Wry & Dry

Trump loses his mind. 800 years of enmity. Chinese Maldives.

Tsar Trump finally loses his mind

“Trade wars are good, and easy to win.”

 - Donald Trump, President of the USA

Not since Bill Clinton said, "I did not have sexual relations with that woman" has a US President said anything so profoundly stupid.  Clinton was misleading about something that gave him pleasure, however momentary.  But at least he knew what he was doing.  Trump was misleading about something that will have an enduring impact.  And about which he knows nothing.

Students of history (i.e. most Readers) shudder at the mention of Reed Smoot and Willis Hawley.  Knowing that the encumbrance of, well, uncommon names would limit their career options, Reed and Willis went into politics [1].  And decided to immortalise their names by introducing and having passed by the US Congress in 1930 the most extraordinary trade-protectionist legislation.  Know as the Smoot-Hawley Tariff, the legislation raised tariffs to the second highest level in over 100 years.  Other countries retaliated, significantly Canada.

It is widely acknowledged that the Smoot-Hawley Tariff significantly exacerbated the Great Depression of the 1930s.  And in 1932, with the depression only having worsened for workers and farmers despite Smoot and Hawley's promises of prosperity from a high tariff, the voters gave the two the DCM in the elections that year.

Which brings Wry & Dry to Donald Trump.

Cartoon Trump steel corn2

Readers will know that Tsar Trump last week announced that he was raising US tariffs on steel and aluminium.  This is the first time in his 413 days in office that an action of Tsar Trump has unified almost the entire world.  Against him.  His action has been met with wails of dismay, anger, disbelief and [insert your outrage here].  And also within the Yoo Ess Aye.  And his top economic adviser, Gary Cohn quit in protest. And the stock market took a 2% hit.

The reality, by itself, is that the proposed action targets just 2% of American imports.  The world can manage this standing on one leg.

But the folly of all of this lies manyfold.  Consider that Trump used US Presidential Executive Action based on little known national security threat legislation.  

Firstly, unlike the aforementioned Smoot-Hawley Tariff, which was passed by both Houses of Congress, Tsar Trump was too afraid to take this massive course of action to Congress.  Or maybe he just wants to show Putin, Xi, Erdogan et al that he has bigger gonads than they. 

Secondly,  the largest countries from which the US imports steel are Canada, South Korea, Mexico, Brazil and Japan: all strong allies.  No national security issue there. 

Thirdly, the production of the US steel industry has been unchanged for a decade.  So there is no diminution of capability to make weapons or other items critical to US national security interests.

An aside: Let W&D give readers a short economic analysis of the problem.  Tsar Trump sees the massive US trade deficit as the rest of the world making a profit and the US a loss.  Err. no.  See further below for W&D's Tariffs 101.

In the meantime, what is Tsar Trump thinking?  Is this the start of Tsar Trump's version of Smoot-Hawley?

Tsar Trump has lit a fuse leading who knows where.  He certainly doesn't.   

[Breaking news: Tsar Trump just tweeted “We have to protect & build our Steel and Aluminum Industries while at the same time showing great flexibility and cooperation toward those that are real friends and treat us fairly on both trade and the military.”]

Map of Tasmania unchanged

It was with great relief that W&D read that there would not be a minority government in Tasmania.  Even greater news was that the Greens' vote crashed by almost 4% and Jackie Lambie's party gained just 3.2% of the statewide vote.  The incumbent Liberal government won 50.2% of the primary vote and 13 of the 25 seats, with the possibility of winning two more.

The Labor Party did a good job of protecting its left flank from the Greens, but it was not enough.  The electorate clearly didn't like the possibility of a hung parliament.

The risk for the Liberals is that over the next four years Rebecca White, the telegenic but neophyte Labor leader, gains maturity in a number of areas.  First of these is graciousness in defeat.  Secondly, to create policies distant enough from the Greens to make Labor attractive as a majority government.  And thirdly, to somehow move the Tasmanian parliamentary ALP to the right: the election saw it lose its right wing MPs.

