Commentary on Moody’s downgrade gives the game away – finally

We sometimes encounter commentary that blows away the smoke that provides cover for important myths in the world of economics and finance. Whether that commentary knows the import of its message is questionable but it certainly has the effect of casting aside a myriad of fictions and redefines the sort of questions that one can ask. Such was the case last week following the decision by the ratings agency Moody’s on May 16, 2025 to ‘downgrade’ US government debt ratings from Aaa to Aa1. While many commentators acted in Pavlovian fashion and crafted the ratings downgrade as signifying that the US government was “more likely to default on their sovereign debt”, one influential opinion from the mainstream came out with the conclusion that “there is next to zero chance the government won’t be able to pay its creditors”. Which really game the game away and exposed these ratings agencies as political attack dogs representing sectional interests that want less government money going to welfare and more to them – among other things.

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I wonder how progressives are viewing the fact that they gave credence to a key Trump operative

It’s a big data week for me and today’s post is more of a news information offering rather than a deeper analysis of a topic, which is my usual pattern. However, I discuss in some detail recent appointments to the US Health Administration, some of which were prominent during the early COVID years and received considerable promotion from so-called Left progressives. One of the leading characters in the attack on government restrictions is now Trump’s appointment to the major national health research funding agency and he has vowed to defund any institution that doesn’t follow the ‘freedom’ dictates of the authoritarian regime that Trump is running. I wonder how these progressives are viewing the fact they gave credence to a key Trump operative.

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Australia is not America – elections after Trump

Last week, the – 2025 Canadian federal election – was held and the Liberal Party won for the fourth consecutive time securing 169 seats (in the 343-seat House of Commons), just short of a majority. They also won the popular vote (43.7 per cent of the vote – up 11.1 per cent), which was the first time they had achieved that since 2015. The Opposition Conservative Party leader lost his own seat in the election. On January 7, 2025, national polling saw support for the Conservatives of around 47 per cent and support for the government around 20 per cent. By the time the poll came, that had shifted dramatically in favour of the government. In between, came Trump. The UK Guardian analysis (March 19, 2025) – Canada’s Liberals on course for political resurrection amid trade war, polls show – said the shift “has little precedent in Canadian history, reflecting the outsized role played by an unpredictable US president”. To some extent, the craziness of the US political situation at present also impacted on the – 2025 Australian federal election – which was held on Saturday (May 3, 2025). The incumbent government, which was well down in the opinion polls before Trump took power, won in a landslide achieving the highest two-party preferred outcome in Australia’s electoral history. The parallels with the Canadian outcome are strong despite the different voting systems in both countries. Moreover, the conservative Liberal-National Coalition in Australia, the dominant party in the Post-WW2 era has been reduced to being little more than a far Right populist party. Similar to the Canadian situation, the Opposition leader also lost his seat, which was the first time that has ever happened in Australia. So Trump is undermining the very movements he is trying to promote. But what is very clear is that Australia is nothing like the US, despite some commonalities (language – sort of!).

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US National Accounts – growth contracts but likely to be temporary

People are closely watching the US data at present to see what the impacts of the recent tariff decisions by the new US President might have. I am no exception. Yesterday (April 30, 2025), the US Bureau of Economic Analysis published the latest US National Accounts figures – Gross Domestic Product, 1st Quarter 2025 (Advance Estimate) – which provides us with the first major data release since the new regime took office. The fact though is that this data cannot tell us much about the tariff decisions, given that Trump’s – Executive Order 14257 – only really became operational on April 4, 2025, although there had been some earlier tariff changes before then.

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Trump Administration appears to be kicking lots of own goals

Soon after the US President announced – Liberation Day tariffs – I wrote this blog post – US government is pinning its tariff hopes on some unlikely to be realised assumptions (April 7, 2025) – to help readers understand what logic there was, if any, in the decision by the American government to impose wide-ranging and seemingly random tariffs on the rest of the world. The only apparent logic was that his advisors thought that while the tariffs would variously increase the US dollar price on final goods and services available to US consumers via imports, the flood of global investment funds into US treasury bonds, as a result of the heightened global uncertainty would push the US dollar up and offset the tariff impacts on import prices, because all foreign goods would now be cheaper. We now have a few weeks of data available to see whether things are turning out as Trump and his advisors thought. The definitive answer to date is that the opposite trends are emerging which will see the burden of the tariffs borne by the US consumers and producers rather than the presumption of the Administration that the burden would be pushed onto the rest of the world, which would precipitate rapid change in the favour of the US. It seems at present that an ‘own goal’ is being kicked – and – probably a lot of them.

