Category Archives: World

(BBG) The Era of Cheap Money Shows No One Knows How Monetary Policy Works

(BBG)

  •  Low rates haven’t lured indebted households and businesses
  •  Central banks face questions as divide from politics blurs

Monetary policy is supposed to work like this: cut interest rates, and you’ll encourage businesses and households to borrow, invest and spend. It’s not really playing out that way.

In the cheap-money era, now into its second decade in most of the developed world (and third in Japan), there’s been plenty of borrowing. But it’s been governments doing it.

The numbers help explain a growing sense that central banks, which took emergency action to pull economies out of the 2008 slump, may not be able to repeat the trick in another downturn.

They’re even facing broader questions about their independence from politics, a cornerstone of economic management in rich countries. In the past decade, still-indebted private actors were mostly unwilling to dive back into the red, even at ultra-low rates engineered by the central banks — while governments could and did. The dividing line is starting to look fuzzy.

‘Fat Tail’

Some analysts say it’s time to redraw it.

The arms-length relationship between politicians and central bankers “was built when the fat tail was excessively high inflation,” said Paul McCulley, the former Pimco chief economist. “Now the fat tail is excessively low inflation, call it deflation. We need to update our thinking on a more cooperative stance between the fiscal and monetary authorities.”

Most economists see that as a slippery slope that could lead to prices spiraling out of control. That’s one reason they’re dismissive of Modern Monetary Theory, a school of thought which supports bigger deficits, and is relaxed about central banks financing them. MMT economists say public debt is generally safer than the private kind, which snowballed in the age of monetary policy dominance before disaster struck.

The question is a live one, and not just in academia. It gets bumped up the agenda every time President Donald Trump snipes at the Federal Reserve. There are similar political pressures in other countries.

‘Somewhat Sluggish’

Also growing are calls for governments to boost economies if central banks can’t.

The European Central Bank has just been forced to postpone any effort to shift monetary policy back toward normal. The region’s growth prospects “are somewhat sluggish,” Isabelle Mateos y Lago, chief multi-asset strategist at BlackRock Investment Institute, told Bloomberg TV this week. “We could use some fiscal stimulus.”

Read more: ECB near end of road seeks government backup

What Our Economists Say

Should governments a) run larger deficits because low rates allow them to or b) because central banks can buy their debt and keep rates low? In a sense it doesn’t matter. In both cases, the answer is that governments should run larger deficits.

Tom Orlik, chief economist, Bloomberg Economics

In Japan, there’s been more cooperation between the people in charge of budgets and those who manage interest rates than pretty much anywhere else.

When the government and central bank work in tandem, “synergy effects from both sides can produce stronger economic stimulus,” former BoJ deputy governor Kikuo Iwata, a key architect of the plan, said at the Bank for International Settlements last year. He’s argued that monetary policy has done what it can, and that Japan — which already has the world’s biggest public-debt burden — needs even more fiscal stimulus to complete its escape from deflation.

Tag Team

In the heat of crisis, collaboration between governments and central banks has been fairly explicit almost everywhere. In 2008 in the U.S., for example, the Fed’s Ben Bernanke and Treasury’s Henry Paulson rapidly formed a tag-team. In Europe a few years later, Mario Draghi’s pledge to do “whatever it takes” to preserve the single currency gave Italian government debt a backstop, and brought yields down from the brink.

Public borrowing at low rates proved to be an effective way of putting a floor under the Great Recession. The U.S. and Japan did more of it than Europe, where there’s no central authority able to tap credit markets and spend on the continent’s behalf — and they’ve had better recoveries.

The problem for policy makers is that what once looked like a short-term crisis stopgap has in fact stretched out for years — making it increasingly likely that the next downturn will arrive with interest rates still low.

In the U.S., a plurality of economists expect a recession in 2020, a presidential election year. The Fed will have some room to cut, though less than the 500 basis points reckoned to be its typical response to a shrinking economy. Its peers have much less, if any.

Read more: ECB, BoJ have ‘very little’ ammunition left

And even if they had, recent history says it would likely be governments that took advantage of the lower rates.

The worst recessions to hit developed countries lately (and some emerging markets too) have followed rapid buildups in private credit — one reason why central banks have found it hard to inject stimulus. And today, households and businesses are still highly indebted by past standards.

Unlike governments, they haven’t been eager to borrow more money, however cheap it is.

(ECO) Entre os mais ricos do mundo há uma portuguesa. Fernanda Amorim subiu na lista

(ECO)

A viúva de Américo Amorim continua a ser a única entrada de Portugal na lista dos mais ricos da Forbes. A sua riqueza chega aos 4,8 mil milhões de dólares.

A lista dos mais ricos do mundo está a encolher, tanto em riqueza como em número. Tal como no ano passado, só há um português no ranking global. É Maria Fernanda Amorim, viúva de Américo Amorim, que até conquistou algumas posições, apesar de ter registado uma quebra na fortuna.

Maria Fernanda Amorim está na posição 379 da lista dos multimilionários da Forbes(acesso livre/conteúdo em inglês), quando no ano passado figurava no 382.º lugar do ranking.

Apesar da subida, a portuguesa, em conjunto com a sua família, apresenta umafortuna de 4,8 mil milhões de dólares, um valor que compara negativamente com os 5,1 mil milhões do ranking do ano anterior.

O maior ativo da viúva do empresário português que liderava a Corticeira Amorim é uma participação de 18% na Galp Energia. A petrolífera, que tem atualmente como chairman a filha, Paula Amorim, contribuiu também para a fortuna de Isabel dos Santos que figura na posição 1.008 do ranking, com uma fortuna de 2,3 mil milhões. Perdeu 300 milhões num ano, caindo da posição 924.

É o segundo ano consecutivo em que Portugal conta apenas com um representante no ranking dos mais ricos. Nos anos anteriores, tinha três, juntando-se Alexandre Soares dos Santos e Belmiro de Azevedo a Américo Amorim. Tanto Belmiro como Américo Amorim faleceram em 2017.

Fernanda Amorim é uma entre os multimilionários da Forbes. O número de pessoas a figurar nesta lista caiu para 2.153 em 2019, menos 55 do que no ano anterior. Quase metade daqueles que conseguiram um lugar no ranking, cerca de 46%, viram a sua fortuna diminuir.

Jeff Bezos continua a liderar a lista, depois de ter ultrapassado o fundador da Microsoft Bill Gates, com uma riqueza de 131 mil milhões de dólares.

(JN) JPMorgan: Novas subidas nas bolsas terão que ser suportadas por crescimento

(JN) A gestora de ativos do JPMorgan acredita que as bolsas mundiais vão registar um ano positivo, mas a evolução da economia será determinante para perceber se há margem para as ações prolongarem as subidas.

A gestora de ativos do JPMorgan tem vindo a adotar uma postura de investimento mais defensiva. A entidade continua, porém, a identificar espaço para retornos positivos nas ações mundiais. No entanto, após a escalada registada neste início de ano, apenas se houver uma confirmação de notícias positivas no crescimento económico é que as bolsas poderão prolongar as subidas.

Uma política monetária mais acomodatícia, um alívio das tensões comerciais e expectativas de um crescimento mais moderado, mas positivo. São estes os temas que têm estado a determinar a recuperação dos mercados financeiros, mas que, segundo o JPMorgan Asset Management, também estão amplamente descontados nos mercados. Numa apresentação a jornalistas realizada em Lisboa esta terça-feira, Manuel Arroyo argumentou que, grande parte da subida registada em 2019, se deve a um ajuste técnico, depois das descidas expressivas acumuladas nos últimos meses de 2018.

