May 25, 2018

US fiscal outlook ‘not good’ as ballooning debt threatens economy – Goldman Sachs

The bank’s chief economist Jan Hatzius forecast the federal deficit to increase from $825 billion (or 4.1 percent of gross domestic product) to $1.25 trillion (5.5 percent of GDP) by 2021. The number will balloon to $2.05 trillion (seven percent of GDP) over 10 years, he said.

“An expanding deficit and debt level is likely to put upward pressure on interest rates, expanding the deficit further,” said Hatzius. “While we do not believe that the US faces a risk to its ability to borrow or repay, the rising debt level could nevertheless have three consequences long before debt sustainability becomes a major obstacle.”

The Congressional Budget Office (CBO) said in April debt could equal GDP within a decade if Congress extends the tax cuts. That’s a level not seen since World War II.

According to CBO, economic growth should jump above three percent this year thanks to the stimuli. Nevertheless, debt held by the public will soar to $28.7 trillion by the end of fiscal 2028.

“Lawmakers might hesitate to approve fiscal stimulus in the next downturn in light of the already-substantial budget deficit,” said Hatzius. “While we would expect some additional loosening of fiscal policy during the next downturn, there is a good chance in our view that it would be less aggressive than it was in the last few recessions.”

Goldman analysts’ team explained that even if the debt and deficit levels don’t prevent lawmakers from approving countercyclical fiscal stimulus during the next recession, a political desire to stabilize the debt level would likely hamper growth during the next recovery. “The current fiscal expansion … must at some point give way not just to a neutral stance, which we expect by 2020, but to a tightening of fiscal policy that could restrict growth,” Hatzius wrote.

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Why Trump’s Intense Focus on the Trade Deficit Could Cost the Economy in the Long Run

The administration’s approach might quickly reduce the headline level of the trade deficit, but it largely ignores the frustrations of American sectors that are the most promising sources for creating future good export-related jobs.

American companies that make automobiles, semiconductors and other complex products bemoan Chinese government requirements that force American firms to form joint ventures with Chinese companies, sharing their technology. They accuse those partners of widespread theft of intellectual property as they try to catch up in advanced technologies. Many American firms face Chinese competition that receives heavy state subsidies.

These are some of the most stubborn, longstanding issues in American-Chinese economic relations. But they aren’t likely to be fixed overnight, and even if the United States wins concessions, it won’t necessarily affect the trade deficit — especially in the next couple of years.

This helps explain why some prominent advocates of a tougher stance toward China — who applauded President Trump’s tariff threats — are critical of the turn the negotiations have taken.

The tariffs the president threatened “are designed to address China’s technology theft and their plans to dominate advanced and high technology manufacturing,” said Dan DiMicco, chairman of the Coalition for a Prosperous America, which advocates for a hard-line stance, in a statement. By contrast, “an agreement to sell agricultural and energy commodities is the result of bad negotiating and bad economic strategy.”

Exports of agriculture were directly or indirectly responsible for 524,000 jobs in 2014, according to analysis by the International Trade Administration; petroleum and coal products were responsible for an additional 255,000. But combined that is less than 7 percent of the jobs tied to exports that year.

Sectors like computers and electronic products and machinery were responsible for substantially more export-related jobs.

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‘Toilet for dirty money’: UK targets Russians because of hate for Putin

“The City of London is afloat on dirty money and for the money that’s too dirty even for the City of London, we have our own crown dependency tax heavens, which are the toilet for dirty money,” the politician-turned-broadcaster Galloway told RT.

‘Russophobic dirty money campaign’ in UK is all about unfair competition – Kremlin

Ill-gotten cash from Russia does not damage UK security more than fraudulent gains, brought to the City of London from any other state across the world, according to the former MP. “Dirty money is dirty money wherever it comes from, and thieves are thieves wherever they come from,” he said, noting the lack of concern by the British government about money coming from the Middle East.

Galloway sees the craze around Russian investments as a politically motivated. “Cracking down on Russian dirty money when you’re allowing other dirty money to buy up at least 20 percent of London, is just hypocrisy,” he said.

