Why ‘national security’ makes us less secure

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From Bill Bonner, Editor, Bill Bonner’s Diary:
GUALFIN, ARGENTINA – TrimTabs, an investment research firm, reports that stock buybacks are running at twice the rate of this time last year.
Corporation managements are taking their tax cut money and delivering it to shareholders… and to themselves.

Skin in the Game

For several years now, corporations have been the biggest source of demand for their own shares. The number of shares outstanding goes down. The share price goes up.
The higher stock prices make shareholders richer and also help managers hit their compensation targets. Their lobbying paid off. Everybody’s happy.
But don’t expect this to help the working stiff… or the real economy… or the real prosperity of the average American.
And don’t expect the tax cuts to “pay for themselves” by making stock investors richer. It doesn’t work that way.
Real economic progress is made by willing participants with skin in the game doing win-win trades with real money. Lobbying the feds for favors, handouts, protection, and win-lose deals doesn’t help. That is, it might help you… but it won’t help others.

Deep State Hack

Meanwhile comes word that the Trump administration has fired its top diplomat, the oilman Rex Tillerson, and put the Deep State hack, Mike Pompeo, in his place.
Tillerson reportedly referred to Trump as a “moron.” The moron seems to have had the last laugh.
But brains don’t have much to do with what goes on in Washington anyway. What counts is cunning, and Mr. Trump has plenty of it.
The president also scotched the biggest takeover deal ever proposed in the tech sector.
Broadcom was set to take over Qualcomm. But POTUS blocked the move, citing “national security” reasons.
Broadcom and Qualcomm are both in the semiconductor business and both source their supplies and talent from all over the world.
But Broadcom, which originally sprang from Hewlett Packard, put its headquarters in Singapore. This made it a “foreign company.” Qualcomm stayed put in San Diego. And so, the deal is off.

More Swamp Deals

National security was also the reason given for the trade barriers imposed on steel and aluminum imports.
Markets for both are wide and deep. There is no reason to think America’s security would suffer if a single country cut us off; we could just buy our steel from one of dozens of other suppliers.
But national security probably had little to do with either move. Instead, these are more swamp deals…
We already showed how the trade restrictions help some cronies… but hurt almost everyone else.
Now, in blocking Broadcom’s takeover of Qualcomm, we see the fix was in again.
Bloomberg reports:
Well before Qualcomm Inc. confronted a hostile takeover bid from Broadcom Ltd., the San Diego-based chipmaker laid the groundwork for support in Washington by outspending its rival by nearly 100-to-1.
Qualcomm spent $8.3 million in 2017, while Broadcom spent $85,000, according to federal lobbying disclosures. Qualcomm disclosed spending on issues including immigration, international trade, taxes and antitrust, among others, showing how it amassed clout in Washington. It’s unclear how much of Qualcomm’s money paid for lobbying against Broadcom’s bid.
Qualcomm spent about $2 million a quarter, according to the disclosures, increasing slightly in the fourth quarter. Broadcom’s unwanted advances started in November. Qualcomm’s widespread lobbying operation marked a sharp contrast with the effort made by Singapore-based Broadcom, which instead sought to curry favor with President Donald Trump and offered to move its headquarters to the U.S. That was in exchange for winning approval for its purchase of Brocade Communications Systems Inc., a substantially smaller deal.

For Reasons of National Security

The cronies always find the “national security” rationale useful. But it is dangerous. The military is pure win-lose. The more you have – except in rare circumstances – the worse off you are.
In the 1930s, for example, Japan’s military-industrial complex got control of the government. Spending money on military adventures is always a losing proposition economically. But it can be hard to stop.
The head of Japan’s central bank, Takahashi Korekiyo, resisted. He cut government spending in 1935. Then he was assassinated by the military in 1936.
Japan has few raw materials. So for “national security” reasons, it decided to take over much of the Far East, from China down to Singapore.
They called it the Greater East Asia Co-Prosperity Sphere. Rather than buy resources on the open market in win-win trades, the Japanese – led by their security industry – forced win-lose deals on their neighbors, with an eye to taking control of the oil fields in Indonesia.
This had predictably bad consequences; the neighbors resisted.
Aiding the resisters was the United States of America, which cut off oil exports to Japan as war fever heated up.
Then, Japan faced a major choice. It could back down, accepting that it would have to play by the rules of civilized, win-win commerce. Or, for reasons of national security, it could bomb Pearl Harbor.
This latter course is the one it chose. With the generals and war-industry cronies waving the flag and whooping for war, it was inevitable.
But the results were less than satisfactory; in terms of “national security,” the Japanese couldn’t have made a worse choice.
Within six months, the U.S. fleet had scored a major victory at the Battle of Midway. After that, the Japanese had little chance of victory.
And by the time they finally surrendered, the home islands were in ruins, Hiroshima and Nagasaki were nearly obliterated by atomic bombs, and the national security of Japan was in the hands of the United States of America.


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