Archive for category: Uncategorized

As we place our iPhone in a dark corner far from prying FBI eyes, watch a campaign manager get charged with literally twisting arms, and gaze upon 10% of the Cuban population rocking out with Mick, Keith and the gang, we cast glum eyes on the wreck that is Russia, worry about the long-term health of Spain and list the perhaps surprisingly largest locations of Islam.* Yes, it’s this week’s International Need to know, bringing the sanity of facts and figures to a world seemingly head over heals in love with crazy.

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

The Sadness that is Russia

There are many bears in this world. The polar bear is unfortunately threatened by climate change. The Chicago Bears will never surpass my beloved Green Bay Packers. Yogi Berra left this world last year. But perhaps the saddest bear these days is Russia. While Vladimir Putin poses sans shirt like a crazy Uncle at a drunken family reunion, the country’s economy continues to struggle.

Raising the minimum wage is all the rage nowadays. We see California is considering raising the state minimum wage to $15 per hour. Russia is in on the act as well, raising their minimum wage this week yet again, by 21 percent.  This comes after a 4 percent increase in January. The Russian economy is a mess. More than 20 million Russians, about 14% of the population, are now living in poverty, up from 16 million in 2014. These are the official statistics but it would be no surprise if the numbers are much greater than that.The Russian economy contracted 3.7% in 2015 and so far it’s getting smaller this year too. Vodka exports are down 40%, which is bad for the economy, but perhaps good for Russians who need a stiff drink in bad times, but bad because of Russian’s huge alcoholism rates. Two drunken steps backwards for every step forward seems to be the norm there. In fact, Russia is perhaps the only country where life expectancy is getting shorter, at least for males, due to alcoholism and disease. Some of the economic problems are due to sanctions and to an economic climate mired in corruption. But oil prices play a role too. Nearly half of Russia’s government revenue comes from its oil and gas exports. With prices remaining at a low level for over a year, Vladimir Putin is like a vicious Jed Clampett who has run out of black gold. INTN once knew lots of people doing business in Russia. Now we can count them on one hand.

Long Spanish Storms

Much of Europe is still in distress despite some marginal improvements the last year. Usually we think of Europe’s problems as a result of the financial crisis, austerity and a currency union absent a fiscal union. But Spain, which puts the plural in PIIGS (Portugal, Italy, Ireland, Greece and Spain), the countries that were most in distress a year or so ago, may tell us otherwise. I recently came across the graph below. This shows Spain’s economic growth below trend since 1978.  It’s possible the problems of the EU, or at least parts of it, are more long-standing and complicated then we think.  Some of these economic difficulties are like a blues soul song, a long time coming.

Where the Muslims Are

Via the Pew Research Center, we find that the largest Muslim populations are not in the Middle East but in Asia. Strangely enough, I have not see any calls for banning Indians from coming to America.

1. Indonesia, 205 million

2. Pakistan, 178 million

3. India, 177 million

4. Bangladesh, 149 million

5. Egypt, 80 million

6. Nigeria, 76 million

7. Iran, 75 million

8. Turkey, 75 million

9. Algeria, 75 million

10. Morocco, 32 million

*Yes, we have promised a dive into the deep end of the Chinese banking system but we’re still assembling our mask and oxygen. Stay tuned!

Merrick Garland is in the new Indiana Jones movie and Harrison Ford has been nominated to the Supreme Court. Or have I gotten my old men mixed up? Apparently March Madness reigns supreme on the court and at the court. But even as International Need to Know escapes the madness for New Orleans–the only city in the United States where you feel like you are not in the United States–for intensive cocktail, music and cultural research, we gaze steely eyed at the question of whether Brazil is in another one of their lengthy bust cycles, we consider an international gender gap and we worry about whether to expect a Donald Trump of China.  It is, of course, this week’s International Need to Know, a tour of the world’s important issues minus baggage fees and jet lag.

