Tag Archives: economics

“…the Nature of Capitalism”

My Comments: There are changes afoot, and 45 and his cronies seem to have few clues. Or, more likely, they don’t give a damn.

The disparity between those at the top of the economic food chain and the rest of us not at the top, is called ‘income inequality’. The different approach taken by the two primary political parties, assuming there is a motivation to govern, is that ‘income inequality’ results from laziness and social giveaways, while the other party argues there are pressures whose origins are beyond the capacity for anyone to influence.

The disparities show up now as anemic job growth numbers across the nation, to the rise in disaffected people who show up at Trump rallies, to the tension in so many communities between law enforcement and the people they are supposed to be protecting, to the tension between rural and urban populations, and on and on and on.

There are huge implication for people with years of retirement left to navigate. This is a good read and very thought provoking.

by Oscar Williams-Grut | November 5, 2016

Lord Adair Turner, the former vice chairman of Merrill Lynch Europe and ex-head of the Britain’s financial watchdog, is “increasingly worried” that advances in technology are undermining capitalism and stopping the global economy recovering from its “post-crisis malaise.”

In an interview with Business Insider, Lord Turner said: “We have an economic malaise where the capitalism system is not delivering as well or to enough people to maintain its legitimacy.

“There’s a certain sort of equality of citizenship that requires that everybody does OK. I think that may breakdown. I think it may breakdown because of the fundamental nature of technology. You have to be aware that the way that capitalism works will vary depending on the different stages of technology that we’re in.”

‘Huge returns for them and relatively low and precarious returns for an increasing percentage’

Lord Turner ran the Confederation of British Industry (CBI) in the mid-1990s, before becoming vice chairman of Merrill Lynch Europe from 2000 to 2006. He then served as head of the UK’s former financial watchdog the Financial Service Authority from 2008 to 2013, taking the jobs on the eve of the global financial crisis sparked by the US mortgage security bubble.

Lord Turner is now chairman of George Soros’ economic think thank the Institute for New Economic Thinking and this year authored “Between Debt and the Devil” on the global financial crisis. (There are those on the right who claim George Soros, despite his billions, it really a communist, interested in destroying capitalism – TK)

He told Business Insider that businesses like Facebook, Uber, and Airbnb are focusing huge amounts of wealth in the hands of relatively few people and generating fewer jobs than previous technological breakthroughs. This is undermining the fundamental promise of capitalism that advances in technology and the wider economy will bring some benefit to everyone.

He said: “Look at Facebook — it now has a market cap of about $370 billion. It only employs 14,000 people and it had to do very little investment in order to get there. The reason is this technology has this extraordinary feature that once you develop one copy of software, the next billion copies don’t cost you anything.

“There’s zero marginal cost of replication. That is just completely different from the world of electromechanical machinery. Once Henry Ford had built one factory, if he wanted another he’d have to build it all over again. He had to put in lots of millions of stock.”

Technological innovations, such as industrialisation, have traditionally generated more jobs than they destroyed. But research by Citi and Oxford University earlier this year found a “downward trend in new job creation” from the 1980s onwards, with technology generated fewer, lower-skilled jobs than past revolutions.

The World Economic Forum has already forecast that 5 million jobs could be eradicated by technology by 2020 and 57% of all jobs across the OECD are at risk of automation, according to research by Citi and Oxford University.

Lord Turner says: “The problem is this: I think we probably are on the verge of a wave of automation and robotisation and the application of big data etc., which will tend to create an economy of huge returns for the people clever enough to create the software, do the big of data analytics, create the computer game, create the new business model or the data system that sits at the centre of Airbnb or Uber.

‘One of the things is it does seem to be driving inequality’

Multi-billion dollar tech platforms like Airbnb and Uber pitch themselves as part of the “gig economy,” which they say helps people earn extra money through either flexible work or renting out their assets.

But British economist Guy Standing argues that most of the people who work on these types of platforms are part of what he terms the “precariat” — low-paid workers with precarious job security. He claims these types of platforms that connect workers with employers are part of a wider trend of low-paid agency work.

