Why 2007-08 was only a curtain-riser

What began as a message to my faculty colleagues at IFMR Graduate School of Business was eventually abandoned and it ended up being a ‘long read’ article published in Mint. They had removed many of the hyper links to keep the piece tractable. Fair enough.

Here is the original version. Perhaps, Mint should have titled the piece, ‘Why it feels like the autumn of 2007?’ The original version, below, has more links.

Wall Street Journal recently issued an oxymoron alert. The oxymoron was that high yield bonds had gone negative. “There are about 14 companies with junk bonds worth more than €3 billion ($3.38 billion) that are trading with negative yields, according to Bank of America Merrill Lynch. They include telecom giant Altice Europe NV and tech-equipment company Nokia Corp.” It would have been unthinkable even a few years ago to have high-yield/speculative/junk bonds being sold for negative yields. They were meant to be high-yielding bonds because they carried with a high probability of default. But, to compensate the borrower to buy them means that the logic of higher expected return for higher risk has been upended. This makes investing impossible.

A pension fund manager in a European country was told by his regulator not to hold too much cash because it is risky and was told to invest them in negative yielding bonds, instead! This cannot and will not end well. It is time for investors to baton down their hatches and settle for safety rather than returns because it is a recipe for the elevation of socialist policies in America to a historically unprecedented level, after the next Presidential elections in 2020.

Globally, about USD 13.0 trillion of debt is trading at negative yields. Two US companies that issued leveraged loans have quickly seen their bonds lose value. Obviously, lenders chasing yields have ignored risks. The companies recycle printer ink cartridges and another one is a beauty company! – Clover Technologies and Anastasia Beverly Hills! See here.

Amidst all this, what is funny or tragic (depending on your lens) is that investors, according to Schroders, have upped their return expectations for 2019 to 10.7% from 9.9%. This is based on a survey of 25,000 people across 32 countries. In other words, the survey respondents plan to make riskier investments (some of which now yield negative returns!) and that they expect central banks to underwrite their risks with ultra-low interest rates or negative rates or nominal GDP targeting into eternity.

Who is responsible for this upside-down world of investing?

Let us start with the Federal Reserve. Its monetary policy committee is meeting on July 30-31. Donald Trump is putting tremendous pressure on the Federal Reserve to ease monetary policy aggressively. Check out his four tweets on the Federal Reserve including and starting from this one. Although the Federal Reserve strenuously denies complying, it is behaving as though it is complying. The Federal Reserve is ready to cut interest rates by 25 basis points at the minimum in its meeting in July. One should not be surprised if the pre-emptive ‘vaccination’ is 50 basis points. The American economy does not need it. William Dunkelberg of the National Federation of Independent Businesses marshalled data to show that no real business – including small ones – is being starved of credit.

All else being equal, a besieged Federal Reserve would have made the US dollar a sitting duck for speculators and for the world, in general, to fall out of love with the greenback. But, it won’t happen in a hurry because others are far worse off. So, the story of the world finally getting out of the dollar standard has to wait. That is because other central banks are again talking of cutting rates aggressively. European Central Bank is fully prepared to outdo the Federal Reserve. Eurozone countries have selected a ‘tainted’ politician to replace Mario Draghi as the President of the European Central Bank. She will be more populist and ‘bolder’ than him with monetary policy experiments. That will be music to financial markets, hedge funds, PE investors who place bets with a high degree of leverage.

The crisis of 2008 was supposedly due to excessive debt carried by different financial institutions – some visible and some hidden. But, the answer from central banks has been to incentivise even higher gearing of balance sheets. In America, the number of companies with increased risk of becoming financially distressed  – companies that either generated negative EBITDA or have net debt to EBITDA over 3x – has grown noticeably this cycle (53% as 6/30/19) versus last cycle (32% as of 6/30/2007). It gets worse.

