CounterPunch: How the Economy Loses under Trump or Clinton

by Michael J. Sainato

Oct. 5, 2016


Famous Wall Street Investor Asher Edelman served as the inspiration for the character Gordon Gekko, played by Michael Douglas in the 1980’s Oliver Stone film, Wall Street. A recent CNN article published on August 23rd about Donald Trump’s controversial investing in the 1980’s referred to the time as the “Gordon Gekko Era” though Edelman, the character’s inspiration, called the election between Trump and Clinton, “the worst of two evils or the best of two evils,” in a phone interview with me, noting “I guess Hillary is the best of two evils.”

Earlier this year, Edelman’s segment during a CNBC interview in which he described his support for Bernie Sanderswent viral. He described Sanders as the best candidate for the economy due to Sanders’ ambitions to redistribute wealth in this country to the lower and middle classes who tend to spend much more of their income than the wealthy. Recent trends have seen wealth increase for the wealthy, while the consumer base of the lower and middle classes continues to shrink. As far as providing solutions to the increasing wealth and income inequality throughout the United States, the candidacies of Hillary Clinton and Donald Trump don’t provide any, according to Edelman.

“I think a Clinton presidency would leave us in the same position we are in today. That is to say with the middle class and lower classes remaining disadvantaged, with the wealthier people becoming wealthier, with favoritism towards Wall street, the oil companies, and the pharmaceutical companies,” he said. “I think with a Trump presidency, it’s foolish to even think of one, but it’s a remote possibility because of Hillary’s difficulties.”

Edelman cited the idea of Trump having the authority to fire nuclear weapons increases the threat of nuclear war, but even if that were evaded, the United States would still be headed towards an economic disaster. “Donald Trump doesn’t have a clue about economics, and doesn’t have a clue about macroeconomics. I imagine you would have one of these dictatorships which are favorable to his friends and unfavorable to the rest of the country, with most businesses moving offshore pretty quickly.”

One of the most economically divisive issues this presidential election is the Trans-Pacific Partnership Agreement.Hillary Clinton has vocally opposed it, although she helped further negotiations as Secretary of State, the surrogates she appointed to the Democratic Party platform voted in support of it, and her running mate, Senator Tim Kaine (D-VA) has spoken highly of the deal. Bernie Sanders has vehemently opposed the trade agreement and led progressive opposition against the deal, while Donald Trump has also opposed the agreement for different reasons.

Edelman explained it’s a much bigger question as to opposing or supporting the agreement.

“You have to make a couple of decisions. Whether your real wish is to attempt to continue to dominate the world both politically and economically or whether you want to run trade as something that has to do with trade and not something that has to do with political needs and advantages,” he said. “If you were to take that trade agreement and convert it into something slightly different from what it is, and I wouldn’t say I’m very in favor of it, and that something has to do with protecting labor from the consequences of cheap labor elsewhere. This would mean you would try to adjust tariffs in a way that reflected the cost of labor in the countries with which you were dealing as oppose to having total open trade without any additional expenses for those countries that are taking advantage of very inexpensive labor.”

Edelman also added the deal would also have to apply this to American companies who exported their manufacturing and service jobs to countries with cheap labor, and adjust tariffs for them accordingly.  “I think that would very successful and I think something like that is necessary because you do need these trade agreements. The U.S. can’t isolate itself from the rest of world, but it also can’t use it to politically dominate the world. These agreements have to be used to be economically sound both for the U.S. and its relationships with other countries.”



Geoffrey Diner and AXA Insurance Company

Dear all,

Now and then we find, in life, behavior which, though it is a passing event, sufficiently moves us to tell the word. Should any of you want to chat about the idea of shipping other people’s extremely fragile art in a sea container with furniture (Geoffrey Diner’s choice), a total disregard for contractual arrangements (Geoffrey Diner again), and the art of obfuscation and delay (the AXA insurance company), please feel free to contact me at If you leave a phone number I will call. If you have questions I will do my best to answer in detail.

