Archive for month: July, 2016

China Peak Coal, Slow Crawling Europe and Where the Under 20’s are

We were absent last week from our INTN responsibilities, traveling to NYC where we visited with family, friends and the tour guides of the modest but cool Louis Armstrong house in Queens. We also saw Ken Griffey, Jr. take his rightful place among the greats of Cooperstown. So we missed most of the chatter of the two political conventions but heard enough to be reminded that rhetoric is unfortunately like food: what tastes good and makes us feel better is rarely good for us.* Sad but true we live in a world where broccoli is better for you than ice cream. Nonetheless, we offer a bit of both as we examine whether China has reached peak coal usage, ponder the EU’s weak economic recovery and track down where those under 20 live. It’s this week’s International Need to Know, providing tasty bones of information in the dog days of summer.

But one more ado, before we jump in, our friend, six-year-old Maya Gladhart was recently diagnosed with kidney cancer. She is as brave a girl as you would want to know, who after having her kidney removed is now facing months of chemotherapy. Fortunately her cancer is eminently treatable and we know she will beat it, but there is also a financial toll that is affecting her wonderful and courageous parents, Pete and Jackie. A You Caring account has been set up and should any of our dear readers like to contribute to help Maya, Pete and Jackie, please do so. Here’s the link to help Maya.

Now, and finally without further ado, here’s what you need to know.

China Peak Coal?

A few months ago” href=”” target=”_self”>A few months ago, we noted that peak oil (usage) is imminent. But forget about black gold, coal usage appears to be peaking too with some claiming peak coal usage in China is already here. After rapidly increasing for over a decade, in 2014 coal usage in China dropped 2.9% and in 2015 by 3.6%. Is this just another underlying sign that China’s economy is not really growing at the rates its leaders claim? Or, is something else going on? According to that great summer beach read,Nature Geoscience,Slowing GDP growth, a structural shift away from heavy industry, and more proactive policies on air pollution and clean energy have caused China’s coal use to peak. It seems that economic growth has decoupled from growth in coal consumption.” Up until 2014, China’s GDP growth rate and power consumption had a 1-1 relationship. But in 2014, China claimed GDP growth of 7.4% while power demand grew by only  3.8%. Again, this may be an indication that China GDP growth is like my belief each year that the Seattle Mariners will finally make the playoffs–a bit rosy and optimistic. Regardless of the reasons why, China, which represents half of global coal consumption, is a big reason why world consumption of Santa’s favorite gift for bad kids has stalled too. Coal consumption decreased by 0.9% in 2015 after averaging 4.2% annual growth for the ten years before that. Just as with China, lower coal usage may be a sign of worldwide economic stagnation. But if so, this economic malaise could be a bridge of despair to a cleaner land by providing time for the exponentially increasing use of solar to further dampen the use of coal. We may not be at peak coal yet, but there’s a good chance within a decade we will be.


The EU’s Slow Crawl

Speaking of slow economies, the EU continues to lag behind the other democratic market economies of the OECD (Organization for Economic Cooperation and Development) as you can see in the chart below. Back in 2007, the EU was already behind in terms of the percentage of the population of 15-74 year olds working. Over the last nine years, the gap has increased. In the OECD as a whole, the percentage of that age bracket working has finally reached the 2007 pre-financial crisis level. In fact, Germany and Chile are above the pre-crisis level as is Turkey (although with all the teachers, judges and journalists now out of work thanks to the purges of Erdogan, their employment percentage is surely decreasing!). For much of the rest of the EU, however, tough times remain, including and especially in Greece, Italy, Ireland and Spain, who are all still below pre-financial crisis levels. The Brexit vote and other fracturing events in the EU take place in a context of continued economic difficulties. The fracture is a symptom of a long-standing more challenging disease–whether Europe can heal itself is a huge question for the world economy.


