China, the U.S. and the Oil Blame Game

By Nathaniel Taplin

Investors in the black stuff found themselves with a big black eye Tuesday. U.S. oil prices dropped by more than 7%, the worst one-day fall since 2015 following a bearish report from the Organization of the Petroleum Exporting Countries (OPEC) and more Twitterbluster on oil supply from President Trump.

The market’s main focus has been on what the report had to say about oil supply, particularly figures that showed rising production in Russia and from other OPEC members more than offsetting cuts from sanction-hit Iran. More worrying is what the report didn’t say. In particular, its estimates for demand growth next year from China, the world’s second-biggest consumer, are starting to look a little too rosy. 
An oil tanker at China’s Ningbo Zhoushan port. OPEC’s demand-growth estimate for China might be a little too rosy.

An oil tanker at China’s Ningbo Zhoushan port. OPEC’s demand-growth estimate for China might be a little too rosy. Photo: china stringer network/Reuters 

Chinese oil consumption has held up well given the country’s softening growth. Data for October released Wednesday hint at choppier waters ahead: investment in real estate, the main bright spot in the economy this year along with exports, was up just 7.7% from the same time last year, its slowest rate since December. Retail sales also weakened again, after a late summer bounce.

OPEC has penciled in slower growth in oil demand from both China and the U.S. next year. But it is still forecasting Chinese demand to rise by 340,000 barrels a day in 2019, not much below its estimate of a 390,000 gain this year. For the U.S. it predicts a much sharper slowdown in demand growth: a 240,000 barrels a day gain in 2019 against an estimated 410,000 rise this year.

China has managed to defy doom-mongers so far, and its economic data paint a mixed picture: industrial output accelerated in October, for instance. But oil demand growth there is already running well above its long-term average, leaving plenty of downside potential. Chinese apparent demand—refinery runs plus net oil-product imports—rose nearly 8% on the year in the third quarter. Over the five years to October, that growth rate was less than 3% a month on average.

For now, demand growth in both the U.S. and China still looks decent. But the U.S. economy is still roaring along, and consumer confidence is at its highest since 2000. In China, retail sales are growing at their slowest since the early 2000s, private businesses are struggling to get loans and tariff rates on Chinese goods entering the U.S. are about to jump sharply again.

If there is a big hit to oil demand globally next year, it looks likely to come from across the Pacific rather than the U.S.

Trump’s Diminishing Power and Rising Rage

The coming months may be especially dangerous for America and the world. As US President Donald Trump’s political position weakens and the obstacles facing him grow, his mental instability will pose an ever-greater danger.

Jeffrey D. Sachs  

trump angry

NEW YORK – The drama of Donald Trump’s presidency has centered around whether an extremist president would be able to carry out an extremist policy agenda against the will of the majority of Americans. So far the answer has been no, and the midterm elections make it far less likely. Yet Trump’s rising frustrations could push him over the edge psychologically, with potentially harrowing consequences for American democracy and the world.

None of Trump’s extremist policy ideas has received public support. The public opposed last year’s Republican-backed corporate tax cut, Trump’s effort to repeal the Affordable Care Act (Obamacare), his proposed border wall with Mexico, the decision to withdraw from the Iran nuclear agreement, and the imposition of tariff increases on China, Europe, and others. At the same time, contrary to Trump’s relentless promotion of fossil fuels (coal, oil, and gas), the public favors investments in renewable energy and remaining in the Paris climate agreement.

Trump has tried to implement his radical agenda using three approaches. The first has been to rely on the Republican majorities in the two houses of Congress to pass legislation in the face of strong popular opposition. That approach succeeded once, with the 2017 corporate tax cut, because big Republican donors insisted on the measure, but it failed with Trump’s attempt to repeal Obamacare, as three Republican senators balked.

The second approach has been to use executive orders to circumvent Congress. Here the courts have repeatedly intervened, most recently within days of the election, when a federal district court halted work on the Keystone XL Pipeline, a project strongly opposed by environmentalists, on the grounds that the Trump administration had failed to present a “reasoned explanation” for its actions. Trump repeatedly and dangerously oversteps his authority, and the courts keep pushing back.

