Donald Trump Way Ahead In Latest Poll

WASHINGTON – Even before we know the results of the critical Super Tuesday vote, (1/4 of the Republican delegates at stake), it appears that outsider Donald Trump has enough national support to get the Republican Party nomination. A Washington Post article (On Super Tuesday Eve, Donald Trump gets his best numbers yet, February 29, 2016) summarized the latest polls:

“Trump leads at 49 percent — his highest numbers in any poll tracked by Real Clear Politics this cycle. The number suggests that the theory that he had a ceiling of support — that he could never get to 50 percent — was … flawed. With Tuesday’s numerous contests looming, Trump has the support of about half of his party, in a field with five candidates.

And that consolidation theory is revealed as a consolation theory. As we noted over the weekend, if Ohio Gov. John Kasich were to drop out and every single one of his supporters were to migrate to Sen. Marco Rubio, the senator from Florida would go from trailing by 33 to trailing by 27.”

Everybody is wrong 

So, all the analysts, Washington insiders, influential commentators, and senior Republicans have been wrong –I mean really wrong. No, Trump is not a passing phenomenon, an entertaining but short-lived freak show, destined to leave the stage to the real pros, the people who supposedly master all the issues, and who can talk intelligently about their policy agendas.

And no, Trump does not have a “natural ceiling” of support that can get him up to 30% to 35% of the votes, but not beyond. And no, the non-Trump votes that went to Christie and Bush are not converging around Marco Rubio, now the “de facto” “Establishment Candidate”. (By the way, in case you missed this, Chris Christie, now out of the race, actually endorsed Trump. Talk about counter intuitive developments).

On the eve of primaries that will allocate about 1/4 of all the Republican delegates, Trump leads nationally, and in almost every state, (Texas seems to be the only exception, with Cruz number 1, and Trump number 2) in which Republicans will vote tomorrow.

Republicans firmly with Trump 

Whatever you want to make of this, the Republican base is fed up with all traditional elected leaders. For better or worse, they are willing to trust Donald Trump. Unless a miracle takes place on Super Tuesday, hard to see a path to the Republican nomination for Ted Cruz or Marco Rubio, let alone John Kasich and Ben Carson.

Chris Christie Endorsed Donald Trump

WASHINGTON – Here is some political news that will move the needle. New Jersey Governor Chris Christie (he recently quit the race for the Republican nomination) just endorsed Donald Trump. On the face of it this may not mean that much since Christie was a weak candidate with very limited national support.

A big deal 

But in fact this means a great deal. The conventional wisdom until today was that all the non-Trump votes will eventually converge on an “Establishment Candidate”, possibly Marco Rubio. Well, not so. Christie is an unusual politician. But he is a moderate. And yet now he is with Trump.

This is a big deal. This means that Christie out of conviction or calculation realizes that Trump is leading a national anti-establishment wave that has not been fully understood by the professional politicians and the professional media that cover them. He wants to join it. Expect many others to follow.

A different leader

The fact is that Trump, in his own unorthodox ways, managed to embody what millions of Americans crave: a strong leader with a real presence, not beholden to anybody. This may look like a very low bar for the next President. But for millions of Americans it seems to be enough.

The rest does not matter. Nobody really cares about detailed policy positions, nuanced figures, projections on GDP growth and ways to achieve Social Security reform. Most voters really do not care about any of this. They just want a Big Picture guy in charge who will take care of things.

Debate performance 

On this note,  the pundits concluded that Donald Trump, under attack from both Ted Cruz and Marco Rubio, did not do so well in the latest televised Republican debate. They concluded that Trump lacked substance. He could not articulate his positions in an elaborate way.

A self-confident man 

May be so. But the fact is that nobody cares. I watched a self-assured Trump give a speech in Texas the day after the debate. He certainly did not seem perturbed by whatever happened during the debate. He was his usual self: a confident man on stage, painting a rosy picture of how America will be great again after he has a chance to change everything in Washington, and more.

Yes, his long speech was not neatly organized. He jumped from topic to topic: immigration, the border, jobs, trade, China, health care, the support he is getting from Evangelicals. And all this was laced with sarcastic humor aimed at his opponents, especially Marco Rubio.

“I am not a politician” 

No, this was not the typical politician’s stump speech. This was not the usual litany of canned policy positions. It was something else. Perhaps the most enlightening thing Trump said a couple of times is this: “I am not a politician”.

And here we may find the key to his success. Indeed, Trump is not a politician. But he wants to do something really big, and he is at ease with crowds. He always has something to say. And he says it forcefully.

Stage presence 

Look, just like Trump, Doctor Ben Carson is not a professional politician. And what he says about fundamental American values does resonate with some people. But only very few people. And much of that may have to do with delivery.

