Wednesday, August 29, 2018

Skip the Hamptons and Spend a Weekend in Watch Hill, Rhode Island This Summer - Vogue

Sunday, August 26, 2018

Revolutionary Future Ahead | Mauldin Economics

Revolutionary Future Ahead | Mauldin Economics

...I explained last week in The Good News Economy how the current recovery should continue for a couple more years. Beyond that lies the Great Reset, featuring the “major economic pain” part. But beyond that is something much better… a time unprecedented in human history, when life will improve in ways we can barely imagine right now.

...No one on Earth had a smartphone until 2007. That first iPhone, revolutionary at the time, was primitive compared to even today’s low-end models.

...In the next decade, we’ll see multiple inventions bring similar and, I believe, even greater changes. The details won’t be immediately obvious, but the changes will come. By 2030, they will be as ho-hum to us as smartphones are today.

.... Intangible software and information can spread at lightspeed, while 3-D printing will let manufacturing capacity grow faster and more widely than we’ve ever seen before.

In sum, the kind of change, magnitude of change, and rate of change will all likely speed up considerably in the coming years. It will be a roller-coaster ride. Now let’s look at some of the twists and turns it will bring us.

...The Mathematical Reason for Accelerated Change

Back in the late 1700s, maybe a dozen people understood the steam engine,... a steam engine that could do the work of four horses pumping water out of a coal mine.

... Google and Facebook are in a race to make wireless internet available to every part of the earth. ...By the middle of the next decade, Wi-Fi will be essentially free or at negligible cost.

...Turning Back the Clock

Demographic challenges lie behind many of our economic problems, and the #1 demographic challenge is aging. ...This is going to change for the better. I don’t mean simply longer lifespans, ... Much better to have a long, healthy life, and then decline quickly when it naturally ends.

That is exactly where biotechnology is taking us. ... treatments that can not only slow the aging process to a crawl, but in some quite profound ways, actually reverse it. We already see it in animal studies. Elderly mice exposed to these new treatments regrow their hair, gain muscle mass, see and hear better, and even regain their sexual vigor.

...Then there is the astonishing progress being made against our most challenging medical foes: cancer, heart disease, diabetes, and assorted other killers. Big data and AI systems are quickly decoding the genetics behind some of them, leading to better detection and treatment. I truly believe we will have eliminated most cancers by 2030, or at least turned them into minor, easily treated conditions.

...I’m invested in a company that is in phase 2 of a “silver bullet” cancer cure. If we are successful, and it is still if, the treatment will not require hospitalization and seems to have minimal side effects. I now think the biggest risk to my investment is not that our drug does not work, but that other drugs will be cheaper, better, and faster.)

... New Space Race

At the end of last week’s letter, I mentioned the billionaires’ space race. Paul Allen, Jeff Bezos, Richard Branson, and Elon Musk all want to send satellites and/or people into orbit and eventually beyond. Unlike the 1960’s US-Soviet space race, this one has unashamedly commercial motives.

These men are so wealthy, in part because they can recognize opportunities and what it takes to seize them. Reaching space at a reasonable cost is the first step, so that’s the first order of business. … and competition between them will probably work better and faster than waiting for the government to do it.

...The first goal is to put more satellites in orbit. We forget that our smartphone location features depend on the satellite-based Global Positioning System. And of course, satellites take the pictures you see on your phone’s mapping app. All that works well, but more satellites will make it even better.

Financial Revolution

Finally—and you wouldn’t know this from all the tariff talk—capital is flowing around the world like never before. Investors who once thought they should stick “close to home” have branched out internationally. They do this in part because technology makes it possible to monitor assets you own, even on the other side of the world. This is good because it means capital will flow more easily to the entrepreneurs with the best ideas, wherever they may be geographically. Ultimately, that’s good for everyone.

From a human perspective, it really doesn’t make any difference where an invention comes from, as long as it improves our lives. 35% of artificial intelligence research funding will come from China in the next three years. PricewaterhouseCoopers recently projected AI’s deployment will add $15.7 trillion to global GDP by 2030, with China taking home $7 trillion of that total, dwarfing North America’s $3.7 trillion share.

You think engineers and scientists in India are going to sit back? Or Thailand? No. Ricardo was right, different countries will specialize in their strengths. Yes, we would all like our home team to be the one that benefits the most, but the reality is the world is going to benefit, and we are all part of the world.

