Can Trump Destroy Hong Kong's Dollar Peg?

♠ Posted by Emmanuel in , at 7/08/2020 07:20:00 PM
Asian financial crisis, SARS, global financial crisis, COVID-19 outbreak...HK$ remains pegged. Whither Trump?
There are several ironies in the Trump administration's ongoing efforts to strike back at China for eroding Hing Kong's political freedoms through passing a national security law via the mainland's rubber-stamp legislature. For a wannabe authoritarian, Trump taking action against China for eroding its territory's independence is kind of rich. For another thing, Hong Kong is one of the few places on earth that imports far more the United States than it exports. Trump regularly bashes those the US runs large bilateral trade deficits with, so what is Hong Kong doing here? Take it from the horse's mouth--the US Trade Representative notes:
U.S. goods and services trade with Hong Kong totaled an estimated $66.9 billion in 2018. Exports were $50.1 billion; imports were $16.8 billion. The U.S. goods and services trade surplus with Hong Kong was $33.4 billion in 2018.
As such, the US cannot punish Hong Kong with the same tariff it hits the rest of the PRC with since it mostly trades in services, not goods. So, how about restricting services trade with Hong Kong, then? One way the Trump administration has thought of doing this is by targeting the Hong Kong dollar's peg to the US dollar at about 7.8 HKD per USD:
The proposal to strike against the Hong Kong dollar peg, possibly by limiting the ability of Hong Kong banks to buy U.S. dollars, was raised as part of broader discussions among advisers to Secretary of State Mike Pompeo, Bloomberg’s report on Tuesday said. Undermining the peg was seen by some advisers as one way to hit back at China for its moves to whittle away at Hong Kong’s political freedoms, the report said.

Other administration members pushed back against the proposal, worrying that such a move would only hurt Hong Kong banks and the United States, not China, sources told Bloomberg. The idea also was not elevated to White House senior levels, the report said.
The ways it would work are by restricting access to US dollars:
Market watchers are pondering what measures could be implemented to undermine the peg and what the fallout would be. Analysts at broker Hamilton Court FX predicted this could be done by reducing or rescinding swap lines, curbing Hong Kong authorities’ ability to buy and sell dollars in order to keep the currency within its defined trading range. Commerzbank analyst Hao Zhou called it a “low-possibility” event but with risk of huge market impact.
Sure, the Trump administration's China-bashing appears boundless, from pulling out of the World Health Organization over allegations of unwarranted PRC influence to denying entry to foreign students who will only be taking online courses at US universities (since Chinese account for the largest number of foreign students). Remember, though, that the Hong Kong Monetary Authority--its central bank--has $445 billion worth of reserves to combat a US assault on the peg with. If things get tough, Hong Kong authorities have said they can further draw on the PRC's dollar stockpile. Most market commentators also describe this proposed action as futile since it would boomerang mightily on its perpetrator. So the Trump administration can try, but it will most likely fail--after plunging the world economy into heaven-knows-what that would make the global financial crisis look like a rom-com romp by comparison.
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Patrick Bennett, head of macro strategy for Asia at Canadian Imperial Bank of Commerce
It’s a fairly wacky idea that they would be able to force Hong Kong off the peg by some means. I’ve been against the idea that Kyle Bass and others trying to break the peg -- that has been a spectacularly unsuccessful idea so far, and I expect it to be the same.
Stephen Innes, chief global market strategist at AxiCorp
Why this is bad not to mention an unlikely move: First, direct U.S. action against the peg could trigger China’s response by putting U.S. assets, including USTs or equities. Second, such a move could destabilize USD pegs elsewhere, including U.S. allies around the world, especially those in the Middle East. Third, the unthinkable instability that it would trigger in the USD-based global financial ecosystem could drive a selloff in US equity markets – an outcome abhorrent to the White House ahead of the November presidential election.
Xia Le, chief Asia economist at BBVA Hong Kong
It’s technically difficult to impose, and it’ll hurt U.S. a lot. The peg is maintained by Hong Kong, which doesn’t need approval from the U.S. and not something the U.S. could easily manipulate. Technically, it’s very hard for them to prevent any businesses from investing in the city or limiting the ability of Hong Kong banks to buy U.S. dollars.
Carie Li, an economist at OCBC Wing Hang Bank
At the moment, the Trump administration isn’t seriously considering this as it’s very risky for them. It’s more about specific restrictions for financial institutions under the sanctions. Hong Kong is the world’s third-largest U.S. dollar trading center, which would mean if the HKD can’t be pegged to the USD it would be unfavorable to the U.S. by curbing the number of transactions in U.S. dollars and would lower investor confidence in the greenback.
Becky Liu, head of China macro strategy at Standard Chartered Bank
At this stage I personally assign a relativity low possibility for this to happen. Having said that, in the recent days U.S. has taken some totally unexpected actions by withdrawing from the WHO. So the likelihood of the U.S. doing something is still very likely, it’s just likely to be less drastic in terms of impacting the convertibility between the HKD and the USD, like setting a limit on how much exposure banks are able to have on the Hong Kong dollar or setting limits on the amount of exposure U.S. companies can have towards the Hong Kong dollar.

