Who Pays?

Now that tariffs have risen to 25% on $200 billion of Chinese imports and may be extended to $300 billion more, there has arisen a controversy about who pays these tariffs. Trump says China does and Goldman Sachs says the US consumer does. Let’s investigate ...

Assume that Walmart now buys Barbie dolls made in China for $4 and sells them for $10. When a 25% tariff goes into effect, the price to Walmart or its wholeseller would go to $5. But wait, Walmart might say (as it often does) that this is too high ... and so demand that the Chinese manufacturer eat all or part of this increased cost.

Let us assume that the Chinese manufacturer  eats it all but turns to Xi to help out. These Chinese government can do many things to help out:

- It can subsidize this manufacturer with tariff offsets or low cost loans

- It can devalue the yuan so that the $3.20 it then gets for each Barbie doll buys more yuan which it uses to pay its workers

So this example would validate Trump’s claim. Of course there are US importers who don’t have the buying clout of Walmart so here the American consumer would pay a higher price ... or the American importer would make a smaller profit.

In truth, both things will happen ... to what extent one cannot predict precisely. My suspicion is that China will bear the largest part of any tariff increases. But, if, not, America’s inflation rate will go up which is not happening currently.

So watch the future US inflation rate to see whether Donald Trump or Goldman Sachs were more right now.

Headlines

On Tax Day, Trump tax cuts remain deeply unpopular

Huawei is ‘open’ to selling 5G chips to Apple for IPhone, making a big shift in strategy

Indiana Mayor Pete announces 2020 run ...

Trump celebrates golfing buddy Tiger Woods’ Masters victory

As Dems debate Medicare for All, a less radical idea stalls in the blue states

American Airlines cancels all 737 MAX flights through August 18

Goldman Sachs: Trump re-election likely ...

Tory establishment devises ‘stop Boris’ plan ...

Trump’s campaign raises $30 million in first quarter

US is said to water down demand that China curb subsidies amid push for a trade deal

Sarah Sanders: Congress not smart enough to read [Trump] tax returns

Tlaib blasts Dems: They put Muslims in photos to show party ‘diverse’

Headlines

Trump fumes over abortion comments at SOTU preview meeting

Medicare for All could take center  stage in 2020 election. Here's what that means

Call for unity, Trump approval 48%, Teflon Don

Mexican border state busing 1,700 caravan migrants to Texas border ...

Actually, it was Democrats that killed the 70 percent tax

Bernie Sanders and Lloyd Blankfein get in Twitter fight over tax rates

Maxine meltdown: Waters begs Americans to turn off TV during State of the Union ...

Lawyers for Catholic student Nick Sandmann prepare to sue for libel

Michael Bloomberg disputes tax breaks for Amazon

Goldman Sachs: If you missed the January rally, you likely missed the 2019 gain

Top Pelosi aide tells insurance execs not to worry about Medicare for All ...

Pope admits priests, bishops sexually abused nuns

Headlines

Democrats see late surge in Senate battlegrounds

More than 2 million homeowners just missed  their chance to save money by refinancing

Trump would prefer softer tone as president but has 'no choice' ...

MIT Prof reveals  that bots helped Hillary Clinton more than Trump

[Lindsey] Graham: New attorney general coming 'most likely early next year'

Supreme Court declines to take on net neutrality challenges, in blow to telecom industry

Maine Gov announces move to Florida: 'No income tax' ...

Giuliani: Sessions 'probably will step down'

Iran president says he will defy new U.S.sanctions

Goldman Sachs: Economy needs to slow down to avoid 'dangerous overhearing'

Iran president warns of 'war situation' as sanctions resume ...

Poll: 79% of farmers sticking with Trump

Headlines

Dems grit their teeth and cheer for Trump on North Korea

Trump may reportedly lift US sales ban on ZTE [phones]

Iced latte: Starbucks says drug use, sleeping unacceptable ...

