Adios Trumpian Shithole: Surrendering US Citizenship

♠ Posted by Emmanuel in , at 9/14/2020 04:03:00 PM
Well, OK, Trump is not really the main cause of expatriate Americans wanting to surrender their citizenship...but it likely doesn't help matters. 2020 is shaping up to be a banner year for citizenship renunciations, and the proximate cause is the ridiculous amount of paperwork expats must fill to be in compliance with US financial regulations. Especially after 9/11, American authorities have kept a tighter leash on financial record-keeping worldwide. And, unfortunately, US citizens abroad have borne a disproportionate share of the pencil-pushing burden. So, it was only a matter of time that more wanted out of America for good:
A record number of Americans are renouncing their citizenship. In just the first half of this year, 5,315 Americans gave up their citizenship. That puts the country on track to see a record-breaking 10,000 people renounce U.S. citizenship in 2020. Until a decade ago, fewer than 1,000 Americans per year, on average, chose to renounce their citizenship... 
In surveys and testimonials, these people say they’re dropping their U.S. citizenship because American anti-money-laundering and counterterrorism regulations make it too onerous and expensive to keep... 
Still, all American expats — even those who’ve lived abroad for decades, earn no income in the U.S., and hold no U.S. assets — must submit an annual tax return to the Internal Revenue Service. Now, ever since Congress strengthened anti-money-laundering and counterterrorism financial reporting requirements, many have had to hire costly international accounting firms to do their taxes.

A firm offering tax services to expats cites its straw poll indicating almost a quarter of all US expats want to give up citizenship already. You'd think the firm is honest since it would be lost business to them:

89% of expats feel their concerns are less likely to be addressed than those of Americans living in the U  23% of expats are seriously considering renouncing their US citizenship or already have plans to renounce. 23% said they were interested in citizenship renunciation because they were disappointed with the direction of the US government—a 6% increase from last year. 

The world looks at America and sees an inequitable, racist and violent society with next to nothing going for it. Filled with COVID-19 and massive debt loads, what person in his or her right mind would want to be financially shackled to such a decrepit society? Why pay for the "privilege" of being American, in short? To invert Trump, before calling other countries "shitholes," see just how your people with knowledge about the wider world regard your country. 

Unsurprisingly, more and more expat Yanks want out... for good. 

COVID-19 Victim: Kuwait is Broke

♠ Posted by Emmanuel in ,, at 8/19/2020 05:52:00 PM
Kuwait's energy-dependent economy is not coping well with the pandemic like its neighbors.
How the mighty have fallen together with the collapsing demand for hydrocarbons as tourism and travel have been grounded around the world due to the ongoing coronavirus pandemic. Kuwait is a famously rich--albeit geographically tiny--country whose invasion sparked the first Gulf War. Nevertheless, its geopolitical clout was such that then-US President George HW Bush gathered together American allies to summarily eject Saddam Hussein's invading forces.

Thirty years later, we see it confront perhaps a more invidious threat in the form of the spread of a pandemic. Kuwait's current plight reflects that of its neighbors--albeit in a more extreme way. You see, Kuwait is burning up its liquid reserves at a prodigious rate, so much so that it projects being unable to pay its civil servants after October. While it has a sterling credit rating (like most other Middle Eastern energy exporters, it must be said), its legislature's delays in authorizing further borrowing are causing it to unsustainably deplete its liquid reserves in the meantime:  
Kuwait has 2 billion dinars ($6.6 billion) worth of liquidity in its Treasury and not enough cash to cover state salaries beyond October, Finance Minister Barak Al-Sheetan warned parliament, as political wrangling again delayed efforts to return to international bond markets.

The government is withdrawing from its General Reserve Fund at a rate of 1.7 billion dinars a month, meaning liquidity will soon be depleted if oil prices don’t improve and if Kuwait can’t borrow from local and international markets, he said.