Friday, August 24, 2018

Today's WorldView: Trump’s racist coda to a terrible week - btbirkett@gmail.com - Gmail

Today's WorldView: Trump’s racist coda to a terrible week - btbirkett@gmail.com - Gmail

Ireland has set up several systems to compensate abuse victims, but it falls short of what some politicians and activists feel is enough. Meanwhile, most primary schools there are still affiliated with the church.

Aug. 24, 2018

A daily newsletter that explores where the world meets Washington. Not on the list? Sign up here.

Edited by Max J. Rosenthal and Ruby Mellen

BY ISHAAN THAROOR

Friday, August 17, 2018

How Venezuela's Maduro Threatens Latin America | Americas Quarterly

How Venezuela's Maduro Threatens Latin America | Americas Quarterly

...Many of those who escape suffer from illnesses that have long since disappeared in the receiving countries, like malaria and diphtheria, and they run the risk of creating a massive contagion. There are now cases in Brazil of people newly contracting illnesses, such as measles, that were previously eradicated. In addition, the costs of investment in infrastructure, education, nutrition and health are very high, and can alter the budget of some receiving countries. There are also political refugees, like myself; I was forced to emigrate to the United States in August of 2017, after Maduro’s regime removed me from my position as mayor of El Hatillo, Caracas, and ordered my arrest.

But the biggest threat to the region comes from the promotion and protection of illicit activities – including the traffic of drugs, minerals, gasoline and even people – on the part of the Venezuelan government. Maduro’s regime not only conducts the world’s largest legal trade, which is gasoline, but also finances the world’s largest illegal trade: cocaine. Every day planes fly through Venezuelan airspace carrying Colombian cocaine to destinations in Central America and the Caribbean. The nephews of Venezuela’s first family are prisoners in the United States after having been detained in Haiti with drug cargo. The ex-vice president and current minister of industry, Tareck El Aissami, and the current president of the National Constituent Assembly, Diosdado Cabello, have been sanctioned by the United States and the European Union for basically being real-life protagonists of the series “Narcos.”

Wednesday, August 15, 2018

Genoa bridge collapse: investigation begin as crews work to rescue victims - CNN

Genoa bridge collapse: investigation begin as crews work to rescue victims - CNN

...Anil Agrawal, professor of civil engineering at the City College of New York, told CNN that if there is corrosion in the concrete, water can cause a void, further corroding the cables. And if there's no easy way to inspect them, "it's a high-risk system," Agrawal said. "If you lose any cable you have a catastrophe in the making."

That catastrophe was one that some Italian engineers had been warning about for years.

Antonio Brencich, engineer and associate professor of reinforced concrete constructions at the University of Genoa, expressed concern back in 2016.

"It was affected by serious corrosion problems related to the technology that Morandi himself had patented, which he had not used anymore, and which proved to be disastrous," Brencich told Italian daily La Repubblica.

...Agrawal said that if the maintenance operation was something to do with any of the cables, it would have been a sufficient risk to have prompted many agencies in the US to close it during renovation.

Monday, August 13, 2018

The Maine Surprise Was Time | Mauldin Economics

The Maine Surprise Was Time | Mauldin Economics

...China does seem to be working harder at protecting intellectual property, and something like $15 billion a year (if I remember reading correctly) is now coming our way as part of royalties and other patent rights. ...

How serious is Turkey's lira crisis and what are the implications? | World news | The Guardian

How serious is Turkey's lira crisis and what are the implications?

The options as the country’s economic growth displays the classic signs of overheating

Larry Elliott Economics editor

A big danger is that Turkey’s crisis will spill over into other emerging market economies. Photograph: Chris McGrath/Getty Images

How serious is Turkey’s crisis?

Bad and getting worse by the day. Over the past five years, Turkey’s growth has been virtually keeping pace with that of China and India but it is now displaying the classic signs of overheating: a large trade deficit, a construction boom and soaring debt. Financial markets have taken fright at inflation, rising at an annual rate of more than 15%, and have been selling the Turkish lira, which is down by 45% against the US dollar since the start of the year.

Two additional factors are exacerbating the crisis. Turkey’s president, Recep Tayyip Erdoğan, is opposed to raising interest rates to cool down the economy and support the currency and has used his recent election victory to impose his unorthodox views on the country’s central bank. The lack of interest-rate action has coincided with a marked worsening of Turkey’s relations with the US. Turkey’s decision to hold an American pastor, Andrew Brunson, under house arrest on disputed terrorism charges, has prompted Donald Trump to impose sanctions and double tariffs on imports of Turkish steel and aluminium.

What are the implications for the global economy?