Trump’s third tactic has been to rally public opinion to his side. Yet, despite his frequent rallies, or perhaps because of them and their incendiary vulgarity, Trump’s disapproval rating has exceeded his approval rating since the earliest days of his administration. His current overall disapproval rating is 54%, versus 40% approval, with strong approval from around 25% of the public. There has been no sustained move in Trump’s direction.

In the midterm elections, which Trump himself described as a referendum on his presidency, the Democratic candidates for both the House and Senate vastly outpolled their Republican opponents. In the House races, Democrats received 53,314,159 votes nationally, compared with 48,439,810 for Republicans. In the Senate races, Democrats outpolled Republicans by 47,537,699 votes to 34,280,990.

Summing up votes by party for the three recent election cycles (2014, 2016, and 2018), Democratic Senate candidates outpolled Republican candidates by roughly 120 million to 100 million. Nonetheless, the Republicans hold a slight majority in the Senate, where each state is represented by two senators, regardless of the size of its population, because they tend to win their seats in less populous states, whereas Democrats prevail in the major coastal and Midwestern states. Wyoming, for example, elects two Republican senators to represent its nearly 580,000 residents, while California’s more than 39 million residents elect two Democratic senators. Democrats win more votes, but Republicans win more seats.

Without control of the House, however, Trump will no longer be able to enact any unpopular legislation. Only policies with bipartisan support will have a chance of passing both chambers.

On the economic front, Trump’s trade policies will become even less popular in the months ahead as the American economy cools from the “sugar high” of the corporate tax cut, as growing uncertainty about global trade policy hamstrings business investment, and as both the budget deficit and interest rates rise. Trump’s phony national-security justifications for raising tariffs will also be challenged politically and perhaps in the courts.

True, Trump will be able to continue appointing conservative federal judges and most likely win their confirmation in the Republican-majority Senate. And on issues of war and peace, Trump will operate with terrifyingly little oversight by Congress or the public, an affliction of the US political system since World War II. Trump, like his recent predecessors, will most likely keep America mired in wars in the Middle East and Africa, despite the lack of significant public understanding or support.

Nonetheless, there are three further reasons to believe that Trump’s hold on power will weaken significantly in the coming months. First, Special Counsel Robert Mueller may very well document serious malfeasance by Trump, his family members, and/or his close advisers. Mueller kept a low profile in the run-up to the election. We will most likely hear from him soon.

Second, the House Democrats will begin to investigate Trump’s taxes and personal business dealings, including through congressional subpoenas. There are strong reasons to believe that Trump has committed serious tax evasion (as the New York Times recently outlined) and has illegally enriched his family as president (a lawsuit that the courts have allowed to proceed alleges violations of the emoluments clause of the Constitution). Trump is likely to ignore or fight the subpoenas, setting the stage for a major political crisis.

Third, and most important, Trump is not merely an extremist politician. He suffers from what author Ian Hughes has recently called “a disordered mind,” filled with hate, paranoia, and narcissism. According to two close observers of Trump, the president’s grip on reality “will likely continue to diminish” in the face of growing political obstacles, investigations into his taxes and business dealings, Mueller’s findings, and an energized political opposition. We may already be seeing that in Trump’s erratic and aggressive behavior since the election.1

The coming months may be especially dangerous for America and the world. As Trump’s political position weakens and the obstacles facing him grow, his mental instability will pose an ever-greater danger. He could explode in rage, fire Mueller, and perhaps try to launch a war or claim emergency powers in order to restore his authority. We have not yet seen Trump in full fury, but may do so soon, as his room for maneuver continues to narrow. In that case, much will depend on the performance of America’s constitutional order.

Jeffrey D. Sachs, Professor of Sustainable Development andProfessor of Health Policy and Management at Columbia University,is Director of Columbia’s Center for Sustainable Development andof the UN Sustainable Development Solutions Network. His books include The End of Poverty, Common Wealth, The Age of Sustainable Development, Building the New American Economy, and most recently, A New Foreign Policy: Beyond American Exceptionalism.

Europe should work with Iran to counter US unilateralism

Iranian president warns that the Trump administration endangers world stability

President Hassan Rouhani: 'Iran believes in multilateralism and is prepared to join other peace-loving nations in this path' © Don Emmert/AFP

The world faces a myriad of challenges, including economic issues, social crises, the predicament of refugees, xenophobia, terrorism and extremism.

