Wednesday 11 January 2017
Photo, left:
JOHN BATCHELOR SHOW
Co-hosts: Gordon Chang, Forbes.com & Daily Beast.
Hour One
Wednesday 11 January 2017 / Hour 1, Block A: Bill Gertz, author of the just-published iWar: War and Peace in the Information Age and senior editor of the Washington Free Beacon, in re: Rex Tillerson: context for his hearing is fending off a groundswell of objections to Putin; trying to get confirmed by Senate to be Secretary of State. Taking fire from both sides of the aisle. (Note :China continues to hack US for commercial and other purposes despite in Sept 2015 Xi’s having agreed with Pres Obama not to do so again; and Obama has done naught.) Hacks costing the country bili0ns ($300-500 bill PA) of dollars in the absence of pushback. Intell community told Obama that unless he pushed back China would escalate; he did not; they did. Obama’s response was, “We can’t do anything or it’ll turn into the Wild West.” Decided to turn the other cheek out of fear of eliciting reaction; but Russia and China understand only aggressive pushback. So no let-up in cyberespionage, Chinese have changed methods to avoid detection. OPM attack: no evidence whatsoever of any US response to 22 million secure US workers’s files being stolen. Trump today said: Within 90 days he will have assembled the best cybersecurity experts and set them to protecting us. http://www.washingtontimes.com/news/2017/jan/4/inside-the-ring-plas-hacking-hotel/ ; http://freebeacon.com/national-security/intel-russian-election-hacking-long-term-information-assault/
Wednesday 11 January 2017 / Hour 1, Block B: Christopher Balding, associate professor of business and economics at Peking University HSBC Business School and author of Sovereign Wealth Funds: The New Intersection of Money and Power, in re: Notion that capital flight ourt of China tells everyone hawt it's a ticking time-bomb. Look at outflow and figure out how much is left — they say, $3 trillion, although it looks like less; but in any case, that’s the total of what they have with which t defend their currency, When that’s gone, it ends. They don't seem to have a Plan B. Also don't understand that their ham-handed measures only make it worse. . .. Last year; up to $1.1 trillion of net capital outflow in 2016; puts a lot of pressure on RMB and on gov’t to stem loss. The quasi-black-mkt cut is about 10% because more than capital expatriation is at stake: taking money and leaving China Legendary tales of what they'll pay for a home in Australia, Canada or US: just to get out of China, I live in Shenzhen; real estate is about $1,000/sq ft. Can find apt for $2..5 million. If you can buy a hose in the US for under a mill and still have a lot left, off hey go. Only way to de-link RMB from dollar is to let the RMB float to its real value Not happen What’s the level of bad loans? . . . How long till they can't play this game? In the next 3 to 12 mos, probably no meltdown, but between 2018 to 2010 China will have to to recapitalize banks or else let the RMB float. https://www.bloomberg.com/view/articles/2017-01-05/china-can-t-hide-yuan-s-dangerous-dollar-dependency
Wednesday 11 January 2017 / Hour 1, Block C: Michael Auslin, American Enterprise Institute, Director of Japan Studies; in re: TPP and South China Sea addressed by Rex Tillerson in Senate. “I do not oppose TPP.” Ergo, there can be a debate in the new Administration on the matter; divergent voices; people will argue for both economic and strategic effects. Next, whet to renegotiate, and how to get the eleven other nations to the table? (US is the big market.) Steve Moore and Larry Kudlow are free-traders; will have to contend with Robert Lighthizer, Wilbur Ross and Peter Navarro. Robust discussions. We already have almost he most open economy in the world; for others to profit, they need out economy to be strong, and we all need rules in order to function.
China wants TPP to die so the US, which created it, will look weak and feckless. Then, that’ll let China run its Regional Economic Partnership (which has fewer labor and envtl standards, everything bad for workers; and also keeps China in the driver’s seat). Also, will use the Asia Infrastructure Investment Bank as an economic and political tool. Absent a TPP, wd have to have a series of bilateral treaties. If we have to return to revise the TPP, not clear we can cut-clip-paste. Also, not clear that individual nations will come back to re-discuss.
