Twin Peaks Revival and Critiquing Anti-Globalization

♠ Posted by Emmanuel in at 7/18/2017 05:26:00 PM
Dr. Amp throws the finger [x2!] at global capitalism.
After embarking on a fairly lengthy discussion of how Donald Trump should be a hero and not a hate figure of the anti-globalization movement amid violent protests at the recently-concluded G-20 meeting in Hambug, here is something a bit more lighthearted. I've been watching the return of the seminal show Twin Peaks to television after a 25+ year hiatus. Its off-kilter blend of melodrama, tragicomedy, horror, and science fiction has always been appealing to me.

However, what caught my attention in the context of anti-globalization was Dr. Jacoby--he of the different colored glasses--sliding further into madness in the revival. He's turned into some sort of crazed conspiracy theorist who goes by the name of Dr. Amp, selling sh_t shovels to dig ourselves out of the filth of modern life:


Instead of having to listen to the likes of Naomi Klein repeat the same old global corporate takeover shtick, why not have essentially the same message delivered in an entertaining way? I'd rather hear the Dr. Jacoby version any day...at least it's amusing in a self-deprecating (instead of self-important) manner. All the same, this satire points out the shortcomings of this genre of foolishness:
  1. Conspiracy - there are vast, unseen forces working against us in so many ways. Once more, the level of coordination implied usually is not demonstrable that there are several actors out just to get the rest of us.
  2. Logical inconsistency - going back to the point about Trump, anti-globalization arguments do not usually benefit from having parts that fit together. For instance, if globalization is providing employment to workers in poorer countries "stealing jobs", would they be "better off" if there were no global economic integration and everything consumed in rich countries was made in the US/Europe/Japan/ANZ, etc.? If anti-globalization activists are presumably concerned about the welfare of poor people (especially workers) elsewhere, then why deny them a living wage by "Making America Great Again" and reshoring virtually all manufacturing operations?
  3. Profit motive - Selling $29.99 "sh_t shovels" is the entire point of Dr. Jacoby's operations. Yes, he is interested in making money. If you were, say, Naomi Klein, and believed that your work contained the wisdom to right the wrongs caused by capitalism, then why not distribute it for free instead of charging us money and enriching some multi-billionaire like Amazon's Jeff Bezos?
Bottom line: As I've said before, most of these anti-globalization types are in it for the money too. The only difference between them and most of those whom they criticize is that they simply don't admit doing so by adopting self-righteous rhetoric.

Go ask Dr Amp.

Shouldn't Anti-Globalization Activists [Heart] Trump?

♠ Posted by Emmanuel in at 7/07/2017 01:07:00 PM
G-20 Hamburg protests: why the hate for anti-globalization champion Trump?
For years, anti-globalization protesters have gone out to all sorts of notable economically-related gatherings worldwide, be they G-7, G-8 or G-20 summits; World Economic Forum gatherings; World Bank and IMF meetings; WTO ministerial conferences, and so on and so forth. The boilerplate accusation is that world leaders betray the interests of the common people in favor of a faceless global capitalist class. To this, the common people must stand up for what they believe in. So far, nothing is new here.

What's interesting with the emergence of Donald Trump in world politics is that he espouses much of the same rhetoric: the [American] working class has been hurt by globalization, and therefore globalization should be rolled back to protect the common people from the ravages of world trade. As such, it's always struck me how vehemently opposed anti-globalization campaigners are to Trump when he's actually done much more to stop further economic integration than all of them combined. From single-handedly dooming the Trans-Pacific Partnership to oblivion to refusing to agree that trade protectionism is to be avoided during economic summits, he should be the man of anti-globalization writer Naomi Klein's dreams. But alas, he is not. This Canadian who likes meddling in Yanks' affairs just cannot stop blathering about how awful Trump is. (It's a form of globalization I don't appreciate when some foreigner thinks she's "active" in US domestic politics.)

There are, of course, all sorts of wrinkles here. Coming from the left, the anti-globalization vision of eliminating world trade is complemented by replacing it with folks being self-sufficient in small, sustainable communities. Meanwhile, the Trumpian vision is instead a triumph of American industry making everything that those in the United States wish for and more--to the exclusion of considering everyone else's welfare. Another line of argument is that Trump is only masquerading as a champion of the working class and is actually globalizer in disguise.