Após uma valorização superior a 10% nas praças norte-americanas e de mais de 8% na Europa, em mês e meio, o diretor de vendas da JPMorgan AM Portugal refere que é necessário “mais crescimento económico” para sustentar a extensão dos ganhos nas bolsas. O especialista acredita que caso a Europa e a China apresentem uma evolução positiva da sua economia, isto pode alimentar maiores retornos nas ações.

Com uma visão moderadamente otimista para a economia mundial, Manuel Arroyo destaca que é esperada muita volatilidade nos próximos meses, fruto de já estarmos numa fase tardia do ciclo económico.

“Os EUA vão continuar a crescer à volta de 2%”, antecipa o mesmo especialista, que lembra, contudo, que este ano não haverá nenhum programa de estímulos orçamental. Vai haver sim estímulos monetários.

A Reserva Federal indicou, em janeiro, uma inversão na sua política de subida de taxas de juro, levando os bancos de investimento e as gestoras de ativos a rever as suas expectativas para a normalização das taxas. Enquanto no final do ano a gestora do JPMorgan previa quatro subidas de juros em 2019, as previsões apontam agora para uma ou duas mexidas nos juros, nos terceiro e quarto trimestre do ano.

Já em relação aos resultados empresariais, Manuel Arroyo realça que está a antecipar um crescimento entre 5% e 7% dos resultados nos EUA. O responsável lembra que, ao longo do último ano, baixaram-se muito as expectativas, mas “ao baixar as expectativas aumenta a margem para surpreender pela positiva”.

(Forbes) Earth’s Magnetic North Pole Has Officially Moved

(Forbes)

This map shows the new location of the magnetic North Pole (the white star).NOAA NCEI/CIRES

Earth’s magnetic North Pole has drifted so fast that authorities have had to officially redefine the location of the magnetic North Pole. The extreme wandering of the North Pole caused increasing concerns over navigation, especially in high latitudes.

Earth’s magnetic field is known to have wandered and flipped in the geologic past. Earth’s magnetic field is a result of spinning molten iron and nickel 1,800 miles below the surface. As the constant flow of molten metals in the outer core changes over time, it alters the external magnetic field.

What we’ve seen in the past hundred years is that the location of the magnetic North Pole has moved northward. That migration of the magnetic North Pole was switched into overdrive in the past few years, causing the pole to rapidly move. The increased speed with which the magnetic North Pole has moved prompted authorities to officially update its location. The official location of the magnetic poles is specified by the World Magnetic Model, which acts as the basis for navigation, communication, GPS, etc. around the globe.

The New Location Of Earth’s Magnetic North Pole

On Monday, the World Magnetic Model updated their official location of the magnetic north. The model is typically updated every five years and was last updated in 2015. However, the recent rapid movement of the magnetic north prompted scientists to update the model early. In the recent past, the magnetic North Pole has moved 34 miles a year toward Russia. Just a half-century ago, the magnetic North Pole was wandering about 7 miles each year.

Movement of Earth’s magnetic pole over timeNOAA

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Earth’s magnetic North Pole is quickly moving from the Canadian Arctic toward Russia. The model update ensures the accuracy of work in governmental agencies around the world. Specifically, NASA, the Federal Aviation Administration (FAA) and the U.S. Forest Service use the magnetic poles in their daily operations from mapping to air traffic control. On a more individual level, smartphones use the magnetic north for GPS location and compass apps.

Is Earth’s Magnetic Field About To Flip?

While the rapid movement of Earth’s magnetic North Pole may cause concern over the potential flip of magnetic poles, there is no evidence that such a flip is imminent. Geologists can interpret magnetic minerals in rocks around the world to reveal the history of magnetic reversals on Earth.

Earth’s magnetic poles have flipped many times in its history, with the latest reversal occurring 780,000 years ago and 183 times in the past 83 million years. When Earth’s magnetic poles do flip, it won’t be a catastrophic “end of the world” scenario. From examining fossil records, there is no evidence that a magnetic field reversal causes increased extinctions, volcanic activity, etc.

However, one big issue will lie in the extensive use our technology relies on the magnetic poles. A reversal would upend navigation and communication systems around the globe. Thankfully, a pole reversal in the past typically takes thousands of years to flip. This will give us ample time to develop mitigating plans. In reality, when Earth’s magnetic field does flip, who knows what planet our descendents will be living on?

(BBG) 2018 Was the Fourth-Warmest Year on Record

(BBG)

The U.S. suffered $91 billion in losses due to extreme weather last year.

Nasa warmest climate
Photographer: NASA

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The last five years were collectively the world’s warmest on record, two of the largest U.S. science agencies announced on Wednesday.

With its fourth place showing, 2018 now ranks behind 2016, 2017, and 2015 and ahead of 2014 on the list of the warmest years, the National Oceanic and Atmospheric Administration and National Aeronautics and Space Administration said in a joint presentation

“The key message is that the planet is warming,’’ said Gavin Schmidt, director of NASA’s Goddard Institute for Space Studies. “The long-term trends are extremely robust.”

That warming is driven by the amount of greenhouse gases humans have introduced into the atmosphere, particularly in the last 100 years, Schmidt said.

In both data sets, the overall trend of global temperatures is rising. However, individual years do see fluctuations due to phenomena such as El Nino and La Nina in the equatorial Pacific, said Deke Arndt, a scientist at NOAA’s National Centers for Environmental Information in Asheville, North Carolina.

“It is like riding up an escalator over time and jumping up and down as you are riding on that escalator,’’ Arndt said during a call with reporters.

Global temperatures averaged 1.49 degrees Fahrenheit above the 1951-1980 average according to NASA data, while NOAA showed 1.42F above the 1901-2000 average. While the two agencies use different baseline averages, the record of global temperatures goes back to 1880.

In addition to the temperature records, the U.S. suffered $91 billion in direct losses from extreme weather events in 2018, the fourth most since 1980, Ardnt said. Hurricanes Florence and Michael and wildfires in the West accounted for $73 billion of that loss.

(ZH) For The First Time Ever, Wall Street Banks Top $100 Billion In Profit

(ZH)

One may not know it by looking at banker bonuses last year, but 2018 was a banner year if only for bank shareholders and upper management: this is the year when the 6 biggest banks generated (well) over $100 billion in profit. They can thank Trump’s tax cuts, the Fed’s payment of interest on reserves, rising interest rates, a jump in dealmaking and a retail-banking boom (if not so much the “bad volatility” that resulted in a plunge in fixed income, currency and commodity trading fees).

As Bloomberg first noted, JPMorgan, Bank of America, Wells Fargo and their peers have already reported more than $111 billion of profit for 2018, and Morgan Stanley will complete the money-center picture tomorrow when it releases its fourth-quarter results Thursday and only makes this number bigger.

While JPMorgan and Bank of America both had record years, Goldman and Citigroup had their biggest annual profits since the financial crisis. The staggering profits, coupled with upbeat commentary about 2019 may ease fears that rate hikes and trade wars will bring an end to good times for the biggest banks.

To be sure, the banks’ bosses see not a cloud in sight: “Is it the end of a cycle? We don’t think so,” JPM CFO Marianne Lake said Tuesday. “We think the outlook for growth in the economy is still strong. The consumer is still strong and healthy, and we’re expecting to see, maybe slower, but still global growth going forward.”

Her optimism may have been a bit stretched as this quarter JPM missed earnings estimates for the first time in 15 quarters, while the bank’s provision for loan losses surged to $1.55 billion, far above the expected $1.3 billion.

Meanwhile, the question is whether or not the market already reflects the banks’ massive profits, or if there is room for bank stocks to run more: the KBW Bank Index surged 10% this month, on the back of a furious bear market rally and following generally strong fourth-quarter results; however, it comes after banks slumped into a bear market, plunging 20% in 2018, the worst performance in seven years.