Techno-Nationalism: India Bans PRC's TikTok

♠ Posted by Emmanuel in ,,, at 7/02/2020 12:44:00 AM
Slap Xi's image with sandals...and ban Tiktok too!
 Well, well, well: In a previous post concerning whether India could boycott China after the recent, fatal border skirmish, I said "They can burn as many Xi pictures as they like, but their compatriots won't stop buying PRC-made goods anytime soon." As it turns out, techno-nationalism is alive and well but not in the way I had envisioned. (I am still correct on technical points since [1] what's transpired concerns services not goods and [2] it's a government ban instead of a consumer boycott). The jingoistic Modi government apparently couldn't help itself from taking a swipe at China.

Nationalism aside, Modi & co. are hitting China in a way that inflicts less damage on India. True, India still cannot restrict the purchase of PRC-sourced electronic equipment since they have limited domestic manufacturing capabilities for smartphones, 5G infrastructure, and so on. But, India has no lack whatsoever of software writing talent. So, India has banned Bytedance of China's TikTok app, nearly a third of whose users are in India:
For thousands of Indian content creators [...] TikTok was a window into fame and fortune. But on Tuesday, the app, owned by China's ByteDance, went blank on phones across India after the government banned it along with 58 other Chinese-origin apps which it considered a threat to national sovereignty. The move came weeks after a deadly skirmish between Indian and Chinese soldiers along the disputed Himalayan border.
So the first key difference is that the government banned TikTok instead of there being a user backlash against the app (though some users support the Indian government's move):
TikTok was a sensation in India. With more than 600 million downloads, India accounted for 30 percent of its two billion downloads worldwide. ByteDance planned to invest $1bn in India, its top growth market where it employs 2,000 people [...]

Unlike Instagram, Facebook and Twitter, TikTok found resonance in India's hinterland as well as its cities, thanks to its less elaborate user interface, background music options and various special effects. Users - who ranged from top Bollywood stars to people in remote villages who became mini-celebrities - posted a wide variety of content, though jokes, dance clips and videos related to India's thriving movie industry dominated the platform.
And second--this is probably the key to the Modi government's thinking--there aren't many difficulties in cooking up homegrown TikTok alternatives. India is exceedingly good at software development, so why rely on China's?
Indian video-creation apps like Roposo, described on Google's app store as "India's own video app", and another named Chingari are likely to see a popularity surge after the TikTok ban.
Like Huawei, ZTE, and other Chinese telecoms firms, ByteDance's fate in overseas markets is inevitably tied to the PRC's image abroad. It's too bad since ByteDance has actually done more than you would expect to customize its offerings in overseas markets. It's the "reward" it gets from being a Chinese concern circa 2020.

Upcoming US-EU Trade War: Taxing Tech Giants

♠ Posted by Emmanuel in ,,, at 6/26/2020 11:01:00 PM
Trump wants his administration to beat up US tech giants, not European nations.
If you've paid attention to US news, you're aware that Facebook and other tech giants have been in the Trump administration's crosshairs for supposedly suppressing "conservative" viewpoints that differ from their supposedly liberal, West Coast biases. After--by his reckoning, at least--wanting to be politically neutral by giving Trump free rein, Mark Zuckerberg recently took a more proactive stance to removing Trump's more [ob]noxious social media messages. Recently, FB banned a campaign ad that had an inverted triangle--a Nazi-era mark for non-desirable persons to be executed in concentration camps like homosexuals and immigrants [sounds familiar]?

Just as I write, the fear of mass boycotts has prompted Zuckerberg to announce giving Trump an even shorter leash on outright politically motivated lies--or so he says:
Facebook said Friday that it will flag all “newsworthy” posts from politicians that break its rules, including those from President Donald Trump. CEO Mark Zuckerberg had previously refused to take action against Trump posts suggesting that mail-in ballots will lead to voter fraud, saying that people deserved to hear unfiltered statements from political leaders. Twitter, by contrast, slapped a “get the facts” label on them. 

“The policies we’re implementing today are designed to address the reality of the challenges our country is facing and how they’re showing up across our community,” Zuckerberg wrote on his Facebook page announcing the changes. Zuckerberg said the social network is taking additional steps to counter election-related misinformation. In particular, the social network will begin adding new labels to all posts about voting that will direct users to authoritative information from state and local election officials.
In retribution for being censored, Trump has threatened to remove protections granted to tech giants under Section 230 of the 1996 Communications Decency Act: No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider. 

