Category Archives: Society

Economic, Government, Politics, Society, United States

With or without tariffs, Trump has reshaped the world

GLOBAL ECONOMY

When the US Supreme Court ruled that Donald Trump’s tariffs were illegal, he reacted with characteristic fury saying the decision is a “disgrace” and that the judges have been swayed by “foreign interests”. Trump then asserted that he has a back-up plan ready to go.

Over the next few days, he may well use all the power of his office to find a way of reimposing additional levies on everything America imports (on top of the 10pc he has already announced).

And yet, despite all of the drama of the decision, it may not make a great deal of difference. Tariffs have already fundamentally reshaped the global economy – and there will be no return to the old order now.

The decision of the Court was split by six votes to three, but was still clear enough. By relying on a 1977 law meant for national emergencies to impose sweeping tariffs on everything from cars to toys to microchips, Trump exceeded the power of his office.

In peacetime, it is the role of Congress to decide on import levies. Trump can try to find another legal route if he wants to; but for now, his original tariffs are dead in the water.

So, does that mean we can all go back to the global trading system that has reigned for the last half-century? One in which the rules-based order is back, where free and open trade is restored, and where globalised supply chains can operate without any barriers? Well, not exactly.

As much as the European Union, the World Trade Organisation, and the gatherings of Davos might want it to, there is no going back to the old system. The world has changed too much since “liberation day” last April for that to happen.

To start, Trump has already said he will impose an additional 10pc global tariff, on top of the levies he has already forced through. Is that legal? At this stage, no one really knows.

The president is planning to use a section of the 1974 Trade Act which allows him to set import restrictions for 150 days, and it will probably be another year or more before the Court delivers a verdict on that decision.

By then, he may well be using another obscure piece of legislation, and then another. Trump is determined to impose tariffs, and will use all the power of the White House to make them stick. He doesn’t care how often the Court rules against him.

More significantly, just look at some of the ways that the global trading system has changed over the 10 months since the tariffs were first imposed.

Europe has already decoupled from the US as much as it can, and, where that hasn’t been possible, made concessions to hold the fort.

Japan has opened up its market to American rice, and will feel nervous of putting up barriers again simply because the Supreme Court ruling might mean it can do so.

China has started to build its own computing and chip industry, replacing the American hardware that it used to depend on.

Global conglomerates, such as Britain’s AstraZeneca for example, have already committed billions of dollars to building factories in the US to make sure their products are on the right side of the tariff wall, and, with those contracts already signed, there will be no movement to scrap those plans now. The list goes on.

The supply chains that span the world have already been reconfigured, and it is too late now for a complete reversal, even if some wanted to do it.  

Many of the senior figures around Trump probably suspected all along that the tariffs were illegal, but decided to go ahead anyway. They knew they would never get Congress to agree to them, and figured that a year would be enough time for the levies to change the global trading system.

In that judgement, then, they were correct. Surreptitiously, or maybe with some good fortune, they may even end up with the best of all possible worlds. The global trading system will have been reordered, and largely in America’s favour, with the tariffs as the battering ram.

But the levies themselves, with all the price rises for ordinary consumers that they triggered, will have to be ditched. The result will be falling inflation, and the Federal Reserve will be able to cut interest rates. That will help going into difficult mid-term elections later this year.

It will be messy over the next few weeks. The Trump presidency is a chaotic wild ride, and no policy has proved more disorderly than tariffs. We still don’t know if the White House’s new legal tricks will work? Or whether the president will try to persuade Congress to impose tariffs for him?

We don’t even know yet whether the billions of dollars in revenue collected from the tariffs will have to be repaid by the American government, and if so whether it is the manufacturers, the retailer, or even the consumer who will get the refund? Even by Trump’s standards everything is up in the air.

One point, however, is surely cast in stone. We are not about to return to the old trading system any time soon.

Trump has already reshaped the way goods move around the world. The huge trade imbalances between the US and the rest of the world will keep on being reduced. Manufacturing will move closer to the consumer. Trade flow will reduce, and barriers will remain in place.

Whether that will be better or worse than the old system is open for debate. Prices may well be higher, but against that there may well be better paid blue-collar jobs, and countries will rely more on their own resources.

Either way, that is the new reality, and one that Trump has created – and whether we like it or not, it will take more than six Supreme Court justices to stop that process now.

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Britain, Digital Economy, Financial Markets, Society, Technology, United States

A digital payments system is undermined by cryptos crash

DIGITAL CURRENCIES

Intro: Digital payments systems are taking hold in China and America, and the eurozone is chasing hard to set one up. The Bank of England’s lack of enthusiasm for a digital pound is a blessing in disguise

China already has one, and envious of the near monopoly American companies enjoy in European digital payments systems, the eurozone is chasing hard in setting one up.

Trump’s America has made it illegal for the Federal Reserve to pursue such a project, and instead has set its sights on privately sponsored stablecoins.

We’re talking here about so-called central bank digital currencies (CBDC) – in effect, digital versions of physical cash.