Tech platforms’ role in society has been in focus recently, with a British employment tribunal ruling that Uber drivers were in fact staff rather than freelancers on the platform. As a result, they are legally be entitled to things like holiday pay and sick pay.

Lord Turner says: “I think we’re just at the beginnings of understanding what deep things this [technological change] does. One of the things is it does seems to driving of inequality. This information and communication technology enables huge wealth creation with very little investment for some categories of people in the economy and creates jobs that are very low pay for others.”

Lord Turner thinks this tech-driven inequality has contributed to the popular resentment for elites and mainstream politics that drove the Brexit vote and support from Donald Trump in the US elections.

He says: “I think we may be at a turning point in the nature of capitalism. Our assumption for the last 200 years has been that although there are ups and downs year by year, broadly speaking decade-by-decade capitalism delivers an increase in GDP per capita and although it’s not an equal system, some people do better than others, on average over a couple of decades everybody does OK.”

‘I am increasingly convinced and worried there are more fundamental forces at work’

Lord Turner suggested that a solution the tech-driven equality could be a universal basic income — a flat wage paid to all citizens that is enough for them to live on. Experiments with this are being carried out in Holland and Kenya.

An alternative could be that the government ensures people are paid a “living wage” for essential human roles such as health and social care, Lord Turner says.

He told BI: “There are many jobs that we need to do in our society, care etc., that you can’t automate and you wouldn’t want to automate. They need to be done but it may be that if you leave those entirely to the private sector or the state in trying to buy them, using competitive bidding processes to continually drive the price down, those things where we do need people to do the job will be at rates so low that it doesn’t give people enough income and dignity.

“Does that mean that we just have to accept that the state has to say through the social care system and health care system it’s going to employ people and pay people at a rate which it considers reasonable — a living wage or whatever — rather than at the lowest rate at which it can put it out to competitive bidding?”

But Lord Turner added: “I think it’s a fundamental social issue that we will increasingly have to debate and I think we don’t really know what the policy levers there are.”
Lord Turner believes that finding a solution to the problems presented by the new tech economy are essential not just to repairing global trust in capitalism but also in repairing the global economy itself.

Lord Turner argued in his book, “Between the Debt and the Devil”, that the global economy’s painfully slow recovery from the 2008 crisis has been caused by the huge debt overhang created by a half century of loose credit conditions in the run up to the crash.

But he told BI: “Whereas soon are 2008 I felt our problem was fundamentally just an enormous debt overhang generated by an out of control credit boom, I am increasingly convinced and increasingly worried that there are some more fundamental forces at work which is why it’s taking so long to get out of, and why we’re still not out of, this post-crisis malaise.”

Bull Market Complacency Calls for Caution—and Action

My Comments: Today is Monday, when I post something about investments. Scott Minerd is not only a global figure in this environment, he has the ability to reduce complex ideas to where even I can understand them. His message, as I understand it, is continue to ride the bull, but be prepared to panic at any time.

  June 09, 2017 | By Scott Minerd, Global CIO

By many measures, the stock and bond markets have rarely been more expensive and more stable, and that has me worried. High-yield bonds and mortgage-backed securities are both trading near their narrowest-ever spreads relative to Treasurys, and they have been hovering around these levels for months. At the same time, U.S. stock market indexes are continuing to make new highs while the Chicago Board Options Exchange Volatility Index (VIX), which measures option-implied S&P 500 volatility, is near its lowest level since 1993. The amount of complacency built into the markets argues for caution.

Plenty of events clustered around this summer and fall could potentially spell disappointment for the markets. In Europe, Emmanuel Macron may have handily won the presidential election in France, but there remains the French parliamentary elections next week. These elections may result in what the French call “cohabitation,” a term that describes when the president and the majority of the members of the French parliament represent two different parties, which has not happened in France since the 1997 election. Meanwhile, the U.K. election results have hobbled Theresa May’s mandate and created a cloud of uncertainty over the timing and direction of Brexit negotiations. German federal elections, due to take place in September, will test Angela Merkel’s conservative bloc.