Then you also have a panoply of leftist causes that are the exact opposite of what Trump champions. These include climate change, racial tolerance, and so on. But, if you really think about it, Trump may be the one who is *really* anti-globalization in outlook here if the criteria is sheer isolationism. Consider:
  • You don't want international cooperation on climate change since, well, it involves representatives of different nations discussing things. A global elite should not be dictating what the free peoples of the world do to their piece of the planet;
  • You don't want tolerance of other people with different creeds, colors, or races. If the opposite of "globalist" is "nationalist," then you cannot have a nation-state which when it is largely indistinguishable from all others.
Abhorrent as those ideas may be, they're arguably more consistent with extricating ourselves from the rest of the world. In this sense Trump is the true anti-globalist, whereas those championing all sorts of progressive causes are not, really.

If anti-globalization means going it alone no matter what everyone else thinks, Trump is its best representative.

Anti-globalization activists should therefore celebrate Trump's arrival, full stop, wherever in the world he shows up. The attention he brings to the cause is unrivaled--especially compared to a ragtag group of anarchists and flunky writers like Klein.

After Trump Killed TPP, is Japan-EU FTA Imminent?

♠ Posted by Emmanuel in ,, at 7/05/2017 04:03:00 PM
EU Trade Commissioner Cecilia Malmstrom and Japanese Foreign Minister Fumio Kishida may have an FTA soon.
Given its recent efforts to join the ill-fated Trans-Pacific Partnership (TPP), Japan actually has an effective grand total of zero [0] FTAs involving more than one country. Yes, it does have one with ASEAN, but it's actually on top of a series of bilateral "economic partnership agreements" with each Southeast Asian member country (except for later accession countries Cambodia, Laos and Myanmar). TPP was to be Japan's first real foray into a plutilateral FTA, but Trump put paid to that.

Yet, emboldened by its adventure negotiating TPP and wanting more than the status quo, Japan is contemplating a deal with the EU. In fact, it may be inked as soon as tomorrow at a Japan-EU summit prior to the Hamburg G-20 gathering on Friday. The largest bugaboo with Japan and multilateral deals has always been agriculture. Why does Japan have so many bilateral deals with ASEAN member countries? It was largely to devise agricultural protections specific to each trading partner.

What's interesting about the mooted Japan-EU FTA are twofold: Once more, it would be Japan's first honest-to-goodness plutilateral FTA. Second, this deal would involve another entity known for agricultural protectionism in the EU. Is the latter an insurmountable obstacle? We will soon find out...
The European Union and Japan expect to commit to signing a free trade deal on Thursday, the EU said, in what both see as a push back against a feared U.S. turn toward protectionism under President Donald Trump.
Confirming on Tuesday that Japanese Prime Minister Shinzo Abe would meet heads of EU institutions in Brussels on the eve of a G20 summit with Trump and other world leaders in Germany, the European Council said: "Leaders are expected to announce a political agreement on the EU-Japan free trade agreement."
That would be short of a final accord ironing out all the commercial intricacies between two of the world's biggest economies and EU officials said on Tuesday that some key issues still needed to be settled before Thursday's EU-Japan summit.

However, confirming Abe's attendance is a sign of confidence that a deal will be ready for his signature and also puts pressure on trade negotiators to secure at least outline agreements on opening up each other's markets, including in the trickiest areas such as Japanese cars and European farm produce.
This Eurasian activity contrasts with the proclivities of a certain American stinker:
Both sides, having seen Trump pull back from free trade relationships, are keen to show they remain committed to removing barriers they say hamper growth.

"It is important for us to wave the flag of free trade in response to global moves toward protectionism by quickly concluding the free trade agreement with Europe," Abe told ministers at a meeting on Tuesday about the EU negotiations.

"This agreement is also important for our growth strategy. We will negotiate with all our energy until the very end to achieve the best deal for Japan."

Abe will meet European Council President Donald Tusk, who speaks for the 28 EU national leaders, and European Commission President Jean-Claude Juncker, the bloc's executive head.

Juncker's Trade Commissioner Cecilia Malmstrom was in Japan at the weekend and said after her talks that she was "quite confident" that a broad agreement could be announced on Thursday. EU officials had said that Abe would only visit Brussels if both sides were certain that the political agreement would be signed.

Malmstrom said: "You can do good, fair, transparent and sustainable trade agreements where you win and I win, and not the American view, which seems to be, 'You lose and I win'."
Abe, Tusk and Juncker will go on to Hamburg on Friday for the G20 summit
Take that, Trumpie! Europeans and Japanese do not take the trade realm as a winner-takes-all arena. As I mentioned, agriculture has been a sticking point for the Japanese negotiators:
European officials have been pushing for a reduction in Japanese tariffs on cheese and agriculture imports that are as high as 30 percent in return for phasing out tariffs on Japanese autos and auto parts.