China's Navy will double size of U.S. Navy by 2030

Grassley seeks DOJ documents on officials' contacts with dossier author

People are selling their royal wedding gift bags on EBay

Human race just 0.01% of all life -- but has eradicated most other living things ...

DHS official: 'In one week, Democrats chose to defend' Hamas, MS-13

Obamas cut deal with Netflix

Goldman Sachs: Fiscal outlook for US 'is not good'

Pope shock: OK to be gay ...

John Brennan threatens Ryan, McConnell for 'enabling' Trump

Headlines

Huge rate cut for Hillary speeches -- down 85% ...

Can [Cynthia] Nixon get female voters to abandon Cuomo?

Disney princess rips Planned Parenthood: 'An abortion doesn't empower women'

Trump pushes infrastructure plan, but says it will have to wait until after midterms

Russia to expel 60 U.S. diplomats, close St. Petersberg consulate ...

Judge denies motion to depose Trump, but Stormy Daniels' lawyer vows to refile

[Coulter:] 'Shallow, lazy, ignoramus' Trump needs a 2020 MAGA primary challenger

NYC: Women's only work places?

Rival Korean leaders to meet in historic summit ...

John Bolton's knife fighting skills alarm his critics

Trump calls Roseanne after HUGE ratings

Coulter: All Trump wants 'is for Goldman Sachs to like him'

Headlines

All from Internet news sites. Guess which from Breitbart?

Gillibrand's remark on Clinton sends shock waves through Democrat party

Goldman Sachs says if you thought 2017 was surprisingly good, just wait for 2018

Maxine Waters: Impeach Trump for name-calling ...

Saudi Arabia to open Justice Ministry jobs to women, legalize yoga

Hillary Clinton: Trump 'is obsessed' with me

Hillary brags that Bill Clinton didn't tweet as president

Update: Murdoch's FOX in talks with multiple [potential] buyers

Report: Roy Moore's fundraising surges after attacks

Kushner still waiting on permanent security clearance

U.S. Navy's 7th Fleet involved in another collision at sea

Claim: Cuomo turned a blind eye to pervert under nose ...

Experts do not believe video games cause violent behavior in children

Tax reForms

"The greatest good for the greatest number."

The Trump administration's new tax system revamping has been unveiled. Although lacking in critical details ... probably on purpose ... it nonetheless is causing considerable dyspepsia. In particular the proposed removal of state/local tax deductions and the reduction in the highest rate are the center of most complaints ... see: NY Times Article

Trump's financial guru Gary Cohn was explaining this administration's new tax reform proposal to the media recently and I was struck by one of his comments. The press asked him its standing question, "Can you guarantee that under this new plan no middle class American will end up paying more taxes?"  Cohn, to his credit, said no ... there were no such guarantees. Some bizarre set of financial circumstances might cause someone to pay more, but the vast majority of  middle-income Americans will end up with more money in ther pockets. And the top 1% would likely be paying more.

However, color me skeptical. Somehow it is difficult to imagine that two Goldman Sachs alums (Cohn and Mnuchin) would so help out middle America without cutting generous vig for their old bosses ... perhaps by the killing of the Alternative Minimum Tax (AMT). Actually, I have in the past suggested a variant of an AMT in which all deductions could only reduce the effective tax rate by a few percentage points. This way Congress would not have to pick winners and losers among the current litany of popular deductions.

For me, the acid test of this new tax reform will be if it scuttles the unfair "carried interest" tax rate that has made so many hedge fund managers multi-billionaires. If it stays, then Wall Street Titans are once again pretending to be altruistic while buying their many Hamptons' mansions.

Headlines

All these headlines have been collected from Internetnews sites. Can you guess which ones came from Politico?

Trump in tweet: Portland attack 'unacceptable'

Leftist media outlet attacks Matines on Memorial Day for 'toxic masculinity'

Macron and Putin agree on restart of Ukraine talks

NYT: Talaban killing Islamic scholars to silence criticism

Goldman Sachs lowers forecast for oil prices in 2017

Silicon Valley elites continue to push for Universal Basic Income

Exclusive: Trump set to roll back Obama's Cuba policies

Trump's budget plan lands with a thud in Middle America

 McCain says Russia bigger threat than ISIS

Venezuelan opposition accuses Goldman Sachs of financing dictatorship

Memorial weekend [movie] boxoffice falls to lowest in 19 years ...

