29/11/17: China vs U.S. – the WTO Fight

“The Trump administration has lambasted China’s bid for recognition as a market economy in the World Trade Organization, citing decades of legal precedent and what it sees as signs that China is moving in the opposite direction under Xi Jinping. The US move to oppose China’s longstanding efforts to be recognised as a market economy in the WTO came in a legal submission filed last week and due to be released publicly on Thursday in a case brought by Beijing against the EU.”
Here are background slides to the dispute from my recent lecture @MIIS :
First, what’s behind the WTO dispute: the fight between the U. S. and the EU against China and other emerging economies in core Bretton Woods institutions – the IMF and the World Bank

This post was published at True Economics on Thursday, November 30, 2017.

SOROS TRANSFERS $18 BILLION TO HIS OPEN SOCIETY FOUNDATIONS

Left-wing financier George Soros has transferred $18 billion to the Open Society Foundations, the network of non-profits Soros uses to advance his left-wing ideology both in the United States and around the world.
The massive transfer, which was first reported by the Wall Street Journal, is roughly equivalent to the gross domestic product (GDP) of Afghanistan, according to World Bank data. Grover Norquist, president of Americans for Tax Reform, suggested that the transfer is a way for the 87-year-old Soros to avoid the estate tax – also known as the death tax – which penalizes large inheritances.
Inside Philanthropy reported last year that Soros, who has said that he considers himself to be ‘some kind of god,’ began laying the groundwork for the foundation to continue his mission after he dies. (RELATED: Leaked Emails Show Clinton Campaign Coordinating With Soros Organization)

This post was published at The Daily Sheeple on OCTOBER 17, 2017.

Playing the Part in NAFTA Negotiations

As the fourth round of NAFTA negotiations comes to an end, the agreement’s survival has once again been brought into question. US President Donald Trump has threatened to strike a new deal with just Canada. Mexico downplayed the threat, saying it would walk away from negotiations if the new terms brought by the US put it at a disadvantage. For their part, the Canadians have been quiet, keeping their cards much closer to their chests.
All this commotion belies the fact that no NAFTA member is likely to walk away from the deal. The economic realities and commercial interests that led to its formation in the first place still incentivize cooperation, no matter how much any side postures.
Still, at first the glance, the United States appears to have the upper hand. It boasts the largest economy in the world and accounts for about a quarter of global gross domestic product. Exports account for only roughly 12% of its GDP, according to the Department of Commerce, so the US has the benefit of a strong consumer class to boost economic activity when international demand is low. Easy access to such a large and vibrant consumer market has enabled Mexico and Canada to build up their economies without having to trade much with each other. In Mexico, on the other hand, exports account for about 38% of GDP, and about 81% of those go straight to the United States. Exports account for 31% of Canada’s GDP, according to the World Bank, about 76% of which go to the US. Exports are simply more important to the Canadian and Mexican economies than they are to the US’s.

This post was published at Mauldin Economics on OCTOBER 16, 2017.

Fed Vice Chair, Stanley Fischer…Exit Stage Left: “This One’s Gonna Hurt”

This one is going to hurt. Stanley Fischer is one, if not, our favorite economist.
As Larry Summers points out in his recent piece in the Washington Post,
The Fed and the international monetary system will be weaker for his departure from official responsibility. It is the end of an era. – Larry Summers, September 7
Our friend, Terence Reilly, over at the Wall Street Blog sums it up best.
When the pressure is on we like to have what we term ‘adults’ in the room. The ‘adults’ are not only the smartest people in the room but they are people who know how and when to make a decision. Stanley Fischer is one of those ‘adults’. Dr Fischer, former professor at MIT, vice chairman of CitiGroup, and chief economist of the World Bank, and former Governor of the Bank of Israel, resigned his position as vice chair of the Federal Reserve. Fischer played the role of intelligent hawk who we felt comfortable leaving in charge of the store. As this critical time approaches of the Fed removing stimulus his absence alone makes us less confident in the ‘adults’ left in the room. In one of his last public speeches as part of the Federal Reserve Dr Fischer warned about historically high asset valuations.

This post was published at Zero Hedge on Sep 11, 2017.

