Archive for month: November, 2016

Asia’s Realignment, A Global Super Grid, and Manipulating the Manipulators

In light of recent events perhaps we should not have been surprised to learn that chimpanzees score higher than humans in “working memory, information processing and strategic play.” No, really, you can see the videos here. The Australian PhD in economics and evolutionary biology blogger (now there’s a description) Jason Collins informs us, “If you briefly flash 10 digits on a screen before covering them up, a trained chimp will often better identify the order in which the numbers appeared. Have us play matching pennies, and the chimp can converge on the predicted (Nash equilibrium) result faster than the slow to adapt humans.” This made me feel both better about what has happened recently and at the same time quite fearful of our future. So we go in search of a chimpanzee to consult about the realignment of Asia, understand the quest for a new super electric grid and amusingly observe the manipulation of manipulators.  It’s this week’s International Need to Know, not monkeying around (though perhaps we should be) about the international doings of this evolutionary world.

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

The Shifting Sand Pebbles of Asia

In a parenthetical in last week’s “What to Expect Internationally” story, we noted Asia is likely to realign in the coming years given the recent U.S. election. We recall a small dinner we attended in Vietnam three years ago at which a Vietnamese legislator sat across from us. The topic of China arose and the legislator said that Vietnam would align more closely with China than with the U.S. This surprised us somewhat given Vietnam’s long contentious history with China. The legislator explained to me there was no telling how long and reliable the U.S.’s presence in Asia would be, but China would always be there right next door. Given the recent U.S. election, the Vietnamese legislator’s comments that night seem particularly prescient. Japan’s Prime Minister Abe has already said that if TPP is dead (Japan ratified TPP right after Trump’s election) then they will have to turn to China’s efforts to create an Asian trade bloc, the Regional Comprehensive Economic Partnership (RCEP). If the U.S. turns inward, Asia will realign with China being the main axis. Over a long period of time, this was likely to happen anyway, given China’s size and importance. But rather than over decades, it is now likely to occur in a matter of years with all the consequences, good and bad, that entails. This realignment all takes place at a time of slowing global trade, a phenomenon we will dive into more soon.

A Global Grid

Speaking of Asia and alignments, a China-based group, the Global Energy Interconnection Development and Co-operation Organization (GEIDCO) is  entering into agreements with energy companies, utilities and equipment manufacturers in China, South Korea, Russia and Japan to build a super energy grid. The idea is to make it possible to transmit renewable energy great distances, something that is likely to be necessary to take full advantage of the current revolution in solar and wind power. As New Atlas notes, “It’s simple enough; whenever there’s a big power load somewhere, there’s somewhere else in the world where that demand matches up with a generation spike. When it’s noon in the Gobi desert, and solar generation is at its peak, it’s dinner time in the UK and everyone’s boiling kettles.” GEIDCO will begin building a super grid for Asia that eventually would grow to cover the rest of the world. They hope to have the Asia super grid complete by 2030 and the world linked up by 2050, “all while bringing global clean energy generation capacity up to some 90 percent of the global total energy demand.” This is additional evidence of Asia’s realignment but also illustrates that whatever the new U.S. administration does or does not do on clean energy and climate change, technology and other global actors will likely matter more.

Manipulating Manipulators Manipulates US

The incoming Trump Administration continues to claim it will label China a currency manipulator. And manipulate they do, but current evidence, as the chart below shows, indicates China is currently propping up the Yuan, which should make exports from China to the U.S. more expensive not less. Brad Setzer of the Council on Foreign Relations notes, “…If China stopped all management (“e.g. manipulation”) and let the yuan float against the dollar, China’s currency would drop. Possibly precipitously. China’s export machine would get a new boost.” Bloomberg also reports that China is propping up the Yuan, “China’s holdings of U.S. Treasuries declined to the lowest level in four years, as the world’s second-largest economy runs down its reserves to support the yuan.” So the Trump Administration may try to manipulate China to stop manipulating their currency. But, this manipulation of the manipulators could end up boosting China’s exports to the U.S.*. Seems like a very fitting scenario for the strange new world we now inhabit. 


**For the record, we assert that currency values play a much smaller role in trade balances than is commonly believed.     

 *INTN will be taking next Thursday (Thanksgiving) off as we prepare the stuffing, eat pie and generally ignore our world, fascinating as it is, for a day.  We’ll be back on Thursday, December 1 with more of everything you need to know about our crazy, mixed-up Aunt and Uncle at the dinner table world we live in. See you then.