(CNBC) Soros says China’s Xi is the ‘most dangerous’ opponent of those who believe in open society

(CNBC)

  • Speaking at the World Economic Forum (WEF) in Davos, Switzerland, Soros lambasted Xi’s proposed social credit rating system.
  • His comments come as the Chinese state continues to set up a broad ranking system to monitor its citizens, giving them a social credit score.
George Soros

OLIVIER HOSLET | AFP | Getty ImagesGeorge Soros

Billionaire investor and progressive political activist George Soroslaunched a blistering attack on Chinese President Xi Jinping on Thursday, describing him as the “most dangerous” opponent to those who believe in open society.

Speaking at the World Economic Forum (WEF) during a private dinner event in Davos, Switzerland, Soros lambasted Xi’s proposed social credit rating system.

His comments come as the Chinese state continues to set up a broad ranking system to monitor its citizens, giving them a social credit score.

“I want to call attention to the mortal danger facing open societies from the instruments of control that machine learning and artificial intelligence can put in the hands of repressive regimes,” Soros said.

“The social credit system is not yet fully operational, but it’s clear where it’s heading. It will subordinate the fate of the individual to the interests of the one-party state in ways unprecedented in history,” he added.

First announced in 2014, the government-run system will track elements of individual people’s behavior and determine some personal privileges for them based on a score.

China is piloting the system in various locations, and it is not clear how it will work after it fully rolls out nationally. So, for example, if a person were to get a traffic violation or criticize the government, their personal score may decline. People with lower scores may face penalties, such as being banned from traveling on certain train linesor getting their children into prestigious schools.

The system, which is due to be fully operational in 2020, is expected to be mandatory.

The head of Soros Fund Management and the Open Society Foundations said the system was “frightening” and “abhorrent.”

Who is George Soros?

The 88-year-old Hungarian-American businessman has spent billions of his own money funding human rights projects and liberal democratic ventures around the world.

He has also been a large donor to the U.S. Democratic Party, backing the presidential campaigns of Hillary Clinton and Barack Obama.

He has previously described President Donald Trump as “an imposter.”

Soros has become a frequent target for criticism by right-wing groups in recent years, in large part due to his support for liberal causes.

(Reuters) IMF cuts global growth outlook, cites trade war and weak Europe

(Reuters)

DAVOS, Switzerland (Reuters) – The International Monetary Fund on Monday cut its world economic growth forecasts for 2019 and 2020, due to weakness in Europe and some emerging markets, and said failure to resolve trade tensions could further destabilize a slowing global economy.Swiss special police officer keeps watch from a rooftop, ahead of inauguration of World Economic Forum (WEF) in Davos, Switzerland, January 21, 2019. REUTERS/Arnd Wiegmann

In its second downgrade in three months, the global lender also cited a bigger-than-expected slowdown in China’s economy and a possible “No Deal” Brexit as risks to its outlook, saying these could worsen market turbulence in financial markets.

The IMF predicted the global economy to grow at 3.5 percent in 2019 and 3.6 percent in 2020, down 0.2 and 0.1 percentage point respectively from last October’s forecasts.

The new forecasts, released ahead of this week’s gathering of world leaders and business executives in the Swiss ski resort of Davos, show that policymakers may need to come up with plans to deal with an end to years of solid global growth.

“Risks to global growth tilt to the downside. An escalation of trade tensions beyond those already incorporated in the forecast remains a key source of risk to the outlook,” the IMF said in an update to its World Economic Outlook report.

“Higher trade policy uncertainty and concerns over escalation and retaliation would lower business investment, disrupt supply chains and slow productivity growth. The resulting depressed outlook for corporate profitability could dent financial market sentiment and further dampen growth.”

The downgrades reflected signs of weakness in Europe, with its export powerhouse Germany hurt by new fuel emission standards for cars and with Italy under market pressure due to Rome’s recent budget standoff with the European Union.

Growth in the euro zone is set to moderate from 1.8 percent in 2018 to 1.6 percent in 2019, 0.3 percentage point lower than projected three months ago, the IMF said.

The IMF also cut its 2019 growth forecast for developing countries to 4.5 percent, down 0.2 percentage point from the previous projection and a slowdown from 4.7 percent in 2018.

“Emerging market and developing economies have been tested by difficult external conditions over the past few months amid trade tensions, rising U.S. interest rates, dollar appreciation, capital outflows, and volatile oil prices,” the IMF said.Slideshow (2 Images)

The IMF maintained its U.S. growth projections of 2.5 percent this year and 1.8 percent in 2020, pointing to continued strength in domestic demand.

It also kept its China growth forecast at 6.2 percent in both 2019 and 2020, but said economic activity could miss expectations if trade tensions persist, even with state efforts to spur growth by boosting fiscal spending and bank lending.

“As seen in 2015–16, concerns about the health of China’s economy can trigger abrupt, wide-reaching sell-offs in financial and commodity markets that place its trading partners, commodity exporters, and other emerging markets under pressure,” it said.

Britain is expected to achieve 1.5 percent growth this year though there is uncertainty over the projection, which is based on the assumption of an orderly exit from the EU, the IMF said.

China’s economic growth hits 28-year low

The rare bright spot was Japan, with the IMF revising up its forecast by 0.2 percentage point to 1.1 percent this year due to an expected boost from the government’s spending measures, which aim to offset a scheduled sales-tax hike in October.

The IMF has been urging policymakers to carry out structural reforms while the global economy enjoys solid growth, with its managing director, Christine Lagarde, telling them to “fix the roof while the sun is shining”. The IMF has stressed the need to address income inequality and reform the financial sector.

However, as growth momentum peaks and risks to the outlook rise, policymakers must now focus on policies to prevent further slowdowns, the IMF said.

“The main shared policy priority is for countries to resolve cooperatively and quickly their trade disagreements and the resulting policy uncertainty, rather than raising harmful barriers further and destabilizing an already slowing global economy,” it added.

(BBG) The World Will Pay for Not Dealing With Debt

(BBG)

Inventive policymaking has only made the problem worse, guaranteeing that any eventual restructuring will be all the more painful. By Satyajit Das23 de dezembro de 2018, 00:00 WET

There’s quite a hole to dig out from. Photographer: Dimas Ardian/Bloomberg

Satyajit Das is a former banker, whom Bloomberg named one of the world’s 50 most influential financial figures in 2014. His latest book is “A Banquet of Consequences” (published in North America and India as “The Age of Stagnation”). He is also the author of “Extreme Money” and “Traders, Guns & Money.”Read more opinionCOMMENTS 51LISTEN TO ARTICLE 5:56SHARE THIS ARTICLE Share Tweet Post Email

Markets, to paraphrase Nobel prize-winning economist Thomas Schelling, often forget that they keep forgetting. That’s especially true when it comes to the intractable challenges posed by global debt.

Since 2008, governments around the world have looked for relatively painless ways to lower high debt levels, a central cause of the last crisis. Cutting interest rates to zero or below made borrowing easier to service. Quantitative easing and central bank support made it easier to buy debt. Engineered increases in asset prices raised collateral values, reducing pressure on distressed borrowers and banks.

All these policies, however, avoided the need to deleverage. In fact, they actually increased borrowing, especially demand for risky debt, as income-starved investors looked farther and farther afield for returns. Since 2007, global debt has increased from $167 trillion ($113 trillion excluding financial institutions) to $247 trillion ($187 trillion excluding financial institutions). Total debt levels are 320 percent of global GDP, an increase of around 40 percent over the last decade.