This tradeoff initially met strong resistance, because some politicians want to protect Japan's dwindling dairy industry. However, Malmstrom expressed confidence that both sides have overcome this problem and can reach a deal.

"We've made meaningful progress, but there are still important points remaining," Kishida told reporters.
Some perspective is useful here. Actually, the Japan-EU deal has been under negotiation for nearly half a decade. My guess is that Trumpism was a spur to it. While the US has begun looking inward, many other countries still see free trade as beneficial. Although there are of course longstanding sticking points like the ever-bothersome agriculture, those committed will find a way to work around such obstacles. In order not to foster a wider climate of protectionism, some gesture was necessary.

So, here we are. By contrast, the Trump administration may announce steel tariffs hitting several G-20 countries in time for the Hamburg meeting. Same gathering; entirely different messages.

Can Ivanka Trump Stop Pop From Cutting US Aid?

♠ Posted by Emmanuel in ,, at 6/28/2017 04:47:00 PM
Would Ivanka Trump be complicit if tens of thousands died due to starvation arising from US foreign aid cuts?
To say Donald Trump hates poor foreigners is an understatement. He's definitely bigoted, but apparently it matters less if you're a Muslim [a] from a wealthy nation with [b] Trump-linked business interests. After all, the 9/11 attackers were mostly from Saudi Arabia and the UAE, but they go off scot-free in a world where, well, money talks. Although the world is fixated on the fate of his travel ban on folks from Iran, Libya, Somalia, Sudan, Syria and Yemen (countries which account for a grand total of zero terrorist fatalities in the US) less is said about the ongoing famines in many of these countries and their near-neighbors.

You see, the Trump administration has been mulling drastic cuts to US foreign aid going to all these poor, ungrateful, Trump-hating coloreds (or is their hatred partly due to the US planning to cut so much aid?) to spend on things like a multi-billion military expansion and a Great Wall of Trump on the US-Mexico border. However, note that Congress ultimately decides what to spend on the US federal budget and not the president.

Meanwhile, some hope that his moderate[-ish] daughter/adviser Ivanka Trump will persuade The Donald to not make such drastic aid cuts--at least that's what some aid agency officials think in the face of massive ongoing famines elsewhere:
The head of the UN World Food Programme has said he is hopeful Ivanka Trump will lobby her father into a U-turn on cuts to humanitarian aid in the face of an urgent cash crisis that is imperilling hundreds of thousands of lives.

David Beasley, a former Republican governor of South Carolina who supported Donald Trump’s campaign for the presidency, said Congress and the Senate had already defied the new president to ringfence $980m (£764m) for famine relief this year.

Beasley said he believed Trump would now rethink his policy of stripping down funding of peacekeeping and humanitarian aid for 2018, due in part to the president’s “savvy” daughter, with whom he posed for photographs following a meeting earlier this month.
Even now, the US is the biggest UN contributor, even if its aid contribution is among the least in GDP percentage terms for OECD nations:
The US is the biggest contributor to the UN, paying 22% of its $5.4bn core budget and 28.5% of the $7.9bn dedicated to peacekeeping. Trump has said that such contributions are unfair, and has been seeking to cut spending on US diplomatic and humanitarian efforts by a third...

In relative terms the US is one of the least generous countries when it comes to foreign aid: spending for 2015 stood at just 0.17% of gross national income, compared with Britain’s 0.7%.
The projected aid requirements this year are certainly staggering:
Speaking on a visit to Brussels, where he met leaders of the EU and the Belgian government, Beasley said he needed an injection of $1bn in the coming months to save the lives of 600,000 children. “While the European Union and Belgium have been tremendous supporters, the needs at this time are just extraordinary,” he said. “We are facing the worst humanitarian crisis since the second world war.

“Some 30 million people don’t know where their next meal is going to come from in just four of the countries facing famine, and 1.4 million are literally on the brink of starvation as we speak. “If we do not receive the resources, the food that we need in the next few months we are talking about the possibility of 600,000 dying. If we receive the funds, we can avert famine and minimise the chance of death.”
What does Trump care? More to the point, why would Trump care about colored people unable to afford Trump-branded gold courses or hotels who hate his guts? My guess is that aid proponents are wasting their time lobbying Trump. Besides, Trump can propose the most vicious cuts to US foreign aid, but it's ultimately the congress that decides how much to allocate in the federal budget. Given that fact, I'd be lobbying congresspersons instead of this guy. It's a waste of time IMHO.

