I have written a couple of times about rising protectionism, and looking at today’s stories, now seems to be an excellent time to revisit the topic. Protectionism is just one facet of how states try to wring out economic advantage over others, with currency and trade policies among the available tools. Today we have several examples.

On the currency policy front, we have “Beijing, Seoul Blast Fed Push” in the Wall Street Journal (WSJ) on page A13. The article talks about how both central banks are opposed to continued U.S. monetary easing, which encourages inflation around the world, weakens the dollar to make U.S. exports more competitive, and in general benefits the U.S. at the expense of its trading partners. Of course, this is exactly what the policy is designed to do. The ability of the U.S. to continue to follow policies that benefit itself at the expense of others, however, is dependent on the continuation of the dollar as the reserve currency, which is the other focus of the article, as both central banks advocate finding an alternative. Not an immediate concern, but a building long-term concern.

The U.S. economy continues to actively stay in one place. The papers reflect this, with headlines like “Numbers Augur Trouble Ahead” and “Obama Trumpets Revised Job Data,” both from page A6 of the Wall Street Journal (WSJ) and both painting very different pictures of where we are. Although the job figures have been revised up—meaning we actually have more than 400,000 more jobs than we thought—slowing growth and a drop in durable goods orders suggest that the future will be worse than expected. Likewise, “Chinese Slowdown Idles US Coal Mines” from the front page of the WSJ talks about how reduced exports and mining employment are hitting the U.S., while “GE’s Immelt Is Upbeat on Industrial Outlook” (p. B3) suggests that the recent industrial and manufacturing slowdown is in fact overdone. But there is cognitive dissonance within the GE article itself, with an acknowledgment that FedEx and Caterpillar are much less sanguine about the future.

The New York Times (NYT) is just as visibly conflicted. “Fearing Fiscal Cliff, Investors Cash In and Seek Safety” (p. B1) is right next to “Economy Still Weak, But More Feel Secure.” A follow-up article, “Good News and Bad in New Data on Economy” (p. B6), makes the uncertainty even more explicit. How’s that for hard-hitting analysis?

The fiscal cliff

Another bad day for Mitt Romney in the papers. The race in Ohio, which, according to the polls, is increasingly in favor of Obama, hit the front pages of the Wall Street Journal (WSJ) with “Electoral Drama Shifts to Ohio” and the Financial Times (FT) with “Romney’s options narrow as poll gaps widen.” Both articles highlight how critical Ohio is to the Republican’s national chances. The WSJ also has a useful map on page A6 that outlines exactly what states are in play, while the FT offers a look at the Ohio race in a special analysis piece on page 11, “Race for the rustbelt,” that highlights some of the state-specific issues in detail.

The race did not make the front page of the New York Times (NYT), but that paper did have a similar analysis by Nate Silver, whom I have recommended before, on page A19: “Romney’s Tough Path as He Trails in Ohio.” Silver provides an excellent breakdown of how past races have evolved and what that may mean for the race going forward. Worth reading.

We seem to be moving out of the eye of the European hurricane, as the winds are starting to blow again and people are taking cover. Spain and Greece made the front pages of the papers: the Wall Street Journal (WSJ) has “Bottles Fly as Spain’s Confidence Shatters,” accompanied by a photo of a bottle shattering on a building right by an older woman’s head as she takes cover; the Financial Times (FT) has “Spain’s premier fights turmoil,” accompanied by a picture of what looks like a masked riot policeman assaulting a member of the Spanish parliament; and the New York Times (NYT) has “New Protests Over Austerity Plans in Greece,” with a photo of a masked riot policeman running away from the remains of a Molotov cocktail. All three papers also have follow-up articles on both the Spanish and Greek protests to provide more context. Although the photos are quite scary, this is not just a photo op—it goes much deeper.

This is what it looks like when all the choices are bad ones. Everyone is looking for a solution that doesn’t require any sacrifice. The Catalonians are convinced they are paying too much, so they want to separate, which, of course, would make the problems worse for everyone, including themselves. “Spain Resists Homage to Catalonia” (WSJ, p. C12), “Spanish Ire Symbolized by a Carrot” (NYT, p. B1), and “Financial crisis stokes fires of Spanish identity” (FT, p. 4) all center on exactly this issue. What is the relevant governmental unit in Europe? At what level should different communities hang together and sacrifice for the common good? Without solving this fundamental issue, can any other issue be solved?

I want to highlight an interesting chart put together by Pete Essele of Commonwealth’s Asset Management and Research teams. Pete does excellent work in a variety of areas, but he is particularly good at putting together charts and graphics that make important points in very clear ways.

China rolled out its first aircraft carrier, in a significant symbolic move. The Financial Times (FT) covered the story in “Sea change: China enlists first aircraft carrier” (p. 6), the Wall Street Journal (WSJ) in “China Adds Carrier to Its Navy” (p. A9), and the New York Times (NYT) in “China Launches Carrier, But Experts Doubt Its Worth” (p. A4). I say symbolic because it will only be used for training and the Chinese do not yet have planes capable of carrier landings, as the NYT article points out. This is a sign of things to come, but not of things right now.

It does raise the ante across Asia, though. Japan is feeling it, per “Island spat raises military heat” (FT, p. 6), which talks about how the confrontation is getting more military in nature. Most people do not realize this, but Japan actually has an extremely capable military, including an excellent navy. If these confrontations result in Japan starting to re-arm, that will change everything about the Asian environment. This is a big deal for the next 10 years and forward.

Even though it is not on the front pages in the U.S., Europe continues to simmer and deserves an update. Spain did make the front page of the Financial Times (FT) with “Catalonian push for independence piles pressure on Spanish premier,” highlighting the problems the regions are creating for any bailout of the country. Not only that, but existing deals are also starting to show cracks; “Deal over bank bailout thrown into doubt” (FT, p. 2) discusses how Germany, Holland, and Finland are backing away from components of the bank bailout deal for Spain and Ireland that they were thought to have agreed on. Nothing solid yet, but a troubling sign.

That troubles are hitting the general population is shown not only in the recent protests in Catalonia, but also in “Protesters Take to the Street in Madrid” on page A4 of the New York Times (NYT), which references the regional protests. The Spanish government is attempting to address the issue, per “Spanish Leader Outlines Fresh Overhauls” on page A12 of the Wall Street Journal (WSJ), but markets are not convinced, as seen in “Debt Auction Shows Unease Over Spain’s Prospects” (NYT, p. B2). Spain is the bellwether here, and Hurricane Spain continues to spin.

So the U.S. markets are at their highest point since 2007. In 2007, the markets were at their highest since 2000. In 2000, the markets were at all-time highs. In 2000, values were driven by the bubble, as we now know. In 2007, spending and growth were driven by unsustainable growth in housing values and consumer borrowing, as we now know. In hindsight, those valuations were not supportable. We are smarter than that now.

I have discussed two major China themes over the past couple of months: growing cracks in the economy and—quite possibly as a result, to distract the population—growing nationalism and conflict with its neighbors. There have been riots over the second, brought on quite possibly by the first. Now, for the first time, we seem to have riots driven primarily by economic issues— not by the authorities.

The papers have stories on large riots at Hon Hai, a large manufacturer better known as Foxconn, which is a principal supplier for Apple. The Wall Street Journal (WSJ) has “Chinese Factory Erupts” (p. B1), the New York Times (NYT) has “Factory Riot Underscores Rift in China” (p. B1), and the Financial Times (FT) has “Foxconn halts production at Apple supplier after 2000 workers riot” (p. 17).