As energy-rich Gulf states see their finances hammered by the collapse in oil prices and the coronavirus pandemic, the remarks point to a dramatic reversal of fortunes for some of the world’s wealthiest nations. Managing the crisis has proven especially challenging for Kuwait, where all laws must be approved by lawmakers who accuse the government of mismanaging public money and are blocking legislation that would allow it to borrow abroad.
The General Reserve Fund is a separate pot of money from that which is invested by its sovereign wealth fund mostly in less liquid foreign assets. Overall, the Kuwait Investment Authority is the fourth-largest of its kind in the world. Yet, [GRF] funds can be used to pay for civil servants' salaries are dwindling. Note there is also a "good governance" complaint thrown in here as well as lawmakers point out that the country's leaders have not been [surprise!] exemplars of fiscal accountability and rectitude with regard to past petrodollar earnings. Imagine the Middle East being run by a jillion Jared Kushners and you wouldn't be far off.

The end result is that Kuwait, of all places, is facing a credit downgrade:
In March, Standard and Poors Global Ratings put Kuwait’s sovereign rating on negative watch, and Moody’s Investors Service followed. The IMF said that month that while Kuwait has large financial buffers and low debt, its “window of opportunity to tackle its challenges from the position of strength is narrowing.”

In June, Sheikh Sabah Al-Ahmed Al-Sabah, Kuwait’s ruler, issued a call to transform the economy to one less reliant on oil and urged rationalizing spending. More than 90% of the country’s revenue is generated from oil.
The reality is that Kuwait is an energy-reliant one-trick pony like its neighbors. Worse still, the bulk of its employment is in the public sector and predicated upon the fortunes of the aforementioned state-led energy exports. Even if it is able to cover its current fiscal shortfall by issuing debt, you have the feeling that the hydrocarbon age is nearing its end. What this future means for the fate of various authoritarian Middle Eastern regimes like Kuwait's is an interesting question.

Who knows? Perhaps Kuwait's fiscal reckoning--and its lawmakers' nascent questioning of the entire Middle Eastern petrostate model--foreshadow the region's political future

Paris St-Germain v RB Leipzig = Qatar v Red Bull

♠ Posted by Emmanuel in , at 8/18/2020 05:48:00 PM

Battle of the bad guys? Many see it that way.

A few hours after I publish this post, two of the world's most reviled football clubs will meet in the first match of the Champions League semifinals in Lisbon, Portugal. (Normally, there would be home/away ties for these clubs in their respective stadiums, but the pandemic has forced them to play a single winner-takes-all match in relatively COVID-free Lisbon as a neutral site. Needless to say, the thousands of fans are also missing.)  This being the International Political Economy Zone, we have international politics in abundance with Paris Saint-Germain [PSG] being bankrolled by the Qatari government, and international economics too with RB Leipzig being bankrolled by drinks company Red Bull. 

To be sure, there is a good chance that it will be a good match to watch. Among other stars, PSG features Brazilian drama queen Neymar and the rather more likeable (to me, at least) French speedster Kylian Mbappe. Meanwhile, RB Leipzig features a bevy of up-and-coming young stars. For all that, though, the way these teams got here--and many say they shouldn't be here at all if fair play were observed--make them arguably the two most hated teams in world football. 

Let's begin with PSG. Although the pandemic has smashed the fortunes of Middle Eastern oil and gas-exporting nations--including PSG's benefactor Qatar--that came after it had already spent EUR1 billion-plus trying to win this biggest prize in the global game--the Champions League. Qatar likes to portray itself as a progressive absolute monarchy, but many would of course point out that is an oxymoron. Two of Qatar's most visible attempts to make its regime more palatable are the TV network Al Jazeera, which likes bashing other Middle Eastern nations for totalitarianism when, er, it is sponsored by one of its practitioners. So in more recent years, they came upon the gambit of purchasing a languishing Ligue 1 franchise, spending big loading it up with high-priced talent, and winning heaven knows how many of the France's league titles amid less competitive opposition:

PSG have spent over a billion Euros since their takeover, and have become virtually unassailable in their domestic league, winning seven of the last eight Ligue 1 titles. The malice directed at them, however, isn’t due to the amount of money they spend. It’s the source of the money, and what it represents. The club is fully backed by a Gulf state that is frequently criticized for denouncing basic human rights. PSG stands accused of being a tool of political “soft power,” whereby Qatar aims to increase its appeal and standing in the western world via its megastar-laden soccer team...