Europe has not been exempt, and has been confronted by these problems almost daily. Over the past two years, US foreign policy has emerged as a new and complicated problem, as America creates new challenges on a variety of fronts in international relations.

We see US complicity in the daily atrocities in Yemen and in the humiliation and gradual perishing of the great nation of Palestine, which has daily inflamed the emotions of one-and-a-half billion Muslims.

We believe the American government has explicitly supported criminal groups like Isis, who value no human principles, exacerbating the problems of our region.

More broadly, US president Donald Trump’s approach to matters of trade, international treaties and the humiliating manner in which he treats even America’s allies, illustrates how US foreign policy has posed new challenges to the global order.

In brief, the US administration’s policies of unilateralism, racial discrimination, Islamophobia, and the undermining of important international treaties, including the Paris Climate Accord, are fundamentally incompatible with multilateralism and other socio-political norms valued by Europe.

There is another critical matter aggravating transatlantic relations: the Iran nuclear deal. Known as the Joint Comprehensive Plan of Action, it was the product of two years of intensive negotiations between Iran and six other countries, including three from Europe.

As an annex to UN Security Council Resolution 2231, this agreement enjoys the approval of the overwhelming majority of the international community and, as part and parcel of international law, imposes certain obligations on all the members of the UN.

Unfortunately, the US, through raising unfounded claims and in complete disregard for its international obligations, has abandoned the nuclear agreement and imposed extraterritorial and unilateral sanctions on Iran and, by extension, other countries.

The US is, in effect, threatening states who seek to abide by resolution 2231 with punitive measures. This constitutes a mockery of international decisions and the blackmailing of responsible parties who seek to uphold them.

The nuclear accord is recognised as a great victory for diplomacy in our time. That is why the EU is working with other nations around the world — with the exception of a very few — to save this great achievement.

Since the US withdrew, we have held constructive talks with the remaining JCPOA participants. Their support has been valuable, but it is essential that the European parties, as well as China and Russia (known as E3+2), present and implement their final proposed package of measuresto compensate for and mitigate the effects of America’s newest unilateral and extraterritorial sanctions before they are imposed.

This historic agreement can only survive if the Iranian people can witness and enjoy the benefits it promised.

The recent decision of the International Court of Justice and its provisional measure against US unilateral sanctions reaffirms the legitimacy of Iran’s position, and the illegality of these oppressive sanctions.

Disregarding the binding and mandatory nature of the provisional measure demanded by the ICJ would undermine confidence in international treaties. That would create a major challenge with possibly dangerous and negative consequences for regional and international peace and security.

The nuclear deal demonstrated that Iran is committed to reason and dialogue. We have initiated political consultations with Europe on key issues of mutual interest, especially on regional crises, with the aim of finding appropriate solutions.

In today’s tumultuous world, the only way to overcome difficulties is through concerted international efforts based on mutual interests, and not the short-sighted demands of one or a few states. Unilateralism is fatal; while multilateralism is the only appropriate, inexpensive and effective course of action.

Europe’s tradition of multilateralism positions it well to play an important role in reinforcing peace and stability, in line with its identity and interests. Iran believes in multilateralism and is prepared to join other peace-loving nations in this path.

Cooperation between Iran and Europe will secure the long-term interests of both parties, and ensure international peace and stability.

The writer is president of the Islamic Republic of Iran

About The Coming Recession

by: Larry Kummer

- This month’s sharp drop in stock prices has raised fears about the US economy?

- Are these fears warranted?

- Is the expansion “old”?

- How can we predict the next recession?

