Monday, February 20, 2017

Monday, February 20, Morning Global Market Roundup: Asia Shares Adrift For U.S. Holiday, Focus On Unilever

By Wayne Cole 
Reuters
February 20, 2017

Asian share markets were mixed on Monday as political uncertainty globally kept the mood cautious, while the U.S. dollar dithered in a tight range ahead of a busy week for Federal Reserve events.

Turnover was light with U.S. markets closed for the Presidents Day holiday. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.1 percent and back toward a 19-month peak reached last week.

Japan's Nikkei .N225 went flat after domestic data showed exports disappointed in January even as imports outpaced forecasts.

Shanghai stocks .SSEC added 0.9 percent and expectations of solid economic growth in China kept commodities such as copper and iron ore well bid.

Spreadbetters predicted opening gains of 0.2 to 0.3 percent for bourses in Europe while E-mini futures for the S&P 500 ESc1 added 0.1 percent.

Shares in Unilever Plc (ULVR.L) could retreat after U.S. food company Kraft Heinz Co (KHC.O) withdrew its proposal for a $143 billion merger. Unilever's shares jumped 13 percent on Friday on news of the bid.

Wall Street ended last week on a roll, with all three major indexes making historic highs and the Dow Jones Industrial Average reaching a seventh straight record close. [.N]

A host of results from retailers are due this week, including Wal-Mart Stores Inc (WMT.N), Macy's (M.N) and Home Depot Inc (HD.N). The results will be watched for a read on spending as well as for commentary from executives on President Donald Trump's proposal to tax imports.

On the interest rate front, no less than five heads of regional Federal Reserve bank are due to speak this week while Fed Board Governor Jerome Powell appears on Wednesday, when minutes of the last policy meeting are also due.

Cleveland Federal Reserve President Loretta Mester said on Monday in Singapore that she would be comfortable raising interest rates at this point if the economy kept performing the way it has.

Speculation the central bank could hike as soon as March has generally underpinned the U.S. dollar, though large long positions leave the market vulnerable to sudden pull backs.

On Monday, the dollar was little changed against a basket of currencies at 100.880 .DXY and a fraction firmer on the yen at 113.05 JPY=.

European politics kept the euro EUR= skittish.

Germany's center-left Social Democrats (SPD) moved ahead of Chancellor Angela Merkel's conservative Christian Democrats (CDU/CSU) in an opinion poll by the Emnid institute for the first time since 2006, Bild am Sonntag said.

On Friday, news the French left could unite behind one candidate in the presidential elections seemed to increase the chance of anti-EU, anti-immigrant Marine Le Pen winning, and knocked the single currency lower.

The euro stood at $1.0616 on Monday, having fallen 0.6 percent on Friday, not far from the recent five-week low of $1.0520. Risk aversion sparked a rally in German bonds while widening the spread against French debt.

Oil prices were a shade lower having suffered the first weekly decline in five weeks as the market weighed rising U.S. drilling and record stockpiles against efforts by major producers to cut output to reduce a global glut.

Brent futures LCOc1 were up 4 cents at $55.85 a barrel, while U.S. West Texas Intermediate crude CLc1 for April delivery added 5 cents to $53.83 a barrel.


Article Link To Reuters:

Oil Prices Flatline As U.S. Drilling Counters OPEC Output Cuts

By Aaron Sheldrick 
Reuters
February 20, 2017

Oil prices held steady on Monday as investors gauged whether an increase in U.S. drilling rigs and record stockpiles would undermine efforts by producers to cut output and bring the market into balance.

Brent futures LCOc1 were down 5 cents at $55.75 a barrel, while U.S. West Texas Intermediate crude CLc1 was unchanged at $53.40. Both contracts earlier rose slightly in quiet trading.

"Sustained gains above $55 a barrel, and a hoped for rally to $60 a barrel, (are) both proving incredibly tough nuts to crack," said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.

"At the crux of the matter is that 90 percent OPEC compliance is being balanced by ever increasing U.S. shale production," he added.

U.S. energy companies added oil rigs for a fifth consecutive week, Baker Hughes said on Friday, extending a nine-month recovery with producers encouraged by higher crude prices, which have traded mostly over $50 a barrel since late November.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, agreed last year to cut output almost 1.8 million barrels per day (bpd) during the first half of 2017.

Estimates indicate compliance with the cuts is at around 90 percent, while Reuters reported last week that OPEC could extend the pact or apply deeper cuts from July if global crude inventories fail to drop enough.

But rising U.S. output helped boost crude and gasoline inventories to record highs last week, amid faltering demand growth for the motor fuel.

Hedge funds and other money managers raised their net long U.S. crude futures and options positions in the week to Feb.14 to a new record high, data from the U.S. Commodity Futures Trading Commission (CFTC) showed on Friday.

The increase in long positions leaves the market vulnerable to a downward correction, analysts have said.

The U.S. market will be closed on Monday for the Presidents Day holiday.


Article Link To Reuters:

Gold Isn't Doing In Practice What It Should In Theory, Yet Again

In a counterintuitive move, metal is advancing as Fed tightens; ETF investors have turned buyers as January rally lingers on.


By Eddie Van Der Walt
Bloomberg
February 20, 2017

What works for gold in practice rarely works in theory.

The last three U.S. interest-rate increases that should, all other things being equal, be bad for the metal have seen prices jump in the months that followed.

Gold is up about 7 percent since the Federal Reserve raised rates on Dec. 14. It jumped 13 percent in the two months following the last increase in December 2015 and 6 percent the previous time way back in June 2006.



Partly, it’s rational expectations, and other things getting in the way. This time one of those things is Donald Trump’s presidency. Uncertainties surrounding his administration have dominated markets since the Nov. 8 election.

Precious metals initially plunged as investors noted Trump’s vow to supercharge the economy with infrastructure spending. That would raise returns on assets such as shares and curb interest in havens like gold.

Yet, with Trump’s time in office so far focused on other matters, the trend was quickly halted and reversed. The Fed’s rate increase in December once again became a low-water mark for gold, and expectations for further increases by the bank have failed to halt further price gains.

“The market worries more ahead of the event than after,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said by e-mail. “Once the hike was out of the way, a more balanced picture emerged and that together with a reality check of the potential Trump impact did the rest.”

Investors in the largest exchange-traded fund backed by gold have bought 44 metric tons this month, helping to boost prices of the metal 4 percent to about $1,240 an ounce. That followed seasonal gains in the run up to Lunar New Year in January when Chinese typically purchase gold as gifts.



“It almost looks as if there’s a big fund manager getting into the market,” said Bernard Dahdah, one of the London Bullion Market Association’s most accurate forecasters. “We won’t know who that is until next quarter.”

At least one such manager has gone public. Billionaire Stan Druckenmiller said this month he was a buyer in December and January because of the lack of clarity on U.S. government policy.

There are other reasons to seek a haven from political uncertainties. Elections in Germany and the Netherlands are looming, while Britain has yet to agree the terms of its departure from the European Union.

