From mining bitcoins to Qatari hostages to the tyranny of convenience to opoids – recent great reads

Andrew Sullivan’s piece in ‘New York Times Magazine’ on the Opoid crisis in America made for grim and sad reading. Of course, some of the causes he alludes to strike a chord even if it is hard to empirically verify them or establish them. You can read the article here.

A British-American friend responded thus:

It’s difficult to analyse how the US has got itself into this position. There are many factors, including a collective cultural desire to be anaesthetised from whatever is disturbing or difficult. That’s been made easier by having a medical profession that’s symbiotically in cahoots with the insurance industry, making the feeding of addictions a win-win situation for both sectors.  The human fallout is horrifying and there is probably not a family in the country that does not have someone who has been affected by this.

Reading this article (ht: Rohit Rajendran) in the ‘Politico’ magazine made me recall the movie, ‘It is a mad, mad, mad world’.  I think the movie came in the Sixties. The extent to which electricity is consumed to ‘mine’ bitcoins boggles the mind. More fascinating are the quarrels and the social effects it has caused. It is a good piece of journalism.

The article does a very good job of explaining what ‘mining’ bitcoins is about and what forms a block and a blockchain, etc. I get it (kind of). But, I really wonder if it can ever threaten the monopoly of the State on money. If it does, its issuers become an alternative State. If it does not, it is a fad and a bubble. As long as the number of bitcoins does not exceed 21 million of them, its artificial scarcity value can be maintained. If it is increased, then it would begin to create doubts in the minds of authorities. Read it here.

Srinivas Varadarajan shared the link to a very thoughtful article on the ‘Tyranny of convenience’. Some sentences that stood out for me:

Particularly in tech-related industries, the battle for convenience is the battle for industry dominance.

Convenience and monopoly seem to be natural bedfellows.

Today’s technologies of individualization are technologies of mass individualization.

Convenience is all destination and no journey.

Struggle is not always a problem. Sometimes struggle is a solution. It can be the solution to the question of who you are.

We give other names to our inconvenient choices: We call them hobbies, avocations, callings, passions. These are the noninstrumental activities that help to define us.

Rajesh Raman shared the link to a long story in New York Times on how members of the Qatari royal family were taken hostage and the dizzy geopolitical calculations behind it. Worth reading, if only to understand a bit of the conflicts between nations (or, tribes) in the Arab Peninsula.

I liked this blog post of MarkGB on the demonisation of Putin. There are no villains nor heroes but only an understanding of high stake games that nations play. I am yet to figure out why the West is hellbent on driving the Russians into the hands of China.

Soeren Kern has a detailed blog post on the political correctness behind unreported rape and assault cases in Germany. What is the rationale for the political correctness or squeamishness?


Markets ignore Italy election results

Close on the heels of my posting on the review by J.W. Mason of Varoufakis’ book, I thought it would make sense to post on the Italy election results which saw both the ‘Five Star’ party and ‘Northern League’ perform far better than expected. It is a bad result. Italy is an important part of Eurozone. Germany finally has a Chancellor but the coalition is fragile. Spain has not really settled the Catalonia issue. Markets are fixated on Trump tariffs and hence pushed the EURUSD higher. That sounds silly, to me.

FT has a good story on the election results and if that is buried behind a paywall, see here. I think the complacency of financial markets provides avenues for exits.

Ferdinando Giugliano has a good piece in Bloomberg Views. That should be accessible to all.

This line struck a chord:

they have sold the electorate a future made up of free money.

Well, ambitious politicians; desperate promises and desperate hopes – not just the prerogative of developing countries.

Adults in the room

That is part (or full) of the title of the book by Yanis Varoufakis, former Greek Finance Minister. I would like to get hold of it.  I have read his ‘Global Minotaur’. I liked it. The review of his book by Prof. J.W. Mason (a Marxist-economist, I am told) is quite well written. Makes one want to buy and read the book. J.W. Mason is Assistant Professor of Economics at John Jay College – CUNY.

The private memo sent by the European Central Bank to Italy, the advice that the Italian Prime Minister got from the German Finance Minister Wolfgang Schäuble to end collective bargaining and then the question that Christine Lagarde posed on Pharma sale de-regulation to Yanis Varoufakis are rather revealing. Notwithstanding all the tall talk of having learnt their lessons from the global crisis, of heightened sensitivity for the marginalised local population, the real agenda is laid bare in these situations.