And yes, Ivanka Trump does not escape responsibility, try as she might to portray herself as a "non-political" actor.

UPDATE: Don't forget her futile attempt to get The Donald to stay in the Paris Agreement. Progressive causes are lost on him...even if his daughter tries to persuade him.

Hong Kong Expat Banker, Endangered Species

♠ Posted by Emmanuel in at 6/25/2017 05:51:00 PM
I remember when most Lan Kwai Fong bar hoppers were Westerners. No more.
A brace of articles came out recently reflecting the changes wrought on employment in Hong Kong's financial services industry. Once upon a time, it was fairly common to come across Westerners plying their trade in the Far East. In particular, the self-deprecating acronym FILTH was used by British expatriates meaning Failed in London, Try Hongkong. The underlying assumption here, of course, was that it was easier to find a job in the less competitive environs of Hong Kong than in the City of London.

With the world's economic center of gravity shifting towards Asia, the inferiority complex of bankers working in Asia is increasingly becoming less warranted. There is more business to be drummed up in Asia today than in, say, post-Brexit UK. So while Hong Kong remains a financial gateway to still-burgeoning mainland China and beyond, London is primed to become a gateway to...nowhere in particular:
For years, the territory’s Chinese, and even its China-savvy expatriates, derisively called indulged Brits FILTH, which stands for Failed In London, Try Hong Kong. Expats who might have never worked in the City, Europe’s financial hub, could walk into good jobs and cut deals in the soft-carpeted confines of the Hong Kong Club or over a pint at the Captain’s Bar in the Mandarin Oriental.

Now FILTH is in terminal decline, its fate seemingly sealed by cost-cutting throughout the financial industry. John Mullally, an executive recruiter, said that as recently as 2010, expatriates from Britain and the rest of Europe, plus those from the U.S. and Australia, landed 40 percent of his finance job placements. Today, that figure is 15 percent. “On a weekly basis I get quite a few senior bankers that 15 years ago would have picked up a job straightaway, but today they’re really struggling,” said Mullally, who runs Robert Walters Plc’s banking practice in Hong Kong.
Moreover, why should banks and insurers pay extra to hire Westerners--relocation costs, housing costs, living costs, and the rest of it--when they are increasingly unsuited to the China-influenced business climate? Having neither the ability to speak Mandarin nor the connections (guanxi) to Asian business networks, what justifies the added expense? You might as well hire the folks from around Asia and groom them for the future:
At Citigroup Inc., Chinese students will account for the majority of university graduates the firm intends to hire full time in Hong Kong next year, according to James Mendes, the U.S. bank’s Asia-Pacific head of recruitment. For the past two years, JPMorgan Chase has hired more than 40 percent of its full-time graduates and interns for Hong Kong from local universities, a number the bank expects to increase as it ramps up business in the region.

Private banks are also looking for China-skilled staff to help them capture a slice of the country’s burgeoning wealth. Bank of Singapore Ltd., a unit of Oversea-Chinese Banking Corp., for example, hired 20 Mandarin-speaking relationship managers in Hong Kong this year.

Scarce, too, for expats are perks like generous housing allowances and memberships to such elite clubs as the Royal Hong Kong Yacht Club, which, unlike most Hong Kong institutions, has retained its “royal” association -- or, for Americans, the American Club. The value of a typical expatriate middle-manager package in Hong Kong fell to a five-year low in 2016, according to a recent survey by consultancy firm ECA International. Still, that’s $265,500.
The new breed is the Western-educated Asian banker with his or her feet in both worlds:
“Young junior bankers without language skills are so rare these days,” said Quinlan, 33, who now runs his own financial consulting firm.

Most global banks have tried to bring in Chinese power brokers. Many of these bankers are not only bilingual but also bicultural -- products of elite Western universities who can move seamlessly between China and the global Wall Street. Many also bring deep connections to China’s leadership and state-owned enterprises. Now mostly in their 40s and 50s, they include Morgan Stanley’s Wei Sun Christianson and Credit Suisse Group AG’s Janice Hu.
Reuters chimes in that the ongoing changes reflect that more and more of the share of business--initial public offerings and the like--coming from the mainland. So, hiring more bankers from the mainland is also a predictable trend:
A flood of Chinese bankers is changing the social fabric of Hong Kong, as they rapidly expand their footprint in one of the world's premier financial centers, even as Beijing struggles to tame the former British colony politically. Twenty years after Hong Kong's handover to Chinese rule, scores of mainland professionals are filling the elite financial ranks of Hong Kong, while a series of lay-offs at Western banks has led to an exodus of expatriates.
The largest increase in mainland staff over the past decade has come in investment banks, with 80 percent seeing an increase of at least 20 percent, according to a 2015 Financial Services Development Council survey. It has a much better environment than Beijing where I used to work," said Hong Hao, a managing director at BOCOM International, who has lived in Hong Kong for five years. "The food is good, and the tax rate is also good." Tax rates in Hong Kong are around 15-17 percent, while they can be as much as 45 percent in mainland China.