On this issue, the UK and the Bank of England stand pretty much nowhere. It might surprise you to learn that’s faintly reassuring. Digital money is not an issue to set the pulse racing, but what is amazing is how people are so exercised by it.

A Bank of England consultation on proposals for a digital pound provoked an unprecedented tidal wave of more than 50,000 responses, overwhelmingly negative in nature.

It wasn’t just issues over privacy posed by a digital currency that many respondents seemed to be upset about. Nor was it the complex and costly logistical problems in providing universal access to central bank money.

Still less was it the threat that a digital pound would pose to the future of fractional reserve banking.

Rather, it was the creeping encroachment on physical cash that people feared most.

Plain and simple, people still like the idea of notes and coins, even if they hardly ever use them.

No decision has yet formally been taken on whether to establish a digital pound, but the sense is that any appetite the Bank of England might once have had for such an enterprise has all but disappeared.

Nor does the Bank appear to be that eager on the supposed alternative of sterling-based stablecoins. Its proposed framework for regulating stablecoins has gone down in the industry like a lead balloon, and although the Bank has rowed back on some of the regime’s more costly features, is still widely thought of as too demanding to allow for the creation of a significant stablecoin presence.

George Osborne, a former UK chancellor, has claimed that Britain is in danger of being left behind in a payments revolution which is taking the rest of the world by storm.

But then, he would say that, wouldn’t he? Among a seemingly ever-widening portfolio of positions enjoyed by Osborne, he is an adviser to the US-based crypto exchange, Coinbase, which has a powerful vested interest in as lightly a regulated stablecoin environment as possible. Since Osborne went public with his concerns, Bitcoin and much of the crypto universe has crashed, and many so-called stablecoins – theoretically backed by the real-world, ultra safe, fiat currency assets – have faltered too.

At least half a dozen of them have “broken the buck”, or lost their dollar peg. Some have fallen to as low as a few cents in the dollar, resulting in losses running to hundreds of millions of dollars.

There’s plenty more damage still to come from that sell-off, so if the Bank of England has been asleep at the wheel in failing wholly to embrace the ecosystem of decentralised finance, we may have much to thank it for.

Instead, the Bank has focused its attention on its plain vanilla business of updating its systems for making direct, account-to-account payments between buyers and sellers.

It’s a kind of muddling through alternative to the European Central Bank’s (ECB) empire-building on the one hand, and Trump’s enthusiastic embrace of crypto on the other.

This should not be read as a derogatory view, but the Bank of England regards payments as a simple utility, not as either a way of maintaining the Central Bank’s grip on the “moneyverse”, which seems to be the ECB approach, or as a fintech opportunity for money-making, which is the current White House approach.

Critics complain that the Bank is further condemning the pound – and indeed the City – to the slow lane. Others would say that its safety-first approach is actually what you want out of a digital payments system.

Certainly, it needs to be faster, even instantaneous if possible, and to cost as little as possible. Above all, though, you want it to be robust, so that it acts as a wholly reliable means of exchange.

Four years ago, the House of Lords economic affairs committee concluded after a lengthy inquiry that a digital pound managed by the Bank of England was “a solution in search of a problem”.

Nothing has happened since then to change that verdict.

The vast majority of sterling transactions are already digital in nature, in any case, but they take place between commercial banks or on card networks, not via the central bank.

The benefits of a central bank digital currency are far from obvious, yet there are clear cut risks to financial stability, privacy, credit provision and security, to name just some of them.

Why then is the European Central Bank fixated on establishing a digital euro? In the main, it’s about monetary sovereignty and parallel fears of US dominance.

All the main card networks are American-owned, while existing systems for direct bank-to-bank settlement in retail transactions are clunky and inefficient in many euro-dominated countries.

And it’s about the threat posed by dollar-denominated stablecoins as an alternative means of payment.

The ECB and its political masters do not want this particular Trojan horse at the centre of the eurozone payments system.

Indeed, Scott Bessent, the US treasury secretary, has openly admitted that part of the purpose of the Genius Act, which sets out a regulatory framework for stablecoins, is to attract money into US treasuries, thereby underpinning dollar hegemony in international markets. Financing the US treasuries market is not what Frankfurt has in mind when thinking about the future of money.

Instead, the digital euro is proposed as part of Europe’s wider, statist approach to “strategic autonomy”, or making the continent less dependent on rival jurisdictions for core industrial, agricultural, and monetary functions.

The idea that money can in some way be reinvented is what really lies behind developments such as CBDCs and stablecoins.

So here’s the truth: it cannot. The Bank of England is no doubt guilty of many failings, but it does at least properly understand this basic maxim. Its overarching responsibility is to ensure that a pound is worth a pound, no more, no less.

Like cryptocurrencies, stablecoins are at root just another mechanism for rent extraction. And as long as there is scope for improving existing pubic infrastructure for digital payments, which is where the Bank of England is focusing its efforts, it is also hard to see the point of digital cash.

Paul Volcker, a one-time chairman of the Fed, had it about right when he said that the only socially useful innovation to come out of finance in the past several decades was the ATM.

