This would be a Mistake

Posted on by
Reply

President Donald Trump (R) laid significant tariffs and tariff rates on the People’s Republic of China. The PRC’s President Xi Jinping responded with matching tariff rates, but with escalatory moves added:

…restricted exports of certain rare-earth minerals, added US companies to trade blacklists, and aimed an antitrust probe at the China operations of US chemicals and materials company DuPont.

Then the WSJ‘s news writer posited this:

What lies ahead is likely to be a cycle of tit-for-tat retaliation, making it hard to even start negotiations in the near term.

If the Trump’s purpose with the tariffs is to (re)balance trade with the PRC’s tariffs, that would be one thing—his reciprocal tariff regime. However, if his purpose is to persuade the PRC to change its overall international trade behavior, particular vis-à-vis the US, then tit-for-tat would be a foolish mistake.

Tit-for-tat only gives the other side time to adapt and maintain. What’s necessary, if Trump’s move is persuasion rather than rebalancing, is to escalate tariffs (and other economic moves) higher and faster than the PRC can respond, and that’s what Xi will attempt as demonstrated by his opening response. Simply matching Xi—as tit-for-tat does generally—is surrender to Xi the initiative in this extension of the PRC’s long-running trade war, with its cyber aspects as well, against us.

So Long, and No Thanks for the Memories

Posted on by
Reply

Law school students and new recruits think they should run the major—or even minor—law firms at which they sought work.

In the days since Paul Weiss, Skadden Arps and other elite firms cut deals with the president to fend off punitive orders, their actions have set off protests and recruiting boycotts among the next wave of top young legal talent. Georgetown Law students canceled a recruiting event this week with Skadden Arps. A group of students and lawyers is circulating a missive on social media and over email, urging students at top schools to refrain from applying to the firms.
Several Columbia law students who signed on to start at the firms this summer are asking whether they can pull out of those commitments, one recruiter said. Junior lawyers at some firms, meanwhile, are rejecting their bosses’ requests to interview summer associates.

I wouldn’t call these Precious Ones “top young legal talent.” They’re too self-absorbed, too ate up with their own importance. The law firms are better off without these folks on their payroll.

So: bye, bye. Good luck to you in your sole proprietor law firms, and in your new small partnerships.

The Market Lost Money

Posted on by
2

Really? How much did “the market” lose, really? Economics news writers, who really should know better, claim

The stock market went off a cliff last week after President Trump announced the highest tariffs in more than a century, vaporizing more than $6 trillion of wealth in two days.

No, $6 trillion in wealth was not vaporized, not even lost. These are purely paper losses, not real losses, and the only ones who were hurt financially by the decline in monopoly money value are those who bought stocks on margin—borrowed money from their brokers to buy stock shares. Those folks are subject to margin calls and must reimburse their brokers with real dollars, or with remaining stock shares which the broker will sell for real money, even at the currently depressed rates.

No one has lost real money in the precipitous drop unless they sold shares for actual money in the throes of last week’s hard drop. These are, to be sure, emotionally trying times, and real losses can still occur, but so far only for those who use their stock shares as collateral for this or that purpose.

Later on, were the economy to start behaving in the same way as the market and itself start to stutter, real losses can occur, but from the market’s perspective, the losses will be from “forced” sale of some fraction of an individual’s remaining stock shares at depressed prices in order to raise real cash with which to make good on real obligations like rent/mortgage, food, energy, and so on.

In that regard, it’s important to keep in mind that the market leads, predicts the future of, the real economy—where real gains and losses of real, spendable money occur—by highly variable amounts ranging from a few months to lots of months into a couple of years, and occasionally the market is plain wrong. The latest example of this occurred early in ex-President Joe Biden’s (D) term when the market priced in a coming recession. That recession never occurred.

Today’s underlying economy remains strong, albeit the figures are prior to the new tariff regime, which won’t be fully laid on for another week or two. The economics news writers do recognize this much.

Whether the real economy will follow is impossible to know. But the risks are tilting in that direction.

The risks are real, but the economy so far has this:

The available evidence suggests US economic fundamentals remained strong through March. Job growth accelerated, with nonfarm payrolls rising 228,000, unemployment low at 4.2%, wages rising at a healthy clip, and layoffs rare.

