European states have been debating new taxes on technology companies but so far only France has gone so far as to propose one. That proposal has elicited a sharp response from the Trump Administration which believes that the new tax unfairly singles out US Companies such as Google and Apple. The Washington Post reports:
“In an unusual move that threatens to worsen trade tensions with Europe, the Trump Administration said it will investigate whether a proposed French tax on tech companies discriminates against U.S. business, a step that could lead Washington to impose trade penalties.
The 301 investigation — the same type of probe that led the United States to slap tariffs on China last year — is a rare tool for Washington to use against a close ally, underscoring the Trump administration’s intent to continue playing tough on trade.
The investigation illustrates growing alarm among U.S. officials and industry executives about the prospect of new taxes on technology giants spreading beyond France. A number of other countries are considering similar levies, on the belief that wealthy U.S. tech giants aren’t paying enough in taxes worldwide.”
The use of tariffs to address the tax issues in another state is very unusual and it the move is likely to trigger off a number of issues not only with France, but also with the EU.
The British Ambassador to the US, Sir Kim Darroch, has resigned, saying that he could no longer perform effectively with the Trump Administration. Reuters characterizes the circumstances, which stem from the leak of highly unflattering memos written by Darroch about the Trump Administration:
“‘We don’t really believe this Administration is going to become substantially more normal; less dysfunctional; less unpredictable; less faction-riven; less diplomatically clumsy and inept,’ Darroch wrote in one cable.
“It led to a scathing tirade from the U.S. president.
“’The wacky Ambassador that the UK foisted upon the United States is not someone we are thrilled with, a very stupid guy,’ he tweeted, describing Darroch as a ‘pompous fool’”.
Darroch really had no alternative, but his resignation made it seem as if the British Government had capitulated to President Trump. The US-British “special relationship” is looking less special every day.
Moody Analytics has published a study entitled “The Economic Implications of Climate Change” which forecasts the differential effects of climate change on a number of different states. Statista outlines the study succinctly:
“A recent analysis by Moody’s Analytics focused on the economic impact of climate change. The research looked at four different scenarios, entailing temperature increases of 1, 1.9, 2.4 and 4.1°C up to 2100. For example, global economic damage is expected to $54 trillion in 2100 under a 1.5°C warming scenario while 2°C would entail a cost of $69 trillion.
There would be winners and losers in the most dire scenario, a 4°C temperature increase. If that came to pass, it is estimated that India would suffer the biggest blow to its GDP in 2048 out of all of the world’s biggest economies, with a 2.45 percent contraction. Given its lower share of service industry employment, India suffers greatly from the heat stress impact channel. China also suffers from negative heat stress but it is not as badly impacted as India due to benefits from tourism and agricultural activity.
Canada, the UK, Germany, France and the U.S. would see very modest increases in GDP under a worst-case scenario. Moody’s does note that the research does not factor in several climate change metrics that are also likely to affect the economy such as the increasing likelihood of expensive natural disasters.
The likelihood that climate change will negatively affect those states that did not emit substantial amounts of greenhouse gases until the early 21st century is a profound inequity. Whatever solutions the world comes up with to address the issue of climate change, only the ones that address this inequity have any chance of success.
Alex Ward has written an article for Vox entitled “‘A nasty, brutal fight’: what a US-Iran war would look like”. At this point I believe that a war between Iran and the US is extremely unlikely: neither side has any substantial benefit from a war. Nevertheless, it is clear that in both countries there are constituencies that have an interest in such a war and have been arguing in favor of one. So it is instructive to think systematically about what such a war would involve. Ward does a good job of describing the various scenarios that might lead to war. Even though the US has superior firepower (as it did in the Vietnam and Iraqi wars), the Iranians have capabilities that would make the idea of a US “victory” moot:
“In other words, Tehran can’t match Washington’s firepower. But it can spread chaos in the Middle East and around the world, hoping that a war-weary US public, an intervention-skeptical president, and an angered international community cause America to stand down.
That may seem like a huge task — and it is — but experts believe the Islamic Republic has the capability, knowhow, and will to pull off such an ambitious campaign. ‘The Iranians can escalate the situation in a lot of different ways and in a lot of different places,’ Hanna [a Middle East expert at the Century Foundation in New York] told me. ‘They have the capacity to do a lot of damage.’”
There are no outcomes to a war that would leave either side better off.
What used to be on of the most important investment banks in the world, Deutsche Bank, has announced extensive layoffs in an effort to avoid insolvency. It was founded in 1870, largely at the behest of Otto von Bismarck, as Germany tried to extricate itself from the control of British finance. Throughout the many years since, Deutsche Bank has been a central pillar of Germany’s rise to global economic power. However, it did not manage the economic stress of the Great Recession in 2008-09 well, and has been in steady decline since. Since that time, moreover, it has been embroiled in illegal and unethical business conduct. It was also one of the very few financial institutions to have any business dealings with Donald Trump before he became president. The bank will probably survive in one form or another, but it will be many, many years (if ever) for it to regain its former status.