In France, National Front leader Marine Le Pen suggested she’ll take back control of the central bank and print money to finance welfare as she leads France out of the euro, assuming she wins the nation’s presidential election.



“Investors are still in search of a refuge,” Bloomberg Intelligence analyst Eily Ong said.


Article Link To Bloomberg:

Panic Over China Is So Last Year, With Market Swings Subsiding

Less volatility in yuan and Shanghai shares, bond yields lower; Attention focused on Trump presidency, France vote, Brexit.


By Justina Lee
Bloomberg
February 20, 2017

At the dawn of the year of the rooster, China’s economy is as leveraged as ever, with credit still outpacing growth.

Yet there’s a difference from past years: an absence of turmoil in financial markets.

-- Swings in the yuan are at a three-month low
-- Volatility in stocks in Shanghai is near the least since 2014
-- Bond yields have retreated from a 1 1/2-year high

This all comes after two bumpy years featuring a surprise currency devaluation that roiled markets globally, a stock-market crash and a sell-off in bonds. Panicking over China seems out of fashion.

One reason: economic expansion has steadied, allowing the central bank to mount a modest tightening in funding conditions that’s offered support for the yuan without threatening growth. External conditions are favorable too, with the dollar pulling back. A key backdrop for China this year: a critical gathering of the Communist leadership this fall where the next generation of top officials is scheduled to be picked.

While U.S. President Donald Trump called for tough measures against China on the campaign trail, there’s been no specific move yet to curtail imports from America’s top trading partner. Skeptics say the China market tranquility is a sign of complacency. Goldman Sachs Group Inc. last week warned that it comes at the cost of rising credit and other imbalances.

Even so, the following four charts help illustrate why China for now has retreated down the list of investors’ worries:



Implied volatility in the yuan has dropped along with the dollar amid doubts over Trump’s reflationary agenda and as fund outflows showed signs of slowing due to tighter capital controls.



The Shanghai stock market isn’t swinging so wildly any more. The interest of China’s dominant retail investors hasn’t returned since the crash in 2015, and more funds are entering Hong Kong shares through a connect program, propelling the local benchmark to a 1 1/2-year high.



China’s latest economic data from exports to new credit have beaten estimates after growth accelerated last quarter for the first time since 2014.



Even bond yields, which jumped the most since October 2010 last month, have dropped lately as the People’s Bank of China resumed fund injections.

Though concerns over tightening, as seen in Friday’s jump in money-market rates, illustrate the continuing dangers of China’s record leverage, it’s other international risks that have been the focus of global market attention -- with looming elections in France, continuing debt problems in Greece and Britain’s struggles with Brexit.

“When you have a global risk-off, that tends to be positive for the U.S. dollar and negative for emerging markets including China -- and that’s going to add more pressure to the stability” in China, said Ken Peng, Hong Kong-based investment strategist at Citigroup Global Markets Asia Ltd. “Domestic problems are more limited” because “for a while you’re not going to have really a problem of refinancing and default risks,” he said.


Article Link To Bloomberg:

U.S. Stocks’ Direction Will Depend On The Dominance Of Either A ‘Good’ Or ‘Bad’ Trump

The ‘good’ Trump wants to lower taxes and regulations, while the ‘bad’ Trump wants protectionist policies.


By Howard Gold
MarketWatch
February 20, 2017

There are two Donald Trumps in Wall Street’s eyes.

The first President Trump will push through corporate tax reform, including the repatriation of trillions of dollars of overseas cash by U.S.-based multinationals; reduce corporate taxes and top marginal tax rates; and abolish the estate tax, which he and other Republicans call the “death” tax. He will cut regulations, especially on banks and energy companies, and will slash the federal bureaucracy.

He even will give Wall Street a special gift by delaying or eliminating the fiduciary rule, under which companies that manage retirement assets have to act in the best interests of clients, not themselves. And he talks about building $1 trillion worth of new infrastructure, perhaps paid for by tax breaks, tolls or private-public partnerships. That is the “pro-growth,” or “good,” Trump.

The second Donald Trump shuts down immigration from seven Muslim-majority countries that have histories of, or ties to, terrorism, including U.S. green-card and visa holders. He conducts raids on hundreds of allegedly illegal immigrants, many of whom have criminal records. He talks loudly about building a Great Wall on the Mexican border, and boasts he could bring the cost down even as he pledges to make Mexico foot the bill, perhaps through a 20% import tax.

He bullies U.S. CEOs to keep jobs in the U.S. as he threatens to impose a border tax on goods manufactured abroad and imported back into the U.S. (Imagine the howls of outrage if a Democratic president, like Barack Obama or Hillary Clinton, had said that!) He repeatedly promises to exit or renegotiate the North American Free Trade Agreement, and doesn’t shy away from talk of trade wars with Mexico or China. That is the “economic nationalist,” or “bad,” Trump.

From Wall Street’s perspective, it’s like the angel on one shoulder and the devil on the other. Wall Street loves globalism, free trade and open borders. The lower the taxes, the looser the regulations and the fewer the barriers, the better for companies’ earnings and share prices.

But it hates tariffs, protectionism, strict immigration laws and especially trade wars. In the past, such policies have led to growing international tensions and even, through the notorious Smoot-Hawley Act, helped cause the Great Depression. In short, they raise risk and are bad for the bottom line.

The “good” Trump has prevailed, so far, for investors. The S&P 500 indexSPX, +0.17% is up 9.9% since the election. On Friday, the S&P 500, the Dow Jones Industrial Average DJIA, +0.02% and the Nasdaq Composite Index COMP, +0.41% — hit all-time highs, and the Russell 2000 Index RUT, +0.05% set a record on Wednesday. The market value of the S&P 500 exceeded $20 trillion for the first time ever.

Last week, stocks rallied when the president said: “We’re going to … lower the overall tax burden on American businesses big league … We’re going to be announcing something, I would say, over the next two or three weeks.” But on Jan. 30, they sold off after the chaotic roll-out of his travel ban.

His comments have hurt individual stocks and sectors most. On Jan. 16, shares of German auto makers fell sharply after Trump threatened them with a 35% U.S. import tariff. The stock price of Constellation Brands STZ, +1.77% a stupendous performer that sells Mexican beers Corona and Modelo, at one point was down more than 10% since the election. Health-care stocks sold off when he said the U.S. needed more competitive drug pricing. Shares of Lockheed-Martin Corp.’sLMT, +0.01% stock fell twice in December and once in January, after Trump slammed pricing of the F-35 fighter. Last week, Nordstrom Inc.’s JWN, +3.42% stock apparently broke the Trump tweet curse after it fell and then rebounded when the president criticized the upscale retailer for dropping his daughter Ivanka’s poorly selling clothing line.

Markets are a lot higher since Election Day, and some of these stocks have bounced back nicely after getting Trumped. But they speak to a risk that the president may not be able to get all the “good” stuff Wall Street wants, such as tax reform and infrastructure spending, both of which must overcome significant obstacles and well-organized interest groups and opposition in Congress, while enacting the “bad” stuff Wall Street hates.