The US and global stock markets have fallen, with the usual hysterical headlines (it is up 6.1% before dividends over 12 months, up 0.6% YTD, down 7.3% from the October 3 peak). Are equity investors telling up something about the economy? The answer might shake America - businesses, households, and Washington DC.
This expansion has run for 112 months counting from the 2009 trough (the second longest), and 130 months from 2007 peak (the longest) - using the NBER's data since 1854. It continues to run strong. When will the growth end? What happens then?
Do economic expansions grow old and die?
Glenn D. Rudebusch summarized economists' answer in "Will the Economic Recovery Die of Old Age?" (San Francisco Fed's Letters, 4 February 2016. He gives two graphs answer the question. First, a simple mortality table shows that people grow old and die.
Age mortality table
Source: Federal Reserve Bank of San Francisco
See the same graph for economic expansions. They aged and died before the Great Depression and WWII. But that taught economists about the value of economic stabilizers (e.g., unemployment insurance), plus fiscal and monetary stimulus. Since then, the odds of recession ending each month increase only slightly over time. That is progress!
Probability of a recession ending by month
Source: Federal Reserve Bank of San Francisco
Non-economists cosplaying economists in the news often say that this expansion is "living on borrowed time." That is false. Also, it is not a recovery. Almost all measures of economic activity long-ago passed their previous peaks. This is an economic expansión.
What kills expansions?
People often confuse signs of a slowdown (e.g., consumer confidence falls, economic activity slows) with the factors that cause the slowdown. Such as economic or political shocks. A partial list includes trade wars, real wars, monetary policy (excessive rate increases by the Fed, restrictions on lending, breaking growth of the money supply), fiscal policy (large cuts in spending, large tax increases), and popping of big investment bubbles. As with most disasters, multiple errors are usually necessary (a dozen mistakes, plus an iceberg, sank the Titanic).
There are many links that can break in our complex world.
Two causes are especially common in the post-WWII era. First, the Fed brakes too hard to prevent "overheating." Sometimes, overheating means a rapid rise of inflation. Sometimes, it means full employment forcing businesses to share productivity growth with their workers. "Profit inflation" is good in bankers' eyes. "Wage inflation" is bad!
Second, "imbalances" in the economy. These can be excessive growth in government, consumer, or business borrowing - which ends suddenly, creating a shock. Or sector imbalances - such as the tech boom and the regional real estate boom-bust cycles.
The slow growth in real GDP after the 2008-2009 bust - roughly 2.5% from 2010 to 2017 - created few imbalances. Optimists cheered as the dawn of a new age the Q2 growth of 4.2% (SAAR) and Q3's 3.5%. Just as they did in 2014: Q2 of 5.2% and Q3 4.9%. But those micro-booms fizzled. As this one might: estimates for Q4 are about 2.7% - despite the GOP's massive debt-fueled fiscal stimulus (quite mad to do late in an economic expansion, when we should be reducing the Federal deficit).
Recessions and depressions are normal!
Thou know'st it's common; all that lives must die, Passing through nature to eternity.- Queen Gertrude to Hamlet (Act I, scene 2).
Something will eventually end an expansion. Expansions are part of the business cycle, along with recessions - and depressions. They do not represent God's judgement on our moral faults, or failure to follow the One True Simple Ideology of Economics. They are similar to weather: to be prepared for in advance, to be mitigated when they strike, and learned from afterwards (to do better next time).
The US economy has been in a recession roughly 20% of the time since 1854. Depressions were frequent before the creation of the Fed and use of fiscal stabilizers.
© Siri Wannapat | Dreamstime.

A look at our future
First, the bad news. Economists have little ability to predict recessions. Surveys of economists' consensus forecast have never successfully predicted a recession. For example, look at the predictions made in February 2008. The consensus forecast for real GDP in 2008 was +1.8%; actual was -0.1%.
Their forecast for 2009 was +2.8%; actual was -2.4%. The recession had begun in December 2007.
Some economists expected a recession (but being pros, were vague about when). I have found nobody that predicted the collapse of the global banking system, which turned a US real estate downturn into the Great Recession.
With that out of the way, let's look at some indicators. There are many quantitative indicators. My favorite is the Econbrowser Recession Indicator Index created by James Hamilton (econ prof at UC San Diego). The probability that Q2 was a recession was 1.1%. That's reassuring - if you worried about that.
Then, there are the US leading indicators and the OECD's Composite Leading Indicator (shown for the major nations and regions). They nicely show were we are; none are reliable guides to the future.
All look OK today.
There are many methods for predicting recessions. None work well. Many of the best look at the shape of the yield curve. See this graph from Cyrille Lenoel's "Predicting recessions in the United States with the yield curve" in the National Economic Review, May 2018. Data as of March 2018. Backtesting shows this model's predictions of a recession are correct 69% of the time (accuracy), but it predicts only 35% of recessions (sensitivity). The odds of recession in the next 12 months is rising fast.
Predicting recessions using the yield curve
For more about this indicator, and what it is telling us, see this dark but clear report: "Forecasting the Next Recession: The Yield Curve Doesn't Lie" by Guggenheim Investments, 29 October 2018 - "Our Recession Probability Model and Recession Dashboard continue to suggest a recession is likely to begin in early 2020. Investors ignore the yield curve's signal at their peril."
Some forecasters rely on quantitative methods and personal skill. Such as the team at the Economic Cycle Research Institute. Their co-founder, Lakshman Achuthan, gave a warning in the New York Post, October 24.
"The economy has been boosted by massive fiscal stimulus - plus an energy boom for the ages - steering it clear of recession risk. But it's remarkable that it is already in a slowdown that not many see - certainly not the Fed."
Their reports look at some darker aspects of recent data. They noticed that Real GDP has been wonderful, but growth of real GDI (gross domestic income) has been slowing since Q2 of last year. Housing construction is weak.

