US GDP Shrinks, But Stocks Near All-Time Highs?

♠ Posted by Emmanuel at 1/31/2013 11:14:00 AM
The partisan wuss Krugman and his various acolytes have long argued that the United States is "doing better" than Europe for the main reason that, instead of starting processes of fiscal consolidation, the Americans have the fiscal and monetary spigots wide open. On the other hand, there are those of us who believe the US is embarking on a path to ruin. Instead of moving away from debt-fuelled, import-driven domestic consumption, it is indulging in it. Even more ridiculously, they are cheering gains in home prices. Lots of borrowing, importing and spending beyond their means; throw in rising home prices and it's akin to rehash of 2007. Do you buy this analogy? Consider too that stock indices are nearing record highs--Dow Jones Industrial Average, Standard & Poor's--take your pick. If it makes Krugman shut the hell up for a while--he yaks far too much anyway--the shrinking US economy belies the false optimism that it has turned the corner during the Bushbama years. What a...
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Obvious? IMF & Another Egyptian Regime Change

♠ Posted by Emmanuel in , at 1/29/2013 03:20:00 PM
The facts of the matter are as follows: (a) The IMF wanted Egypt to achieve "broad-based domestic and international support" for reform prior to lending $4.8 billion or so to the country in a statement dated 20 November 2012; (b) Since then, the Islamic fundamentalist regime of Muhammad Morsi has instead made things worse in terms of securing domestic cooperation by ramrodding a largely Muslim Brotherhood-designed constitution near year-end 2012; (c) Fearful that implementing austerity measures alike the removal energy subsidies would further inflame the passions of an already restless and growing opposition, Morsi delayed seeking the disbursement of a tranche of the $4.8 billion stand-by agreement; (e) This delay will likely require the renegotiation of terms of the earlier staff-level agreement: Egypt must now renegotiate some terms of the accord, and economists say the IMF board's approval is not a certainty - especially if there is any sign of government wavering...
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Fleeing Egypt? Buy Caribbean Dual Citizenship

♠ Posted by Emmanuel in , at 1/27/2013 02:26:00 PM
Mur-dah! Today, let's look at the utterly fascinating intersection of e-commerce, nationality for sale, and the turn for the worse in any number of Middle East countries. I saw the banner advertisement above while visiting Ahram Online that pretty much sums up the mood in Egypt and that outstanding exercise in democracy called the "Arab Spring" (hip-hip-hooray for freedom!) Apparently, real Egyptians do not share the white man's misguided euphoria over regime changes that were supposed to help usher in Western-style political institutions.They just keep piling into the streets and killing each other with abandon. Instead...
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Antigua & Online Gaming: Fighting the US Bullies

♠ Posted by Emmanuel in at 1/26/2013 12:59:00 PM
The United States likes to throw its weight around the international political economy; that much is obvious. Given the sheer girth of its residents, this is not something to be easily ignored. However, like all bullies, the United States can be put in its place if you stand up and fight for a principle. Don't relent: bloody them up, and they'll soon be crying home to the land of apple pie and Guantanamo Ghraib. The North Vietnamese famously sent the Yanks home for supporting the exceedingly corrupt South Vietnamese leadership. Why should it have taken 58,220 dead Americans to figure out that this was primarily a conflict...
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Globalization's Victims: Filipino Workers in Algeria

♠ Posted by Emmanuel in ,, at 1/25/2013 11:25:00 AM
The Philippines is famously a country of migration with an estimated one-tenth of its population of ninety million working overseas. I am of the belief that there is nothing wrong with that. After all, the UN Declaration of Human Rights Article 13 (2) states: "Everyone has the right to leave any country, including his own, and to return to his country." On the other hand, it is also true that Filipinos overseas often engage in archetypal "3-D" jobs that are difficult, dangerous or dirty. As it turns out, Filipino workers plying their trades in the Middle East are plentiful. Observe the regularity with which Filipino seafarers are held hostage when ship hijackings occur off the coast of Somalia. For a long time, Filipino gas field workers were thought to have among the cushier jobs in the Middle East. Working in these fields run and maintained by major local and international firms, they had access to many amenities unavailable in local communities including much-appreciated...
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The Japan That Can't Export? Its 2012 Trade Deficit

