Привет (Hello) Русские Посетители (Russian Visitors)

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Red Lights Blinking! 

You may have heard the news that we are in a red lights blinking state related to Russia and it’s cyber security threats. On Monday, Dan Coates, the Director of National Intelligence (DNI),  warned that cyber threat warnings are “blinking red” with daily attempts by Russia and other foreign actors trying to undermine American democracy as well as water, aviation and electric systems.

For those of you who seek to defend Trump’s actions in Helsinki, or even for those of you have your hair on fire like me — let’s pause to think about what this means.

If the Russians can control our water, aviation and electric systems, and we need to recover basic infrastructure capability, do you think that is a simple matter? What if “Puerto Rico” post-hurricane was our daily reality? Let’s put water aside for a moment. Assume you lose electricity for more than a week. Not only will you be uncomfortable without a fan, A/C or heat, you will not be able to charge or use your electronics or televisions or radios, unless you have a generator. You will need to be able to get to your nearest gas station to get more fuel for your generator. Hope you have one.

These are just the few systems he mentioned. We already know that the Russians hacked our elections. Some people like to say “They have always interfered in the elections, what’s the big deal?” Really? I had totally missed that. Where is that evidence, and how is that comforting in any way? The same apologists also like to invoke the Trumpian Quid Pro Quo — in which he equates an adversary’s behavior with our own. What comes to my mind is his statement to Lester Holt “Do you think our country is so innocent?” Even if we are not so innocent — that does not mean we should accept the behavior from an adversary.

My own little tiny, minuscule to be precise, blog, which is written mostly for my own peace of mind has come under significant attacks from a wide range of nefarious and disgusting actors. In a week’s time, I am receiving about 50+ Russian comments to my blog! All in Russian.They are my main audience! So, I greet them as the title for this blog and also tell them politely in Russian to Отвянь!

I was hoping to add a nice graphic from the Cagle.com website which shows Putin popping out from inside the Donald matrioshka doll — but was very interested/sympathetic to find out that he has been hacked so much that he cannot keep up with it. Free speech? I think we are beyond blinking — that almost sounds cute. Oh yeah, when the power-grid gets hacked the red lights will stop blinking.

Robbing Hood: Trump’s 1st Day in Office Costs FHA Home Buyers $500 (On average)

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By: Reed MacMillan

The Department of Housing and Urban Development has several mission statements, including “Maintain and expand homeownership, rental housing and healthcare opportunities.” In the last quarter of 2016, home ownership increased slightly from 63.5% to 63.70%. The all time high of 69.20% was reached fin the second quarter of 2004, according to data provided by the Trading Economics website. In February of 2017, sales of new single family homes rose 6.1% for a seasonally adjusted rate of 592,000, whereas sales of previously owned homes dropped 3%. This may seem like a largely positive trend in the direction of home ownership. I do not disagree. Yet, if you look at the United States MBA Mortgage data, you will find that in March, both applications for new mortgages and refinancing fell 1.6 and 4.2% respectively.

CNBC’s Diana Olik (@DianaOlick) reported this story with the following headline, ” Trump’s first housing move tanks mortgage applications 3.2%.” To view the story click on the image below, which highlights the FHA fee cut and impact of $480/year to a buyer with a $190K mortgage. Volume was was 18 percent lower than the same week one year ago.

The report further details that there was a 13 percent drop in FHA applications, which they attribute to the Trump administration reversing a cut in the FHA’s annual mortgage insurance premium, just hours after the inauguration. Expressed succinctly by Mother Jones, “FHA loans enable homebuyers—often those with lower incomes and who have fewer assets or bad credit—to bypass conventional lenders who would likely deny them loans by taking out a mortgage that’s insured by the federal government. (Trump’s First Move as President: Screwing Over Homeowners, January 20, 2017)

To be clear, just hours after the inauguration, President Trump signed an executive order that reversed a cut in the FHA’s annual mortgage insurance, that would have decreased monthly payments for thousands of new, lower-income borrowers.  Presidential executive orders require no congressional approval to pass or overturn. Earlier this year, CNBC’s Diana Olik (@DianaOlick) reported that Obama signed this final Executive Order after after assessing that the FHA insurance fund, which had gained $44 million in reserves, could afford to pass on some of the savings to working families.
(CNBC, Obama lowers borrowing rates, claims Trump won’t reverse). Many Republicans in Congress were not happy about this, suggesting that