So it's a no-holds-barred Trump administration versus tech giants fight, right? Well, no. Actually, the administration is taking up their cause of avoiding being taxed in the European Union. Treasury Secretary Steven Mnuchin even recently walked out on negotiations to establish a global pact to tax the likes of Facebook and Google. The hope was that a unified global scheme would forestall revenue-hungry EU states from taxing US tech giants themselves or at the bloc-level. With the US not participating in those negotiations anymore, it's off to the races in the trade war stakes:
Europe and the United States are hurtling toward a trade war over who has the right to tax Google, Facebook and Amazon. After Washington confirmed Wednesday [June 17] that it had pulled out of talks on global rules for taxing the digital economy, officials including Bruno Le Maire, the French finance minister, and Paolo Gentiloni, the European economy commissioner, threw their weight behind national or EU-wide digital levies — plans that would likely bring retaliation from the U.S.

“We need an understanding in the global negotiations,” Gentiloni tweeted. “If the American stop makes it impossible, a new European proposal will be put on the Commission’s table.” The stand-off is expected to reignite a transatlantic trade dispute that has been simmering for more than a year. At stake is which country has the right to tax digital companies whose operations now span the world.



As Phil Collins once sang, it's a groovy kind of love America's current leadership has with the tech giants. On one hand, Trump is battling them at home, purportedly over curtailing free speech. For all that melodrama back home, it also appears that the US government still has its corporate titans' interests in mind abroad. Technology will undoubtedly be the industrial battleground for global dominance in the future, not automobiles, oil, or other dominant sectors of days gone by. 

Over a fifth of market capitalization of the S&P 500 index is now composed of Facebook, Amazon, Apple, Microsoft and Google [Alphabet], AKA FAAMG. The stock market would strongly vouch for Lighthizer's assertion that they represent America's best. So, if it means fighting for Facebook's ability to evade taxes abroad, the Trump administration has no reservations whatsoever in championing it. None at all.

ASEAN's CoronaControl Meets US & UK's CoronaSlaughter

♠ Posted by Emmanuel in ,,, at 6/24/2020 06:24:00 PM
Reputable scientists want to hold the criminally negligent Trump and Johnson accountable... but whither ASEAN?
With a blog subtitle featuring the words "elegant despair," I have primed you, dear reader, not to expect feelgood stories on this blog. Today, however, there may be some reason to hope that countries whose leadership is not criminally negligent actually can do something about the harms caused by COVID-19. Members of the Association of Southeast Asian Nations (ASEAN) have been faring rather better than one would expect given their development status. The contrast is especially remarkable when compared to the examples of criminal negligence you observe in the US and UK [1, 2], which I have already written about at length. To cut a long story short, from ASEAN Economic Community News Today:
With some wealthy Western countries doing quite appallingly, calls for accountability are growing. One highly regarded scientist recently postulated on Twitter that “Nuremberg-style trials for accountability” should be held for leaders of countries that recorded more than 10 deaths per one million population.

“A nation with more than 100 deaths per million population was catastrophically unsuccessful”, said Professor Richard H. Ebright, a Board of Governors Professor of Chemistry and Chemical Biology at the prestigious Rutgers University, and a Laboratory Director at the Waksman Institute of Microbiology.
Lest you think it's the bloc's wealthiest countries that are faring the best--Malaysia and Singapore--it appears that its most recent and least developed members which are confronting COVID-19 the best. Granted, the likes of Cambodia, Laos, Myanmar and Vietnam [CLMV] do not have anywhere near as many international travel links, but you would think their less advanced healthcare systems would be less able to cope with outbreaks. Yet, just as the supposedly "developed" US and UK rank first and third in the global league table of COVID-19 fatalities, these CLMV countries have escaped the brunt of the disease:
Replying to an email from AEC News Today, Professor Ebright said that “it is striking that every nation in the [Southeast Asian] region, from richest to poorest, appears to have done so well compared to the US, UK, and EU (subject to caveats about low testing rates in Indonesia, Cambodia, Laos, and Myanmar)”.

While CLMVT government leaders are coming under increasing pressure to ease international travel restrictions, most are standing firm in maintaining hard borders as they continue returning citizens from around the world. Some have put in place entry processes designed to ensure that only those people who *really need to enter* are doing so.
Now, ASEAN members have huge variations in any factor you can name--geography, population, religion, wealth, economic and political systems. According Dr. Ebright, though, it's not whether your country is an autocracy or a democracy that appears to matter in confronting COVID-19, which couldn't care less about humans or their politics. What really matters, then?
Discussing the success and failure of nations in combating the spread of the SARS-CoV-2 virus, Professor Ebright said, “nations that [had] successfully suppressed [the] outbreak include both small and large, both island and non-island, and both autocratic and democratic. The “sole relevant parameter for success or failure is whether governments took prompt resolute action (success) or whether it did not (failure).