And she will have one critical factor in her favour.  Liberal leader Will Hodgman (whose father, uncle and grandfather were also Tasmanian MPs) will have been premier for eight years.  Will the electorate tire of him?  Is there a rising, charismatic and intelligent Liberal MP? 

Speaking of dysfunction...

"If there is ever another war in Europe, it will come out of some damned silly thing in the Balkans."

 - Otto von Bismark, German Chancellor 1871-1890.

Readers will recall that is was in the Balkans that the powder keg of the First World War was ignited in 1914 [2].

And so, it's now come to this: the 800-year-old dispute between Balkan countries Serbia and Kosovo has caused a drop in continental Europe’s electricity frequency.  This means that oven clocks, digital alarms and central heating timers are running about six minutes late. 

Read on, in disbelief.

Readers will know that most of continental Europe is linked together into an electricity grid that, inter alia, operates at a synchronised frequency. This frequency regulates time-keeping in certain devices.  

Recently, Kosovo did not generate enough electricity to meet its own needs.  And Serbia is legally obliged to meet Kosovo's demand, so as to keep the European grid stable.

But because Kosovo and Serbia are in dispute over the issue (and many more related to Kosovo's unilateral secession from Serbia 10 years ago) Serbia did not pony up with more electricity.

Cartoon Serbia

This failure to act on time forced the electrical frequency to "deviate" - and the drop affected Europe's clocks.

But, it's okay.  On Tuesday, Kosovo generated enough electricity to meet its needs.  And therefore didn't have to draw on the rest of Europe (ex Serbia) for power.

Some damned silly thing indeed.

Speaking of damned silly things...

Readers will know that Neymar, the Paris-St Germain soccer player, is one of highest paid players in the world.  But may not know that he is unable to play for three months after last month breaking his fifth metatarsal bone in his right foot.

The incident is a workplace accident.  And so he is entitled to $34,471.30 from the local welfare office, even though his club will continue to pay him his $1.1m per week in his absence.

His annual salary is about $58.7m.  Nice work, if you can get it.

Deepak, W&D's Uber driver, was talking about...

...the Maldives.  He was planning to go to that Indian Ocean paradise of islands with Anjali.  "I'm going to sell my Bitcoin," he said.  "And splash the cash all on Anjali.  She loves a beach holiday."

"Ah, will you tell her from where the money came," W&D asked.

"Err, no.  But she will be so taken with the trip she won't even ask."

"Well," said W&D, "you may need a Chinese visa to visit the Maldives."

"What?" cried Deepak.  "How does that work?"

"Actually, not yet.  But China is taking over The Maldives.  It has lent the government $2 billion for an airport, bridges, etc.  All to be built by Chinese firms with mostly Chinese labour.  But Maldives' total government revenue is only $1.2 billion p.a. And if it cannot repay the loans, China takes the land."

"Wow," responded Deepak.

W&D went on, "As a writer in the Indian media said last week, 'watch out for a Chinese submarine base.' For example, Sri Lanka couldn't repay the interest on its Chinese loan for the construction of the Hambantota Port, on the Indian Ocean. China was only too pleased to exchange the debt for a Chinese-owned company to lease the port for 99 years." 

Deepak looked worried.  "But the Maldives are sort of in India's sphere of influence."

"Not any more," W&D replied. "China is everywhere." 

"Oh dear," said the sad Deepak.  Maybe I'll take Anjali somewhere else; where do you think?"

"Try Noosa," responded W&D helpfully.  "And your Bitcoin will go further."

Italy - back to the future

Readers will have read of the indecisive Italian election result (as exclusively predicted by W&D).  And those who study history would have recognised that the area of almost total domination of the anti-establishment Five Star party in the south corresponds with the Kingdom of the Two Sicilies.  The Two Sicilies was run by the Bourbon (i.e. French) monarchy and was absorbed into the new Italian state on unification in 1861 [3].

