How To Solve The North Korea Issue

So, President Trump and Kim Jong-Un had a metting which was said to be a first step towards peace. Only general outlines were made, no specifics. Here is a somewhat more specific description on how to achieve peace:

1) North Korea gives up its nuclear weapons. Whish is a MAJOR concession given what happened to Kadaffi and Saddam Hussein after they gave up their weapons of mass destruction.

2) The US gives iron clad security guarantess of not attacking North Korea, similar to the guarantees given to Cuba after the missile crisis in the 1960s

3) US withdraws its troops from South Korea and end military exercises.

4)Warning to North Korea that if it attacks South Korea then points 2) and 3) will be null and void.

5) If North Korean nuclear disarmament is complete and verifiable then the sanctions will be lifted.

Any reasonable observer should see that this is what a final settlement will look like. Let’s hope that after a long time of negotiations, this is what will happen.

Trump’s Dangerous Protectionism

In my review  of Trump’s first year as President of the United States, Inoted that the big fear that I and many others had, that he would actually implement the protectionism he campaigned on had been unfounded.

Unfortunately that has changed in the weeks since then and Trump has started slapping punitive tariffs on industry after industry. First it was solar panels and now he has turned to steel and aluminium.

This is bad news not just for the countries that export these things to America, but also for the U.S. Even in the unlikely scenario that other countries refrain from retaliatory moves, more jobs will be lost than saved.


Because first of all, many U.S. companies use these imported goods as input in their businesses, and they will of course then be less competitive and reduce their work forces.

And because will raise inflation and reduce capital inflows, interest rates will go up, reducing investments. Oh, and higher interest rates also raise the foreign exchange value of the dollar, increasing other imports and reducing exports.

And finally, retaliatory moves hurting U.S. exports have already been announced.

So, contrary to what Trump tweeted, the U.S. can’t win a trade war even if it has a trade deficit. All sides lose from a trade war.




Trump & Trade Deficits

When Trump campaigned for President in 2016, he claimed again and again that the American economy loses from trade deficits and that America loses jobs to for example China and Mexico.

Well, in his first year in office the U.S. trade deficit rose to $566 billion, up from $505 billion in 2016, yet as Trump likes to brag about, the economy grew relatively fast and employment rose by about 2 million.

The reason why this happened is that trade deficits don’t “kill jobs” like protectionists and mercantilists believe. And that is because the flip side of trade deficits is an equally capital inflow. While imports can destroy some jobs, other jobs are created by capital inflows.

Trade deficits can be a symptom of reckless government deficits or unsound investment booms or low private savings, but they aren’t bad in the “job killing” sense that Trump others believes, as the last year’s U.S. economy illustrates.

One year with Trump

So today is the one year anniversary of when Donald Trump got inaugurated as President of the United States. How has he been doing?

Mostly good actually. He hasn’t delivered on all his promises, in some cases because of opposition from Congress or the Courts, in some cases because he no longer seems to want to do it and in some cases both. But since some of his election promicies weren’t good, such as a protectionist trade policy, that’s not necessarily a bad thing.

He has done good things, like appointing originalist judges to federal courts, including the Supreme Court, doing away with a lot of regulation and getting a tax cut plan passed.

The two latest things are partial reasons why the U.S. economy is doing so good now. While the tax cuts weren’t implemented until January 1 this year, the expectation of them helped the economy already last year. The expectation of the corporate tax cut have for example of course contributed to the stock market rally, as it raises after tax profits.

In foreign policy he has taken a strong pro-Israel stance, by recognizing that Jerusalem is the capitol of Israel and move the embassy from Tel Aviv to Jerusalem and by reducing foreign aid to the Palestinians. His North Korea political has been very confrontational in rhetoric but there is no sign that he would foolishly attack North Korea.

His personal style with sometimes strange statements and tweets is problematic, but not a big problem as long as doesn’t lead to unwise policies.

He hasn’t really done much negative things, except allowing his Attorney General Jeff Sessions to threaten states that have made the wise decision of legalizing marijuana.

Still, all in all, his record is actually pretty good, contrary to what leftist journalists would have you believe.



The Lesson Of The Special Elections

This week featured two “special elections” to the United States House of representatives. In both cases Democrats lost. The defeat was especially humiliating in the race in Georgia, since Trump only won it last year by only a percentage point. The Republican winning marging was slightly larger this time even though the Democratic candidate “should” have won. It was an epic fail.

So why Democrats lose? Well, there are probably several reasons, but the most important is that the Democratic campaign kept focusing on the Russia issue. Almost noone outside the establishment i DC and the media cares about that. Ted Cruz said in an interview that in DC all people talked about was Russia, but back home home in Texas people talked about the issues.

These elections illustrate that this is the broader sentiment in America. DC is out of touch with the American people.

What’s So Bad About “Climate Change”?

So President Trump rightly decided to pull the US out of the so-called “Paris Agreement” on climate change. Predictably, the political- and media establisment were outraged.

What is missing here is a discussion of the real issue: What’s so bad about climate change?

I don’t deny that there’s climate change. Climat change has happened ever since this planet was created and will continue until the  sun blows up and takes this planet with it.

Nor do I deny that human activity hasn’t had any effect on this planet’s climate. That seems to be the view of almost every scientist in this area.

But what climate hysterics have yet to explain is: why is a bad thing? Why is it assumed that the “pre-industrial era” temperatures are optimal? I’ve asked climate hysterics this question dozens of times, but I’ve never gotten an answer.

Sure, one degree difference in temperature could have negative effects, but it could also have positive effects. The fact that warmer weather can have positive effects is illustrated by the fact that no one wants to live in Antarctica.

So the real issue here isn’t if “man-made climate change” exists, the issue is why it is assumed that it would only be a bad thing.

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”.