The commentator highlighted London’s change of attitude since the early 1990s, when rich Russians began parking huge amounts of money in Britain.

“Britain and its government and state authorities loved the Russia of the early nineties and laid a red carpet for the oligarchs, escaping here with Russia’s wealth. Britain loved Russia when its president [Boris Yeltsin – Ed.] was lying drunk on floor and its pockets being picked,” Galloway said. “They don’t love its current president, because he’s a real man, who’s standing up straight and recovering Russia’s lost strength and international prestige.”

The former politician added that he is for zero tolerance of emigre crime. “It doesn’t damage Britain’s security except in as much as it helps to pollute the economy here as the use of stolen money always does,” he said.

“I’m against dirty money, all dirty money. All money that’s stolen should be returned to the victim of the theft, to countries from which it was stolen,” Galloway said. “Russian oligarchs involved in dirty money should be sent back to Russia. So should dirty Nigerian money be sent back to Nigeria, and Nigerian oligarchs sent back to Nigeria.”

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Braking point: Elon Musk’s Tesla Model 3 lurching from one crisis to the next

The problem was pointed out by the US magazine Consumer Reports, which exposed the alleged braking issue with the Model 3 sedan.“The Tesla’s stopping distance of 152ft from 60mph was far worse than any contemporary car we’ve tested and about 7ft longer than the stopping distance of a Ford F-150 full-sized pickup,” it wrote.

Tesla bursts into flames after fatal crash in Switzerland (PHOTOS)

The Consumer Reports test is designed to determine how a vehicle performs in an emergency situation. Testers speed up a car to 60mph (96kph) and slam on the brakes until the car comes to a full stop, then measure the braking distance.

CEO Elon Musk tweeted that the situation is under control and will soon be fixed. “With further refinement, we can improve braking distance beyond initial specs. Tesla won’t stop until Model 3 has better braking than any remotely comparable car,” Musk wrote in a tweet.

The report comes at a time when Tesla’s safety is being questioned following the accident involving a Tesla Model S driving in “autopilot” mode when it crashed into a stopped firetruck in Utah.

Tesla’s braking problems described in the Consumer Reports have been previously covered by Car and Driver. The magazine published a test, which said Tesla Model 3’s one stop from 70mph took “an interminable 196ft.”

“I’ve been testing cars for 11 years… And in 11 years, no car has stood out with inconsistent braking like this. Some trucks have. . . . It was just weird,” Car and Driver Testing Director K.C. Colwell said in an interview with Consumer Reports.

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White South African farmers claiming persecution at home seek refuge in Australia

“The type of criteria they of course have to meet – or the key one – is evidence of persecution, so that’s exactly what we will be looking at,” Home Affairs Deputy Secretary Malisa Golightly said. Home Affairs said 89 refugee visa applications relating to 213 people had been received, although they did not specify their ethnicity or any other details.

South African politician attacks ‘racist’ Australia for sheltering fleeing white farmers

News reports emerged earlier this year revealing that white farmers in South Africa had faced persecution after the country’s government approved a new law allowing for the confiscation of their lands, which would be transferred to black citizens.

Following the reports, Australian Home Affairs Minister Peter Dutton announced his willingness to start fast-tracking humanitarian visas for South Africans who had endured violent rural crime at home and wished to move Down Under. The step was slammed by the South African opposition, which called Australia, and those willing to escape there, ‘racist.’

The controversial legislation was endorsed by South African President Cyril Ramaphosa, who pledged to hand the lands owned by white farmers since the 1600s to black citizens of the country without compensation for the owners. South Africa’s 50 million citizens are predominantly black, but 72 percent of farmland reportedly belongs to whites.

The legislation evoked strong disapproval both in the country and internationally, with a reported upsurge in violence against white farmers. Last year, some 82 people were killed in a record 423 farm attacks, and there have been 109 attacks and more than 15 murders in 2018, Afriforum, a South African civil rights group reported in March.

