Donald Trump is 'on the verge of initiating a trade war' over steel

• Pedro Nicolaci da Costa
 

• 9h
• 1,546

Pascal Parrot/Getty Images

Donald Trump is playing a dangerous game of chicken with international trade.

While he initially backed away from major protectionist campaign promises, including ripping up the North America Free Trade Agreement (NAFTA) and naming China a currency manipulator, Trump and his top economic officials have kept up the "America First" drumbeat, insisting the United States has gotten a raw deal from a global trading system it played an enormous role in shaping. 

The latest point of attrition is steel, which has long been the subject of targeted trade disputes between the United States and China. Yet Trump’s aggressive negotiating tone carries a great risk that international trust will evaporate, narrowing rather than improving the wiggle room for fresh agreements.

"Protection is pernicious since it restricts imports and usually this triggers more counter restrictions," Richard Baldwin, professor of international economics at the Graduate Institute, Geneva, told Business Insider.

In particular, Baldwin worries Trump’s evocation of national security concerns to justify the potential tariffs could have broader repercussions. Only 3% of US-made steel is used for military purposes.

"The National Defense clause however opens things up to basically unlimited protection and thus the Section 232 moves are potentially a new and dangerous development," he said. "This is not just more dumping duties of the type we’ve seen on steel for decades."

Caroline Freund, senior fellow at the Peterson Institute for International Economics (where I used to work), says she’s hopeful industry pressure and economic reality is forcing the Trump team to rethink its more draconian proposals, such as tearing up NAFTA.

"I think what they’re looking for is a voluntary export restraint agreement, where Canada and Germany and whoever say we volunteer not to export more, a self-enforced quota that’s agreed upon," she said. "The manufacturing industries are lobbying hard because steel is going to be even more expensive."

"The problem is they’ve antagonized other countries so much, especially after pulling out of the Paris [climate] Accord — you could have gotten there with a carrot rather than a stick, you had have a better chance at a deal," Freund added. 

Richard Haas, president of the Council on Foreign Relations, was clearly taking the Trump threat seriously.

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Potus on verge of initiating trade war with steel tariffs, a move that could threaten success of his presidency more than ill-advised tweets

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Canada hit 2 critical warning signs for a financial crisis

• Daniel Wong, Better Dwelling

• Jun. 28, 2017, 5:16 PM
• 14,016

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AP/Mark J. Terrill

Yet another international organization is warning about Canada’s major debt problems, mostly tied to a housing addiction.

The Bank for International Settlements (BIS), an international banking organization that serves as a bank for central banks, is flashing warning indicators for Canada.

The warning signs mean that debt has reached critical levels, and will likely result in a financial crisis.

Credit-to-GDP Gap Breaches Critical Level in Canada

The credit-to-GDP gap has reached a critical level in Canada. The BIS defines this as the “difference of the credit-to-GDP ratio from its trend.” That’s bankster for “it compares credit consumption to the output of the economy.” If the level is too high, the amount of private credit is “unjustified.” The lower the number, the more credit can be “safely” consumed. BIS considers anything above 2 to be a strong gap, and anything above 10 to be a critical warning. Breaching 10 results in a banking crisis in two-thirds of economies, within three years.

Currently Canada is sitting at 14.1, the only G7 country to breach this level. China and Hong Kong are the only other countries that are higher. China is currently at 24.6, and Hong Kong is at 30.3. To contrast Australia is at -0.5, Germany is at -4.3, and the US is at -7.7. So we’re pretty far off the mark. Also worth noting that the BIS has also flagged Canada for a property price gap above critical level. This could complicate the credit-to-GDP gap even further.

BIS

Debt Service Ratio Will Hit A Critical Level If Rates Rise To "Normal" In Canada

The debt service ratio (DSR) of three countries are throwing warning signs when interest rates return to normal. A DSR is a term economists use to determine the ratio of debt payments a country will be making, compared to the country’s export earnings. It covers principal and interest payments. If the level is too high, it makes it hard for an economy to grow. You know, since people are devoting a high amount of money to stuff they already bought.