Problem is, many Trump voters like that “bad” stuff — the Wall, immigration restrictions, even protectionism — while Wall Street’s traditional Republican agenda leaves them cold. Otherwise we might have had a President Jeb Bush or John Kasich. So, although Trump’s agenda so far has been a boon to Wall Street, don’t expect him to “moderate” his views or “come around” on the things his supporters love and Wall Street hates.

With stocks at all-time highs and the CBOE Volatility index VIX, -2.30% near multiyear lows, complacency reigns supreme. I’m still bullish for now, but a lot will depend on whether we see the best of Trumps or the worst of Trumps in the months ahead.


Article Link To MarketWatch:

Fear Of Economic Contraction Sweeps Wall St. Trading Floors

By John Aidan Byrne
The New York Post
February 20, 2017

While investors have enjoyed their portfolio gains, Wall Street pros don’t share the same high spirits.

Fear of global economic contraction that could badly derail the US recovery — and throw a monkey wrench into the trading markets — is sweeping through Wall Street boardrooms, as managers intensify technology-driven cost-cutting and rein in spending.

One big wave hit last week with stunning force, with some of the largest job-loss announcements in recent memory.

“Yes, I think there will be more layoffs on Wall Street going forward, due to continued cost-cutting and automation,” Anthony Santoliquido, a fixed-income portfolio manager at HGK Asset Management in Jersey City, told The Post, as some pros battened down the hatches for the next round.

“This is happening everywhere,” Santoliquido added. “More of the processes on Wall Street have been automated, eliminating the need for human intervention.”

While headcount in financial services has steadily climbed back to an estimated 935,000 jobs nationwide, which exceeds pre-recession levels, many fear these numbers may have peaked.

Over the same time, the US population has climbed from 296 million in 2005 to an estimated 326 million this year, so Wall Street is hardly picking up this extra slack, analysts say.

“Look at the unemployment rate for 18- to 35-year-olds,” added Santoliquido, noting how the jobless rate for this cohort is much higher than it is for the general population. “And look at how many are living at home and with student debt.”

Santoliquido also says the overall economy, which drives the rise and fall of Wall Street, is masking higher unemployment numbers. “A great job has been done in creating new jobs, but many are in lower-paying service jobs,” he said.

And an increasing number of despondent workers have simply thrown in the towel. If the 4.5 percent reduction in the lower labor force participation rate since the early part of the century is taken into account, today’s official US unemployment rate jumps from 4.8 percent to approximately 8.5 percent, according to Santoliquido. (It is a conservative estimate permitting for some natural reduction in the participation rate.)

Last week, Wall Street itself was rocked.

Word leaked out that Goldman Sachs wouldn’t pay 2016 bonuses to about 100 bankers in mergers and acquisitions, a surprise move reportedly meant to push these “under performers” out the door. One executive at a cross-town rival greeted this news with skepticism, since the M&A sector should see massive grow over the next year.

“With all this talk of as much as $3 trillion being repatriated back to the US if corporate taxes are lowered under the Trump administration, what do these layoffs really say for M&A?” he asked. “Not much. It can’t be a good sign, because this is a lot of money that could be put to work in ordinary circumstance on deals.”

Then there was the announcement last week from Credit Suisse that it was preparing to eliminate 6,500 jobs, after a loss of $2.4 billion last year. Those losses mostly stemmed from a settlement with the US Department of Justice.


Article Link To The New York Post:

Is The Dollar’s Run Done? Why Some Traders Say Yes

By Rebecca Ungarino
CNBC
February 20, 2017

The U.S. dollar finished the week just barely positive, and some strategists see the greenback heading lower as political uncertainty mounts.

Federal Reserve Chair Janet Yellen's fairly hawkish remarks in a press conference Wednesday failed to boost the dollar, which the next day saw its largest one-day drop in over two weeks.

In her two-day semi-annual testimony on monetary policy before the House Financial Services Committee, Yellen reiterated that the Federal Reserve still expects to raise its federal funds rate target three times this year. Rate hikes tend to boost the value of the dollar, as higher short-term rates mean that those who hold greenbacks are paid more to do so.

As the dollar shows modest near-term weakness even in the face of this Fed hawkishness, foreign exchange strategist Boris Schlossberg said he sees further downside ahead.

"The market is not buying what Janet Yellen is saying. And that is actually a very, very telling sign," Schlossberg of BK Asset Management told CNBC's "Trading Nation" last week.

"When the Fed chief says, pretty much unabashedly, that she's going to go to three rate hikes, and she sort of talks up the economy, and yet the market remains skeptical, that's telling me something," he added.

Major political uncertainty surrounding the new Trump administration is weighing on the dollar, Schlossberg said. He noted that such uncertainty regarding policy is also weighing on the fixed income market.

"That tells me that both markets remain skeptical about the continuity of this potential growth as we go forward," he said, adding that these issues are lending themselves to being long the dollar right now would be "very, very dangerous" due to such uncertainty.

He would mark the dollar a sell so long as the yen fails to reach the 115 mark against the greenback. He points to the dollar-yen relationship as an important gauge of dollar strength, as weaker equity markets and yields are said to be associated with a stronger Japanese yen.

"We expect the [dollar] to move sideways until we get the details of the Trump fiscal plans, but we remain bullish," Bank of America Merrill Lynch foreign exchange research strategists wrote in a note published Friday entitled, "Waiting for the great fiscal plan."

The team of strategists led by Claudio Piron and Athanasios Vamvakidis wrote that pessimism surrounding the Trump administration has been feeding "stagflation," or an economic dilemma that comes with high inflation, unemployment and slow growth.

The dollar rose nearly 4 percent in the month following the U.S. election in November. The longer-term trend certainly appears bullish, said Gina Sanchez, CEO of Chantico Global.

"I think the trend is still going to be for dollar strength, but I think that this dollar weakness is interesting and telling, because Yellen was really out talking the dollar up. I mean, she was making fairly hawkish comments, and that should lead to a stronger dollar," Sanchez said Thursday on CNBC's "Trading Nation."

Some of the shorter-term weakness appears to be the result of political uncertainty.

"And I think that is probably what's to blame for this. I don't think that it's going to last for very long," and the general trend is still up, she forecasted.

A bearish technical trend is afoot in the dollar index, wrote Miller Tabak managing director and equity strategist last week. The Dollar Index measures the U.S. dollar's strength against a basket of foreign currencies.

A so-called "head and shoulders" technical pattern—a trend that typically points to a bullish-to-bearish reversal in a security—appears to be forming in charts of the index, Maley wrote. As such, a break below the 99 mark could prove quite negative for the dollar.

This, in turn, could have important implications for other assets.

"We cannot get ahead of ourselves...but a lot of investment assumptions for 2017 have been based on the assumption that we'd see continued strength in the dollar. Therefore, if this 'tradable' pull-back becomes a more lengthy one, it could/should put a wrench in the works of many of those assumptions," Maley wrote.