The mostly rural, middle-American areas that helped propel Donald Trump to victory in the presidential election, are also the areas of the country that have seen little growth in home ownership according to Laura Kusito’s (@LauraKusistoWall Street Journal’s article, Housing Gains Highlight Economic Divide. In this article, she talks about how these regions, with home prices between $100,000 -$150,000 on average, have been especially hard hit after the economic crisis of 2008, when the requirements for obtaining a mortgage became more stringent.

The National Association of Realtors article Hidden Demographics of First Time Home Buyers reveals that  the percent of first-time home buyers varies by region of the country. In the Mountain region of Montana, Idaho, Wyoming, Nevada, Utah, Arizona, Colorado, and New Mexico, all red states, first-time home buyers were only 21 percent of the total number of buyers in 2015, the lowest of any region. First-time home buyers made up 43 percent in the Middle Atlantic in New York, Pennsylvania, and New Jersey; and 42 percent in New England.

In assessing the impact of these actions on our national economy, and its economic stability, I think that you could make a case that it is risky to ease requirements for lower income and first-time home buyers. Yet, this runs counter to the mission of HUD to maintain and expand home ownership. It also runs counter to the narrative of our current President who promised the economically hardest hit new opportunities. For a President who promised to get the economy going again, it is a bit hard to understand Trump’s decision to undo the Obama-era rate reduction. It qualifies as a “Robbing Hood” because it has little effect on wealthier mortgage holders, and harms those with low incomes, middling credit scores or who have less than a 20% down payment on their homes.  Haley Sweetland Edward’s article in Time,  How Donald Trump Just Raised Many Mortgage Bills (January 2017), provides pros and cons for reversing the Executive Order. Whatever the pros are, they must be balanced against the reality of 40,000 Americans potentially losing their chance for a new home, a potential reality captured by Elizabeth Warren’s Tweet on January 20th:

“.@POTUS suspended a planned cut in FHA mortgage insurance premiums,” she tweeted on Inauguration Day, “which @nardotrealtor says will cost 40k families a shot at a new home.”

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Robbing Hood: From Average Joe to Billionaire Bob

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Dedicated to the robber in chief, leading his merry band of GOP thieves, I hereby proclaim, via the first Robbing Hood blog, a new series focused on how the GOP and 45 plan to rob from average Jane and Joe and give to Billionaire Bob!

To all the average Joe’s and Jane’s out there: watch your wallets! 45’s plan to Make America Great Again depends on the “richies” being “nice.” Ahhh yes, that’s it…all those hedge fund folks who destroyed our retirement accounts last time, who packaged up a bunch of toxic real estate assets like they were botox for the bottomline and sold them off to the banks to help the “getting by’s” buy a larger home than they probably needed. Remember the fun and frolic, when the Chinese bought our Treasuries, and credit was loose, and everyone bought more than their fair share of stuff? Oh yeah, those were the good old days of 2002-2008, before we had to pull the rip-cord and parachute to reality.

A bunch of stuff happened after that, including the formation of an organization called the Consumer Protection Agency. As stated on its website, “The FTC’s Bureau of Consumer Protection stops unfair, deceptive and fraudulent business practices by collecting complaints and conducting investigations, suing companies and people that break the law, developing rules to maintain a fair marketplace, and educating consumers and businesses about their rights and responsibilities.” Definitely something we should want to get rid of, right? Woohoo! Soon everyone can engage in the type of business practices that have distinguished 45 as one of the only “77’s” out there. What is a 77 you ask? Someone who has filed Chapter 11 7 times.

