No Escape From the Middle East

No Escape From the Middle East

President Trump was elected on a platform that included “no more dumb wars.”  Whether our recent conflicts have been dumb may not answer a more pressing question – how to get out of the quagmire known as the Middle East.  His recent tweets, threatening the Iranian regime, do not suggest that we are near the end of America’s involvement in that part of the world.

There is no question that Trump campaigned on, and his supporters agreed with, bringing home US troops from the Middle East.  Afghanistan, Iraq … ”America First” meant getting out of other people’s fights.

But are they “other people’s” fights?  The US has allies in the region … America has a vested interest in the free flow of oil from the region … America is the only power that stands with Israel – a Western styled democracy in the middle of a region of authoritarians and royalty … markets rise and fall on the price of oil, meaning our money is impacted by the oil trade … terrorism is born and metastasized in the Middle Eastern countries … this region is not just “other people’s” problems.  America is fully invested in the matters of state within the Middle East.

Unlike North Korea, Iran does not have the same leverage.  Despite daily news coverage of the regime, in concert with Russia, flaunting American interests and international norms, Iran could be playing a losing hand:

Top 3 Reasons Trump is Right to Threaten Iran:

  1. “Their strategic depth is limited in the region”: Unlike North Korea, which has Cold War ties to Russia, a benign patron in China, and an opponent in South Korea that does not want war, Iran is primarily on its own.  Russia is a partner on a transactional basis and does not have the capital or soft power benefits to give to Iran.  US forces are next door in Iraq but also next door in Afghanistan.  The US 5th Fleet patrols the Persian Gulf.  The Saudis and most Sunni tribes oppose Iran on religious grounds, and Israel is a military hegemon for the region with strategic strength.  Bottom line, Iran is much more isolated than other US enemies.
  2. “Their economy is in free-fall, with more US sanctions on the way”: Sanctions have wrecked the Iranian economy.  Even as Europeans wish to stay in the now defunct JCPOA agreement, their home-grown corporations are running for the hills.  When given a choice – do business with America or Iran – that’s not really a choice.  Oil is, for the time being, traded in dollars.  When you attempt to go outside dollars in the oil trade, you impose taxes on yourself, which is exactly what Iran has done.  Their currency is in freefall this year.  On every economic measurable, their economy is collapsing … and more US sanctions are on the way.
  3. “Iranian citizens oppose conflict and are in many respects pro-Western”: Iran’s youthful population is by no means pro-American, but the great victory of Pax Americana is that you can buy a Coke and some Nike shoes in every corner of the globe.  The Iranian public’s desire for freedom from their Muslim overlords was apparent during the Green Revolution in 2009 and the most recent protests against the government.  Trump’s tweets provide a public stance against the regime and can give confidence to aspiring pro-Democracy groups within the country.

 Top 3 Reasons Trump is Wrong to Threaten Iran:

  1. “Another Middle East war would be catastrophic”: It is hard to describe all of the potential bad outcomes of another war in the Middle East involving US troops.  While the initial assault may have the support of Israel and Arab allies, the conflict would most likely spread and in ways we could not contain:  missile strikes from Hezbollah into Israel … terror strikes in Riyahd … terror strikes on the US homeland … the potential of Russia getting involved … counter-moves in other regions by China … oil prices skyrocket and impact the global economy in much more damaging ways than we could imagine……don’t confuse our ability to win a war and the capacity of US soldiers to win any engagement with the political decisions that will most likely cause the most harm.  America, if willing to fight to the end, cannot be defeated.  But today’s political leaders usually don’t have the stomach for Dresden and Tokyo-styled “total war.”
  2. “Follow through will be hard”:  Trump was elected while campaigning against “stupid” wars and specifically the Bush invasion of Iraq.  This is the second major party candidate to win an election based upon an anti-war stance (Obama ‘08).  The public no longer trusts its leaders to tell the truth about why we go to war, and to properly execute the war once we are in it.  Much of that is the public misconstrues much of how the US global order is maintained, but it doesn’t change the fact that (A) voters have soured on sending our soldiers abroad; (B) Trump promised to stop getting into such conflicts; and, (C) there is no public support for another military engagement in the Middle East.
  3. “If we do go in, it won’t be a walk in the park”: Iraq was flat terrain and just a few major population centers in a country of 25 million.  We controlled 30% of the airspace for over a decade since the first Gulf War.  We had infiltrated the entire Iraqi government with spies and hacked their networks.  And yet we saw how well that expedition went.  Iran has a population of 70+ million.  The terrain is a combination of all forms of warfare – mountainous, desert, and urban.  Its population is spread out over a land mass double in size.  Its nuclear weapons facilities are hardened and spread out throughout the country.  It has a global terror network which can create asymmetrical conflict in a moment’s notice.   The American military would not lose a fight, but if we are not willing to exert total war on an enemy, the costs of this fight will be unimaginable, and would not have public support.