Chinese initial public offerings (IPO) dominate the Hong Kong market, the world's largest IPO market in 2016 when mainland offerings represented 80 percent of all new listings, according to Thomson Reuters data.
Hong Kong's financial services industry accounts for 18 percent of the territory's economy, compared with just 10.4 percent in 1997 when the city returned to Chinese rule.
If Asia butters Hong Kong's bread more and more these days, then the days of FILTH becoming ever more numbered is to be expected.

Will Automation End Asia's 'Old' Development Path?

♠ Posted by Emmanuel in at 6/22/2017 12:33:00 PM
Is this an endangered scene for countries like Bangladesh? What would its consequences be?
There is much hand-wringing going on about automation lessening the need for human workers and the unemployment that may occur as a result. In the West, scare stories about robots making humans redundant in any number of industries are all the rage as even skilled work that relies on think power becomes vulnerable to the rise of machines. This may or may not occur in the future, but whatever it holds for us, it's a narrative that's helping sell scare stories in the meantime.

Now, a Bloomberg article argues that it's not just folks in rich countries who should be worried, but also those in developing countries such as those in Asia. Given the rate at which automation is progressing, it may not be very long until even those at the bottom of the wage ladder will become increasingly redundant too. That is, previous technological advances were not so great as to overturn what we will call the 'Asian development model' here of gradually progressing the value-added ladder by starting with the manufacture of the most labor-intensive goods. In short, machines (capital) could not compete with lowest-paid labor in generating cost efficiencies...until now.

Take, they say, the example of the newest Chinese factories relying more on automation than on sweat:
Jinsheng’s factory covers almost 15 million square feet, more than five times the floor area of the Empire State Building, but it needs only a few hundred production workers for each shift. “Textiles used to be a labor-intensive industry,” said Pan Xueping, the chairman and chief executive officer, in a September speech in Urumqi, Xinjiang’s capital. “We are at a turning point.” Instead of moving production to whatever nearby country has the lowest wages, he added in an interview a day after the speech, “the industry can achieve a human-free factory.”

Pan’s company is at the vanguard of a trend that could have devastating consequences for Asia’s poorest nations. Low-cost manufacturing of clothes, shoes, and the like was the first rung on the economic ladder that Japan, South Korea, China, and other countries used to climb out of poverty after World War II. For decades that process followed a familiar pattern...
Even the nuances of garment manufacture requiring a human eye and touch may no longer forestall the move to more automation, with potentially dire political-economic consequences for Asia's developing countries at the bottom rung of progress:
The transformation looks like it will happen fast. The International Labor Organization (ILO) estimates that mass replacement of less-skilled workers by robots could be only two years away. Overall, more than 80 percent of garment industry workers in Southeast Asia face a high risk of losing their jobs to automation, according to Chang Jaehee, an ILO researcher who studies advanced manufacturing. Chang recalls presenting her findings to a government official in a country in the region that she declines to name. The official’s response? If she’s right, the result could be civil unrest.
If this story is true, then why stop at setting up highly automated factories in Asia? Why not move them back to the West or 'reshore' in contemporary parlance if labor costs become an insignificant factor?
As automation accelerates, it’s not just Asia that could see its industrial trajectory affected. If the cost of labor is no longer a major factor, there’s no reason manufacturers can’t relocate production to where the bulk of their customers are: North America and Europe, where wages for decades have been too high to support textile production. Remove most of the workers from the equation, along with the costs and delays of round-the-world shipping, and making clothes or shoes in Dallas or Düsseldorf instead of Dhaka starts to look like a compelling idea.
I don't necessarily buy this story since automation has been in progress for centuries. Do we expect a quantum leap in the near future? The real (narrower) question here is whether technological advances can overcome advantages of low-cost labor combined with human intuition in garments manufacture.The answer will have significant implications, obviously.