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

The Tanking of Brazil

This week I met with a small company whose biggest export market was until recently Brazil. The president of the company told me their sales are way down because of Brazil’s tanking economy. Yes, Brazil is struggling like a salesperson selling faulty mosquito nets at this summer’s Rio Olympics. As I type, tens of thousands of Brazilians are rioting in the streets (U.S. political protesters are slackers by comparison). There’s a reason for a disgruntled nation: the economy is contracting, last year by 3.8% and this year the shrinkage continues.  In fact, some analysts believe it will contract by 4.6% in 2016. If so, that will be the deepest, most sustained contraction since the country began keeping records in 1901. To add misery to insult, the country’s inflation rate is the highest it’s been since 2003. China’s slowing economy has played a part in Brazil’s troubles. Brazil rode the commodity gravy train right off the dining room table. In 2000, Brazil’s annual trade with China was $2 billion. By 2013 it grew to $83 billion with more than $40 billion in exports to China. But China’s slowdown has caused Brazilian exports to China to tumble by 20%. Of course, Brazil has plenty of internal challenges as well, including corruption and mismanagement. In fact, Brazil has trod this muddy economic path before. The now busted Brazilian miracle of the mid-2000s was proceeded by one in the late 1960s and early 1970s. That “miracle” was followed by a lost 1980s decade. Let’s hope Brazil finds its way to the path of economic prosperity sooner this time.

 

   

Women are Better Educated than Men

If you’re a male reader you may have difficulty reading this since you are increasingly an uneducated slob. This is true not just in the United States but around the world. In OECD countries, we see that the gap between women and men obtaining a higher education is widening. Today 58% of people in the OECD graduating from an institution of higher learning are women.  In only four OECD countries are more men than women graduating–Japan, Germany, Korea, Switzerland and Turkey.  The closing of the gender gap is not contained to just OECD countries. In fact, more women than men are graduating from universities in the Middle East, including in Saudi Arabia, Iran and Kuwait.  It is good that finally women are getting opportunities, and taking them. It is disconcerting that men are doing so badly worldwide. Of course, there are educational pockets where men still dominate and women unfortunately lag. In STEM fields, at least in the OECD, there are still far more men graduating: “only 31% of the bachelor’s degrees awarded in science and engineering went to women.”  There are different types of gender gaps for men and women these days in higher education; it would be good to fix them both.

Where’s the Donald Trump of China?

• U.S. Net manufacturing jobs loss/gain since 2010:  +861,000
• Decrease in open manufacturing positions in China since 2012:  -6%

Okay, it’s not exactly apples to apples due to the vagaries of Chinese data, but it squares with previous data that manufacturing jobs are decreasing in China and such jobs are increasing in America. From current political discourse you would think the opposite is true. Of course, up is down and down is up in so many ways in that bloody arena. While in recent years we have seen manufacturing gains in the United States and decreases in China, economic studies have shown that before this decade, the U.S. lost between 1 and 3 million manufacturing jobs to China.  But those days are over. In the future both China and the U.S. are likely to lose jobs to machines rather than to each other.

International Need to Know ditched the winter blues to see the funk, hip-hop, neo-jazz New Orleans band, Galactic, at a local club and discovered in the opening band, Con Brio, a rising star full of youthful rhythm and blues vigor (the lead singer is known to do an occasional backflip when performing). But even a musical Ferdinand Magellan moment did not distract us from answering last week’s question about China, raising new worrisome ones, revealing who is number one at the box office, and providing Donald Trump’s least favorite statistic. So even though Chris Christie is unlikely to endorse us, it is this week’s International Need to Know, where we bust some international economic moves, Con Brio-style, on the world stage.

