Alienated nations will be moved over time to establish alternatives to the U.S.’s systems and markets
But there is a real underlying risk that by deploying and using its economic weaponry so frequently the U.S. will, in the long run, drive others, friend and foe alike, away from its economic orbit. “These are not zero-cost options,” says Robert Hormats, former under secretary of state for economic affairs and an adviser on international economics for presidents going back to Richard Nixon.
Imposing tariffs on China and other nations trying to send their goods to the U.S. not only raises the prices of those products for Americans, it also gives targeted nations an incentive to develop markets, and long-term trade ties, in other countries.
At the same time, those foreign nations can retaliate by cutting purchases of American goods, or by slapping retaliatory tariffs of their own on American products, making them less competitive, as China has just announced it will do. The Chinese may find other countries to provide, say, wheat and soybeans, and in doing so develop lasting, non-American trade ties.
“If the U.S. develops a reputation as an unreliable supplier, countries will turn to our competitors, and, when sanctions end, earlier supply chains will be difficult to restore,” says Mr. Hormats.
.. Similarly, there is a danger the U.S. is providing both allies and adversaries an incentive to find ways around using the American financial system as the wiring for international commerce.
For now, there are few alternatives to using American banks for clearing international transactions. As a result, enemies find they can be shut out of much international commerce by crossing the U.S. and being slapped with American sanctions.
But it isn’t just enemies. Friends also know their companies can be isolated if they don’t heed American wishes to shut down commerce in countries on the American black list. The risk of losing access to the financial system is a powerful motivator.
Yet overuse of this threat could compel other counties—including the very allies whose cooperation the U.S. seeks in applying financial pressure to the bad guys—to find alternatives to using dollars and American banks. Mr. Hormats notes that this “is not easy to do now, given the dollar’s pre-eminent role, but over time such overuse could eat away at the dollar’s role and hence U.S. leverage.”
Indeed, there are signs that others are seeking alternatives to the dollar and the American-led financial network. The European Union is trying to set up its own payment system to allow oil companies and businesses to continue trading with Iran despite American sanctions. China has made clear it would be happy to lead a different international finance system and use its currency as an alternative to the dollar.
Similarly, 11 Pacific Rim allies have moved ahead with their own new trade bloc after the U.S. pulled out of the Trans Pacific Partnership trade deal.
America remains the big kid on the economic block, but it isn’t the only one. The danger is that it could come to be seen as the bully who tries to intimidate the other kids once too often, persuading them to join together to find ways around him.
Venezuelan Spring
More than words are at work. Last week the Bank of England blocked Mr. Maduro from withdrawing $1.2 billion in gold reserves. On Friday the U.S. gave Mr. Guaidó control of Venezuelan government accounts at the Federal Reserve Bank of New York and other U.S.-insured banks.
.. Venezuelans have made numerous attempts since 2002 to restore the liberties lost when Chávez used his majority backing to dissolve civil rights and a free press. But they were never able to persuade the military high command, infiltrated by Cuba, to break ranks with the dictator. If this time is different it’s because Mr. Maduro can no longer guarantee the interests of the top brass.Mr. Guaidó is rumored to be backed by Venezuela’s military rank-and-file and midlevel officers. There are also reports that some commanders of detachments around the country no longer support Mr. Maduro.
The regime is unleashing repression and the international community wants to avoid more bloodshed. The U.S. has offered the military high command safe passage out of the country, and if international efforts to cut financial channels for the leadership are successful, many may find it an attractive option.
.. On Jan. 10 Canadian Foreign Minister Chrystia FreelandwarnedMr. Maduro that he would not be recognized: “We call on him to immediately cede power to the democratically-elected National Assembly until new elections are held, which must include the participation of all political actors and follow the release of all political prisoners in Venezuela.”
.. Mr. Maduro says this is a U.S. conspiracy. But as a member of Canada’s Liberal Party and the lead negotiator of the bitter rewrite of the North American Free Trade Agreement, Ms. Freeland is hardly a Trump administration lackey.
The tyrant isn’t entirely alone. Russia, China, Iran, Cuba, Bolivia, Nicaragua and Hezbollah stand with him. Havana runs the counterintelligence network charged with controlling the Venezuelan armed forces and brownshirts. Reuters reported Friday that Russia has flown an unspecified number of paramilitary contractors into the country. A new asymmetric war can’t be ruled out.
