Trump May Kill the Global Recovery

In a sharp departure from this time last year, the global economy is now being buffeted by growing concerns over US President Donald Trump’s trade war, fragile emerging markets, a slowdown in Europe, and other risks. It is safe to say that the period of low volatility and synchronized global growth is behind us.

.. In 2017, the world economy was undergoing a synchronized expansion, with growth accelerating in both advanced economies and emerging markets. Moreover, despite stronger growth, inflation was tame – if not falling – even in economies like the United States, where goods and labor markets were tightening.
.. Stronger growth with inflation still below target allowed unconventional monetary policies either to remain in full force, as in the eurozone and Japan, or to be rolled back very gradually
.. Markets gave US President Donald Trump the benefit of the doubt during his first year in office; and investors celebrated his tax cuts and deregulatory policies. Many commentators even argued that the decade of the “new mediocre” and “secular stagnation” was giving way to a new “goldilocks” phase of steady, stronger growth.
.. Though the world economy is still experiencing a lukewarm expansion, growth is no longer synchronized. Economic growth in the eurozone, the United Kingdom, Japan, and a number of fragile emerging markets is slowing.
.. while the US and Chinese economies are still expanding, the former is being driven by unsustainable fiscal stimulus.
..with the US economy near full employment, fiscal-stimulus policies, together with rising oil and commodity prices, are stoking domestic inflation.
.. the US Federal Reserve must raise interest rates faster than expected, while also unwinding its balance sheet.
.. the prospect of higher inflation has led even the European Central Bank to consider gradually ending unconventional monetary policies, implying less monetary accommodation at the global level. The combination of a stronger dollar, higher interest rates, and less liquidity does not bode well for emerging markets.
..  Despite strong corporate earnings – which have been goosed by the US tax cuts – US and global equity markets have drifted sideways in recent months.
.. The danger now is that a negative feedback loop between economies and markets will take hold. The slowdown in some economies could lead to even tighter financial conditions in equity, bond, and credit markets, which could further limit growth.
.. Since 2010, economic slowdowns, risk-off episodes, and market corrections have heightened the risks of stag-deflation (slow growth and low inflation); but major central banks came to the rescue with unconventional monetary policies as both growth and inflation were falling.
.. These risks include the negative supply shock that could come from a trade war; higher oil prices, owing to politically motivated supply constraints; and inflationary domestic policies in the US.
.. this time the Fed and other central banks are starting or continuing to tighten monetary policies, and, with inflation rising, cannot come to the markets’ rescue this time.
Another big difference in 2018 is that Trump’s policies are creating further uncertainty. In addition to
  • launching a trade war, Trump is also
  • actively undermining the global economic and geostrategic order that the US created after World War II.

.. the Trump administration’s modest growth-boosting policies are already behind us, the effects of policies that could hamper growth have yet to be fully felt. Trump’s favored fiscal and trade policies will crowd out private investment, reduce foreign direct investment in the US, and produce larger external deficits.

  • His draconian  will diminish the supply of labor needed to support an aging society.
  • His environmental policies will make it harder for the US to compete in the green economy of the future.
  • And his bullying of the private sector will make firms hesitant to hire or invest in the US.

.. Even if the US economy exceeds potential growth over the next year, the effects of fiscal stimulus will fade by the second half of 2019, and the Fed will overshoot its long-term equilibrium policy rate as it tries to control inflation; thus,

achieving a soft landing will become harder.

.. By then, and with protectionism rising, frothy global markets will probably have become even bumpier, owing to the serious risk of a growth stall – or even a downturn – in 2020.

.. With the era of low volatility now behind us, it would seem that the current risk-off era is here to stay.

For Whom the Trump Trolls

Even with his casinos, Trump wasn’t a gambler, either, saying he’d rather own slot machines than play them.

And yet, in a strange twist, Trump has ended up an addict.