This one goes down in the annals of insurance company behavior.

Asher Edelman



A Rational Approach

by Roger Angell


I am late weighing in on this election—late in more ways than one. Monday brought my ninety-sixth birthday, and, come November, I will be casting my nineteenth ballot in a Presidential election. My first came in 1944, when I voted for a fourth term for Franklin Delano Roosevelt, my Commander-in-Chief, with a mail-in ballot from the Central Pacific, where I was a sergeant in the Army Air Force. It was a thrilling moment for me, but not as significant as my vote on November 8th this year, the most important one of my lifetime. My country faces a danger unmatched in our history since the Cuban missile crisis, in 1962, or perhaps since 1943, when the Axis powers held most of Continental Europe, and Imperial Japan controlled the Pacific Rim, from the Aleutians to the Solomon Islands, with the outcome of that war still unknown.


The first debate impends, and the odds that Donald Trump may be elected President appear to be narrowing. I will cast my own vote for Hillary Clinton with alacrity and confidence. From the beginning, her life has been devoted to public service and to improving the lives of children and the disadvantaged. She is intelligent, strong, profoundly informed, and extraordinarily experienced in the challenges and risks of our lurching, restlessly altering world and wholly committed to the global commonality. Her well-established connections to minorities may bring some better understanding of our urban and suburban police crisis. I have wished at times that she would be less impatient or distant when questions arrive about her past actions and mistakes, but I see no evidence to support the deep-rooted suspicions that often surround her. I don’t much like the high-level moneyed introductions and contacts surrounding the Clinton Foundation, but cannot find the slightest evidence that any of this has led to something much worse—that she or anyone has illegally profited or that any legislation tilted because of it. Nothing connects or makes sense; it beats me. Ms. Clinton will make a strong and resolute President—at last, a female leader of our own—and, in the end, perhaps a unifying one.


The Trump campaign has been like no other—a tumultuous and near-irresistible reality-TV show, in which Mr. Trump plays the pouty, despicable, but riveting central character. “I can’t stand him,” people are saying, “but you know, wow, he never stops.”


We know Mr. Trump’s early transgressions by heart: the female reporter who had “blood coming out of her whatever”; the mocking of a physically impaired reporter; the maligning of a judge because of his Mexican parents; the insulting dismissal of the grieving, Gold Star-parent Khans; the promised mass deportation of eleven million—or two million—undocumented immigrants, and more. Each of these remains a disqualifier for a candidate who will represent every one of us, should he win, but we now are almost willing to turn them into colorful little impairments. “Oh, that’s ol’ Donald—that’s the way he is.”


But I stick at a different moment—the lighthearted comment he made when, in early August, an admiring veteran presented him with a replica of his Purple Heart and Mr. Trump said, “I always wanted to get the Purple Heart. This was much easier.” What? Mr. Trump is saying he wishes that he had joined the armed forces somehow (he had a chance but skimmed out, like so many others of his time) and then had died or been scarred or maimed in combat? This is the dream of a nine-year-old boy, and it impugns the five hundred thousand young Americans who have died in combat in my lifetime, and the many hundreds of thousands more whose lives were altered or shattered by their wounds of war.


I take this personally, representing as I do the last sliver of the sixteen million Americans who served in the military in my war. I had an easy time of it, and was never in combat, but, even so, as I have written, I experienced the loss of more than twenty close friends, classmates, and companions of my youth, who remain young and fresh in memory. I have named them in previous pieces, along with some wounded survivors, like my friend Gardner, an infantry captain who landed at Normandy Beach and fought at Hürtgen Forest and Aachen and the Battle of the Bulge, was twice wounded, had five Campaign stars, and received numerous decorations, including the French Croix de Guerre, but who for the rest of his life would fall into wary silence whenever a thunderstorm announced itself. Also my late brother-in-law Neil, who lay wounded on the field for two days during the battle of Belfort Gap, and who hobbled with a cane all his life, and with two canes near the end. Every American of my generation can supply stories like these, and once learned and tried to forget that, worldwide, seventy million people died in our war.