Couple things on that. It’s private—real—economy layoffs that are rare. Layoffs from Federal government employment are rising, as are the numbers of those employees who are accepting the enormously generous buyout/severance packages in return for their resignations. But reducing the physical size of the Federal government is on the whole good for our economy.

The other is that the tariffs may well lead to restructuring of our economy with associated job losses and alternative job creations, but those effects will take months to begin to have effect and more months to work through.

What’s happening currently is the development of a buying opportunity, and a recession only broadens that buying opportunity. The economics news writers cited a JPMorgan research piece titled There Will Be Blood which raised JPMorgan’s assessment of a global recession to 60%. That’s simply a repeat of Baron Nathan Rothschild’s advice to buy when there’s blood in the streets, even if the blood is your own.

Or the disruption might cause permanent losses. That’s the real risk, not a risk of a recession, which is a fact of free market economies.

Free market economies have long periods of prosperity and boom interspersed with recessions which do not fully undo the prosperity, so the economy trends upward over the longer run. The alternative of a government directed economy, though, is permanent recession relative to free markets.

In the end, tariffs don’t undermine free market economies so much as they undermine a globalized “free market” by segmenting the globe back into national (or regional) markets. Whether that’s a good or bad outcome is for a separate discussion.

I Have a Question

Posted on by
Reply

NPR has said that if Federal funding is cut off, it may well see 180 local NPR stations forced to close due lack of funding.

NPR compiled a lengthy document in 2011 that outlined what would happen if the government cut funding to the Corporation for Public Broadcasting, the government-backed company that supports both NPR and PBS….

Neither NPR nor PBS appear to have updated that claim, or the underlying data, in the 14 years since.

Which raises my question: why have NPR and/or PBS not done anything in those 14 years to shore up their finances so as to keep those stations operational?

Bonus question: given that laziness or sloppiness or deliberate dependence on Uncle Sugar, on what basis would any rational American think Federal funding continue?

Federal and State Funding for Abortion

Posted on by
Reply

There is a move afoot in Congress to remove from Medicare reimbursements for abortion, and there is a case before the Supreme Court that will impact States’ ability to remove funding for abortion from Medicaid reimbursements. The removal from Medicare, should it come to fruition, would be entirely consistent with the Court’s Dobbs v Jackson Women’s Health Organization ruling, which rescinded Roe v Wade and put the abortion question entirely in the States’ hands. Now many States are attempting to act on their newly restored authority—hence the case before the Supreme Court.

It’s true enough that it’s a fraught decision for the mother to bring an unwanted pregnancy to term, but my concern here is for the life of the baby. From this, I see two boundary cases that are especially difficult.

One is where the health of the mother is at risk if the pregnancy continues. In this case, the mother’s health must be weighed extremely carefully against the life of the baby. This weighing may need to occur—must occur?—in open court, with competent, well-trained lawyers speaking for the baby.

The other is a mother’s pregnancy as a result of incest or rape. Carrying the baby to term here is an especially terrible choice for the mother—the pregnant child incest or rape victim may be too physically young to carry her baby to term, in which case, see above. Even where the victim mother can safely do so, it remains an especially terrible choice to carry inside her body a constant reminder of the monster who did this to her. Carrying the baby to term isn’t a matter of the mother’s inconvenience for nine months as some extremists on the right claim—the emotional damage to the mother from that is real, extreme, and often irrepairable.

Conventional wisdom is to permit abortion in the these narrowly defined, and not so often occurring compared to “ordinary” unwanted pregnancies, cases of incest or rape. Conventional wisdom here is not a completely bad bit of wisdom, but I remain concerned: why should the baby have to pay with its life for the crime of another? The baby needs competent, well-trained lawyers speaking for him or her in these cases, also.

It’s also true enough that, while Republicans are attempting to do more to provide fiscal support for those mothers during their pregnancies, in the period surrounding birth, and in the early years after birth (here including adoption options), they need to do better at specifically identifying those needs and then providing for them—and to do so publicly. That shortfall, though, shouldn’t be allowed to impact whether the baby is allowed to live at all.