Central banks deliberately avoid thinking about why their decade-long policy of ultra-low interest rates have failed to mend economies. In less than a year after proclaiming the return to normalcy, central banks are priming themselves to become even more adventurous with their monetary policies. All that their policies have engendered is reckless risk-taking in financial markets, more leverage, greater inequality and tremendous stress on savers, bank deposit-holders and pensioners. Think of the clients of the pension fund mentioned earlier.

Another important consequence of such remarkable persistence with such ill-advised policies is the diversion of capital for unproductive ends and personal aggrandisement. Loss-making start-ups are carrying on without a concern for profits because cheap money means private equity investors blanket them with funds. ‘Wework’ is a technology unicorn in the office rental space. The company has filed for an IPO but it had the temerity to issue USD 4.0 billion debt before that and its co-founder has cashed out USD 700.0 million in the last year! It is valued at USD 47.0 billion. Softbank wanted to invest USD 16.0 billion in that company with USD 6.0 billion in new money. Its partners protested and the investment was pared back. IWG, the owner of Regus, another office space rental company, is valued at USD 4.0 billion and it is making profits. I had blogged on it here.

We heard of price-eyeball ratio in the dotcom bubble era of the Nineties. Now, ‘Wework’ presents ‘community adjusted’ EBITDA which strips out “not only interest, taxes, depreciation and amortization, but also basic expenses like marketing, general and administrative, and development and design costs.” No one has heard of this EBITDA before because it is effectively gross revenue and without accounting for costs, it turns into profits, of course.

Not only have promoters benefited immensely from loose monetary policies and funds available on liberal terms from capital markets but they have also profited from the tendency of governments to compete away their tax dollars from companies.

The corporate tax rates in developed world have come down steadily from 38% in 1990 down to 22% in 2018. This has forced low-income countries to lower their tax rates as well as, otherwise, companies will shift their tax bases to havens that still remain in high-income countries. Corporate tax rates in low-income countries have come down from 46% to around 28% in the same period. This data comes from the International Monetary Fund which, officially, has been the cheer-leader for unconventional monetary policies that have played a leading role in precipitating the next biggest crisis after 2008. That will not be just an economic crisis but a socio-political one too.

Capitalism does not need enemies or competing ideologies. Capitalists are doing a great job of destroying it with multilateral institutions like the IMF egging on central banks to stick to policies that would ultimately cause capitalism to implode.

There has been much schadenfreude in Asia at the self-destruction of capitalist western societies. But, if only such sentiment were justified. Asia, if anything, is more vulnerable. The crisis of 2008 has damaged their growth models irreparably. Let us start with China. Beijing is presiding over a shaky economy in China as official growth rate is again overstating true economic growth and global manufacturing supply chains are moving out of China, exactly as intended by the American administration, even if they are not returning to the United States.

In the meantime, China’s Minsheng Investment Trust Corp. is defaulting on its dollar debt. Its parent, Minsheng Banking Corporation is China’s largest private sector bank by assets. In 2015, it did warn of ‘systemic, concentrated financial risk happening in China’ but it has become a victim of it, itself. In Hong Kong, protests against the pro-Beijing government are intensifying.

Smaller Asian nations are faring no better. Japan’s exports have had seven straight months of decline up to June 2019. So has the performance of Korea’s exports been except that its export slump appears to be worse than that of Japan. No wonder South Korean auto industry is in a slump. Singapore’s non-oil domestic exports is a bell-weather for international trade and global economy. It is declining  precipitously and Singapore economy itself appears headed for harder times. Singapore’s overall GDP contracted 3.4% in the second quarter (QoQ, annualised). Of course, this is an advance estimate based on two months’ of data. Preliminary estimates based on three months of data will be released in August. Indonesian exports have declined for eight straight months up to June and Malaysia’s exports have fared slightly better than Singapore’s and Indonesia’s.

In Europe, German investor and economic sentiment (ZEW) is going deeper into negative territory. The same ZEW survey also pointed out that “the indicator for the current economic situation in the eurozone fell 6.9 points to a level of minus 10.6 points in July.”