Ponder that for a moment and the possibility that we may all be headed for an “88” collectively.  But hold onto your hats you “getting by” types because you can definitely count on the “richies” and the businesses who now have full and unfettered access to fraudulent practices to do the right thing, right? I am sure they would never take advantage of or engage in practices at the expense of us pesky consumers to make extra money. Hey maybe they will even employ us and create a whole bunch of awesome jobs, right? You trust them, don’t you? So when you follow Fraulein Conway’s dictate to buy Ivanka’s stuff, because its “So great” — you will definitely be helping both Ivanka and the U.S. economy. I mean, hey, the Chinese who manufacture her clothes may even buy our Treasuries again….

You trust 45, and Fraulein Conway, and Putin, and you hate people like me. I’m the enemy – one of those crazed liberals who reads the news, believes in facts, pays my damn student loan bill ($900) a month because I went to MIT for an MBA to become an eleet.

So what does it feel like to be an “eleet?” Ah…let me count the ways. Ooops. Yes, see the thing is, my friend, — WE — yes you regular Joe, and you regular Jane, are ME. That’s right, I am regular Jane too, and I struggle to pay for that student loan and my other monthly payments, and wonder if my retirement account will crash because we certainly want to make darn sure that those Koch brothers and their industries are deregulated, and that we can pollute again, and that we can vvvvv-OUCH-erize the hell out of public education so that our billionaire baby DeVos can gut public education like she did in Michigan. Watch out for the bears!

But, I get it, its soooooooo unfair to be sooooooo mean to the Tweeter in Chief. I call bullsh*t and ask you to think about who might be taking steps, marching in the streets, blogging, and barking on your behalf?  Yes me, the liberal version of regular Jane. Oh, and did I mention that my great grand-daddy was a coal miner, and my grandpa sold spam for Hormel, and my husband is in the local carpenter’s union. His family came here from Germany after WWII. He is the opposite of eleet, and spent most of his time toiling with his body to make a living. But, hey just remember, I am a snotty liberal jerk out to get you by suggesting that fair labor practices, clean air, and regulations on business serve our purposes.

If we are headed to 88 with 45 (aka 77)…let’s try and do things bigly. Grammar is so Obama. See you at Nordstrom. That’s where the eleets like to hang out.

Political Animals: Watch Out! The Macroeconomic Elephant in the Room: How Trade Wars Depress the Economy

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By Reed MacMillan

Last Friday, the macroeconomic elephant in the room stomped on our microeconomic realities. Senator Lindsey Graham’s tweet, on January 26th, saying, “Simply put, any policy proposal which drives up costs of Corona, tequila, or margaritas is a big-time bad idea. Mucho sad!” summarized part of the problem — that trade wars drive up prices on consumer goods. In other words, microeconomics, which looks at the markets where goods and services are bought and sold, is impacted by macroeconomic policies on global trade and tariffs. Within hours of announcing the new policy, President Trump and his administration back-pedaled on the proposed 20% tariff on goods imported from Mexico. If we enter a trade war, there are downsides to consider, not least of which is our own economic growth. Let’s take a deeper dive into 3 top concerns resulting from protectionism.

1. Trade Barriers Depress Growth

In a recent lecture to Sloan alumni, MIT Economics Professor Simon Johnson, provided an overview on the state of today’s economy and the prospects for global economic growth over the next year and decades. In discussing the United States and protectionism, he said “The overwhelming preponderance of evidence suggests that trade wars depress growth.”  He cited a Wall Street Journal (WSJ) analysis of the increases and decreases in trade resulting from freer trade vs. protectionist periods.  The WSJ measured global trade relative to Gross Domestic Product (GDP) using 1947 as the base point of the index. If you take a look at their chart below, you will see several periods of growth. The first occurs between the 1950’s to the 1970’s, as General Agreements on Tariffs and Trade (GATT) nearly doubled the level of trade by 1970. The next bump up occurs after the 1990 Canada U.S. Free Trade Agreement and 1992 North American Free Trade Agreement (NAFTA) took effect. This period of growth continued through 2007, with a severe drop-off due to the financial crisis of 2008. Since that time, there has been slower growth, but it was anticipated that the Transpacific Partnership (TPP) was going to provide another boost.

The period between 1979 and 1990, when the line is relatively flat, was characterized by a period of increasing oil prices which also drove demand for lighter more fuel efficient cars, the kind largely produced in Japan. Students of history, or those who lived it, may recall a moment of crisis in the auto industry. As the industry collapsed, politicians, on behalf of their constituents, tried to pressure other markets to open up and be more fair.