In Washington, the focus is on the Senate version of the healthcare bill, which is unlikely to be finalized before the August recess. This delay could push back the timeline for enacting tax reform to 2018. This says nothing of the political uncertainty in Russia, North Korea, or in the Middle East.

As this realization settles in, I think some of the hope underpinning the markets will slowly erode this summer. History suggests that there is a high likelihood we will get some sort of shock in the second half of the year, which would lead to tightening financial conditions and widening credit spreads. I have seen it happen a number of times in my career: The stock market crash of 1987 and the Asian crisis in 1998 were both unexpected events late in a lengthy economic expansion that led to a brief but violent repricing of risk assets. Both events, however, were followed by at least two more years of an expanding economy.

Today we are on pace to set a record for the longest expansion in U.S. history, thanks in large part to the slow post-crisis recovery and accommodative monetary policy. The current upward slope of the yield curve offers no indication that it will end soon, but eventually it will, given the Federal Reserve’s indications that further tightening is needed. I believe we will see two more rate hikes in 2017, the next one occurring later this month, and at least three increases in 2018. I also expect that the Fed will announce in September a change to its balance sheet strategy that will involve a gradual tapering of reinvestments in 2018. This should put upward pressure on yields at the short end and the belly of the curve, where most of the new Treasury issuance is likely to come.
Even as conditions call for a healthy dose of caution, there is no need to panic longer term. There is still significant ongoing stimulus coming from the European Central Bank and the Bank of Japan.

The combination of these conditions argues for taking certain near-term portfolio actions. Investors should consider upgrading credit quality whenever possible while reducing exposure to high-yield bonds and stocks. Holding some dry powder* for opportunities that should arise amid a pickup in volatility later this year would be a wise move. With spreads near record tights, fixed-income investors simply are not being compensated for the risk they incur in the hunt for yield. Investors should remain disciplined and not chase returns now. It may not be the most exciting message, but no one ever took a loss by booking a gain.

As I see more life left in this economic expansion, I believe there will be opportunities later in the year to make up for any near-term underperformance. The coming correction might not happen tomorrow, but current conditions bring to mind the legendary response of Baron Rothschild, who, when asked the secret of his great wealth, said he made his fortune by selling early. It might be wise to follow Baron Rothschild’s example and take some chips off the table.

Growth Is Not Dead, But It Is Dying

My Comments: My post on May 26th last about Demographics and Money suggested reasons why economic growth in long established nations will be nothing to brag about going forward. Despite the current Administration suggesting a return to not just 3% annual growth for the US economy, but wait for it, 4% annual growth, it’s just not going to happen.

The tax plan outlined by the White House the other day makes the basic assumption that with high growth, tax revenues will grow to pay for everything. What is not said is that without significant growth, the hole we are in now will simply get deeper.

Right now the Federal deficit is almost $20T. That’s a staggering amount. Pretty soon, the annual cost to service that debt will be $1T per year. That money has to come from tax revenues, which means you and I. Are you prepared to pay your share when the top 1% get more tax breaks?

I’m far from a pacifist, but do we really need to keep paying more annually for our military than the next seven nation’s combined spending? Yes, some of that spending filters back into the economy and functions as a stimulus, but the Administration wants to spend more than we do now.

May 28, 2017 Lorenzo Fioramonti

Growth is dying as the silver bullet for success. Why this may be good thing

The idea that the economic “pie” can grow indefinitely is alluring. It means everybody can have a share without limiting anybody’s greed. Rampant inequality thus becomes socially acceptable because we hope the growth of the economy will eventually make everybody better off.

In my new book “Wellbeing Economy: Success in a World Without Growth” I point out that the “growth first” rule has dominated the world since the early 20th century. No other ideology has ever been so powerful: the obsession with growth even cut through both capitalist and socialist societies.

But what exactly is growth? Strangely enough, the notion has never been reasonably developed.

For common sense people, there is growth when – all things being equal – our overall wealth increases. Growth happens when we generate value that wasn’t there before: for instance, through the education of children, the improvement of our health or the preparation of food. A more educated, healthy and well-nourished person is certainly an example of growth.

