Political economist and philosopher Adam Smith also wrote books. He is famous for his achievements … [+]
Although now an economist, Adam Smith, though more famous in Glasgow, is therefore fairly assumed that he knows one or two things about the intersection of economy, philosophy and politics, which is often a political crisis inspired by a potential economic crisis.
Smith lived in a mercantilist era, which we can describe as a nationalist approach to trade aimed at maximizing a country’s exports while minimizing imports. In this case, Smith wrote that mercantilist countries “whose interest is begging for neighbors”, often using the term “begging for neighbors” in economic contexts, often in a scarcity situation (the consequences of the Great Depression and the global financial crisis)
With the big event and the fashion of “Beggar Neighbors” it's worth going back to Smith's “State Wealth, Book 4”, many observations Smith is integrated with the United States today, such as:
Thus, the secret art of erecting the base for the actions of the great empire. However, through such a motto, countries have been taught that their interests include begging for all their neighbors. Each country is forced to look at the prosperity of all countries it trades with and see its gains as its own losses. In each country, naturally, in individuals, should become the bond of alliances and friendship, which has become the most fertile source of discord and hostility.
To this end, besides the bonfire of American values and diplomatic relations, there is a basic logic in the emerging logic of White House policies that China, Japan and Europe need to pay attention to.
I have written many times in this note that the world economy is in the foreground of a fiscal crisis (listen to “Wake up the world debt”). Unusually, all major economies are bearing debt at the same time, and the process of their attempt to reduce debt at the same time (ES) can be financially dangerous.
It seems Trump's entourage understands this, logically speaking, the unification behind the different policies from the creation of “Manog” to NATO is driven by a cruel sense of austerity, which began with the cuts of all the international public goods invested in the United States since Bretton Woods.
In this case, the “begging” in Europe pushed the European security bill toward European security throughout the Atlantic and shaped the European debate into a larger debt accumulation (for example, the debt brake is one of the most controversial topics of the new German government and the EU, which will soon launch the EU defense bond issue). Japan, South Korea and Australia may be next.
In fact, the White House is using special regions of the United States – financial markets, military and multinational corporations – to coerce its allies. Debt may be next.
The closest template we are to Trump’s big macro plan is a paper written by Stephen Miran, who may soon be the director of the Economic Advisory Board. The elements in the program are commonly referred to as the “Mary Lago Agreement”, which is no different from the idea of the World Debt Conference I wrote on the level, although my version was in a recently renovated raffle (Singapore).
One of the pillars of the cited “Mar-A-Lago Agreement” is that holders of the Treasury exchange long-term loans to these securities (which may not be available for coupons). The result is the maturity and fiscal burden of the restructuring of the U.S. debt burden. It's a neat idea, but it won't work in practice. Any debt agreement may need to act as a driving force for a major financial crisis that motivates the need to restructure debts in all major economies and to rewrite global financial regulations (for example, for pension funds).
In fact, trying to develop a Magra dollar agreement in the same way as the debate around NATO may create disgust (distrust) for U.S. financial assets and the dollar. While Europeans may not appreciate the extent of the “beg neighbor” philosophy driven by U.S. security policy, the White House underestimated the value brought by the wide range of financial, diplomatic and commercial infrastructure in the United States. One example is that nearly 40% of large U.S. companies are revenue from overseas.
In the short term, we are also beginning to witness the impact of austerity policies on the U.S. economy. While the “hard” data on the economy remains solid, the outlook will become very noisy in the coming months as government layoffs efforts and cuts in social welfare (especially in the mortgage industry). Markets are also starting to jitter in the belief that the government is more focused on reducing bond yields (and the cost of government debt).
In the case of a weakening of the (US) economy, investors usually turn to Treasury bonds, but forcing the prospect of the Margrago agreement to them could lead to a strike by buyers.