Carson is soft-spoken. Trump shouts. And Trump is a master of the stage. He understands the role of the media in our society. He has the right instincts, and the right TV image.

Big changes ahead 

And he promises big changes, radical transformations. This is what millions of Americans want. A new leader who looks strong and believable, because he is definitely not part of the usual crowd.

No, Trump is not another professional politician. His unconventional style resonates. And this is why he may end up winning (probably) the Republican nomination. And, if he is really lucky, the White House.

President Trump?

WASHINGTON – Donald Trump most likely will be the Republican nominee for president. This is not on account of his considerable national appeal. It is mostly because of the inability of the moderate Republican candidates to get out of the race and coalesce early on and convincingly around just one of them.

Fragmented front will not win

While everything is possible in politics, it is just not possible for a fragmented front to create a credible alternative to Trump. Look, we all know that Trump is not getting huge majorities. He is getting significant pluralities, (more than 30% on average , with a high above 40% in the most recent Nevada caucuses). However, these pluralities look a lot bigger because the non-Trump vote is scattered. None of the other candidates get even close to Trump’s numbers. And yes, you can get the GOP nomination with a consistent string of strong pluralities.

Kasich will not withdraw 

What makes Trump’s victory almost inevitable is that this fragmentation of the moderates is not going away. Most recently Ohio Governor John Kasich with a straight face declared that he has a great plan that will lead him to the Republican nomination. Really? Kasich gets 5% or 6% in most polls. He may or may not win his own state of Ohio; but this is not enough.

In New Hampshire, a state where he spent an inordinate amount of time and resources, Kasich managed to be a distant second to Trump, with 16% of the votes. How on earth does Kasich think he will get the nomination?

Same thing for Doctor Ben Carson. He may have a core group of supporters. But they are at about 4% to 5%.

35% to 40% is enough 

As I said, Donald Trump is not leading by enormous margins. But he is leading essentially everywhere. And in some primaries states the rule is “winner takes all”. Which is to say that with his 35 or 40% Trump will get all the delegates at stake. Who is going to stop him after that?

Rubio had  a chance 

I theorized that Marco Rubio could have a chance, if all the others withdrew early, and openly and enthusiastically decided to endorse him. But I also said that the window of time was disappearing soon.

Well, it may have disappeared. With Kasich and Carson still in the race, the best that Rubio can hope to achieve is to get to second place in many races, a little bit ahead of Texas Senator Ted Cruz.

Second place not good enough 

I am sure that the Rubio people must know that finishing second, even assuming he does so everywhere, is just not good enough, especially in “winner takes all” states.

President Trump? 

That said, if Trump gets the Republican nomination, can he be elected President? Hard to believe this, unless he cleverly reinvents himself just in time for the general election, becoming all of a sudden soft-spoken, inclusive and congenial.

Assuming he does that, and this is really a big assumption, will the average American believe him? Based on the level of applause that empty promises get in this campaign, I would not rule it out.

Running against Clinton 

Most likely Trump would run against Hillary Clinton, a strong but hardly formidable Democratic candidate. In this strange environment in which a surprising number of voters are yearning for a “Mr. Tough Guy” in the White House this may even be possible.

Look, if most Americans were sane, the very idea of a President Trump would look preposterous. But until a few months ago the idea of Trump as the presumptive Republican nominee also looked preposterous.

In a sane world, Jeb Bush or John Kasich –both experienced policy-makers with a solid record– would be in the lead among Republicans, and not Donald Trump.

Well, Bush is out, and Kasich is in single digits.

Angry Americans Love Donald Trump

WASHINGTON – How do you explain the “Trump Phenomenon”? It is easier than you think. Traditional democratic capitalism is short of breath, ideas and leaders. If this is true in Europe and in Japan, it is also true in America.

Discontent everywhere 

The Japanese for the moment trust Prime Minister Shinzo Abe, an old school politician with a new varnish. But he is failing. He could not deliver on his promises to boldly transform the country. We shall see how Japanese society will react to the obvious decline of what until the 1980s used to be a self-assured world power.

In Europe it is a mixed bag. Some traditional political forces are doing alright. But there is also a brand new universe of anti-system parties, from the National Front in France, to Podemos in Spain, or 5 Stelle in Italy. These are the new, rebellious parties that emerged in the aftermath of the Great Recession of 2008. (The French National Front is older. But it gained strength after the global recession).

Their policies capture the anger, resentment and fear about an uncertain economic future felt by millions in Europe. Until now, these new parties have been disturbances rather than real political insurgencies. But it may get worse.

We got Trump 

And in the US we got Donald Trump. (We also got Bernie Sanders on the far left. But his impact on the system is likely to be much more limited. Hillary Clinton, although taken aback by Sanders’ aggressive campaign, will regain momentum. She is a shopworn old school politician. But the Democrats in the end will pick her. And America may very well follow suit, if the Republicans pick Trump as their nominee).