NOAA: Above normal Atlantic hurricane season is most likely this year

What Now?

About two weeks ago I offered here some tongue-in-the-cheek suggestions as to how to adjust to a Trump victory. Surprisingly, since this event actually did occur last night, I think I might reprise these suggestions here:

- Open a relo service to Canada and New Zealand 

- Go into the construction business along our southern border

- Make sure your dead uncle's vote was counted

- Cancel your subscription to the New York Times

- Buy coal company stocks

- Abandon writing a book on the Bush family 

- Buy deep-discounted Russian bonds

- Swear to your friends you voted for her

- Open a McDonald's franchise near the White House

- Get a job

- Rescind your pledge to contribute to the Clinton Foundation 

- Short Goldman Sachs stock

- Buy a gas guzzler

To this list I might also now add the following events:

- All the printers at the Clinton Foundation will run out of paper due to the slews of resumes being produced there

- A number of media members will change their professions

- A number of polling organizations will start selling Slurpees

- Huma Abedin will convert to Buddhism

- Hellary Clinton will start raising money for her Almost-Presidential Library

- FBI Director James Comey and Anthony Weiner will be put on suicide watches as notes to those ends have already been discovered

Taking Our Medicine

The gang at Morning Joe has already elected Hellary Clinton president. The establishment might be right ... they usually are. But still the stock market has been in a swoon since Donald Trump's polling numbers have started rising. If he were to prevail on next Tuesday, it is likely there will be a continued sell-off as the nabobs at Goldman Sachs and others in the Wall Street canyon realize that their huge investments in Hellary Clinton have gone south ... see: CNBC Article. Of course, in time, investors would adjust to this new reality ... but it would take some time ... particularly since I expect that there would be some additional financial shocks ... for example, I would predict a half point increase in interest rates by the Fed in December as Janet Yellen tries to show Trump who is the real boss.

There also might be a few foolish big money investors who would pull the plug (Mark Cuban?) which would also roil the markets further, but by next Spring I expect that things would settle down as Trump and his financial advisers begin to remedy many of this country's structural problems. Of course the rest of the world would also likely be in a Brexit-like panic ... expecting Trump's opening negotiating positions on world trade and international relations to prevail. However, as these stances were softened, volatility might subside.

This exercise in parsing the consequences of a Trump victory is obviously premature, but world stock markets are usually quite predictive and, therefore need to be heeded. A Trump victory would entail swallowing a big dose of medicine ... but cures sometimes require such bitter potions.

What if Trump Wins?

On the off chance that The Donald wins on November 8th, here are some suggestions:

- Open a relo service to Canada and New Zealand

- Go into the construction business along our southern border

- Make sure your dead uncle's vote was counted

- Cancel your subscription to the New York Times

- Buy coal company stocks

- Abandon writing a book on the Bush family

- Buy deep-discounted Russian bonds

- Swear to your friends you voted for her

- Open a McDonald's franchise near the White House

- Get a job

- Rescind your pledge to contribute to the Clinton Foundation

- Short Goldman Sachs stock

- Buy a gas guzzler

Headlines

These headlines are real ... they have all been discovered on Internet news sites.

Tampons in men's rooms at [Brown] university ...

Goldman Sachs bans donations to Trump, but not to Clinton

Report: U.S. may have given Iran $33.6 billion in secret payments

FACEBOOK Co-founder commits $20 million to defeat Trump

Apple IPhone 7 slogan in Hong Kong translates to 'This is Penis' ...

Dr. Gorka: 'Good generals have been removed,' 'Political yes-mem have survived'

Italian high court rules public masterbation not a crime

Soros pushes online voting ...