After unification, the agricultural south was exploited by the north.  It remains the poorer.  The vote for Five Star was a protest vote from a part of the country that feels neglected as the slow economic recovery is being felt mostly in the north.

Those in the south have long memories.

In the north, voters, worried about immigration, turned to the right-wing League Party and, to a lesser extent, Burlusconi's Forza Italia.  And the voters in the south turned to Five Star.

The point is that the economic differences between the south and north have morphed into clear political divisions.  The underlying essence of Italy as nothing more than a geographical expression is re-emerging, slowly.  Italians only come together for the World Cup (soccer).

The other point is perhaps it doesn't matter.  Italy is an economic mess, relying on the EU and ECB to keep it afloat.  The Eurocrats have a big problem.  But those Euro-elitists want to focus on strangling the UK as it leaves the EU.  And to be seen to so do.

Readers know that W&D supported (and predicted) Brexit.   Italy's mess (exemplified by Jean-Claude Juncker's comment: "we must prepare for the worst scenario") reinforces W&D's long-held view that the UK will be much better off outside the EU than in it.  Europe, and Italy within it, is a long-term economic disaster.

Swing a cat

W&D is often worried about the cost of housing for his many sprogs: how will they afford to live in an area with the amenity to which they were used?  Well, they won't, is the answer.  And W&D has given each a Lonely Planet Guide to Hobart.  Just to get them thinking about alternatives.

Not that Melbourne is too bad, compared with other great cities of the world.

Housing 1m to buy

One million dollars will get Readers 90 square metres of prime residential space in Melbourne.  Prime residential means, to W&D's mind, a new apartment within wheelchair distance of the MCG.  Ninety square metres is about 3 times the size of an average hotel room. 

Just enough room to swing a cat.

With a minimum of fuss

W&D is old enough to remember the British Airways television campaign, led by a very well-spoken pilot named Captain Benson, who assured viewers that British Airways would get you there with "a minimum of fuss".

Once when travelling BA on Concorde, W&D was, therefore, most reassured, after some considerable shaking of the tube of aluminium at 55,000 feet and the rapid unwinding of the courtesy altimeter at the front of the cabin, by the voice of the driver, "Ladies and gentlemen, this is your captain, you have nothing to worry about..."  And so W&D was not concerned.  Until he was soon flying at what seemed like 100m above the Atlantic for the last 30 minutes of the flight.  And then noticing on landing at JFK a guard of honour of ambulances, fire-trucks and police cars lining up along the runway.   

What the driver didn't tell the passengers was that the giant rudder thingy on the fin (or 'vertical stabiliser', the vertical bit at the back of the plane) had fallen off.  And, as Jack Hawkins might have cried out (as in Zulu), "You're all going to die."

Well, W&D didn't.  But after that W&D has always been worried about British Airways.  And its minimum of fuss. 

Which bring Readers to the point of the "minimum of fuss" story.

It seems like BA is creating a bit of fuss with its 'densification' (the very word used on the media handout) of passengers.  W&D will ignore the use of the abominable 'densification'.  And focus on the news that on BA's B-777 long-haul flights from LGW, its seats to the right as a passenger enters the cabin (a direction unknown to W&D) will be 10 across the plane, rather than nine. 

Cartoon BA

The company unveiled its densification policy with a cheery media release, touting ‘elegant new seats’ with entertainment screens that are 50% larger.  But it failed to mention that economy passengers will be sitting in spaces that are nearly 10% smaller.

BA has joined other airlines in the race to the bottom.  No fuss.

This will end with standing room only.  Only for those down the back, of course.

Brexit

There is really sand in the wheels of this diplomatic and bureaucratic nightmare.  Readers will be aware of Mrs May's Brexit problems: she accidentally becomes Prime Minister with a mandate to execute a policy with which she didn't agree.  

