Bill Owens: Confounding And Confusing Events 9/3/19

Sep 3, 2019

A British Government report was leaked indicating that if there was a no-deal Brexit, that there would be shortages of food, fuel and medicine. This obviously raises the stakes for Mr. Johnson as he goes forward in negotiations, the risk of failure got a bit higher. The Northern Ireland/ Republic of Ireland border is another major potential pitfall, which could devolve into the violence and chaos that existed during the “troubles.”

The Canadian elections are coming up this fall, and it appears that Prime Minister Trudeau is in a virtual dead heat with the Conservatives. There are a number of issues swirling around in Canada including some inappropriate ethical conduct by Mr. Trudeau which, at least in my judgment, may have been technically an error, but the goal of Mr. Trudeau clearly was the preservation of jobs. The ongoing issues with the USMCA and Mr. Trump are also clearly weighing Mr. Trudeau down, as well as Canada having been supplanted by Mexico as our largest trading partner. The impact of the Huawei matter on Canadians and the United States’ lack of support may lead to a belief that Mr. Trudeau is not effective.

There are always warning signs in the economy, some of which are technical like the inverted yield curve, and then there are the practical. Two examples, RV shipments are slipping as a result of declining sales in RVs, this was a huge issue during the 2008 recession and should be paid attention to. John Deere recently reported weakening sales which obviously is impacted by the weakening AG economy. These are not technical, but are significant indicators that should be watched. The question is, is anyone in the administration paying attention.

The Yellowstone super volcano is an 8 out of 8 on the volcanic explosivity index, having exploded 3 times over the past 2.1 million years, and most recently 640,000 years ago. There are 20 of these super volcanos around the planet, and these may well constitute our greatest existential risk to survival. The damage caused by the eruption of a super volcano would be devastating, not only to the local area but regionally with diminishing effects as it spreads around the world primarily due to its ash plume and the impact that would have on sunlight, rainfall, etc. When we consider the risks, we all face, this might be one of the scariest. There is an excellent article in the New York Times by Brian Walsh, dated August 23, 2019, and I encourage you to read it, but would suggest early in the morning rather than before bedtime.

China trade war continues to bounce around the news. POTUS says the Chinese called asking to restart talks, China says not so; aides to POTUS confirm the Chinese version. Then a real story emerges from China, describing the emergence of ever-increasing consumer spending (ours is 60%-70% of GDP) while theirs is currently around 48% of GDP, but in absolute numbers its huge. Is this how the Chinese win the trade war?

POTUS and Fox are fighting. POTUS says Fox no longer works for him- now that’s a strange and troubling claim- Fox asserts its independence, now that’s real fake news.

Back to the China/US trade war. The Trump Administration confirmed it was imposing an increase of 5% in tariffs effective September 1, 2019 after saying they were delayed until December. Retailers are scrambling and wary of increased holiday prices. Farmers also continue to be deeply troubled by the Chinese trade war. The strategy seems to be to alienate as many constituents as possible. As a democrat, I like that strategy.

Senator Tom Cotton recently published an op-ad in the New York Times supporting Mr. Trump’s proposal to purchase Greenland. His reasoning was specious at best, without taking into account the desires of Greenlanders nor the Danes, effectively dismissing those as unimportant. It is also worthy of note, that Senator Cotton is a sycophant for President Trump, and it wouldn’t surprise me if the White House wrote the article.

A recent “Shoe” comic had as its theme an idea of how we might resolve the debt and deficit crises, and proposed a true business solution which I am sure Mr. Trump might embrace when it said, “Close 46 states”. In humor there is truth.

The UK Prime Minister, Boris Johnson, has requested that the Queen dissolve Parliament, which would have Parliament return with approximately 2 weeks before the October 31st deadline for the withdrawal from Brexit. The obvious strategy here is to give the members of Parliament little time to debate a no exit Brexit. The question this begs, although I don’t have expertise in the Parliamentary processes of the British House of Commons, is whether or not the opposition could force a no confidence vote before being disbanded. This should get pretty interesting at every level, particularly economically as the pound fell again on Mr. Johnson’s announcement.

Mr. Owens is a former member of Congress representing the New York 21st, a partner in Stafford Owens in Plattsburgh, NY and a Senior Advisor to Dentons to Washington, DC.

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