Trump’s rise 

But so, what about Trump’s rise? Well, it is mostly about American voters who (just like their European counterparts) are at the same time worried, scared, angry, and deeply disappointed in the ability of traditional parties to improve their conditions.

Let’s start with disappointed. Many Trump supporters feel in their gut that America has lost its sheen. We do barely OK. We do not excel anymore. We are no longer number one. (As Trump says: “We are not winning anymore”). Our economy is limping along. We do not lead in most sectors. Most of our consumer products are made in China. Many old fashioned “good jobs”, mostly in manufacturing, are gone –for good it seems.

Bad wars 

In foreign policy, nobody can see any victories. in 2001 we went to war in Afghanistan, and it went badly. In 2003 we started another war in Iraq, and it ended up horribly. Thousands of American soldiers dead. Tens of thousands came back without arms or legs. And nothing, really nothing to show for this huge effort that cost American tax payers trillion of dollars. Afghanistan is still fighting against the Taliban. Iraq is a horrible mess, while Iran has extended its influence there.

We are not safe 

In the meantime, thanks to irresponsible saturation media coverage, Islamic terrorism is portrayed as a looming threat. We are told that we are under daily attack. Tomorrow it may be our turn to be targeted by a crazy jihadist. Yes, this perception is wrong. And yet many believe this to be factually correct.

And who can fix any of this? Who can make us once again prosperous, safe and proud? Not the Washington, DC GOP crowd. And not even experienced, battle tested, Republican Governors who after all can point to a record as chiefs executives. They are all yesterdays’ people.

A huge opening 

So, none of the above.

And so here is a huge opening for Donald Trump.

He jumped on the national scene as the new “No-Nonsense”, “I’ll tell it like it is” brand of leader. And this is his message. “I am rich, because I am successful. And I am successful because I am smart. If you elect me, I’ll put all my talent to work, and I’ll fix America, in no time; trust me. The traditional politicians are in the pockets of the special interests who fund their campaigns. And these people are not just corrupt, they are also unimaginative, weak and stupid. I am the best”

Attitude, not policies 

Well, this is about it. Yes, there may be Trump policy positions papers on this and that. But I bet that very few Trump supporters could name any.

They simply like “the Man”. They like the fact that he is self-assured and unscripted. And yes, they like that he is blunt, indeed at times vulgar and openly offensive when attacking his opponents. Who cares anyway? Those Washington professional politicians do not deserve any respect.

Well, now we understand how a deep “disappointment”, created a space for Trump. And it follows that when disappointed voters no longer believe their leaders, they are likely to be also angry, and worried about their future. Hence the craving for someone entirely different.

Immature reaction 

That said, this is incredibly immature. I understand disappointment. To a degree. The problem is that many voters do not understand that broader issues, such as “lack of innovation” that leads to “lack of new jobs”, may not have quick political solutions. Certainly no short term fixes. You may elect whomever you want, but the issues will still be there. Because they are rooted in systemic weaknesses that cannot be resolved in a short time.

Angry voters 

Furthermore, being angry is not a good argument for blind faith in a populist with zero public policy experience. Electing a President entails a lot more than savoring the thought that he will kick the old guard out.

This is show business 

Finally, the Trump phenomenon demonstrates how politics is now deeply blended with entertainment. Nobody cares about well-crafted policy positions. Nobody cares about a good resume. People care about how the candidates look on TV.

They want to see who wins the verbal duels. They wait for the clever punch line. In other words, this is the triumph of appearance versus substance. This is why outrageous statements get an applause. This is show business. And in show business the unusual entertainer quite often has an edge.

Trump’s support 

Now, let’s look at Trump’s large support. In the early primaries he has done very well. However, is the 32% to 34% he is getting Trump’s floor, the base on which he will build an even wider support? Or is it his ceiling?

I tend to believe that this is a ceiling. Many polls indicate that Trump has very high unfavorable numbers. In other words, while 30% of Republican primaries voters really love him, most of the others really dislike him. Besides, in other polls, Trump is no one’s second choice. In other words, at the moment the chances of extending the considerable Trump base do not look that good.

This of course may change. If he keeps winning, even with only 30 or 35% of all votes cast, (remember that there will a number of “winner takes all” primaries), the rest of the party faithful may agree that he is not so bad after all. People want to back a winner.

Fragmented Establishment 

At the moment Trump’s victories look a lot bigger because the “Establishment” has come to this crucial political battle quite disunited. In a word: just too many candidates that caused a fragmentation of the “non Trump” votes.