Article Link To CNBC:

Uber CEO Orders 'Urgent Investigation' On Sexual Harassment Claims

By Vishal Sridhar
Reuters
February 20, 2017

The chief executive of Uber Technologies Inc [UBER.UL] has ordered an "urgent investigation" into claims of sexual harassment at the ride-hailing service company made by a former employee.

Susan Fowler, an engineer who left Uber in December, wrote in a blog post that she was subjected to sexual advances through a 'string of messages' over the company's chat software from the beginning of her employment in late 2015. bit.ly/2kCE416

"What she describes is abhorrent and against everything Uber stands for and believes in," CEO Travis Kalanick said on the Twitter microblog on Sunday in response to Fowler's post. He said he had instructed the company's new Chief Human Resources Officer Liane Hornsey to conduct an urgent investigation.

Fowler wrote that Human Resources told her the person "was a high performer" and that management would not be comfortable in "giving him anything other than a warning".

Arianna Huffington, who joined Uber's board last year, said in a tweet that she would work with Hornsey in the investigation.

Kalanick, in an Uber statement, said there is no place for this kind of behavior at Uber and that "anyone who behaves this way or thinks this is OK will be fired".

The sexual harassment claims are the latest hit to Uber, following the social media campaigns against Kalanick's participation in President Trump's business advisory group. The mounting pressure from activists and employees who opposed the government's immigration policies led to Kalanick's departure from the group.


Article Link To Reuters:

Two Cheers For A Carbon Tax, But Don’t Expect It To Fix Everything

By Robert J. Samuelson 
The Washington Post
February 20, 2017

By all means, let’s have a carbon tax. It’s the best way to deal with global climate change. It would require Republicans and Democrats to compromise — a good thing — and would provide revenue for a government that desperately needs more revenue. Fine. But let’s not pretend that a carbon tax is a panacea for either climate change or too much debt.

With most Republicans — and some Democrats — hostile to any tax increase, a carbon tax remains a long shot. Still, the odds have shortened, because some respected Republican elders recently endorsed it. These include George P. Shultz, James A. Baker and Henry Paulson. All were treasury secretary and/or secretary of state in administrations from Richard Nixon to George W. Bush.

Under their proposal, the tax would initially be $40 for each emitted ton of carbon dioxide (CO2). This corresponds to about 36 cents on a gallon of gasoline and a 5 to 10 percent increase in retail electricity rates, says economist Marc Hafstead of Resources for the Future, a nonpartisan think tank. The tax would increase annually by the rate of price inflation, plus two percentage points. (If inflation were 2 percent, the tax would rise by 4 percent.)

Carbon dioxide represents about 80 percent of U.S. greenhouse gas emissions. The theory is that higher prices for fossil fuels (coal, oil, natural gas) would favor more efficient cars and appliances while also accelerating the switch of electricity utilities to wind and solar. Studies by Hafstead and others suggest that this sort of carbon tax could reduce U.S. emissions by 26 to 28 percent below 2005 levels. That’s the goal the United States accepted at the 2015 Paris climate change summit. The Republicans’ proposed carbon tax would also raise slightly more than $200 billion annually.

But none of this eliminates the main objection to a carbon tax — for most Americans, it’s all pain and no gain.

“It is inherently difficult to convince people to endure costs now for benefits that accrue to others 30 years hence,” writes Ted Halstead, head of the Climate Leadership Council, sponsor of the carbon-tax plan. “Even then, such ‘benefits’ will manifest in the form of the situation getting less worse, rather than an outright improvement.”

To overcome this objection, the Republican plan would rebate all the money raised by the carbon tax. There would be a flat quarterly “carbon dividend” — the poor would get the same as the rich — starting at about $2,000 annually for a family of four. As the tax rose, so would the “dividend.” The politics of a carbon tax would change, argues Halstead, because most Americans would receive “benefits in the here and now.”

What’s not to like? We can fight global warming and favor the middle class and poor. Actually, it’s not so simple.

A carbon tax is one of the last big revenue sources left for a government facing budget deficits of roughly $9 trillion over a decade. If the carbon tax goes entirely to “dividends,” deficit reduction will suffer. Or taxes on labor and business will have to rise. But if (say) half the carbon-tax revenue went toward deficit reduction, the dividend would be less politically appealing.

Regardless, the tax will probably have to increase substantially. Halstead cites studies concluding that the tax needs to go up to as much as $200 a ton (nearly $2 on a gallon of gasoline) if fundamental changes are to occur. In part, a carbon tax is bait and switch. It starts low but must rise sharply to be effective.

What matter for global warming are the concentrations of CO2 in the atmosphere. These will increase even if the rate of annual emissions declines. How well we do depends on how well others do. The United States may hit its emission target, and other countries may miss theirs. Indeed, most of the growth in global emissions occurs in China, India and other “emerging market” countries.

Fossil fuels now supply four-fifths of the world’s energy, a share that has dropped only slightly since 1990. To stabilize CO2 concentrations, we must essentially stop burning fossil fuels. How is this to happen? Supporters of a carbon tax hope that the market mechanism — higher prices for fossil fuels — will unleash a torrent of innovation: safer nuclear, less costly solar, better batteries. This is a leap of faith. Higher prices do not guarantee technological breakthroughs.

We should not ignore climate change but should acknowledge the limits of what we know and can do. We are seeing a political convergence around a carbon tax. Thoughtful Republicans — perhaps President Trump? — want to be rid of their do-nothing stigma on climate change. Thoughtful Democrats are tired of the political paralysis. As Ronald Reagan once said: “If not us, who? And if not now, when?”


Article Link To The Washington Post:

Kraft Walks Away From 'Friendly' Bid For Unilever

By Carl O'Donnell 
Reuters
February 20, 2017

U.S. food company Kraft Heinz Co (KHC.O) withdrew its proposal for a $143-billion merger with larger rival Unilever Plc (ULVR.L), the companies said on Sunday, raising questions about whether Kraft will turn its focus to another target.

Kraft had made a surprise offer for Unilever to build a global consumer goods behemoth that was flatly rejected on Friday by Unilever, the maker of Lipton tea and Dove soap.

Kraft withdrew its offer because it felt it was too difficult to negotiate a deal following the public disclosure of its bid so soon after its approach to Unilever, according to people familiar with the matter who requested anonymity to discuss confidential deliberations.

Kraft had not expected to encounter the resistance it received from Unilever, one of the people said. Some key concerns raised during talks included potential UK government scrutiny, as well as differences between the companies' cultures and business models, the person added.

“Kraft Heinz’s interest was made public at an extremely early stage," Kraft Heinz spokesman Michael Mullen said in a statement. "Our intention was to proceed on a friendly basis, but it was made clear Unilever did not wish to pursue a transaction. It is best to step away early so both companies can focus on their own independent plans to generate value.”

