Russia’s Putin Trap

Today’s Agenda

Russia’s Putin Trap

The Limits of Putin’s Power

(Bloomberg Opinion) -- Vladimir Putin seems to have it all: Seemingly endless political power. Oil. A nuclear arsenal. A way with horses. Whatever this is. What he doesn’t have, though, is the ability to breathe new life into Russia’s listless economy. And that is bad news for the country’s future – which has implications for the rest of the world.

More specifically, Putin can’t fix what ails Russia – slow growth, crumbling infrastructure and an unhealthy and aging workforce, /for starters – without changing everything about how he rules, write Bloomberg’s editors: “Putin can have Putinism or a more prosperous Russia, but not both.” Read the whole thing.

Mark Whitehouse, who lived in Russia for a decade, including the years of Putin’s rise, and recently spent another informative month there, provides an essential history of Putinism. Essentially, Putin’s choices – seizing property to give to his supporters, crushing political opposition, invading neighbors – have made the country toxic for investment. Changing his approach now, however, could lead to his ouster and then, maybe, an even bigger mess. “If Putin can’t establish a rule of law, how does Russia get from where it is to a brighter future?” Mark asks. At the moment, it doesn’t seem possible. Read the whole thing.

Of course, underestimating Putin is dangerous too. Leonid Bershidsky examines the skill with which Putin is handling the uproar over his proposal to raise the retirement age – a necessary but unpopular step on the road to economic health – calling it “a master class in the art of political survival.” Open question: Will that artistry be enough to transform Russia, or will the rest of the world have to deal with a nuclear power in perpetual decline?

Trade War, Distilled

President Donald Trump’s trade war’s latest friendly-fire casualty is good old American whiskey maker Brown-Forman Corp. The company today cut its profit forecasts for the year, thanks to tariffs Europe levied in retribution for Trump’s. Brooke Sutherland points out that Trump’s chummy meet-and-greet with European Commission President Jean-Claude Juncker last month didn’t remove any of these tariffs, meaning Brown-Forman and other U.S. exporters are still suffering. Trump may ultimately cut a symbolic deal with Europe as he did with Mexico. Still, Brooke wonders: “[H]ow many millions in profits will Brown-Forman and others have sacrificed before we get there?” Read the whole thing.

Russia’s Putin Trap

On the other hand, Trump’s tax cuts have padded the bottom lines of many companies, points out Justin Fox, citing new government profit data. But it would be wrong to say the tax cuts are doing all of the work:

Russia’s Putin Trap

Bonus corporate reading: Elizabeth Warren’s plan to make companies give workers a say in corporate governance has some pitfalls. –Noah Smith

China Is Lost in Bear Country

Trump’s aforementioned trade deal with Mexico seems to be focused on North America. But a lot of it – including its protections for intellectual property, labor rights and, most glaringly, shark fins –  seems aimed right at China, writes Christopher Balding. This suggests the Trump administration hopes to isolate and keep up the trade pressure on its Asian rival, Chris writes.

Such worries have been slamming Chinese stocks for months now, writes Shuli Ren – prolonging an earlier downturn over worries about government efforts to curb runaway borrowing. As a result, China’s stock market may be stuck in bear country for a long, long time.

On the bright side, China’s big banks are enjoying re-opened credit spigots and a government crackdown on shadow lending, notes Nisha Gopalan – but the hangover could be nasty.

Trump vs. Madison

It might take you a while to explain to Founding Father James Madison what the heck a “Google” is, if you could travel in a time machine to talk to him. But it wouldn’t take long for him to see that Trump’s threat yesterday to mess with Google’s search algorithm is really a threat to the First Amendment, writes Cass Sunstein. It’s nothing less than a revival of the Madison-opposed Sedition Act of 1798. “In essence, the president of the United States is accusing Google of a form of sedition, and calling on his government to punish it.” Read the whole thing.

The Fed’s Balancing Act

The Federal Reserve says it’s considering many potential risks while it steadily jacks up interest rates, but it seems to be ignoring one, warns former Minneapolis Fed President Narayana Kocherlakota: the risk of a recession in the near future.  Fortunately, there is some sign the Fed may take a breather from the rate-raising when it hits a “neutral” level, whatever that may be, points out Conor Sen. Though this might avert a catastrophic policy mistake, it would remake the economy in some fundamental ways. 

Bonus economy reading: Toward a unified theory of what the heck is going on with the economy. – Tyler Cowen 

Chart Attack

Brands are increasingly leaving retailers high and dry, notes Sarah Halzack. The latest victim: Dick’s Sporting Goods Inc., suffering as Under Armour goes its own way.

Russia’s Putin Trap

Quick Hits

Trump had a pretty good primary night last night.– Jonathan Bernstein 

Zealotry won in last night’s Florida gubernatorial primaries for both parties. – Al Hunt 

Hope you enjoyed the past decade of relatively low utility bills, because that’s ending. – Liam Denning 

Marco Rubio’s plan to tap Social Security to pay for parental leave doesn’t quite hit the mark. – Michael Strain 

ICYMI

Another Trump lawyer bites the dust. Justin Trudeau is willing to cut a Nafta deal, if it’s the “right deal.” Miami’s drinking water could be history soon. Stocks are near “euphoric” levels.

Kickers

To heal some wounds, adult cells turn more fetal.

Meet the teens who have quit social media, or are at least dialing it back.

Put your phone in do-not-disturb mode forever.

This Japanese company will quit your job for you.

A truly pun-ishing cease-and-desist letter. (h/t Scott Duke Kominers)

Let’s revisit “John From Cincinnati,” the HBO flop that led to the premature death of “Deadwood,” so thanks a lot.

Is it art, or is it just more space junk?

Note: Please send space junk, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mark Gongloff is an editor with Bloomberg Opinion. He previously was a managing editor of Fortune.com, ran the Huffington Post's business and technology coverage, and was a columnist, reporter and editor for the Wall Street Journal.

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