Malcolm Turnbull has only got the Triple Aholes (Abbott, Andrews and Abetz) and the National Party as burrs under his saddle.  Mrs May has not only the loonies from Northern Ireland's DUP as a coalition partner, but also many of her Conservative colleagues are either extreme Remainers or extreme Brexiters.  And are not afraid to toss grenades into her wig-wam.

And then there are the belligerent Eurocrats, who want nothing more than to 'make the UK pay', both to deter other countries from considering leaving the EU, but also to (a) enhance their elite and sanctimonious view of the EU; and (b) to take the focus away from economic and political basket cases such as Italy (see above).  They do not wish their EU project to be disturbed.  Readers will recall Yes, Minister: little responsibility and much opportunity to negate anything positive.  

Hence their rigid application of process and rules.  And the direction to the UK not to 'cherry-pick' Euro laws, i.e. take the benefits of belonging to the EU and to discard the distasteful bits. 

But history shows that the EU is perfectly capable of being extremely 'flexible' about its own laws.  France and Germany broke the EU’s Stability and Growth pact — rather than accept legally mandated fines for breaking its budget-deficit rules. 

Cartoon France Vichy water EU

There was a 'no bailout' clause for the euro, but Greece was bailed out.  Now the European Commission is pursuing Poland for breaching the rule of law, but ignoring equally egregious breaches in Hungary.  So the EU can cherry-pick the law, when it is politically convenient.  

Sir Humphrey wouldn't want anything less.

W&D's suggestion to Mrs May is to man person-up.  And start being belligerent.  And bring defence and strategic issues to the table.  That will shake up Brussels.  And Frankfurt.   

W&D's Tariffs 101

[W&D is a busy man.  He has an expensive family to run, friends with whom to indulge in the pleasures of life, etc.  And so has little time to prepare an academic treatise.  So W&D is prepared to admit to shamelessly adapting and truncating the below from an article by John Cochrane in Seeking Alpha. Read on.]

The rest of the world sells the US more than the US sells to them. But the rest of the world uses every cent of the extra dollars it gets from that trade to invest in the U.S. and to buy US government bonds.  If the US sells the whole world exactly as much as they sell the US every year - in other words, if there were no overall U.S. trade deficit - the US would have to start saving huge amounts of its income in order to invest in U.S. companies, give mortgages to people to buy houses, and to fund the governments' trillion dollar deficits.

So, trade is good. And tariffs? Tariffs are not good. Tariffs on steel hurt businesses that use steel, especially those that compete with imported products made of steel. Tariffs hurt consumers, who pay more for steel-using products. But perhaps the greatest damage is to the steel industry itself. Tariffs, like all protection, shield the industry from competition. And industries shielded from competition do not innovate, do not cut costs, do not make better products. Only when the Big Three US car makers faced import competition (Toyota, etc), did they start to make better cars and cut costs.

Why is this so hard to understand? Tariffs, like all protection from competition, are great for the protected business and its workers, at least for a while. If you're a practical businessperson, you think the way to get the economy going is to just to replicate for the economy what is good for your business, and hand out protection to everyone. But protection only helps one business at the expense of all the others, and at the expense of consumers.  And the damage is worse than the gain. What is good for an individual business is not good, scaled up, for the economy as a whole. Business people and bankers-turned-policymakers miss that.

Tariffs, like other protections, also help visible, large, and politically powerful constituencies. The larger pain is spread throughout the economy, in ways most of us may not even notice in day-to-day living. But it adds up.

Donald Trump: go figure.  

And, to soothe your troubled mind...  

Miscellany 

Last words...

"S&P Dow Jones Indices announced today the changes in the S&P/ASX indices, effective at the open of trading on March 19, 2018 as a result of the March quarterly review...  S&P/ASX200. Out: MYR Myer Holdings Limited ”  

-   Media announcement from S&P Dow Jones Indices.