An in-depth analysis of this period can be found in chapter 8 of the National Bureau of Economics Research (NBER) book Politics and Economics in the Eighties.  The author I.M. Destler describes that while Congressional trade activism multiplied, trade protection only increased marginally.  Among the increases in American trade protection were the “voluntary” export restraints (VERs) in steel and automobiles. He further concludes that, “The auto VER remained technically in force through the decade, but it had lost its bite by the late eighties. It had been enlarged by 24 percent, and the combination of the weaker dollar and increased production by Japanese firms on American soil made it increasingly difficult for the quotas to be filled.”

Today, as members of the World Trade Organization, we are bound by preexisting agreements. In a WSJ article by James Bacchus, on January 4th, “Trump’s Challenge to the WTO” the author says that, “Under the WTO treaty, the U.S. is legally bound by the tariff commitments it made on thousands of traded products. These commitments can be renegotiated. But they can’t legally be ignored.” Decisions designed to appease the political base of President Trump, such as in the case of Mexico or with the TPP,  may not take into consideration prior negotiated agreements. No doubt those negotiators also sought to provide certain advantages to the U.S. consumer, or to our own exporters.

For a good source of information on the existing tariffs between Mexico and the United States, visit the World Trade Organization website and refer to the current Schedules of WTO Members. When you open this page, you can scroll to the United States, and download a .pdf file, that contains many details on current tariff rates by product type.

2. Unintended Consequences: Winners and Losers

One downside of tit-for-tat trade policies is calculating the complexities of who might gain and who might lose. At the macro-level, what seems easy, to add a tariff to goods manufactured outside of the United States as a way of encouraging domestic companies to increase their manufacturing in the United States, may have some unintended consequences. A few questions we might ask include:

1) Will these manufacturing plants be located within states that have unions or not? As described in Wikipedia, the UAW has been credited for aiding in the auto industry rebound in the 21st century and blamed for seeking generous benefit packages in the past which in part led to the automotive industry crisis of 2008-2009.  According to Bloomberg, UAW members produced only 54 percent of the cars and trucks made in the United States in 2013. That compares with 85 percent of cars and trucks built in the U.S. in 1999.

2) Assuming the plants are built in non-union states, will there be incentives to help relocate workers to lower paying manufacturing jobs in the South? There is already an unofficial trade war among states in the U.S. who create incentives to lure companies to their state. New protectionism may exacerbate this, as states increasingly compete to provide incentives to automakers to relocate. As long as labor as plentiful and willing to move, this might work. As soon as labor markets tighten, and the dynamics shift in favor of the worker, relocating for cheaper labor will no longer be cost-effective. CEOs who continue to evaluate which is the best economic environment in which to do their manufacturing, will factor in protection of jobs and workers only as long as they can achieve competitive market advantage.

3) How will consumers react to higher prices and less choice? Perhaps, there will be a migration of the displaced union workers from Ohio and Michigan to the South, where they can take advantage of these new non-union job opportunities. Or, if companies choose to build the factories in union states, then we can expect that the increased wages of these union workers might impact to the prices of the automobiles produced. This takes us back to the 1980’s — when the automobiles produced were higher priced than the imports, and potentially less attuned to consumer desires. Thus, two of the benefits of this global competition, more choice and better prices, may decline.

Another aspect of this story is how our politicians respond. In 1991, The National Bureau of Economic Research’s published volume of conference proceedings includes a chapter titled: “U.S Trade Policy-making in the Eighties.” One interesting finding concerns the role politicians played during this time: essentially embracing protectionist views to appeal to their constituents without taking specific concrete protectionist actions. Generally, the article finds that in spite of protectionist rhetoric during this period, the measures taken were weaker than the rhetoric espoused.