Wednesday 11 January 2017 / Hour 1, Block D: Michael Auslin, American Enterprise Institute, Director of Japan Studies; in re: The militarized islands China has seized in the South China Sea are “illegal” according to Tillerson. A sharp word. “We’re going to have to send China a clear signal . . . Your access to those islands is not going to be allowed.” Under Obama. Difficulties acknowledged then brushed aside. Tillerson seems to be saying, We won’t act like the Obama Administration, we’ll hold the line” This leaves Scarborough Shoal, where Chinese navy swarms the shoal but hasn't built anything yet. Philippines’s inability to defend it, thus ultimately acquiescence. About 100 mi from Filipino territory. Problematic choices I think we can crowd their space, but I don’t know if Xi will back down. This week, sent aircraft carrier through the Taiwan Strait, msg to Obama you're feckless; to Trump: we're here to stay, US needs to do regular FON exercises with allies so China knows we’re consistently present.
How does China hear Trump? It's a new language to them, which they don’t understand. For 40 years, never heard anyone say that they're illegal of abrogating intl law. In Beijing, they don't know how to deal with Trump or Tillerson. If civilian diplos are confused, military may take the reins and do something hostile, Further, Xi may turn to his military. Bad cop of tweets; good cop of friendly US ambassador plus a chat with Jack Ma. For negotiations, this is brilliant. However, recall that the enemy gets a vote.
WASHINGTON: Chinese military action and building an artificial island in the disputed South China Sea is "illegal", Secretary of State nominee of the incoming Trump Administration Rex Tillerson today said, as he lashed out at Beijing on issues such as theft of intellectual property.
http://economictimes.indiatimes.com/articleshow/56483455.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst ; Tillerson and the End of the Asian Century...
Russia’s recent actions disregarded US interests: Tillerson However, there was no mention of India in his nine-page prepared testimony ... Tillerson took a strong line on Russia, saying, "We must also be ... ; Rex Tillerson to face questions on Russian ties at confirmation hearing ; Tillerson has a shaky show before skeptical senators ; Rex Tillerson Senate confirmation hearings: what the Senate needs ...
Hour Two
Wednesday 11 January 2017 / Hour 2, Block A: Steve Yates, chairman of the Idaho Republican Party, CEO of D.C. International Advisory, and former advisor to Vice President Dick Cheney, in re: these are momentous and perilous days: transition; eke for kings, emperors, presidents. When the old king died in France, it was possible for some Frenchmen to finance the American revolution. So many in Washington pulled their hair out when Trump spoke with Pres Tsai, but it was also true that US policy was failing for Taiwan and US; working only for China.
SUS had to scramble jets when China sailed the Liaoning through the Taiwan Strait in a threatening way. Gov Abbot and Sen Ted Cruz of Texas met Pres Tsai in Houston; she was reported to have had discussions with officials of incoming Trump Adm. There have been members of transition team who've spoken with her by phone; I’ve heard of think-tank members, and some who might be under consideration for work, but no one official. Taiwan has limited choices; individual states also have relations with Taiwan. Trump team will reassess longstanding China policy – trade, cyber, et al. - we may keep a One China policy, but it may be administered very differently. . . . The lazy policy of recent decades has served only China.
Trump has surrounded himself with people who favor robust relations with Taipei, not really as part of China policy. Recalibrate the facts of relations with Beijing. http://www.foxnews.com/world/2017/01/11/taiwan-scrambles-jets-as-china-aircraft-carrier-enters-taiwan-strait.html ; https://www.washingtonpost.com/news/powerpost/wp/2017/01/09/against-chinas-objections-ted-cruz-and-texas-governor-meet-with-taiwanese-president/
Wednesday 11 January 2017 / Hour 2, Block B: Gordon Chang, Daily Beast, in re: I’m sure that China hears a threat to use force; it will test Trump; could be South China Sea Air Defense ID Zone. Might seize Scarborough Shoal, as China hasn't yet poured concrete.
