I learned early on in my career, while financing energy producers in Oklahoma and Texas, that the Heads of the Seven Sisters, in part, formulated most of our Middle East policies. That name, which was taken from the 7 mythological Pleaides sisters taken by the Titan Atlas, was later adopted as a description of the 7 largest multinational oil companies in the world. The companies are as follows:
- Anglo-Iranian Oil (now BP)
- Gulf Oil
- Royal Dutch Petroleum
- Standard Oil of California (now Chevron)
- Standard Oil of New Jersey
- Standard Oil Of New York, combined now as ExxonMobil and Texaco
These companies were and are a big deal, as they controlled 85% of the world’s petroleum reserves at the time of the 1973 energy crisis. You might wonder where all this is going, so I will hasten to the point. The ‘73 energy crisis launched by OPEC (Organization of the Petroleum Exporting Countries) eventually quadrupled the price of oil and contributed to a steep global recession. Whew! I finally got it out.
The first “T,” of course, is the President. He certainly draws the attention of the media almost daily with his pronouncements on both global and domestic issues that could effect the lives and wellbeing of our citizens. His recent announcement of the soon-to-be implemented hefty trade tariffs on imported steel and aluminum is a case in point. It is currently being reported that he made these monumental decisions on trade and tariffs (the second and third “Ts”) over the strenuous objections of both his Chief Economic Advisor (Gary Cohn) and Secretary of State (Tillerson, the fourth “T”).
The manner in which President Trump developed his plan to implement hefty tariffs and trade proposals on many of our long-standing trade partners is what the news cycles should focused on rather than the trials and tribulations of Stormy Daniels.
It stands to reason that Rex Tillerson, as the former Chairman of ExxonMobil, has enormous executive skill sets, impeccable connections, and an immense knowledge of future energy reserves that the US is dependent on. Did it really make sense for Trump to sack him?
It is my opinion that any good CEO (President) working for the benefit and protection of his citizens should have given Tillerson another spot on the team just to keep us close to enormous energy supplies around the world. Although we don’t see much of this argument in the press, we need the connection to energy for national security purposes.
Our armed forces in peacetime are huge consumers of energy, simply carrying out the daily global missions of providing a visible show of policing in the potential hot spots around the world. I don’t want to sound like a neocon but this active policy of being on constant patrol has most assuredly kept potential flare-ups and military threats from rogue nations from becoming a reality.
And how about Gary Cohn’s resignation? He was recruited by Trump from Goldman Sachs where he was President and COO. In the financial world there are few that reach that pinnacle. The new tax rates have certainly created an environment in the corporate world of sharing more of the benefits with employees and shareholders. The new tax rates, however, are going to add significantly to our debt. Higher taxes are already being whispered about as a remedy to the ballooning deficit. It sounds like too much Scotch -- a little merriment followed by a hell of a hangover.
The trade and tariffs issue is one that could have significant tailwinds for our economy. Despite the President’s pledge to many workers and companies to protect their jobs, the answer cannot be a tool that has caused economic wreckage rivaling the two World Wars.
One of our former and notable experiments with tariffs was the Smoot-Hawley Tariff Act, passed into law in June of 1930. The backers thought that the protectionist policies supporting the law would improve commerce for both US corporations and citizens. There are a lot of facts and timetable adjustments made which, in turn, create estimates as to the total effects of the implementation. The problem is that unmatched measurement standards have produced many differing results, and therefore, no reliable conclusions.
We do know that from 1929 to 1934 world trade declined by 66%. We also know that unemployment levels in the US in June of 1930 were 6.3% and jumped to 11.6%. Workers without jobs and unable to pay bank loans defaulted on their debts causing banks to ultimately fail. The stock market crash of 1929 combined with a surge in unemployed put the banks in desperate shape. There were certainly other factors that contributed to the shrinking economic base; tariffs and trade wars were most likely all part of the stew. In the hands of an amateur, they are damn well dangerous. Do you think Gary Cohn should have been a permanent member of Trump’s team? I certainly do.
Last thought: our economy continues to be in very good shape. The power of tax cuts for both corporations and individuals is becoming quite evident. More to come on this subject soon…
- David Hunter