The controversial reform may jeopardize commercial farming in the country, according to the Transvaal Agricultural Union of South Africa. Experts say that the South African government may repeat the mistake made by the government of Zimbabwe, which had passed through a state-sanctioned purge of white farmers in 1999-2000. The measure plunged the country into famine.

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Trump’s Charm and Threats May Not Be Working on China. Here’s Why.

China’s problems in the area of technology could get worse. American officials are investigating whether a much bigger Chinese tech company, Huawei Technologies, also flouted American trade controls. Huawei has said it adheres to international conventions and local laws.

Despite that vulnerability, China has plenty of negotiating strengths.

White House trade officials have more expertise with trade law, but China has a small but cohesive team of negotiators who report directly to Liu He, a vice premier and nearly lifelong friend of Xi Jinping, the country’s top leader. The group has also streamlined Beijing’s ability to make economic policy decisions, a benefit in evaluating the impact of any concessions to the United States. Policy decisions that once took a month can now take as little as a day, said a person with a detailed knowledge of the process who insisted on anonymity because of the political sensitivity of the issue.

By contrast, the United States has shifted its demands and struggled to send out a consistent message.

The internal divisions were on display again on Sunday. Mr. Mnuchin said in the morning that any tariffs were on hold. Later that day, Robert E. Lighthizer, the United States trade representative, issued a statement in which he said, “As this process continues, the United States may use all of its legal tools to protect our technology through tariffs, investment restrictions and export regulations.”

In March and early April, Mr. Trump and his trade advisers threatened to impose tariffs unless Beijing agreed to curb long-term subsidies for high-tech industries.

The president then shifted to conciliation.

His financial policy advisers, led by Mr. Mnuchin, sought a fixed reduction of up to $200 billion in the $375 billion American trade deficit with Beijing. China’s trade negotiators resisted again, and the administration ended the weekend with a joint statement by officials from the two countries that did not commit China to any specific concessions.

Chinese and American officials did exchange lists last week of extra goods that China might buy to narrow the deficit. But China only committed to continue buying ever-rising quantities of American food and fossil fuels, a position reflected in the joint communiqué issued at the close of the talks.

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‘Isolated’ Russia welcomes investment funds worth over $13 trillion at St. Petersburg forum

According to the head of the Russian Direct Investment Fund, Kirill Dmitriev, about 40 leaders of the world’s largest investment funds from 20 countries with total assets of over $13.5 trillion will participate in the forum. This is a record for such meetings, Dmitriev explained.

“Foreign guests will discuss with President Putin that Russia has a good macroeconomic position and that they have benefited from investing in the Russian economy,” he said, adding that “all assumptions that the Russian economy will be isolated were not justified.”

About 15,000 participants from more than 100 countries are expected at the three-day event, which will officially open on May 24.

“The interest is high and official delegations from over 100 countries will come, which is about 15,000 potential participants,” St. Petersburg Governor Georgy Poltavchenko told reporters. “Among high-ranking guests, we are expecting French President Emmanuel Macron and Japanese Prime Minister Shinzo Abe.”

US Ambassador to Russia John Huntsman is also expected to visit Russia’s premier economic forum. He will be the first US official to visit the St. Petersburg International Economic Forum (SPIEF) since 2013, when relations between Moscow and Washington deteriorated.

According to Poltavchenko, representatives of major companies from over 70 countries, including the UK, are expected at the economic forum.

“Great Britain will be also represented,” he said. “I am not ready to say who will be heading the delegation, but it will consist of representatives of major British businesses.”

Poltavchenko stressed that “despite the recent rhetoric, the interest of business as well as among world politicians is still high in regard to the forum.”

SPIEF is one of the world’s key economic discussion platforms. It is held under the patronage of Russian President Vladimir Putin. Traditionally the event gathers foreign heads of state and government, key public figures, heads of international organizations and major companies, leading world experts, analysts and the media.

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World’s first floating nuclear power plant reaches Russia’s Arctic for maiden mission

The water-borne power plant, named Akademik Lomonosov, was built by the state-run nuclear corporation Rosatom in St. Petersburg. The new vessel is set to pioneer a new power source for remote regions of the planet, the company says.

