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America’s biggest weapon against North Korea isn’t nuclear, and isn’t directed at the Norks

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Treasury Secretary Steve Mnuchin unveiled the biggest weapon the U.S. has in its arsenal against North Korea, and it’s not a bomb.

No bank in any country should be used to facilitate Kim Jong-un’s destructive behavior. This new executive order will authorize Treasury to impose a range of sanctions such as suspending U.S. correspondent account access to any foreign bank that knowingly conducts or facilitates significant transactions tied to trade with North Korea. These sanctions will be forward-looking and applied to behavior that occurs following today when President Trump signed the executive order. Foreign financial institutions are now on notice that going forward they can choose to do business with the United States or with North Korea, but not both. This new executive order enables Treasury to freeze assets of anyone conducting significant trade in goods, services or technology with North Korea. It also allows us to freeze assets of actors supporting North Korea’s textile, fishing, IT and manufacturing industries.

The target of this executive order, which is wholly legal and proper for the president to sign, is certainly China. China is North Korea’s biggest trading partner by far. It will hurt China far worse than anything we could do to North Korea. And China can force North Korea into starvation or negotiation.

Perspectives

Why Sanctions Against North Korea Are Causing Pain in China – Bloomberg

https://www.bloomberg.com/news/articles/2017-09-20/north-korea-sanctions-claim-another-victim-china-s-rust-beltWhile Beijing has joined the international community in condemning North Korea’s missile launches and nuclear tests, it doesn’t want a war on the Korean peninsula or Kim’s regime to collapse. Either event may trigger a rush of refugees and the potential for U.S. troops on its border, risking social unrest and a heightened security presence that could further hinder trade.

China advises against unilateral sanctions against North Korea | South China Morning Post

http://www.scmp.com/news/china/diplomacy-defence/article/2112446/china-advises-against-unilateral-sanctions-against“The situation facing the Korean peninsula is complicated,” Foreign Ministry spokesman Lu Kang told a press conference in Beijing.

Lu said at the press conference that “China opposes the imposition of sanctions outside the framework of the United Nations Security Council”.

In his address at the assembly, China’s Foreign Minister Wang Yi said negotiation remained the only solution to the North Korea problem, while warning its neighbour not to pursue the development of nuclear weapons.

Final Thoughts

As long as goods can flow into and out of North Korea, all the military threats we make are simply saber-rattling. Kim Jong-un will continue to provoke until we back down from a potential holocaust for South Korea. This is what he’s done for decades. But if the U.S. truly punishes China with banking sanctions and assets freezes, just like we did to Iran, soon they will push North Korea to the table, or make it clear that the Hermit Kingdom is on its own taking on the U.S. in a military battle.

The money bomb is a much bigger weapon than anything our military possesses. History shows that it always has been (read your World War II history of Japan).

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Economy

J&J hammered by report it knew of asbestos in baby powder

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J&J hammered by report it knew of asbestos in baby powder

NEW YORK (AP) — Johnson & Johnson is forcefully denying a media report that it knew for decades about the existence of trace amounts of asbestos in its baby powder.

The report Friday by the Reuters news service sent company shares into a tailspin, suffering their worst sell-off in 16 years.

Reuters is citing documents released as part of a lawsuit by plaintiffs claiming that the product can be linked to ovarian cancer. The New Brunswick, New Jersey company has battled in court against such claims and on Friday called the Reuters report, “one-sided, false and inflammatory.”

Shares are down more than 9 percent, the most severe decline since 2002.

In the report, Reuters points out that documents show consulting labs as early as 1957 and 1958 found asbestos in J&J talc. Further reports by the company and outside labs showed similar findings through the early 2000s.

In its statement Friday, Johnson & Johnson said “thousands of independent tests by regulators and the world’s leading labs prove our baby powder has never contained asbestos.”

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Economy

Fed survey cites rising concerns about trade tariffs

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Fed survey cites rising concerns about trade tariffs

WASHINGTON (AP) — The Federal Reserve said Wednesday that the U.S. economy was growing in the fall, but there were concerns about higher tariffs from a widening trade war, rising interest rates and tight labor markets.

In its latest report on economic conditions around the country, the Fed said that most of its 12 regions saw moderate growth through late November. Dallas and Philadelphia said growth had slowed, while St. Louis and Kansas City depicted growth as slight.

The report, known as the beige book, found that optimism about the future had waned somewhat, with business contacts citing “increased uncertainty.”

The survey will used at the Fed’s next meeting on Dec. 18-19. The central bank is widely expected to boost its benchmark rate for a fourth time this year at that meeting.

The beige book report noted problems the higher tariffs from Trump’s get-tough approach to trade were causing: rising costs for manufacturers, weaker sales at companies and farmers hurt by retaliatory tariffs imposed by China and other nations.

Even with the tariff concerns, the beige book said most districts continued to report moderate growth in manufacturing.

The impact of rising interest rates affected interest-rate sensitive sectors such as housing, with the beige book noting that new home construction and sales of existing homes were either holding steady or experiencing slight declines.

The Fed survey said that labor markets had tightened further across a broad range of occupations.

“Over half of the districts cited firms for which employment, production and sometimes capacity expansion had been constrained by an inability to attract and retain qualified workers,” the report said.

Unemployment fell in October to a 49-year low of 3.7 percent with economists forecasting further declines in the coming months. A key reason the Fed has been raising interest rates is to slow the economy to ensure that tight labor markets don’t unleash unwanted inflation pressures.

With labor markets already so tight, the Fed said that many districts were seeing examples of firms enhancing their nonwage benefits, including health benefits, profit-sharing, bonuses and paid vacation days.