BIS modeled a 250 basis point rise in interest rates, which would put Canada back to a“normal” level according to Canadian parliament. This modest increase would send three economies above the critical warning threshold – Hong Kong, China, and Canada. The DSR of those countries are modeled to be 11.1, 8.8, and 7.6. The organization claims that when this warning threshold is breached, two-thirds of countries face a banking crisis within two years.

Canada, China, and Hong Kong are the only economies that have issues with both their credit-to-GDP gap, and their debt-service-ratios if rates rise. China is actively trying to crackdown on high amounts of leverage, even at major financial institutions. Canada and Hong Kong, not so much. Two-thirds of countries experience a banking crisis, eh?

Read the original article on Better Dwelling. We’re building a different kind of news outlet – one that aims to stimulate discussion rather than direct it, but we need your help. Like this article? Share it with a friend. Hate it? Give us a tweet and tell us why. Like us on Facebook to be notified when the next post goes live. Copyright 2017. Follow Better Dwelling on Twitter.

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CONFIRMED: Britain is officially the worst performing major economy on earth right now

• Will Martin
 

• 6h
• 1,429

Photo by Andrew Parsons - Pool/Getty Images

LONDON — Britain's economy grew just 0.2% in the first quarter of 2017, according to the Office for National Statistics' third estimate of GDP growth at the start of 2017, released on Friday.

GDP had initially been estimated at 0.3% but was revised down in May, as more data became available for the first three months of the year. The 0.2% Q2 figure makes Britain the worst performing major economy on earth right now.

The third reading confirms the previous data released in May.

"Gross domestic product (GDP) and its components are little changed from the previous estimates published on 25 May 2017," the ONS said in a release accompanying the data.

"GDP growth for the first three months of 2017 remained unrevised at 0.2%," Darren Morgan, the ONS' head of GDP said.

"Growth was driven by business services and construction, partially offset by declines in some consumer-focused industries, such as retail sales and accommodation."

Here is the ONS' chart showing the quarter as part of a longer term trend:

ONS

Until the beginning of 2017, the UK economy fared better than all but the most optimistic of forecasters imagined in the immediate aftermath of the Brexit referendum, confounding predictions of an immediate recession, and virtually ignoring any uncertainty over the future.

However, as the falling pound has pushed up inflation in recent months, regular Brits have started to feel the pinch, spending less, and slowing the consumer boom that has fuelled the country's economic performance in the past handful of years.

Commenting on the numbers, Samuel Tombs, chief UK economist at Pantheon Macroeconomics wrote in an email:

"The national accounts demonstrate that net trade and investment are not compensating for the slowdown in growth in households’ spending, and therefore are a setback for the hawks on the MPC who seek an immediate increase in Bank Rate.

"The revised expenditure breakdown of GDP shows that net trade subtracted 0.8 percentage points from quarter-on-quarter GDP growth in Q1. Although this drag was smaller than the -1.4pp estimated for the second estimate of GDP, the data continue to show that sterling’s depreciation has been the less successful in Britain’s post-war history."

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Warren Buffett is now the largest owner of 2 of the world's biggest banks

• Akin Oyedele
 

• 2h
• 5,306

Bill Pugliano/Getty Images

Warren Buffett's Berkshire Hathaway is now the biggest owner of two of the world's largest banks: Bank of America and Wells Fargo.

On Wednesday, the Federal Reserve cleared the way for Buffett to become Bank of America's largest shareholder.

It passed all the big banks on their so-called stress tests, giving them permission to use their capital for things beyond buffering against disaster, including share buybacks and dividend payments. 

Bank of America raised its dividend to 12 cents per common share.

That made it compelling for Berkshire to convert its preferred shares into common stock, giving it shareholder ownership, and earning as much as $12 billion in profit. Berkshire announced on Friday that it would exercise its warrants to buy 700 million common shares of Bank of America, the third largest US bank by market cap, instead of waiting until just before their expiry in 2021.

In a statement, the bank said it welcomed Buffett's decision. 