A survey of the global political landscape confirms our worst fears. Leaders are ill-equipped to face the oncoming economic storm. Worse, they are seeding and nourishing it. Japan and South Korea are back to feuding in which the trade disputes playing a small but significant role in it. The wounds are historical and they were re-opened by a Seoul court ruling last October. Malaysian Prime Minister looks all set to walk back on his word to hand over power to Anwar, again! Such political conspiracies and power-grab have rendered ASEAN irrelevant both politically and economically. It was laid low by the crisis of 1998 and it has not recovered since then.

In the United Kingdom, Boris Johnson looks set to become Prime Minister and Brexit – deal or no deal – looks likely. Its consequences will be unpredictable because the country has now fraught relations with the United States, with European Union, with China and with Iran. But, the English team’s Pyrrhic victory in the Cricket World Cup 2019 is a small boost to national sentiment. In continental Europe, Angela Merkel’s physical health is deteriorating. Turkey, the pivotal Eurasian nation at the frontier of the Western alliance against Russia, is no longer a part of it, de facto, if not de jure. This is historic and has enormous implications.

Elsewhere, Iran has seized a British oil tanker and America has shot down an Iranian drone. Of course, the current expectations are that things won’t spiral out of control. But, a President seeking re-election is increasingly focusing on cementing and consolidating his base. Belligerence towards his domestic and international opponents will be consistent with those political goals.

Finally, let us examine if India is anywhere close to being a safe haven from the turbulent world. After all, in the elections held in May, its government won a strong mandate with a better majority Alas, its economy is getting deeper into trouble. The slump in the Indian auto sector mirrors that of South Korea and its overall economy has not stopped slowing. The Reserve Bank of India Governor has taken to chiding public sector banks on their non-transmission of his rate cuts. Just as it is the case in the West, monetary policy has no answers to structural ills. Resolving them starts with admitting to them and then being patient without too much anxiety about short-term growth pains. Window dressing only complicates the problem and delays eventual resolution, recovery and strong growth. The budget was incoherent at best and dangerous at worst, for it privileged financial liberalisation and trade illiberalisation. It socked the rich again and that was needless, both politically and economically.

The government announced that it would go for sovereign foreign currency borrowing at a time when India’s export performance is poor and the global growth environment is becoming worse. Dr. Y.V. Reddy, former Governor of the Reserve Bank of India, wrote that a decision on India’s capital account convertibility must precede the decision to issue sovereign dollar bond. But, this is not the best time to liberalise capital account when India’s fiscal health is not at its best and when export performance is sluggish at best and has deteriorated, at worst.

What appeared to be a cleverly disguised (positive) move to divest government stake in public sector enterprises below 51% has been denied, as well. Monsoon is erratic once again and anecdotal evidence points to India being more vulnerable to global climate change than most other nations. India may be sleepwalking into a major and prolonged economic slowdown. Narayanaswamy Jayakumar may have been prophetic here.

As we head into 2020 – the year of American Presidential elections –present trends in financial markets and economies around the world would coalesce into a major storm, convulsing most of them in the process. The Presidential election campaign in America could yet be the most fractious in history searing the nation apart, at a time when the economy may be pushed into a recession by a crash in the stock market or the other way around. That may set off a dollar crisis. The rest of the world, with political and economic problems of their own, will be unable to fill the leadership vacuum left by a politically fractious and economically floundering America.

Once the storm subsides, a new world economic and political order might emerge. To end on a positive note, the destruction wreaked by the storm might mark a true and a lasting bottom for the world economy on which its durable recovery could be built with more sensible policies than the snake oil that central banks have applied.

G-2 to G minus 2

My friend Rohit Rajendran forwarded the ‘Project Syndicate’ piece written by Arvind Subramanian and Josh Felman. The article is, in short, about global leadership vacuum. Calling it ‘G minus 2’ is smart.

The points made about China’s lack of soft power, it not being a benevolent hegemon are well made. I would be blunter: I would call it a predatory hegemon.