Mr. Trump was born in 1946, just after this cataclysmic event of our century, and came of age in the nineteen-sixties, when the implications and harshness of war were being debated as never before, but little or none of this seems to have penetrated for him—a candidate who wants to give nuclear arms to Japan and South Korea and wishes to remain unclear about his own inclinations as commander of our nuclear triad. This makes me deeply doubt his avowed concern for our veterans or that he has any sense of their sufferings.

Reservations like this are predictable coming from someone my age, but I will persist, hoping to catch the attention of a few much younger voters, and of those who have not yet made up their minds about this election. I do so by inviting them to share an everyday experience—the middle-of-the-night or caught-in-traffic moment when we find our hovering second thoughts still at hand and waiting: Why did I ever?… What if?… Now I can see… and come to that pause, the unwelcome reconsideration that quiets us and makes us mature. It’s the same thought that Judge Learned Hand wanted posted in every school and church and courthouse in the land: “I beseech ye … think that we may be mistaken.”


Mr. Trump has other drawbacks I haven’t mentioned: his weird fondness for Vladimir Putin; his destruction of the lives and hopes of small investors and contractors unlucky enough to have been involved in his business dealings; his bonkers five-year “birther” campaign, now withdrawn, though without accountability—but never mind all this, for now.


Mr. Trump is endlessly on record as someone who will not back down, who cannot appear to pause or lose. He is a man who must win, stay on the attack, and who thinks, first and last, “How will I look?” This is central, and what comes after it, for me, at times, is concern for what it must be like for anyone who, facing an imperative as dark and unforgiving as this, finds only the narcissist’s mirror for reassurance.


If Donald Trump wins this election, his nights in the White House will very soon resemble those of President Obama. After he bids an early goodnight to his family, he sits alone while he receives and tries to take in floods of information from almost innumerable national and international sources, much of it classified or top secret. His surroundings are stately, but the room is shadowed and silent. There are bits of promising news here and there, but always more bloodshed, sudden alarms, and unexpected lurking dangers. The import of the news is often veiled or contradictory, or simply impenetrable. The night wears on, and may contain brief hours of sleep. There’s time to tweet. A new day is arriving, and with it the latest rush of bad news—another police shooting out West, another suicide bomber in Yemen, and other urgent briefings from a world already caught up in the morning’s difficult events. He needs to respond, but the beginning of this President’s response is always reliably at hand: How will I look?



“Portugal Reforms Not Gone Far Enough to Ensure Financial Solidity”


In September 2015, we wrote China? Oil Prices? Saudi Arabia? Iran? Why Volatility? The Grand Surprise Part II where we said “the depth of European Banks’ illiquidity and careless lending policies” as a likely catalyst for the worldwide economy’s collapse. The Financial Times article below brings home the current level of risk in the Portuguese banking system.

Asher Edelman

Portugal reforms not gone far enough to ensure financial solidity

by Tony Barber, Europe Editor

Sep. 7, 2016


As Portugal emerged in May 2014 from a three-year, €78bn EU-International Monetary Fund bailout, unsentimental central bankers in Lisbon had words of caution for the hard-pressed Portuguese people.

Despite having escaped the disaster of crashing out of the eurozone, Portugal had not reformed itself enough to ensure lasting economic and financial success, they said.

Two years and four months later, the Portuguese central bank’s assessment appears to have been correct in every important respect. Portugal is at the centre of a perfect storm of meagre economic growth, falling investment, low competitiveness, persistent fiscal deficits and an undercapitalised banking sector that owns too much of the nation’s sky-high public debt.

Grappling with these challenges is a minority Socialist government, propped up in parliament by the far left. In the eyes of Portuguese business, the government is inclined more to crowd-pleasing anti-austerity measures than to reforms aimed at improving public sector efficiency and encouraging investment. The question is whether Portugal’s troubles will make a second financial rescue unavoidable.

