Category Archives: Global Economics

The Risks That Threaten Global Growth

changeaheadroadsignMy Comments: Readers of this blog will recall my observations about risk in general and in particular, those that will influence our economic well being in years to come.

With the new administration seemingly in favor of conflicts over trade between nations, and of retreating from the forces that have fostered global economic growth for the past 7 decades, these comments by Martin Wolff seem prescient.

Just as I tend to agree with Trump’s call to ‘drain the swamp’, or in my words, re-assess the assumptions on all levels that led us to where we are now, there are major forces at work over which we have virtually no control that demand a reassessment of economic assumptions. The next few decades are going to be tough for a lot of us.

by Martin Wolff, January 3, 2017

What is going to happen to the world economy this year? Much the most plausible answer is that it is going to grow. As I argued in a column published at this time last year, the most astonishing fact about the world economy is that it has grown in every year since the early 1950s. In 2017 it is virtually certain to grow again, possibly faster than in 2016, as Gavyn Davies has argued persuasively. So what might go wrong?

The presumption of economic growth is arguably the most important feature of the modern world. But consistent growth is a relatively recent phenomenon. Global output shrank in a fifth of all years between 1900 and 1947. One of the policy achievements since the second world war has been to make growth more stable.

This is partly because the world has avoided blunders on the scale of the two world wars and the Great Depression. It is also, as the American economist Hyman Minsky argued, because of active management of the monetary system, greater willingness to run fiscal deficits during recessions and the increased size of government spending relative to economic output.

Behind the tendency towards economic growth lie two powerful forces: innovation at the frontier of the world economy, particularly in the US, and catch-up by laggard economies. The two are linked: the more the frontier economies innovate, the greater the room for catch-up. Take the most potent example of the past 40 years, China. On the (possibly exaggerated) official numbers, gross domestic product per head rose 23-fold between 1978 and 2015. Yet so poor had China been at the beginning of this colossal expansion that its average GDP per head was only a quarter of US levels in 2015. Indeed, it was only half that of Portugal. Catch-up growth remains possible for China. India has still greater room: its GDP per head was about a 10th of US levels in 2015.

The overwhelming probability is that the world economy will grow. Moreover, it is highly likely that it will grow by more than 3 per cent (measured at purchasing power parity). It has grown by less than that very rarely since the early 1950s. Indeed, it has grown by less than 2 per cent in only four years since then — 1975, 1981, 1982 and 2009. The first three were the result of oil price shocks, triggered by wars in the Middle East, and Federal Reserve disinflation. The last was the Great Recession after 2008’s financial crisis.

This is also consistent with the pattern since 1900. Three sorts of shocks seem to destabilise the world economy: significant wars; inflation shocks; and financial crises. When asking what might create large downside risks for global economic growth, one has to assess tail risks of this nature. Many fall into the category of known unknowns.

For some years, analysts have convinced themselves that quantitative easing is sure to end up in hyperinflation. They are wrong. But a huge fiscal boost in the US, combined with pressure on the Fed not to tighten monetary policy, might generate inflation in the medium term and a disinflationary shock later still. But such a result of Trumponomics will not occur in 2017.

If we consider the possibility of globally significant financial crises, two possibilities stand out: the break-up of the eurozone and a crisis in China. Neither is inconceivable. Yet neither seems likely. The will to sustain the eurozone remains substantial. The Chinese government possesses the levers it needs to prevent a true financial meltdown. The risks in the eurozone and China are unquestionably real, but also small.

A third set of risks is geopolitical. Last year I referred to the possibility of Brexit and “election of a bellicose ignoramus” to the US presidency. Both have come to pass. The implications of the latter remain unknown. It is all too easy to list further geopolitical risks: severe political stresses on the EU, perhaps including the election of Marine Le Pen to the French presidency and renewed inflows of refugees; Russian president Vladimir Putin’s revanchism; the coming friction between Mr Trump’s aggrieved US and Xi Jinping’s ascendant China; friction between Iran and Saudi Arabia; possible overthrow of the Saudi royal family; and the threat of jihadi warfare. Not to be forgotten is the risk of nuclear war: just look at North Korea’s sabre-rattling, the unresolved conflict between India and Pakistan and threats by Mr Putin.