.. Lanier, who met Trump a couple of times back in the real estate developer’s New York heyday, thinks the president’s addiction to tweeting is rewiring his brain in a negative way. As Trump picks up speed on Twitter, the Oval Office is becoming a Skinner box. Like other “behavior modification empires,” as Lanier calls social media sites, Twitter offers positive reinforcement for negativity.

.. “Twitter addicts take on this kind of nervous, paranoid, cranky quality, sort of itching for a fight,” Lanier said in an interview. “Trump used to be in on his own joke, and he no longer is. He’s just striking out every morning, fishing for somebody to harass or seeing who’s harassing him.

“I do think it creates a terrifying situation because somebody who is addicted is easy to manipulate. It’s easier for the North Koreans to lie to him than if he wasn’t an addict.”

.. I saw a report on PBS about a mother on the border who was reunited with her 14-month-old child after 85 days. “The child continued to cry when we got home and would hold on to my leg and would not let me go,” the mother wrote. “When I took off his clothes, he was full of dirt and lice. It seemed like they had not bathed him the 85 days he was away from us.”

On the occasion of America’s 242nd birthday, we must ask who we are, if we can see accounts of infants snatched from their parents and returned covered in lice, and not worry about our country’s soul.

.. We have a president who is an addict running a country overflowing with opioid and social media addicts. (In an interview with The Times a few days ago, our tech reporter Nellie Bowles said she dealt with her smartphone addiction by graying out her screen, noting, “These phones are designed to look and work like slot machines — hit us with bright colors and little pings to activate and please,” and “we all have to figure out little hooks to pull back into the physical world.”).. hopes people will resume a sense of decorum when they realize “there’s very little long-term profit from a viral tweet.”

.. He figured out how to dominate Twitter, not with the cool-kid arch style of making fun of someone, but by being school-yard-bully mean.

His tweets propel the story on cable news and shape the narrative for reporters — who are addicted to the First Addict.

Trudeau takes his turn as Trump’s principal antagonist, and Canadians rally around him

Before he was elected Canadian prime minister, Justin Trudeau faced a consistent type of criticism from his opponents: he was too young and too eager to please, conservatives said. His economic plans added up to “unicorns and rainbows.” He did not have the gravitas to represent Canada internationally.

But President Trump has helped bring together the most bitter of Canadian enemies, as he lashed out at Trudeau following the Group of Seven meeting in Quebec, and even the country’s most staunch conservatives have publicly backed up their Liberal prime minister for taking a tough tone in the U.S.-Canada trade conflict.

“I think sometimes, you know, you have to tell the schoolyard bully that they can’t have your lunch money. And I think that’s what the prime minister did today,” said Jaime Watt, a Toronto-based conservative political strategist. “I think most Canadians would say that they were proud of their prime minister.”

.. Who knows what to do with Trump? Nobody knows what to do with him. His own people don’t know what to do.”

..  Trudeau repeated a certain comment, saying Canada was “polite” but “will not be pushed around.”

.. Trump took the second such comment, made in a news conference after the Quebec meeting, badly. In a tweet, he depicted Trudeau as two-faced, saying the prime minister had been “meek and mild” during the meetings, only to lash out afterwards. “Very dishonest & weak,” he tweeted.

Perhaps some of the falling-out boils down to a misunderstanding of Canadian etiquette, said Bruce Heyman, the former U.S. ambassador to Canada — “especially for somebody who’s coming from the world that [Trump] is coming from, and has been so blunt and so confrontational in his conversations and approaches.”

Canadians, Heyman said, “are collaborators who try to find paths to solutions.” It could be easy for someone to misread them, “not taking them seriously or not understanding the resolve they have.

..  I think he’s trying to make an example of Canada. Canada’s a small, super-friendly ally . . . and I think he’s just kind of sending a message to the rest of the world: ‘If we can treat the Canadian this way, you ain’t seen nothing yet in terms of what might be coming your way.’ ”

.. Trudeau has two good reasons to change his tone now, Hampson said: First, the NAFTA talks are unlikely to be resolved any time soon. Second, the next federal Canadian election is next year.