Tillerson; addtl sanctions on Chinese entities – UN sanctions. Also: what’d China do to Tillerson? Nada yet.
China’s economic and trade deeds have not followed its promises; act with abandon to pursue its own goals. Digitally: they’re thieves. Expect Trump actions against cyber thieves —China, Russia, Iran. China is totally unprepared. Kim Jong-eun: the poodle of Beijing will wait for Beijing to speak.
Wednesday 11 January 2017 / Hour 2, Block C: Aaron Klein, Breitbart Middle East Bureau Chief, in re: UN declared eastern sections of Jerusalem to be “occupied territory,” even though these never been a Palestinian state in history. The Paris so-called peace summit of 70 nations, absent is Israel This matter deeply because depending n parameters set there on 15 Jan, and what happens with European countries, there cd be something going on in the General Assembly, or a meeting in one the UN departments .
Paris discussions: probably make a statement n how to enforce a complete to Jewish construction, how to pressure Israel more. Or to set a timetable to create a Palestinian state – maybe 2019 as the deadline. Palestinians have repeatedly been offered a state, Netanyahu has begged PA to accept a state and negotiate. Abbas and predecessors have consistently refused. “The temporary intl presence mission in Hebron” observers — an extension of lawfare. Will Obama move to undermine Israel in the UN? Ambush? Yes, 100% according to all my official sources. Bibi: “Unequivocal evidence of Obama having led the 2334 resolution.” President of the US signed on to the 23 Dec lawfare manoeuver. One of the goals is that when Trump comes into office Israel will be bound. Who’s driving this in the Obama Adm? Ben Rhodes, John Kerry, Pres Obama. Corresponds with Obama’s ideology before his election, with compatible friends in academe and think tanks.
Trump’s Rex Tillerson Says Obama’s John Kerry “Quite Troubling” on US-Israel Alliance. @AaronKleinShow. @BreitbartJerusalem Rex Tillerson condemned the Obama administration’s decision not to veto a U.N. Security Council resolution critical of Israel’s development of settlements on the West Bank.
The former ExxonMobil chief said the resolution was “not helpful” and “undermines” the conditions for peace talks to continue. He described Secretary of State John F. Kerry’s subsequent speech criticizing Israel as “quite troubling.”
Tillerson said it was important for the United States to recommit to its alliance with Israel, which he said “is, was and always has been our most important ally” in the Middle East.
https://www.washingtonpost.com/politics/2017/live-updates/trump-white-house/confirmation-hearings-trump-speaks-and-vote-a-rama-analysis-and-updates/tillerson-criticizes-u-s-decision-to-abstain-from-u-n-israel-vote/?hpid=hp_hp-top-table-main_liveblog-931a%3Aprime-time%2Fpromo&utm_term=.4f9ff084a238
Wednesday 11 January 2017 / Hour 2, Block D: Aaron Klein, Breitbart Middle East Bureau Chief, in re: TEL AVIV – Israeli defense officials here have noted a sharp increase in Palestinian rock-throwing attacks since the United Nations Security Council passed an anti-Israel resolution on December 23, 2016 calling the West Bank and eastern Jerusalem “occupied Palestinian territories.”
Avi Issacharoff at the Times of Israel notes: In September 346 rock-throwing attacks were recorded, in October 375, in November 420, and in December 344. Most of the December attacks occurred in the final week of the month. In the first week of January there were 169 recorded attacks, a pace that, if maintained, would lead to almost 700 attacks by the end of the month.
Issacharoff writes that the increase in rock attacks could be linked to exam season in Palestinian high schools, although a similar increase was not recorded in previous years. http://www.breitbart.com/jerusalem/2017/01/10/alarming-rise-palestinian-...