♠ Posted by Emmanuel in at 1/24/2013 10:52:00 AM
Japan used to epitomize the Asian Exporting Nation, feared around the world for its superior-quality and in-demand products. Those glory days, however, are rapidly receding like the hairline of HRH Prince William the Bald. Most recently, the news was that Japan had a "record" trade deficit in 2013. It actually isn't as dire as the headline sounds since Japan's postwar deficits haven't been remotely American-sized to begin with. Against that scale, a $78B annual trade deficit isn't all that large. But, by Japanese standards, it may be alarming nonetheless as headwinds in generating and sustaining an economic recovery. Importantly,...
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"Hurry Up and Die": Japan & the Cost of Eldercare

♠ Posted by Emmanuel in , at 1/23/2013 01:24:00 PM
Former Japanese PM and current Finance Minister Taro Aso has a novel way of dealing with Japan's increasing health care tab that may not resonate so well with their (obviously aging) electorate: "Heaven forbid if you are forced to live on when you want to die. I would wake up feeling increasingly bad knowing that [treatment] was all being paid for by the government," he said during a meeting of the national council on social security reforms. "The problem won't be solved unless you let them hurry up and die." Although the phrasing may be very politically incorrect, Japan's tab for caring for the elderly is pronounced and will become only more so given its demographic profile: To compound the insult, he referred to elderly patients who are no longer able to feed themselves as "tube people". The health and welfare ministry, he added, was "well aware that it costs several tens of millions of yen" a month to treat a single patient in the final stages of life. Cost aside,...
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Markets, Not China, Will Determine RMB Adoption

♠ Posted by Emmanuel in , at 1/22/2013 08:12:00 AM
I think this is a point we often forget when discussing "China's rise": while its government can tinker with several important factors that will affect RMB adoption alike its convertibility, its interest rate and even its pace of appreciation, markets will ultimately determine the pace at which the rest of the world climbs aboard the yuan bandwagon alike, say, Indonesia and Nigeria. There is an interesting article in the FT by Mike Rees of StanChart that presents a much-needed viewpoint from one of the world's largest commercial banks on this matter. Compared to that of, say, economists or political scientists, they are not interested so much in using econometric models to extrapolate the currency's potential for widespread adoption but rather in its adoption by more and more market participants at the present time. First, you need to consider the volume of trade denominated in it among freely transacting buyers and sellers in commodities trade: The exponential growth of the...
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Britannia Forever: UK to Jilt EU for Commonwealth?

♠ Posted by Emmanuel in at 1/19/2013 04:16:00 PM
The classic split within the British Conservative Party is reappearing with a vengeance: On one hand you have those wishing to leave the European Union altogether or severely dilute Britain's misplaced fealty to those supposedly usurping the last vestiges of the UK's sovereignty--AKA those faceless and unaccountable bureaucrats in Brussels. On the other hand you have Tories who emphasize the economic links to the continent; after all, the EU remains by far the largest trading partner for the UK. There are innumerable articles and op-eds from the Financial Times [1, 2, 3, 4] weighing the pros and cons of Britain leaving the...
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Victors and Vanquished: Korean Cars in Europe

♠ Posted by Emmanuel in , at 1/17/2013 02:57:00 PM
Seeing what Japanese carmakers did to the United States automobile industry during the Eighties, the Europeans have always been wary of the same story repeating itself in their part of the world. However, the remarkable thing for many years is that while Japanese brands have made inroads into the European auto market, they have never been dangerous enough to existentially threaten the likes of France's Peugeot and Renault or Italy's Fiat among others. In the aftermath of the global financial crisis, car sales have indeed fallen--but have hit European and Japanese makes alike However, as of late Korean cars have quickly gained market share in a way that Europeans once feared the Japanese would. Keenly priced and well-built, Korea Inc. has made a reasonably lucrative living selling cars in a stagnant-to-declining car market. Make no mistake: it is not a happy sales scene in Europe for those selling four-wheeled vehicles for private use. Plant closures all over the continent have...
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Trash for Treasure: CenBanks Swapping $ for RMB