“In nations where travel controls were (1) promptly implemented and (2) promptly expanded to include emerging zones of infection, travel controls were extremely effective in suppressing the outbreak”, he said, adding that “a fast and strong response by government equals success. A slow and weak response by government equals failure”.
I don't want to laud ASEAN members' achievement too much lest I jinx our region. Suffice to say, if the pseudo-Christian Trump actually read the good book instead of holding it up like a piece of meat, COVID-19 appears to be turning over the league tables not just within ASEAN but in the rest of the world -

So the last shall be first, and the first last: for many be called, but few chosen.

Border Conflict: Can India Boycott China?

♠ Posted by Emmanuel in ,, at 6/20/2020 07:11:00 PM
They can burn as many Xi pictures as they like, but their compatriots won't stop buying PRC-made goods anytime soon.
I have always been fascinated by territorial conflicts over uninhabitable lands. Due to its altitude, the area where Chinese and Indian forces had a border skirmish cannot sustain an appreciably-sized population of any sort. Moreover, the details of the encounter remain sketchy: Who initiated the conflict? If both sides were unarmed, why do casualties on both sides number in the double digits? There is still a lot we don't know.

Importantly from an IPE perspective, will there be economic consequences for this particular encounter? In particular, the Indians have been avid buyers of PRC tech goods--and count on Chinese sources of investment also. So despite Indian officials allowing for some public letting off of steam directed at China, there will likely not be a break in their commercial ties. Simply put, India does not have the production capabilities or an alternative supplier (ideally nearby) to China at the current time:
India imports more goods from China than any other country. And over the past decade, India and China have enabled each other's rise as emerging technology powerhouses. Chinese tech giants have invested billions of dollars into India's biggest startups, while its smartphone makers dominate the country's market and Indians have flocked to apps like TikTok. 
Now, the dispute threatens those ties. Growing anti-China sentiment in India has already led to calls for a boycott of Chinese products and services, while new rules on foreign investment could constrain China's ability to cash in on India's internet boom.
What are the chances of a realistic Indian boycott of PRC tech? Slim to none:
China has created a significant place for itself in India's technology sector over the last five years, according to a report published by Indian foreign policy think tank Gateway House. Unable to convince India to sign on to its global infrastructure project known as the Belt and Road Initiative, China entered India's tech scene by flooding the market with cheap smartphones from brands such as Xiaomi and Oppo and plowing money into Indian startups.  
Gateway House estimates that Chinese investors have poured some $4 billion into Indian tech startups since 2015. Alibaba (BABA), for example, has invested in Indian e-commerce company Snapdeal, digital wallet Paytm and food delivery platform Zomato. Tencent (TCEHY), meanwhile, has backed Indian messaging company Hike and ride hailing app Ola. Gateway House found that more than half of India's 30 unicorns — private firms worth more than $1 billion -— have Chinese investors.
Despite some new rules to curb PRC investments disguised as additional scrutiny of those emanating from countries India shares borders with--Pakistan isn't investing in Indian tech anytime soon--India can only hope to channel some PRC investment in areas which may generate some jobs there. It's a structural dependence India has on China:
"I don't think there's a widespread understanding of how difficult it would be to completely reduce India's reliance on China," said Ananth Krishnan, former Brookings India fellow and author of the report. 
India relies on China for everything "from heavy machinery and all kinds of telecom and power equipment, to active pharmaceutical ingredients," said Krishnan, who is now a reporter with The Hindu newspaper. In his Brookings report, Krishnan estimated that the total current and planned investment from China into India is at least $26 billion. Trade between the two countries reached more than $87 billion in the 2018-2019 fiscal year, according to India's Department of Commerce. China was India's second largest trading partner that year, just behind the United States.
Also note that PRC smartphone makers have set up shop in India already, making them fairly entrenched in India's commercial scene:
Last year, four of the top five best-selling smartphone makers in India were Chinese: Xiaomi, Vivo, Oppo and Realme, according to market research firm IDC [...]
And all of them have manufacturing facilities in India. Doing so allowed the Chinese firms to both embrace Prime Minister Narendra Modi's "Make in India" program and avoid stiff import tariffs. Xiaomi manufactures 95% of the phones it sells in India locally. "So if you're talking about cutting down the sales or shipment for these guys, it also impacts the factories that they have in India," which will "absolutely" affect Indian jobs, said Kiranjeet Kaur, an analyst with IDC.
Both sides may allow or even foment some jingoistic posturing since they have nationalist-leaning leaders. But ultimately, India cannot wean itself of China at this point in time--much as it would like to. With China equally keen on securing export markets, this drama can only play out so far. 