US, wrongly, for the most part, thinks that it has been too benevolent a hegemon. That is convenient excuse to deflect problems which defy easy answers.

Taking a step back or rising above these, we should expect these kinds of long cycles to keep coming in a 30-year rhythm. 

We have just begun the long journey of turbulence. 2008 was a decent-enough warning. Our central banks applied monetary balm and politicians were happy to go along with it.

The truth – which most humans do not accept – is that some problems do not have answers. Or put differently, the problems will have to solve themselves, through sheer passage of time and through participants realising the folly of their ways. 

In the current global context, it is going to take rather long, I am afraid.

Did cricket really win on the 14th July 2019?

My good friend Dakshinamurthy Venkatesh Babu (‘Babu’ for short) is an avid fan of sports and films. That is an understatement because I cannot capture in words his intensity, energy and enthusiasm for both. So, I am not trying. He loves Roger Federer so much that neither Federer himself nor Federer’s wife would be able to match him. It takes longer for Babu to recover from the losses suffered by Federer on tennis courts than for Federer himself.

You can imagine what he must have been going through sitting in the upper half of the Edrich stand at Lord’s cricket ground on the 14th of July with the rest of us when his heart and mind were in the Centre Court at Wimbledon. This is where technology failed Venkatesh Babu and the sport-loving humanity. It has not progressed to a point where they could be at two different places at the same time. Many cricket-tennis enthusiasts would have loved to be at Lord’s and at the Wimbledon Centre Court on the afternoon of the 14th July. They could not. So, they watched history being made in one place while they heard of history being made in another.

Roger Federer lost a match that he, for all practical purposes, had won. He was serving for his 9th Wimbledon title and could not hold serve. Federer had won more games in the match and hence scored more points than Djokovic in that match but, in the end, it was Djokovic who was crowned the Wimbledon champion for the fifth time. Federer’s reactions were as impressive and inspiring as the man and his craft are.

May be, some spiritual practitioners who know how to do these things and even teach a select few might become a little more sought-after for this specific purpose, after the events of Sunday, the 14th July 2019.

On my part, I was happy to be at the Upper Edrich Stand at Lord’s in Row J in seat number 67 to witness the bizarre ways in which life unfolded on the 14th of July for cricket players of England and New Zealand. Again, it was due to Babu who had taken the initiative to organise this visit for the rest of the nine of us. Left to myself, I would have watched it in the sweltering sauna-like living room of my apartment in Sri City (IFMR Business School campus) in Andhra Pradesh or, with some luck and planning, in the more comfortable environs of my apartment in Singapore, with my wife and son.

My bragging rights to future generations that I was present at the ‘one and only cricket match that could ever end like this’ is dedicated to Babu!

We watched a cricket match at Lord’s on Sunday that may never again be repeated. Perhaps, the way it was concluded should not be repeated at all. That would be better for the game.

Osman Samiuddin writes in Cricinfo that if ever a proof was needed that life was random, the Cricket World Cup final match of 2019 served it up. One should not be surprised that an outcome like this forces humans to dig deeper and wider into philosophical realms to make sense of it all.

For the record, I had come to a different conclusion. Both Kane Williamson and Roger Federer were born on the 8th August, nine years apart, and they both had a heart-breaking day. It is equally true that both of them are the finest blokes you could find, not just in their respective sporting arenas, but outside of them too.

Many things that happened on the 14th July at Lord’s were not random. No, I am not saying that there was a conspiracy to make England win. Far from it.

Martin Guptill reviewed the ‘LBW’ decision against him. The review went against him, denying Ross Taylor a review when the umpire was clearly in the wrong. Some of us who had a direct view – as I had – felt that the ball had hit him high up, on the thigh.

Martin Guptill ran out M.S. Dhoni with a brilliant throw in a crunch situation in the semi-final but he, inadvertently, ended up conceding 4 overthrows, in a most bizarre and cruel twist to the game when New Zealand had almost put the match out of England’s reach.

