Here are summaries from a selection of articles we read today:
Is the U.S. Due For a Recession?
- Art Cashin: every decade since 1850 the U.S. has had a recession.
- For someone that thinks correlation implies causation, they might assume we’re due a recession in the next couple of years (not had one since 2009).
- From 1850s to end of WWII the average contraction in economic activity was more than 22%! Since then, it’s been just -2.3%. Time between downturns has also increased.
- This period is the second longest expansion in U.S. history.
- Australia hasn’t had a recession since 1991. Thy have a different economic make up than the U.S. but it still shows a recession doesn’t have to happen just because there hasn’t been one for a while.
- Economists don’t have an overarching model or theory to predict a recession, since economic activity is mainly controlled by human behaviour, not rational economic theory.
Donald Trump and Kim Jong Un sign the blandest of agreements
- The two men signed a declaration resolving “to build a lasting and stable peace regime on the Korean peninsula”.
- Trump declared he would provide “security guarantees” and in return, Kim Jong Un gave his “firm and unwavering commitment” to complete denuclearisation of the Korean peninsula.
- The statement is similar to the ‘wooly’ statement with South Korea, where they commit to achieving peace on the Korean peninsula.
- Mr Kim will be implicitly recognised as an equal by a sitting American president. Something his father and grandfather wanted but never achieved.
- North Korea wanted the summit, but Trump didn’t get anything in exchange.
- Several analysts cast doubt on how effective the agreement would prove to be in the long run at getting North Korea to give up its cherished nuclear weapons.
- Trump said he expected the denuclearisation process to start “very, very quickly” and it would be verified by “having a lot of people in North Korea”.
States that supported Trump would get hit hardest in a Canada trade war
- Canadian Foreign Minister told reporters that Canada would retaliate against U.S. tariffs in a measured and reciprocal way, adding that the country would always be willing to talk.
- Voter turnouts and trade flows with Canada show that states such as Ohio, Texas and Indiana that supported Trump generally enjoy a surplus in goods trade with Canada. The main exception being Michigan.
- The biggest goods trade deficits with Canada are in states such as California and Illinois that voted for Clinton.
- The services surplus more than offsets the deficit in goods, giving the U.S. an overall trade surplus with Canada of $8.4 billion.
America’s allies should respond to steel tariffs with targeted sanctions on the Trump Organization
- Overall economic conditions are generally pretty good in the United States right now, you’d need to inflict a lot of retaliatory pain on the metal tariffs for it to be noticeable.
- President Trump has said the tariffs are deemed vital to national security as steel and aluminium are materials of war, they do not want to become dependent on nations that may deprive access to imported metal during wartime. However, the countries Trump is taxing are not only friendly, but they are literally bound to the United States by mutual defence treaties.
- When China wanted to get Trump to let ZTE off the hook for repeatedly violating sanctions against North Korea, it had a Chinese state-owned enterprise approve a huge loan to an Indonesian real estate project that will feature Trump-branded hotels, condos, and a golf course.
- The U.S allies are unlikely to take the same approach, but they can work together on a package of targeted sanctions narrowly designed to inflict pain specifically on the Trump Organization.
- The EU’s idea is that if they punish Paul Ryan’s constituents by levying new taxes on Wisconsin’s Harley-Davidson motorcycles, it will induce Ryan to bring pressure to Trump.
- Sanctions on Trump personally would cause pain to fewer people and they would be vastly more effective since Trump is egocentric, although they would be seen as a dangerous escalation.