Trump Infests USAID With Right-Wing Ideologues

♠ Posted by Emmanuel in ,,,, at 6/16/2020 09:53:00 PM
Truth in advertising should be applied to USAID given the similarly bigoted beliefs of Trump's new appointees. 
Although foreign aid provision features much lofty rhetoric—giving the rest of humanity a helping hand—its reality is much more mundane. Like a lot of things in life, a mixture of altruistic and self-interested motives drive official development assistance or ODA provided by the likes of the American government through its US Agency for International Development (USAID). Being a practical sort, I do not believe this situation is necessarily wrong. For instance, the George W. Bush administration spearheaded the highly effective HIV/AIDS initiative PEPFAR in Africa, partly out of the conviction that stopping its spread there would benefit the rest of the world—including the US. Who led that effort? None other than one Anthony Fauci.

That’s why I am exasperated when ideologues are put in charge at USAID. Their agendas can be quirky, driven more by loopy thinking than practical ideas about how to improve the well-being of people in poor countries. To begin with, Trump regards aid as a waste of money, and has tried to cut it ever since. After all, there’s no redeeming what he calls “shithole countries,” right? So now Trump has decided that if he cannot singlehandedly stop aid provision—Congress decides that—he might as well put in those harboring—how do I put this—unusual ideas.

Instead of being attuned to evolving understandings about gender and championing democratic principles as USAID traditionally does, Trump has appointed some nutter blathering about "homo empires" and the genius of Hungarian strongman Viktor Orban. I did not make this stuff up:
A new White House staffer appointed by President Donald Trump once suggested America was a “homo-empire” ruled by a “tyrannical LGBT agenda” in a slew of writings that have since come back to haunt her.

Merritt Corrigan, White House deputy liaison at the US Agency for International Development (USAID), wrote that “our homo-empire couldn’t tolerate even one commercial enterprise not in full submission to the tyrannical LGBT agenda” in a tweet posted to her personal account, Politico reported, which has since been made private.

Ms Corrigan, who previously worked at the Hungarian embassy in Washington, has also claimed the country’s leader Viktor Orbán “is the shining champion of Western civilization” in a separate post.
But wait, it get worse. USAID's new appointee on religious freedom is an unapologetic Islamophobe. What a guy to get for reaching out to nearly a quarter of the world's population of Muslim faith:
USAID officials confirmed to me that [acting USAID administrator John] Barsa chose Mark Kevin Lloyd to be USAID’s new “religious freedom adviser.” His first day was Tuesday. In 2016, the Associated Press reported that Lloyd (then the Trump campaign’s Virginia field director) had made and shared several Islamophobic posts on his personal social media accounts. On June 30 of that year, he shared a post on Facebook that called Islam “a barbaric cult,” the AP reported.

Four days after the Orlando terrorist attack that same June, he shared a meme saying potential gun buyers should be forced to eat bacon. In another post, Lloyd wrote that “those who understand Islam for what it is are gearing up for the fight,” the AP reported. Those post are no longer public, but Lloyd’s Facebook account as of Tuesday still shows public posts where he accuses Barack Obama of ties to the Muslim Brotherhood and says people who believe Islam is a peaceful religion don’t understand history.
If these very fine people weren't enough, USAID's deputy deputy chief of staff is an anti-transgender activist. Apparently you can't get a job there nowadays without being controversially offensive.

The honest truth is that, inside the Beltway and in much of the rest of the world, serving as a Trump appointee is a stain on your CV akin to being the nightwatchman on the Titanic or the navigator of the Hindenburg. Given this talent pool [sic], Trump is forced to hire assorted right-wing nutters who are oftentimes the only ones desperate enough to serve a madman hellbent on loyalty oaths.

As with most things, USAID's rot starts at the top, with its current head viewing the post as a springboard to some future right-wing career [away from these developing country shitholes, too!] The more outrageously right-wing you are, the more attention you get from Uncle Donnie:
The White House named Barsa acting administrator last month without even consulting the State Department, reaching down to elevate him over more qualified senior officials. In the brief period since his appointment, Barsa has already gotten into hot water by writing a harshly worded letter to U.N. Secretary-General António Guterres demanding the removal of references to “sexual and reproductive health” from a recent U.N. pandemic response plan, and insisting that no funding be allowed to go to abortions.

That brought him rebukes both from Democrats in Congress, who took issue with Barsa’s characterization of the U.N. plan, as well as the Trump administration’s own U.N. ambassador, Kelly Knight Craft, who called Barsa to dress him down for not clearing the letter with top State Department and U.S. Mission to the United Nations officials in advance.

