The U.S. economy is barreling ahead. For now. But Trump's economic policies will prove to be anathema to U.S. stock prices. How deep will the fall be? Read on.
--Marvin Zonis

Yes, the stock market is at historic highs. Yes, the economy continues to grow robustly. Yes, employment is really low and wages are beginning to rise. But what else would you expect from the various stimulative policies adopted by President Trump. The massive tax cuts combined with increased federal spending have done wonders for all the indicators (including a massive increase in the annual federal budget deficit). But powerful costs follow as well. As interest rates rise, the burden of carrying increasing annual deficits of a trillion dollars becomes significant. Given the massive deficits, the feds will have less ammunition the next time the economy needs stimulating. Other challenges follow as well. Here are some of them.
—Marvin Zonis

African population growth continues at a startling pace. In 2017, Africa’s population was estimated at 1.3 billion people. By 2030 the number is estimated to grow to 1.7 billion. Nine out of the ten countries with the highest total fertility rate (TFR - the average number of babies a woman births over the course of her reproductive life) are in Africa. (The tenth is Afghanistan.) The average number of babies born to women in Niger, for example, is 7.3. The average number of babies born to women in Nigeria is 5.5.

A number of factor account for Africa’s rapid population growth. One is that African women report that they wish for larger families than women from any other continent. Another is the absence of modern contraception in certain countries. Below is a chart on the percentage of women using modern contraceptives, by country. Virtually all African countries are below the levels of the rest of the world.

Simultaneously, some of the world’s lowest total fertility rates are to be found in Europe. The average number of babies born to women in Italy is 1.3; in Germany, 1.5; in France, 1.9. Since the average has to be 2.1 babies per woman to maintain stable adult levels, these numbers will actually result in shrinking populations. But even where the population grows, the numbers for Europe are tiny. For example, Spain’s population is expected to grow from 46 million in 2015 to 48 million by 2050. In the same period, Tanzania’s population will grow from 48 million to 138 million.

It seems a sure bet that those 138 million will not find adequate employment opportunities or a level of well being at home they consider acceptable. Their answer seems obvious — head for those rich European countries whose population have grown only by minuscule amounts or even better, have actually shrunk over the previous decades.

The reality is that Europe faces yet another threatening challenge — from demography.

——Marvin Zonis

President Trump has expressed his willingness to meet without preconditions with President Rouhani of Iran. Immediately after, Secretary of State Pompeo listed preconditions: “If the Iranians demonstrate a commitment to make fundamental changes in how they treat their own people, reduce their malign behavior, can agree that it's worthwhile to enter into a nuclear agreement that actually prevents proliferation, then the president said he's prepared to sit down and have the conversation with them.” Obviously, Pompeo just killed off President Trump’s offer.

At about the same time, the rial-dollar exchange rate fell to over 100,000 as Iranians continued their rush to get out of their own currency. When I left Iran in September 1979, 70 rials would buy a dollar. (I urged my Iranian friends to convert whatever rials they had into dollars.)

The widespread protests in Iran at the end of 2017 and periodically in 2018 were put down relatively easily by the Iranian police without the help of the Iranian Revolutionary Guard Corps or the Basij (the Mobilization). The Basij, the organizing and arming of neighborhood men by their local mosques, was crucial for suppressing the 2009 uprising. The regime has committed major resources to professionalizing the police and training them in riot control. The implication is that the regime has not only the will but the means of putting down any protests that arise from the widespread economic discontent. A significant analysis of the Iranian police by Saeid Golkar can be read at
https://www.brandeis.edu/crown/publications/meb/MEB120.pdf.

Below is a response to my recent piece on Iran from Howard Rotblat-Walker, a PhD in Sociology from the University of Chicago whose thesis research was done in the bazaars of the Iranian city of Yazd and who recently returned from a trip through that country.
——Marvin Zonis

The heart of the U.S. administration is made up of anti-Iran hardliners.

*DOD Secretary Mattis: “Iran is the single most enduring threat to stability and peace in the Middle East” and not really a nation-state at all but “a revolutionary cause devoted to mayhem.” And of course, the more famous “the three gravest threats facing the United States are “Iran, Iran, and Iran.”

*NSA Chief John Bolton: “To Stop Iran’s Bomb, Bomb Iran.”

*State Secretary Pompeo: “The [Iranian] regime has been fighting all over the Middle East for years...After our sanctions come in force, it will be battling to keep its economy alive. Iran will be forced to make a choice: Either fight to keep its economy off life support at home or squander precious wealth on fights abroad. It will not have the resources to do both.”

And of course the Commander in Chief, President Trump: “My number one priority is to dismantle the disastrous deal with Iran.”

Their hostility - stemming from the Iranian revolution that overthrew the Shah in 1979; the seizure of U.S. citizens and their 444 day captivity; the killing of 241 U.S. military personnel when Hezbollah blew up the U.S. Marine barracks in Beirut in 1983; the 1991 car bombing of Khobar Towers in Saudi killing 19 U.S. airfare personnel and from many other causes — has now coalesced around a policy of forcing regime change in Iran.

Along with stringent new sanctions to crush the Iranian economy will come an all out information war directed at the Iranian people to turn against their regime and the initiation of U.S. and Israeli clandestine activities to mobilize anti-Islamic Republic groups within Iran.