Then, Martin Guptill was run out himself, inches from the crease, sprawling, almost like Dhoni was, in the semi-final.

Technology helped New Zealand when it failed to overturn an umpire’s decision that went against Virat Kohli in the semi-final. Technology did not help New Zealand when it failed to conclusively establish that Jason Roy was out the first ball he faced from Trent Boult.

There were other minor-major errors. Quite what Santner was thinking on the last ball of the innings he faced is unclear to us. He not only failed to make any attempt to make meaningful contact with the ball but also failed to take a run off it. It mattered in the end. In a big way.

The big difference, for the worse, on the day, was Trent Boult himself. He was at his best against India. He was well below par on this day, conceding at least one boundary per over.

As for England, did they deserve to win the tournament? I wish I had no doubt in my mind that they deserved. They found a very purposeful and effective bowler in Chris Woakes and Ben Stokes, born in New Zealand, had carried their hopes alive in many matches. He is world class. Jofra Archer, a Barbadian import, is a bowler to watch. But, the more impressive teams in the league phase were India and Australia. England, except on placid tracks, came up short.

Finally, about the rule book. Simon Taufel, a former respected umpire, notes that England should have gotten only five runs off the overthrow rather than six. The specific rule is written clumsily but its intent seems clear as its application. The two umpires on the ground – Erasmus and Dharmasena – missed it. But, that was not the only thing they missed on that day. Playing teams, despite the help or hindrance of technology, must include umpires as part of their team or as part of their opposing team, depending on the day.

Thank Goodness for them that the team that faced most of their errors on 14th July at Lord’s was New Zealand and not India at Eden Gardens, Kolkata.

The most important rule of the day was something that no one had paid attention, probably, including the players and the managements of the teams: if the match was tied, there would be a super over and if the super over was tied as well, the team that scored the most boundaries in the match would be declared victors. It is as daft as it could get.

It is not that we are criticising it now, after remaining silent when it was being drafted. The rule was not crowd-sourced and ICC did not invite suggestions from cricket fans, administrators, et al., to come up with a better rule.

Cricket is about runs and wickets. How you score them is less important. In theory, a team can take singles and twos and score 300 runs in a 50-over match. Possible. Another team can do it differently. Merely because another team scores the same number of runs with 30 boundaries and five sixes plus singles and twos, does not make it a superior team. Arguably, it is a riskier, less athletic and less efficient approach.

Since cricket is about runs and wickets, if the runs are tied, the next important thing is wickets. Since New Zealand scored the runs for the loss of eight wickets and England were all out, New Zealand should have been the winner.

If that too was inconclusive, then one can look at either of the two:

(1) The difference in the net run rate for the entire tournament between the teams or

(2) Difference in the number of runs scored per wicket lost between the two teams in the entire tournament

The only rationale for determining the outcome on the basis of the number of boundaries is that the team that provided the most entertainment to the crowd in terms of boundaries wins! Well, even that may not be correct for it takes no account of how the boundaries were scored.

It privileges batsmen over bowlers. It is flawed.

Why not the team with the most economical bowler wins?

The point here is not to come up with another unilateral (and unfair and unreasonable) rule but to indicate things that administrators needed to think through the signal that they are sending to cricket players.

The ICC has to be indifferent or neutral between batsmen and bowlers. Administrators in combination with Television channels or because of revenues from television rights have put a premium on big-hitting batsmen.

The message of the (second) tie-breaker rule is that technique be damned, bowling be damned and fielding be damned.

That is not cricket. That is not good for cricket either.

(Cross-posted at http://jeevatma.wordpress.com)

Stuck in and with ‘stimulus’

As I read Mike Mackenzie’s market commentary in FT on the 16th May, I was stuck by the use of ‘stimulus’ four times in the article, at various points:

Hopes of a stronger spring bounce in China’s economy reflecting earlier stimulus appears stuck on the launch pad….