“I think he and his government feel under some pressure to talk tough and to do so publicly.”

.. “I’m not sure if it’s been niceness,” he said. “It’s been more cordial — cordial and businesslike.”

.. “I think that Canadians do pride themselves on an international image where we’re seen as being cordial, friendly and even-handed in terms of trying to get along with other states,” he said.

.. “The reality is that even under the best of circumstances, Canada is a middle power and, you know, when you’re a middle power, you have to get along with larger powers. You’re not necessarily going to get along with larger powers by aggressively attacking them.”

.. But Canadians have also supported tougher stances in the past, when there’s a principled reason for taking them

A Higher Sanctimony

Comey’s memoir shows he is more like Trump than he cares to admit.

But Mr. Trump told an interviewer that he had fired Mr. Comey because the FBI chief wouldn’t say publicly that the FBI wasn’t investigating Mr. Trump. The President also threatened Mr. Comey with a false claim about Oval Office “tapes.” Mr. Comey responded by leaking documents that caused Mr. Rosenstein to name a special counsel, which has put Mr. Trump’s Presidency in mortal peril.

.. The main lesson from Mr. Comey’s book is that Mr. Trump’s abuse of political norms has driven his enemies to violate norms themselves.

.. The most notable fact in the book is how little we learn that is new about Mr. Trump.

.. Mr. Trump is preoccupied with his critics and the validation of his presidential victory. He is clueless that his bullying and flattery would repel Mr. Comey

.. The book mainly adds Mr. Comey’s moral and aesthetic contempt for Mr. Trump.

.. Mr. Comey’s comparison of Mr. Trump to a “mafia” boss is hilariously overstated. Don’t they call it “organized” crime? And what about that code of silence known as omerta? The Trump White House can’t keep anything secret.

.. Mr. Comey reveals in his excessive self-regard that he is more like Mr. Trump than he cares to admit. Mr. Trump’s narcissism is crude and focused on his personal “winning.” Mr. Comey’s is about vindicating his own higher morality and righteous belief.

.. He accuses Mr. Rosenstein of acting “dishonorably” by writing the memo describing how Mr. Comey mishandled the Clinton probe. Yet he barely engages Mr. Rosenstein’s arguments, which quoted from former Justice officials of both parties. Mr. Rosenstein wrote that Mr. Comey was “wrong to usurp” the authority of Attorney General Loretta Lynch and wrong to “hold press conferences to release derogatory information” about Mrs. Clinton.

That mistake made Mr. Comey feel obliged to intervene again in late October—this time to announce the reopening of the probe in a way that helped Mr. Trump. Had Mr. Comey followed Justice protocol in July, he would not have had to make himself the issue in October, damaging the reputation of the FBI and Justice in the bargain.

.. This has been the habit across Mr. Comey’s career, though you’ll find no mention in his memoir of Steven Hatfill, the government scientist he wrongly pursued for years as the anthrax terrorist; or Frank Quattrone, the Wall Street financier he prosecuted twice for obstruction of justice only to be rebuked by an appeals court; or Judith Miller’s recantation of her testimony against Scooter Libby.

Mr. Comey has also had little to say so far about the controversy over the Steele dossier and his handling of the Russian investigation of Mr. Trump. Did he know that the dossier was commissioned by Democrats for the Clinton campaign? He also has nothing to say about the dismissal of his former FBI deputy, Andrew McCabe, for “lack of candor.”

Mr. Comey is getting his moment of revenge as much of the press revels in the attacks on Mr. Trump. Yet his career, reinforced by his memoir, is a case study in the perils of the righteous prosecutor. It also shows why Mr. Comey’s view of the FBI as “independent” of supervisory authority is wrong and dangerous. A presidential bully who abuses power needs to be checked, but so does an FBI director who turns righteousness into zealotry.