♠ Posted by Emmanuel in at 1/15/2013 07:58:00 AM
The old saying goes "one man's trash may be another man's treasure." To be sure, there are any number of countries around the world that would welcome even dollar foreign exchange reserve assets. Think of Egypt. The happy-sad fact though is that, in part because of international currency war being waged by the United States, several developing nations now have more than adequate reserve holdings going by traditional metrics such as number of months' cover for imports or short-term liabilities (sovereign debt and suchlike maturing within a year). If the latter is the case, you may have a problem of holding excessive dastardly dollar-denominated detritus whose ultimate direction is known to all--downhill from here, baby. This situation calls for a move away from the dollar. What sort of portfolio diversification in terms of currency holdings is desirable, though? The Euro is remarkably resilient despite the woes of its certain member countries largely due to the ECB's inherent...
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How Broke is Greece? It Drops Volleyball Tourneys

♠ Posted by Emmanuel in , at 1/14/2013 07:21:00 AM
Blues legend Buddy Guy has a song entitled "Too Broke to Spend the Night" from his comeback album Damn Right I've Got the Blues. I think Greek officialdom may be singing a similar tune right about now in sporting terms. In 2004 it famously hosted--rather unprofitably, too--the world's foremost gathering of international sporting competition, the Summer Olympics in Athens. That was in its heyday of spending like tomorrow and hiding massive budget deficits to cheat its way into the Eurozone. Heady times they were including their improbable 2004 UEFA Euro championship victory, but they were built on unsustainable finances. If...
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End of an Outsourcing Era: 787 Nightmareliner

♠ Posted by Emmanuel in , at 1/12/2013 02:26:00 PM
There is a justifiably very well-cited article in the Review of International Political Economy by Gary Gereffi, John Humphrey and Timothy Sturgeon concerning "The Governance of Global Value Chains." (I think it's required reading for anyone with an interest in the field; simple as that.) Here, the authors discuss different sorts of arrangements possible in global value chains which range between the two extremes of hierarchy (you make everything yourself), and market (you exchange for everything and make virtually nothing yourself). Table 1 on p. 87 is very helpful in summarizing these different ideal types: Again, anyone...
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Odd Arne Westad on Frosty China-Japan Relations

♠ Posted by Emmanuel in , at 1/10/2013 12:10:00 PM
LSE IDEAS is such a hive of activity nowadays I don't even manage to keep up with what the boss is up to. (Of course he isn't "odd"; it's a Norwegian name!) A few weeks ago I featured his well-received book about China's history of reaching out to the rest of the world since 1750. Fluent in Mandarin, he now has a take on Sino-Japanese relations in the New York Times that is quite critical of Chinese officialdom. (It even reached the "most-read" list a few days ago.) I mainly think this quarrel is a commercial disaster; he goes deeper into the historical tensions that remain unresolved. Given that we've been hosting Chinese Foreign Ministry officials via Chevening scholarship programmes for a few years now, I am still surprised how forthright he is while I would have been...more circumspect about doing so. I suppose academic integrity still counts for something in the highly commercialized world of higher education, and perhaps you don't build a reputation mincing words. There's...
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Nuke to Thrill: Rekindling Japan's Fission Passion