After the tweetstorm exchange, Trump has signaled his willingness to “deal” with Iran.  We have entered a new era of nuclear proliferation.  Unless the US is willing to enforce non-proliferation with force, then we have little that can stop countries from developing these types of weapons.  It is not the 80s or 90s anymore – and maybe this volatility is reason that your money should be in safer places as well.

Call now and speak with your Ty J. Young Inc. advisor at no cost or obligation. Learn how you can have your retirement money protected and growing at the same time. (877) 912-1919

 

he US Can Win a Trade War

The US Can Win a Trade War

The tit-for-tat tariffs and war of words over trade imbalances has created the very real possibility of pushing the world into a global trade war.  This will have massive repercussions that could radically impact our economy, our markets, and your investment portfolio.

The conventional wisdom is that all of this is “bad”… bad for markets, bad for stocks … yet several hundred billion in actual tariff’s have already gone into effect, and the sun still came up.  The potential for a looming trade war would typically bottom the market, yet stocks remain within an elevated fixed range.

What’s going on here, is this Trump’s “Art of the Deal,” or someone playing a very strong hand in the game of poker?

 Free trade has been the cornerstone of conservative economic orthodoxy for 70+ years.  When practiced liberally, and through American hegemony, it benefits and has benefitted the entire planet.  Today however, with a large public debt, vanishing industrial base, changing great power interests, and allies who take advantage of US markets, there is little “free” about free trade for the United States.

And trump’s policies seem to be working:

1)  China’s stock market has been down over 20% in the last few months.

2)  The Chinese yuan is down 7% since March.

3)  German car manufacturers have asked the government to eliminate tariffs on US cars – their competitors!

4)  Canadian tourism into the US increased since March, and Canadian agricultural stocks slid when tariffs announced.

US trade policy with our allies as well as China has entered a new era, the outcome of which is past the horizon and unknown at this time.  But it is improbable the US would lose in a battle over free trade and markets:

 

I. Top 3 Reasons the US Can, and Probably Would, Win a Trade War with Everyone Else

  1. “They need us more than we need them.” A childish way to frame the debate perhaps, but true nonetheless.  The party with the trade deficit has the advantage in any trade war, since his side is less dependent on making money from exports than the party with the trade surplus.  Furthermore, most of the trade deficit is in the form of US manufacturers outsourcing – meaning foreign countries are typically exporting US brands back into the US, assembled abroad – demand for US brands would remain in the marketplace … we have things people want, most of our competitors do not.
  2. “U.S. markets are more diverse than competitors.” Mexico is driven by agriculture and manufacturing but is largely a corrupt failed state…..Canada has a diverse economy but smaller constituencies more easily impacted by economic downturns … China and Europe are driven by export growth … ALL, whether they have marketplace diversity or not, still pale in comparison to the deepest markets in the world – the United States.  Changes in any one dominant commodity, say oil for Canada, agriculture for Mexico, autos for Germany, or telecoms (Apple) in China, and you would have radical shifts in the politics and the budgets of those countries.  In the US, it would be painful for some in that particular industry, but would be a minor blip on the larger US GDP number.
  3. “We don’t have free trade today, so fair trade is a victory.”   China steals … everything; Europe, Canada and Mexico all have barriers to their markets which prevents US access, as compared to easy access to US markets; and, the hollowing out of US manufacturing is a direct national security threat.  That is not fair trade.  Fair trade is selling a car in my country, so I get to sell one in yours.  As it stands today, Germany can export cars to the US with a 3% tariff, while US cars are slapped with a 10% tariff.  This occurs across all export markets with all countries.  We do not and have never had free trade – to suggest we did is simply not accurate.  All Trump is doing is attempting to re-balance the trade system to modern circumstances.

This unbalanced trade regime was a byproduct of post-war American hegemony and the policy decision to rebuild the world after World War II.  Allies against communism were the priority at that time.  While China remains communist and many countries are authoritarian, the global threats to the US are substantial, but not the same, as they were in 1945.

Trade wars can make us less prosperous.  They can, in the long run, run the risk of recession or worse.  But not everyone loses equally … their can be a winner … and based upon the data and simple economic reality, the US would find it hard to lose this battle over global trade.

Call now so you can have safe and simple, principal protection products! (877) 912-1919