Iran has announced that it will enrich uranium beyond the limits set by the Joint Comprehensive Plan of Action (JCPOA). The media continue to describe this decision as a “violation” of the agreement, but it is hard to describe it as a violation since the US pulled out of the agreement over a year ago. The Iranians have been slowly ratcheting up pressure on Europe (which wants the agreement to remain in force) to get the US to loosen the sanctions which the US is unilaterally enforcing despite the clear demand of the agreement that the sanctions should be lifted. The Iranian strategy really depends on whether the US uses the slight violations as a casus belli.
“Iran has said it is willing to go back to the deal if it is given the economic benefits it was promised. That will be difficult as long as the U.S. continues to enforce strict sanctions on the nation.
“But there is not another obvious way to stop Iran from accumulating dangerous levels of nuclear material. Sabotage efforts and assassinations have slowed the country’s program in the past, but such methods have been unable to stop Iran outright.
“Similarly, military action against Iran’s nuclear facilities would probably set the program back, but only temporarily. ‘You just can’t bomb their program out of existence,’ says David Albright, president of the Institute for Science and International Security. ‘I think what you’re left with is negotiations.'”
“In one of the most sensitive documents, Sir Kim writes: ‘We don’t really believe this Administration is going to become substantially more normal; less dysfunctional; less unpredictable; less faction riven; less diplomatically clumsy and inept.’
“He also says that he doesn’t think Trump’s White House will ‘ever look competent’.”
The British government did not dismiss the cables as published, insisting that “The British public would expect our Ambassadors to provide Ministers with an honest, unvarnished assessment of the politics in their country. Their views are not necessarily the views of Ministers or indeed the government. But we pay them to be candid.” The Conservative Party is poised to elect a new Prime Minister and it looks as if Boris Johnson is the leading candidate. If that occurs, it is likely that the British government will send an Ambassador significantly friendlier to President Trump.
“Household wealth — the value of homes, stock portfolios and bank accounts, minus mortgage and credit-card debt and other loans — jumped 80% in the past decade. More than one-third of that gain — $16.2 trillion in riches— went to the wealthiest 1%, figures from the Federal Reserve show. Just 25% of it went to households in the middle- to upper-middle class. The bottom half of the population gained less than 2%.
Nearly 8 million Americans lost homes in the recession and its aftermath, and the sharp price gains since then have put ownership out of reach for many would-be buyers. For America’s middle class, the homeownership rate fell to about 60% in 2016 from roughly 70% in 2004, before the housing bubble, according to separate Fed data.”
The political implications of this inequality are clear: a loss of confidence in political systems and their legitimacy, leading to the rise of populist nationalism.
Turkish President Recep Tayyip Erdogan has fired the head of the Turkish Central Bank, Murat Cetinkaya and replaced him with his deputy. The Central Bank has been consistently raising rates in an attempt to stem the rise of inflation in Turkey, but raising interest rates has also led to a sharp slowdown in the Turkish economy. Erdogan unquestionably believes that the slower economic growth poses serious political risks as evidenced in the loss by his party of the mayoralty in Istanbul. Erdogan’s move reflects a sentiment that has been growing in a number of countries by political authorities that believe that monetary policy should not be independent of political control, a situation that would likely lead to easy money policies that lead to higher inflation. In the US, President Trump has also been calling for the Federal Reserve to lower interest rates in a move designed to keep economic growth high.
The New York Times ran a fascinating article today, written by two very reputable reporters, Michael Crowley and David Sanger. They assert that the Trump Administration is contemplating changing its objectives with regard to North Korea. For nearly two years the objective was defined as “the complete, verifiable, and irreversible denuclearization (CVID) of North Korea.” Now, according to the report, the objective may be a freeze of current capabilities. A freeze would enshrine North Korea’s status as a nuclear power with between 20 and 60 nuclear bombs and a an intercontinental ballistic missile.
That objective is far more realistic than denuclearization which was never possible and I would support the move as long as there are adequate safeguards to verify the freeze and as long as Japan and South Korea are comfortable with that situation. But we should not forget how we got to this point: backing down from an objective that was supported with threats of “fire and fury” is a strategy that corrodes the credibility of the US. That credibility was also challenged by the “truce” in the US-China trade war which included the US opening up its markets to Huawei, a company that had previously been blackballed by the US.
On the anniversary of the British handover of Hong Kong to the People’s Republic of China in 1997, protesters in Hong Kong rushed government buildings in protest over policies proposed by the Beijing government. The protests were extraordinary and finally suppressed by riot police using tear gas and rubber bullets. The Beijing government has two problems with the demonstrations. First, it does not wish to allow the protests to encourage similar behavior in other parts of China. Second, it does not wish to scare away those investors who have a crucial economic interest in protecting investments that are necessary for the capital needs of the country. Trying to balance these two objectives is very difficult, but at some point, to preserve order in the country, the state will have to prevent citizens from protesting in ways that challenge the authority of the Communist Party and the Chinese state.
