Worthy of Note: Trump Considers Sanctions on China, Ancient Tensions Simmer, and Lockdowns Maybe Deadlier Than COVID-19
In the United States, the long holiday weekend to observe Memorial Day, in addition to marking Americans’ respect for service members who’ve made the ultimate sacrifice, essentially marks the beginning of summer. The shift happens culturally, economically. This year is unique, on account of the Pandemic Panic, of course, but that doesn’t necessarily mean ‘This time is different.’
As states begin to relax restrictions across the US, Americans’ barbecues and beach outings provide a cathartic release of historic proportions. After months on varied levels of lockdown, crowded summer scenes and eager restaurant diners show the impetus is now aimed at a return to the American way of life.
Productive work is a significant part of the American ethos, and Memorial Day 2020 may indeed mark a broad pivot from lockdown mentality to one of reclamation.
Notably, Federal Reserve Bank of St. Louis Governor James Bullard predicted Tuesday that the initial economic shock stemming from the COVID-19 crisis has passed. Further, he thinks that unemployment could reclaim single digits by the end of the year.
Such a scenario maybe what the stock market has been forecasting with its relatively upbeat performance of late, with a massive assist from central bank actions. Chairman Jerome Powell has reassured that the Fed has unlimited ammunition. They may very well need it to battle this unprecedented economic contagion spreads further, but for now Wall Street is buoyantly hopeful.
And so, with the fog of the coronavirus lifting, there must be another wall of worry to climb.
US vs China
Bloomberg reported Tuesday that the Trump administration is considering a range of sanctions on Chinese officials, businesses, and financial institution over Beijing’s crackdown on Hong Kong. Under such a move, the U.S. Treasury would be active in freezing assets and blacklisting certain entities from financial services under U.S. jurisdiction.
President Donald Trump reinforced the reports with comments that he doesn’t see how Hong Kong could remain a financial hub if the new Chinese legislation were implemented. U.S. Secretary of State Mike Pompeo called the national security legislation ‘disastrous’ and contradictory to the Basic Law governing the autonomous region that comprises Hong Kong.
The interesting wrinkle here is that the Chief Executive of Hong Kong, Carrie Lam, pushed back against opponents of the law, assuring that the legislation was consistent with Basic Law and would improve the ‘One Country, Two Systems’ arrangement the former British colony was supposed to enjoy under transfer to Communist Chinese rule.
Lam is the same chief executive that presided over the tumultuous protests of late 2019, a resistance aimed at her, in part, for her part in enforcing the will of the Chinese Communist Party (CCP) and President (for life) Xi Jinping. When it comes down to it, Lam holds power by the good graces of Xi, and she can be relied on to push the official CCP agenda despite the lip-service paid to ‘One Country, Two Systems.’
Meanwhile, American and Chinese economic advisers are tentatively saying that the Phase One trade deal reached last year is still intact. Trump economic advisor Larry Kudlow said in an interview Tuesday that the deal is on, “or so they say.” The rest of the context was about how disturbing Chinese actions are with respect to Hong Kong and their mishandling of the coronavirus.
President Xi made headlines Tuesday for stating the Chinese military will “step up preparedness for military combat,” and the Chinese Foreign Minster warned the two nations were “on the brink of a new Cold War,” while threatening countermeasures if the US continued to undermine Beijing’s interests.
As summer kicks off, the US vs China continues to heat up
Ancient Tensions Simmer
There are not many conflicts on the globe that have been simmering as long as those between Greece and Turkey. Since ancient times these two history-shaping nations and cultures have battled, each having eras of prominence and defeat, and those tensions continue into today.
The divide is historical, cultural, economic, and political. It is the point at which the East meets the West, for good or for ill.
After years of war weary migrations throughout the Middle East, Turkey hosts some four million displaced refugees, more than anywhere else in the world. You’ll remember the constant barrage of headlines from several years ago during the European Migrant Crisis. Those scenes are replaying in Greek and Turkish border regions now, but with more animosity and suspicion.
Greece accuses Turkey of weaponizing the refugees, and reports of forced returns have emerged. Earlier this year, Greece deployed riot police and military patrols to the land border while dispatching gunships and coastguard vessels to conduct around-the-clock patrols off the Turkish coast.
Emotions and suspicions are heightened. Reports of Turkish forces occupying Greek Islands have had to be dispelled by Greek ministers, after emerging and going viral in Greek and British media.
Summer is typically the more forgiving season for Middle Eastern and North African migrants to make the dangerous trek to seek asylum in Europe, but this year’s seasonal change will be exacerbated by the effects of the coronavirus pandemic.
During the height of global lockdowns, Turkish authorities closed borders in ways they had previously neglected to do and migrant movements out of Turkey slowed to a trickle for the apex of Pandemic Panic. But now, with coronavirus fears and restrictions lifting, EU authorities have reported mass movements toward the Greek border and worry the summer of 2020 could reignite a migrant crisis.
Turkish President Recep Erdogan certainly appreciates the amount of leverage this gives him. He needs all he can get, because the ascendant strongman has found that he cannot reverse the laws of economics by decree or simply purge away the pressures of leading a conflicted nation.
Greece, having dealt with its own struggles over the last decade, is demonstrating a resolve to not become the victim of such crises. The proud and storied nation’s leaders have presented a strong front against Turkey, with many calling for even more aggressive responses to Turkish provocations.
A new border crisis is brewing, and when it breaks open Europe will be be that much more strained. Ironically, the Pandemic Panic may better prepare the EU against such refugee waves. Since the pandemic hit Europe, the Schengen agreements, which govern the free movement of people and goods across EU member countries, have been suspended. Borders that made a comeback to slow the spread of the virus may prove useful in guarding against a forced incursion of migrants orchestrated by Turkey.
Lockdowns Deadlier Than Virus Itself?
As lockdowns are tentatively lifted around the US, many are reexamining the costs and benefits of the economically detrimental policies and what the net effects on public health are. More evidence is emerging that the lockdowns have been deadlier than the virus itself according to a report written by John R. Birge (professor at the University of Chicago Booth School of Business), Ralph L Keeney (professor emeritus in business at Duke University and in engineering at the University of Southern California), and Alexander Lipton, a visiting professor and dean's fellow at the Jerusalem Business School of the Hebrew University of Jerusalem.
Understanding the extent of damage done, not just in the surface level unemployment reports and GDP numbers, but over the full scope of the Pandemic Panic’s impact, will be vital in understanding what policymakers will be facing even after the crisis seems over. All of those millions of years of life lost by way of a mandated lockdown will reverberate economically, culturally, and politically for months and years to come.
These pressures will only add more weight to central bank policies of printing with abandon in desperate hope to plug leaks in a fragile global financial system.