New York Life Insurance Sold Slave Insurance
Banks like JP Morgan Chase and Wells Fargo accepted Slaves as Collateral
Rachel Swarns of the New York Times joins us to discuss what she discovered when she followed the money trail of one of the nation’s top financial institutions all the back to the 19th century... RACHEL: In 1847, Godfrey died in the Midlothian Coal Mines. We still don’t know exactly how he died, but in New York Life’s accounting of the deaths that happened, they simply described, “burned to death.”
New York Life was good for its policy. And Nicholas Mills put in a claim and within months of Nicholas Mills’ claims— three months, actually— they paid up: $337. The folks at New York Life collected a lot of information, but not information that his family, today, might wanna know, or people looking at the institution of slavery might wanna know. They did not record his last name. They did not record where he was, or if he was, buried. Simply “burned to death” and “$337 payment.”
CHENJERAI: This payment to a Southern slave owner wasn’t coming from Charleston, or Richmond, it was coming from New York... And slaves were often used by people who went to a bank, wanted to get a loan, and had to, as we often do today, show some property for collateral, and would say, “okay, I got these 20 guys here. This is my collateral.”
That was a very pernicious system because, if you think it through, what happens when that guy defaults? Well, we know what happens if you default on your car loan today. The bank will come take it. The same thing happened back then.
JACK: Wait a minute. There were slave repo men?
RACHEL: There were slave repo men.
It’s very simple. You default on your loan, you have given up some collateral, the banks then become the owners of that property. And so the banks became owners of human beings, of these enslaved people. They took them, repossessed them, and tried to sell them, because it’s just like in foreclosures, you know, they don’t wanna hold on to these distressed properties. You know, they’re not in the real estate business. Banks are not really in the slave owning business.
RACHEL: We are talking about, you know, there, there are contemporary banks that have this history, you know.
CHENJERAI: Could you, could you name them?
RACHEL: So some of the banks that were involved in this business, banks who accepted slaves as collateral were J.P. Morgan Chase and Wells Fargo.
.. CHENJERAI: So this how the descendants are responding? How are the insurance companies responding to this?
RACHEL: You know, no one really wants a call from a reporter saying, talking about…. their ties to slavery. It’s, it’s just not … A lot of people are looking-
JACK: Mm.
RACHEL: … for coverage from the New York Times. This is not an issue where anyone is happy about a connection.
This information about slave insurance and these records came out in the 2000s, when states and municipalities required companies to disclose their ties to this period of time. So, you know, there was some trying to say, “well this is old news, there’s no reason to delve into this.” In some ways, it’s no surprise that-
.. There was a lawsuit that was filed particularly against New York Life and other companies that was dismissed in 2004, after a judge ruled that the black plaintiffs had been unable to establish a direct link to the companies that they had sued, and that the statute of limitations had run out.
With the advance of genealogy and the digitization of records, it’s now possible, difficult, but possible, to trace these people, and their descendants to the present day... JACK: And in terms of just Americans coming to grips with this history, how should we- how do we tell that story?
RACHEL: You know, I think, with a lot of these issues, you know, there is the moral question, right? And what do we do with that, as, as Americans? It is simply true that African Americans were not paid for labor, right? For a long time. (laughing).
.. Ta-Nehisi Coates obviously did that really provocative piece about reparations and arguing for reparations. And he actually was at a conference and he was talking about that debate in American society and saying… You know people were saying, “Well, what would it look like?” and he said, “You know, we can’t really talk about what reparations looks like if there is no consensus that there was a debt.”And I think that’s where America is right now is trying to figure out is there a debt? And part of the work that I do, and the work that a lot of people are doing in this area and looking at these kinds of connections between slavery and today, is just illuminating those kinds of connections.
Trump-Appointees Urge Bank Examiners to Go Easier on Risky Practices
After years of acrimony, the nation’s top banking regulators are seeking a detente with the firms they oversee. Two Trump-appointed officials have spent several months touring the country, visiting bank examiners in regional offices and asking them to adopt a less-aggressive tone when flagging risky practices and pressing firms to change their behavior.
- The Federal Reserve’s Randal Quarles and the Federal Deposit Insurance Corp.’s Jelena McWilliams aim to change policy in a subtle but significant way and reshape regulators’ relationship with banks, which officials have said was too contentious during the Obama years that followed the financial crisis.
- Critics say friendlier examiners could blunt the effect of postcrisis rules, giving banks more freedom to engage in riskier practices.