All forms of borrowing have increased — household, corporate and government. Public debt had to grow dramatically to finance rescue efforts after the Great Recession. U.S. government debt is approaching $22 trillion, up from around $9 trillion a decade ago — an increase of 40 percent of GDP. Emerging market debt has grown as well. China’s non-financial debt has increased from $2 trillion in 2000 (120 percent of GDP) to $7 trillion in 2007 (160 percent of GDP) to around $40 trillion today (250 percent of GDP).

U.S. non-financial corporate borrowing as a share of GDP has surpassed 2007 levels and is nearing a post-World War Two high. Meanwhile, the quality of that debt has declined. BBB-rated bonds (the lowest investment-grade category) now account for half of all investment-grade debt in the U.S. and Europe, up from 35 percent and 19 percent, respectively, a decade ago. Outstanding of CCC-rated debt (one step above default) is currently 65 percent above 2007 levels. Leveraged debt outstanding (which includes high-yield bonds and leveraged loans) stands at around $3 trillion, double the 2007 level.

Today, the world doesn’t have many options left. In theory, borrowers could divert income to pay off debt. That’s easier said than done, given that very little of the debt assumed over the last decade was put to productive uses. As wages stagnated, households borrowed to finance consumption. Companies borrowed to finance share buybacks and acquisitions. Governments borrowed to finance current expenditure, rather than infrastructure and other strategic investments.

A sharp deleveraging now would risk a recession, making repayment even more difficult. Shrinking the pile of public debt, for example, would require governments to raise taxes and cut spending, which would put a damper on economic activity.

In theory, strong growth and high inflation should reduce debt levels. Growth would boost incomes and the debt-servicing capacity of borrowers. It would reduce debt-to-GDP ratios by increasing the denominator. Where real rates are negative (with nominal rates below the level of price increases), inflation would reduce effective debt levels.

Since 2007, however, attempts to increase growth and inflation have had only modest success. Monetary and fiscal measures, however radical, have their limits. They can minimize the effects of an economic dislocation but can also damage long-term growth prospects. Since the 1990s, too, much economic activity has been debt-driven. Credit intensity is rising: It now requires increasingly higher levels of debt to generate the same level of growth. Efforts to reduce that debt risk an economic contraction, rather than a boom.

Finally, where debt is denominated in a national currency but held by foreigners, countries could slash that debt by devaluing their currencies. The problem is that everyone knows this: Since 2007, a multitude of nations have sought to engineer cheaper currencies in order to boost their competitive position and devalue their liabilities. That’s produced a stalemate, constraining this option.

The only other way to reduce debt levels is by default. This can either be done explicitly — through bankruptcy or write-offs — or implicitly, using negative nominal interest rates to reduce the face value of the debt. Default is almost certainly the likeliest long-term option.

In a default, debt investors as well as banks and depositors suffer losses of savings and income. Financial institutions and pension funds may become insolvent. Retirement income and public services that are paid for by household taxes and contributions won’t be delivered. In turn, this will reduce consumption, investment and the availability of credit. Depending on the size of the write-offs required, the economic and social losses could be considerable.

In 2007, policymakers passed up the opportunity to devise a slow, controlled correction because it would have necessitated defaults and creditor losses. That might at least have allowed an equitable sharing of losses, with the most vulnerable protected. Instead, leaders arrogantly gambled that their policy toolbox would make their debt problems disappear. The breathing space they purchased was wasted. Sovereign states used interest rate savings to finance increased expenditures rather than debt reduction.

Now time is working against them. Previous restructurings show that early default helps cauterize the wound, minimize loss and facilitate recovery. The longer the delay, the higher the cost and bigger the adjustment necessary. Not wanting defaults on their watch, policymakers have been less than honest, including with themselves, about the options to deal with unsustainable debt. They’ve effectively transferred the costs to the next generation. One way or another, though, those costs will have to be paid.

(P-S) From Yellow Vests to the Green New Deal – Joseph Stiglitz

(P-S)

The grassroots movement behind the Green New Deal offers a ray of hope to the badly battered establishment: they should embrace it, flesh it out, and make it part of the progressive agenda. We need something positive to save us from the ugly wave of populism, nativism, and proto-fascism that is sweeping the world.

NEW YORK – It’s old news that large segments of society have become deeply unhappy with what they see as “the establishment,” especially the political class. The “Yellow Vest” protests in France, triggered by President Emmanuel Macron’s move to hike fuel taxes in the name of combating climate change, are but the latest example of the scale of this alienation.

There are good reasons for today’s disgruntlement: four decades of promises by political leaders of both the center left and center right, espousing the neoliberal faith that globalization, financialization, deregulation, privatization, and a host of related reforms would bring unprecedented prosperity, have gone unfulfilled. While a tiny elite seems to have done very well, large swaths of the population have fallen out of the middle class and plunged into a new world of vulnerability and insecurity. Even leaders in countries with low but increasing inequality have felt their public’s wrath.1

By the numbers, France looks better than most, but it is perceptions, not numbers, that matter; even in France, which avoided some of the extremism of the Reagan-Thatcher era, things are not going well for many. When taxes on the very wealthy are lowered, but raised for ordinary citizens to meet budgetary demands (whether from far-off Brussels or from well-off financiers), it should come as no surprise that some are angry. The Yellow Vests’ refrain speaks to their concerns: “The government talks about the end of the world. We are worried about the end of the month.”

There is, in short, a gross mistrust in governments and politicians, which means that asking for sacrifices today in exchange for the promise of a better life tomorrow won’t pass muster. And this is especially true of “trickle down” policies: tax cuts for the rich that eventually are supposed to benefit everyone else.

When I was at the World Bank, the first lesson in policy reform was that sequencing and pacing matter. The promise of the Green New Deal that is now being championed by progressives in the United States gets both of these elements right.

The Green New Deal is premised on three observations: First, there are unutilized and underutilized resources – especially human talent – that can be used effectively. Second, if there were more demand for those with low and medium skills, their wages and standards of living would rise. Third, a good environment is an essential part of human wellbeing, today and in the future.

If the challenges of climate change are not met today, huge burdens will be imposed on the next generation. It is just wrong for this generation to pass these costs on to the next. It is better to leave a legacy of financial debts, which our children can somehow manage, than to hand down a possibly unmanageable environmental disaster.

Almost 90 years ago, US President Franklin D. Roosevelt responded to the Great Depression with his New Deal, a bold package of reforms that touched almost every aspect of the American economy. But it is more than the symbolism of the New Deal that is being invoked now. It is its animating purpose: putting people back to work, in the way that FDR did for the US, with its crushing unemployment of the time. Back then, that meant investments in rural electrification, roads, and dams.1

Economists have debated how effective the New Deal was – its spending was probably too low and not sustained enough to generate the kind of recovery the economy needed. Nonetheless, it left a lasting legacy by transforming the country at a crucial time.

So, too, for a Green New Deal: It can provide public transportation, linking people with jobs, and retrofit the economy to meet the challenge of climate change. At the same time, these investments themselves will create jobs.

It has long been recognized that decarbonization, if done correctly, would be a great job creator, as the economy prepares itself for a world with renewable energy. Of course, some jobs– for example, those of the 53,000 coal miners in the US – will be lost, and programs are needed to retrain such workers for other jobs. But to return to the refrain: sequencing and pacing matter. It would have made more sense to begin with creating new jobs before the old jobs were destroyed, to ensure that the profits of the oil and coal companies were taxed, and the hidden subsidies they receive eliminated, before asking those who are barely getting by to pony up more.

The Green New Deal sends a positive message of what government can do, for this generation of citizens and the next. It can deliver today what those who are suffering today need most – good jobs. And it can deliver the protections from climate change that are needed for the future.