If any of these activities generate some costs, either for us individually or for society, we should deduct them from the value we have created. In this logical approach, growth equals all gains minus all costs.

Paradoxically, our model of economic growth does exactly the opposite of what common sense suggests.

Negative values of growth

Here are some examples. If I sell my kidney for some cash, then the economy grows. But if I educate my kids, prepare and cook food for my community, improve the health conditions of my people, growth doesn’t happen.

If a country cuts and sells all its trees, it gets a boost in GDP. But nothing happens if it nurtures them.

If a country preserves open spaces like parks and nature reserves for the benefit of everybody, it does not see this increase in human and ecological wellbeing reflected in its economic performance. But if it privatises them, commercialising the resources therein and charging fees to users, then growth happens.

Preserving our infrastructure, making it durable, long-term and free adds nothing or only marginally to growth. Destroying it, rebuilding it and making people pay for using it gives the growth economy a bump forward.

Keeping people healthy has no value. Making them sick does. An effective and preventative public healthcare approach is suboptimal for growth: it’s better to have a highly unequal and dysfunctional system like in the US, which accounts for almost 20% of the country’s GDP.

Wars, conflicts, crime and corruption are friends of growth in so far as they force societies to build and buy weapons, to install security locks and to push up the prices of what government pays for tenders.

The earthquake in Fukushima like the Deep Water Horizon oil spill were manna for growth, as they required immense expenditure to clean up the mess and rebuild what was destroyed.

Disappearing growth

Against this pretty grim depiction, you may ask yourself: where is the good news? Well, the good news is that growth is disappearing, whether we like it or not. Economies are puffing along. Even China, the global locomotive, is running out of steam.

And consumption has reached limits in the so-called developed world, with fewer buyers for the commodities and goods exported by developing countries.
Energy is running out, particularly fossil fuels, and even if polluting energy sources were endless – as some supporters of shale gas, or fracking, suggest – global agreements to fight climate change require us to eliminate them soon.

As a consequence, mitigating climate change forces industrial production to contract, thus limiting growth even further. What this means is that, on the one hand, growth is disappearing due to the systemic contraction of the global economy. On the other, the future of the climate (and all of us on this planet) makes a return of growth, at least the conventional approach to industry-driven economic growth, politically and socially unacceptable.

Window of opportunity for change

Even the International Monetary Fund and mainstream neoliberal economists like Larry Summers agree that the global economy is entering a “secular stagnation”, which may very well be the dominant character of the 21st century.

This is a disastrous prospect for our economies, which have been designed to grow – or perish. But it is also a window of opportunity for change. With the disappearance of growth as the silver bullet to success, political leaders and their societies desperately need a new vision: a new narrative to engage with an uncertain future.

In my new book, I argue that as we begin to recognize the madness behind growth, we start exploring new paths. These include: forms of business that reconcile human needs with natural equilibria; production processes that emancipate people from the passive role of consumers; systems of social organisation at the local level that reconnect individuals with their communities and their ecosystems, while allowing them participate in a global network of active change makers.

This is what I call the “wellbeing economy”. In the wellbeing economy, development lies not in the exploitation of natural and human resources but in improving the quality and effectiveness of human-to-human and human-to-ecosystem interactions, supported by appropriate enabling technologies.

Fulfilling lives

Decades of research based on personal life evaluations, psychological dynamics, medical records and biological systems have produced a considerable amount of knowledge about what contributes to long and fulfilling lives.

The conclusion is: a healthy social and natural environment. As social animals, we thrive thanks to the quality and depth of our interconnectedness with friends and family as well as with our ecosystems. But of course, the quest for wellbeing is ultimately a personal one.

Only you can decide what it is. This is precisely why I believe that an economic system should empower people to choose for themselves. Contrary to the growth mantra, which has standardised development across the world, I believe an economy that aspires to achieve wellbeing should be designed but those who live it, in accordance with their values and motives.