Barsa’s brazenness is fueling suspicion inside the administration that he is auditioning publicly for his next administration job, perhaps in the leadership of the Department of Homeland Security, where he worked during the first year of the Trump administration.
Let's see, USAID now prefers hiring those openly hating homosexuals, transgenders, Muslims, the idea of "reproductive health," and so on. Using Trump's language, I think the rest of the world would benefit if he kept these folks in America where they can do their best to f--k s--t up to impress the American president instead of inflicting their radically intolerant views abroad. If you just hate everybody unlike you, why even get into the business of claiming to help improve their well-being?

Can the UK Poach Up to 3 Million Hongkongers?

♠ Posted by Emmanuel in ,, at 6/13/2020 06:17:00 PM
British students are not even on par with Yankee ones. No wonder the UK needs people from fourth-ranked Hong Kong.
Everybody is an opportunist: When the PRC passed security [sic] legislation by force in Hong Kong following the latter's supposed inability to do so, the British saw an opportunity. Now, the United Kingdom is still fully engaged in that exercise of unmitigated self-harm called Brexit. However, it seems that even the grossly inept government of Boris Johnson (my spell-checker suggests "Boorish Johnson"; who am I to disagree?) recognizes something. Without brainy Estonians, Irish, Polish, etc. coming from elsewhere in the European Union to work in the UK, they need to import "human capital," i.e., smarts, from elsewhere.

The chart above shows test results of the PISA 2018 standardized examination conducted annually by the Organization for Economic Cooperation and Development (OECD). The EU countries I mentioned above stomp the UK. Pretty soon, their citizens can't come to the UK to work anymore--at least nowhere near as easily as when they all belonged to a single labor market. So, with discontent mounting in Hong Kong over months and months of anti-PRC protests and now this anti-terrorist legislation, why not offer 3 million Hongkongers documentation to come to the UK? Like the other greyed-out Asian regions and countries (they participate in the test but are not actually OECD members), Hong Kong smashes the UK in academic performance.

That said, there is a catch since it's not simply a case of being able to buy a UK passport:
In his op-ed published by the Post on June 3, British Prime Minister Boris Johnson made a heroic pledge that Britain would not walk away from its obligations to Hong Kong (“Britain to offer alternative for Hongkongers fearing for their way of life”).

Improving on the offer made by Foreign Secretary Dominic Raab on May 28 to extend the visa-free stay of BN(O) passport holders to 12 months, Johnson said that, if China imposes its national security law on Hong Kong, Britain would change its immigration rules to allow BN(O) passport holders to go to Britain for work, which would provide a pathway to citizenship.
Johnson’s offer is far less generous than it sounds. Under Britain’s immigration rules, a BN(O) passport holder admitted for work will need to satisfy the continuous ordinary residence requirement for five years (without being absent for more than six months in any year) to acquire “settled” status. A person who has acquired “settled” status will have to wait another 12 months before qualifying for British citizenship. During that time, that person needs to have the means to support himself or herself in Britain, and pay British tax.
Is a diminished post-Brexit Britain more attractive than a Hong Kong ravaged by years of civil unrest and now the loss of political freedoms? It seems to me that folks both places would want to have might want to go elsewhere instead given the chance. New Zealand, for instance, isn't a dumpster fire of a nation.

The Expendables 4: Granny Dies So Dow Jones Lives

♠ Posted by Emmanuel in , at 6/11/2020 11:23:00 PM
Teaser trailer for The Expendables 2 explodes online – The Reel Bits
Yo Adrienne, let's drink some Lysol!
Death Wish aside, there is this more recent American movie franchise The Expendables starring the aging action star Sylvester Stallone. Apparently, Trump's America has real-life elderly expendables too--they go by the name of "senior citizens." In the calculations of Trump and his administration's officials, the almighty economy cannot be sacrificed in the name of preventing COVID-19's spread in retirement communities or probably anywhere else. The administration's gospel according to Treasury Secretary Steven "The Munchkin Man" Mnuchin goes like this:
“We can’t shut down the economy again. I think we’ve learned that if you shut down the economy, you’re going to create more damage,” Mnuchin said in an interview with CNBC’s Jim Cramer on “Squawk on the Street.  And not just economic damage, but there are other areas and we’ve talked about this: medical problems and everything else that get put on hold,”  he added. “I think it was very prudent what the president did, but I think we’ve learned a lot.”
Now, his boss Trump has made no bones about wanting to quickly open up the United States despite COVID-19 ravaging the nation. Trump acts as if he could wish COVID-19 away. Witness his request for this year's Republican convention be held without social distancing, masks, or any substantive visual indicator that things are different nowadays. Trump's rush to open up America leaves those most vulnerable to COVID-19--especially seniors with their weaker immune systems--susceptible. Apparently, their gullibility is not infinite. They've taken notice in retirement communities like Florida:
The roots of senior discontent aren’t hard to find. Nora Patterson, a longtime Republican county commissioner and former mayor of Sarasota, told me that the “old people are all hidden away, fearing for their lives.” Florida has so far been spared the ravages of coronavirus compared to New York or New Jersey, two states that tend to feed Florida’s population, but concern remains high: According to the same Quinnipiac poll, 77% of seniors fear hospitalization for themselves or their family members. And seniors aren’t giving Trump high marks for his erratic handling of coronavirus. 
The simple fact is that the national government is profoundly indifferent to seniors with regard to COVID-19. Reporting requirements concerning the disease are lax despite nursing homes being frequent sites for the disease's spread:
Three months after the coronavirus began rampaging through U.S. nursing homes, the federal government has released the first nationwide data on the virus' impact on long-term care facilities, showing nearly 26,000 resident deaths and 449 staff deaths to date.