Pointless Trip? UK Trade Minister Seeks FTA in US

♠ Posted by Emmanuel in , at 6/18/2017 04:03:00 PM
Why send a Brexiteer (code word for isolationist) to negotiate a bilateral FTA with Trump's America?
Things are smacking of desperation in the UK as Prime Minister (as of this moment) Theresa May is not only vulnerable for calling an election when her party's majority was squandered, but also for coming into Brexit negotiations with a weakened position as a result. It is thus quizzical that she recently dispatched her trade minister to the United States. Recall that this is a new position after the UK left negotiating trade deals to the EU for decades.

It's being reported as a mission to scope the level of support for a UK-US FTA in the future:
Britain's International Trade Secretary Liam Fox said he would meet U.S. trade leaders in Washington on Sunday to talk about the possibility of signing a free trade deal between the two countries soon after Britain leaves the European Union... 


Britain starts formal Brexit talks with the other 27 EU countries on Monday, and is due to leave the bloc in March 2019.

Fox will meet U.S. Trade Representative Robert Lighthizer, as well as the U.S. Chamber of Commerce, trade policy organizations and business representatives.
The mission may be as described, but its viability has certainly been undermined by the current political turmoil in the UK. What's more, the Trump-era US trade stance isn't exactly very promising given the aforementioned lout's conviction that trade is a zero-sum game. Consider, then:
  1. For how much longer will the May government survive? Even if she is replaced by another Conservative politician, there is no guarantee s/he will retain the services of Fox or pursue an FTA with the US as a priority;
  2. Given Fox's precarious position as trade minister, what confidence will his American counterparts have in him representing UK interests even in the medium term?;
  3. How palatable will deliberately lopsided bilateral trade deals favoring the US be for others? The UK will be an early test case for others contemplating one with the US. It's the guinea pig;
  4. Given that Brexit isn't even a sure-fire thing given the amount of paperwork that the now-weakened May government needs to push through parliament over a protracted period of time, why would Fox's American counterparts be comfortable assuming that March 2019 is an appropriate target date?
  5. If the UK has been complaining about the EU's bullying ways all these years, how favorably will it respond to an even more demanding counterparty in the US--the world's largest economy (with its greater political-economic clout)?
None of these five questions have clear answers, leading me to believe that the trip was very, very exploratory and nothing more. 

EU: Ensuring Theresa "Trump Lite" May Can't Brexit

♠ Posted by Emmanuel in at 6/10/2017 03:12:00 PM
Before her boneheaded, majority-killing snap election, May was sending self-deportation vans around the UK as home secretary.
Before getting into more detail, let me be clear that the main characters in this story are not "protagonists" to any Remain advocate: Theresa May calling a snap election to improve her negotiating position for Brexit by increasing the Tories' majority instead resulted in the loss of her party's majority. Good for her. Meanwhile, her opponent, Labour's Jeremy Corbyn, is an old-style socialist / Communist sympathizer who reflexively favors nationalization and state control. It's as if Tony Blair's Third Way never came along. Both May and Corbyn are closet Brexiteers [1, 2].

However, the unexpected loss of the Conservative Party's majority for any number of reasons, including calling a snap election when she said one wasn't needed (she's a liar, liar), brings up a whole host of limitations to what she can now do. Essentially, they make the task of extricating the UK from the EU much harder instead of easier as she had intended by calling the snap election.
Theresa May’s electoral humiliation has raised hopes among pro-Europeans that she will be forced to abandon her plan for a “hard Brexit”, or that the process of Britain leaving the EU could grind to a halt completely.
George Osborne, former chancellor, said that her aim of leaving the EU single market and customs union could now be impossible: “I don’t think that hard Brexit has a majority in the House of Commons any more,” he said.

Some in Mrs May’s team even believe that her position is now so precarious that she will be unable to deliver Brexit, because of her vanishing authority and the problems of pushing a mountain of legislation through parliament. “How can you deliver Brexit when you don’t have any negotiating authority and no majority in the House of Commons?” asked one pro-European minister. “In practical terms, Brexit is a dead duck.”
Her position in parliament has become very tenuous when several bits of legislation must be passed in support of Brexit. Many are betting she simply cannot get these passed now:
Several things have changed. Firstly Mrs May’s slender majority in the House of Commons has vanished just at the point where she has to start the massive task of legislating for Brexit, including introducing the sprawling “Great Repeal Bill” that will transfer EU laws to the UK statute book.