Source article: http://theconversation.com/growth-is-dying-as-the-silver-bullet-for-success-why-this-may-be-good-thing-78427

CBO: Conservative Bulls**t Obliterator

My Comments: I am relatively powerless as one of some 325M people living in these United States of America. But I have a voice and at least a few people read my blog posts.

I’m disturbed by 45’s apparent glee in ceding global economic and moral leadership to China and Germany and other nations. I’ve concluded he’s actually Our Man in DC. That is, Moscow’s Man in DC.

Universal health care is becoming the accepted norm among these 325M Americans. We are a wealthy nation, and our values, developed over 250 years and more suggest it’s appropriate to take care of our elderly, our children, our less fortunate brethren.

But there are those in 45’s inner circle whose expressed values significantly contradict my values. I’m happy there exists a potential Bulls**t Obliterator to help draw attention to this.

By Jon Perr \ Sunday May 28, 2017

This past week was a very big one for some very big promises from Republicans in Washington. It didn’t go well for them.

Three weeks after House Republicans voted to pass a new version of their “American Health Care Act,” the nonpartisan Congressional Budget Office (CBO) weighed in on high-profile pledges from President Donald Trump and House Speaker Paul Ryan. While Trump guaranteed “insurance for everybody” that is “much less expensive and much better,” Ryan insisted the revised AHCA “protects people with pre-existing conditions.” Not content to rest there, HHS Secretary Tom Price boasted that Trumpcare’s $880 billion in cuts to Medicaid will “absolutely not” result in millions losing coverage.

Meanwhile, the Trump administration also unveiled its fiscal year 2018 budget proposal. With its draconian spending cuts to the social safety net programs, the White House blueprint was proclaimed “dead on arrival” even by some Republicans. But more embarrassing to Donald Trump was its double-counting of $2 trillion in revenue for Uncle Sam magically generated by “sustained, 3 percent economic growth.” As Treasury Secretary Steven Mnuchin declared a month ago, “the plan will pay for itself with growth.”

Unfortunately for the White House and GOP leaders on Capitol Hill, the CBO demolished all of those Republican myths. Again. That’s because whether the issue is health care, taxes, job numbers, or the impact of the President Obama’s 2009 economic stimulus, the acronym “CBO” doesn’t just stand for “Congressional Budget Office.” It’s also shorthand for “Conservative Bulls**t Obliterator.”

As it turns out, in recent years that’s been true even when Republicans have their hand-picked choice running the agency.

Consider, for starters, the decades-old GOP myth that “tax cuts pay for themselves.” In January 2015, the new Republican majorities in the Senate and House selected former Bureau of Labor Statistics chief Keith Hall to lead CBO. But by that August, Hall had some bad news for the Red team: “No, the evidence is that tax cuts do not pay for themselves. And our models that we’re doing, our macroeconomic effects, show that.”

Of course, it’s not just a question of economics models, but more than 40 years of economic history. Almost from the moment that Arthur Laffer first sketched his now-famous curve on a napkin in 1974, right-wing pundits, politicians, and propagandists have declared as an article of faith the belief that tax cuts incentivize so much economic growth that revenues to Uncle Sam will be at least as high as they would have been without the reduction in rates. Unfortunately for the American people, four decades of supply-side snake oil have produced only mushrooming national debt and record-high income inequality. Far from paying for themselves, the Reagan and Bush tax cuts delivered a windfall only for the wealthy while unleashing oceans of red ink from the United States Treasury. It’s no wonder why every economist surveyed by the University of Chicago Booth School of Business in 2012 and again in 2017 disagreed with the claim that “a cut in federal income tax rates in the US right now would raise taxable income enough so that the annual total tax revenue would be higher within five years than without the tax cut.”

As former Obama administration economist Austan Goolsbee put it:
Moon landing was real. Evolution exists. Tax cuts lose revenue. The research has shown this a thousand times. Enough already.