With $2.19 trillion in assets, Bank of America ranked ninth in the world, according to an S&P Global Intelligence ranking released in April.  

Buffett's initial investment in the bank dating back to 2011 was a thumbs-up of sorts to CEO Brian Moynihan, who had recently taken the helm. It was also a bet that the bank would recover from the fallout of toxic mortgage securities.

He acquired $5 billion of Bank of America preferred stock with a 6% dividend, or $300 million annually, in August 2011, at a time when investors worried about the bank's capital needs, Reuters reported. 

The conglomerate said last July that it owned more than 10% of Wells Fargo, which on Friday amounted to nearly 537 million shares according to Bloomberg. It's the second-largest bank in the US by market capitalization, and was the 10th largest in the world by assets according to S&P.

Berkshire Hathaway also owns smaller stakes in Goldman Sachs and JPMorgan. 

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The Happiest People on Earth (Video)

The Happiest People on Earth

2017

The ironically titled documentary The Happiest People on Earth is an enlightening journey into one of the world's most contentious and controversial countries: North Korea. The cameras capture one of the few times each year that foreign guests are permitted inside the gates of this isolated land - the birthday celebrations for supreme Ieaders Kim Jong-il and Kim II-sung - and expose a culture marked by strict discipline and incessant hero worship.

In the eyes of each figure profiled in the film, Kim Jong-un and his immediate predecessors are deities. In their view, these fearless leaders fostered an environment of economic growth, unprecedented opportunity, and strength and prominence on the global stage. They speak of them in hushed, reverent tones.

This unfaltering allegiance to power is evident in the painstaking birthday festivity preparations, and in the working classes that slave every day in desperation to serve their Great Marshall. A young mother recalls the monumental moment when Kim Jong-un visited her textile mill, a rare occasion which is memorialized by a large engraved marking. Female military members run drills throughout the day in anticipation for a war with America they believe to be imminent. A male chorus rehearses a song of worship for their dictator. As one chorus member expresses, their leaders have made North Korea the greatest country on Earth, and anyone who believes otherwise should be considered an enemy.

These sentiments are cult-like in nature, and are ingrained from an early age. Children as young as six months of age are sent to live in schools for six full days every week. There, they are successfully indoctrinated into a mindset of blind obedience. Adults also live with the absence of dissenting opinions as government sanctioned media and internet faculties keep them sheltered from the outside world.

But the outside world is watching them, and continues to grow more fearful of North Korea's increasingly unpredictable and treacherous regime. The Happiest People on Earth places us inside the living rooms and work places of the country's everyday citizens, and their perspectives deepen our understanding of North Korea's limitations, ambitions and uniquely frightening way of life.

Directed by: Natalya Kadyrova

The richest US families own a startling proportion of America's wealth

• Pedro Nicolaci da Costa
 

• 18h
• 12,489

Charlie Crowhurst/Getty Images for Ascot Racecourse

Distribution matters.

The United States has long taken pride in being the richest nation in the world. It remains so despite China’s quick game of catch-up and much larger population, at least when it comes to the broadest measure of a country’s economic output, gross domestic product (GDP).

Yet deep inequalities, which became a hot-button political issue in the wake of a deep recession and financial crisis that highlighted those disparities, paint a different picture of how well off most Americans really are.

Research from Berkeley economists has found incomes at the top 0.001% of the income strata surged a whopping 636% between 1980 and 2014, while wages for the bottom half of the population were basically stuck in place. 

Critics of that body of work say its use of pre-tax data masks some of the equalizing effects of the tax code, and thus overstates inequality. If that were indeed the case, a look at the distribution of wealth as opposed to just income, while harder to measure, could be a better barometer as to the true state of America’s social divide.

This chart courtesy of Deutsch Bank economist Torsten Slok shows the picture with regards to wealth is even bleaker. The richest 10% of families are worth a combined $51 trillion, equal to 75% of total household wealth. To put that figure in perspective, US GDP totaled $18.5 trillion in 2016. 

Deutsche Bank

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