I was also looking for a blog post that my friend Gulzar Natarajan had written on how many of these social enterprise investment funds incorporate in tax havens. Very simple. Consistency between practice and precepts or between words and deeds is missing. Credibility eroded. Backlash occurs and non-establishment candidates win. No point in blaming them. Elites bring this upon themselves and the public. Elites will survive. The public has it tough under both regimes.

At another level, this is also about the sovereign right to choose its economic agenda, the sequence and timing of implementation. Reminded of the paper, ‘Refocusing the IMF’ by Martin Feldstein published in ‘Foreign Affairs’ (March/April 1998). He said that IMF had no business dictating economic policy agenda to sovereigns.

(Postscript: I could not understand Professor J.W. Mason’s interview on the stock market. I do not quite fully understand why Marxist-economists believe that the Federal Reserve is helping the working class by not raising interest rates. To a degree, I can understand that. By raising rates just as wage growth gets going, the Federal Reserve snuffs at the nascent trend of higher income share going to workers. But, the failure lies not in that but in not raising rates early enough. The damage the Federal Reserve causes to the incomes of the working class with its monetary policy framework that underpins asset prices far exceeds the damage that it causes them with its belated tightening).

China trade surplus and other links

In absolute dollar terms, China’s trade surplus with the United States reached USD275bn in 2017. The previous high was USD260bn in 2015. Clearly, the United States matters to China. If the United States monetary policy remains loose in the guise of supporting economic growth and employment, because inflation is not showing up and if financial instability risks are disregarded, clearly it is to China’s benefit. Just saying.

A fascinating and even somewhat frightening report on China’s appetite for commodities. The geopolitical influence that this buys China will be hard, if not impossible, to match.

I read a piece by Mohamed El-Erian in FT. He is permitting himself economic optimism and less discomfort with asset prices. I wonder how he would react to this story about the ‘shocked’ market reaction to the tiny shift in the asset purchases by the Bank of Japan. In other words, how durable is this so-called global recovery?

This page gives details on the asset purchase programme of the European Central Bank. The 10-year Greek bond yield is at 3.75%. There has been no big improvement in its unemployment rate or in its debt ratio. This table gives the youth unemployment rates in European Union countries. Check out the statistics for Greece, Spain, Italy, Portugal and France. This is annual data up to 2016. This table gives you the figures as of August 2017. You can compare the numbers for the above countries and figure out the improvement, if any and decide for yourself whether this is the stuff of a sustainable recovery that justifies Mr. El-Erian’s optimism.

India’s consumer price inflation data for December 2017 was a bit of a worry. JP Morgan finds the momentum in core CPI (headline minus food and fuel) surprising and concerning. Among States, Tamil Nadu and Kerala contribute quite a bit to the inflation rate with their 7% inflation rate and a combined weight of 11%. That means nearly 80 basis points of inflation out of an inflation rate of 5.2%. That is nearly 16% contribution. Inflation in Uttar Pradesh is well behaved. Is hoarding by intermediaries an issue in Tamil Nadu and Kerala? Just asking.

Industrial Production data for November, notwithstanding the outsized contribution by the Pharma sector (and that too, antacids!), was more encouraging than that of the inflation data because motor vehicles, other transportation equipment and basic metals constitute 20% of Industrial Production. They are growing nicely. Pharma with a weight of 5% was growing at an annual rate of 40% and that gives you a contribution of 2% to the annual IP growth rate of 8.4% – almost 25%.

The rather poor growth in textiles and apparels must be worrisome for a country that is looking to light manufacturing to create jobs. It is not that they command a high percentage in the index. In fact, their should increase and they should be productive.  There is a role for policy action here?

Lewis on Thaler and other links

Been on the road since last Friday. Too much of travel and hence less time to think but made time to read, though.

Thanks to Tracy Alloway’s Twitter handle, saw this Michael Lewis piece on Richard Thlaer, written first in May 2015, republished early in October.

Google/Alphabet’s urban cities project is fascinating, mind-boggling or scary or something to be welcomed? I have no idea.

HSBC might have helped Guptas in South Africa to launder money.  Could be behind a paywall.