Kraft was forced to publicly disclose its offer on Friday to comply with Britain's takeover regulations, after rumors of its approach to Unilever circulated among stock traders.

Under UK takeover rules, Kraft's public withdrawal of its offer precludes it from reviving takeover talks with Unilever for six months.

A combination would be the third-biggest takeover in history and the largest acquisition of a UK-based company, according to Thomson Reuters data. The combined entity would have $82 billion in sales.

The premature exposure of Kraft's bid left the aggressive acquisition machine scrambling to craft an appetizing message for shareholders, the press, Unilever's rank and file, and British and Dutch leaders.

Prime Minister Theresa May ordered top officials to investigate if the proposed deal posed potential threats to British economic interests, the Financial Times reported.

May has been adamant the government should be more active in vetting proposed foreign acquisitions of UK companies. She had previously singled out Kraft's 2010 acquisition of another British household name, Cadbury Plc, as an example of a deal that should have been blocked.

A deal for Unilever would have marked the next installment of Brazilian private equity firm 3G Capital Management Inc's longstanding strategy of buying food companies and slashing costs.

In 2013, 3G teamed up with billionaire investor Warren Buffett to acquire Heinz and then purchased Kraft two years later. It is now the second-largest shareholder in Kraft, behind Buffett's Berkshire Hathaway Inc (BRKa.N).

Unilever feared that a merger with Kraft, under 3G Capital's relentless cost-cutting, risked eroding the value of its brands and could impede its expansion in emerging markets, which requires more investment, according to people familiar with the company's thinking.

Unilever also saw its household products and consumer care divisions as too distinct from Kraft's food business, the people added.

3G made its name in corporate America by orchestrating large debt-laden acquisitions and then slashing costs dramatically to juice profits. Using a strategy called zero-based budgeting, its managers must justify all expenses, from pencils to forklifts.

Kraft Still Hungry?


The breakdown in deal talks sparked speculation among analysts and investors about whether Kraft might attempt to purchase another large consumer goods company as a backup plan.

"We believe this announcement serves as a reminder – if needed – of (Kraft's) interest, capacity, and commitment to pursuing large-scale M&A in a potentially near-term time horizon," said Barclays analyst Andrew Lazar in a note.

Its bid for Unilever, where more than 60 percent of sales come from home and personal care products, signals a willingness to make big buys outside of its historic area of focus - food - said Sanford Bernstein analyst Ali Dibadj.

He cited Colgate-Palmolive Co (CL.N) as one potential target, noting that its stock popped 4 percent Friday on news that Kraft was eyeing Unilever.

However, the breakdown of the Unilever talks means that some food companies that have long been speculated as potential targets for Kraft, such as Mondelez (MDLZ.O), are still very much on the table, said an industry banker, who declined to be named because he was not authorized to speak to the press.

Low interest rates and cheap debt have fueled big cross-border deals, marking the busiest start to the year for M&A activity on record. The bid also reflected a broader interest in UK companies as acquisition targets, in part due to the British pound, which has been under pressure since Britain announced plans to withdraw from the European Union.

Labor union representatives expressed relief that the deal talks broke down, citing concern about its potential effect on jobs and consumers.

"How many scares must the government put UK workers through before they actually do as they have promised, which is to make the takeover process socially responsible?" said Len McCluskey, general secretary at Unite, Britain's largest union.


Article Link To Reuters:

Why ‘Made in America’ Is So Hard To Do

By Nicole Gelinas
The New York Post
February 20, 2017

Long before President Trump, American Apparel was making America great again: making clothes in Los Angeles and selling them to the mass market. Now, American Apparel is closing up shop. It wasn’t a failure of American manufacturing. It came from something even harder to fix: bad management and bad laws.

Back in 1990, 938,600 Americans made clothes for a living, according to the Bureau of Labor Statistics. Today, that figure is 126,900. Just like the country’s other manufacturing workers, clothesmakers, spurred by NAFTA and China’s most-favored-nation status in the early 1990s, went to Mexico and Central America and then to Asia.

Americans grew accustomed to buying poorly made clothes for cheap. But even when clothes aren’t cheap, 97 percent are imported, compared to half in 1990.

American Apparel bucked that trend by giving consumers a choice. In 2003, the company opened its first store in Los Angeles. In 2004, it started selling online.

Despite the company’s outlandish offerings — metallic shorts? — its main product was basic high-quality wear: T-shirts, hoodies and underwear, made of good cotton and cut and stitched well. In a free market, informed buyers could support American jobs.

Now, the company is done. As Trump was being inaugurated and saving 800 manufacturing jobs in Indiana, American Apparel, most of its assets in liquidation, was laying off 3,477 manufacturing workers in Los Angeles. (Retail workers are losing their jobs, too.)

The good news is that AA failed for reasons that have nothing to do with American manufacturing. Like lots of retailers, it expanded too fast, going from one LA store in 2003 to 281 stores from Brazil to Israel in 2009.

It relied on expensive borrowing. When the company went public a decade ago, it warned investors of the potential “consequences of our significant indebtedness.”

American Apparel went from being a small, modestly profitable company in 2003, with $82.2 million in sales and $6.4 million in profit, to a bigger, less profitable company in 2009, with $558.8 million in sales and $1.1 million in profit. Interest costs ate away at its margin for error.

If you’re beholden to high-interest lenders, it’s best to manage your company professionally. Founder Dov Charney got himself embroiled in multiple sexual-harassment suits, among other problems, before losing control of the company three years ago.

The bad news, though, is that AA was hobbled in part because the country doesn’t support manufacturing. Even operating in Los Angeles and paying well above minimum wage with benefits, it had trouble cobbling together a workforce to cut and sew without running into immigration problems. In 2009, it fired 1,500 workers after a federal inspection.

Charney notes that American manufacturing works only in a dense urban area, because that’s where the workers and infrastructure are.

“Could you do this in Wyoming?” he says. “No, it’s cheaper to go to China. The stupidity of the Trump administration is that they are anti-immigrant and pro-made-in-the-USA at the same time.” This oversimplifies the point, but employers willing to pay skilled immigrants well should be able to do so legally.

Then, trade laws disadvantage American exporters. “I don’t believe in tariffs and I believe in entrepreneurialism,” Charney says, dismissing retailers who “go thousands of miles away to pay slave wages” as lazy and short-sighted. But, he adds, “it is illegal to export to Mexico” — or at least difficult — and “there’s more [tax] duty on made-in-USA clothes to Canada than there is to Europe.”

Charney says there are countless apparel makers who produce in America. In starting again with a new company, he’s trying to be among them.

But how to do it on a mass scale? “The automation of clothing manufacturing will take place,” he says, “to challenge the offshore slave model . . . Advanced manufacturing is going to take hold,” anchored by “machines which I plan to invent.”

Maybe, but someone will.

Smarter management and better technology means we won’t have Bangladeshi children locked in a factory making our clothes — the poorest people in the world making up for the richest people’s management deficiencies. “Sears has all access to all that offshore manufacturing and they’re [near] bankrupt,” Charney points out.