Which is to say that being number one with 35% looks positively great when number two is way behind, at 22%, while number 4 or 5 are in single digits. Well, now Chris Christie is gone and, after his South Carolina debacle, Jeb Bush also left the scene. This creates an opportunity for consolidation of the Moderate/Establishment votes around one candidate, most likely Marco Rubio.

But this is not happening fast enough. Ohio Governor John Kasich is still hanging on, (God knows for what reasons). And this makes it a lot more difficult for Marco Rubio, the best placed among the more palatable candidates, to become the rallying point of the traditional Republicans who rightfully see Trump as a calamity and a guarantee of a major defeat in November.

The Establishment Republicans may still have a chance to coalesce around Rubio, this way making him a much stronger candidate. But this window of time will close very soon.

Will Trump mania fade? 

Who knows, may be the “Trump mania”, based on Trump’s behavior rather than his policies, may fade. It is true that in this celebrity saturated American culture, the shelf life of at least some celebrities is not that long.

Still, this may not be an issue for Trump. He does not have to campaign for another year. He needs to keeps his momentum going for just a few more months. After that, he may have secured enough delegates to win the GOP nomination.

And that would be an extraordinary achievement for a complete outsider.

Winning the White House 

But at that point the real fight begins. At that point the battle will be about convincing, not just a majority of the Republican base, but more than half the Nation that he is the best leader for all Americans.

And that is a very high bar. His hard-core base of 35% or even 40% angry Republicans, as loyal as it can be, will not be enough to get Trump into the White House.

Too Many Bad Loans In India

WASHINGTON – India recently decided to change its methodology for calculating GDP and the rate of growth. And, presto, GDP now is a lot bigger, and growing much faster. Except that most analysts do not believe the numbers. No, the 7.5% rate of growth is more likely 5%.

Cooking the numbers

This is no mere detail. It is hard to take seriously a country that cooks up its numbers to make them look better. India’s government better fix this, and fast. A major developing economy, a country of more than 1.3 billion, cannot risk becoming a laughing stock by producing data that most of the world believes is fake.

Fake statistics in Argentina 

Indeed, Mauricio Macri, recently elected President of Argentina, immediately replaced all the top management at INDEC, the national statistics agency. The simple reason is that the agency had lost all credibility. Under the previous populist government, it published what the political leadership wanted. In order to re-establish credibility, accountability and transparency, as a minimum Argentina needs a truly professional, non-political statistics agency that will publish real data.

And so does India.

Bad loans

In India there are also other problems. There are just too many bad loans on the books of state controlled banks. More credit is extended to borrowers already in default. As a result, the percentage of Non Performing Loans, NPLs, jumped from 6% in 2011 to 14% in September 2015. According to the FT, this is “the worst level in Asia”. 

As the NPLs issue is out in the open, the markets are punishing banks stocks. But the government is reacting too slowly. Various analysts openly argue that Finance Minister Arun Jaitley should act swiftly. This situation damages India’s financial sector, and more broadly it shows its corrupt politics.

Crony capitalism 

It is obvious that all these NPLs are mostly about crony capitalism. Well connected Indian tycoons do not go bankrupt. No, first they get all the loans they want. And when their businesses go south, their bad debts are rolled over, and in fact augmented with the justification that a more robust capitalization of failed enterprises will finally heal them. But this never works.

NPLs in China 

Look, this is happening everywhere in Asia. In China, virtually defunct State Owned Enterprises, SOEs, now explicitly called “Zombies”, keep getting fresh capital from friendly state owned banks. How big is China’s financial hole caused by NPLs? We do not know. But probably bigger than we think.

Rigged game

Thank God, in India there is a bit more transparency. Investors know more or less the extent of the NPLs problem. All the more reason to attend to it. State banks should not be in the business of funding well connected people who are lousy business leaders.

Difficult to get foreign investors to take the country seriously, if the Indian economy is perceived to be an insiders’ game designed to fit the needs of corrupt elites.


No Deal To Cut Oil Production – Still, Russia And Saudi Arabia Are Talking

WASHINGTON – Saudi Arabia and Russia are the leading world oil producers and exporters. Energy Ministers from both countries met in Qatar to discuss a possible agreement leading to production cuts. They were joined by Qatar and Venezuela.

No deal 

But nothing really happened. The only “agreement” reached by the two oil exporting giants, (the other two participants are not very consequential), is to freeze their production at January levels, an all time high. So this does not mean much.

Besides, the agreement is contingent on Iran and Iraq not raising their production beyond this level. And this is almost impossible. Iran wants to ramp up its production to pre-sanctions levels. This translates into adding another one million barrels a day beyond the 400,00 it has already added. Iraq desperately needs cash to finance its counter-insurgency efforts against ISIL in the North West of the country. So, expect no production freezes from these two key OPEC members.