A comprehensive interview with CEO of UBS. Parts of it have a wider relevance than only to financial types.

Countries around Asia are banning sale of sand and Singapore’s land expansion is threatened.

Americans are ‘freaking out’ but, as consumers, they are feeling confident more than ever in the last seventeen years.

The scariest chart is the last one – Halloween special.

This – a similar set of scary charts – is from the bond market perspective. The information below boggles the mind:

ECB QE is currently 7 times bigger than net issuance. So is it any wonder why yields have fallen, and what happens when the ECB tries to turn off the easy money tap?

Germany, Austria and Catalonia and other links

For the last few weeks, my posts have tended to concentrate on India. But, the world does not wait for me to blog about it!

The elections in Austria, coming on top of the rather weak mandate in Germany for mainstream parties and the mood and momentum for secession in Catalonia in Spain have dealt big blows to the facade of European stability and leadership in the world.

Noah Smith has a piece on the ‘inevitable’ takeover of global leadership by China. I demur but that requires a lengthier post. Do not miss the link to a useful and interesting recent paper inside his post.

This article in the Wall Street Journal explains why the clamour for Russian connections to the American Presidential elections appears to have slowly faded away.

Google did not let me circulate the following two articles to my mailing list:

The rise of road fatalities in the US and the use of smartphones [Link]

A new game by ‘Tencents’ to applaud the Chinese President [Link]

A new poll shows that Abe’s political party would win a super-majority in Japan’s polls. Hope it turns out to be correct.

(FT and Nikkei Asia Review links might be behind paywalls. Apologies)

A bubble pops

Hectic traveling continues. Traveled to a village called Dattwada in Madhya Pradesh, about 150 kms from Indore. The route goes via Tikri, Anjad (Anjad-Bharwani Road) and then to Dattwada. The heat was sweltering in end-September. No internet connectivity.  Back to the base in Singapore on Sunday.

Too many things happen for us to keep pace. We cannot. We cannot keep pace. We can try and keep peace with ourselves and the world. That is what we can and should try. The European economic and political stability bubble was pricked with the German election result. Christian Democratic Union of Merkel turned in its worst performance since WW II and the Social Democratic Party (SDP) turned in its worst performance from even earlier. The Alternative for Germany (Alternativ für Deutschland – AfD for short), deemed far-Right by the commentariat turned in its best performance and won some 94 seats, I think. AfD picked up votes in Bavaria State (where Munich is located) and in the capital Berlin too. As for what AfD stands, it is only thing to emphasise nationalism and security and seek tigher curbs on immigration and it is another to deny the holocaust. See here. The WSJ article has some useful charts.

Even before the elections in Germany, I had been sceptical of the romance of the so-called global ‘elites’ with Europe. They saw in Merkel an alternative to the isolationism of Trump. But, Merkel was disregarding the popular feelings towards immigration. Daily Shot, a nice collection of pictorial global economic snapshot from the Wall Street Journal carreid this chart on 6th September:

Pressing issue in Germany_Sept.2017

While I was searching for the chart above, I saw this one too.

Germany divided over Merkel policy_Aug.2016

Other charts carried in this article in August 2016 are equally interesting. The warning signs were there. Again, the elites and the biased media ignored them.

European economic convergence had not happened. Post-Euro introduction, it has been a story of divergence between Eurozone original 12. Further, IMF Article IV consultation report for the Eurozone stated bluntly that the Southern European nations had not used the windfall from low interest rates to put their fiscal house in order. They are vulnerable when rates rise. I had written about it in a MINT column recently.  It is a different story that IMF still advised European Central Bank not to raise rates, despite low rates encouraging complacency!

Over the weekend, there was a stabbing incident in Marseille (France) outside the train station. Two women were killed in a ‘terrorist’ incident. Such attacks are meant to create panic and hardening of attitudes among the locals. Alienation is what terrorists seek and such attacks succeed in breeding alienation as they strike very near ‘home’ for many. However, analysts and intellectuals would blame the locals for not wanting immigrants in their midst. It is silly to question the innate human need for security. Charity comes after security.

In Spain, Catalonia held an ‘illegal’ referendum. 42% showed up to vote and of them, 90% voted in favour of independence from Spain.

It is a difficult world. Europe is no exception. Indeed, Europe is arguably the epicentre of it. It was delusional to think otherwise.