But the figures released Monday are significantly lower than other estimates, as they capture only a part of total coronavirus deaths associated with nursing homes. The federal government is not requiring facilities to report data on cases or deaths that happened before May, and the administration said nearly 3,000 nursing homes have yet to submit data to the government.

According to the latest NBC News tally, nearly 40,000 coronavirus deaths are associated with nursing homes, assisted living and other long-term care facilities since the beginning of the pandemic — representing almost 40 percent of all coronavirus deaths in the U.S. The NBC News tally is also likely to be an undercount, as a handful of states have still not released their nursing home death tolls.
They are not counting all nursing homes with coronavirus infections--much less their number of deaths. It makes Trump look better like not letting infected people off cruise ships, right? To add insult to injury, Trump is looking into defunding Social Security payments that seniors rely on by reducing payroll tax contributions from working-age persons:
Large majorities across party lines continue to support Social Security while opposing benefit cuts. They also recognize the financial lifeline that their earned benefits supply at a time of gross income inequality and diminished retirement savings -- and now, during a global pandemic, 40% of seniors rely on Social Security for all of their retirement income. That's how vital this program is.
Social Security may be vital to seniors--as is keeping unnecessary movement to a minimum like masses staying away from Republican conventions. But Trump and his administration will have none of it since he obviously prioritizes his re-election over the well-being of seniors. If pumping up a moribund economy requires their sacrifice, well, so be it. Nevermind that people--seniors included--would probably be more persuaded to engage in economic activity if they knew COVID-19 was on the wane in their country due to national government action--which it isn't, really. Not by a long shot.

The post's title says it all. Congratulations on your overwhelming 2016 voting choice, American seniors. Maybe you'll make a more sensible choice next time around--if you'll get one. 

Brainless Markets, US vs. Asia COVID-19 Edition

♠ Posted by Emmanuel in ,,,, at 6/09/2020 11:34:00 PM
Are US stock markets missing something, or is Trumpland going to be socked more by COVID-19 than Asian economies?
The legendary economist John Maynard Keynes is attributed for saying "the market can stay irrational longer than you can stay solvent." Well, if we are to evaluate countries by how hard hit they are by the coronavirus pandemic, the performance of American stock markets should be all the evidence you need that Keynes was right as it leads the rest of the world in rebounding from their March lows. The tech-heavy NASDAQ is somehow at record highs three months or so after stock markets worldwide imploded. Is it because the United States is doing so much better in coping with COVID-19 than anyone else? Heck no!

1. The Organization for Economic Cooperation and Development (OECD) predicts the US economy will shrink far more than Pacific Rim countries like Japan, India, Indonesia, China and Korea, and the disparity will be starker if there is no "second wave" of infections. (See the chart above.) For, the American economy is expected to suffer much the same GDP declines in either case than the aforementioned Asian economies. Yet, those Asian economies' stock markets are not doing anywhere near as well.

2. As China's stock market remains comparatively moribund, we are reminded that PRC fatalities are by now less than one-twentieth of the United States' despite being the country from which the virus originated. In fact, the US death rate is by now over 100 times greater than China's:
COVID-19 remains an ongoing threat and the U.S. has just reached a tragic milestone in the pandemic that may not get much attention. The COVID-19 death rate in the U.S. has now passed 340 per million residents, just over 100 times the rate in China. Let that sink in: The death rate from COVID-19 in the U.S. is 100 times greater than it is in China, where the virus first emerged in humans and where the Trump Administration claims the blame should lie for letting the pandemic get out of hand.
3. With 112,000 deaths and still rising, the United States has in no way slowed COVID-19 down unlike most European and East Asian countries. So, the Yanks' lead in this dubious statistic--coronavirus deaths--should become even more insurmountable in the coming weeks as they continue to climb without appreciable arrest. Its states have removed most restrictions on movement despite not having any noticeable improvements on a nationwide basis, so it's almost a given that things will get even worse Stateside. 
---

In my humble opinion, those betting on US outperformance--whether in dealing with COVID-19 or its economic fallout--are as delusional as that country's leader.  It's the financial equivalent of wishful thinking that the country that is so far ahead of any other country in COVID-19 cases and deaths will also be the one to do the best economically. It's the financial equivalent of ingesting  hydroxychloroquine, Clorox, or whatever chemical Trump is fancying at the moment so that the virus will magically go away.