Read more


The Brits Were Visionary

eu break2

I am attaching an article from the New York Times on the EU and the likelihood of its dissolution. Serious banking restructuring, forgiveness of sovereign debt and fiscal stimulation are required to save the EU experiment. The rich countries, such as Germany, will benefit from such an approach. A collapse of the EU will cost Germany dearly as approximately 50% of its exports go to its EU partners. The time of reality testing for the richer nations is here. Otherwise we face the break up of the EU and massive recession worldwide. How do we awaken the sleeping governments? The U. S., which seems involved with all world issues should probably focus with its EU allies on assisting in the needed solutions, much more meaningful to America and its people than all the Middle East and other wars we are fighting. Helping the EU will also be less costly than the various expensive warrior activities.

How a Currency Intended to Unite Europe Wound Up Dividing It

by Peter S. Goodman–NYT

Were there warnings when the euro was begun that maybe it wasn’t such a wonderful idea?

Yes, but it was mostly Americans, and that may have colored the reaction to it: “Oh, you don’t understand the value of the European project.” But the criticism was not that we don’t agree with the European project, but that you were undertaking something that will undermine the European project, because it’s not going to work. Their answer was, “We will create institutions as we go along.” A lot of people pushing for this were not economists.

You blame the euro for widening economic inequality. How has this played out?

The idea was that for the euro to work, the countries had to converge, and they formulated these ideas called the convergence criteria. They put enormous pressure on the countries to keep their deficits and debts relative to G.D.P. down. That was viewed as the necessary and almost sufficient conditions for making the euro work.

Several of the countries that went into crisis, Spain and Ireland among them, actually had a surplus before the crisis, and a very low debt-to-G.D.P. ratio. But they still had a crisis. That tells us an important lesson: What the people who were behind the creation of the euro thought was going to be a critical condition was not.

The disappointing thing was that after the crisis, they didn’t learn a lesson. What they did was double down on that same recipe — austerity. The structure of the euro was at fault, and the policies they enacted amplified the structural deficiencies. The result was that the countries diverged.

In your telling, Germany has imposed austerity across Europe out of faith in a discredited economic idea, the notion that if policy makers concentrate solely on preventing budget deficits and inflation, the markets can be counted on to deliver prosperity. A lot of your book is devoted to demolishing this idea. Does the German elite still really believe in this philosophy, or is something else at play?

I’ve visited Germany often, and I’m shocked about how strong the belief is in this view that has been totally discredited elsewhere.

But the policies are mixed together with interests. When the Greek crisis broke out in 2010, what was really at risk were German and to some extent French banks. And there was an enormous bailout that was called a bailout of Greece but was really a bailout of German and French banks. Most of the money went to Greece and then right away went back to Germany and France.

When you look at other aspects of the program, you see that it is also helping special interests within Europe.

How so?

Let me give you an example of one of the really absurd things they did. They demanded that Greece scrap a rule that fresh milk is no more than four days old. If milk was older than four days, it needed to be labeled.

Of all the things that were going on, why would you have a debate about that?

The German and the Dutch dairy industries wanted to ship their factory-farmed milk across Europe and sell it to Greek consumers. That would devastate the small Greek producers. Here was something that could only be seen as benefiting special interests in the eurozone and actually weakening the Greek economy.

You argue that some European leaders secretly welcomed mass unemployment as a means of adjusting to the crisis because this was the only way they could see to spur investment — lowering wages. The strictures of the euro took other options off the table: Crisis countries could not let their currency fall or lower interest rates or expand government spending. Was unemployment really embraced as a fix?

They wanted to break the back of workers. Their view was that workers needed to accept a wage cut and we are going to change the bargaining rules to make it more difficult for them to resist. And if we need to add on a little dose of unemployment, well, that’s unfortunate.

Doesn’t that goal predate the crisis?

It’s very clear that the euro was a neo-liberal project in its construction. Employers like low wages. They have broken the back of the unions in many of the countries of Europe. They would view that as a great achievement.