But it doesn’t mean that hundreds of thousands of Americans will find employment in a more efficient onshore system, as we need fewer workers to make higher-quality clothes that last longer.


Article Link To The New York Post:

The Media Doesn’t Call The Shots -- Trump Does

By Michael Goodwin
The New York Post
February 20, 2017

The media smart set fixates on creating a narrative that explains the big picture of events and offers gripping examples. In that spirit, then, here’s a narrative to help them understand President Trump’s recent burst of activity:

He’s serving notice that he, and not the media, sets the nation’s agenda. And that when journalists behave like opponents, he will treat them like opponents, punching back harder than they punch him.

That’s the meaning of the president’s epic press conference Thursday and his tour of the Boeing plant in South Carolina and Saturday’s rally in Florida. As Milton Friedman said in another context, everything else is detail.

The catalyst for Trump’s campaign-like barnstorming was that, after a rough week in which Democrats in Congress picked up the loony left’s impeachment mantle, the president’s team looked outgunned and outmaneuvered. The emerging media narrative was that the White House was in chaos, riven by infighting, leaks, an unhappy president and an unhappier first lady.

Trump knows better than most that perception, even if it’s wrong, can quickly harden into accepted fact. He sensed danger and decided to take matters into his own hands.

Nobody speaks for Trump better than Trump, which is not always a virtue. But Thursday, he made a wise game-day decision to do his solo version of a reset.

The official business was to announce his new nominee for secretary of labor, a choice that was well-received by the few outlets where it wasn’t ignored because of the media punch-palooza that followed. (A good trivia question: name the new guy!)

The president was deliberate in making his points, talking for more than 20 minutes about what he’s done to keep his campaign promises and how he’s unfairly depicted.

His impressive litany of action includes canceling the Asian-Pacific trade deal, green-lighting two pipeline projects and jawboning firms like General Motors and Walmart to spend and hire. He boasted of his 55 percent approval rating in a poll and of the booming stock market.

He talked about rebuilding the military, hosting leaders from Japan, Israel, Canada and Great Britain, strengthening borders and immigrant vetting, targeting the Islamic State and nominating Judge Neil Gorsuch for the ­Supreme Court, calling him a “true defender of our laws and our Constitution.”

Even as he complained about courts blocking his travel ban and Democrats delaying his Cabinet picks, Trump hailed “a tremendous surge of optimism” about the changes he’s making.

That was Trump the agenda setter. Then came Trump the media basher.

He contrasted public optimism with relentless press criticism, saying big outlets on both coasts don’t speak “for the people, but for the special interests and for those
profiting off a very, very ­obviously broken system. The press has become so dishonest that if we don’t talk about [it], we are doing a tremendous disservice to the American people.”

He added: “We have to talk to find out what’s going on, because the press honestly is out of control. The level of dishonesty is out of control.”

That was the start of a sustained media attack like nothing America has ever seen. If this were football, it would be described as smash-mouth because the president plowed straight into the ­establishment powers.

He called much coverage “dishonest” and “fake news.” He accused some of “hate” and “venom” and singled out individual reporters, anchors and outlets, especially CNN, saying it now peddles “very fake news.”

It was an extraordinary use of the bully pulpit, yet accounts calling it a nonstop rant don’t do it justice. Some of it was playful and teasing, and Trump wasn’t alone in finding humor on several occasions. Many journalists clearly enjoyed the raucous informality, which included back-and-forth exchanges where some freely talked over the president.

Contrast that with the previous eight years of news conferences, where President Barack Obama generally delivered long lectures to an amen chorus.

There was contrast, too, in Trump spending 50 minutes taking more than 40 questions, all spontaneous and none arranged in advance. It was a scrum to be called on, and no topic was off-topic — he answered them all.

He also made errors, repeated himself frequently and some answers raised more questions. But the overall performance was incredibly effective at creating a very different narrative about his tenure for the TV audience — the people he cares about most.

Expect those two themes — he is putting America First and much of the media is dishonest — to be the pillars of his presidency, as they were the pillars of his campaign. That’s why he’s taking his show on the road, and likely will do so regularly.

Predictably, his prime media targets reacted with feverish claims that Trump was “unhinged” and his ­attacks were “un-American.” Some said he is a threat to the First Amendment.

On the contrary, he’s embracing it. As legendary New Yorker Ed Koch often said about his own criticisms of the press and judges, he didn’t lose his First Amendment rights when he became mayor.

So it is with Trump. He’s free, like all Americans, to speak his mind. His words carry more weight as president, but attempts to silence him are truly un-American. The White House is not a coddled college safe space.

Something else Koch said also is relevant. He once called a journalist who was a partisan critic a “politician with a press pass.”

That’s how Trump sees much of the media, and he’s more right than wrong. Many tried to block his election, and now are trying to destroy his presidency.

They have a choice: get back to being journalists, or get used to being a piƱata.


Article Link To The New York Post:

The Terrifying ISIS Sleeper Cells Of Mosul

As the ‘final offensive’ to retake the western half of the city begins, the underground networks of ISIS continue to attack in the ‘liberated’ eastern half.


The Daily Beast
February 20, 2017

The “My Fair Lady” restaurant was making a brisk trade when the suicide bomber stepped into the open-fronted eatery flanking a busy roundabout in east Mosul and detonated the explosives strapped around his waist. The blast swept through the cavernous interior, killing staff and guests enjoying a lunch of kebab, salad, and soup in one of the city’s most famous restaurants.

The owners had defiantly reopened the My Fair Lady, or Sayidati al-Jamila in Arabic, soon after the so-called Islamic State was forced from the east bank of the Tigris, which bisects the city and now forms a natural barrier against the jihadists. With a reputation for good food, and occupying a prime spot in the bustling Zuhour neighborhood, it quickly became popular with locals and security personnel alike, in the process also attracting attention of the wrong kind.

"The restaurant was targeted because life was coming back to Mosul. This restaurant is the center of Zuhour, and Zuhour is the center of east Mosul," says Mohammed, the son of one of the owners.

The 22-year-old Mohammed, who wears a stylish leather jacket and trimmed beard, is close to tears as he recounts how his younger brother, his uncle, and his cousin were among the 10 fatalities of the Feb. 10 attack. His uncle, Hajji Nasser, was one of the three brothers who ran the restaurant, a well-known figure in Mosul and beyond.

When his death became known, condolences began flooding in not just from the city, but from all over Iraq and even from Iraqis living in Europe. Moslawis are horrified not just by his murder, but also by the terror threat that remains alive in the liberated part of the city even as a major new Iraqi government offensive has begun to take the western half.

The suicide attack on the restaurant was not the first bombing in government-controlled Mosul, as ISIS tries to prevent normality from returning to any part of the city, and these attacks raise questions about the extent to which the city as a whole can be brought under control even if the current offensive manages to push out the dug-in ISIS fighters on the western side of the Tigris.