Appeals Court blocks proof-of-citizenship voting requirement

Muslim men sentenced for raping 13-year old girl

Obama halts North Dakota pipeline after judge okays its construction

Apple pumps breaks on self-driving car strategy, laying off dozens

Headlines

These headlines are real ... they have all been discovered on Internet news sites:

Bullet bounces off armored vest of [Dallas] gunman

Obama pushes more federal oversight of cops

Saudi twins murder mother for trying to stop them from joining Muslim State

Giant Japanese grapes fetch $10,900 at auction

Hillery: 'All of us' are racists

Former EU Prez now Chairman of Goldman Sachs Int'l

Saudi Arabia: Arrests for hoasting dog beauty pageant

Inmates break out of cell to save jailer's life

Obama grins as nation mourns

Baltimore sees steep fall in police numbers as murder rate soars ...

War on police spreads: 3 more cops ambushed across U.S.A.

California gang [with ties to Mexican Mafia] members charged in attacks targeting blacks

Pantsuit Aflame

Hellery Clinton has denied that her private e-mail server was ever hacked ... and has also denied that there were any materials "marked classified" on this server. Well, we know that this second statement is now "inoperative" and it is beginning to look like the first is a whopper too. We just were told that the Clinton Foundation, the Hellery Clinton Campaign, and the Democrat National Committee (DNC) have all had their computers hacked by the Russians ... see: Yahoo News Story. (Thanks to a reader, my son, for this reference.)

For an interesting example of what these Ruskies got from the DNC breach (Hellery's many requirements, other than her huge fees, for when she speaks at some event) see: Daily Caller Article. Notice that one of these demands is for a stenographer ... soooo she must have transcripts of her Goldman Sachs payola talks too.

Now, kind reader, if the Russians can hack into these three Hellery treasure troves, why would they not be able to do the same with her puny e-mail server? Someone's pantsuit is once again aflame ...

I Agree with Bernie

In last night's Democrat debate, Bernie Sanders made a few points with which. I concur:

- Wall Street was mainly responsible for the housing and financial collapse in 2008. The fact that no one has been indicted for this travesty proves that Washington ... in particular the Obama administration ... is beholden to Wall Street money.

- The repeal of the Glass-Steagall Act in the late 1990's (under Bill Clinton's presidency) is the primary reason that America's big banks have gotten too big to fail and required huge government bailouts in 2008 and 2009. Glass-Steagall needs to be reimposed.

- The Dodd-Frank financial reform bill has not fixed this problem ... in fact, these banks have even gotten bigger since the collapse and would require another bailout the next time around.

- Hillary Clinton and Barack Obama have taken huge campaign contributions and speaking fees from the Wall Street banks ... particularly Goldman Sachs ... and this is why things are so cozy between these parties. Hillary Clinton cannot be relied upon to sever her relationship with Wall Street.

Now, am I a Socialist because I agree with Bernie? Not hardly, in fact what Bernie didn't and couldn't say was that the Democrat party ... in particular Barney Frank and Chris Dodd ... are another primary reason for the financial collapse in 2008 ... because they forced banks to give sub-prime mortgages to poor credit risks and then had these mortgages purchased by Fannie Mae and Freddie Mac, two Democrat-controlled honey pots.

Apple Polishing

What company with a cash hoard of $145 billion would issue new debt of $17 billion … the largest debt offering in history for any corporation? (Isn’t this like carrying coals to Newcastle?)  The surprise answer is Apple Inc. which completed this (3-times oversubscribed) debt offering yesterday at interest rates that approximate what the U.S. Treasury pays for its debt issuances … see: NY Times Article.  But the real question is, “Why?”

Pay no attention to most of the operational rationales given in the above NY Times article.  I am convinced that Apple’s investment bankers (Goldman Sachs and Deutsche Bank) have persuaded it that interest rates have reached their nadir and must soon go up … and go up significantly.  When this happens, Apple will be able to buy back this debt at a considerable discount … and pocket billions of dollars of capital profits from this round-trip transaction  ... and, of course, Goldman Sachs and Deutsche Bank will also prosper.