But the CBO is hardly finished in debunking the rubbish being shoveled by Messrs. Trump, Mnuchin, and Mulvaney. Candidate Trump didn’t just promise average annual economic growth of 4 percent during the campaign. The White House web site currently pledges “to get the economy back on track, President Trump has outlined a bold plan to create 25 million new American jobs in the next decade and return to 4 percent annual economic growth.” No President since JFK and LBJ ever achieved that target. When Mulvaney and Mnuchin promised 3 percent GDP growth over the next decade, their rosy scenario represented a 1.1-point gap over CBO’s forecast of 1.9 percent.

Ethanol In Our Gas?

My Comments: Do you ever notices those little signs on the gas pumps? The small notices that tell us 10% is actually not gasoline? Do you ever wonder why they are there? Me neither.

Clean air, global warming, political deal making, the Paris Climate Agreement – who knew this stuff was so complicated?

William O’Keefe | Saturday, November 26, 2016

To get enough votes to pass the 1990 Clean Air Act Amendments, Democrats led by Henry Waxman made a deal with the corn lobby. In exchange for its support, Congressman Waxman committed to an oxygenate provision — essentially a mandate to blend corn derived ethanol into gasoline.

As a way of disguising this requirement, Congress wrote the oxygenate provision in a way that made it part of a formula for gasoline — government gas. Section 211 (k) of the Clean Air Act spells out in detail specific component levels for gasoline. Just think, lawmakers acting like chemists, telling refiners how to make gasoline.

Prior to the passage of the 1990 Amendments, it was clear that initiatives to improve air quality would mean that tailpipe emissions would become more stringent. In anticipation, the oil and auto industries undertook the most extensive fuel-engine research program ever conducted. The objective was to determine the most cost-effective ways to meet lower emission standards and to provide research based data that could be used by government.

Since the mandate went into effect, almost 26 years ago, its cost has been about $200 billion or more.

The two industries briefed Congress on the research and made one primary request: set emission standards to achieve Clean Air Act objectives but give the two industries the freedom to determine how best to achieve them. That request was rejected because of a deal with the corn lobby.

Ever since then, motorists have been stuck with higher fuel costs and lower mileage, and consumers have been stuck with higher food prices. Corn production has continued to increase and Congress expanded the mandate to include specific volumes. The cost of the ethanol mandate has been documented extensively as has the lack of real environmental benefits. In 2015, the Manhattan Institute published a report — The Hidden Corn Ethanol Tax — that concluded in 2013 the mandate cost consumers $10.6 billion. Since the mandate went into effect, almost 26 years ago, its cost has been about $200 billion or more.

President-elect Trump has pledged to “drain the swamp.” The ethanol mandate is a good place to start because it may be the most visible and lasting example of how crony capitalists create Baptist and Bootlegger schemes to enrich themselves with taxpayer dollars.

Ethanol manufacturers have perfected championing the environment with corn farmer support for both to get richer. Bringing the ethanol mandate to an end would send a clear signal that campaign promises to take on crony capitalists was more than just rhetoric. Changing the Washington culture has to break the link between special interests, lobbyists, lawyers, the alliance between Bootleggers and Baptists.

Re-Negotiate NAFTA?

My Comments: The North American Free Trade Agreement was passed by Congress on 11/30/1994. It was approved by 34 Republicans and 27 Democrats. It’s purpose was to increase trade across North America without creating a single currency among the three countries involved.

22 years later, industries specific to each country have evolved to reflect strengths and weaknesses inherent across the region. The drive for economic survival among those industries means there have been winners and losers, but with a 22 plus year history, those strengths and weaknesses have either surfaced or been culled out.

On balance, NAFTA has been good for the agricultural sector. We have a warmer climate than Canada and more rain than Mexico. Of the hundreds of nations across the planet, we are the only one with net exports of food. Everyone one else has to import some of their food.

In anticipation of a disruption of imports of American food stuffs into Mexico, they have now started a move to import more of their food requirements from China. That won’t create jobs in the US.

I think it’s ok and necessary to re-evaluate ideas from time to time. But changes will have consequences, some of them will hurt and US farmers are nervous. This explains why.