For many, however, PSG’s combination of problematic funding, a lack of history and a healthy dose of hubris form a particularly unedifying combination.  Thus, Tuesday’s Champions League semifinal is the Battle of the Maligned Monoliths. It is not Paris against Leipzig; it is Political Influence against Rampant Commercialism.

Admittedly, I dislike PSG more than RB Leipzig. Making a mockery of UEFA's financial fair play rules, it has bought its way thus far into the semis. They have more connections to Qatar than to their city or country, and seems smugly content beating up other French teams unable to muster the same kind of financial muscle. Elsewhere in the commentary above, while the Premier League's Manchester City (Abu Dhabi) and Chelsea (Russian oligarch Roman Abramovich) have equally problematic ownership, these are clubs with substantial histories that could stand apart from their current owners. The same cannot be said for PSG.

How about RB Leipzig, then? Its story is well-known: Red Bull bought a fifth-tier club, renamed it RB Leipzig (RB stands for RassenBallsport, although it's really a not-so-subtle abbreviation of Red Bull), and has since blossomed into one of the Bundesliga's top clubs. Germans are purists about their football clubs, believing that they should be substantially run by the fans who provide inputs on their operations. RB Leipzig upends all that, inviting much ire in their home country since it makes no pretensions about being anything more than a marketing ploy for Red Bull:

The Independent has meanwhile been told of one early meeting at RB Leipzig, when Red Bull owner Dietrich Mateschitz was asked about the project. “Oh, it is a commercial enterprise,” Mateschitz said. “I won’t sell one extra can through this, but we will create a lot of brand awareness.” A phrase as corporate as “brand awareness” isn’t what most of us got into football for. And while it’s true the purpose is not as consequential as soft power or sportswashing, it is questionable, and provokes a lot of debate about the direction of the game and its role.

That difference over what the game is supposed to be for fosters the central tension around RB Leipzig.

While figures like Mateschitz see it is a vehicle for commerce, German football culture sees it as about community representation, and much more than the match. It is a communal experience, where they have agency. This is a viewpoint that was most aggressively articulated by magazine 11Freunde this week, who announced they are refusing to cover Tuesday’s semi-final. “RB Leipzig isn’t a football club, but an imitation… it never intended on just playing football.”

Unlike PSG, though, RB Leipzig has rather more welcome attributes. For starters, its wage bill is nowhere as large as PSG's, and it has achieved success in one of Europe's more competitive leagues with many journeymen of little pedigree. Leipzig's manager is only 33 years old. It's also in the economically less-prosperous former East Germany, which earns it additional sympathy...albeit from non-Germans like me:

What’s more, they’ve managed it in quite a progressive way. Their entire team will cost less than half of Neymar’s fee, and just over a half of Kylian Mbappe’s. They are as refreshing a new face in the Champions League semi-finals as they are at the top of the Bundesliga.

If RB Leipzig were not controlled and owned by a domineering drinks giant selling quite unhealthy, sugar-laden beverages and were run by the fans instead, it would be considered as a good example of how to nurture a modern club. But it isn't run that way, and for some it makes all the difference. Me, I am not a German purist, so I am more lukewarm about it. PSG, though, is hard to cast as anything but a panto villain people describe it to be. Money usually talks in sport, but sometimes people get offended when some do not take any pains to downplay this fact. 

Anyway, here's hoping it's a good game. From the above, you won't be surprised this neutral is rooting for Red Bull (for the first time ever!)

Silver Eclipses Gold... Thanks to the EU?

♠ Posted by Emmanuel in ,, at 7/22/2020 05:46:00 PM
I have been looking at an entry point to buy silver over the past few months, but a dip has not really come. Indeed, the metal has soared recently, handily outperforming gold. Why is this so? For a long time, the gold/silver price ratio was historically high, so there is likely some mean reversion there. That is, gold became too costly relative to silver despite having similar attributes, so silver's price had to move up eventually. Like gold, silver is something with intrinsic value unlike paper money or even virtual currencies. So there's some of that consideration at play:
It is hard to find an asset on more of a roll than silver. On Tuesday, silver for September delivery surged nearly 7%, the highest settlement since March 2014, and 83% above its March lows. Silver was up in the early hours of Wednesday as well. “It seems the precious metal has been caught up in the perfect storm,” says Jeroen Blokland, senior portfolio manager at Robeco Asset Management.