There are other signs of slowing. Sales of light vehicles have been flattish since June 2014.

There is another indicator "flashing red", described by Achuthan on October 26.

"Notably, the combined debt of the US, Eurozone, Japan, and China has increased more than ten times as much as their combined GDP [growth] over the past year. …the world's largest economies are generating debt 10X faster than economic growth. Adding debt at that pace, if it continues, will boost the debt-to-GDP ratio at an alarming rate. 
"Remarkably, then, the global economy - slowing in sync despite soaring debt - finds itself in a situation reminiscent of the Red Queen Effect we referenced 15 years ago, when tax cuts boosted the US budget deficit much more than GDP. As the Red Queen says to Alice in Lewis Carroll's Through the Looking Glass
'Now, here, you see, it takes all the running you can do to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!'"

But stock prices predict recessions!

But they don't. There is a low correlation between stock prices and GDP, or anything else (on an ex ante basis), or stock market traders would be richer than stockbrokers (they're not).
Investors in stock and bonds have no special insights, either as individuals or crowds. My favorite example was their inability to see WWI as it began.
On the other hand, a stock market crash would have only a small effect on the economy. Watch the banks! If they crumble, the economy crumbles too (as it did after 1929+ and 2008-2009).
Why should we care?
We need a long warning because we are unprepared for a recession. Monetary policy is the fast and effective method to fight a recession. But with rates so low, that cannot help much. Fiscal policy is the second big tool. Trump's tax cuts, part of the GOP's long-term effort to make the rich richer - and bleed the Federal government - will make that more difficult to use. The April 9 CBO report gave this chilling warning.
"CBO estimates that the 2018 deficit will total $804 billion, $139 billion more than the $665 billion shortfall recorded in 2017. …In CBO's projections, budget deficits continue increasing after 2018, rising from 4.2% of GDP this year to 5.1% in 2022 (adjusted to exclude the shifts in timing). That percentage has been exceeded in only five years since 1946; four of those years followed the deep 2007-2009 recession."
Keynes recommended running deficits during recessions - countercyclical stimulus - with surpluses during expansions. The GOP keeps cutting taxes during expansions, sending the Federal deficit skyrocketing. Reagan did it. Bush Jr. did it. Now Trump has done it.
The Federal deficit was 1.1% of GDP in 2007. It zoomed in the recession as tax receipts crashed and expenditures rose (e.g., unemployment and welfare payments, and later the fiscal stimulus).
We will begin the next recession with a deficit of 4-5%. That is insane. The politics of stimulus programs will be complex. If we have a Republican President and Congress, the US economy might have a bad time. That is guaranteed if Trump is President.
What might happen in a recession?
I wrote several posts about that during the 2015-2016 slowing, when the theory about a "stall speed" of the US economy (below which it would fall into recession) made a recession appear likely. This proved that there is no stall speed. The most valid is that the big victim of the coming stock market crash will be the San Francisco Bay Area. It sells dreams for money, an industry that I expect to crash hard in the next recession. The accelerating exodus of middle-class families makes the region even more vulnerable.
Beyond that, we can only guess. Much depends on the nature of the downturn and the government's response. The private and public pension systems are already weak, despite the long expansion. A stock market crash and long recession will push many past the point of recovery, as the date at which their cash flows turn negative approaches (i.e., more payments than contributions). Also, boomers have saved too little for retirement, and too much of that is in real estate and stocks - both probably severe casualties of a long recession.
My best guess: it won't be pretty. My advice: expect the unexpected.