In December, three car bombs reportedly disguised as a funeral procession killed 23 civilians in a crowded part of Gogjali, an outer suburb. From the other side of the river, the insurgents also target east Mosul with mortars and drones that drop grenades on groups of civilians and even schools that have reopened.

Hostilities on the east bank ceased in January after Iraqi special forces cleared it of insurgents in four months of fighting. But as the bombings show, the military was not able to eliminate the jihadist threat, now embodied by ISIS sleeper cells.

With the elite counterterrorism troops redeploying for the assault on west Mosul, the east is now held by a motley mix of army units, militia groups, federal and local police. Rooting out ISIS cells has fallen to the local Nineveh police and the National Security Service (NSS) intelligence agency.

The Nineveh police, Kalashnikov-wielding men in blue combat fatigues, ride on massive U.S.-made pick-up trucks mounted with heavy machine guns and patrol the shot-up neighborhoods of east Mosul, navigating their vehicles past bomb craters and collapsed houses to patrol and set up checkpoints.

For this police force, named after the governorate surrounding Mosul, providing security for the city’s inhabitants is a mammoth task.

In part, this is because ISIS conducted extensive recruitment during its two-and-a-half-year rule of the city.

“There are a lot more cells in Mosul now than before the occupation. When people here saw a lot of the country fall to Daesh [ISIS], they thought the government would never take control again and they joined the Islamic State,” says Col. Isham Mahmoud of the NSS.

As ISIS numbers rose, the police force was decimated. The terrorists embarked on a campaign of extermination after storming the city in 2014. Thousands of policemen and security personnel are thought to have been killed after being hunted down by the victorious terror group. The bodies were dumped in mass graves outside the city.

“Daesh took all the policemen and army members they could find and killed them. The majority of the police were killed,” says Ziad Tarek. The 27-year-old policeman was blinded by a roadside bomb before ISIS took over Mosul in 2014, but was tortured and ordered to repent for his involvement in the security forces by the city’s new masters. Fearing for his life, Ziad went into hiding. Over time, he found out about the death of many of his friends in the police.

Prior to ISIS, the police in Mosul numbered 28,000 men, according to Col. Uday Saber, who fled the city for the autonomous Kurdish region, and whose police unit fought alongside the military as it rolled back the caliphate to the doors of Mosul over the past two years. Only 6,000 men now remain in the ranks of the Nineveh police, according to Col. Saber. “There are many men about whom we have no information, we don’t know if they are dead or not,” he says.

Not all have been killed. Policemen and some soldiers that managed to flee Mosul in 2014 are being trained by the Australian and Spanish military in camps in Baghdad, Kut, and Diyala. A first batch of 1,700 men have completed a five-week training course in Baghdad, and are about to be deployed in Mosul.

In a city where sectarian rifts were in the past exacerbated by the poor behavior of the security forces, bolstering the local police is a wise move.

The Iraqi army divisions stationed in Mosul before the ISIS takeover were deeply unpopular with the local population. Derisively referred to as “Maliki’s army,” the mainly Shia force became synonymous with discrimination against the country’s Sunni minority by the government under the former prime minister, Nouri al Maliki. These grievances helped ISIS rout a force several times their number when they stormed the predominantly Sunni city.

The Shia militias that now hold the ground in the liberated areas of east Mosul enjoy a dubious reputation, and stand accused of serious human rights abuses against Sunni civilians in virtually every campaign they have been deployed.

“It’s important that the policemen are from Mosul,” says Col. Saber. “Before Daesh there were a lot of issues between the Iraqi security forces and the people. The fall of Mosul was more about political than military issues.”

The colonel only returned to Mosul a few days ago himself, and is doing his best to bring back law and order, and above else security. His officers have set up a checkpoint on a busy thoroughfare, where they pick out vehicles for closer inspection. On a side street blocked by a police pick-up parked across the road, the unit has requisitioned an abandoned house. The plain building with cheap furniture and an unkempt garden was occupied by ISIS fighters before the liberation.

On the patio kneel two men, their eyes blindfolded and their hands bound. They have been detained on suspicion of belonging to the Islamic State, and are awaiting interrogation.

***

ISIS and its precursors have deep roots in Mosul, running a terrorist network that extorted millions of dollars a month and assassinated opponents long before it chased out the army.

After over two years of barbarous Islamist rule, support for the group has ebbed, and more locals are coming forward to help the police.

"The jihadists became active in 2004. It will be difficult to eliminate them. But right now it is different, because we are getting tip-offs from the people," says Col. Saber.

In a residential road cordoned off by blast walls in the Nour area, the police have established a provisional headquarter in east Mosul. On the first floor of a modern house, an operations room is furnished with tables lined up and down its middle, and white boards are hung on the walls next to an Iraqi flag and an ancient Kalashnikov. The boards are filled with columns detailing unit strength and ammunition supplies.

An officer sits at the table, waiting for a couple of budget mobile phones to start ringing. He does not have to wait long. Throughout the day, Moslawis call a hotline number broadcast on Iraqi TV to inform about ISIS sleeper cells in east Mosul. The NSS and the police work together to gather this information, which is handwritten into ledgers and then entered into a computer in the corner of the room.

"We are getting more information about Daesh cells now than before the city fell, because Daesh was so brutal and the situation in the city was so bad when they were in control," says Col. Ibrahim, a veteran of the Nineveh police force, as he sits in the operations room.

The officers can receive up to 200 calls a day, they say. Behind closed doors, security officials admit that one of the reasons they cannot cope with this volume is the detention facilities in the city are packed to the brim, and they have to wait for the suspects to be carted off to a larger facility in the nearby town of Qayyarah.

Fearing retribution, many people in east Mosul are still afraid to speak out against ISIS. For some, this is because the understaffed police are not ruthless enough.

"The police arrest Deash members,” says Mohammed, anger flickering in his eyes as he scans the gloomy insides of his gutted restaurant. “But they let them go again after two days because there isn't any evidence of them committing a crime. People are afraid to tell them about sleeper cells because they fear that they will be killed for speaking out.”


Article Link To The Daily Beast:

Why The White House Is Leakier Than Trump Tower

By Noah Feldman
The Bloomberg View
February 20, 2017

President Donald Trump has threatened to prosecute leakers and bring in an outsider to review the intelligence agencies after reading unfavorable stories about his administration day after day in the news media. But he’s learning the hard way that there isn’t much he can do to stop government leaks.

That may surprise Trump, because in the private sector, the tools to stop leaking are generally pretty effective. It’s an anomaly of the legal system that in government, where the stakes are arguably higher than in business, it’s easier to get away with leaking.

You would think that criminal prosecution would be enough to deter government leaking. And if the leaked material is classified, leakers can go to prison. Both the George W. Bush and Barack Obama administrations aggressively went after classified leaks, convicting officials as prominent as vice-presidential adviser I. Lewis “Scooter” Libby and ex-CIA officer Jeffrey Sterling.