The whole point of the European project has been to get past the hostilities of World War II and build a sustainable community. Yet, in your telling, the euro and the policies delivered to preserve it left much of Europe nursing fresh grievances. How are these grievances coloring politics?

The most important divergence is between creditor, Germany, and debtor, the rest. The criticisms that you hear in Greece of the Germans, they are reliving the horrors of World War II; the criticism in Germany of the Greeks, saying that they are lazy even though the number of hours that they work per week is higher than the Germans’. The flinging of accusations, whether true or not, has been enormous and the divisiveness has been enormous.

We just saw Britain vote to exit the European Union — in part, a reaction to the sense that the European Union is a place of weak economic growth and poor leadership. In Italy, the so-called Five Star political movement is gaining support with calls to abandon the euro — in part, a backlash against German-led austerity. Is there any evidence that these sorts of events are leading to a re-examination of the economic philosophy guiding Europe?

I wish that were happening. Unfortunately, what I’ve seen is almost the reverse. It’s doubling down on a failed experiment. It’s a hard-line approach in which the European leaders in response to Brexit, people like Jean-Claude Juncker, who is the head of the European Commission, have said, “We’re going to be very, very tough on the U.K. because we want to make sure that no other country leaves.

To me that was shocking. You hope that people want to stay in the E.U. because it’s delivering benefits, because there’s a belief in European solidarity, the belief that it’s bringing prosperity. He’s saying the only way we are going to keep the E.U. together is by the threat of what happens if you think about leaving.

You conclude that the best-case scenario from here is to reform and save the euro. But absent that, you contend that it is better to just scrap it as a failed experiment. What needs to happen to make the euro viable?

A banking union with deposit insurance. Something like a euro bond. An E.C.B. that doesn’t just focus on inflation — you want it to focus on employment. A tax policy that deals with the inequalities. And you have to get rid of limits on government deficits.

What’s your sense of what will actually happen?

It is hard to believe that the muddling-through can continue for another five years. Greece is still in depression, no better than it was a year ago. The likelihood is there that in one country or another there will be enough support for another referendum, and an exit will occur. That will begin the process of a real unraveling of the eurozone.


European Banking (Portugal)


Yesterday, Patricia Kowsmann published the attached article on the Portuguese banks. I wish it was as good as Patricia described.

The facts are:

With one exception all of the Portuguese banks including Caixa Geral, the government owned bank, are technically bankrupt and insolvent. They have not yet written down most of their nonperforming loans nor the owned properties acquired through default.

Caixa, as a result of cronyism and poor management sits on debased assets, many of which came out of the Ricardo Salgado fraud and embezzlement of the Espirito Santo Bank and his cozy relationship with the government and the Caixa. We estimate that to be made whole, after realistic write-downs and accounting, the government bank, Caixa, will require a capital injection of between 5 and 10 billion Euro, not the 2 billion Euro the Wall Street Journal suggests.

Novo Banco, the good bank exiting from Banco Espirito Santo, the primary victim of the Salgado embezzlement, has already received a 4.9 billion Euro injection and will certainly need another 3 billion of capital to survive. It’s management has been pulling hard to survive the bank’s crisis but Salgado hit it hard with fraudulent and croniest transactions. Each day there are new discoveries of worthless assets. The Portuguese government will not only loose the 3.9 billion Euro it has put in to the bank but will be required to guarantee a buyer against substantial additional losses (in the billions) if the bank is to be sold.

The story goes on–most of it in Patricia’s article.

Portuguese Banks May be Brewing a Perfect Storm

by Patricia Kowsmann–WSJ

LISBON-Portuguese banks have been excluded from a European Union stress test release Friday, but that doesn’t mean investors shouldn’t be worried.

A slew of problems in the country’s largest lenders-from capital requirements at state-owned Caixa Geral de Depósitos SA to a difficult sale of the “good bank” that resulted from the collapse of Banco Espírito Santo SA-have raised concerns that Portugal could be in trouble again soon.