Too much oil 

The current oil production glut, intentionally allowed by Saudi Arabia when it refused to cut production when confronted with lower prices in 2014, is hurting both Russia and Saudi Arabia. And, as noted above, the situation is about to get worse. With the lifting of international sanctions, Iran is now free to export more to Europe and elsewhere. We can expect more than 1.4 million barrels of additional Iranian oil to hit already saturated markets in the near future.  For sure, this over supply will keep crude prices down. They are around $ 30 right now, down to just 1/3 of what they used to be before this glut began.

Financial pain

Saudi Arabia can tolerate the financial pain caused by the huge oil revenue loss, for now, but not indefinitely. Likewise, the Russian government has been forced to cut spending, repeatedly, while dipping into a reserve fund to cover the substantial revenue shortfall. Depressed crude prices are really bad for both countries.

While no breakthrough took place in Qatar, may be it is time for the Saudis to get a deal with Russia. The problem is that Saudi Arabia is also concerned with retaining market share. If it cuts production, it will lose some customers. And others who are not cutting may end up benefiting. (Think Iraq and Iran, among others).

Can they agree? 

Hence the importance of a deal with Russia, the other giant exporter. The two of them combined control 20 millions barrels of production. Still, is such a deal really possible?

In theory, yes. In practice, we would be entering uncharted territory. This has not been done before. Russia is not an OPEC member. Besides, Russia is not viewed as a friend by the Saudis. Moscow is on good terms with Iran, while it heavily supports Assad in Syria.

May be 

Can the two countries go beyond these major political differences, and strike a deal that would benefit both of them financially, in a major way?

As we are getting closer to what begins to look like an emergency situation caused by oil revenue collapse, a production cut agreement between Moscow and Riyadh is just possible.

The meeting in Qatar was inconclusive. Still it counts as an exploratory talk between two critical players that until today had no established venue for bilateral energy talks.

Will there be more meetings? Can the two sides get a real deal, a deal that will cut production, and therefore lift oil prices? I would not rule this out. Both Russia and Saudi Arabia badly need more cash.

A Russia-Saudi Arabia Oil Production Cut Deal?

WASHINGTON – Saudi Arabia and Russia are the leading world oil producers and exporters. Energy Ministers from both countries are about to meet in Qatar to discuss a possible agreement leading to production cuts.

Too much oil 

The current glut, intentionally allowed by Saudi Arabia when it refused to cut production when confronted with lower prices, is hurting both of them. And the situation is about to get worse. With the lifting of international sanctions, Iran is now free to export more to Europe and elsewhere. This means even more supply (about 400,000 barrels a day) from Iran in an already over supplied market. This will keep crude prices down. They are around $ 30 right now, less than half of what they used to be when the glut began.

Financial pain

Saudi Arabia can tolerate the financial pain caused by the huge oil revenue loss, for now, but not indefinitely. Likewise, the Russian government has been forced to cut spending, repeatedly, while dipping into a reserve fund to cover for the substantial revenue shortfall. Depressed crude prices are really bad for both countries.

May be it is time for the Saudis to get a deal with Russia. The problem is that Saudi Arabia is also concerned with retaining market share. If it cuts production, it will lose some customers. And others who are not cutting may end up benefiting.

Can we get a deal? 

Hence the importance of a deal with Russia, the other giant exporters. The two of them combined control 20 millions barrels of production. What will be the substance of a deal? What guarantees can the two sides offer? Is such a deal really possible?

In theory, yes. In practice, we would be entering uncharted territory. This has not been done before. Russia is not an OPEC member. Besides, Russia is not viewed as a friend by the Saudis. Moscow is on good terms with Iran, while it heavily supports Assad in Syria.

May be 

Can the two countries go beyond these major political differences, and strike a deal that would benefit both of them financially, in a major way?

As we are getting closer to what feels like an emergency situation, an agreement between Moscow and Riyadh is just possible. Stay tuned.

Obama Announced The Death Of A Supreme Court Justice In Casual Attire

WASHINGTON – The sudden death of US Supreme Court Justice Antonin Scalia will complicate this already messy US political environment. It is no mystery that the US Supreme Court (nine members who serve for life) is often divided on key issues along political lines. Until now, the conservatives prevailed; but usually by a thin 5 to 4 margin.

The death of a conservative Justice 

Antonin Scalia was a leading member of the conservative group. Now that he is dead, left leaning President Obama has the opportunity to nominate a replacement and send his nomination to the Senate for confirmation, as the US Constitution mandates.

In this unfortunate political climate, it is most likely that Obama will select a jurist with left wing political leanings. If his nominee is confirmed, in the last year of his presidency Obama will have accomplished a shift in the orientation of the US Supreme Court that may last way beyond his presidency. But this is most likely a dream.