Russia Eyes New Sources of Revenue Amid Low Oil Prices

Low global energy prices have been a strain on the finances of many oil producers, but they’ve hit Russia particularly hard. Oil and gas accounted for 43% of Russia’s government revenue in 2015 and this figure was expected to drop to 36% in 2016, according to the World Bank. But this declining percentage doesn’t mean the government has become less dependent on energy; it’s simply a reflection of low energy prices.
And with its financial resources dwindling, Russia’s ability to defend against both external and internal threats will be severely tested. After all, the country will be hard pressed to find the cash needed to fund its defense and social welfare programs with declining revenue from one of its most important industries. As a result, the government will have to find new ways to raise revenue.
One option is reforming the personal income tax system. President Vladimir Putin has given some indications that he’s considering changing the current flat income tax rate to a progressive system. Another proposal, which is now being reviewed by Alexei Kudrin, an economic adviser to the president, is to raise the personal income tax rate from 13% to 17%.

This post was published at Mauldin Economics on SEPTEMBER 11, 2017.

Bolivia’s President Declares “Total Independence” From World Bank And IMF

Via The American Herald Tribune,
Bolivia’s President Evo Morales has been highlighting his government’s independence from international money lending organizations and their detrimental impact the nation, the Telesur TV reported.
“A day like today in 1944 ended Bretton Woods Economic Conference (USA), in which the IMF and WB were established,” Morales tweeted. “These organizations dictated the economic fate of Bolivia and the world. Today we can say that we have total independence of them.”
Morales has said Bolivia’s past dependence on the agencies was so great that the International Monetary Fund had an office in government headquarters and even participated in their meetings.
Bolivia is now in the process of becoming a member of the Southern Common Market, Mercosur and Morales attended the group’s summit in Argentina last week.

This post was published at Zero Hedge on Jul 25, 2017.

The Elephant in the Room: Debt

It’s the elephant in the room; the guest no one wants to talk to – debt! Total global debt is estimated to be about $217 trillion and some believe it could be as high as $230 trillion. In 2008, when the global financial system almost collapsed global debt stood at roughly $142 trillion. The growth since then has been astounding. Instead of the world de-leveraging, the world has instead leveraged up. While global debt has been growing at about 5% annually, global nominal GDP has been averaging only about 3% annually (all measured in US$). World debt to GDP is estimated at about 325% (that is all debt – governments, corporations, individuals). In some countries such as the United Kingdom, it exceeds 600%. It has taken upwards of $4 in new debt to purchase $1 of GDP since the 2008 financial crisis. Many have studied and reported on the massive growth of debt including McKinsey & Company http://www.mickinsey.com, the International Monetary Fund (IMF) http://www.imf.org, and the World Bank http://www.worldbank.org.
So how did we get here? The 2008 financial crisis threatened to bring down the entire global financial structure. The authorities (central banks) responded in probably the only way they could. They effectively bailed out the system by lowering interest rates to zero (or lower), flooding the system with money, and bailing out the financial system (with taxpayers’ money).
It was during this period that saw the monetary base in the US and the Federal Reserve’s balance sheet explode from $800 billion to over $4 trillion in a matter of a few years. They flooded the system with money through a process known as quantitative easing (QE). All central banks especially the Fed, the BOJ and the ECB and the Treasuries of the respective countries did the same. It was the biggest bailout in history. As an example, the US national debt exploded from $10.4 trillion in 2008 to $19.9 trillion today. It wasn’t just the US though as the entire world went on a debt binge, thanks primarily to low interest rates that persist today.

This post was published at GoldSeek on Friday, 21 July 2017.

Romania hit by $4.4-billion damage claim over stalled gold mine project

A Toronto-listed mining company is claiming $4.4 billion in damages from Romania at the World Bank’s arbitration tribunal, accusing Bucharest of unfairly blocking its $2 billion project to create one of Europe’s biggest gold mines and expropriating its assets.
Gabriel Resources won a licence in 1999 to exploit the Rosia Montana gold and silver deposits in Transylvania, but was never granted the necessary permits. The company says it has complied with all necessary Romanian and European Union legal requirements.
Environmental groups and local campaign groups have fought a bitter battle against the mining plan, saying it would destroy a region of natural beauty and damage historic mine workings dating from Roman times. Some of the biggest street protests since the Communist era broke out in Romania in 2013 after the then socialist-liberal coalition sent a draft law to parliament giving the go-ahead to the project. An incoming socialist government in January this year asked UNESCO to grant world heritage status to Rosia Montana — which would end any chance of developing the mine.

This post was published at Financial Times

Leading The Multipolar Revolution: How Russia And China Are Creating A New World Order

The last thirty days have shown another kind of world that is engaging in cooperation, dialogue and diplomatic efforts to resolve important issues. The meeting of the members of the Belt and Road Initiative laid the foundations for a physical and electronic connectivity among Eurasian countries, making it the backbone of sustainable and renewable trade development based on mutual cooperation. A few weeks later, the Shanghai Cooperation Organization meeting in Astana outlined the necessary conditions for the success of the Chinese project, such as securing large areas of the Eurasian block and improving dialogue and trust among member states. The following AIIB (Asian Infrastructure Investment Bank) meeting in ROK will layout the economical necessities to finance and sustain the BRI projects.
The Shanghai Cooperation Organization (SCO) and the Chinese Belt and Road Initiative (BRI) have many common features, and in many ways seem complementary. The SCO is an organization that focuses heavily on economic, political and security issues in the region, while the BRI is a collection of infrastructure projects that incorporates three-fifths of the globe and is driven by Beijing’s economic might. In this context, the Eurasian block continues to develop the following initiatives to support both the BRI and SCO mega-projects. The Collective Security Treaty Organization (CTSO) is a Moscow-based organization focusing mainly on the fight against terrorism, while the Asian Infrastructure Investment Bank (AIIB) is a Beijing-based investment bank that is responsible for generating important funding for Beijing’s long-term initiatives along its maritime routes (ports and canals) and overland routes (road, bridges, railways, pipelines, industries, airports). The synergies between these initiatives find yet another point of convergence in the Eurasian Economic Union (EEU). Together, the SCO, BRI, CTSO, AIIB, and EEU provide a compelling indication of the direction in which humanity is headed, which is to say towards integration, cooperation and peaceful development through diplomacy.
On the other side we have the old world order made up of the IMF, the World Bank, the European Union, the UN, NATO, the WTO, with Washington being the ringmaster at the center of this vision of a world order. It is therefore not surprising that Washington should look askance at these Eurasian initiatives that threaten to deny its central and commanding role in the global order in favor of a greater say by Moscow, Beijing, New Delhi and even Tehran.

This post was published at Zero Hedge on Jun 21, 2017.

The end of the Anglo-American order?

There has always been a shared conceit at the heart of the special relationship between the United States and United Kingdom that global leadership is best expressed and exerted in English.
More boastful than the Brits, successive U.S. presidents have trumpeted the notion of American exceptionalism.
Prime ministers, in a more understated manner, have also come to believe in British exceptionalism, the idea that Westminster is the mother parliament, and that the U.K. has a governing model and liberal values that set the global standard for others to follow, not least its former colonies.
In the post-war Anglo-American order those ideas came together. In many ways, it was the product of Anglo-American exceptionalist thinking: the “city upon a hill” meets “this sceptred isle”.
NATO, the IMF, the World Bank and the Five Eyes intelligence community all stemmed from the Atlantic Charter signed by Franklin Delano Roosevelt and Winston Churchill in August 1941.
The liberalised free trade system that flourished after the war is often called the Anglo-Saxon model. The post-world global architecture, diplomatic, mercantile and financial, was largely an English-speaking construct.

This post was published at BBC

The Definition of Hypocrisy

Oh really?
RIYADH, Saudi Arabia – The World Bank announced Sunday at an event with Ivanka Trump, the U. S. president’s daughter and senior White House adviser, that Saudi Arabia and United Arab Emirates have pledged a combined $100 million to a fund that will assist women entrepreneurs and small business owners.
Oh do come on.
The social media fawning over Trump’s (and Ivanka’s) involvement in this is nauseating. And no, it has nothing to do with any parallel to the Clinton Foundation (there isn’t one) either.
It has to do with this, which the WSJ did note:

This post was published at Market-Ticker on 2017-05-22.

Scandal At China’s Grand Silk Road Summit As India Skips, Warns Of “Unsustainable Debt”

It was supposed to be China’s day of celebrating massive infrastructure spending for the sake of spending (read ghost towns, only now outside China’s borders) as Xi Jinping pledged $124 billion on Sunday for his new Silk Road plan to forge “a path of peace, inclusiveness and free trade” while calling for the abandonment of old models based on rivalry and diplomatic power games. However, it did not go quite as smoothly as expected.
A celebration years in the making, Xi hosted dozens of world leaders – including a piano-playing Vladimir Putin – on Sunday for the country’s biggest diplomatic showcase of the year, touting his vision of a new “Silk Road” that opens trade routes across the globe. Xi used the summit to “bolster China’s global leadership ambitions” as U. S. President Donald Trump promotes “America First” and questions existing global free trade deals.
In total, leaders from 29 countries attended the forum, including some of China’s close allies and partners such as Russian President Vladimir Putin, Cambodian Prime Minister Hun Sen, Kazakh President Nursultan Nazarbayev, Turkey’s quasi-dictator Tayyip Erdogan, as well as the heads of the United Nations, and the CapEx leeches from the IMF and World Bank.

This post was published at Zero Hedge on May 14, 2017.

World Bank Maintains Oil Price Forecast At $55

In its latest Commodity Markets Outlook, the World Bank maintained its Q1 forecast for oil prices at $55 a barrel, saying, however, that overall energy prices will increase 26 percent in 2017.
The WB is overall optimistic for oil, expecting supply to tighten in the current quarter as OPEC and non-OPEC production cuts start to affect global supply. In that, the institution differs from some energy analysts who are markedly bearish on oil prices.
Listen to Jim Bianco on Global Market Rally, Oil, Rates, and More
Based on this optimism, the World Bank expects crude prices to reach $60 a barrel next year – the price level that Middle Eastern producers would like to see sooner rather than later. Oil is unlikely to go much higher than this, however, the WB argues, shale output increases will limit the upward potential of prices.
If shale production rises faster than the bank expects, this would put additional pressure on prices and would slow down the rebalancing of the market. It would also lower compliance with the OPEC deal, which is also a possibility as the current reductions in output are taxing for many producers’ budgets, and an extension could motivate some of them to cheat.

This post was published at FinancialSense on 04/28/2017.

IMF Drops Pledge To “Resist All Forms Of Protectionism”

One month after a startling reversion by the G-20 finance ministers and central bankers, who during their latest meeting in Baden-Baden dropped a decade-long tradition of rejecting protectionism and endorsing free trade, pressured by Trump’s delegate Steven Mnuchin, the IMF has done the same, and according to a communique from the IMF’s steering committee released on Saturday in Washington echoed the G-20 reversal, and said that officials ‘are working to strengthen the contribution of trade to our economies” while omitting a call from its last statement in October to ‘resist all forms of protectionism.”
The International Monetary and Financial Committee – which is the IMF’s top advisory panel, composed of 24 ministers and central bankers from nations including the U. S., China, Germany, Japan and France – released the statement during the spring meetings of the IMF and World Bank. Since joint statements at gatherings such as the G-20 and the IMF require assent from members, the change in the U. S. position on trade from the Obama administration is forcng modifications in language that was previously uncontroversial.
While the trade language was drastically changed, some positions remained the same: the IMFC statement reiterated pledges from October to ‘refrain from competitive devaluations’ of currencies and to avoid targeting ‘our exchange rates for competitive purposes.’
There were other changes: in addition to the trade stance, the latest communique omits language from October that welcomed ‘the entry into force of the Paris Agreement on climate change.’ Trump is contemplating whether to make good on his campaign promise to withdraw from the deal, as Bloomberg notes.

The shift in the trade “plege” was due to the Trump administration’s persistent threats to raise tariffs if US trading partners don’t agree to renegotiate trade agreements and create fairer conditions for U. S. goods; in the past week Trump fired the first shot in what may be upcoming trade wars when he signed an executive order looking into curbing steel imports under the guise of “national security” concerns.

This post was published at Zero Hedge on Apr 22, 2017.

Key Events In The Coming Week: French Election, Earnings, Manufacturing, Housing

This week will be dominated by the first round of the French presidential election on Sunday. With the number of undecided voters remaining high, four candidates look set to fight for the two places in the second round on 7 May. On the data side, following China’s strong economic report, attention will focus on US industrial production growth on Tuesday. In the euro area, flash PMIs for April due on Friday could point to moderation. In the UK, retail sales (Friday) should have dropped in March as rising inflation eats into real income growth. On Friday, the World Bank and IMF Spring meetings also start.
In addition, there are a few scheduled speaking engagements by Fed officials this week, including a speech by Vice Chair Stanley Fischer on Monday.
Focusing on the US, after lacklustre readings in January and February, industrial production data in March may finally have exhibited the kind of strength seen in the ISM factory index. Output readings early this year were held down by sharp declines in utilities output, which reflected unseasonably warm weather, but utilities output looks set to have jumped noticeably, which should help to drive the headline figure higher. Meanwhile, existing home sales may have climbed in March, although the expected gain was likely due in part to the unusually warm temperatures in February, which boosted demand in that month and may have propelling contract closings higher last month.
The key this week will be in France on Sunday where the first round of the French Presidential election takes place. Official exit polls are due at 8PM CET. The 11 candidates are then whittled down to two, with the second round runoff held two weeks later on 7 May. On the data front, it looks to be a quiet week. We expect softer numbers in Friday’s flash PMI release while consumer confidence should also moderate.

This post was published at Zero Hedge on Apr 17, 2017.

A Global Eurodollar Shortage

The World Bank just released a telling report entitled “Trade Developments in 2016: Policy Uncertainty Weighs on World Trade“. Though they deflect the problems in global trade to areas such as excessive regulatory initiatives and policy uncertainty (which is true), what is to be found buried in the appendix are the two un-annotated charts below. I suspect the World Bank didn’t compare them directly (they are shown separately) because it would cast a spotlight on an even larger political ‘football’.
How does global trade ship ~10% more trade volume but receive ~12% less revenue over a 5 year period? The answer has traditionally been significant improvements in productivity. However, the productivity numbers by country don’t even come close to supporting such a premise.
We believe the actual answer is that a strong US dollar is choking global profits and wealth creation because of a dollar shortage and a lack of real global economic growth! It went “critical” when ‘TAPER’ ended. You can see this inflection point in an endless array of economic charts.

This post was published at GoldSeek on 27 February 2017.

This is Why World Trade is the Weakest Since 2009

Despite what you may think, it’s not due to protectionism.
World Trade has been on our worry-list for a while, most recently in December [World Trade Falls to 2014 Level, just in Time for a ‘Trade War’]. Why has world trade refused to boom recently? And it wasn’t just last year. But last year was particularly crummy. Lackluster global demand gets blamed. But that’s using a broad brush to sketch a troublesome development.
Now the alarmed World Bank, in its report, Trade Developments in 2016 (PDF), barely blames the usual suspects for this lackluster global demand, but identifies a new and dominant one: ‘policy uncertainty.’
It points out that 2016 was the fifth year in a row of ‘sluggish trade growth.’ 2015 had already been the weakest year since 2009, when global trade collapsed as a result of the Financial Crisis. But 2016 was even worse than 2015.
World trade is devilishly hard to quantify, and so the estimates for 2016 vary:

This post was published at Wolf Street by Wolf Richter ‘ Feb 21, 2017.

When the Money Supply Dries Up — Jeff Thomas

In 1944, the U.S. had been the primary supplier for arms for the allies during World War II and, as such, exited the war with more wealth than any of the other nations that had entered the war earlier, draining their treasuries of money. Since payment was largely demanded in gold, the US held three-quarters of the world’s gold and therefore was in a position to call the shots with regard to the free world’s economic future.
At Bretton Woods, the U.S. took advantage of this situation, setting up the World Bank and the IMF and declaring the dollar to be the default currency for all countries concerned. From that point on, the US was in the catbird seat, able to dictate economic terms to other countries and even to behave irresponsibly, eventually creating previously unheard-of levels of debt, thereby inspiring other nations to do their best to create their own debt in order to keep pace as best they could.
Eventually, of course, such irresponsible economics will cause any country, no matter how powerful, to collapse economically, no matter how many Keynesian economists such as Thomas Piketty, Paul Krugman, and Larry Summers declare otherwise.

This post was published at International Man

Jeffrey Christian on the Short and Long Term Future of Gold

Jeffrey Christian, managing partner of commodities market firm CPM group, predicts gold prices will remain mostly flat for the first half of 2017 but rise sharply in the second half based on increasing global uncertainties and other factors recently discussed on FS Insider.
Christian, a recognized expert on the precious metals markets and commodities in general, has advised many of the world’s largest corporations and institutional investors. In addition, he’s lent his insights to the World Bank, United Nations, International Monetary Fund and numerous governments.
When FS Insider spoke with Christian on December 17, 2015 – the very day gold made a major bottom – he accurately predicted a revival in 2016 and drew special attention to a possible ‘boomerang effect’ as record short positions flip long, which is exactly what took place in the weeks and months following his interview. This time, he gave us some insight into how the election of Donald Trump and looming geopolitical events will impact gold prices in 2017, which you can hear below in the following clip:

This post was published at FinancialSense on 01/25/2017.