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

The Yang: Why China has Become Innovative

As we learned last week, despite difficulties, lots of good things are happening in China, including companies innovating, not just copying. But how did this happen? We promised we would tell you why they’ve become an innovative economy and unlike presidential candidates we here at INTN always fulfill our promises. The answer, of course, is scale. Yes, China is big and that matters.  For example, China has as many 4G phone users as the entire U.S. population. There are more than 500 million mobile internet users in China. These mobile users are young with the average age 15 years younger than the average U.S. user. To service this enormous, young user base, Chinese companies have to innovate. Yes, Chinese companies have been protected from foreign competition but despite that, the sheer scale of the market has forced them to innovate.  A population of 1.3 million, a middle class of 150 million – 260 million (depending on whose counting), compels companies to meet market demands with new innovations. You gotta give the people what they want. Here’s your bonus how-large-is-China statistic: for the first time ever, China’s monthly box office receipts were larger than North America’s thanks to the smash hit, The Mermaid. Regrettably, this is unlikely to spur innovation in Hollywood.

The Yin: China’s Economy is slowing

New underlying economic data raises fears that China’s economy is growing at a much slower pace than the official 6.9% GDP growth rate. China’s purchasing managers index for manufacturing dropped to 49 in February. Anything below 50 indicates contraction. In fact, this is the lowest level since January 2009, which was smack dab in the middle of the world financial crisis. It’s not just manufacturing. The services PMI has also slowed to 52.7 from 53.5 in January.  This is still above 50 but is nonetheless at its lowest level since December 2008. Another sign that jobs are not as plentiful as they were before, at least not in the developed cities, is that for the first time in 30 years the migrant population has decreased, by 5.7 million in 2015. We’ve noted before that imports are down and beer sales too. Given the preponderance of the evidence, it is very difficult to believe that the economy is growing 6.9%. The question remains of whether this is a normal business cycle recession? Despite opinions to the contrary in recent years that China is invulnerable to business cycles, China is not the Golden State Warriors and President Xi is not Stephan Curry, China is going to lose every once in a while. Or, is there something deeper afoot? We’re scared to end up like Alice but soon INTN may dive into the China banking system rabbit hole to find out what is really happening.

A Mexican Appetizer

We teased you a few weeks back when talking about the relative lack of crime in most of Mexico that we would come back with more on their underrated economy. And we will, but for now, in honor of a certain presidential candidate frontrunner, we leave you with this chart on net migration between Mexico and the United States. Go ahead and peek, there has been zero net migration from Mexico since 2008. In fact it’s slightly in the other direction. Maybe Mexico willpay for that wall to be built to keep us out of their country?

  

As we savor the banana pudding we ate at Roux restaurant on Valentine’s Day, rue that we are not joining pitchers and catchers this year, and mourn the passing of both a supreme court justice and the last vestiges of civility in political campaigns, we examine the list of countries with negative interest rates, ponder the world’s fifth-most important graph and wonder at the relationship between Taylor Swift and the Japanese stock market. Yes, even at the risk of being the target of a crazy Kayne West tweet, it is this week’s International Need to Know, your loving guide to matters of the world that count.

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

Why Are You So Negative?

Is 2016 the year of the negative interest rate? A few weeks ago the Bank of Japan instituted negative interest rates and Sweden recently joined the monetary party too. Here’s the growing list of countries currently with negative interest rates:

• Bank of Japan: Rate is minus-0.1 percent for some reserves
• Danish National Bank: Deposit rate is minus-0.65 percent
• European Central Bank: Deposit rate is minus-0.3 percent
• Swedish National Bank: Main interest rate is minus-0.5 percent
• Swiss National Bank: Main interest rate is minus-0.75 percent

Some think Canada, Norway, Israel and even the UK may soon join in the fun. The fantastically named Robin Wigglesworth, an editor at The Financial Times, tweets “that eurozone banks are down 41% since ECB introduced negative interest rates…and Japanese bank stocks have done worse this year than in the 6 weeks following Lehman collapse.” So the question is will the negative interest rate policies work? If more countries join the parade will it have an effect on those already using negative interest rates? Does it signal we have entered a new economic era? These are some of the most important economic questions we can ask. And, we don’t have the answers. Sorry!  But we hazard a guess that even those who think they know the answers should listen to Noah Cross from the movie, Chinatown—“You may think you know what you’re dealing with, but, believe me, you don’t.”