Follow the Young

We’ll admit to having a bit of an obsession with demographics, but there are worse obsessions to have and we’re fairly certain we will not end up in jail or rehab over this one. Nonetheless, we are compelled to inform you of where the under 20-year-old set lives. We’ve noted before that Africa has the youngest demographics. According to the World Bank, in 40 of Africa’s 54 countries, over half the population is under the age of 20.  In Niger, remarkably over 60 percent of the population is under the age of 20. The United States has more people (25.4%) too young to drink than China (23%). France has the most south-of-20 people in Europe, a continent full of aging demographics. Japan, of course, has the fewest under 20s overall, though Germany is not far behind.  Overall, a third of the world’s population is under the age of 20. Follow the young people if you want to understand our future for economics, violence (at least in terms of young men) and good times.


*Although at least one speech we saw was a full, balanced, nutritional meal. To find out which, you will have to buy us a beer, a fine companion to such meals.

If you have a spare moment and dime, don’t forget to help Maya and her family. Donate here. 


Minding Britain’s Productivity Gap, China Bulls, Vietnam Test Takers

Note: INTN is gone next Thursday, July 21. We’ll be back Thursday, July 28 with everything international you need to know.

Yesterday I had the opportunity to speak with a group of aspiring young entrepreneurs from Mexico. When asked why they want to be entrepreneurs, some answered money, others said they wanted control while several expressed the desire to be creators. But nearly all also said they want to improve Mexico and the world. Much recent news has focused on doom and despair but if this talented group is any indication, the future is in good hands. But even as we get caught up in our own entrepreneurial dreams (an artisanal bialy shop in Seattle), we mind Britain’s productivity gap, welcome China bulls and wonder at the educational prowess of Vietnam. It’s this week’s International Need to Know, which although next week will be distracted and unpublished due to a trip to NYC, this week is loyal like a cat at Ten Downing Street shedding key data about our world you’ll need to vacuum up.

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

Mind the Gap: Britain’s Lousy Workers
Those good for nothing Europeans that just over 50% of British voters recently elected to flee–they may want to say good riddance to the unproductive workers of Britain. Via the always intriguingMarginal Revolution, we learn that British worker productivity lags far behind the rest of the G-7 countries and behind many other EU countries as well. Britain is not even in the same soccer, er, football stadium as Germany and France and is even behind Italy. It’s also behind Spain, Belgium, the Netherlands and Ireland. There are some positive results, however, when looking at subsectors. In manufacturing, “UK output per hour is estimated to be above that of Italy, and UK output per worker is a little higher than equivalent estimates for Germany and France.” But overall, and including Britain’s vaunted finance sector, the country’s productivity lags far behind. Even as the EU needs to make changes to its structure and policies, the UK might want to gaze into the reform mirror itself. It could use a good comb and wash.


China’s Shoppers
China’s bears bullied their way into this space a few weeks ago but it’s time for the bulls to have their time in our China shop, as we delicately examine new numbers on the size of China’s middle class, wealthy cities and online shoppers. China’s middle class is large as in over 100 million people large. Much of this middle class is huddled in China’s big cities. We’ve noted in the past that China’s demographics are aging at a rate faster than America’s, but its urbanites are relatively young with half the population of China’s big cities under the age of 35. If we look at the wealthiest cities, our old friend Shenzhen comes in first, as you see in the chart below. Shanghai surprisingly is far down the list. Shenzhen, of course, is where Tencent is headquartered which createdWeChat a sort of combination of texting, Facebook and Netflix. Tencent and other online companies are profiting from Chinese online spending. From Next Big Future, we learn that “online shopping in China accounts for 16 percent, or $672 billion, of all spending — and about half of that takes place on mobile.”  In the U.S., by comparison, online sales account for about 8% of retail spending. China’s got problems (which we’ll return to soon) but absent a crash, its consumers will continue to beckon companies who want to sell to a large number of hungry buyers.


Vietnam is Good at Tests

As we discussed earlier this year, Vietnam is young, dynamic, larger than you think and embraces trade. They also, it turns out, are good test takers. According to the international education organization, RISE, “Vietnam school children score over 100 points better on comparable tests than the average for low-income countries.” In the chart below, you see Vietnam in all its outlier glory hovering very near high income countries like the United States and Canada and well above low income countries from Peru to India to the Philippines. Vietnam’s children score better on tests than other low income countries from a young age and with each resulting year in school, the gap grows. RISE wanted to know why this was the case. What are Vietnam’s schools doing that is creating such great educational productivity results?  A World Bank study, that should have been titled, “We’re Not Sure,” found that part, but not all of Vietnam’s achievement is a result of higher level of access to pre-school and investment in school infrastructure. The study also claims there are cultural factors involved, including students skipping fewer classes and “teachers appear to benefit from closer supervision of their work by the school principal.” Don’t ever mess with a Vietnamese principal. Do keep an eye on an economy with young demographics and a strong educational system.