Life in the World of Trump, What to Expect Internationally, and Who Needs Talent

I tell those who are afraid of flying that it is not the flight you should be scared of, it’s the taxi ride at the end of it. I have been nearly killed in at least half a dozen cab rides in different locations around the world. Last week in a small town in Eastern Washington, my cab driver was very safe, kind and his life story enlightening. He drives a taxi because he lost medical clearance to drive a truck when he developed numbness in his hands, eventually requiring surgery to fuse two neck vertebrae together. He became a truck driver for the good pay (far better compensation than cab driving) and health care since he was a single father of two twins. He was a single father because his first wife had mental health problems, refused to take her medication, turned to drugs and alcohol, became violent and generally unstable and unsafe for their children. He met his second wife at church and is seemingly a very good father to her kids, whom he referred to as his kids, not step-kids.  He says they live in “a good Christian town where there’s seemingly a church for every two people.” But he and his wife have not been to church in eight years. For him, religion was a social valve. He is seemingly a good dad, good husband, and has experienced much economic hardship and bad luck. He told me he didn’t like his presidential candidate choices…but, he was going to vote for Donald Trump. If we had been paying closer attention to such stories, perhaps we would not have been so surprised Tuesday night. Sometimes the most foreign of countries is your own. So, this week we gaze at America briefly and what the election means for our global economic order, examine a few likely international trade policies of the Trump Administration (will it be rebranded the “Trump House”?) and then head back into the world in search of who needs talent. It’s this week’s International Need to Know, remembering that the wisest words anyone ever says are “I’m not sure.

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

A New World Economic Order

America and politics are not our beat. But, although there are many ways to interpret Tuesday’s vote, placing it in the context of Brexit and electoral and political winds blowing in other parts of the world, it appears people are fed up with the current global economic infrastructure, and new players, both in America and abroad, in democracies and authoritarian governments, are ready to upend our current world order. That is our beat, or is at least part of it. As we have written before, we live in the most peaceful, prosperous time in the history of humans. The institutions, values and norms created out of the ashes of World War II, flawed as they are (and all human creations are imperfect), for the most part served us well. We here at International Need to Know will dance and sing in the second line at their passing. But, all things end and the world is changing, and changing rapidly. Technology has radically transformed how we communicate with each other. We appear to be on the brink of technological changes that will transform how we work (and if we work), how we transport ourselves, our capacity for violent destruction and how our privacy is kept or more likely is not. There are profound demographic changes occurring all throughout the world. Perhaps people grasp this in their gut even if they do not fully run it through a Nate Silver algorithm. This is not to dismiss the many less savory reasons for why people want to upend institutions and voted for Brexit and change in the American political landscape. The unifying emotion driving the demand for change is, of course, fear. Perhaps this fear is well-founded and we need to change the current international institutional infrastructure and culture to address a changing world. But if so, the big question is what takes its place? No one currently has the answer and this question does not even appear to have been thought about by those demanding change. We don’t know the answer either but I expect we will take a turn on the global policy dance floor, two-stepping and spinning our partners with some ideas in the weeks and months to come.

What to Expect Internationally

Although in many areas, Trump was remarkably vague about policy, in a few international policy realms he was consistent both verbally and in writing. I think we can all assume the Transpacific Partnership (TPP) is dead. In other areas of trade, Trump has said he will:

  • Tell NAFTA partners that “we intend to immediately renegotiate the terms of that agreement to get a better deal for our workers. If they don’t agree to a renegotiation, we will submit notice that the U.S. intends to withdraw from the deal.” In those negotiations he hopes to institute a fee on Mexico imports into the US that he would use to build his wall. Not coincidentally, on election night we saw the largest decrease of the peso against the dollar since 1994.
  • Instruct the Treasury Secretary to label China a currency manipulator. This basically means the U.S. would have to negotiate with China on adjusting their rate of exchange. It’s unlikely to have much practical effect and China’s exchange had and has little to do with the U.S. trade deficit with China. But, Trump says any country that devalues their currency (currently almost everyone), “will be met with sharply, and that includes tariffs and taxes.” If so, will countries retaliate with their own tariffs and taxes? I vaguely remember from history books and economics that this may not turn out so well.
  • He will bring a bunch more suits against China at the WTO. At the pace the WTO resolution process works, the Seattle Mariners will win a World Series before anything of substance results from these complaints. But here too, he threatens to institute taxes and tariffs. What it will mean for relations with China and how China will react, is an open question.
There’s much more in terms of refugees, relations with Russia, the Asia Pivot (we are likely to see more Philippine-like actions in southeast Asia and in other regions of the world), NATO, Syria, Paris climate change accord, nation-building and other issues. Suffice it to say, we are in a new world today. The post-world war II global infrastructure and alignments are ended.

Who Needs Talent?