Do I Need a Budget?

Jared Dillian
Editor, The 10th Man


Probably not.

I am a bit like the Joker. Do I look like a guy with a plan?

The problem with plans is that people interpret them a little too rigidly. I know of a situation where a woman budgeted x for groceries, and her bill at the checkout line came to x + $20. She stood there and said “I can’t afford my groceries” because she went over her budget by $20.

True story.

That is the type of stupid stuff that happens when you put people on a budget.

The problem is, some people need to obey stupid rules, because they have zero discipline.

Unless they follow a budget to the penny, they are going to spend like sailors. I am sorry that these people exist. As many others have observed before me, rules are for the stupid.

Even though I am not high on budgets, I am high on radical saving, so I like a simple heuristic such as save as much as humanly possible or save until it hurts. That usually does a better job than an actual budget, and is a lot less work. Of course, that works for me because saving comes naturally to me in the first place, so it might not work for everyone.

What does saving until it hurts look like in practice?

You are driving down the road. You are thirsty. You think of stopping at Burger King and getting a large Diet Coke, but you are saving as much as humanly possible, so you don’t spend the $2.50 and you keep driving, and you stay thirsty.

Basically, if you are saving as much as humanly possible, you will experience discomfort. Physical discomfort. That is when you know you are doing it right.

You will go to a restaurant and get the cheapest thing on the menu, whether you like it or not. That is mild discomfort.

You will go to Dick’s Sporting Goods for a pair of running shoes and get the $39 shoes instead of the $129 shoes. That is mild discomfort.

You will buy a gently used car that is one year old rather than a new car. No new car smell. That is mild discomfort.

The goal is to save and save and save so you can reach a point where you no longer have to experience discomfort. If you are thirsty, you can buy the Diet Coke. The $2.50 will not be a big deal.

I can speak from experience—it is nice when you get there. But I was once forced to make those economic choices.

Some People Don’t like Discomfort

Some people are never willing to make any sort of economic sacrifice. Hey, a wine fridge sounds like a good idea. Hey, the panoramic sunroof sounds like a good idea.

My story is one of economic sacrifices. I lived far below my means during a time when it was expected I would live far above my means. When I was at Lehman Brothers, I bought a tiny, cheap house in a neighborhood that was not even really up-and-coming. I famously bought Men’s Wearhouse suits. I brought cans of Chef Boyardee to work for lunch. I was comically miserly.

Interestingly, it ended up being necessary. Lehman went bankrupt, my stock vaporized, my income disappeared, and I had to start from zero. But I had a seven-figure bank account from what I had saved in the good years, and that meant I was able to take risk—at a point in time where nobody was in the mood to take risk.

Dave Ramsey has an expression for this: “Live like no one else, so you can live like no one else.” I have my disagreements with Mr. Ramsey but I like this turn of phrase.

At the Same Time

You can’t spend your whole life in doomsday-prepping mode. I have some relatives who were prodigious savers all their lives, never allowing themselves any extravagance, and they are now too old and physically infirm to enjoy their wealth.

There are two types of people in this world: people who spend too much, and people who spend too little. Sometimes, the latter are even more frustrating than the former.

Some people say that budgets give people good habits. I am not so sure. Budgets are good for people who follow rules.

But what if there are no rules? There are no rules in life. If you make more money, are you going to change the rules, to allow the occasional extravagance? Who gets to change the rules?

If you change the rules, are you cheating on the budget?

This is why I hate budgets.

Some people inherit a ton of money and never spend a minute of their lives in discomfort. That does not apply to most of us. Unless you are blessed with unlimited resources, you are going to spend at least some of your life in a state of discomfort.

Better to do it while you are young, when you are better able to bear it.

What Happens After That

Only after you have established good saving habits should you start investing.

The Neuroscience of Hate Speech

Humans are social creatures who are easily influenced by the anger and rage that are everywhere these days.

By Richard A. Friedman

Do politicians’ words, the president’s especially, matter?

Since he has been in office, President Trump has relentlessly demonized his political opponents as evil and belittled them as stupid. He has called undocumented immigrants animals. His rhetoric has been a powerful contributor to our climate of hate, which is amplified by the right-wing media and virulent online culture.