… many think the global economy requires a lot more stimulus from here.

… “bad news is actually good news” as it means Beijing will accelerate its stimulus efforts 

… Unless the EU gets to grips with expanding fiscal stimulus across the region

The world has thus come out of (has it?) of an unprecedented monetary stimulus kept in place for nearly a decade – unprecedented in scope, magnitude and duration.

Yet, barely a year later, if almost all parts of the world require further stimulus, what does it say of its effectiveness or, more importantly, desirability, considering all the unpleasant consequences it has engendered, in its wake?

The fine art of dentistry

“A team of researchers at ETH Zurich, a Swiss university, asked a volunteer patient with three tiny, shallow cavities to visit 180 randomly selected dentists in Zurich. The Swiss Dental Guidelines state that such minor cavities do not require fillings; rather, the dentist should monitor the decay and encourage the patient to brush regularly, which can reverse the damage. Despite this, 50 of the 180 dentists suggested unnecessary treatment. Their recommendations were incongruous: Collectively, the overzealous dentists singled out 13 different teeth for drilling; each advised one to six fillings.” [Link]

This is in Switzerland! nearly 30% of the sample have recommended unnecessary treatment!

An article worth reading, even if a bit worrisome. Good to be alert. With dentists, it looks like you cannot stop with a second opinion. You need a third and a fourth, no matter which part of the world you live in.

Denial

It is very easy to write about ‘climate change’ and ‘denial’ in the same sentence. But, ‘denial’ is a human reaction to many things. When faced with a difficult situation or adversity, we first respond with denial. So, one of the usual cycles goes like this:

Crisis – anger – denial – acceptance – action – recovery – complacency – crisis.

Another situation in which we first respond with denial is when we come across something decidedly superior to our work and our knowledge, we respond with denial and then try to belittle it. When it fails, then we begin to accept it grudgingly. Perhaps, the ‘grudge’ never goes away.

So, the theme of this blog post is ‘denial’ in different contexts.

Here is a news-story on Miami going under water and how real estate agents are responding to it. The interesting lines that caught my attention are these:

The sea level in Miami has risen ten inches since 1900; in the 2000 years prior, it did not really change.

The second one that caught my attention is this:

This is the neoliberal notion, that the reasonable and mature way to think about this stuff is: Get more efficient and find the right incentives to encourage the right kinds of enterprise. But my friend wondered, what if the mature thing to do is to mourn – and then retreat?

I really liked this second one because it is in line with this blog post of mine, done a few days ago: ‘Problems and Solutions’. Humans do not or cannot have answers for all issues. In many cases, the ‘fix’ is to retreat, admit that we made a mistake and that we cannot fix it. Most of the time, the ‘fix’ is about continuing with our preferred way of living, not wanting to change it and that somehow we could have the cake and eat it too.

Closely related to this theme is the story published in FT is on a study by Blackrock that investors fail to price in the potential impact of climate change on their portfolios. No surprises there. The story has the link to the full study for those interested. [Link]

In the same issue of FT, there is also the story of the Great Barrier Reef slowly disappearing due to the effects of…….. ahem…. climate change. The first sentence of the article is a good-enough summary:

The damage caused to the Great Barrier Reef by global warming is severely compromising the ability of its corals to recover with a near 90 per cent slump in new coral growth last year, a study has found.  [Link]

This is from the story in the ‘New Yorker’ on migration from Gautemala into the United States:

In a sixteen-hundred-page analysis, government scientists described wildfires in California, the collapse of infrastructure in the South, crop shortages in the Midwest, and catastrophic flooding. The President publicly dismissed the findings. “As to whether or not it’s man-made and whether or not the effects that you’re talking about are there, I don’t see it,” he said. There was a deeper layer of denial in this, since overlooking these effects meant turning a blind eye to one of the major forces driving migration to the border. [Link]

Another sentence in that long ‘New Yorker’ article on Gautemala, climate change and forced immigration to the United States caught my eye:

When the program started, the names we took down were all men,” Loyda Socop, another staffer at the C.D.R.O., said. “But it turned out that it was mostly women who were behind it. They were the ones who wanted to give this a try.” [Link]

Probably, it is worth studying if men are more prone to ‘denial’ and all the dangers associated with ego and hubris than women and, second, if they are more willing to adapt and change than men.