By PAUL WISEMAN, AP Economics Writer/May 19, 2017

Why Trump’s combative trade stance makes US farmers nervous

WASHINGTON (AP) — A sizable majority of rural Americans backed Donald Trump’s presidential bid, drawn to his calls to slash environmental rules, strengthen law enforcement and replace the federal health care law.

But last month, many of them struck a sour note after White House aides signaled that Trump would deliver on another signature vow by edging toward abandoning the North American Free Trade Agreement.

Farm Country suddenly went on red alert.

Trump’s message that NAFTA was a job-killing disaster had never resonated much in rural America. NAFTA had widened access to Mexican and Canadian markets, boosting U.S. farm exports and benefiting many farmers.

“Mr. President, America’s corn farmers helped elect you,” Wesley Spurlock of the National Corn Growers Association warned in a statement. “Withdrawing from NAFTA would be disastrous for American agriculture.”

Within hours, Trump softened his stance. He wouldn’t actually dump NAFTA, he said. He’d first try to forge a more advantageous deal with Mexico and Canada — a move that formally began Thursday when his top trade negotiator, Robert Lighthizer, announced the administration’s intent to renegotiate NAFTA.

Farmers have been relieved that NAFTA has survived so far. Yet many remain nervous about where Trump’s trade policy will lead.

As a candidate, Trump defined his “America First” stance as a means to fight unfair foreign competition. He blamed unjust deals for swelling U.S. trade gaps and stealing factory jobs.

But NAFTA and other deals have been good for American farmers, who stand to lose if Trump ditches the pact or ignites a trade war. The United States has enjoyed a trade surplus in farm products since at least 1967, government data show. Last year, farm exports exceeded imports by $20.5 billion.

“You don’t start off trade negotiations … by picking fights with your trade partners that are completely unnecessary,” says Aaron Lehman, a fifth-generation Iowa farmer who produces corn, soybeans, oats and hay.

Many farmers worry that Trump’s policies will jeopardize their exports just as they face weaker crop and livestock prices.

“It comes up pretty quickly in conversation,” says Blake Hurst, a corn and soybean farmer in northwestern Missouri’s Atchison County.

That county’s voters backed Trump more than 3-to-1 in the election but now feel “it would be better if the rhetoric (on trade) was a little less strident,” says Hurst, president of the Missouri Farm Bureau.

Trump’s main argument against NAFTA and other pacts was that they exposed American workers to unequal competition with low-wage workers in countries like Mexico and China.

NAFTA did lead some American manufacturers to move factories and jobs to Mexico. But since it took effect in 1994 and eased tariffs, annual farm exports to Mexico have jumped nearly five-fold to about $18 billion. Mexico is the No. 3 market for U.S. agriculture, notably corn, soybeans and pork.

“The trade agreements that we’ve had have been very beneficial,” says Stephen Censky, CEO of the American Soybean Association. “We need to take care not to blow the significant gains that agriculture has won.”

The U.S. has run a surplus in farm trade with Mexico for 20 of the 23 years since NAFTA took effect. Still, the surpluses with Mexico became deficits in 2015 and 2016 as global livestock and grain prices plummeted and shrank the value of American exports, notes Joseph Glauber of the International Food Policy Research Institute.

Mexico has begun to seek alternatives to U.S. food because, as its agriculture secretary, Jose Calzada Rovirosa, said in March, Trump’s remarks on trade “have injected uncertainty” into the agriculture business.

Once word had surfaced that Trump was considering pulling out of NAFTA, Sonny Perdue, two days into his job as the president’s agriculture secretary, hastened to the White House with a map showing areas that would be hurt most by a pullout, overlapped with many that voted for Trump.

“I tried to demonstrate to him that in the agricultural market, sometimes words like ‘withdraw’ or ‘terminate’ can have a major impact on markets,” Perdue said in an interview with The Associated Press. “I think the president made a very wise decision for the benefit of many agricultural producers across the country” by choosing to remain in NAFTA.

Trump delivered another disappointment for U.S. farm groups in January by fulfilling a pledge to abandon the Trans-Pacific Partnership, which the Obama administration negotiated with 11 Asia-Pacific countries. Trump argued that the pact would cost Americans jobs by pitting them against low-wage Asian labor.