Of course, it’s difficult to prove that incendiary speech is a direct cause of violent acts. But humans are social creatures — including and perhaps especially the unhinged and misfits among us — who are easily influenced by the rage that is everywhere these days. Could that explain why just in the past two weeks we have seen the horrifying slaughter of 11 Jews in a synagogue in Pittsburgh, with the man arrested described as a rabid anti-Semite, as well as what the authorities say was the attempted bombing of prominent Trump critics by an ardent Trump supporter?

You don’t need to be a psychiatrist to understand that the kind of hate and fear-mongering that is the stock-in-trade of Mr. Trump and his enablers can goad deranged people to action. But psychology and neuroscience can give us some important insights into the power of powerful people’s words.

We know that repeated exposure to hate speech can increase prejudice, as a series of Polish studies confirmed last year. It can also desensitize individuals to verbal aggression, in part because it normalizes what is usually socially condemned behavior.  
At the same time, politicians like Mr. Trump who stoke anger and fear in their supporters provoke a surge of stress hormones, like cortisol and norepinephrine, and engage the amygdala, the brain center for threat. One study, for example, that focused on “the processing of danger” showed that threatening language can directly activate the amygdala. This makes it hard for people to dial down their emotions and think before they act.

Mr. Trump has managed to convince his supporters that America is the victim and that we face an existential threat from imagined dangers like the migrant caravan and the “fake, fake disgusting news.”

Were the men arrested in the synagogue shootings and bombing attacks listening? Robert Bowers, for example, apparently blamed Jews for helping transport members of the Central American migrant caravan. It seems he did not think the president was going far enough in protecting the country from invaders. “I can’t sit by and watch my people get slaughtered,” he wrote online before the murderous rampage. And Cesar Sayoc Jr., accused of mailing bombs to CNN, echoed the president in a tweet: “More lies con job Propaganda bye failing failing CNN garbage.”

But you don’t have to be this unhinged to be moved to violence by incendiary rhetoric. Just about any of us could be susceptible under the right conditions.

Susan Fiske, a psychologist at Princeton, and colleagues have shown that distrust of a out-group is linked to anger and impulses toward violence. This is particularly true when a society faces economic hardship and people are led to see outsiders as competitors for their jobs.
Mina Cikara, a psychologist at Harvard and a co-author of that study, told me that “when a group is put on the defensive and made to feel threatened, they begin to believe that anything, including violence, is justified.”

There is something else that Mr. Trump does to facilitate violence against those he dislikes: He dehumanizes them. “These aren't people,” he once said about undocumented immigrants suspected of gang ties. “These are animals.”

Research by Dr. Cikara and others shows that when one group feels threatened, it makes it much easier to think about people in another group as less than human and to have little empathy for them — two psychological conditions that are conducive to violence.

A 2011 study by Dr. Fiske and a colleague looked at “social cognition” — the ability to put oneself in someone else’s place and recognize “the other as a human being subject to moral treatment.” Subjects in the study were found to be so unempathetic toward drug addicts and homeless people that they found it difficult to imagine how those people thought or felt. Using brain M.R.I., researchers showed that images of members of dehumanized groups failed to activate brain regions implicated in normal social cognition and instead activated the subjects’ insula, a region implicated in feelings of disgust.

As Dr. Fiske has written, “Both science and history suggest that people will nurture and act on their prejudices in the worst ways when these people are put under stress, pressured by peers, or receive approval from authority figures to do so.”

So when someone like President Trump dehumanizes his adversaries, he could be putting them beyond the reach of empathy, stripping them of moral protection and making it easier to harm them.

If you still have any doubt about the power of political speech to foment physical violence, consider the classic experiment by the Yale psychologist Stanley Milgram, who in the early 1960s studied the willingness of a group of men to obey an authority figure.

Subjects were told to administer electrical shocks to another participant, without knowing that the shocks were fake. Sixty-five percent of the subjects did what they were told and delivered the maximum shock, which if real could have been fatal. The implication is that we can easily be influenced by authority to do terrible harm to others — just by receiving an order.

Now imagine what would happen if President Trump actually issued a call to arms to his supporters. Scared? You should be.

Richard A. Friedman is a professor of clinical psychiatry and the director of the psychopharmacology clinic at the Weill Cornell Medical College, and a contributing opinion writer.