Economist Anne O. Krueger offers the following insights on this topic: “In this light, one can adopt a demand-and-supply framework. There is a “demand for protection,” which is presumably a function of voter concerns, lobbyist pressures, and other considerations. Simultaneously, there is a “supply of protection,” which is a function of the economic and political costs of providing protection. The demand for protection is higher the less well informed voters are about economic policy, the less economic knowledge supports a free-trade stance, and the larger the negative net trade balance in individual economic activities. The supply of protection is greater the smaller the negative impact on other producers (and hence greater for consumer goods than producer goods and greater for activities in which domestic firms do not have overseas operations from which they supply part of the domestic market) and the smaller the negative side effects (such as foreign policy considerations) of protection. In this framework, the 1980s experience could be interpreted differently. Clearly, the demand for protection increased. It increased because negative net trade balances emerged and/or increased for a large number of economic activities. It increased because the economics profession was willing to give more credence to considerations of “strategic protection” than it had earlier, thus undermining the professional consensus that had stood as a partial barrier to protectionist measures. ”

Put simply, it is our own non-specific demand for general protectionism which may cause the most harm. Blanket policies may help some, but these will also likely hurt others. Swapping Mexican tequila for American-made bourbon may be palatable, but will it be palatable to pay more for domestically produced automobiles? Furthermore, will a global company such as Ford, which sold 1.27 million vehicles in China in 2016 (Melissa Burden, The Detroit News, January 6, 2017) face retaliation on the world stage that causes a decline in their growth? If that happens, will the impact on their value and evaluation as measured by indicators such as the stock market face downward pressure? Will other countries with less cumbersome trade policies fare better on the global stage?

3. Fair Labor Practices and Environmental Standards may Erode

While some manufacturing jobs may return, they are no guarantees that they will be at the former UAW compensation levels. Michelle Maynard, a contributor to Forbes, writes in “The UAW Is Losing Its Grip On Auto Industry Labor” about how the increase in foreign automotive manufacturing plants has caused a decline in UAW influence. She says that “While many of the older foreign plants pay wages similar to those earned by senior UAW members, the newer companies have been paying less, especially those located in the Deep South, from Texas to Georgia. Meanwhile, the UAW has agreed to more-significant differences in wages for new hires at the Detroit companies in recent contract negotiations, moving it farther away from its vow that workers will be treated equally. These two-tier wage systems have helped create new jobs, but mean that newer workers earn substantially less than their veteran counterparts.”

Without delving into climate change, and whether it exists, it is not hard for Americans to remember times when companies and factories were freer to pollute than they are today. Among the checks and balances that we take for granted today, are the measurement of toxic releases by these companies. The EPA produces something known as the Toxics Release Inventory which offers analyses and interactive maps showing data at a state, county, city, and zip code level. The EPA describes the purpose as follows:

“We all have the right to know about the chemicals we may be exposed to in our daily lives. The Emergency Planning and Community Right-to-Know Act of 1986 and the Pollution Prevention Act of 1990 require certain industrial facilities across the country to report annually to EPA’s Toxics Release Inventory (TRI) about toxic chemicals they release* and what they’re doing to prevent or reduce pollution. TRI includes data about more than 22,000 facilities across the country and covers more than 675 toxic chemicals.”

Simply by inputting my zip-code, 06489, I was able to generate a snapshot of what is going on in my own backyard. The EPA is vitally important to our country and to its citizens. We have paid with our tax dollars to gather rich and important data which can be used by all US Citizens to learn about what is being done to their environment in their backyards and farther afield. If you think that this impact is only domestic, I know first-hand that many countries also analyze these data to assess what kind of neighbor the company might be, when/if they move in.

But, let’s not assume that American companies take with them all of the good practices that are required here by the EPA when they locate internationally. In fact, they may relocate precisely to avoid regulation and reduce costs, which also allows US consumers to benefit from cheaper goods manufactured with less environmentally friendly practices, while also removing job opportunities.