Thereby pushing Myer out of the ASX200 index.  How embarrassing.

First Samuel client events calendar

Date 

Description

Details

2018 Events  (Invitations not yet sent)

Tue-29-May-18

Eat Street - food & wine fest

Sofitel

Wed-18-Jul-18

NGV Winter Masterpieces Exhibition

Masterworks from Moma (New York)

NGV

Tue-14-Aug-18

Forum - guest speaker TBA

Leonda

Some lightly salted absurdities from all over...

At the extreme left-hand end of the Bell Curve

Guess what happened next

A man from Baltimore was going on a date.  And just to make sure of success, he took off his shirt and sprayed himself with an aerosol body deodorant.  Somewhat liberally.  He then lit a cigarette to calm his nerves before driving off.  What happened next?

a.  The deodorant worked.  His date fell in love;

b.  The deodorant wasn't tested.  He was stood up;

c.  The deodorant wasn't tested.  His car broke down; or

d.  The deodorant wasn't tested.  As the lighted cigarette caused the deodorant fumes to explode.    

Close.  But no cigar.  The correct answer is d.  The car's fours doors and two windows were blown out.  The driver was taken to hospital with serious burns.   

(NBC)  

Pro-tip: if you are going to text a local phone list offering to sell marijuana you want to first check whose name/ number is on the list

Carlos Tarell Wilson, 30, of Sumpter County, Wisconsin, was sold a local phone list of possible clients.  He texted them all.  One of the recipients was a Sumter County Sheriff’s deputy.  

The deputy agreed to meet up with Carlos, who gave a description of the car he was in.  Around 4:30 p.m. that day, a car matching the description pulled into the meeting location with four people inside.

Possession, trafficking, etc.

(wyff4.com) 

The phone list was stolen from a local pizza shop.

You'd better believe that's coming out of your pocket-money, young man

A mum was visiting a friend's home with her two-year-old son.  The mum and her friend were in the kitchen when the toddler strolled into the living room.  The toddler pushed a button on the remote that he found on a coffee table.  This caused the lid on a sideboard to open and a TV to start sliding up.  The sideboard was being used to display a collection of antiques, which spectacularly crashed.  Estimated damage €100,000.   And that doesn't include the damage the crash caused to the parquetry flooring after a marble clock smashed on it.

(Msn.com) 

Should have shopped at IKEA.

 

Have a wry and dry weekend.  ,

Anthony

[1]  Reed Smoot was a Senator from 1902 until 1933.  He was an apostle of The Church of Jesus Christ of Latter-day Saints.  Smoot's mother was Smoot's exhausted father's fifth wife of six plural marriages and 27 children.  That's a big Christmas dinner table.  Willis Hawley was a Representative from 1907 to 1933.  Before politics, Hawley was a professor of history and economics at Willamette University, Oregon. Not that all Willamette alumnus are fools: 2010 Nobel Prize winner in economics, Dale Mortensen, was a graduate of Willamette. 

[2]  Being the assassination of Arch Duke Ferdinand of Austria-Hungary by a Serbian nationalist.  Cooler heads did not prevail.  Austria-Hungary declared war on Serbia, Russia declared its support for Serbia. Germany seeing Russia mobilise, declared war on Russia. And then declares war on France.  Germany attacked France through Belgium pulling Britain into war. Then Japan declares war on Germany. Later, Italy and the United States would enter.     

[3]  Of course, the fact that the last King of the Two Sicilies was deposed in 1861 doesn't mean that the House of Bourbon-Two Sicilies also died.  There is a sort of 'court-in-exile', but, as with so many of the pretenders, there is more than one person who sees him/her self as the rightful heir.  Currently, Prince Pedro, Duke of Calabria (who lives in Spain) is battling it out with Prince Carlo, Duke of Castro (who lives in Paris) for a defunct kingdom in Italy. Oh, the vanity.