Despite the wage pressures, the report said that prices continued to increase at a modest pace in most districts although reports of tariff-inducted cost increases have spread more broadly in such areas as manufacturing, retailing and restaurants.

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White House intensifies confusion and fear on US-China deal

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White House intensifies confusion and fear on US-China deal

WASHINGTON (AP) — The Trump administration raised doubts Tuesday about the substance of a U.S.-China trade cease-fire, contributing to a broad stock market plunge and intensifying fears of a global economic slowdown.

Investors had initially welcomed the truce that the administration said was reached over the weekend in Argentina between Presidents Donald Trump and Xi Jinping — and sent stocks up Monday. But on Tuesday, after a series of confusing and conflicting words from Trump and some senior officials, stocks tumbled, with the Dow Jones shedding about 800 points, or 3.1 percent.

White House aides have struggled to explain the details of what the two countries actually agreed on. And China has not confirmed that it made most of the concessions that the Trump administration has claimed.

“The sense is that there’s less and less agreement between the two sides about what actually took place,” said Willie Delwiche, an investment strategist at Baird. “There was a rally in the expectation that something had happened. The problem is that something turned out to be nothing.”

Other concerns contributed to the stock sell-off, including falling long-term bond yields. Those lower rates suggested that investors expect the U.S. economy to slow, along with global growth, and possibly fall into recession in the coming year or two.

John Williams, president of the Federal Reserve Bank of New York, also unnerved investors by telling reporters Tuesday that he supports further Fed rate hikes. His remarks renewed fears that the Fed may miscalculate and raise rates so high or so fast as to depress growth.

The disarray surrounding the China deal coincides with a global economy that faces other challenges: Britain is struggling to negotiate its exit from the European Union. Italy’s government is seeking to spend and borrow more, which could elevate interest rates and stifle growth.

And in the United States, home sales have fallen sharply in the past year as mortgage rates have jumped.

Trump and White House aides have promoted the apparent U.S.-China agreement in Buenos Aires as a historic breakthrough that would ease trade tensions and potentially reduce tariffs. They announced that China had agreed to buy many more American products and to negotiate over the administration’s assertions that Beijing steals American technology. But by Tuesday morning, Trump was renewing his tariff threats in a series of tweets.

“President Xi and I want this deal to happen, and it probably will,” Trump tweeted. “But if not remember, I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so.”

Trump added that a 90-day timetable for negotiators to reach a deeper agreement had begun and that his aides would see “whether or not a REAL deal with China is actually possible.”

He revisited the issue later Tuesday with a tweet that said: “We are either going to have a REAL DEAL with China, or no deal at all – at which point we will be charging major Tariffs against Chinese product being shipped into the United States. Ultimately, I believe, we will be making a deal – either now or into the future. China does not want Tariffs!”

The president’s words had the effect of making the weekend agreement, already a vague and uncertain one, seem even less likely to produce a long-lasting trade accord.

“We expect the relationship between the world’s two largest economies to remain contentious,” Moody’s Investors Service said in a report. “Narrow agreements and modest concessions in their ongoing trade dispute will not bridge the wide gulf in their respective economic, political and strategic interests.”

Among the conflicting assertions that White House officials made was over whether China had actually agreed to drop its 40 percent tariffs on U.S. autos.

In addition, Treasury Secretary Steven Mnuchin said Tuesday on the Fox Business Network that China agreed to buy $1.2 trillion of U.S. products. But Mnuchin added, “If that’s real” — thereby raising some doubt — it would close the U.S. trade deficit with China, and “We have to have a negotiated agreement and have this on paper.”

Many economists have expressed skepticism that very much could be achieved to bridge the vast disagreements between the two countries in just 90 days.

“The actual amount of concrete progress made at this meeting appears to have been quite limited,” Alec Phillips and other economists at Goldman Sachs wrote in a research note.

During the talks in Buenos Aires, Trump agreed to delay a scheduled escalation in U.S. tariffs on many Chinese goods, from 10 percent to 25 percent, that had been set to take effect Jan. 1. Instead, the two sides are to negotiate over U.S. complaints about China’s trade practices, notably that it has used predatory tactics to try to achieve supremacy in technology. These practices, according to the administration and outside analysts, include stealing intellectual property and forcing companies to turn over technology to gain access to China’s market.

In return for the postponement in the higher U.S. tariffs, the White House said China had agreed to step up its purchases of U.S. farm, energy and industrial goods. Most economists noted that the two countries remain far apart on the sharpest areas of disagreement, which include Beijing’s subsidies for strategic Chinese industries, in addition to forced technology transfers and intellectual property theft.

Chief economic adviser Larry Kudlow acknowledged those challenges in remarks Tuesday morning.

“China’s discussed these things with the U.S. many times down through the years and the results have not been very good,” he said. “So this time around, as I said, I’m hopeful, we’re covering more ground than ever … So we’ll see.”

Complicating the challenge, Trump’s complaints strike at the heart of the Communist Party’s state-led economic model and its plans to elevate China to political and cultural leadership by creating global champions in robotics and other fields.

“It’s impossible for China to cancel its industry policies or major industry and technology development plans,” said economist Cui Fan of the University of International Business and Economics in Beijing.

Trump had tweeted Sunday that China agreed to “reduce and remove” its 40 percent tariff on cars imported from the U.S. Mnuchin said Monday that there was a “specific agreement” on the auto tariffs.

Yet Kudlow said later that there was no “specific agreement” regarding auto trade, though he added, “We expect those tariffs to go to zero.”

___

Associated Press writer Joe McDonald in Beijing contributed to this report.

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