Much of what’s driving silver also is driving gold — aggressive monetary policy financing of fiscal spending, which limits the ability of bond yields to rise. That is sending inflation-adjusted, or real, yields lower, which tends to boost precious metals. In addition, silver is still cheap relative to gold by historical measures.
However, it's not probably not enough to say "silver is like gold" for an explanation. Indeed, silver has more industrial applications than gold. That said, how does this function matter when economic activity is slowing down dramatically worldwide? The emerging argument is that "green" industries rely a lot on silver, and that the current pandemic is hastening the emergence of these industries. What's more, the EU recently passing a bloc-wide stimulus measure championing investment in these industries should in theory boost silver's fortunes further:
But the latest catalyst may well be the European Union’s €750 billion recovery fund, which not only earmarked 30% of spending on environmental initiatives but said funding of other projects has to be in line with the Paris climate accord. Furthermore, the possibility the EU could issue so-called green bonds may create a safe asset, providing a reference security for private sector green bond issuance.

“The catalyst of the recent rally, however, seems to be the fact that the world is aiming for a ‘green’ recovery, with a significant part of the stimulus assigned to environmentally friendly measures,” says Blokland. “As silver has a wide range of industrial uses, including electronics and solar panels, demand for this metal should rise from this angle as well. We remain overweight commodities as the outlook for both industrial and precious metals looks bright.”
For the increasingly environment-conscious like myself, this development is a welcome one. I just wish I bought some silver sooner as it races into the distance [aargh].

Is China's TikTok Turning American to Avoid a US Ban?

♠ Posted by Emmanuel in ,, at 7/22/2020 05:15:00 PM
So much international controversy over such a mindless diversion. That is TiktTok's current predicament.
This is just a follow-up on a previous post I made about how India banned TikTok's app there. During these difficult times, countries are understandably adapting protectionist stances. After all, it's the easiest strategy to pursue when confronted with hardship: blame foreigners for whatever ails your country. In the telling of US Secretary of State Mike Pompeo, TikTok is a Trojan horse for Chinese Communist encroachment into American life. For kicks, I am linking to a Fox News story for the first time ever (I think)--fitting since we're dealing with the realm of xenophobic post-truth here:
Secretary of State Mike Pompeo said Monday the Trump administration is considering restricting United States' users' access to the Chinese social media application TikTok over concerns it is potentially being used by the Beijing government as a means to surveil and propagandize people.

"With respect to Chinese apps on people's cell phones, I can assure you the United States will get this one right too," he said, adding that he did not want to dive into specifics and potentially "get ahead" of any presidential announcement.

"But, it is something we are looking at," he said, going on to warn Americans that they should be cautious in using TikTok, lest they want their private information "in the hands of the Chinese Communist Party.
Nevermind that Pompeo presents no evidence for this claim--eek, it's from China! is the extent of his exceedingly juvenile argument--but when has that deterred anyone from the Trump administration from bashing the PRC for whatever reason? To appease Trump, TikTok's parent company is proposing to hire 10,000 US workers:
TikTok said Tuesday that it plans to create 10,000 jobs in the United States over the next three years, a substantial increase from the roughly 1,400 employees it currently has in the country. The announcement comes as the company faces mounting criticism over its handling of user data and its ties to China through its parent company, ByteDance.
Which is all well and good, but is there any guarantee this appeasement strategy will work? Since it keeps highlighting that its CEO is American, why not go whole hog and become a majority American-owned company? Indeed, some investors are thinking of doing just that to get rid of this folly once and for all:
Beleaguered video app Tiktok could be split from its Chinese parent company Bytedance and sold off to US investors in a bid to curtail a mooted ban on the app in America, as questions over the company’s data protection policies face mounting criticism on both sides of the Atlantic. Tiktok’s $110bn (£86bn) parent firm Bytedance is in talks with a small group of US investors to sell off a majority stake in the viral video platform, according to Silicon Valley news site The Information [...]