Not only does Mrs May have to legislate for the detail of Brexit but there will also be an estimated seven major bills, including measures changing the law on immigration, customs and agriculture that will have to pass through the Commons and the House of Lords. Mrs May also has to pass contingency laws to allow her to leave the EU without a deal — even if they are never needed.
Lacking a majority, she's looking to partner with the Democratic Unionist Party (DUP), the loyal-to-the-queen Protestants in Northern Ireland. While the DUP shares a pro-Brexit stance, it wants to keep trade and transportation access privileges to Ireland proper. Which, I suspect, means preferring to stay in the EU if leaving it means losing such access:
The second complication for Mrs May is that her arrangement with Northern Ireland’s Democratic Unionist party: while the DUP is pro-Brexit it wants to avoid checks at the border with Ireland, which could be required if the UK leaves the EU customs union.
Arlene Foster, DUP leader, has said: “No one wants to see a ‘hard’ Brexit, what we want to see is a workable plan to leave the European Union, and that’s what the national vote was about — therefore we need to get on with that.

“However, we need to do it in a way that respects the specific circumstances of Northern Ireland, and, of course, our shared history and geography with the Republic of Ireland.”
On top of all that--and this hasn't been pointed out a lot--the Conservatives' representation among pro-Remain Scots has increased, thereby lessening the viability of all sorts of Leave legislation:
A third factor weighing on Mrs May is that her parliamentary party now includes 12 new MPs from Scotland, a country that is strongly pro-EU and where the Scottish National party is arguing for Britain to stay in the single market.

One pro-European Conservative MP said the prime minister would be wise to change course. “The country has turned against Brexit. There has been a youthquake. We are not in touch with younger voters.”

Another minister who backed Remain said there was scope for a “more nuanced” approach to Brexit, but John Redwood, the veteran Eurosceptic, pointed out that both Labour and Conservatives had ruled out staying in the single market.
If I were the EU, I would be even more encouraged to play the hardest of hardball with May--assuming she remains prime minister over the course of exit negotiations, which is hardly a sure thing given her precarious position. Because UK constituencies would balk at a deal stacked heavily against Britain, I'd make sure that it was. With May having no clear mandate to make a clear or "hard" Brexit, the end result is likely the status quo. EU anti-Brexit measures to ensure this result should include:
  • Hit the UK with a "divorce bill" in the hundreds of billions of Euros;
  • Do not negotiate an FTA alongside Brexit talks;
  • Make Brexit mean Northern Ireland loses near-total trade and transport preferential access to Ireland; 
  • Generally make the UK negotiators' lives as hellish as humanly possible by seeking next to no concessions on anything they wish
Can you fathom the idiocy these Conservatives have put their country and this world through via self-inflicted wounds? Former PM David Cameron called for an in-out referendum when there was absolutely no need for one and the general public didn't exactly clamor for it. Now May squanders Cameron's electoral majority, putting Brexit into question.

Oftentimes busybodying makes no sense. At any rate, here's hoping the EU offers May the worst possible deal to ensure the alternative of remaining looks far more palatable to the UK parliament. She can no longer make the threat of pulling out unilaterally, so take advantage of it, EU. Apparently May's homegrown brand of Trumpian, isolationist bigotry isn't too popular even in the UK.

Investors Decide UK Isn't Part of "Europe"

♠ Posted by Emmanuel in at 6/06/2017 11:12:00 AM
There are several ways to signify membership in a particular geographical region. The most straightforward one is that you share [duh] roughly the same real-estate on the world map. Others may, of course, include being part of a regional cooperation organization--or any number of such organizations. Into this picture we have this strange bastard entity called the "United Kingdom." Not only is it physically detached from continental Europe, but it has also chosen to forsake many of the signature institutions of Europe.

The UK is not part of the Schengen Agreement for continent-wide travel. The UK has never been part of the Eurozone using the Euro as a common currency. Now, it has also declared that it doesn't want to be part of the European Union. While geography and international institutional cooperation may be significant markers of belonging, what are subtler manifestations? How about investors--undoubtedly important stakeholders--treating you as part of a particular region? As the UK leaders act like the Trump-o-philes of Europe with their isolationist leanings, folks are starting to get the message that the UK really *isn't* European:
Global investors are distinguishing between the UK and the rest of Europe as part of a fundamental reassessment of what investing in the region means, reflecting growing enthusiasm for Europe's broad economic prospects and nervousness about thorny and possibly protracted Brexit negotiations.
That has meant the forceful emergence this year of "Europe ex-UK" as an investment class, as offshore investors actively seek to avoid lumping British stocks into any Europe-bound investments.
Like their namesake, these Euro-Trumps are being shunned, bigly:
With Brexit, and the future of many of those links uncertain, there is a growing realization that the UK and EU financial markets will develop their own nuances and drivers which require old assumptions to be challenged.