Hour Three
Wednesday 11 January 2017 / Hour 3, Block A: Gregory Zuckerman. Special Writer at the Wall Street Journal; writes on big financial trades, hedge funds, private-equity firms, the energy revolution, in re:
Wednesday 11 January 2017 / Hour 3, Block B: Gregory Zuckerman. Special Writer at the Wall Street Journal; writes on big financial trades, hedge funds, private-equity firms, the energy revolution, in re:
Wednesday 11 January 2017 / Hour 3, Block C: Richard A Epstein, Hoover Institution, Chicago Law, NYU Law, in re: Obama & Kerry “One-sided and anti-Israel” “Hit Job at the UN” @RichardAEpstein, @HooverIns The one-sided treatment of these legal issues is consistent with the general UN approach that obsessively condemns Israel while mostly overlooking the atrocities that have ravaged the greater Middle East. In light of these issues, it is somewhat odd to treat the settlements as though they were the major obstacle to the two-state solution. Remove them tomorrow, especially in response to the UN resolution, and the most likely outcome is that the PA and Hamas would intensify their activities to destroy the Jewish state, just as they did in 1948, 1956, 1967, and 1973 when Israel fought wars of survival, knowing full well that the first defeat would be the last one, even if the 1949 Geneva Convention places strict limitations on how occupying powers have to behave toward conquered people.
The Israelis know this all too well. They also know that the lesson of the 2005 withdrawal from Gaza led to the rise of Hamas and to repeated military actions and missile attacks between 2006 and 2014. Any unilateral surrender of lands in the West Bank to a new Palestinian state opens up the possibility that greater hostilities could be launched against an Israel weakened by successive rounds of fatal concessions. The Israelis claim that the only path to peace is through bilateral negotiations between the parties, backed by the US and the UN. Those negotiations were apparently close to success in 2000 and 2008, but the deal was never closed because of the Palestinians.
At this point, Resolution 2234 has killed the prospects for any negotiated peace in the foreseeable future. The Palestinian Authority will treat compliance with a ruinous Resolution as a precondition for further negotiations. The Israelis cannot live in a world that requires them to surrender territories under their control before 1967. The terms of the UN Resolution thus have put an effective end to all negotiations between the two sides. The Israelis are likely to continue the dangerous game of expanding settlements in the West Bank, as the only credible way of punishing the Palestinians for their continued delay. Whether this strategy will work, or should work, is a hard call. But much of the blame for the current impasse lies at the feet of Secretary of State John Kerry who never did understand the political dynamics of the Israeli-Palestinian negotiations. http://www.hoover.org/research/obamas-dangerous-palestinian-gambit?utm_source=hdr&utm_medium=email&utm_campaign=2017-01-10 (1 of 2)
Wednesday 11 January 2017 / Hour 3, Block D: Richard A Epstein, Hoover Institution, Chicago Law, NYU Law (2 of 2)
Hour Four
Wednesday 11 January 2017 / Hour 4, Block A: Peter Thal Larsen, Reuters BreakingViews, in re: Breakingviews predicts a shaken-up world in 2017. The world faces 2017 all shook up. After the electoral upsets that kicked off with Britain’s vote to leave the European Union and culminated in Donald Trump’s victory in the U.S. presidential race, governments, companies and investors are confronted with uncertain and unfamiliar terrain.
The increasingly free flows of trade and capital that stretched across the planet over the past quarter century are in doubt. Two of the world’s oldest democracies, the United Kingdom and the United States, have been shocked by insurrections at the ballot box. Faith in established political, corporate and financial leaders is at a nadir. Even the availability of the trustworthy information on which free societies depend can, it seems, no longer be taken for granted.
So it may seem foolhardy to try to predict the coming year. The task is an order of magnitude more difficult than it was twelve months ago. Then the idea of a President Trump seemed improbable – but not unimaginable. Indeed, Breakingviews anticipated that a sluggish economic recovery would damage Hillary Clinton’s chances of occupying the Oval Office, though we were less confident about the identity of her opponent.