I've put my money where my mouth is at: I am long Asian stocks and short American ones. If equity valuations are still reality-based--on fundamentals--the relatively lesser economic consequences of the virus on Asian economies should ultimately result in their stocks outperforming American ones going forward.

6/11 UPDATE: US stock markets have been hammered right after this posting, with the Dow Jones Industrial Average  down 1,800+ points. To paraphrase Forrest Gump, brainless is as brainless does. 

Meet Iran, World's Hottest Stock Market

♠ Posted by Emmanuel in , at 5/17/2020 09:26:00 PM
Infidel, witness the power of the Tehran Stock Exchange.
Your first reaction may be, "They have a stock market in Iran"? Fret not, dear readers, they do have one. What's more, it's been on fire despite the ongoing US embargo that's brought its economy to a near-standstill in terms of international trade. Speaking of which, one of the things Iran still trades--albeit in reduced amounts--is oil. With oil prices near multi-decade lows at the moment due to the sheer lack of demand for it as the world has come to a halt, you would be right to expect that this newly-discovered Iranian stock market is faring very poorly at the moment.

And that's where you are precisely wrong. As it turns out, the stock market is one of the few domestic money-making opportunities left in Iran. They cannot trade internationally, and that which they can trade--oil--is worth #$%^. Sounds like a boom scenario for the local bourse, no?
The Tehran Stock Exchange has seen gains of 225% in the last year, with sharp increases even as the country struggled with one of the first serious coronavirus outbreaks outside of China. Encouraged by a government eager to privatize state-owned firms, average people now have access to the market and can trade shares, earning returns they’d never see in a savings account or a certificate of deposit.

But these rapid gains increasingly have analysts and experts worried about a growing stock market bubble, one that could be particularly dire and wipe away the earnings of the average people flooding into the market.

“We have witnessed a very strange incident,” said Hossein Tousi, a member of Iran’s Chamber of Commerce , speaking to 90eghtesadi.com, an Iranian economic review website. “As all markets have fallen, crude prices have fallen sharply, but in our market, the situation is upside-down. It is clear that it is a bubble.”
To be sure, you would still be worse off in US dollar terms since the rial has depreciated mightily since Trump's reintroduction of sanctions. It's worth less than a fourth of what it was pre-Trump. Decades of isolation have made Iranian leadership characterize foreigners' skepticism of outsized stock market gains as (surprise!) a Western plot to destabilize Iran. This is not a bubble, they say:
The exchange lists a half-million active traders out of some 12 million people who registered to buy and sell stocks. “An everyday 5% percent is very sexy,” said Abdollah Rahmani, a retired bank employee who trades stocks. ”What other market makes such a profit?”

Even President Hassan Rouhani, beleaguered since U.S. President Donald Trump unilaterally withdrew America from his 2015 nuclear deal with world powers, has pointed to the market as a rare bright spot for the country. Iran’s rial currency has fallen to 160,000 to 1 against the U.S. dollar, as opposed to the 35,000 to $1 in 2015.

“As Iran’s bourse has developed, (our enemies) become nervous and asked why the market is developing while markets in the world are in chaos,” Rouhani said at a Cabinet meeting last month. This rise “is because of efforts by all companies, business people and fortunately offering shares of big companies to the stock market.”
This stock mania traces its roots to nationalization post-1979 revolution and then privatization once more a few years thereafter as public management of the commanding heights was not found to be conducive to economic development:
The stock market rise in part takes root in how Iran’s economy has changed in the decades since its 1979 Islamic Revolution. Immediately after taking power, Iran’s Shiite theocracy seized large private industries, putting them in large trusts, or bonyads. The bloody 1980s war with Iraq saw Iran further nationalize its economy.

In the 1990s, Iran began a privatization effort. The stock market became one way to accomplish this, with former hard-line populist President Mahmoud Ahmadinejad giving out so-called “Justice Shares” in firms to the poor. Some 50 million Iranians now hold those shares.
When day trading is the only economic activity left in a country, and that country's stock market is the only one up significantly in the whole wide world, you are right to be skeptical. Economic theory holds that shares rise in the expectation that corporate earnings will increase rather than decrease, and Iran remains in the direst of straits. Maybe the next question we should have is, "Do they have short-selling in Iran"?