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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

This week at International Need to Know we light up your life with the exponential growth of solar energy, darken it with the decline in world trade and note where the cheapest and most expensive phone bills are in the world. Welcome to this week’s edition of International Need to Know, your global gift of information and data.

Of course, if you don’t want to know, just hit “unsubscribe” at the bottom or reply to this email and I’ll remove you from the list. Alternatively, if you want others to be in the know, hit “tell a friend” which can also be found at the bottom. Without further ado, here’s what you need to know.

Peak Globalization?

Since World War II, world trade has grown at a faster rate than world GDP. In fact, according toBernard Hoekman at the Robert Schuman Center, “Global trade increased 27-fold between 1950 and 2008, three times more than the growth in global GDP.” Global trade grew even faster than GDP during the period from the early 1980s to mid-2000s thanks in large part to China’s reintegration into the global economy and the fall of the Iron Curtain. But the world has changed the last ten years. Even before the financial crisis, trade growth has been below GDP growth. So, the trade to GDP ratio, after rising from 25% in the 1960s, is now stuck at 60% today and falling. Is this peak globalization? Probably not, globalization is more than trade, it’s investment, immigration, cultural transference and more. But, at least for the moment, world trade is not driving the economy. In fact, in a worrisome sign, world trade has been shrinking in recent months. More on that soon.

A Moore’s Law of Solar Power?

We alluded to this in last week’s INTN (the latest hip acronym—memorize it, use it)—solar power is increasing rapidly. In fact, the amount of solar generation is doubling every two years or so. The futurist Ray Kurzweil pointed this out in the late aughts and yours truly decided to track solar power and see if Kurzweil, to use a technical term, is full of it.  Well, at  least in this regard, Kurzweil is on track—the solar power increase  phenomenon continues as you can see in the graph below from the International Energy Agency (IEA). As solar costs continue to decrease and as finally there are real strides in energy storage technology, it seems likely this exponential rate of growth will continue. If this doubling continues, then by the 2030s (not that far from now if you think about it—sure at current rates most rock gods will be dead, but Keith Richards is likely to still be alive), basically all our energy needs could come from solar generation and storage. This will have a profound impact on our economy, jobs, stock market and efforts to combat climate change. Something to keep in mind as that same mind reels from today’s falling oil prices, stock markets and rock idols.

Expensive Smart Phone Bills? Move to Iran

I’ve managed to use a question mark in every headline. Question marks are an under utilized punctuation in human discourse. To paraphrase the Atticus Finch of modern lawyers, Dean Strang, much of what ails us is certitude. At any rate, International Need to Know is amazed at his monthly smart phone bill. But, it could be worse, he could live in Tuvalu (for those not acquainted, it’s a Polynesian island nation and also would be a great lyric for a 1960s R&B song), which has the most expensive monthly phone usage costs. Or we could save some Rial and move to Iran, the third cheapest place to have a phone. For your travel and shopping pleasure we present the top ten cheapest and most expensive places for phones.