The Green New Deal will have to be broadened, and this is especially true in countries like the US, where many ordinary citizens lack access to good education, adequate health care, or decent housing.

The grassroots movement behind the Green New Deal offers a ray of hope to the badly battered establishment: they should embrace it, flesh it out, and make it part of the progressive agenda. We need something positive to save us from the ugly wave of populism, nativism, and proto-fascism that is sweeping the world.

Anchor Opinion (FT) Liberalism’s most brilliant enemy is back in vogue – Gideon Rachman

Anchor Opinion

Disgusting but not to be ignored in order to be prepared to fight it.

This revival of interest in the ideas of Carl Schmitt, “the crown jurist of the Third Reich”is certainly not a good omen in the strange World with no values we live in. 

As the Medieval Catholic formula for exorcism says,(recorded in a 1415 manuscript found in the Benedictine Metten Abbey in Bavaria), VADE RETRO SATANA!

(Go back, Satan or Step back, Satan)!

Nazis ?

Over my dead body!

Francisco (Abouaf) de Curiel Marques Pereira





(FT) Liberalism’s most brilliant enemy is back in vogue

Nazi jurist Carl Schmitt appeals to opponents of democracy and the rule of law
Gideon Rachman

https://www.ft.com/content/bc9c69fe-14da-11e9-a581-4ff78404524e

(P-S) Risks to the Global Economy in 2019 – Kenneth Rogoff

(P-S)

Over the course of this year and next, the biggest economic risks will emerge in those areas where investors think recent patterns are unlikely to change. They will include a growth recession in China, a rise in global long-term real interest rates, and a crescendo of populist economic policies.

CAMBRIDGE – As Mark Twain never said, “It ain’t what you don’t know that gets you into trouble. It’s what you think you know for sure that just ain’t so.” Over the course of this year and next, the biggest economic risks will emerge in those areas where investors think recent patterns are unlikely to change. They will include a growth recession in China, a rise in global long-term real interest rates, and a crescendo of populist economic policies that undermine the credibility of central bank independence, resulting in higher interest rates on “safe” advanced-country government bonds.1

A significant Chinese slowdown may already be unfolding. US President Donald Trump’s trade war has shaken confidence, but this is only a downward shove to an economy that was already slowing as it makes the transition from export- and investment-led growth to more sustainable domestic consumption-led growth. How much the Chinese economy will slow is an open question; but, given the inherent contradiction between an ever-more centralized Party-led political system and the need for a more decentralized consumer-led economic system, long-term growth could fall quite dramatically.1

Unfortunately, the option of avoiding the transition to consumer-led growth and continuing to promote exports and real-estate investment is not very attractive, either. China is already a dominant global exporter, and there is neither market space nor political tolerance to allow it to maintain its previous pace of export expansion. Bolstering growth through investment, particularly in residential real estate (which accounts for the lion’s share of Chinese construction output) – is also ever more challenging.1

Downward pressure on prices, especially outside Tier-1 cities, is making it increasingly difficult to induce families to invest an even larger share of their wealth into housing. Although China may be much better positioned than any Western economy to socialize losses that hit the banking sector, a sharp contraction in housing prices and construction could prove extremely painful to absorb.

Any significant growth recession in China would hit the rest of Asia hard, along with commodity-exporting developing and emerging economies. Nor would Europe – and especially Germany – be spared. Although the US is less dependent on China, the trauma to financial markets and politically sensitive exports would make a Chinese slowdown much more painful than US leaders seem to realize.1

A less likely but even more traumatic outside risk would materialize if, after many years of trend decline, global long-term real interest rates reversed course and rose significantly. I am not speaking merely of a significant over-tightening by the US Federal Reserve in 2019. This would be problematic, but it would mainly affect short-term real interest rates, and in principle could be reversed in time. The far more serious risk is a shock to very long-term real interest rates, which are lower than at any point during the modern era (except for the period of financial repression after World War II, when markets were much less developed than today).

While a sustained rise in the long-term real interest rate is a low-probability event, it is far from impossible. Although there are many explanations of the long-term trend decline, some factors could be temporary, and it is difficult to establish the magnitude of different possible effects empirically.

One factor that could cause global rates to rise, on the benign side, would be a spurt in productivity, for example if the so-called Fourth Industrial Revolution starts to affect growth much faster than is currently anticipated. This would of course be good overall for the global economy, but it might greatly strain lagging regions and groups. But upward pressure on global rates could stem from a less benign factor: a sharp trend decline in Asian growth (for example, from a long-term slowdown in China) that causes the region’s long-standing external surpluses to swing into deficits.

But perhaps the most likely cause of higher global real interest is the explosion of populism across much of the world. To the extent that populists can overturn the market-friendly economic policies of the past several decades, they may sow doubt in global markets about just how “safe” advanced-country debt really is. This could raise risk premia and interest rates, and if governments were slow to adjust, budget deficits would rise, markets would doubt governments even more, and events could spiral.

Most economists agree that today’s lower long-term interest rates allow advanced economies to sustain significantly more debt than they might otherwise. But the notion that additional debt is a free lunch is foolish. High debt levels make it more difficult for governments to respond aggressively to shocks. The inability to respond aggressively to a financial crisis, a cyber attack, a pandemic, or a trade war significantly heightens the risk of long-term stagnation, and is an important explanation of why most serious academic studies find that very high debt levels are associated with slower long-term growth.

If policymakers rely too much on debt (as opposed to higher taxation on the wealthy) in order to pursue progressive policies that redistribute income, it is easy to imagine markets coming to doubt that countries will grow their way out of very high debt levels. Investors’ skepticism could well push up interest rates to uncomfortable levels.1

Of course, there are many other risks to global growth, including ever-increasing political chaos in the United States, a messy Brexit, Italy’s shaky banks, and heightened geopolitical tensions.1

But these outside risks do not make the outlook for global growth necessarily grim. The baseline scenario for the US is still strong growth. Europe’s growth could be above trend as well, as it continues its long, slow recovery from the debt crisis at the beginning of the decade. And China’s economy has been proving doubters wrong for many years.

So 2019 could turn out to be another year of solid global growth. Unfortunately, it is likely to be a nerve-wracking one as well.

(ZH) The Richest People In The World Lost More Than $550 Billion In 2018

(ZH) Like the old saying goes: What goes up must come down. And just as the fortunes of the world’s wealthiest swelled during the post-crisis era as QE and ZIRP bolstered asset prices, now that trend has been thrown into reverse thanks to the turbulence in global markets during the second half of the year.

According to Bloomberg, even the world’s richest individuals failed to find respite from a global market meltdown that has rendered 2018 the “worst year for markets on record.”

DB

Bloomberg’s Billionaires Index showed that the 500 richest people in the world had a combined $4.7 trllion in wealth as of Friday’s close, some $511 billion less than they had at the beginning of the year. With one week left to trade this year, 2018 is set to become the second year since the list was created in 2012 that the world’s wealthiest have seen their wealth decline.

Coaster

At their peak, soaring markets drove the aggregate wealth of the world’s wealthiest above $5.6 trillion before the downturn began shortly after the Federal Reserve raised interest rates for the third time this year back in September.

“As of late, investor anxiety has run high,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management. “We do not expect a recession, but we are mindful of the downside risks to global growth.”

Even Amazon founder and CEO Jeff Bezos, who saw his fortune swell to $168 billion earlier this year, has watched it fall more than $50 billion from the highs as FANG stocks have lead the market lower.

Even Jeff Bezos, who recorded the biggest gain for 2018, wasn’t spared the volatility. His fortune peaked at $168 billion in September, a $69 billion gain. It later tumbled $53 billion – more than the market value of Delta Air Lines Inc. or Ford Motor Co. – to leave him with $115 billion at year-end.