In a report released Wednesday, Moody’s Investors Service called Portugal’s banks, which are faced with low profits and souring loans, “among the most weakly capitalized institutions in the euro area.” That, Moody’s said, not only represents a major threat for a country whose debt is already too high but also limits growth prospects for the struggling economy.

“For the state, the weakness of the banking system forms a key liability,” it said.

Trouble in Portugal’s banking system is neither unique nor surprising. Across Europe, banks’ profits are being challenged by low interest rates, political and economic uncertainty, and new technologies that are making the old banking model obsolete. Since Portugal requested a three-year €78 billion ($87 billion) bailout in 2011, two lenders-Banco Espírito Santo and Banco Internacional do Funchal SA-have collapsed. In both cases, regulators found that risky lending took place.

A weak economic environment has rendered highly indebted companies unable to repay loans. Corporate debt stood at 110% of gross domestic product last year, according to the International Monetary Fund. The Portuguese central bank said total loans at risk of default stood at 12.2% as of end-March, but Moody’s said the figure seems overly optimistic.

Now, the piling-up of bad news for some of country’s largest lenders is generating what could become the perfect storm.

The government is currently negotiating with the European Commission and the European Central Bank a capital injection into Caixa Geral de Depósitos, the country’s largest lender by assets. Analysts say the bank could need over €2 billion, and because it will be the state pumping in that money, the country’s debt, already close to 130% of GDP, will rise further.

“Hence, any further debt increase to fund bank recapitalizations is a credit negative for the sovereign,” Moody’s, which already rates Portugal’s sovereign as junk, said.

Meanwhile, Novo Banco SA, the “good bank” created from the collapse of Banco Espírito Santo, is posing problems. Novo Banco received a €4.9 billion capital injection from the state and domestic banks when it was created, and it should have been sold last year for at least that amount.

The sale, however, was postponed after the central bank struggled to find good offers. The lender also needed more capital and its portfolio of souring loans turned out to be larger than previously thought. A second sale effort is currently under way, and four parties bid for the lender last month.

The Portuguese government has said it is expected to be paid back for the €3.9 billion it injected into the lender, which means likely losses from a sale will have to be split among domestic lenders already struggling to turn profits.

Earlier this week, Fernando Ulrich, the chief executive of Banco BPI SA, one of the better-off lenders, said healthy banks are being unfairly burdened by the mistakes of others.

“Enough of collective solutions that throw on us and our shareholders the costs of other people’s mistakes,” Mr. Ulrich said.

The executive has been critical of an idea being mulled by the government and Portugal’s central bank to create a system-wide “bad bank” to free lenders from souring loans. But such a solution could prove tricky given the transfer of the assets would create deeper capital holes at banks.

BPI is facing its own life-changing moment after the ECB told it in late 2014 to either raise a prohibitive amount of capital or shed its highly profitable Angolan unit after its exposure to the former colony’s debt exceeded regulatory limits. The issue is yet to be resolved. The lender is currently subject to a takeover attempt from its largest shareholder, CaixaBank SA.

Meanwhile shares in Banco Comercial Português SA, the country’s second-largest by assets, have fallen over 60% in the year to date on fears that it too may need more capital. Its fully-loaded core tier 1 capital ratio-a key measure of a bank’s balance sheet strength-stood at 10.1% in the first quarter compared with an average for European banks of 12.3%.

According to Barclays, if the lender were to improve that figure to 11%, increase its coverage of nonperforming loans and repay €750 million it owns the state, it could require a capital increase of about €2 billion.

“While the bank could seek to bridge this gap through earnings, asset sales and private sector equity raising, these options seem particularly challenging in light of current market conditions and relative to the current market capitalization of the bank at around €1 billion,” Barclays said recently in a note.

Banco Comercial Português said it would voluntarily disclose results from the European Banking Authority’s stress test Friday night along with its second-quarter earnings.

The EBA will only publish the results of the 51 largest lenders in the EU, none of which are in troubled Portugal.