But the deal would have given U.S. farmers broader access to Japan’s notoriously impregnable market and easier entry into fast-growing Vietnam. Philip Seng of the U.S. Meat Export Federation notes that the U.S. withdrawal from TPP left Australia with a competitive advantage because it had already negotiated lower tariffs in Japan.

Trump has also threatened to impose tariffs on Chinese and Mexican imports, thereby raising fears that those trading partners would retaliate with their own sanctions.

Farmers know they’re frequently the first casualties of trade wars. Many recall a 2009 trade rift in which China responded to U.S. tire tariffs by imposing tariffs on U.S. chicken parts. And Mexico slapped tariffs on U.S. goods ranging from ham to onions to Christmas trees in 2009 to protest a ban on Mexican trucks crossing the border.

The White House declined to comment on farmers’ fears that Trump’s trade policy stands to hurt them. But officials say they’ve sought to ease concerns, by, for example, having Agriculture Secretary Perdue announce a new undersecretary to oversee trade and foreign agricultural affairs.

Many farmers are still hopeful about the Trump administration. Some, for example, applaud his plans to slash environmental rules that they say inflate the cost of running a farm. Some also hold out hope that the author of “The Art of the Deal” will negotiate ways to improve NAFTA.

One such way might involve Canada. NAFTA let Canada shield its dairy farmers from foreign competition behind tariffs and regulations but left at least one exception — an American ultra-filtered milk used in cheese. When Canadian farmers complained about the cheaper imports, Canada changed its policy and effectively priced ultra-filtered American milk out of the market.

“Canada has made business for our dairy farmers in Wisconsin and other border states very difficult,” Trump tweeted last month. “We will not stand for this. Watch!”

Some U.S. cattle producers would also like a renegotiated NAFTA to give them something the current version doesn’t: The right to label their product “Made in America.” In 2015, the World Trade Organization struck down the United States’ country-of-origin labeling rules as unfair to Mexico and Canada.

Many still worry that Trump’s planned overhaul of American trade policy is built to revive manufacturing and that farming remains an afterthought.

“So much of the conversation in the campaign had been in Detroit or in Indiana” and focused on manufacturing jobs,” said Kathy Baylis, an economist at the University of Illinois. The importance of American farm exports “never made it into the rhetoric.”

AP Writers David Pitt in Des Moines and Mary Clare Jalonick in Washington contributed to this report.

What Is The World Coming To?

My Comments: What’s your poison? Politics? Money? Entertainment? Sports? Religion?

Well, this post is about economics and finance. Some of you will run and hide. That’s OK. It comes from Guggenheim Investments and is a quick and dirty look at the next few months…

With spreads tight in high-yield corporate bonds, loans, structured credit, and Agency mortgage-backed securities, we expect an uptick in volatility this summer. While we see some near-term weakness ahead, our positioning, informed by the long-term themes identified in the highlights below, should provide a sound footing for our portfolios. Our Sector teams, Portfolio Managers, and Macroeconomic and Investment Research Group discuss shorter-term, sector-specific tactics for managing through current market conditions in the pages of this edition of the Fixed-Income Outlook.

Report Highlights

▪ With the Federal Reserve (Fed) set to continue to raise interest rates—and at a faster pace than that which is priced in the market—positioning for a flattening yield curve will remain a major theme in our portfolios.

▪ In addition to two more hikes this year, we expect the Fed will raise rates four more times in 2018. The Fed is also plotting a strategy to reduce its balance sheet; this should pressure yields higher in the short end and belly of the curve, which is where most of the new Treasury issuance is likely to come.

▪ Our view on the global macroeconomic environment is positive, which should support strong credit fundamentals for several years. China has stabilized, Europe is recovering, and corporate earnings in the U.S. are rising.

▪ We are focused on the legislative complexities of passing President Trump’s pro-growth agenda. Failure to put his plans into effect in a timely manner may cause markets to realize that the Trump rally is long on promise and short on delivery.