But Bezos’ losses were mild compared with Mark Zuckerberg, whose net worth took the biggest hit among the world’s tech titans.

Zuck

The Amazon.com Inc. founder had a better year than Mark Zuckerberg, who recorded the biggest loss since January, dropping $23 billion as Facebook Inc. careened from crisis to crisis.Overall, the 173 U.S. billionaires on the list — the largest cohort — lost 5.9 percent from their fortunes to leave them with $1.9 trillion.

Billionaires in Asia lost a combined $144 billion…

Even Asia’s fabled wealth-creation machine stumbled as the region’s 128 billionaires lost a combined $144 billion in 2018. The three biggest losers in Asia all hailed from China, led by Wanda Group’s Wang Jianlin, whose fortune declined $11.1 billion.

Despite the turmoil, Asia continued to mint new members of the three-comma club. The Bloomberg index uncovered 39 new members from the region in 2018, although that status proved short-lived for some. About 40 percent had lost their 10-figure status as of Dec. 7.

…While billionaires in Europe also saw their fortunes decline.

From Zara founder Amancio Ortega to former Italian Prime Minister Silvio Berlusconi, most of Europe’s billionaires saw their fortunes fall. Germany’s Schaeffler family, the majority shareholders of car-parts maker Continental AG, lost the most as extra costs and tough business conditions in Europe and Asia hampered the company’s performance.

Georg Schaeffler and his mother Maria-Elisabeth Schaeffler-Thumann are $17 billion worse off than at the start of the year. That sum alone would place them among the world’s 100 richest people.

Mexico’s Carlos Slim, the majority shareholder of Latin America’s largest mobile-phone operator, also suffered big losses. Once the world’s richest person, Slim now ranks sixth with a $54 billion pile. 3G Capital co-founder Jorge Paulo Lemann saw his fortune drop the most among Latin American billionaires, losing $9.8 billion. But even with that fall, he remains Brazil’s richest person.

Russian fortunes on average fared better. The volatility caused by collapsing oil prices, a flare-up in tensions with Ukraine and tightening sanctions was partially offset by periodic gains. The combined net worth of the country’s 25 wealthiest people was down only slightly, ending at $255 billion, according to the ranking.

One outlier, though, was Russia, where billionaires fared better than elsewhere in the world (though only slightly).

Russian fortunes on average fared better. The volatility caused by collapsing oil prices, a flare-up in tensions with Ukraine and tightening sanctions was partially offset by periodic gains. The combined net worth of the country’s 25 wealthiest people was down only slightly, ending at $255 billion, according to the ranking.

Still, 16 of the 25 Russian billionaires on the Bloomberg index saw their net worth fall in 2018. Aluminum magnate Oleg Deripaska, who remains under U.S. sanctions, lost the most — $5.7 billion — and dropped out the Bloomberg ranking of the world’s top 500 richest people.

By contrast, energy moguls Leonid Mikhelson, Gennady Timchenko and Vagit Alekperov added a total of $9 billion. Timchenko, sanctioned in 2014, added 27 percent to his net worth as shares of gas producer Novatek rose 40 percent.

And if the co-CIO of the world’s largest hedge fund is right, the aggregate net worth of the world’s richest and most powerful individuas could be on track to worsen next year, which would, in our view, only ratchet up pressure on central banks to do whatever it takes to spare the global elite any more discomfort.

(Economist) The fastest growers and biggest shrinkers of 2019

(Economist) Economic forecasts for the coming year

Jan 2nd 2019

MARKETS ACT. They don’t stop to explain. But the rotten performance of stockmarkets last year, which has been maintained at the start of this one, can be traced in part to growing worry about the state of the world economy, and to its two biggest economies in particular.

According to the Economist Intelligence Unit (EIU), our sister company, America will grow by 2.3% this year. That is substantially down on an estimated growth rate of 2.9% for last year, as the Federal Reserve tightens monetary policy and as the effects of last year’s tax cuts ebb. China’s forecast growth rate is much higher, at 6.3%, but that is still down on its estimated 2018 performance—and plenty fear worse because of the trade war with America and China’s campaign to rein in debt.Get our daily newsletter

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Europe presents a gloomier picture still. Britain, which is due to leave the European Union in March, is forecast to grow by a tepid 1.5%; France faces less uncertainty but fares no better. Italy, a perennial economic disappointment, is tipped to notch up growth of just 0.4%. That makes it the seventh-worst performer in the EIU’s table of forecasts. Those below it are all forecast to contract in 2019, none more precipitously than Venezuela, which has been in freefall for years.

It’s not all doom and gloom. Some countries are projected to have bouncy years. India will again be the fastest-growing big economy, maintaining its estimated 2018 rate of 7.4%. A continuation of the China-US trade war would suit some places: Vietnam, which offers an alternative to China as a manufacturing location, is forecast to expand by 6.7%. But the economy that is expected to perform best in 2019—Syria, with forecast growth of 9.9%—is a sobering reminder that a high number can reflect the worst of starting-points.

(ZH) Angela Merkel: Nation States Must “Give Up Sovereignty” To New World Order

(ZH) SNation states must today be prepared to give up their sovereignty”, according to German Chancellor Angela Merkel, who told an audience in Berlin that sovereign nation states must not listen to the will of their citizens when it comes to questions of immigration, borders, or even sovereignty.

No this wasn’t something Adolf Hitler said many decades ago, this is what German Chancellor Angela Merkel told attendants at an event by the Konrad Adenauer Foundation in Berlin. Merkel has announced she won’t seek re-election in 2021 and it is clear she is attempting to push the globalist agenda to its disturbing conclusion before she stands down.

In an orderly fashion of course,” Merkel joked, attempting to lighten the mood. But Merkel has always had a tin ear for comedy and she soon launched into a dark speech condemning those in her own party who think Germany should have listened to the will of its citizens and refused to sign the controversial UN migration pact:

There were [politicians] who believed that they could decide when these agreements are no longer valid because they are representing The People”.

[But] the people are individuals who are living in a country, they are not a group who define themselves as the [German] people,” she stressed.

Merkel has previously accused critics of the UN Global Compact for Safe and Orderly Migration of not being patriotic, saying “That is not patriotism, because patriotism is when you include others in German interests and accept win-win situations”.

Her words echo recent comments by the deeply unpopular French President Emmanuel Macron who stated in a Remembrance Day speech that “patriotism is the exact opposite of nationalism [because] nationalism is treason.”

The French president’s words were deeply unpopular with the French population and his approval rating nosedived even further after the comments.

Macron, whose lack of leadership is proving unable to deal with growing protests in France, told the Bundestag that France and Germany should be at the center of the emerging New World Order.

The Franco-German couple [has]the obligation not to let the world slip into chaos and to guide it on the road to peace”.

Europe must be stronger… and win more sovereignty,” he went on to demand, just like Merkel, that EU member states surrender national sovereignty to Brussels over “foreign affairs, migration, and development” as well as giving “an increasing part of our budgets and even fiscal resources”.

(BBG) 2018: The Year of the Woeful World Leader

(BBG) Trump, May, Macron, Merkel. Italy, Spain, Sweden, Latvia. Even the dictators stumbled. So much bad governing, so little time. By Leonid Bershidsky26 de dezembro de 2018, 07:00 WET

Leonid Bershidsky is a Bloomberg Opinion columnist covering European politics and business. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.R

The dictionaries have decided on their 2018 words of the year. Oxford picked “toxic.” Merriam-Webster went for “justice.” Collins chose “single-use.” I’d zero in on “misgovernment.” Surely, 2018 saw a staggering number of countries woefully misruled by the worst crop of world leaders in recent memory.