This serious new chapter in U.S. foreign policy is now underway.
——Marvin Zonis

President Trump's initiation of a trade war with China will result in the U.S. and the American people as the ultimate losers. China is far better suited to withstand the pain of reduced exports to the U.S. than is the U.S. in its trade with China. To a significant extent, this is due to the authoritarian nature of the Chinese government and its ability to control its economy.
—Marvin Zonis

Is the failure of President Trump to understand the role of imports merely ignorance or willful obfuscation? If the latter, what could be his motive?
--Marvin Zonis

President Trump apparently fails to understand what virtually every legitimate economist knows to be true — tariffs are a disaster. This is especially the case for the citizens of the country that imposes them. Every American consumer will now be paying more for everything that is made with steel or aluminum, for instance. Maybe even worse, manufacturers which use steel or aluminum in their products are likely to find their products’ prices increasing and their exports shrinking.
--Marvin Zonis

Using data on the relationship between trade and unemployment and trade and GDP growth, Steil and Della Rocca show how Trump has it wrong on trade.
—Marvin Zonis

Ayatollah Khamenei announces that he has ordered Iran’s atomic energy agency to prepare for the rapid enrichment of uranium to bomb levels, given President Trump’s withdrawal from the nuclear deal. All the signatories to the deal as well as the International Atomic Energy Agency assert that Iran was scrupulous in meeting its commitments under the deal. Yet the President withdrew on the grounds that its was the “worst deal ever.” The deal was negotiated by Barack Obama; did not require Iran to allow inspections on its military bases; did not apply to its missile development programs; and was silent on Iran’s aggressive foreign policy — all issues that have troubled the U.S. president (along with his close ally, Bibi Netanyahu, Israel’s Prime Minister.)

By withdrawing from the deal, the President has managed to accomplish the following:

*Uniting Iranian hardliners and moderates in hostility to the U.S. and in support of Iran’s nuclear program
*Driving up oil prices in response to fears over new U.S. sanctions on Iranian exports
*Infuriating U.S. allies by threatening secondary sanctions on firms registered in their countries which do business in Iran
*Emboldening China to continue to export to Iran after a warm reception for Iran’s president in a recent visit to Beijing
*Doing nothing towards constraining Iran’s regional ambitions or missile development programs.
--Marvin Zonis

Henry Siegman was once a key figure in the American Jewish community. He was president of the American Jewish Congress, an organization founded in 1918. On its web site, the first entry under “Issues,” is:

"U.S./ISRAEL RELATIONS
Israel is the United States’ steadfast ally, and AJCongress works to help strengthen the bond between the two nations by reaching out to decision makers in the highest levels.

Additionally, AJCongress works to promote mutual understanding and normalization between Israel and neighboring nations."

Siegman, as president, worked diligently towards that end. But somehow, his understanding of the entire Israeli-Palestinian relationship changed dramatically. His vigorous and bitter criticism of Israeli policy has led many American Jews to brand him an anti-Semite. Here is an example of his criticism.
—Marvin Zonis

The ceremony marking the opening of the U.S. Embassy in Jerusalem —at the time, the only country in the world with an embassy there — was primarily a celebration of President Tump. He sent his daughter and son-in-law, Jared Kushner, as his official representatives. Prime Minister Netanyahu thanked them for their “pursuit of peace,” He thanked President Trump for his making history and then thanked the President “for making the bond between us stronger than ever.” The president of Israel, Reuven Rivlin, was even more effusive, “President Trump, the Israeli people thank you for keeping your word, for your courage, for your determination, and for your firm, unwavering stand alongside the State of Israel. . . We hope and expect that other nations will follow your path and your leadership.” (Guatemala did follow the path and became the second country to open an embassy in Jerusalem.)

Two evangelical ministers were even more effusive. Robert Jeffress, perhaps the President’s favorite evangelical had prayed at Trump’s pre-inauguration breakfast. (This, despite the fact — or maybe because of it — he had previously declared, “Islam is wrong. It is a heresy from the pit of hell,” Mr. Jeffress said in the same interview, “Mormonism is wrong. It is a heresy from the pit of hell. . . Judaism — you can’t be saved being a Jew. You know who said that, by the way? The three greatest Jews in the New Testament: Peter, Paul and Jesus Christ. They all said Judaism won’t do it.”) Offering the opening prayer at the Jerusalem ceremony, Jeffress said the President “stands on the right side of you, God, when it comes to Israel.”

The Reverend John C. Hagee offered the closing prayer. (He had previously declared, “Islam in general, those who live by the Quran have a scriptural mandate to kill Christians and Jews,” adding that about 200 million Muslims wanted to “come to America or invade Israel to crush it.”) At the ceremony he said, “We thank you oh Lord for President Donald Trump’s’s courage in acknowledging to the world the truth established 3000 years ago that Jerusalem is and always will be the eternal capital of the Jewish people. . . Let every Islamic terrorist hear this message, ‘Israel lives’.”

The ceremony, in short, was a celebration of the two political leaders — Netanyahu and Trump - who had made the ceremony possible. But it was also an exercise in the “suspension of disbelief,” as Bernard Ashivai suggests in the attached article. The reality of the occupation of the West Bank, the encroachment and seizure of ever more Palestinian land, and, above all, the killing of more than 60 Gaza protesters on the same day as the ceremony were realities utterly missing.
-—Marvin Zonis

Keith Alaniz is a second year student at the Booth School of Business at the University of Chicago, about to graduate with his MBA. Keith served a tour of duty with the U.S. Army in Iraq and was then transferred to Afghanistan for another tour. He finished his combat duties convinced that greater economic opportunities for Afghans were necessary for the future stability of the country. He then started a company, Rumi Spice, which organized Afghan saffron growers — the world’s best saffron — and began to market that rare and valuable product in the U.S. Now almost 2,000 saffron farmers have been organized to supply the company and Rumi Spice has begun to develop other products. You can order your saffron at rumispice.com. Please do.
-—Marvin Zonis

As President Trump considers cancelling the Iran nuclear deal, he might think more creatively about Iran’s vulnerability — its currency.
--Marvin Zonis