Similarly, there was a clear possibility that Britain’s referendum on membership of the European Union might result in a vote to leave. That is why we included a fictional memo from a bank chief executive preparing to move staff out of the City of London in our 2016 Predictions book.
Other successes included our prognosis that Argentina would reach a settlement with bondholders. We foresaw that Western central banks would be cut down to size after stretching the limits of monetary policy. And though Caterpillar did not attract a public activist investor, it did placate shareholders by parting company with CEO Doug Oberhelman.
The same crystal ball exercise today, however, involves considering a wide range of once-unthinkable events. What are the chances that Trump stumbles into a military standoff with China? What if the People’s Republic responds by aggressively devaluing its currency? How about the possibility that Russian President Vladimir Putin annexes a Baltic state? Or that a new Italian government defaults on the country’s debt and crashes out of the euro zone?
To be clear, none of these scenarios seem likely. But they are characterised by what former Bank of England Governor Mervyn King calls “radical uncertainty”: they are beyond measurement. These are precisely the types of risks that financial markets struggle to process. When presented with radical uncertainty, hope and fear – or denial – tend to take over.
This is visible in the early response to Trump’s election. Investors have cheered the prospect of large-scale tax cuts and spending on infrastructure, which they hope will boost growth and inflation. But we think that they will eventually have to discount the impact of Trump’s apparent indifference to the Constitution, or his willingness to pursue reckless diplomacy with Taiwan before inauguration.
We expect centrist parties in Europe to reassert themselves in elections in France and elsewhere, but only if they stop trying to appeal to everybody. Angela Merkel will win a fourth term as Germany’s chancellor, but will step down before it ends.
The merger boom will rumble on, if at a reduced pace, partly fuelled with cash repatriated by U.S. corporations. Large deals will increasingly fall foul of trustbusters or uppity shareholders. The Brazilian investors behind Anheuser-Busch InBev and Kraft Heinz, will target Mondelez International. Walt Disney and China’s Tencent are on the prowl.
As we approach the 10th anniversary of the beginning of the financial crisis, the banking sector remains out of kilter. Fragmenting regulations will make it even harder for cross-border lenders to earn adequate returns. Some European investment banks might decide that 2017 is the time to merge their Wall Street subsidiaries. Fund managers, meanwhile, will feel the kind of pay squeeze that bankers have been experiencing for years.
Yet for all the gloom, there are chinks of light. Despite Trump’s scepticism about global warming, market forces will keep renewable energy powered up. New drugs based on magic mushrooms will improve mental health, while the ability to treat genetic diseases by tinkering with DNA will go mainstream. Even Brexit will have a silver lining, prompting investment banks eager to move staff out of London to invest in new international schools.
Some of our predictions may prove wide of the mark, as in years past: Europe did not ditch the Schengen agreement that permits passport-free movement across the continent; Volkswagen’s top brass clung to their jobs; and HSBC decided not to move its head office from London, even though our analysis suggested that Hong Kong or Singapore would be better alternatives.
Despite these caveats, we hope that Predictions 2017 will be thought-provoking and fun to read – and offer some guidance in an increasingly shaken and uncertain world. http://www.reuters.com/article/us-predictions-2017-breakingviews-idUSKBN14N0JS Download Breakingviews’ Predictions for 2017: bit.ly/BVPredictions2017 (1 of 2)
Wednesday 11 January 2017 / Hour 4, Block B: Peter Thal Larsen, Reuters BreakingViews, in re: Breakingviews predicts a shaken-up world in 2017. (2 of 2)
Wednesday 11 January 2017 / Hour 4, Block C: Robert Zimmerman, BehindtheBlack,com, in re: Searching for a Tabby’s Star Theory, and a dozen other topics (1 of 2)
Wednesday 11 January 2017 / Hour 4, Block D: Robert Zimmerman, BehindtheBlack,com, in re: Searching for a Tabby’s Star Theory, and a dozen other topics (2 of 2)
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