Understanding economics is easy. In the short run it's all about INCENTIVES, in the Long Run it's all about DEMOGRAPHICS. The more I travel the world the more I realise that the latter has a big impact on the short run too. Birth and death rates and MIGRATION are massive issues for global decision makers today. They impact public service resources, taxes and budgets.The chart below is one example of the statistics that bring understanding of these variables. For example, I am looking at smart investing in those countries with lots of young people who can strive to give me a long-term return.
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The latest UK ‘Issue’ polling confounds the pollsters and political elite by showing that ‘Immigration’ is now the most important issue facing the country. It is to the credit of the British people that they are dead right. Immigration is the most important because it drives every other issue from immigrant labour displacing indigenous workers and moderating wages to putting pressure on UK infrastructure. In fact, migration is the most important issue facing policy makers worldwide – scratch the surface of any other and the effects of the movement of people will be in there somewhere. Early this morning I was high up in the Penthouse Suite of Barings overlooking London for a briefing on Asia Economies. Over a bacon roll I discover this article in CityAM. I ask one of the presenters how exports can be rising in China and yet the Baltic Dry is sliding? She admits that the Chinese numbers maybe a bit flaky. This PM the US surprises markets with stats that show the US economy shrank a steep 2.9% in Q1. I am used to my political and economic forecasts being right over the medium to long term…but have never been proved right in just a matter of hours! Champagne (and more bacon rolls) all round! Oh yes this is a good one! The effect of the financial crisis on the Richest and Poorest 10% in world’s major economies 2007-11. One definition of equality in any society is surely that when things go bad we all share the pain. Germany and the UK share this attribute where the line between the two is narrow. By definition the poorest will have suffered more as economies decline but in Britain we have ameliorated this and yet not skewered the wealth creators disproportionately. Is this why we are the fastest growing developed economy? All we have to do now is sort the national debt. Easy peesy!? It seems it’s game on for swapping terrorists for prisoners for any government after Obama's brilliantly botched Bergdahl-Taliban swap. After years of NOT negotiating with terrorists, at least the Yanks kept the swapped baddies to single digits (5). With 3 boys taken on the West Bank, the Israelis have a habit of exchanging 100s of detainees for one citizen. Should they all follow France’s lead and just pay millions in ransom instead? If you are a UK citizen watch out though. So far HMG has stuck to its guns - no talks with the bad boys and AQ and its followers are cropping up all over the Middle East and Africa. It's scorching out there! The day after ISIS takes Mosul in Iraq, the UK's National Audit Office says the Coalition's plans to scale back the Army and increase reservists have "significant risks" to its operational abilities and that the decision was taken without "appropriate testing of feasibility". Just a week after the D-Day commemorations, ask yourself: will we ever learn that our armed forces are like puppies and 'not just for Christmas'. You have a standing army, navy and air force to protect the hospitals, schools and values that we hold dear. Investing in the Defence of the Realm comes first in this dangerous, dangerous world. So this morning, the Chinese finally sign a deal to take Russian East Siberian Gas in a 30 year deal. They really did hold all the cards in the end in these negotiations. That Gas had nowhere else to go other than China if it came out of the ground at all. President Putin had already arrived in Beijing and it was touch and go whether the Chinese would sign - last minute squeeze by his hosts after a decade of negotiations? No wonder the Russians are desperate to do this deal. Already eastern European countries are looking for alternative, more secure, energy supplies so that they can stay warm in future winters given the insecurity of Russian supply. This search may be looking for a medium to long term solution but Russia can see the writing on the wall. As for the Russian's inviting Chinese interest in its Siberian natural resources – Be Careful What You Wish For, Mr Putin! Yesterday's Ballsy Short was about Eurozone deflationary expectations and my perennial whinge about Quantitative Expansion. Next month, it looks like ECB President Draghi will ramp up Euroland’s QE. Question is: will this liquidity reach smaller businesses in Europe. This chart from an article in today’s International New York Times entitled “Little guys still face a euro credit crunch” shows the high cost of SME loans in Euroland when the ECB base rate is currently a negligible ¼%! How can SMEs grow with rates like this? With the coming deflation and no growth how can periphery Euroland ever repay debt? The spectre of DEFLATION hangs over the world's developed economies despite the massive Quantitative Expansion (QE) of the global money supply by Central Banks. Too Big Too Fail institutions have filled their boots and stuffed their balance sheets with cash to cover their bad and not-marked-to-market-yet assets and to meet increased regulatory capital reserve requirements. This morning’s survey by #Bloomberg tells us what ‘investors’ think. But these are same people who blindly invested in collatorised Debt Obligartions and hooky mortgage derivative instruments that brought the system to its knees in 2007/08. If Draghi listens and responds to them, he is likely to move to an even more aggressive QE as the news box above shows. Are we doomed once again to a financial crisis worse than the one we just had? Is the solution to problems of global inequality more ‘world government’? This remedy lies at the heart of the policy prescriptions in the book by French Economist Thomas Piketty, "Capital in the Twenty-First Century", which is taking the world by storm according to The Economist (Read summary here). The international numbers for global inequality are shocking and Piketty puts them into useful historic context. But his prescriptions are, as a friend put it: “global government, global taxation and uber socialism or, in old terms, ‘communism’ in a nice suit”. After the European parliamentary elections this debate will really take off… |
Ballsy ShortsConcise Ballsy Thinking as the latest news rolls off the ticker tape. (Er, if you are under 20, Google it!) Archives
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