Data from Lipper - a Thomson Reuters company - on year-to-date flows in and out of exchange traded funds (ETF), a proxy for broader investments, shows that this is well under way.

ETFs that track European stocks excluding the UK are the ones seeing the strongest demand and the largest of these, the iShares MSCI Eurozone ETF, has seen a net $3.9 billion pumped into it this year.
Meanwhile, regional ETFs which include UK stocks have bled money, suggesting investors looking only for European exposure are actively seeking to avoid British stocks.

"Europe ex-UK" is not a new investment concept, and the size and scope of products available to investors is small compared to those available on a pan-European basis.
It's another sign of continental drift for the isolationist UK. With fortunes looking up on the continent, it may be a case of "See ya, and the EU wouldn't want to be ya." It's not as if the UK can do anything that continental Europeans cannot by offering something unique. Go ask the investor class.

Linking Depopulation and Debt in Puerto Rico, Illinois

♠ Posted by Emmanuel in at 6/02/2017 05:49:00 PM
Accumulating debt is the American way...even in a protectorate.
The role of demographics in economics is often overlooked. However, there are any number of examples you can bring up that illustrate its substantial role. First, consider Puerto Rico. To say that the US protectorate is in dire economic straits is an understatement. With its ballooning debt, it has the disadvantage of being a mere protectorate instead of a full-fledged part of the USA. Besides defaulting on its debt, poor prospects there are causing an exodus as folks seek work where it is to be found. Namely, somewhere else other than Puerto Rico:
The population drop is astonishing. The island has lost 2 percent of its people in each of the past three years. A comparable departure from the 50 states would mean 18 million people moving out since 2013. About 400,000 fewer Puerto Ricans live on an island of 3.4 million today compared with a decade ago, when its economy began contracting.

The departures have trapped Puerto Rico in a downward spiral. A grinding recession, with joblessness at 11.5 percent, and $74 billion mountain of debt that pushed the island to insolvency has made collecting taxes key to an economic rebound. At the same time, more Puerto Ricans from all walks of life are moving away to better their lives, meaning government revenue is dwindling.
The interesting thing is that economic scenarios for Puerto Rico to begin reducing its massive debts largely underestimates the drag from depopulation. Simply put, what happens when there are not enough folks to pay off these debts? Things look pretty bad on the demographic front:
The government doesn’t seem to have come to grips with the outflow. Puerto Rico’s turnaround plan -- a path to sustainability approved by a U.S. oversight board -- assumes the population will shrink just 0.2 percent each year for the next decade. It uses that number as the basis for its projections of tax receipts and economic growth.

“Most people believe that those forecasts in the fiscal plan are really, really optimistic and probably would have to be revised at some point,’’ said Sergio Marxuach, public policy director at the Center for the New Economy in San Juan.
The rate, as mentioned above, is closer to 2% annually than 0.2%. If you think, "hey, what's the big deal with a US protectorate?" then you're not looking hard enough. Illinois has lost the most residents of any US state for three year running:
For the third consecutive year, Illinois has lost more residents than any other state, losing 37,508 people in 2016, which puts its population at the lowest it has been in nearly a decade, according to U.S. census data released Tuesday.

Illinois is among just eight states to lose residents, putting its population at 12,801,539 people, its lowest since about 2009. Illinois' population first began to drop in 2014, when the state lost 11,961 people. That number more than doubled in 2015, with a loss of 28,497 people, and further multiplied in 2016.
While cause-and-effect is challenging to establish with the cases of either Puerto Rico or Illinois, you see the same pattern of depopulation accompanying debt woes in Illinois as well:
Illinois had its bond rating downgraded to one step above junk by Moody’s Investors Service and S&P Global Ratings, the lowest ranking on record for a U.S. state, as the long-running political stalemate over the budget shows no signs of ending.

S&P warned that Illinois will likely lose its investment-grade status, an unprecedented step for a state, around July 1 if leaders haven’t agreed on a budget that chips away at the government’s chronic deficits. Moody’s followed S&P’s downgrade Thursday, citing Illinois’s underfunded pensions and the record backlog of bills that are equivalent to about 40 percent of its operating budget.

“Legislative gridlock has sidetracked efforts not only to address pension needs but also to achieve fiscal balance,” Ted Hampton, Moody’s analyst, said in a statement. “During the past year of fruitless negotiations and partisan wrangling, fundamental credit challenges have intensified enough to warrant a downgrade, regardless of whether a fiscal compromise is reached.”
Same banana in Illinois, then. Folks should really research the depopulation-debt link there better, too.