Reminder: There will be no International Need to Know next Thursday, July 21,due to a trip to the Big Apple, but we’ll be back July 28th bringing wit and wisdom from the four boroughs of NYC and beyond.      

Italian Bank Shots, Economic Rankings and Megacities

Recently, in the midst of all the news of people trying to separate themselves from each other, whether in the recent UK election, current shenanigans in the United States, violent attacks in Turkey, Saudi Arabia and elsewhere, we were reminded that the world is more connected than ever before. A cinematographer in Tehran liked the Facebook page of a short film we made a few years ago with our friend, Michael Williams, called Please Hold. It’s a short (only 7 minutes) dark comedy about customer service. So even as the world is seemingly yelling collectively, “Get off my lawn,” it’s good to remember that we are all–including Iranians–united in our frustration with technical support. But even being caught up in such idealism, we are not distracted from warning bank shots in Italy, changes in countries’ economic status and locating the world’s megacities. It’s this week’s International Need to Know, driving far better than a Tesla down the international road of knowledge and information.

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

Italy’s Bank Shot

Early this year we noted the high rate of nonperforming loans in Italy. In the large turbulent wake of Brexit, as everyone waits for the next British made footwear to drop, markets and pundits are paying more attention to Italy’s challenges. In the chart below, we see that the non-performing loan rate in Italy is up to 17% (only surpassed by Greece, which at this point we should probably rename “Yikes”*). Italy is the third-largest economy in Europe, but it has not seen GDP growth rates above 2% since the 1980s. Italy is also a great illustration of the world’s aging demographics which we’ve referred to in this space. The median age in Italy is 45. Over a fifth of Italians are now senior citizens which is a higher percentage than in that mecca of retirees, Florida. You could turn Italy into a Disneyworld theme park for the movie, Cocoon. Earlier this week, Italy’s regulators banned short selling on Italy’s third-largest bank, Banca Monte dei Paschi Siena, whose stock has fallen, oh, uh, well, 99% from its 2007 highs. The EU Commission, which in the past was hardline on Italy and its banks, is now allowing the Italian government to use guarantees of up to $150 billion for short term liquidity support. Brexit, as we suspected last week, is forcing the EU to change. But regardless of what the UK does, the EU has deep ongoing structural challenges that have to be addressed to deal with its deep ongoing economic challenges. The problems in Italy are not new. New pressure to do something about them is. The race is on.


*As in: “If you go to Yikes, you should really check out the Parthenon.”

Moving on Up (and Down)

Every July, the World Bank revises its classification of world’s economies based on estimates of gross national income (GNI) per capita.  The categories for countries are low income; lower middle income; upper middle-income and high income. This year a number of countries moved into higher categories with Cambodia going from Low to Lower Middle, and Georgia from Lower Middle to Upper Middle. But two countries, like English Premiere Football clubs relegated to a lower division, fell from High Income status to Upper Middle:  Russia and Venezuela. We look forward to Putin and Maduro taking the walk of shame.



Meet Me in the City

As you’ve probably read, the world is urbanizing at a rapid rate. Everyone it seems wants to live in big cities, even as it turns out, Kevin Durant.  We wonder if 100 years hence, should our planet still be spinning reliably on its axis, whether great swathes of the world’s countrysides will return to their previous natural state as humanity huddles in tiny pods (save the lucky few in their penthouses and stray mansions) in huge megacities. While we wait to find out, we note that most of the current megacities in the world are located in Asia. In the UN graph below, Tokyo is listed at number one, followed by Delhi and Shanghai. America barely makes the top ten, with New York (where we’re headed in a few weeks) coming in at number 9. Africa is urbanizing faster than anywhere else in the world and if that trend continues, will soon dominate the top 20. That may, or may not, be good for elephants, rhinos and other endangered animals.