But enough of such weighty matters, new world orders and what our future holds. Let’s talk about talent. Specifically, which countries have the most difficulties filling jobs because of not enough available talent and in which countries is filling jobs not difficult? We go to the Pacific Rim for both answers. As you can see in the chart below from ManpowerGroup (who can continue to keep their company’s name after Tuesday’s electoral results), 88% of Japanese employers report having trouble filling jobs. That is certainly a reflection of the aging demographics in Japan where the population is actually shrinking. Taiwan is high on the chart as well and for reasons of which we are in the dark, so is Romania. On the other side of the ledger is China, where companies have the least difficulty filling jobs. As always with this ever complicated country, there are many ways to interpret the ease with which Chinese companies can fill jobs: lots of talent, a slowdown in the economy, not enough jobs requiring talent and many other ways. We expect the new U.S. administration, if it pays attention to such data, will have an interpretation of its own.


More on Peak Oil (Usage), European Immobility and Who Cares in the World

(Caution: Parts of the following was written early in the morning after the 2016 World Series [congratulations Cubs! Once every 108 years without fail]. We cannot vouch for veracity, grammar or decency but like the Cubs and Indians, we left it all out on the field.

International Need to Know is attending a Homeland Security Conference this week, working with a company that has excellent applications relevant to such endeavors. While talking with an Army commander at the conference we realized anew how fast (relatively) things change in our geopolitical world. Today’s enemies are tomorrow’s allies, vice versa and in many other combinations. The Army commander, who deals with asymmetric threats, told us about traveling to Vietnam to study the tunnels used by the Vietcong against America during the war there. He and his American military colleagues met with and were guided by the Vietnamese military and are using the information to apply lessons to today’s threats, including from ISIS. If you told a military commander in 1971 that his successor would be hanging with and working with the Vietnamese military, they may have thought you’d been exposed to Agent Orange.  So we keep our fast changing world in mind even as we tunnel for more evidence of peak oil usage, examine the immobility of much of Europe and wonder who in the world cares the most. It’s this week’s International Need to Know, like the Godfather of international information, keeping friends close, enemies closer and everyone else nearby too.

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

Update on Peak Oil (Usage)

The rest of the world is starting to catch up to INTN’s bold prediction that peak oil (usage) is coming sooner than we think. Bloomberg New Energy Finance (BNEF) has a new study out that asserts the rise of electric vehicles could cause an oil crash similar to what we saw beginning in 2014. This could happen as early as 2023, a mere six years from now. Their thesis is that in 2015 the oil price collapse occurred because of a global oil glut of 2 million barrels per day. BNEF’s analysis is that if electric vehicle sales continue at their current rate, they will displace 2 million barrels per day of oil usage by 2023. And thus, another collapse in oil prices. However, they don’t think global electric vehicle sales will continue to increase as rapidly as they are today and so think more likely the oil price collapse won’t come until 2028. The chart below shows three different growth rates coupled with when oil displacement rates would reach 2 million barrels. Interestingly, Norway recently announced it is planning to ban the sale of new gasoline- and diesel-powered cars starting in 2025. You know Norway, the country that is one of the major oil producers. The world is moving quickly, including in the energy sector. But, as we have pointed out, electricity needs to be generated cleanly if this is ultimately going to be good for the environment. However, with the rapid improvments of solar, we expect that will be the case, certainly by 2030. So this is good news for the environment but expect some major disruptions to the world economy as it happens. In 20 years will Exxon be tweeting like The Last Blockbuster Store?

Going Mobile

Last week we discovered that 70% of high skilled talent moves to only four countries. But what about movement within countries? The U.S. is known for having a mobile population from its earliest days when people fanned out west from the East Coast. And, it’s true, America is more mobile than other countries, especially Europe. According to a Gallup Poll, about one in four Americans “reported moving within the country in the last five years.” Only Finland, Norway and New Zealand move around in their countries as much as Americans do. The rest of Europe, not so much. Many Europeans I know have never moved more than 20 miles away from their hometowns. But there is even less internal movement in Venezuela and China which is surprising given the huge urban migration in China the last 30 years, but perhaps that great migration is slowing down. We have seen other evidence of a slowdown in this migration in recent years. Internal mobility can be beneficial to job matching. As job categories go away, being willing to move to find a new job can be crucial. If we face a slew of job destruction from automation in the next twenty years, mobility may become even more important.

Who Cares?

You may think the United States is the most charitable nation on earth but you would be wrong. America is second. Myanmar of all places is the most giving nation on earth, according to the Charities Aid Foundation’s (CAF) annual World Giving Index (I believe there is now an index for every single possible thing that can be ranked in our world–charity, economies and worst Kardashian*) Myanmar earned the top spot through “high levels of participation by donating money (91%) and volunteering (55%).” The Index also ranks which countries are most likely to help a stranger. The people of Iraq top this list with 81% of Iraqis helping a stranger. In fact, Middle East countries dominate this category as you see in the chart below. This matches up with my experiences in that part of the world where I have always found the people to be the most hospitable of any I encounter. With that, we exit our worldwide headquarters to help an old lady cross the street…

*No it’s not a seven way tie for last.