Jeffrey Sachs has written a very thought-provoking essay on the interventionist nature of President Trump’s foreign policy. President Trump made it very clear that he is opposed to further military interventions, but that has not meant that he does not wish to use US power to achieve certain objectives. Sachs argues that Mr. Trump has substituted economic power for military power.
“While Trump has so far eschewed a new war, he has continued US regime-change efforts by other means. Trump is often called an isolationist, but he is as interventionist as his predecessors. His strategy, at least so far, has been to rely more heavily on US economic power than military might to coerce adversaries, which creates its own kind of cruelty and destabilization. And it constantly risks flaring into outright war, as occurred with Iran this month.
“The Trump administration currently is engaged in three attempts at comprehensive economic blockades, against North Korea, Venezuela, and Iran, as well as several lesser blockades against countries such as Cuba and Nicaragua, and an intensifying effort to cut off China’s access to technology. The blockade against North Korea is sanctioned, at least in part, by the UN Security Council. The blockade against Iran is in direct opposition to the Security Council. And the blockade against Venezuela is so far without Security Council engagement for or against. The US is attempting to isolate the three countries from almost all international trade, causing shortages of food, medicines, energy, and spare parts for basic infrastructure, including the water supply and power grid.”
The US made two concessions to the Chinese to persuade them to return to the bargaining table. First, the US will allow the Chinese company Huawei to purchase US technological products. The US had banned such sales because it believed that Huawei products compromised national security because of its close ties to the Chinese government. Second, the US decided to ease up on visa restrictions on Chinese students attending US universities. The truce does not resolve any of the major issues between the two states. We shall see if the future talks are productive.
Russian President Putin gave an interview at the G-20 meeting in which he asserted that liberalism had “outlived its purpose”. Implicitly, Putin was arguing that personal freedom was not a human right. According to Time:
“Putin told the Financial Times that liberal governments have ‘pursued a mindless multiculturalism’ by embracing sexual diversity, among other things. Echoing views expressed by other right-wing populists, such as Poland’s Law and Justice leader Jaroslaw Kaczynski and Hungary’s Prime Minister Viktor Orban, Putin said ‘[LGBTQ persons] must not be allowed to overshadow the culture, traditions and traditional family values of millions of people making up the core population.’
With regards to Russia’s own LGBTQ rights record, Putin told the newspaper that ‘we have no problem with LGBTQ persons. God forbid, let them live as they wish … But some things do appear excessive to us. They claim now that children can play five or six gender roles.’”
Putin’s description of LGBTQ rights does not correspond with the anti-gay legislation which has been passed during his tenure as Russian leader. Moreover, the attack on liberalism is more generally an endorsement of authoritarian rule, one consistent with the rise of ethnic and racial nationalism that is being revived in many parts of the world. For his part, US President Trump seems to have missed the point of Putin’s remarks.
“President Donald Trump joked with Russian President Vladimir Putin about meddling in the US elections.
After the two leaders met on the sidelines of the G20 summit on Friday, a reporter shouted a question at Trump about whether he’d warned Putin not to interfere in US democracy.
The US president replied, ‘Yes, of course I will.’ He then turned to Putin, with a slight smirk, and told him: ‘Don’t meddle in the election, President.’ He then pointed toward the Russian delegation and repeated, ‘Don’t meddle in the election.’”
The attempt at humor indicated that President Trump still does not believe that Russia interfered in the 2016 election even though his intelligence services and Special Counsel Mueller’s report proved widespread meddling. Given that there is evidence that Russia intends to intrude in the 2020 election, one can only conclude that President Trump does not take the threat seriously and that he does not care.
But the second exchange was more jaw-dropping. Both leaders joked about the problem of “fake” news in their respective countries.
“And in addition to his comedic riff about election meddling, Trump joked with Putin about the threat of ‘fake news.’
“Bloomberg News reported that Trump commiserated with Putin about journalists, telling him: ‘Get rid of them.’
“’Fake news is a great term, isn’t it? You don’t have this problem in Russia, but we do.’
“Putin laughed and replied that, yes, Russia does actually have that problem.
I find it incomprehensible that President Trump would miss the opportunity to compare freedom of the press with the leader of a country that has seen many journalists killed. Since 1992, when Putin begin his tenure as the leader of the country, 58 journalists have been killed. I am not sure President Trump knows anything about the country he leads, and I cannot shake the feeling that Putin has something on Trump that explains his indifference or complicity.
A heat wave has enveloped parts of Europe and temperatures have reached 40 degrees Celsius (104 F), levels rarely seen on the continent. The temperatures are reminiscent of the heat wave in 2003: “the 2003 heat episode was the deadliest natural disaster in Europe in the last 50 years, with a death toll exceeding 30,000.” A French meteorologist named Ruben Hallali compared the map of heat in Europe to the painting by Edvard Munch, “The Scream”. It is impossible to make a direct connection between the heat wave and climate change, but “…a climatology institute in Potsdam, Germany, says Europe’s five hottest summers since 1500 have all been in the 21st Century.”
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