The most egregious examples are in the news every day. U.S. President Donald Trump tops the chart as he runs out of straws to clutch in trying to convince Americans that his election has been good for them. The stock market bump of which he was so proud is disappearing. The fiscal deficit is the highest since 2012. Trade wars notwithstanding, the trade deficit is at a 10-year high.

The turnover on the presidential staff has reached catastrophic levels: 65 percent of Trump’s “A Team” had been replaced since his election as of Dec. 14, according to the Brookings Institution, and that doesn’t even include cabinet members (12 of the 24 officials in the cabinet have been replaced and now a 13th, Defense Secretary James Mattis, is leaving). Trump is having trouble filling once-coveted positions, and the officials he fired and those who have resigned are sometimes unconstrained in criticizing him — a situation that, were it to occur in a corporation, would have tanked its stock.

All this doesn’t even scratch the surface of what Trump has done. The damage he has wreaked on the U.S. role in the world is only beginning to manifest itself. Almost everywhere (with a few exceptions such as Israel and South Korea) favorable views of the U.S. are declining, and people are becoming convinced that the U.S. doesn’t care about other countries’ interests. Alliances are loosening and the multilateral world order is creaking.

QuicktakeQ&A: What a ‘No-Deal’ Brexit Means

Almost as obvious is the misgovernment of the U.K. Blind to the reality of disappearing economic growth, slowing business investment and a growing trade deficit, Prime Minister Theresa May’s government has persevered in trying to pull the country out of the European Union and in fantasizing about withdrawal terms that the EU rejected from the start. Destroyed by the EU’s dream team of super-competent negotiators, May’s bungling, ill-prepared representatives flailed about, resigned in exasperation and finally produced a deal nobody really wants — not even the EU, though it’s skewed heavily in its favor. With her support weak even within her own party and her negotiating options exhausted, May now is setting up the country for a no-deal Brexit scenario that would cause massive disruption to millions of lives — anything to avoid the only reasonable option, a new vote on EU membership for a U.K. public that found out this year it had been misled by Brexit campaigners who lied about the consequences of withdrawal.

Not Just an Anglo-Saxon Thing

QuicktakeQ&A: The Yellow Vest Protests

Even beyond these two most obvious examples of mismanagement and incompetence, things aren’t looking much better. Last year, Emmanuel Macron of France looked like the Western world’s great hope with his sweeping reform plans and a grand vision for a tighter-knit EU. He ends the year in retreat before what’s looking like the most effective Facebook-driven revolt in a Western nation to date, the Yellow Vest movement that started as a protest against a small increase in fuel taxes but grew into a violent anti-elite rebellion. Macron has undermined his reform ambitions by making concessions to the Yellow Vests worth up to 11 billion euros ($12.5 billion) a year, and his popularity hasn’t recovered, remaining at a dismal 27-percent approval in public opinion polls.  

Another potential leader of the west, German Chancellor Angela Merkel, spent most of the year hobbled by an open revolt within her party, the Christian Democratic Union, and its Bavarian sister party, the Christian Social Union. The conservative rebels paralyzed the government demanding tougher immigration policies and forcing Merkel into exhausting backroom battles that left her drained, sometimes even apathetic. The Union performed badly in two important state elections, and Merkel was forced to give up the party leadership. Though her chosen successor, Annegret Kramp-Karrenbauer, won the leadership election earlier this month, beating the more conservative Friedrich Merz, the split in the party hasn’t been healed and a lame-duck Merkel hasn’t acted as though the lifted burden of party politics has freed her up to be more assertive as chancellor. The best she’s been able to do is ensure stability, which looks to many Germans like stagnation at a time when the country is falling behind others in technology and underinvesting in areas such as education and infrastructure.

This was a year of chaos in other democracies, too.

The populist government in Italy drew up a fantasy budget that included a version of a universal basic income and fought with the EU over it (only to end up lowering its unrealistic projections) while the economy slid toward recession.

In Spain, Mariano Rajoy’s center-right government buckled under the weight of corruption scandals and the outgoing prime minister spent a whole day at a restaurant as Socialist rival Pedro Sanchez unseated him in a kind of parliamentary coup. Sanchez, however, isn’t doing too well, either: His government is beset by scandals, he faces a reprise of troublemaking by Catalonian separatists that made it almost impossible for Rajoy to focus on anything else. Now, for the first time in decades, a nationalist-populist party, Vox, is gaining popularity and has won representation in Andalusia’s regional parliament. 

Sweden and Latvia are entering the new year without governments following inconclusive elections and months of coalition negotiations. In Sweden, established parties are trying to exclude an increasingly powerful populist rival. In Latvia the establishment would like to engage the surging populists to get around a strong party that’s considered pro-Russian, but the results are the same: a political fracturing unprecedented in both countries’ history.

In Belgium, the government has just been toppled by a nationalist party campaigning against a non-binding United Nations migration pact that Belgium approved along with 163 other countries.

Weakening Strongmen

It hasn’t been a great year for strongmen and hybrid regimes, either.

Russian President Vladimir Putin was re-elected, but has since seen a dropin popularity following a highly unpopular retirement-age increase. Russia’s economy and Russians’ incomes are stagnating, and Putin’s been constrained overseas by a string of public failures by Russia’s aggressive military intelligence service and an inability to build a working relationship with the U.S.

India’s Narendra Modi goes into 2019 having lost elections in three states where his Bharatiya Janata Party was previously dominant. Modi’s hubris and the lasting effects of his policy mistakes, such as the disastrous “demonetization” of 2016 in which Modi took 86 percent of the country’s cash out of circulation, are partly responsible for his weakening hold on power. Urji Patel, the central bank governor, resigned earlier this month after Modi’s repeated attempts to weaken the bank’s independence and get control over its reserves. Though economic growth has been strong, it hasn’t been inclusive as Modi had promised; unemployment hit a two-year high in October. 

Turkey’s Recep Tayyip Erdogan consolidated his power with an election win, but he’s mismanaging Turkey’s economy. The Bloomberg consensus forecast sees the country plunging into recession starting this quarter. The lira is the world’s second-worst performing currency after the Argentine peso, having lost about 29 percent of its value against the U.S. dollar.

Saudi Arabian Crown Prince Mohammed bin Salman, once feted as a bold reformer, has seen his reputation destroyed by the October murder of Washington Post columnist Jamal Khashoggi inside the Saudi consulate in Istanbul. The brutal act has undermined international support for MBS, as the prince is known, and thrown a monkey wrench into his plans to reduce the Saudi economy’s oil dependence.

Saudi Arabia’s arch-rival, Iran, isn’t doing much better. Beset by domestic protests and hit again by U.S. sanctions from which European powers have been unable to protect it, the regime of Supreme Leader Ayatollah Ali Khamenei has had an awful year, even if it’s not teetering yet.

Viktor Orban in Hungary, whose Fidesz party won a supermajority in an election in April, appears to have overplayed his hand with a series of moves aimed at consolidating his power over courts and media, as well as a recent law that has the potential to force Hungarians into working overtime for pay that would be delayed for three years. He’s facing the most persistent protests of his rule and has been forced to resort to violenceagainst the protesters.

The current crew of error-prone rulers makes for a fractious world with a growing potential for conflict, armed and otherwise, domestic and international. The elites, both democratic and authoritarian, are weak, and they invite backlashes against their mismanagement. Protest movements and anti-establishment parties have sprung up and are strengthening everywhere; they have different goals but are all bolstered by social-network technology that amplifies anger and violence. 

Winners Lose Ground

Even the few notable exceptions to the misgovernment rule of 2018 don’t inspire much confidence.