The World’s 5th Most Important Graph

What are the top four?  Oh I’m sure we’ll cover them at one point or another here at INTN, but for now let’s concentrate on number 5. Below you see that the working age population for much of the world is either flat, decreasing or increasing at a much slower rate than previously. That makes achieving a fast growing economy more difficult and has implications for countries who want to export. There are less of the people who do the most buying and producing.  GDP growth is built on such people.  There are two big exceptions to this demographic trend: sub-Saharan Africa and India. It will be interesting to see if they can propel world economic growth or whether their other challenges will hamstring their economies despite a growing working age population.

Taylor Swift and the Japanese Stock Market

Planning your investments? Here’s a not so fun factoid. On December 1, 1989, the Nikkei closed at 38,916. Twelve days later, Taylor Swift was born and the Nikkei has never come close to those heights since. In fact, nearly thirty years later, even after large increases since 2012, the Nikkei is at 16,022, still less than half what it topped out at. Unlike Kanye, we don’t blame Taylor Swift for the Nikkei’s inability to fully recover. We do remember, however, that the experts say invest for the long-term. It’s been a long time.  With Japanese exports decreasing at the largest rate since the financial crisis (more evidence of a slowdown in the Chinese economy) and Japan’s population decreasing (5th most important graph!), it will be longer still.    

  

This week at International Need to Know while political eyes shift from one state’s corn fields to another’s granite quarries, we focus on the world’s largest protectionists, computers playing ancient board games and one possible cause of slowing growth in Africa. Welcome to this week’s edition of International Need to Know, your go-to place for understanding this mixed-up, muddled-up planet we call home.

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

The World’s Top Protectionist Countries

Ever since Smoot met Hawley for an American-made beer (unbeknownst to them served in Irish-blown glass) in some dark corner of Washington, D.C., economists have warned of the dangers of protectionism.* But who are today’s greatest protectionists? The Economist Intelligence Unit lists the top ten countries with the most protectionist policies among the G-20 major economies. Your mileage on their methodology may vary.

1. Russia

2. Argentina

3. India

4. Brazil

5. Indonesia

6. Germany

7. USA

8. Japan

9. China

10. Italy/UK

*What? You don’t believe Smoot and Hawley drank beer in Irish-made glass?

Go Dog Go

Last week we noted in passing (no pun intended) that artificial Intelligence pioneer Marvin Minsky died. In what perhaps could be a sign of intelligence in the universe, a significant milestone in AI was achieved that same week when for the first time a computer beat a highly ranked player in the ancient Chinese Board game, Go.Bloomberg tells us that Jon Diamond, the head of the British Go Association (not to be confused with the UK Go Go Association), didn’t think this would happen for another five to ten years, “It’s really quite a large, sudden leap in strength,” he said. In addition to it happening sooner than we humans expected, the other significance of this milestone is how the computer achieved the victory. Computers beating humans in chess is done through brute processing power. However, Go, which has 200 choices per move, is more complicated than chess in which there are only 20 choices per move. In playing Go, the computer won through the use of neural networks that learned from human players and then gained further knowledge by playing itself a multitude of games. Such a learning process lends itself to applications in disciplines perhaps more useful than playing Go, such as health care, economics and autonomous vehicles. Last week’s victory was against the 675th ranked player in the world (INTN is ranked 70,567,356th).  A bigger test looms. In March, the computer will play the world’s best human player in a match that will take place in Seoul, Korea.  We here at INTN will be watching.

File Under Correlation or Cause?

In 2015, Africa’s GDP grew at its lowest rate since 1995. The continent’s GDP growth rate was only 3.6% last year. According to the Washington Post, “China accounts for more than 40 percent of exports in more than a half-dozen African countries, including Zambia, Angola, and Sierra Leone.” How much is China’s economy slowing?  How much is that affecting Africa? These are not unrelated questions.

Africa’s GDP Growth