♠ Posted by Emmanuel in , at 1/08/2013 08:20:00 AM
The taste of love is sweet  When hearts like ours meet  I fell for you like a child   Oh, but the fire went wild... [The chart above is from Nuclear Tourist.] The return to the status quo ante of Liberal Democratic Party (LDP) leadership in Japan unsurprisingly means the comeback of any number of policies the nation has become accustomed to: healthy agricultural subsidies to key rural constituencies; budgetary and monetary largesse; and, for today's topic, a return to nuclear power. While the incidences at Fukushima power plant illustrated the hazards of operating nuclear plants in the earthquake-prone Pacific...
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TorrentWorld: How LED TV Makers Co-Opt Piracy

♠ Posted by Emmanuel in ,, at 1/06/2013 08:40:00 AM
Pssst...is that a 720p or a 1080p? Here's one last story whose implications run in the billions and billions that involves home entertainment as we come to the end of the holiday season. (Oh, the sacrifices I have to endure alike watching a digitally enhanced Mariah Carey moping around in a Santa outfit with Justin Bieber.) Call it fortuitous timing, but our old Sony CRT TV finally conked out prior to start of the holiday season. Gone. Kaput. Off to the see the Great Mother Cathode Ray Tube in the Sky. As its replacement, we bought a brand spanking new LG 42LS5700 for a low, low price. Its feature set blows anything twice...
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Falklands Referendum is Farce (But I Support UK)

♠ Posted by Emmanuel in at 1/04/2013 07:46:00 AM
Oh, when will we ever be done with the firebrand red-haired woman from Argentina, Missus Kirchner?  Never will I more clearly support a blatantly specious argument for "democracy"*--make that *****--than here. At midyear 2012, the UK government announced plans to hold a Falklands referendum to determine its allegiances once and for all--whether to the UK or Argentina. Coming thirty years after the Falklands War stemming from Argentina's invasion of the islands, let's just say it raises sensitive issues in Latin America concerning colonialism, imperialism and the rest of it. I was particularly struck by how David Cameron...
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PC Gone Mad: Women Drivers' Car Insurance in EU

♠ Posted by Emmanuel in , at 1/04/2013 06:15:00 AM
Contrary to hoary stereotypes about "women drivers," the truth is that they are safer drivers--at least in the EU. So much so that women have been charged commensurately lower premiums in EU nations for years. However, in a dubious case of political correctness, the EU has issued a directive against discriminating against charging premiums differentially based on gender. End result? From December 21, 2012 onwards, profit-minded insurance companies have by and large chosen not to bring down male insurance premiums to those for females, but to bring up female premiums up to those for males. The UK Mirror writes: Next month Brussels delivers an unwanted early Christmas present to women drivers – a nasty hike in car insurance premiums. Under a new European law known as the EU Gender ­Directive, insurers will no ­longer be able to calculate how much a driver pays for their insurance based on their sex. It means that from December 21 women, who are statistically much safer drivers...
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Racism and Turkey's EU Bid, Episode VLXVII

♠ Posted by Emmanuel in at 1/03/2013 07:49:00 AM
In the days of my youth, I was told what it means to be a man Now I've reached that age, I've tried to do all those things the best I can No matter how I try, I find my way into the same old jam  Good times, bad times, Turkey's had its share alike Led Zeppelin. When it comes to its prospects for joining the single market, though, its been mostly bad times. Unbeknownst to many, there are still several nations wishing to join the EU despite its economic crises on the periphery. After all, one doesn't have to be in the European Monetary Union (EMU) to be in the EU. What's more, it will probably be much harder to fake...
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Gangnam Fail: A White Guy on K-Wave's Success

♠ Posted by Emmanuel in ,,, at 1/01/2013 09:24:00 AM
I am verily annoyed by an FT op-ed by neoconservative stalwart Christopher Caldwell that so happens to be the most-read article in the opinion section at the moment, so please indulge me in starting off the year with a critique. (This remains a blog, after all.) I do not need to reiterate how Americans are among if not the most insular of people, profoundly unconcerned with the rest of the world. Caldwell's best-known work is a me-too "Eurabia" book peddling apocalyptic scenarios about the forthcoming takeover of Europe by Muslim migrants. It is curious how most of the authors of such books tend to be American; the implicit...
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