Sunday Sanity Break, 15 July 2018 – Trumpism and economic growth
Britain’s Theresa May is in the fight of her life to produce a solution to Britain’s departure from the Europe. Always a bit odd for Mrs May to be leading this push as she was a was a ‘remainer’, as were most of Britain’s urban ‘elite’. Mrs May is angling for a ‘light’ Brexit. In the limit I suggest withdrawal from law making (though British laws presumably must not vary too sharply from those of the Eurozone), and perhaps some allowance by the EU for the rules that most irritate British farmers.
No need to fire up the printing presses as Britain never abolished the good old pound to take up the Euro, already doomed because it greatly advantages ‘Northern’ Eurozone nations , eg Germany, at the expense of’ Southern’ Eurozone nations like Greece, Italy and Spain. (Why respectable economists do not say this baffles Henry.)
The freedom or otherwise of British trade with the European mainland will be contentious, and only achieved if Britain allows EU citizens free access to life in Britain. Of course, current illegal immigrant problems is encouraging a general tendency to making immigration policies tougher. Milton Friedman said many decades ago that a nation cannot have social welfare and open borders. Only Australia seems to understand this point of economic logic, though American economists are trying to catch on.
If the free world called President Trump’s bluff and agreed to abolish all tariffs and bureaucratic barriers to trade that might solve the the Brexit problem, but is too hard to imagine just yet. But with the Friedman point slowly catching on in Europe the case for immigrant control at borders will become more widely discussed. An especially difficult case involves Northern Ireland’s border with the Republic of Ireland. No-one presumably wants to restore sectarian warfare or erect costly border controls, but any freedom from the latter will be at best irritating and at worst foster old barriers that seem now to be invisible.
Some snippets from our visit, brief and anecdotal.
* Middle-aged men in both Irelands, but in Belfast in particular, seemed chronically unhappy, if Henry’s reading of body language is anything like accurate. Maybe our sample was biased by long visits to places prominent in the ‘Troubles’, sectarian warfare that should never be repeated.
* Among the several Eastern European nations, the Poles seemed the cheeriest. Given their deep pain and great damage during WWII by the Nazis and their new Russian overlords after then, the current Polish brio is a tribute to their basic human qualities. In Warsaw and Krakov people seemed busiest and unusually cheerful, with easily the largest numbers of bambini.
* The Italians in Rome and Florence, where we spent most of our time, seemed their usual volatile but basically relaxed selves. In Prato, where Mrs Thornton was teaching, the long-standing textile industry has been sold to Chinese buyers who are busy shifting most production to China.
* In all places noted, tourism is a major industry, perhaps the major industry. We wish them well and hope their leaders will wake up and get rid of foolish practices like crucifying Southern Eurozone jobs on a cross of Eurozone cardboard.
* President Trump’s ‘misspoken’ blunder when striving to become President Putin’s best pal is another cause for slower growth and deep concern about America’s role in world affairs. Do not miss Paul Kelly’s splendid diatribe in today’s Oz.
We are home again after traveling with JAL: Rome to Helsinki, Helsinki to Narita and Narita to Melbourne. Well over 24 hours if time between flights counts. (A delay at the start of the trip meant our flight to Helsinki landed after departure time of the flight to Narita. After walking rapidly from one end of the Helsinki terminal to the other end (with 6 others) we reached the plane in time to board. Then there was a further delay as the airport was in lockdown until the Donald’s plane left.
The US economy keeps bubbling along, and President Trump is surely not to be blamed. (What a surprise for the Democrats.) The US Fed is gradually raising interest rates and who knows if it will be blamed for wrecking the recovery. New US Fed chief Jay Powell , has said overnight that US jobs are growing strongly, growth is doing better and the Fed should keep raising interest rates gradually. On the other hand, the real possibility of a major trade war could become a real drag on global growth
Europe overall is inching along, and the gloom in Southern Europe is palpable. German prosperity is maintained by national personality of hard work plus what for Germany is an inexpensive currency, kept low by the good people in Southern Europe.
Japan’s population is old and growing older and either have to accept a whole lot of young Eurozone immigrants or settle down for a long, slow decline.
China’s vast boom seems to be slowing and The Economist has noted that a relatively low key, approach is being taken to Mr Trump’s apparent global trade war.
Lots of Doomsters emerging. An asset inflation crash is one concern. One Harry Dent of Australian Tribune and Port Phillip Publishing fame is seriously flogging his 2017 book Zer0 Hour . His analytic contribution is identification of several vast ‘cycles’ that in the next few years are supposedly about to enter a coordinated crash that will make the 2007-08 downturn, even the Great Depression of the 1930s, look like a Teddy Bear’s picnic. Henry himself has been preaching for years, starting in 1986, to the effect that continued borrowing and asset inflation will eventually produce a great downturn. As shown in 2007-08 the Masters of our current universe will throw money at the problem in attempts to minimize the pain again. How long this can go on is an issue that needs debate and discussion.
The second big issue is the political uncertainty being created by President Trump by abusing allies, cozying up to ideological enemies and trying (it seems) to ignite a trade war. At some stage this will create real economic concern and this may trigger the damaging asset crash that concerns both Henry and Mr Dent.
One great benefit of being in Europe was the opportunity to watch World Cup futball games at reasonable times of the day. The final was dazzling as a very talented young French team in the end comfortably defeated a brave Croation team. While commentary was Italians who get VERY excited, the coverage was fine. One feature of futball is the frequency and skill of leading players in ‘the dive’. Often the replay shows no one touched a diver, and when there is a clash of bodies the player hit, or both, writhe is apparent deadly pain in the hope the other bloke will get a red card or the (apparently) most injured bloke gets a free kick in front of goal.
Makes a farce of an otherwise fine game and one hopes FIFA eventually gang up to stop the practice. Here is a suggestion that may help. Any player who looks like he is seriously hurt, writhing, clutching head, or leg or some other body part, has to be subbed off, immediately.
We have been baked, fried and reduced to sad little sweaty tourists is what is a hot Eurozone summer, and are totally glad to be home. Caaaarrlton! got flogged by St Kilda and after the season so far one has to begin to believe that something horrible is happening at Princes Park. Like Fitzroy before it, next step is a merger with another side with no hope and a move to a distant outpost of AFL footy. (If this is unavoidable I’d vote for the Tiwi Islands and would ask David Parkin to become the first coach. Keeping Cripps, Kreuzer, Rowe, and a few of the very promising young players being blooded by Coach Bolton and providing an infusion of Tiwi talent would provide a brand new dimension of AFL footy.
Image of the week - Putin and Trump in Helsinki
Courtesy The Australian