If at all there is some hope for a resilient response and recovery from the ravages of climate change, does it lie with women than with men?

Not that I think Sapiens have left much room for recovery. I think we may have gone past the doomsday clock with respect to climate change. We may mitigate, we may delay but not deny the impact.

Lastly, an illustration of the other form of ‘Denial’ – intellectual and/or ego-induced denial. My colleague, Raghuraman, pointed the ‘denial’ out to me.

This is a (very) long-form article I read in the early hours of Sunday before going to bed, on the Asteroid strike on the planet some sixty-six million years ago – on the moment the Cretaceous period ended and the Paleogene period began. A young Paleontologist (Robert DePalma) may have discovered the ‘record’ of that event in a place called ‘Hell Creek’ (what an apt name?!) in North Dakota.

What comes through, among many other things, in that article is the reluctance of the scientific community that this young man might have discovered what they have not been able to:

All expressed a desire to see the final paper, which will be published next week, in the Proceedings of the National Academy of Sciences, so that they could evaluate the data for themselves. [Link]

The article was published on March 29, 2019. The paper must be out by now. Those interested and capable can go through the paper and decide for themselves if the young paleontologist has indeed stumbled upon the most amazing recorded evidence of the asteroid strike on Mother Earth.

For those interested, Robert DePalma is related to Hollywood Director Brian DePalma.

Lastly, I read that young Republicans are forcing their elder counterparts to shed ‘climate change’ scepticism (or, denial):

Mr Gaetz said: “One of the problems Republicans have with climate change is they assume if you accept the science of climate change, then you are [required] to embrace the left solution set.” But he added: “I recognise the obvious science of climate change. I didn’t come to Congress to argue with a thermometer.” [Link]

It is not just the Republicans who are to be blamed for climate change. One should blame even central bankers. Low interest rates and high debt have brought forward economic growth mindless construction – think Miami real estate!) that did not exist and have brought forward climate change. So, solutions have to start from the pursuit of mindless and structurally unsound economic growth. But, it might all be too late.

Well, we are like this only. We need asteroids to start afresh.

‘Has Asian dominance arrived’ and other links

This Bloomberg story tells us that global debt rose ‘only’ USD3.3trn in 2018 to around USD243trn, about three times the global GDP. If you want to know the background to this news, the link is there in the Bloomberg news-story. It is a research note by the Institute of International Finance.

Despite that, President Trump is not happy with Fed Chairman Jerome Powell. He says he is ‘stuck’ with Powell. This is quite wrong and dangerous. I am surprised at US dollar’s resilience in the face of such gibberish.

According to ‘What we are seeing’ (Edition: 22.03.2019), for the first time, globally, the number of 65-year olds has exceeded the number of 5-year olds.

One has to do more detailed work on the claim that Asia has become the world’s largest economic bloc and that its GDP now exceeds the combined GDP of the rest of the world, in PPP $. My simple response is ‘So, what?’. Of course, I could be very wrong here but the obituatry of Western dominance is being written too prematurely. Asia is at very high risk of internecine warfare and the West has a good track record of ‘divide and rule’. I would like to recall my MINT column from nearly four years ago that the 21st century would belong to the West or to nobody.

This blog post from ‘Bank Underground’ (Bank of England blog) says that rising interest rates increase labour share of GDP because productivity might fall faster than wages do. Or, we can add that capital’s share declines faster in an environment of rising rates due to correction in asset prices. Very interesting and important empirical evidence in this. It shows that a reflexive opposition to higher interest rates by the likes of, say, the Economic Policy Institute is wrong.