The U.S. Federal Reserve Bank’s Open Market Committee is finishing today its two days of meetings to update its stance on its quantitative easing (QE) and interest rates policies.  So, if there are any surprises coming out of this meeting or any of its next few meetings, consider this Apple debt offering to be of quite good predictive value.

Afterward: For another view see:  Financial Times Article ... could have some merit ... but I stick by my reasoning.

Robbing the Bank

Permit me an indulgence … I offer here an analogy to try to explain our sub-prime mortgage meltdown in late 2008 that cost the United States at least one trillion dollars and likely elected Barack Obama to the Presidency. This analogy will use a simple bank-robbery scenario to try to explain the actors and their roles in this (to me) criminal enterprise. Here is the cast:

- The Master Planners – Barney Frank and Chris Dodd whose drive for universal home ownership was the diabolical felonious scheme behind this travesty (with the template of the Community Development Act of 1974.)

- The Bank Robbers – Countrywide Finance, GMAC, Quicken and the myriad of other bucket-shop mortgage origination companies that sprung up during the last years before the meltdown … along with the complicity of the hundreds of thousands of homeowners who got these no-documentation mortgages using chicanery and mendacity.

- The Money Launderers (legitimizing the pelf acquired in this robbery) – Fannie Mae and Freddie Mac abetted by all those financial institutions (e.g.s: Morgan Stanley, Goldman Sachs, Citigroup, etc.) that packaged up these mortgages (Collateralized Debt Obligations -- CDOs) to sell to these fences … AND all those players in the Credit-Default Swaps casino (AIG, Goldman Sachs, Lehman Brothers, Deutsche Bank, etc.)

- The Get-Away Car Drivers – the Credit Rating Agencies that gave these CDO’s unrealistically high credit ratings

- The Bank’s Security Force – those myriad Federal financial regulatory agencies who spent the period during the actual robbery lounging in the bank’s break room playing pinochle and watching porn on the bank’s security-system screens.

- The Bank’s Depositors (who lost their money in the robbery) –ordinary United States’ citizen-schlubs.

Off Balance

The current sovereign-debt crisis in Greece is apparently caused by unfunded off-balance sheet transactions (reportedly aided and abetted by Goldman Sachs ... so what else is new?) I am over seventy years old and I can't remember a single financial crisis, either private or public, which was not caused in whole or in part by off-balance-sheet shenanigans -- last year's banking crisis, Mexico's near collapse in 1994, the Enron scandal, AIG, Tyco, etc. ... the sliminess goes on and on. How can the accounting community, which has created such a beautiful mechanism for faithfully representing the fiscal health of corporations, charities, and public trusts, continue to allow these entities to subvert this process with off-balance-sheet transactions of any type? It is as though the Swan Lake ballet was being danced in a garbage dump ... or Mozart was being played with kazoos.

Until such time as veracity is returned to the accounting profession, we will continue to enjoy a conga-line of financial crises into the forever future. And this, unfortunately, includes how we, as a nation, keep our own books.

Skin the Cat

Goldman Sachs is now making loans to its cash-strapped employees. See: Goldman Loans. This, most likely, is in response to the public outrage that has arisen over the bonuses that AIG recently gave to many of its managers. Like AIG, Goldman was also a recipient of taxpayer largess to the tune of $10 billion of TARP funds last fall PLUS a $12.9 billion pass-through of taxpayer funds from AIG (which I wrote about in my previous blog post). This loan program pretty much substitutes for what would be standard bonuses at Goldman. Instead, it is loaning its employees the money necessary to meet their internal capital calls.

Now the rub … I would be willing to bet a good steak dinner that many of these “loans” will be eventually forgiven by Goldman. Thus they effectively will turn out to be retroactive bonuses without the pejorative label. (And this legerdemain also allows recipients to defer income taxes on these payments.) So you see … there is more than one way to skin a taxpayer.