Clash with the Senate

Indeed, the problem for Obama is that the Senate is controlled by the Republicans. They will never confirm a left wing jurist. In fact, Senate Majority Leader Mitch McConnell has already stated that the new Supreme Court Justice should be appointed by the next President who will be in office 11 months from now. With this de facto obstruction, there will be no new Justice confirmed before the next presidential elections, therefore there will be an eight members, incomplete Court for almost a year.

Anyway, we shall see how this goes. Can Obama send a reasonably moderate jurist to the Senate? A compromise candidate, someone that the Republicans can live with and will therefore confirm? Possible, but very unlikely.

What happened to form? 

That said, beyond the obvious political angle, let me spend a few words focusing on formalities. Scalia’s death came suddenly and unexpectedly. He was in Texas with friends, on a hunting trip. He went to bed, and apparently never woke up.

President Obama was away from Washington, in California for a short vacation, playing golf. As form and protocol would recommend, President Obama made an official TV announcement about Scalia’s death.

The announcement was sober and respectful. Obama pointed out Scalia’s remarkable influence on modern jurisprudence and the very important role that he played in the US Supreme Court. He offered his condolences to the family, and to the Court.

No tie

So, the President did the right thing. Except that he made his televised speech wearing a jacket and an open shirt; but no tie, “casual Fridays style”.

Of course, I am well aware that these days formalities are not in fashion any more, in America –and elsewhere, for that matter. People, including high ranking professionals, go to work dressed pretty much as they please. “Coat and tie” is not just not mandatory, it may even look funny and out of place in certain work environments. (Think Silicon Valley, for example).

But this should have been different. Here is the President of the United States announcing to the Nation the death of one of nine Supreme Court Justices. This is about the highest court in the land, the ultimate guarantor of our constitutional integrity, and therefore a solemn moment. This announcement does require form. And our President could not even put on a tie for the occasion?


If he did it on purpose, then this is his way to show disrespect for a deceased conservative Justice whom he disagreed with on most issues. If he did it without thinking, then he is totally clueless. In that moment President Obama was speaking to America about a loss that affects the US Supreme Court, a key pillar of our Republic. While his words were appropriate, his attire was not.

No advice

What I find extraordinary is that there is probably no one on his staff who could have made the suggestion. “Mr. President we strongly advise you to put on a tie for this TV announcement about  Justice Scalia’s death. The occasion requires formal attire”.

If someone said this, they were not listened to. But I suspect that no one did. And this is bad. This was certainly not a major public ceremony, with complex, ritualized steps.

It was however a solemn moment. But Obama trivialized it with his causal attire. Yes, a simple tie would have a made a huge difference. In this case, it would have been a sign of real respect; for Scalia, for the US Supreme Court, and for the Republic.

In 1992 Ross Perot Was The Billionaire Ready To Fix Everything In No Time – Just Like Trump

WASHINGTON – This is an excerpt from a funny imaginary vignette (Notebook, by Robert Shrimsley, Republicans seek reasons to be cheerful about Donald Trump, The Financial Times, February 11, 2016). Establishment Republicans want to get adjusted to the idea of Donald Trump becoming the GOP nominee:

“Hell, yes. [Trump] is gonna make America great again. And at least he’s not Ted Cruz.

There is that.

And remember he’s already going to fix the problems of our society.

And make America great again?



He’s going to bring in the smartest people around, and they are going to fix our problems.

Damn — why didn’t we think of that?

Because we are part of the Washington elite. Donald thinks outside the box.

That’s how he’ll make America great again.


Has he said which people he’ll bring in?

Smart ones.

That’s good.”

Well, this imaginary exchange exposes Donald Trump’s complete intellectual void. He’s got a Great Plan, but we do not know what it is. We only know that he will pick the best people to shape it, and implement it. Amazing to see that so many Americans are buying this.

We have seen this before 

But the interesting thing is that this is not the first time that someone is selling this CEO approach to public policy-making. Look at this:

“I want people who are smart, tough, self-reliant, have a history of success since childhood, a history of being the best at what they’ve done, people who love to win. And if you run out of people who love to win, look for people who hate to lose.”

Do you know who said that? It was Ross Perot, the Texas billionaire who also run for President in 1992, purely on the basis that he was a super successful businessman, and a smart problem solver. Well, he did not make it. But his third party candidacy weakened the Republican incumbent George H. W. Bush, and contributed in some measure to Bill Clinton’s victory. (Ross Perot received almost 20 million votes, about 19% of the total.)

Be that as it may, regardless of elections outcomes, the point is that we have seen this movie before. Ross Perot was another megalomaniac populist, with an outsize ego. And yet millions loved him, and voted for him, because he sold himself as “Mr. Fix It”. Yes, he would have also brought the best people to Washington and put them in charge, so that they would fix things in America, one by one. As easy as that.