The direct impact of what looks like an inevitable recession in Turkey would be relatively small because, despite a population of 80 million and strong growth in recent years, the country accounts for only 1% of global GDP. Eurozone countries run a trade surplus with Turkey but it is small. In the two previous Turkish financial crises since the turn of the millennium, European exporters have been able to divert their business to other markets. The European Central Bank has expressed concern about potential contagion through the eurozone banking system, with Spain, followed by Italy, the most heavily exposed countries.

A bigger danger is that Turkey’s crisis will spill over into other emerging market economies and there were signs on Monday that other countries seen as vulnerable were coming under speculative attack. Turkey’s problems are particularly acute because it has more than $300bn of dollar-denominated corporate debt, which is getting more expensive to finance by the day. However, other countries – such as Mexico and South Africa - also took advantage of low US interest rates in the years after the financial crisis to borrow heavily in dollars and saw their currencies coming under pressure. The fear is of a full-blown emerging market crisis.

What are the geopolitical implications?

Since the second world war, Turkey has gravitated to the west. It has been a member of Nato since 1952; in 1987 it applied to join what later became the European Union and prided itself in being a secular democratic state. But there has been a marked shift under Erdoğan. Accession talks with the EU have been suspended in response to alleged human rights and rule of law abuses; Washington has said Ankara’s decision to buy Russian S-400 missiles was incompatible with Nato’s defence systems; and Erdoğan has supported the Islamisation of Turkey.

The Turkish president’s standoff with Trump has fuelled concerns of a foreign policy shift that would result in Turkey leaving Nato, forging stronger political links with Russia, China and Iran, and allowing the three million Syrian refugees living in Turkey to leave for the EU. But none of these long-term decisions will resolve Turkey’s immediate problems.

So what can the Turkish government do?

For the time being, the government’s response has been to talk tough but to do very little. Erdoğan has accused the US of stabbing Turkey in the back, the government has announced a crackdown on those on social media spreading fake news about the crisis and the central bank has eased financing requirements for Turkish banks.

None of this looks remotely sufficient to deal with the scale of the crisis, particularly given the paucity of Turkey’s foreign currency and gold reserves – which are often used by central banks to fight off currency speculators. Erdoğan has insisted that Turkey remains committed to the principles of an open market economy but one option for the government is to try capital controls as a way of taking pressure off the lira. This might provide a breathing space but probably only a temporary one, given that Turkey is an open economy and has large foreign currency needs.

What happens next?

The history of previous emerging market crises suggests there is only one likely winner in the battle between Turkey and the currency speculators. In the current circumstances, only two things will halt the lira sell-off: a substantial rise in official interest rates (already above 17%) or the announcement of an emergency package of financial support from the International Monetary Fund – or, if things continue to deteriorate, both together. Freeing Brunson would also help. All this would be a grave embarrassment for Erdoğan, one of the world’s self-styled strongman leaders, but there are no easy options available. The issue is not whether Turkey is heading for recession, but just how deep the recession will be.

Since you’re here…

7 Things to Keep in Mind About Turkey - Bloomberg

The country is confronting some old problems and a host of news risks.

Mohamed A. El-Erian

August 13, 2018, 7:00 AM GMT+1

The bill is due. Photographer: Jasper Juinen/Getty Images

The weekend gave Turkey and the world's financial markets a much-needed breather after the country’s currency experienced a week of intense weakness and dizzying volatility But it also builds expectations among traders of a decisive policy initiative that, if it proves insufficiently impressive, could lead to even more market disorder and, with that, the potential for wider economic and financial dislocations.

There are seven main issues that traders, investors, governments and central banks should keep in mind.

No. 1. Beyond foreign exchange

Even though the focus these days is on how much the currency moves, Turkey’s predicament extends well beyond the foreign-exchange market. Currencies overshoot quite often, especially in emerging economies, and not just on the way down. Such violent moves are often neither the driver of the underlying turmoil nor the end result. They are best thought off as a highly visible indicator, and one that can also contain important forward-leading signals.

No. 2. Imbalances have been around for a while

By persistently stimulating its economy through credit and, more recently, the budget, Turkey has accumulated twin deficits –-- that is, imbalances in both its public-sector budget and in the current account of the balance of payments. Funded by external borrowing and capital inflows, these have helped boost investment and growth. But the incremental income generated has been insufficient to curb the debt burden.

No. 3. The external environment has turned less hospitable

Although financing needs remain considerable, Turkey is now facing a more challenging external environment. This will not change any time soon. As a result, inflows have become less abundant and more expensive.