As we ponder how to make America great again, maybe we can figure out how we can afford to purchase goods which are manufactured in accordance with the best environmental practices required here in the United States, whether produced here or off-shore. Environmentally sustainable production may decrease the advantages of relocating to avoid regulation, but we will not be trading our values for lower priced goods that harm our own economic prospects.  If we are really are so concerned about Chinese pollution, perhaps we might want to export our environmental practices as a way of protecting our workers. If we gut our own environmental protections as a cost saving measure to encourage manufacturing at home, we may face our own pollution crisis. It is not coincidental that a climate change denier will soon lead the EPA, industries will be de-regulated, and we will seek to shore up U.S. industry by putting up trade barriers. We should therefore expect, higher-priced products, more polluted environments, and less economic growth. If those are the goals we have, then we are on the right path.

Additional Sources of Interest on this Topic:

Political Animals: The Foundation of The Greatest “Alternate Reality TV Show of All Time

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The Foundation of The Greatest “Alternate Reality TV Show of All Time

by Reed MacMillan

The United States of America elected a real-estate mogul with a trail of tears behind him over a life-time politician with demonstrated accomplishments helping American children and families. She came to represent elitism, a flavor that blends fairness and equality with diversity, and sustainable economic policies balancing growth, environmental imperatives, and fair labor practices.

With the world turned upside down, the gentleman living in a golden tower, who apparently likes a golden shower, spewed hateful rhetoric and actual lies while also promising jobs and American greatness. Let us now call this the greatest “Alternate Reality Show” ever presented on TV and across the nation in a series of rabble-rousing rallies.

The taller the building the more intensive the foundations required, but the newest and tallest buildings, such as the Shanghai Tower, require three interlocking systems to remain upright. Popular Science explains that the first system is a 90-by-90-foot concrete-and-steel core, which provides vertical strength. This is augmented by a ring of steel “super-columns” which surround the core, and also connect to it. The columns buttress the building against lateral forces. Every 14 floors, two-story belt trusses hug the building’s perimeter; each marks the start of a new zone. “The structure works like a wedding cake in nine sections,” says Dennis C.K. Poon, an engineer with the firm Thornton Tomasetti, which worked on the building.

Let’s take a look at the core structure of this presidency: the election. What we know so far is that Donald J. Trump won the electoral college vote and lost the popular vote by about 2.8 million votes. With very little fanfare, this foundational mechanism of the electoral college which balances power among states, and redistributes it, has placed him into office. Even those of us disappointed by the failure of the other function of the electoral college — to check demagogues at the door — have moved on. We are readying ourselves to fight against his government to protect its people and preserve our planet.

Inexplicably, our new President has not. Yesterday, we heard Press Secretary Sean Spicer say that the President feels that voter fraud might represent between 3-5 million fraudulent votes. The implication is that these fraudulent votes were for Hillary and not for him. As corroborated by all three of the Unites States top intelligence agencies – The CIA, NSA, and FBI, we already know Putin intervened into this election and may have tipped the scales towards President Trump. Many of us wonder about FBI Director James Comey’s timing with regard to the Weiner emails and his stony silence about Putin’s involvement in this election. Fraud is a taste we know well.

Georgia Congressman John Lewis questioned the legitimacy of this President due to the aforementioned inconvenient truths. Yet, we all went through this inauguration. We all breathed just a moment of “Let’s give this guy a chance.” We all hoped that his sins were in the past, and that he would become the President for all Americans, as he says he wants to be. Many of us marched this past weekend — peacefully and in solidarity — for an America that is inclusive, diverse, balances growth and greed, and recognizes climate change is a grave threat to our world.

Yet, after only 3 days in office, we are faced with alternate facts, alternate reality, and a President, who must know that he has built his house on a very poor foundation, one in need of shoring up.

Without “legitimate” data or evidence, or perhaps because of the “legitimate” evidence which makes him look very sketchy indeed — he seems to be hooked on a feeling.  We too are hooked on the feeling that he is a fraud and by bringing this up, you remind us of your arrogance beyond bound, new and as of yet unchecked power, pure delusion, and lack of grace.

We NO LONGER want to waste time flattering your ego, especially with alternate facts. We have actual issues to deal with. Build the foundation of your administration with steel riggers that connect to a core of decency and the Americans you want to lead. Charge your cabinet and the government with building a layer cake of zones that includes different constituencies. Display strength, not rigidity. And, if your foundation includes the layers of corruption and fraud we fear, let this house crumble, so we can get back to Real Reality.