The smart people 

And now Donald Trump comes along telling us exactly the same thing. He will fix everything because he is the best mind in America and he will get all the smart people in a room, so that together they will figure out how to re-engineer the Nation. Don’t forget that these are all hand-picked geniuses, expertly led by super genius Donald Trump.

Damn — why didn’t we think of that?

Because it is a really bad idea. In a democracy it does not work this way. Yes, the traditional political/policy-making process is cumbersome, wasteful, and pretty horrible. And yes, many people who are put in charge of important policies are not that smart.

No accountability, no freedom 

But the only way in which you give the smart people the latitude to use their superior intelligence, so that they can go ahead and fix everything, is by abolishing or at least suspending our system of checks and balances, and giving up our freedom. In order to be able to quickly implement the brilliant ideas of his smart collaborators, President Trump would have to bypass Congress, the Judiciary and more. And what if the Great Policies turn out to be not so Great after all?

Anyway, all this is crazy, infantile, and really dangerous. And yet there are armies of loyal Trump supporters who think that this is indeed the best approach, and the best way forward.

I am asking them to reconsider.



Maersk Warning About Global Slow Down – Recession In the US?

WASHINGTON – Maersk, (based in Denmark) is the largest shipping conglomerate in the world. Their business is to transport every day tens of thousands of containers from exporters to importers around the world. The company just announced losses for 2015. Just a temporary setback? Well, apparently not. Maersk ascribes this setback to shrinking global trade volumes. Their profits are way down because a much weaker world economy generates much less shipping of goods.

The worst since 2008 

Maersk’s CEO is quoted by the WSJ saying that the conglomerate is facing a “massive deterioration”, adding that this is the worst they have seen since the onset of the Great Recession of 2008. Got that? We are back to a 2008-like scenario. I suggest that this is really bad.

And Maersk believes that this weak trade flows trend will continue in 2016. We should pay close attention to what Maersk managers say. Global shipping volumes are a very good proxy for world economic health. 95% of all manufactured goods are transported via containers that get to destination thanks to global shipping companies like Maersk.

Less activity in ports world-wide

Maersk is not alone in predicting bad times. DP World, a very large Dubai based port facilities management company, with operations in 70 terminals in practically every continent, chimed in, indicating that their business (handling the containers moved by Maersk and other shipping companies) is down, significantly. And the IMF confirms this pessimism about a global economy that run out of steam. They have lowered their forecasts for both growth and international trade flows.

So, here we go. The big companies that handle global trade are hurting. Their business is down because the world economy is slowing down, at a rapid pace. They are worried.

Weak economies 

And why is that? Because the day of reckoning is finally getting close. The jig is up. For several years we have lived in a fools’ paradise created by easy money created by central banks that caused asset price inflation in developed countries, and too much easy credit in emerging markets. Underlying economic conditions all over were rather weak, but everything looked good because of the artificial froth created by monetary easing.   `

Central banks to the rescue 

Until recently, when stock market worldwide showed signs of weakness, investors simply waited for central banks in the US, the EU, UK, and Japan to come to the rescue. And they were never disappointed. Trying to boost sagging economies, central bankers would launch, or relaunch, monetary easing, and zero per cent interest.

They would ladle quantitative easing, or QE. If it wasn’t enough, they would ladle some more. When that did not do the trick, they went further. Some of them (Japan’s Central Bank just joined the group) stopped paying interest to commercial banks parking their funds with them.

More of everything

And when even that proved to be insufficient, some of them started charging interest on deposits as a way to force banks to lend more in order to induce more growth. (Even Janet Yellen, the Chairwoman of the US Fed, just declared during a congressional testimony that negative interest rates could be looked at here in the US as a policy option, in some scenarios).

All these gimmicks produced some results. But nothing stellar. With all this gigantic monetary stimulus, the US has been growing at a modest 2%. Europe, at roughly 1%, has done much worse. Still, notwithstanding meager results, the international financial community seemed to be comfortable.

As long as the central banks seemed to be in control, busy doing one thing or another to  prop up markets and keep stock markets reasonably buoyant, (regardless of the weak underlying economic fundamentals), it all looked promising.

Artificial valuations 

Except that everybody, unless totally insane, must have known that nothing was right. Here is the thing. The extravagantly long season of monetary easing did not do much to grow the economies. But zero interest rates pushed cash from savings into stocks, therefore artificially boosting stock prices.

This cannot go on for ever.

Therefore, investors paying high prices for inflated assets must know that these high valuations were and are artificial. What happens when the central banks cannot provide any more monetary easing?

Governments have done nothing 

It is true that central banks intervened so heavily mostly because governments did practically nothing. Sadly, in most western countries there has been no serious attempt to launch new pro-market, pro-growth, pro-investments policies. And it is obvious that, without a business friendly policy environment, there will be fewer investments, less innovation, less enterprise, fewer new companies, and fewer new jobs. And this means no growth, or lackluster growth.