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US cars don’t sell in Japan because they are inferior and ill-suited to the market

It’s obviously becoming difficult to keep track of where the US government policy is on any particular day. Last week, it was ‘Liberation Day’, which included tariffs being imposed on remote penguin colonies in the back of nowhere, then Musk labelling the Trump’s trade adviser ‘dumber than a sack of bricks’, then tariffs on Chinese goods rising to 124 per cent (which will make then uncompetitive), then the ‘pause’ on reciprocal tariffs beyond the 10 per cent level … what will be next. These shifts and decisions are not exactly benign and the US Administration is displaying the sort of incompetence, capriciousness, flippancy – whatever you want to call it – that hardly befits the largest economic nation in the globe which has its tentacles spread far and wide. I was particularly interested though in the now infamous ‘Rose Garden Liberation Day’ speech Trump made last week (April 2, 2025) where he made claims about Japan, which were used to justify the imposition of 24 per cent tariffs on that nation. According to the President, Japan is among a host of countries that have “looted, pillaged, raped and plundered” the US. His evidence? None is available. The reality is that US cars don’t sell in Japan because they are inferior and ill-suited to the market. We explore that theme in this blog post.

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US government is pinning its tariff hopes on some unlikely to be realised assumptions

Last week, the US President honoured his election promise, indeed his long-held commitment, to increase tariffs on imported goods and services to the US. The formula they came up to differentiate between countries was bizarre but I don’t intend commenting on that here, except to say, the imposition of tariffs on the – Heard Island and McDonald Islands – which are an ‘Australian external territory’ that is a ‘a volcanic group of mostly barren Antarctic islands, about two-thirds of the way from Madagascar to Antarctica’ (where penguins live) ranked up there with their Signal chaos. These guys have access to the ‘red button’ after all. That’s the scary thing. Anyway I was sent a document that seemingly is the theoretical rationalisation for the tariff decision (thanks Mahaish, appreciated) and so I thought I would give it some time.

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The hollowing out of the middle class in the US and beyond

The Post WW2 period was marked by the mass consumption boom and the rise of the ‘middle class’, which is a sociological designation that is intended to say that the working class had segments that had experienced better conditions and outcomes than the labouring cohorts. The fact that Capital (as a class) deigned to concede to the rise of this cohort was due to the threat that the Soviet Union and the increasing interest in Marxism in Western nations during the mid-C20th posed to the on-going hegemony of capital. The solution was to share a bit of the booty out with workers, improve pay and working conditions, and provide the basis for a ‘divide and conquer’ strategy, which would effectively segment the working class into ‘individual’ elements that could be played off against each other. And to maintain the profits, sales had to expand and what better way than to encourage the ‘middle class’ households to consume like crazy and fill their ever increasing size homes with stuff. That strategy worked for some decades until the middle class and the trade unions started to get too vocal and demand more at which point something had to give. And in the early 1970s, give it did, and with Monetarism running rife in the academy and industrialists plotting to capture the legislatures (think Powell Manifesto), the conditions for neoliberalism were laid. And the next several decades have seen that ideology become dominant and establish a dynamic that is now likely to implode.
Today, I report on dimensions of that implosion.

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Tariffs and more – Part 1

This week, Australia learned that old geopolitical relationships and so-called ‘free trade’ treaties mean little when it comes to US policy. The obsequious way our political class fawns after the US has been a constant sickening element of our national identity for as long as I can recall. When I was a child, we were told by our Prime Minister that Australia was “all the way with LBJ”, a foreign policy that took out nation, against all reason, into the Vietnam War. Now, the US President is demonstrating why a reliance on the US as a ‘good citizen’ of the world is a poor strategy for an advanced nation to adopt. The other interesting aspect of what is going on is that the world is once again entering an experiment that will provide knowledge about the impacts of ripping up free trade agreements and increasing barriers to entry. Theorising is one thing but now we have a practical experiment underway. This is Part 1 of a series on the current debate about tariffs.

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The Left has created the swing to the Right – some reflections

The last several decades of what is termed the neoliberal era has led to some fundamental changes in our social and economic institutions. It was led by the interests of capital reconfiguring what the polity should be doing, given that most of the significant shifts have come through the legislative or regulative capacity (power) of our governments. In turn, this reconfiguration then spawned shifts within the political parties themselves such that the traditional structures and voices have changed, in some cases, almost beyond recognition. The impacts of these shifts have undermined the security and prosperity of many citizens and redistributed massive wealth to a small minority. The anxiety created as the middle class has been hollowed out has been crying out for representation – for political support. Traditionally, support for the socio-economic underdogs came from the Left, the progressive polity, which, after all was the Left’s raison d’être. But that willingness by the Left politicians to give voice to the oppressed has significantly diminished as it surrendered the macroeconomic debate to the mainstream and got lost in post modernism. As a consequence, the ideological balance has demonstrably shifted to the Right, and the former progressive parties have been abandoned. My thesis is that the Left has created a burgeoning return of the Right with a daring and resolve that we haven’t seen for decades. The election and aftermath of Donald Trump’s elevation to presidency demonstrates the situation. Last weekend’s general election in Germany demonstrates the situation. And today a poll was released in Australia that suggests the current Labor government, which slaughtered the conservatives in the last election just 3 years ago are now facing a clear loss to the Opposition – that is advocating Trump-style radicalism. As the saying goes – you get what you deserve.

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