Media meltdown as Russia’s first floating nuclear power goes on fueling trip (PHOTOS)

The floating nuclear power plant will take on board a supply of nuclear fuel and will then be towed to Pevek, a small town in the Far Eastern region of Chukotka. The port of Pevek, which is located in Russia’s extreme northeast, is separated from the US state of Alaska by the 86-km (53 mile) wide Bering Strait.

The power plant is set to start providing electricity for homes as soon as in 2019, replacing a coal-powered plant and an old nuclear power plant that provides electricity to more than 50,000 people in the region.

According to Rosatom, small sea-borne power units are best suited for remote areas. The plants may help to reduce greenhouse gas emissions, which are blamed for global warming. Power plants of this kind are able to operate without stopping or the need for refueling for up to five years. The vessels were created to make it possible to supply electricity to hard-to-reach regions of the huge country.

However, green campaigners have raised some concerns over the risk of nuclear accidents. Greenpeace has dubbed Akademik Lomonosov the “nuclear Titanic.” Various environmental protection groups sent Rosatom a letter, calling for full and unrestricted regulatory oversight of the vessel. The floating power plant will not just generate electricity for Pevek, it will be used for oil and gas exploration as Russia is pushing development further north into the Arctic.

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‘Russophobic dirty money campaign’ in UK is all about unfair competition – Kremlin

According to Peskov, Russian companies have been expanding abroad in recent years, and targeting them with sanctions shows a “manifestation of unfriendly, unfair and illegal competition, violating all the rules and regulations of the World Trade Organization.”

UK crackdown on wealthy Russians ‘politically driven by Cold War mentality’ – George Galloway

The UK House of Commons’ Foreign Affairs Committee has issued a report named ‘Moscow’s Gold: Russian Corruption in the UK,’ which accuses Russia of “hiding and laundering corrupt assets in London.” The report urges the government “to work with the EU, US and G7 to tighten loopholes in the sanctions regime that allow Russia to issue new sovereign debt with the assistance of sanctioned entities such as VTB Bank.”

The report should be a signal to other countries, meaning that their money in Britain can be regarded as “dirty,” too, said Peskov. “Many countries are working to strengthen their investment attractiveness, I believe that this report is a step in the opposite direction.”

According to the Kremlin spokesman, “we are witnessing a rather unprecedented Russophobic mania… You see that this Russophobic wave was not provoked by some events in relation to Britain or its citizens.”

“It was a provocation by the British of the so-called Skripal case,” he added, referring to the recent poisoning of former double agent Sergei Skripal and his daughter, Yulia, in the UK.

Britain has blamed Russia for the incident, although Moscow has rejected the claims and has demanded that the UK allow it access to a full and transparent investigation – something London has rejected.

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South Korea looks to boost economic ties with Russia

South Korea wants to speed up the building of the so-called “nine bridges” meaning gas, railways, the Northern Sea Route, shipbuilding, job creation, fishing and other types of cooperation.

Pipeline for peace: Russia hopes to unite North South Korea through gas project

The initiative was first proposed by President Moon Jae-in during the Eastern Economic Forum in Russia. During the meeting of foreign ministry officials, the countries also agreed to look at building trilateral economic ties with North Korea.

Last month, South Korean diplomat Kang Kyung-wha said Russia could build a natural gas pipeline to the country through the North’s territory. “Should the security situation on the Korean Peninsula improve, we will be able to review the pipeline natural gas (PNG) business involving the two Koreas and Russia,” she said then.

Last year, trade between Seoul and Moscow grew 40 percent to $19 billion. The countries have joint projects in Russia’s Far East and economic ties can grow, if the countries reach a breakthrough on gas deliveries.

South Korea is currently forced to buy more expensive liquefied natural gas (LNG) shipments. President Moon also said that good business ties between Russia and South Korea could solve the problem of the North Korean nuclear weapons issue.

“If the North sees Northeast Asian countries successfully conducting economic cooperation, it will realize that participation in the development of the Russian Far East would be beneficial to it,” he said.

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