ByteDance’s sale discussions have reportedly included the company’s founder and chief executive Zhang Yiming, and Neil Shen, a board member and a partner at Sequoia Capital’s Chinese branch. The sale plan would require investors such as Sequoia, General Atlantic and New Enterprise Associates to form a consortium, with Bytedance potentially retaining a minority stake in the video platform.

It is thought a formal split from China would allay spreading fears that the video platform’s parent company is beholden to Beijing authorities and could be used as a tool of Chinese state surveillance.
i myself am flummoxed by how something so lowbrow and inane can not only find so many devotees but also attract the attention of ardent protectionists. Would Bytedance be willing to offload its golden goose to assuage the concerns of an American madman and his minions? November nears, you know, and Joe Biden may not be as silly. Maybe Bytedance just has to wait Trump out.

"Trade War 4.0": How the EU Plans to Punish US Tech

♠ Posted by Emmanuel in ,, at 7/20/2020 08:12:00 PM
This is a follow-up to the earlier post about how the EU and US are on a collision course over the tax treatment of American tech giants, which the EU believes are operating nearly tax-free within their countries. If we were still dealing with old-fashioned goods, the solution for the EU would be simple: apply tariffs, which are taxes on goods. After all, the US is applying those on a lot of EU goods right now. But how would you retaliate against services which the US is dominant in? Since these are intellectual property-rich things, you would make it easier to violate IP.

Now, if there is anything the US guards zealously, it's the intellectual property of its firms. Even the WTO reflects this American predilection by incorporating Trade-Related Aspects of Intellectual Property Rights (TRIPS) despite there already being a United Nations World Intellectual Property Organization (WIPO) since 1967.

To be sure, the EU is also IP-rich and also pushed for IP inclusion at the WTO. However, the clear difference circa 2020 is that while the US is strong in technology IP, the EU is rather less so. Maybe it's really anger at not getting enough taxes out of the US tech giants. Or maybe it's just plain jealousy that the EU hasn't really developed many of these next-generation industries. No matter; the EU is looking to hit US IP in the quarrel over American tech giants as an emergent trade war strategy:
The EU is preparing a law that could allow its executive body, the European Commission, to hit back against U.S. tariffs by imposing sanctions on the intellectual property of companies such as Amazon, Google and Facebook. In a rare united front, Europe's main political groups on July 6 backed proposals to strengthen the EU's trade powers by expanding them into the realm of services and intellectual property rights, which they argue would allow them to match U.S. trade firepower...

Lawmakers in Brussels think sanctions on services will be a bigger deterrent than tariffs on soybeans and machinery. They would also be a better fit for highly globalized value chains, where production easily jumps borders...

Sanctions directly targeting a company's intellectual property, by contrast, would catch a larger share of America's high-value exports, and would be much harder to circumvent [by relocating production outside the US]. Experts contacted by POLITICO agreed that trade retaliation on services and intellectual property would be a powerful weapon, but cautioned that the U.S. could react furiously. “Tariffs on Bourbon and Boeing is one thing, but cross-retaliation against copyright and religious symbols like [trademarks] is a whole different level of warfare," said Hosuk Lee-Makiyama, director of the ECIPE think tank.
Essentially, the US has found it easy to conduct trade warfare with Europe because the EU still largely exports goods to America. The opposite does not hold, though: the US export mix to the EU is biased towards services, which again cannot be tariff-ied. By abrogating US IP as cross-retaliation, though, the EU walks a tightrope. Truly, it is the nuclear option that would prompt a significant deterioration in transatlantic trade relations. Even in the age of Trump, that's not a place more level-headed Europeans would like to head towards.  

