Stop Tiptoeing

Most Federal Reserve officials agree on the path for interest rates over roughly the next year: proceed with gradual increases until borrowing costs reach a level that neither slows nor spurs growth.

You bet.

The big question, however, is what to do after getting to that so-called neutral setting. The answer will largely depend on how inflation behaves as unemployment falls, and they are poring over recent research for clues.

Serious or Not?

European Commission President Jean-Claude Juncker came to DC Wednesday, allegedly to talk about trade.  Juncker came with no offers, or even ideas, to propose concerning the European Union’s trade status with the US , and he was proud of that lack.  Apparently, he just came for some idle chit-chat and to see the sights.  EU Trade Commissioner Cecilia Malmstrom, though, had some concrete things to say before Juncker left to come over.

If the tariff dispute were to include cars that would be a “disaster,”

Deutsche Welle cited her as saying.  And this, as paraphrased by DW:

Foreign Business Inside the PRC

The Qualcomm’s acquisition of NXP Semiconductors is supposedly in jeopardy as the People’s Republic of China threatens approval of the acquisition in its prosecution of its long-term trade fight with the US.

But wait—Qualcomm is an American company, and NXP is a Dutch company.  Why does the PRC even have a say in this?

[The PRC] is the last of nine markets where Qualcomm and NXP need approval from competition authorities….

Auditors and Regulators

American regulators regularly inspect American auditors—particularly the Big Four accounting firms, Ernst & Young, Deloitte & Touche, KPMG, and PricewaterhouseCoopers—in order to give confidence to investors and the market at large that the auditors are giving accurate and balanced reports on balanced and accurate audits of the companies they audit.

Inspecting the auditors in the People’s Republic of China is a different matter.

Big Four accounting firms use their Chinese and Hong Kong affiliates to do significant work on the yearly audits of dozens of US companies doing business in China, including Walmart, Pfizer, and 3M, according to regulatory disclosures the auditors recently made for the first time.

Auto Tariffs Revisited

EU Trade Commissioner Cecilia Malmström says the EU will respond to any increase in US tariffs on imported autos and auto parts with its own tariffs on autos and parts imported from the US.


The EU cannot offer a bilateral deal only on autos, Ms. Malmström said, to address Mr Trumps complaints about the 28-member bloc’s 10% car tariffs—which are quadruple the US rate.

Never mind that applying its own auto and auto parts tariffs to imports from the US is precisely such a bilateral action.

Get Rid of Fannie Mae and Freddie Mac?

Fed Chairman Jerome Powell thinks it’s a good idea.

I think it is really important for the longer run that we get the housing finance system off the federal government’s balance sheet.  I think it is very important for the economy longer term.

Treasury Secretary Steven Mnuchin agrees.

I am determined that we have a fix to the GSEs and that we don’t leave them in conservatorship for the rest of time[.]

But this doesn’t go far enough.  It’s insufficient to kick these Government Sponsored Entities out of conservatorship.  Left as GSEs, they’d still be able to dip their fingers into our pocketbooks; Fannie Mae wants another $3.7 billion of our tax money already.

Auto Tariffs

Auto makers, parts suppliers, and dealers are joining forces to push back against the Trump administration’s proposal to apply tariffs of up to 25% on vehicles and components imported into the US….

The auto industry is aiming at the wrong target.  The German auto industry and the US have already agreed in principle to a regime of no auto tariffs at all.  It’s the German government that’s waffling and the EU that’s ignoring the matter altogether.

These domestic execs need to be asking the German government and the EU why they’re so disinterested instead of whining about domestic matters.

A Good Start

Congress is considering RESA, the Retirement Enhancement and Savings Act, a bill that would represent a massive change to our retirement system, in particular our 401(k) system.  This bill would, among other things,

encourage more small employers to offer retirement savings plans and make it easier for companies to offer annuities that turn workers’ savings into a guaranteed annual income.

Among specific things that the House wants in such a bill are

  • a universal savings account, funded with post-tax dollars but with tax-free earnings and more flexible withdrawal rules than existing retirement accounts.

An Example of Irrationality

Here’s Donald Trump decrying Germany’s willingness make itself dependent on Russian energy supplies by pushing for Nordstream 2, which will mean that Germany will get 60% of its natural gas from Russia, to go with the 40% of its oil imports that already are from Russia.  Aside from becoming so dependent on an enemy for its energy, Germany will be paying Russia billions of euros for the privilege.

I have to say, I think it’s very sad when Germany makes a massive oil and gas deal with Russia, where you’re supposed to be guarding against Russia, and Germany goes out and pays billions and billions of dollars a year to Russia.

Not Far Wrong

In an interview with the British newspaper The Sun, President Donald Trump said that Prime Minister Theresa May’s Brexit “blueprint” for Brexit would likely kill any opportunity for special trade deals with the US.  A critical part of that blueprint would have Great Britain

stick[ing] to a common ­rulebook with Brussels on goods and agricultural produce in a bid to keep customs borders open with the EU.