffs on cars in a frantic bid to avert a trans-Atlantic trade war and preserve its lucrative US market.

    (ii) German industrialists increasingly suspect that Mr Trump is spoiling for a fight and intends to go ahead with 25pc tariffs on European car imports, exploiting a national security loophole under US trade law as he did over duties on steel and aluminium. The EU currently imposes 10pc duties on cars, mostly aimed at curbing a flood of imports from Asia. This could turn into a double drama for Germany if Brexit talks break down at the same time, leading to trade barriers with Britain. The German car industry might then face a sudden squeeze in its two biggest global markets.

    (iii) Exports equal 46pc of GDP in Germany, but only 12pc in the US… The difficulty is that Brussels cannot wave tariffs on US cars alone even if it wants to. The EU has to extend the same zero rates to China, India, and emerging Asia to be compliant with World Trade Organisation rules. “You can’t just cut the tariffs for US cars. You are not allowed to discriminate. The EU now has carefully crafted trade agreements with South Korea and Japan, where the lifting of car tariffs has been agreed to be gradual,”… Audi is the worst hit by the threatened tariffs since it does not manufacture models in America.

    (iv) The dispute is really a cover from something else. The White House complaint against Germany and China is that they have strategically gamed the global trade system, although in different ways… Germany has locked in a semi-permanent trade advantage through the deformed structure of the euro, allowing it to amass and hold a current account surplus of over 8pc of GDP… China is different… It is a contest for control over the technologies of the 21st Century. Seen it this light, the US assault on the world’s existing trade system becomes less of a mystery. It is not a discussion about tariffs or Ricardian theories of comparative advantage. It is about geopolitics. This is much more threatening for Germany.

      • ResearchtimeMEMBER

        Maybe some… who knows? The problem with that argument is that Bankers could go there anytime – but they largely eschewed Europe largely for London. Why?! Bankers go where they feel safe and the rule of law is robust. London has always been the centre of banking, for at least 500 years.

        Propaganda suggests that money is centric – that Euro need EU banking. That has never been the case… ever in the history of human endeavour. Left Marxist view… problem with that, Europe needs debt. And don’t have the sources. London debt wise is bigger than the US and Japan combined – and a bunch of others besides.

        Unemployment in London is the lowest for over four decades, the City is booming, international investment is at all time record highs.

        The biggest argument for Brexit is that the UK is now too dependent on finance and the City, with UK manufacturing halved since Tony Blair came into office. An Australian disease look alike to be sure.

        Property prices very expensive. Should fall.

        Who knows the future??? – other than to say, the UK is doing pretty well considering. Not the recession that the economic elites were predicting…

        And the biggest surprise!!! There are more bankers now than ever…

      • ResearchtimeMEMBER

        There are some very worrying developments with EU law. The Irish Apple tax case is an interesting example. The EU department that made the initial ruling, is the department that to judging the Irish submission against the decision. It is also the final arbiter on how the case is finally resolved.

        Its national Socialism on a Grand scale, and could never happen in Anglo-Saxon tort – with prosecution and defence around given law, the right of appeal. That is the scary thing about operations in the EU, the single government body is the investigator, the fact review and the final judge. No recourse, decision final.

        One cannot debt bank in that environment. It has to be neutral. Agreement based.

      • RT…

        Actually most firms in London all ready have made plans to move, your see there is this thing about boarders and how it effects trade. BTW the Law thing is a joke considering pulling the trigger on article 50 on a lark gone bad. You know where law actually dictates ones bargaining power.

  7. Robert Hanssen

    Yeah – people are crazy and need a psychiatrist for questioning Donald Trump – wow – really ?

    And Russia and China are out to destroy the west.

    It really does not get any more Alex Jones and Information Wars than that – this blog really is a joke. It staggers me people still read this crap.

    https://www.youtube.com/watch?v=Jgi_Usy4O7I

    The EU has handed a massive middle finger to the US – and are abandoning NATO to form their own EU defense force. The EU has decided to abandon being screwed over by US power plays over energy and abandon the US energy hegemony and are forging ahead with new energy pipelines directly to Germany to cut off the Anglo-American dog and pony show.

    There really is zero understanding of world affairs on this blog – none – its just a mish mash of we’re the goodies with America – and everyone else are baddies.

    Its WORSE than Alex Jones.

  8. H&H

    Do you guys have any opinion on a possible trade nuke card Trump could play?

    I think, if he wanted to, he could tap Straya on the shoulder and say “Cancel your contracts. Send all your ore and coal my way. ANZUS is at stake.”

    Think how that’d play out.
    After the schizophrenia, we’d fold like a cheap chair, China would be… furious but probably not able to do anything about it, and US steel would boom to the moon.

    I can’t think of any reasons to rule that out as a possible card.

    • Might seem a little silly to point this out but, you are aware I trust that China currently produces something like 55% of the worlds Steel.
      https://en.wikipedia.org/wiki/List_of_countries_by_steel_production
      China’s raw steel production in 2017 was 831 Million Tonnes
      US raw steel production in 2017 was 81 Million Tonnes
      That’s an order of magnitude size difference we’re talking about.
      Now lets think this through, how many trains would it take to transport Aussie IO from a west coast port to the US steel mills (at how much per Km rail transport cost?). OK so we’ll ship to the east coast around the Cape. Yeah that’s a fantastic idea BUT I suspect the Brazilians would get to the East coast US ports quicker and cheaper. Does S11D mean anything to you?
      Now lets just follow through with this, who’d buy this massive step function change in US steel output, well the Chinese of course, they’re the only country today that has an end use for anything like that volume of steel. So US steel mills would then ship to China from the East coast.
      And that’d all be done far cheaper than the cost to Chinese mills if they sourced Indian, African or Brazilian ore.
      Yeah right!

      You guys have some weird ideas about how international trade in commodities really works

      • Yes. And they make it with our ore.

        You’re missing the main point. I would be about geopolitics – not trade.
        Isolating China’s steel industry and driving a wedge between them and Oz would be a geopolitical coup.

        A complete bastard move – but I think we can see that bastard moves are on the table.

        As for the logisitics of it all, IIRC Pittsburgh on one of their great rivers was their historical steel hub – meaning there’s not much need to build new rail.

      • Do you really think the price of something dictates geopolitical thinking e.g. how many trillions has America spent on military adventurism to gain market share and bargaining power whilst at the same time fighting a non existent fear of inflation. All whilst OECD standards go down the gurgler.

    • kiwikarynMEMBER

      Look a little closer to home. Why do you think Vale is substantially increasing its iron ore production in a world that’s supposedly already over supplied?

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