When it comes to global liquidity, the world is in the midst of a transition away from a protracted period of loose financial conditions engineered by central banks. Some of the large monthly injections of cash resulting from central banks’ asset purchase programs have either stopped (as in the case of the Federal Reserve) or are tapering (European Central Bank). The short end of the U.S. yield curve has risen as the Fed has hiked rates several times, a policy path that it is unlikely to abandon any time soon with the continuing rise in inflation. And with policy, growth and rate differentials favoring the U.S., the likelihood of a further general strengthening of the dollar is considerable.

This has affected technically more fragile asset classes, especially emerging markets, which have experienced considerable capital outflows. Local- and foreign-currency denominated bonds and, therefore, currencies and risk spreads, have come under pressure.

This less accommodating external environment has been amplified for Turkey by its political spat with the U.S. With that came talk of a doubling of tariffs that the U.S. applies to imports of metals from Turkey. Reaching some political resolution has become an important step in the short-term to reduce some of the pressures on Turkey’s currency market.

No. 4. Investors have doubts about Turkey’s policy responses

The country’s situation is further complicated by concerns about economic management. Amid significant political pressure, confidence is low that the central bank is in a position to deliver decisive market-based measures to stabilize the currency. Worries about political interference have been amplified by the appointment of the President Recep Tayyip Erdogan’s son-in-law to a key economic coordination and oversight role in the cabinet.

No. 5. The country lacks credible external anchors

The conventional response for countries facing these or similar conditions is to look for one or more external anchors pending the strengthening of domestic policies. Usually, this entails a program with the International Monetary Fund that provides both financing and a seal of good housekeeping for domestic policies. That’s what Argentina did earlier this year to counter the disorder in its own currency markets. And Turkey’s case for IMF support would, in theory, be strengthened by concerns about possible contagion.

But Turkey appears hesitant to approach the IMF, and for understandable reasons. Especially with U.S. support far from guaranteed currently on the fund’s executive board, the Washington-based organization is likely to require significant policy adjustments by Ankara, including some U-turns away from many of President’s Erdogan’s key initiatives. There is another internal political dimension here. Bringing back the IMF could be seen as a return to the “bad old days” of the early 2000’s that, in fact, opened the way for the president and his ruling party.

Yet without the IMF, Turkey may be forced into an even bigger turn away from these initiatives. With or without the IMF, Turkey is likely to face a period of spending cuts, increased prices for public services, and higher taxes to reduce both internal and external deficits.

There aren’t many alternatives to the IMF. Other European governments and institutions aren’t likely to step up with anything that would materially alter Turkey’s funding needs. The same is true of most Gulf countries. China, while less burdened by political issues, is unlikely to engage quickly on the scale required. And the closer political ties with Russia, including a publicized call on Friday between Presidents Erdogan and Vladimir Putin, is unlikely to deliver much in terms of cash flow.

No. 6. Riding out the storm is an option, but not an attractive one

Turkey could just step back and allow the currency to find its floor on its own. The question is not whether this would eventually happen -- it would -- but at what cost to the economy.

Already the sharp currency depreciation experienced this year has fueled inflation, aggravated debt and currency mismatches, pressured local banks, undermined growth and worsened the prospects of many local businesses. Should this to continue, it will set the stage for recession and crippling inflation, together with higher bankruptcies and corporate debt defaults. The result will also be greater demands for the government to support local banks and protect the most vulnerable segments of the population.

No. 7. Growing chatter about capital and convertibility controls

It’s not a great surprise that there is now more talk domestically about the possibility of Turkey implementing capital controls to limit outflows and counter the dollarization of the economy. This increases the incentive for the private sector (both local and foreign) to accelerate its dis-engagement from the local currency. With that comes even greater financial and economic pressure.

The bottom line for Turkey is not a pleasant one. Due to the coincidence of domestic and external pressures, the authorities have limited room for maneuver when it comes to policy formulation and financing, especially if they decide to continue to go it alone. It is becoming less and less likely that the government will be able to avoid some combination of higher interest rates, budgetary austerity, recourse to IMF financing and some forms of capital controls. Indeed, the longer it waits to tighten policies domestically and engage with the IMF, the greater the risk that all of this will come about.

Investors should brace for more volatility for the Turkish lira and bond spreads, as well as more technical contagion for other emerging markets. The spillover for the advanced world -- particularly Europe -- would only become consequential if the sources of contagion were to spread.

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