Why Wilders Didn’t Win As Much As Expected

The Netherlands has just had elections, which the media describes as a “loss” for right-wing populist Geert Wilders’ party PVV

Actually, Wilders didn’t really lose as his party won a greater percentage than in the last election.Still, he didn’t win as much as some had expected and his success certainly isn’t comparable to those of the Brexit campaign or Donald Trump.

Why? Because while there is great popular support for restricting the inflow of asylum seekers, most other parties already supports that. And Wilder’s rhetoric, and proposals (like banning the Quran) is viewed by many as too extreme.

But perhaps most importantly, his anti-EU views don’t resonate in the Netherland. The Netherlands is one of the most export dependant countries in the world, and leaving the EU would risk hurting exports.

That would be much more devasting than trade barriers for Britain would be, which is a key reason why “Nexit” has far less support than “Brexit”

Why Not Move Embassy To Jerusalem?

Donald Trump, disappointgly but not surprisingly, seems to partially backtracking from the pro-Israel stance he had during the election campaign.

Leaving, for the moment, aside the issue of how it can be justified that Jews are ethnically discriminated against regarded housing construction in East Jerusalem and the so-called “West Bank”, it is unjustifiable that Trump violates his election pledge to move the U.S. empassy from Tel Aviv to Israel’s real, de facto, capital during the last 7 decades.

What is puzzling is why this hasn’t happened already. For nearly 7 decades Jerusalem has been the de facto capital of Israel. Tel Aviv has never been Israel’s capital. Yet nearly all countries, including the United States, keep having their embassies in Tel Aviv.

It would be partly understandable if this was about moving it to the “disputed” Eastern parts of Jerusalem. But there’s plenty of parts in Western Jerusalem where it could be used. And the understanding has been that any “two part solution” would mean a partition of Jerusalem where the Western parts would remain Israeli. So why object to an embassy in Western Jerusalem?

The only possible reason is opposition to Israel itself (or pandering to those that oppose Israel’s very existence).

Who Would Pay The Wall With Tariffs?

Lately, headlines has been dominated by issues relating to fake outrage about the Trump administration doing for 3 months to certain Muslim countries what they are doing permanently to Israelis (and non-Israelis who has visited Israel).

As the absurdity and hypocricy of this is so obvious I’m not going to elaborate on that issue. Instead I will focus on one issue were you really should be critical of Trump: trade.

One of the recurring campaign slogan from Trump was “We’re gonna build a wall, and Mexico is gonna pay for it”.

Mexico, who thinks that the wall would be a very bad thing even if they don’t pay for it, has said that there is no way they’re gonna pay for it. When asked then, how he’s gonna make Mexico pay for it, Trump and his officials have suggested a 20% tariff on imported Mexican goods.

To that some free traders have suggested that this would only hurt American consumers, not Mexican producers, and so it would be the American consumers that would pay for the wall.

Actually, they’re both partly right and both partly wrong.

When you have a tax wedge between what the seller gains and the buyer pays, it will almost always lead to a lower price for the seller and a higher price for the buyer. To what extent the seller and the buyer is hurt depends on the specific market conditions and price sensitivity.

As I haven’t done any empirical research on the subject, I can’t tell you to what extent tariffs would lower seller’s prices or raise buyer’s prices. But sound economic theory tells us it would be a combination.

Meaning that both Mexico and the United States would suffer, or in other words “pay for the wall”.

Proctectonism will weaken the economy

American President-elect Donald Trump’s arguably worst quality is his protectionist trade policy. He has promised to “bring jobs back to America” by slapping punitive tariffs on imports, or at least imports from China and Mexico.

Recently, a few manufacturing companies like Carrier, Ford and Fiat Chrysler, have announced that they would refrain from investments in Mexico or even make new investments in the United States. Trump and his supporters have used this as anecdotal evidence that the trade policies he has pledged to implement works are successful.

Wrong. Such policies will probably reduce the trade deficit, though not by much as Trump supporters think, as the dollar will rise in value. Furthermore, a lower trade deficit means a lower inflow of capital (a rule of national accounting any serious economist is aware of), raising the cost of capital, something which in turn will lower investments in domestic industries.

So while there will be some workers who will benefit from such policies, the nation as a whole won’t benefit. Quite to the contrary, by not benefiting from the benefits of the comparative advantage effect that trade brings, the economy will be weaker.

No, Building homes for Jews not what’s stopping peace

In defending the outgoing Obama administration’s decision to allow a UN Security Council resolution condemning the construction of homes for Jews in Judea and Samaria (aka “the West Bank), State Secretary John Kerry claimed that “settlements” are what’s preventing peace between the “Palestinians” and Israel.

No it’s not. Even setting aside the immorality and hypocricy of specifically preventing Jews, but not Arabs, from building homes, that story is obviously false.

In 1949-1967, Gaza, Judea and Samaria and the Golan Heights were all judenrein , not a single Jew (“settler”) were there. Yet that was when the “Palestinian movement”, the PLO, was created. And the Arab states still decided to attack Israel.

In 2005, then Israeli PM Ariel Sharon conducted an experiement on the “settlements are what’s preventing peace” theory by giving in to the foreign demands to ethnically cleanse Gaza and make it judenrein. Well, guess what, it didn’t result in peace in Gaza.

The problem is that the Arabs don’t just oppose Jewish homes in the “West Bank” and Gaza. They oppose any Jewish presence in all of Israel.

Trump Making US Dollar More Expensive

One of the most interesting, from an economic point of view, of Trump’s victory is how it has made the US dollar a lot more stronger/expensive. A euro now only cost $1.04, the lowest in a long time, and the exchange rate against most currencies have moved in a similiar, or even more dramatic, way.

There are three reasons for that:

-Trump promises lower taxes (with one exception that will be discussed below) AND higher spending. That is what is called “fiscal stimulus”, which will increase consumer price inflation, and thus induce the Fed to hike interest rates.

-What’s also inducing the Fed to hike interest rates was that before the election they wanted to help Hillary by not raising rates, but now they feel free to do so.

-The third reason is that the taxes on imports (tariffs as they’re often called) that Trump has pledged to impose on at least Mexico and China will reduce American demand on foreign imports, and so also the demand on foreign currencies, raising the price on the American currency.