Canadian Prime Minister Justin Trudeau has made no major errors, but his popularity is trending down ahead of next year’s election.

South African President Cyril Ramaphosa, who vowed to clean up the country after the disheartening corruption that plagued it under Jacob Zuma, couldn’t maintain “Ramaphoria” for long. Though he has restored investor confidence, his anti-corruption efforts haven’t yielded quick results and fears of a land expropriation campaign continue to hang over the country. 

Most intriguingly, Chinese President Xi Jinping, who has avoided major errors for years, may have made some in 2018. It’s unclear whether accepting Trump’s trade-war challenge was a good idea. For all its might, China is still a middle-income country that’s extremely dependent on trade. Xi’s battle against Trump may win him sympathy in Europe, but Europeans aren’t natural allies for China. Xi’s show of strength may be premature, and that will become clear in the next couple of years.

The shortage of competent, clear-headed, hubris-free leadership in today’s world may be a freak accident. But if it’s the new normal, living in this world will require new skills from ordinary people, too. Vigilance and easy mobility in case a country deteriorates intolerably are two of them; a capacity for constructive protest is a third. Bad leadership isn’t just something we read about on news sites. It could signal the deterioration of institutions, both global and domestic, that shape our lives.

O.P (MW) George Soros, a ‘standard bearer of liberal democracy,’ was just named ‘Person of the Year’ by the Financial Times

Merece!
Tenho uma admiração muito especial pelo George Shwartz, que é o nome original dele.
Mudou de nome para escapar dos nazis.
É um homem que está nos píncaros da minha consideração.
Não me ocorre mesmo, de momento, alguém vivo por quem tenha tanta consideração.
Os a seguir estão muito abaixo.
Contrariamente ao que dizem os homens nao nascem todos iguais…
Há uns que nascem muito mais dotados que os outros.
Disse.



(MW)

Founder and Chair, Soros Fund Management and the Open Society Foundations George Soros

‘I’m blamed for everything, including being the anti-Christ. I wish I didn’t have so many enemies, but I take it as an indication that I must be doing something right.’George Soros

That’s George Soros, a man “under siege from all sides” for his activism and liberal views, talking to the Financial Times, which just named the 88-year-old founder of the Open Society Foundation its “Person of the Year.”

The editorial board of the London-based publication explained that its annual pick “is usually a reflection of their achievements. In the case of Mr. Soros this year, his selection is also about the values he represents.”

Those liberal values, which fly in the face of the forces of nationalism and populism spreading around the world, have made Soros a target in Vladimir Putin’s Russia and Donald Trump’s America, the Financial Times wrote.

Read: Soros says “everything that could go wrong, has gone wrong”

Soros, perceived as some “master manipulator of global politics” is a favorite of conspiracy theorists, including Trump supporters and even the president himself, who’s peddled allegations Soros funded the caravan of central American migrants.

Trump also tweeted out this allegation regarding the protesters at Brett Kavanaugh’s confirmation hearing:

The very rude elevator screamers are paid professionals only looking to make Senators look bad. Don’t fall for it! Also, look at all of the professionally made identical signs. Paid for by Soros and others. These are not signs made in the basement from love! #Troublemakers— Donald J. Trump (@realDonaldTrump) October 5, 2018

“I’ve been painted as the devil,” says Soros, who was targeted with an explosive device sent to his home in October. “The fact that extremists are motivated by false conspiracy theories about me to kill hurts me tremendously.”

One Georgetown professor praised the selection:

The sheer volume of negative (largely false) criticism of Soros dulls us into a reflexive defense of his rights rather than his achievements.
But he deserves immense praise for consistently investing in freedom and against authoritarianism. Kudos @FT https://t.co/oP1BKYUsvf— Don Moynihan (@donmoyn) December 19, 2018

Before Soros emerged as a philanthropic force, he made a killing as an arbitrage trader who’d become one of the world’s most successful speculators. He’ll forever be known as the man who bet against the British poundGBPUSD, +0.5155%  in 1992, a position that netted him a profit of more than $1 billion.

“The way I came out ahead on the moneymaking is that I was as critical of my own decisions as I was of the system,” he told the FT. “I abandoned positions that didn’t work; I cleaned up on my wins and I was generally first in, first out.”

He’s doesn’t always get it right, of course. As one of the largest donors to Hillary Clinton’s campaign, he wrongly bet that the stock market would take a hit in the immediate wake of a Trump victory. Two years later, and Soros is still not a fan.

“[Trump] is his own worst enemy, a narcissist who wants the world to revolve around him and has succeeded beyond his wildest dreams,” he said.

(BBG) Xi’s Speech Gives No Hope for Stock Traders as Asia Markets Sink

(BBG) Xi Jinping’s speech marking the 40th anniversary of China’s reform era was one that Asia’s equity investors had their eyes on Tuesday. But his comments weren’t what they were hoping for.

No new initiatives for reform measures were mentioned, and it ended up being a speech about what the nation’s Communist Party had done so far. That was a disappointment for investors who were expecting to hear more about specific policies for further opening of China’s economy.

Japan’s Topix index closed at its lowest level since May 2017, sinking the most among the region’s shares. Chinese and Hong Kong equities fell, and in Southeast Asia, several benchmark indexes including those of Singapore and the Philippines plunged by more than 1.3 percent as the U.S. stock carnage seeped into Asian markets. The S&P 500 Index closed at its lowest in 14 months on Monday.

Expectations that Xi’s speech would give stocks a boost (or at least, prevent a sell-off) were thwarted, and since “nothing special” was announced, Asian shares are following the overnight sell-off in the U.S., said said Castor Pang, head of research at Core Pacific-Yamaichi International HK.

Francis Lun, chief executive officer of Geo Securities, agreed. Investors were disappointed by the speech as they had been expecting some comments on economic stimulus or the further opening-up of the Chinese economy, he said. “But he didn’t mention it. That’s why A shares dropped 1 percent and also dragged down Hong Kong stocks.”

Read more on Tuesday’s Chinese stock slump here

But compared with the U.S., where the equity benchmark slid more than 2 percent, the MSCI Asia Pacific Index’s 1 percent decline as of 4:39 p.m. in Hong Kong looked tame. And U.S. stock-index futures were still holding on to some gains Tuesday, despite S&P 500 contracts paring an advance of as much as 0.5 percent.

With nothing special announced in Xi’s speech, investors are pivoting back to the interest-rate decisions expected this week. First up, the Federal Open Market Committee holds its final two-day meeting of 2018 and the result will be announced Dec. 19. in Washington. Then come the Bank of Japan and Bank of England. There’s also the Central Economic Work Conference taking place this week that many will be keeping an eye on.

“This week could be a turning point for Asian equities, with the FOMC happening and investors focusing on how determined China is about rekindling its economy,” said Lee Kyoung-min, a Seoul-based senior analyst with Daishin Securities Co.

Stock-Market Summary

  • Japan’s Topix index down 2%; Nikkei 225 down 1.8%
  • Hong Kong’s Hang Seng Index down 1%; Hang Seng China Enterprises down 1.2%; Shanghai Composite down 0.8%
  • Taiwan’s Taiex index down 0.7%
  • South Korea’s Kospi index down 0.4%; Kospi 200 down 0.4%
  • Australia’s S&P/ASX 200 down 1.2%; New Zealand’s S&P/NZX 50 down 0.7%
  • India’s S&P BSE Sensex Index down 0.3%; NSE Nifty 50 down 0.3%
  • Singapore’s Straits Times Index down 1.9%; Malaysia’s KLCI down 0.2%; Philippine Stock Exchange down 1.3%; Jakarta Composite down 0.4%; Thailand’s SET down 1.1%; Vietnam’s VN Index down 0.7%