The trouble is that figuring out who leaked and getting them convicted is surprisingly difficult. Journalists are prepared to face contempt charges to protect sources. Serving jail time is even a badge of honor to reporters, a symbol of their commitment to the journalistic ethic of protecting a source. Even if the prosecution can show that a source and a reporter were in touch, it’s tough to prove the leak beyond a reasonable doubt without the reporter’s testimony or notes.

The criminal prosecution of leaks is also politically costly. It makes the administration look petty and vindictive. It typically creates a public standoff between the heroic journalist and the scary government, a story line that rarely redounds to the credit of the prosecution.

The result is that even zealous administrations don’t bring too many leaking prosecutions -- which in turn lets leakers know that the odds of being sent to prison are vanishingly small.

When the content of the leaks isn’t classified, the only option the government has is to fire the leaker. That’s a deterrent, but not a huge one.

In contrast, private employees typically sign nondisclosure agreements that subject them to civil damages for unauthorized leaks. That could include holding the leaker liable for the harm suffered by the company as a result of the leak. It could also include fines specified in the agreement.

Regardless, what that means is that a private employee who leaks runs the risk of becoming a defendant in a lawsuit. That’s extremely expensive, as the defense alone could be bankrupting. And losing would mean financial ruin for most defendants.

The employer would still have to prove that the nondisclosure agreement was violated. But it can be easier to trace private leaks than public ones, partly because employers don’t have to respect Fourth Amendment search rights like the government does.

Does it make sense for government leaking to be easier than private leaking? Generally, the public does have a greater interest in knowing the inner workings of the government than it does in knowing facts that corporations want to hide. That’s a reason to think the difference makes some sense.

What’s more, the civil penalties in nondisclosure agreements may be set too high. We might benefit from more corporate whistle-blowing.

Yet the truth is that the consequences of government leaks can also be tremendously costly -- and criminal prosecution plus firing are pretty blunt instruments for preventing those leaks. Civil enforcement, with financial penalties attached, can be a more finely honed tool for prevention. Used correctly, not excessively, it can create incentives for people entrusted with secrets to keep them under lock and key, where they belong.

One obvious-seeming solution would be to make public employees sign nondisclosure agreements that would subject them to civil penalties, just like private employees. Nothing in the Constitution would make that illegal, provided it didn’t chill employees’ free speech when they aren’t acting in their official capacities.

In practice, however, government employees’ unions would protest and probably make the change impossible.

Private sector employees are, in theory at least, compensated for signing the nondisclosure agreements through higher pay. The government wouldn’t want to pay that premium. So the unions would have a reasonable objection if they said the government wanted to be able to sue its employees without offering anything in return.

The upshot is that Trump is going to have to live with the leaks. That’s poetic justice for a president who benefited from leaks in his campaign. And it’s a reminder that government doesn’t always work with the efficiency of the private market -- even when the Constitution would allow it.


Article Link To The Bloomberg View:

The European Union First

By Javier Solana
Project Syndicate
February 20, 2017

The world needs the European Union now more than ever. Despite recent crises and the hard blow dealt by the Brexit vote, the EU may well be the world’s best line of defense against today’s most serious threats: isolationism, protectionism, nationalism, and extremism in all forms, all of which are once again growing in Europe and beyond. The key to enabling the EU to meet this potential – to save itself and the world from catastrophe – is for member states urgently to adopt a “European Union first” mantra.

Unlike the “America first” credo embraced by US President Donald Trump, such a mantra would not be an exercise in damaging unilateralism. On the contrary, it would compel member states’ governments to look beyond narrow national interest, defend openness and multilateralism, and confront head-on the exclusionary political forces that have lately been gaining ground. It would drive member states to consolidate the EU, thereby enabling it to overcome the challenges it faces and help preserve the international order.

That order is neither an inessential accessory nor a post-war relic. It has supported global prosperity and stability for 70 years. We need it – together with the multilateralism on which it is built – to confront many of the economic, environmental, and strategic challenges we now face, challenges that cannot be addressed at the national level.

A cornerstone of the existing international order is the recognition that maintaining peace and human welfare requires an understanding of and respect for the needs and interests of others – needs and interests that are no less legitimate than our own. Multilateralism is not a product of unsustainable solidarity, as some like to claim; it is the result of an enlightened interpretation of one’s own interests. With a constructive attitude, even a large number of disparate actors can reach agreements in which everyone wins by yielding a little; without it, prospects for sustained peace and widely shared prosperity become far bleaker.

If all countries put their own interests first, paying no heed to others, competition will quickly overwhelm common interests. If nobody is ever willing to yield, we will all lose. If we depend solely on bilateral deals, the shared spaces and synergies that facilitate agreement on difficult but vital topics – from climate change to security – will narrow until they disappear.

This is why Trump’s embrace of an American first mantra is so worrying. As the world’s leading power, the US sets the tone of cooperation and often provides the incentives for other countries to participate. If the US maintains a unilateral and isolationist stance, other countries are almost certain to follow suit, endangering everyone – including the US.

Recently, the Trump administration has begun to moderate some of its foreign-policy positions. In particular, Trump has finally agreed to honor the “One China” policy. He also seems to have rectified his approach to Japan, after having raised doubts about his willingness to follow through on America’s security commitments. These developments imply that the administration is beginning to recognize the need for a more constructive approach.

That recognition may arise partly out of an understanding of history. Experience has shown that the most effective way to prevent conflicts is through inclusion and cooperation. Exclusionary rhetoric plays into the hands of those who reduce identity to nativist definitions. When such figures – nationalists and populists – have been left to guide policy in the past, the result has been large-scale conflict.

At a time when global power dynamics are in flux, as is true today, the risk of such an outcome is even greater. Today, an effort is being made to incorporate emerging powers – particularly China – more deeply into the existing structures of global governance. Casting doubt on these structures, which have sustained stability over the last seven decades, would merely fuel more nationalism and competition, opening the way for volatility and conflict.

If the US cannot be counted on to support global stability, the EU’s model and experience will become even more important. The EU is the embodiment of inclusion, cooperation, and democratic values. Despite its flaws, the EU has proved time and again how differences can be resolved peacefully and constructively. Its member states are uniquely committed to multilateralism; indeed, we practice it daily.

The results speak for themselves. No one can doubt that the EU has been a guarantor of peace, democracy, modernity, and progress for all of its members. Its community model – which requires cooperation, negotiation, and compromise to reach any consequential decision – amounts to a check on extremism, because no member country can push radical policies forward without other members pushing back.

This is not to say that EU countries face no risk of falling victim to simplistic populist rhetoric. On the contrary, the point is to highlight why EU member states must dedicate themselves to the continued construction of a stronger and deeper union. For the sake of Europe and the world, it is time to put the EU first.

No one knows better than Europe the consequences of extremism and nationalism – or how to overcome them. With an enlightened and supranational spirit, the EU has achieved a sustained peace that would have seemed impossible a century ago. It must not lose sight of that achievement. Instead, it must continue to advance the union, and show the world what multilateralism can do.


Article Link To Project Syndicate: