Archive for month: April, 2016

India, Face Recognition and Part-Time Dutch

Some weeks the world can be especially disorienting. As we continue to reconcile ourselves to a world without Prince, a fall election featuring Donald Trump and a Seattle Mariners team in first place, we still find time to take a passage to India, wonder about Moore’s Law of Mad Scientists and ponder where the part-time help is located. It’s this week’s International Need to Know, providing a Sign o’ the Times in a purple world of international information.

Without further ado, here’s what you need to know.

An Economic Passage to India

India has many challenges going forward, including ongoing infrastructure deficits, large environmental challenges and a bureaucracy as skeletal and large as the Tyrannosaurus Rex in the lobby of the Natural History Museum. And yet India has been doing relatively well in recent years. So far in 2016 they have one of the world’s fastest GDP growth rates; last year they were also near the top with GDP growth of 7.6%. And, India is now, as you see in the chart below, the largest recipient of Greenfield investment in terms of total value.* China still has more projects but India pulled in more in value. India is a fascinating place to watch. Twenty years ago, even ten years ago, people would compare China and India and predict which would grow and develop faster. China won that race easily. China might be over investing in infrastructure, but India invested far too little. And, India’s famous bureaucrats have hamstrung growth there for decades. Prime Minister Modi is trying to break the bureaucracy. It’s an intimidating, entangling challenge, but if he can succeed, then India may win the next few decades in a different way from how China won the last two. Even as we continue to eye India’s economy, sometime soon we’ll delve deeper into India’s pollution and environmental challenges.


You Have Lost Control

America’s use of drones in Afghanistan have been controversial for a number of reasons. But that has not slowed down the use of them. In fact, last year marked the first time that more weapons were fired from drones than from traditional aircraft. And so far this year, “drone strikes account for 61% of attacks in Afghanistan.” The number was 5% in 2011, a mere five years ago. But we are not here to comment on military strategy, but to note that the world itself has indeed changed lots in the last 5 years. Countries do not have monopolies on advanced technology like they once did. Or at least the monopolies are short-lived nowadays. Five years ago, 11 countries were deploying drones. Today, at least 57 countries have and use drone technology. The spread and adoption of new technologies continues to accelerate.   Access to powerful technology is much more widespread. It reminds me of Moore’s Law of Mad Scientists: “The minimum IQ required to destroy the world drops by one point every 18 months.” Enjoy your afternoon!

Who is Working Part Time

The workforce is changing in recent years we’re told. There’s the so-called Gig economy full of Uber drivers, freelancers for hire and others. In addition, during and after the Great Recession data pointed to lots of underemployment. People who lost their jobs couldn’t find the same level of employment or in some cases had to rely on part-time work. In other cases, part-time work is just what people wanted. Which countries have the largest percentage of part-time workers? The Netherlands, by far, especially for women. Labor participation rates in the Netherlands are very different than in the E.U. as a whole, with 26.8% of Dutch men and 76.6% of Dutch women working less than 36 hours per week (which many in workaholic America would consider part time) as opposed to 8.7% of men and 32.2% of women in the E.U. as a whole working part-time. The full list is below for your pleasure and study when you’re not working full time.


Confusing China, Peak Oil (Usage), Where are the Cynics

Many years ago I was traveling to Melbourne, Australia for work and brought gifts for some of the people we would be meeting with. Unbeknownst to me, the gifts–glass art work made by local artists–contained plants pressed between the glass. Australia is very rigid about plants and animals coming into their isolated continent and my gifts were confiscated at the airport. I was a very unwise man bringing neither frankincense nor myrrh. So I had some sympathy and certainly nostalgia when viewing Johnny Depp and Amber Heard’s dog video released this week. But even tough-minded customs officials can’t stop us from discussing the always confusing China, presenting more evidence of peak oil usage and showing where in this great big world of ours the optimists can be found. It’s this week’s International Need to Know, your neither optimistic nor pessimistic but merely clear eyed if somewhat amused look at what’s important in the world.

Without further ado, here’s what you need to know.

The Ever Confusing China

Surprisingly*, last week China announced that GDP growth rates for the first quarter were right in line with expectations–an annualized 6.7% growth rate. Others pointed out this growth was built on a shiny new skyscraper of credit. In fact, as you see in the chart below, China’s first quarter financing was as large as entire countries economies such as Indonesia and the Netherlands. That’s misleading a bit, of course, since China’s scale makes most things seem small in comparison (though Indonesia is the world’s 4th largest by population). Nonetheless, total credit in China in the first quarter was CNY7.5 trillion, up 58% year over year. That’s about 46% of nominal GDP, a record level for China. Maybe GDP growth really is at 6.7% (some independent experts estimated 4%) but if so more and more credit is needed to achieve that growth rate. GDP growth appears to be driven by government spending and bank loans (ahh, the dark deep waters of China’s banks that we will continue to explore) with government spending rising 16.9% in the first quarter. Of course, this may be smart Keynesian policy in an economic downturn. But for how long can GDP growth be propped up with credit?  Time, that rascally ever marching dimension, as always, will tell.

More Signs Peak Oil Usage is Coming

We noted in this sacred space a few months ago that we are nearing peak oil consumption (not production). Today comes more evidence for this with the news that, “Saudi Arabia is raising $10B from a consortium of international banks as it embarks on its first global debt issuance in 25 years.” For the first time, Saudi Arabia is becoming dependent on foreign capital. At the same time, the country is building a sovereign wealth fund using $108 billion from its investments in local companies. The idea apparently is to start investing around the world through the sovereign wealth fund and use the returns as revenue for the state budget, a budget that increasingly has less oil money to spend. Saudi Arabia is becoming like a public pension fund. Other oil countries are also now borrowing on the world market, including Oman and Qatar. The changing nature of the oil markets (there may be short and even mid-term price spikes but as we noted last month, oil prices in the long term will stay low), is forcing changed interactions between oil producing states and the rest of the world.

Where the Cynics Aren’t

In the throes of a political campaign and on the washed up shores of cynicism, we hear lots of pessimism out there nowadays. In the midst of rapid technological change, environmental concerns and terrorism threats, lots of people think the world is getting worse, not better. But someone out there must be optimistic, right?  Below is a poll showing the share of the population who think the world is getting better. China tops the list. For hundreds of millions of Chinese, the world is indeed better than it was thirty years ago. Whatever the trade-offs that came with that, it is a good thing these hundreds of millions are doing better and rose out of poverty.

*Someone needs to create a sarcasm emoji**




–Note some design changes to INTN.  More to come soon, including a website where you can find INTN archives–

China’s Banking System, Self-Driving Trucks and Where the Rich Women Ar

Journalists from more than 15 countries covered Kobe Bryant’s last NBA game last night. Chinese journalists were prominent among this flock (or is it a murder?) of journalists. Kobe is huge in China. So as we bid adieu to Kobe’s long career, we examine just how safe his money is in a Chinese bank, pull over briefly at a computer’s truck stop and gaze in wonder at where the wealthiest women are concentrated in the world. It’s this week’s International Need to Know,  working to be the Stephen Curry of international information sources.

Without further ado, here’s what you need to know.

Dipping a Toe in the China Banking System

We’ve promised a deep dive into the China banking system but we start gingerly, testing the murky financial waters. We’ve discussed in this space that China’s official statistics are often likeBill Clinton’s golf score, something to smile over but not entirely trust.That makes understanding the challenges of China’s banks difficult. China’s official statistics claim non-performing loans (NPL) at only 1.6%. Other estimates, as you see in the graph below, put the NPLs at above 20%.  Of course, this is not the first time there has been great worry over Chinese banks. I remember in early 2007 attending a program where U.S. Fed speakers talked about China’s NPLs and the systemic risk it presented to China’s economy. That was quickly forgotten when less than a year later the U.S. banking system nearly collapsed post-Lehman Brothers.  Back then China’s government dealt with the problem by essentially taking the bad assets from the banks and putting them aside. Continued rapid economic growth helped alleviate the problem over the next eight years. The Chinese government is well aware of the current NPL problem but the challenge today occurs in a slower growth environment. More on all this sometime soon when we may at least wade up to our ankles.


Truck Driving Man, Er, Computer

We’ve discussed self-driving cars before and will again and not just because they are a bit of an obsession of INTN, but instead because they promise to be a transformative technology. We first predicted in another forum in 2006 that self-driving cars would exist in 7 – 10 years and be commercially viable soon after that. But we are not here today to talk about cars but rather trucks. Last week, a dirty dozen of self-driving trucks from Volvo and Daimler traveled across Europe. The trucks departed from Stockholm, Stuttgart and Brussels and converged on Rotterdam. The trucks were participating in the European Truck Platooning Challenge, organized by the Dutch government. These trucks formed a digital convoy so that they traveled right behind each other, making them more fuel efficient. Humans should not tailgate but computers can do so safely. Unilever is hoping to deploy such trucks as early as 2017 making my 2006 prediction relatively accurate (please do not look up any of my other predictions). But, to do so, Unliver must leap through some EU regulations, which leads to one more prediction: regulatory, not technological issues, will ultimately be the main roadblock to seeing these vehicles on the Autobahn, I-5 and other roads. Here’s a video of the self-driving European trucks with a strangely fitting soft-jazz soundtrack.

Where the Rich Women Are

Perhaps not where you think. Via Ian Bremmerwe learn where women’s wealth is located, or at least that of “self-made”* female billionaires. If you thought the United States would be number one, you would be wrong. China takes the top spot. The United States is second but you may be surprised by some of the other top countries listed below.

Total Wealth of Self-Made Female Billionaires

  1. China $95.4B
  2. US 28.8
  3. UK 4.9
  4. Spain 4.6
  5. Italy 2.4
  6. Nigeria 2.4
  7. Australia 1.8
  8. Brazil 1.4

*Self-made can be interpreted many ways, of course

Forgotten Japan, The Changing Look of Death and the French Like Brexit

We were just returning from making a withdrawal from one of our offshore accounts when we realized we are deeply underpaid compared to aclassical cellist of the St. Petersburg orchestra.Still, we carry on and remind ourselves that Japan is not as bad as you think, face the changing look of death squarely in the eyes, and chuckle at the French and British. Yes, it’s this week’s International Need to know, providing important information lost in the cheese factories of Wisconsin while singing Merle Haggard back home.

Without further ado, here’s what you need to know.

The Forgotten Japan

It is common to think of Japan’s economy as a basket case. Overall GDP Growth has been slow to nonexistent there since the crash way back in Taylor Swift’s 1989. The government debt to GDP ratio is the highest in the world by far at 220%, much higher than Greece’s 179%. GDP growth last year was less than 1% and there are worries this year Japan will lapse back into recession. They have instituted negative interest rates, one of a growing number of countries taking this uncharted measure. If you ask about the Japanese economy, likely the answer you’ll get is Japan is a slow-moving, 30-year disaster. But remember, as we noted here before, that Japan’s population has begun shrinking. In discussing Japan’s microscopic GDP growth rates and stagnant economy, we too often forget that there are less Japanese then before, and certainly less working-age Japanese. So, despite everything, GDP per capita continues to grow as you can see in the graph below. When a country is shrinking in population, it’s difficult for the overall economy to grow but that does not meant things are getting worse for the individual. As Mr. Spock did not say, the needs of the one are not always affected by the economy of the many.  When I travel to Japan I do not encounter a dystopian future but instead what feels like a prosperous society. Yes, Japan has deep challenges and they may be creating systemic risks, but things are not as bad for the average Japanese as one would be led to believe.


The Changing Look of Death

Death in the world is changing. In the rich part of the world we are accustomed to dying of heart disease, diabetes and other such ailments. But the developing world is increasingly dying of these things too. The good news is we’ve made much progress on malaria, diarrheal diseases, HIV/AIDS and other maladies that have inflicted so much misery and pre-mature death in the developing world. But as you can see in the World Bank graph below, so-called first-world diseases such as strokes, diabetes and heart attacks are rapidly rising in low and mid-income countries. In fact, today as many people die of strokes as they do of malaria in these countries.  We need to genetically modify mosquitoes to carry a virus that makes people repulsed by French fries.

Brexit More Popular in France than Britain

Brexit More Popular in France than Britain In just a couple months the good people of the UK will be voting on whether to stay in the EU.  It’s fortunate the French are not the ones voting since as it turns out more Brits than French prefer the UK be part of the EU. According to an Odoxa poll, 55 percent of the British want to remain in the union, but only 54 percent of French want this. I’m sure there’s an old Monty Python skit fit for this polling data. But, as you see below, the rest of Europe is happier at the prospect of the UK remaining a part of their club.

Against Brexit

  • UK 55 percent
  • France 54 percent
  • Spain 76 percent
  • Germany 65 percent
  • Italy 67 percent