But policy-makers, paralyzed by their ideological blinders that privilege spending on social issues as opposed of investments in future growth, sat on their hands.

It is true that central bankers, at least in the US and in the EU, pleaded with governments. They wanted action, real reforms that would free up resources, favor enterprise and therefore new growth. They did say that they could not manage the economies all on their own. But nobody listened, and almost nothing happened.

No reforms in the US 

In the US nothing has been done about reforming entitlement spending (Social Security, Medicare and Medicaid) and a horrendously complicated, burdensome federal tax system that discourages business creation. On the contrary, instead of reducing regulations, the US government keeps adding more, this way suffocating enterprises with unnecessary mandates.

In Europe, if anything, it is even worse. In Japan, Prime Minister Shinzo Abe back in December 2010 announced “Abenomics” a major reform plan consisting of “three arrows”: fiscal stimulus, monetary easing and structural reforms. Well, thanks to a subservient Bank of Japan, he got the monetary easing. But the rest –especially the structural reforms– did not happen. Abe simply could not deliver. Japan continues to stagnate.

Central banks keep easing 

So, confronted with systemically weak economies, and no help from policy-makers, the central banks tried to provide more oxygen via monetary stimulus. And it worked; but only a little. However, in so doing, the central banks created unprecedented asset price distortions and misdirected the allocation of capital. Trying to buy some time, they created a gigantic mess.

Nervous investors 

And now investors are very uneasy. They are on the lookout for any signs that may indicate the imminent collapse of this house of cards. They know that China, the most astonishing example of fake growth almost entirely financed (since the 2008 Great Recession) by unprecedented levels of new debt, is doing poorly. How poorly? Well, we do not know, because we cannot trust Chinese economic statistics. But global investors know that something really bad is brewing there. There is massive industrial over capacity, and no new demand. There is capital flight. For how long can the Chinese Government keep so many virtually bankrupt companies open? Not for ever.

And the same investors know and fear the cascading effects of the China retreat, some of them already unfolding, (and captured by Maersk’s warning on world trade flows deterioration). Indeed, South Korea, Thailand, Japan, Indonesia, Australia and others are closely tied to the Chinese economy. Many of their companies are part of China’s supply chains. So, as China goes down, they follow. This means a broader contraction.

Commodities down 

And then you have all the commodities producing countries, also hurt badly by China’s slow down. This would be bad enough as it is. But it is made a lot worse by the fact that the rapid growth of many sectors (not just commodities) in emerging markets was debt-financed. Now that business is down, and profits have disappeared, where is the money to pay back the loans? These companies are going down, while their fall causes losses in the financial sector. This means more negative ripple effects.

So, here is the picture. Stock markets are over valued. Commodities producing countries are in bad shape because of lack of demand from China and over supply. There is too much bad debt.

Too much debt

Now, is this another September 2008 in the making? Who knows really. It is clear that no major economy is in high gear. On top of that, at least some highly indebted companies will be unable to make it. There are nasty rumors of troubled European banks with too many non performing loans on their books. Now they are abandoned by investors who fear the worst.

In China, at least for now, the losses are disguised through heavy-handed interventions by the state. But what about elsewhere? In the US, for instance, many of the companies that participated in the now defunct shale oil boom borrowed heavily to finance their operations. Because of the oil price collapse, now many of them will go under. This already hurt producers, contractors, suppliers and vendors, not to mention tens of thousands of high paying jobs lost. And you have to add the banks that financed the energy boom to the list. More broadly, the global financial system is exposed to a lot of non recoverable loans in emerging markets.

Bad news 

So, there you have it. The global economic slow down is here to stay, according to Maersk and others. I would trust them. It is their core business to properly understand trends in trade flows.

Commodities prices are not going to rebound. Mining multinationals from Glencore to BHP Billiton to Vale are in bad shape. China got a massive indigestion and stopped buying. Brazil is in a recession. Russia is doing poorly because of low oil prices. Europe is fragile. And there is a lot of bad debt in distressed emerging countries.

US cannot insulate itself 

It is true that in this rather gloomy context the US is not doing so badly. We have some growth, (a bit more than 2%), and unemployment is way down, (4.9%). The point is that the US is not strong enough to be able to insulate itself from these global currents. While the American economy is less dependent on foreign trade, many large US companies are tied to world markets. (Think about Caterpillar, or General Electric). If they suffer because of lost foreign sales, there will be ripple effects. At some point America as a whole will also feel the pain.

And if this happens while investors lose confidence in the Fed’s ability to keep propping up markets with some more tricks, then all bets are off. At that point expect a mad rush for the exit.

Right now a US recession seems a very distant possibility. But may be it is a lot closer than we think.