Missing US Innovation: Assisted Suicide On Demand

♠ Posted by Emmanuel in ,, at 7/16/2020 06:10:00 PM
Numbers don't lie: There isn't much to live for Stateside. Healthcare is largely misspent there, so how about the opposite?
The United States is perceived as an innovator leading the rest of the world. Sometimes, its innovations are not necessarily ethically or socially edifying. Witness the emergence of its sprawling prison industrial complex. No other country on earth spends as much on incarceration or throws as many of its own people behind bars. Usually those jailed are us colored people, but that's another discussion for some other time. Suffice to say that fortunes have been made in this industry. Profiting off the misfortunes of others--such as with "private" prisons--is a staple of Americana. Facebook's critics deride it as a hate-for-profit outfit. So, why not innovate by combining the "on demand" nature of video on demand like Netflix, Amazon Prime, etc. with just ending the folly of it all?

Now, it's well-known that the United States stands apart from other OECD (i.e., "developed") countries in having a falling life expectancy the past several years. 2018 was an exception--albeit a very marginal one--when it fractionally rose. Still, 2020 promises to more than wipe out any such gains. The reasons for these declines are equally well-known: radical inequality is causing those left behind--many of whom are Trump voters disaffected with American life, by the way--to harm themselves. Suicides, drug overdoses, and other so-called deaths of despair. In a way, voting for Trump was an act of desperation itself. What sensible reason was there to believe that a serial bankrupt would right the United States' financial situation? Faced with epochal health, financial, and social crises, America is reeling from endless self-inflicted blows by electing this fraudster in 2020. So, those desperate enough to vote for Trump find themselves over worse off.

But I digress. Trump is a symptom, rather than a cause of much of what ails America. I'll get more into America's obesity 'n' indebtedness complex soon enough, but suffice to say that Trump is simply exacerbating already-prevalent US pathologies. Wondering aloud, therefore, why doesn't the United States pioneer assisted suicide on demand? Legally speaking, it's in the same line of thought as another fine US invention, no fault divorce. In short, spare everyone the drama and just get it over with. As believers in the free market, Americans should be comfortable with this service: If the market is always right, then let the laws of supply and demand give adult Yanquis the right to top themselves quick ‘n’ easy. Instead of leaving a physical mess of your guts splattered all over the place, why not make ending it all a quick and convenient process--no questions asked?

2019 set a new Stateside record for drug deaths following a slight drop in 2018 fatalities, which were largely attributable to fewer prescription opioid-related deaths. 2020 is continuing 2019's rising trend, with early numbers suggesting the pandemic is boosting drug deaths. Fentanyl figures large:
Drug deaths in America, which fell for the first time in 25 years in 2018, rose to record numbers in 2019 and are continuing to climb, a resurgence that is being complicated and perhaps worsened by the coronavirus pandemic. 

Nearly 72,000 Americans died from drug overdoses last year, according to preliminary data released Wednesday by the Centers for Disease Control and Prevention — an increase of 5 percent from 2018. Deaths from drug overdoses remain higher than the peak yearly death totals ever recorded for car accidents, guns or AIDS, and their acceleration in recent years has pushed down overall life expectancy in the United States. 

It looks as if 2020 will be even worse. Drug deaths have risen an average of 13 percent so far this year over last year, according to mortality data from local and state governments collected by The New York Times, covering 40 percent of the U.S. population. If this trend continues for the rest of the year, it will be the sharpest increase in annual drug deaths since 2016, when a class of synthetic opioids known as fentanyls first made significant inroads in the country’s illicit drug supply. 
Trumpmerica isn't getting any better, and removing the symptom (Trump) certainly won't be the cure for what ails that country. Almost all health, economic and social indicators suggest things are getting worse. Absent any real hope for change, many are turning to self-harm to end it all in increasing numbers. Americans are masters at profiting from other's misfortunes. In the name of liberty--and commerce, it must be said--this industry is long overdue. As I mentioned, not all innovations are edifying, but some are just...necessary. Aside from being illegal, fentanyl and its ilk represent a messy way of suicide. What's required is something convenient and prepackaged--on demand, indeed.

In post-COVID-19 America, there is arguably no innovation more strangely missing than assisted suicide on demand. [Cue Blue Oyster Cult for mood music.]

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.

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.