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Government, Israel, Legal, Myanmar, Politics, Society, United Nations

Genocide once had meaning. It has become a political tool

GENOCIDE

Of the many examples of moral collapse in society today, the debasement of genocide has been among the ugliest. Using the megaphone of social media, activists, hostile states, the media, and non-governmental organisations have corrupted a precise legal term to smear troops who were issuing evacuation orders, facilitating aid handouts, and fighting an enemy that used human shields. If the proper meaning of genocide is lost, no Western army will be safe.

As Keir Starmer’s failed attempts to marshal international law against our own troops who fought in Iraq demonstrated, such instincts are strong amongst progressives. As in London and Strasbourg, so in The Hague. Just days ago, judges at the International Court of Justice (ICJ), the principal judicial organ of the United Nations, finished hearing a genocide case against Myanmar. Given the appalling atrocities against the Rohingya, few would dispute the verdict if the crime is confirmed. Scratch the surface, however, and trouble is brewing.

Genocide as a modern legal concept first emerged in print in Axis Rule In Occupied Europe, a 1944 book by Polish-Jewish jurist Raphael Lemkin. Crucially, it described mass violence with the intent to “destroy, in whole or in part, a national, ethnical, racial, or religious group”. Lemkin was influenced by the 1915 Armenian massacres, but it was the Nazis’ attempted extermination of the Jews – in which 49 members of his own family were murdered – that provided the catalyst for its inclusion on the statute books.

Since 1945, only five legally confirmed genocides have been recognised by the British government: the Holocaust, Rwanda, Bosnia, Cambodia, and the liquidation of the Yazidis by Islamic State. Between the Srebrenica massacre – the last time the ICJ delivered a guilty verdict – and Myanmar, times have changed.

As part of the Myanmar hearing a few days ago, hostile Facebook posts were presented as evidence. Social media has become part of life since 2007, but there are fears that relying on such contextual and emotive ephemera may eclipse the hard facts. This will especially apply to the ICJ’s next case against Israel.

Aggressive posts and videos of soldiers chanting bloodthirsty slogans already form the backbone of the prosecution’s case against the Jewish state. Whatever our view may be over Palestinian Gaza, are these really evidence of genocidal intent in an army that is said to warn civilians to flee before it attacks? The Myanmar precedent may lead judges to give such things undue weight.

Similarly, NGOs giving evidence against Myanmar included Human Rights Watch and Amnesty International, both of which have a well-established bias against Israel. None of this necessarily invalidates the case. But it reveals the weakness of the court.

One of the presiding judges, an 84-year-old South African jurist, has already been accused of turning genocide into a political tool. For many years the jurist headed a UN Human Rights Council “commission of inquiry” that was dismissed as laughably biased. As long ago as 2014, 100 members of Congress said the commission that this jurist led could “not be taken seriously as a human rights organisation”. Another commission member later claimed that social media was “controlled by the Jewish lobby”. Sanctions were then called for against “apartheid Israel”.

Last September, the commission produced a highly contemptible and skewed report which pre-emptively found Israel guilty of “genocide” and airbrushed out of its report all other parties to the conflict. Remove the combatants from any war and you have a crime against humanity. Is the jurist leading the commission, then, a proper person to preside over genocide cases at the UN’s highest court?

Like the rest of the world, the UN seems to be deploying “genocide” as a campaigning tool, fuelled by ideology and the often-empty rage of social media.

The California state senator Scott Wiener, who is in line for Nancy Pelosi’s San Francisco congressional seat, said the quiet part out loud.

“In terms of the word ‘genocide’, it’s traditionally been a very technical legal term under the Geneva Convention. It is a descriptor for an extreme level of devastation of a people. It’s a heartfelt descriptor.”

Heartfelt or not, replacing facts with emotive feelings is a dangerous game. Just 10 days after October 7, the Lemkin Institute for Genocide Prevention accused Israel of “genocide”. Others may conclude that it was an unprecedented military operation. Members of Lemkin’s family are fighting to have his name removed from the institute’s title.

Last Tuesday, Holocaust Memorial Day was held. As any schoolboy knows, or used to know, victims of that genocide totalled about 11 million, of which six million were Jews. Regardless, the BBC and other broadcasters repeatedly paid tribute to the six million “people” who were murdered, erasing the Jews once again as a reprehensible coda to the genocide.

Was that “heartfelt”? It probably was. Unsurprisingly, of the 2,000 secondary schools that marked the Holocaust in 2023, 1,146 have since given it up. Lurking in the background is the cunning little piece of anti-Semitic propaganda, shamefully endorsed by the UN, that when it comes to genocide, the Jews are as bad as the Nazis. Yet nobody has used the G-word for massacres by the Iranian regime, an enemy of our democracies.

How easy it has become to dismiss truth as a quaint and old-fashioned habit. But unmoor legal definitions at your peril. When genocide becomes a political weapon, it is wielded against the West. Be careful what you are aiming for.

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