In 2016, political risk did not have much effect on economic outcomes. This year, political actions might do so. An obvious danger is a trade war between the US and China, though the short-term economic effects may be smaller than many might suppose: the risk is longer term, instead. The implications of the fact that the most powerful political figure in the world will have little interest in whether what he says is true are unknowable. All we do know is that we will all be living dangerously.

An important longer-run possibility is that the underlying economic engine is running out of steam. Catch-up still has great potential. But economic dynamism has declined in the core. One indicator is falling productivity growth. Another is ultra-low real interest rates. Mr Trump promises a resurgence of US trend growth. This is unlikely, particularly if he follows a protectionist course. Nevertheless, the concern should be less over what happens this year and more over whether the advance of the frontier of innovation has durably slowed, as Robert Gordon argues.

A good guess then is that the world economy will grow at between 3 and 4 per cent this year (at PPP). It is an even better guess that emerging economies, led yet again by Asia, will continue to grow faster than the advanced economies. There are substantial tail risks to such outcomes. There is also a good chance that the rate of innovation in the most advanced economies has slowed durably. Happy New Year.

Welcome to the Exponential Age

18 years ago, the Eastman Kodak company sold 85% of all photo paper on the planet and employed 86,200 people, 46,300 of them in the US. By 2015, they employed 6,500 people and surrendered what was left of the photo paper business so they could emerge from bankruptcy.

You may recall digital cameras were invented in 1975 and the first images had only 10,000 pixels. But with Moore’s law and as with most exponential technologies, it was only a disappointment for a short time. It soon became far superior and today it’s the dominant technology when it comes to recording images.

A similar transition will now happen with Artificial Intelligence, health, autonomous and electric cars, education, 3D printing, agriculture and jobs. Welcome to the 4th Industrial Revolution. Welcome to the Exponential Age.

Over the next 10 – 20 years, what happened to Kodak will happen in a lot of industries and most people won’t see it coming. Did you think in 1998 that by 2002 you would never use film again to take pictures?

Software will disrupt most traditional industries in the next 5-10 years.

Uber is just a software tool, they don’t own any cars, and are now the biggest taxi company in the world.

Airbnb is now the biggest hotel company in the world, although they don’t own any properties.

Artificial Intelligence. Computers become exponentially better in understanding the world. This year, a computer beat the best Go player in the world, 10 years earlier than expected.

In the US, young lawyers already don’t get jobs. Because of IBM Watson, you can get legal advice (so far for more or less basic stuff) within seconds, with 90% accuracy compared with 70% accuracy when done by humans.

So if you study law, stop immediately. There will be 90% fewer lawyers in the future, only specialists will remain.

Watson already helps nurses diagnose cancer 4 times more accurately than human nurses. Facebook now pattern recognition software that can recognize faces better than humans. In 2030, computers will become more intelligent than humans.

Autonomous cars: In 2017 the first self driving cars will appear for the public. Around 2020, the complete industry will start to be disrupted. You don’t want to own a car anymore. You will call a car with your phone, it will show up at your location and drive you to your destination. You will not need to park it, you only pay for the driven distance and can be productive while driving. Our grandchildren will never get a driver’s licence and will never own a car.

It wiIl change the city landscape, because we will need 90-95% fewer cars for that. We can transform former parking spaces into parks. 1.2 million people die each year in car accidents worldwide. We now have one accident every 60,000 mi (100,000 km), with autonomous driving that will drop to one accident in 6 million mi (10 million km). That’s a million fewer car accident deaths each year.

Most car companies will probably become bankrupt. Traditional car companies will try the evolutionary approach and just build a better car, while tech companies (Tesla, Apple, Google) will do the revolutionary approach and build a computer on wheels.

Many engineers from Volkswagen and Audi are completely terrified of Tesla.

Insurance companies will have massive trouble because without accidents, the insurance will become 100x cheaper. Their car insurance business model will disappear.

Real estate will change. Because if you can work while you commute, people will move further away to live in a more beautiful neighborhood.

Electric cars will become mainstream about 2020. Cities will be less noisy because all new cars will run on electricity. Electricity will become incredibly cheap and clean: Solar production has been on an exponential curve for 30 years, but you can now see the burgeoning impact.

Last year, more solar energy was installed worldwide than fossil. Energy companies are desperately trying to limit access to the grid to prevent competition from home solar installations, but that can’t last. Technology will take care of that strategy.

With cheap electricity comes cheap and abundant water. Desalination of salt water now only needs 2kwh per cubic meter (@ 0.25 cents). We don’t have scarce water in most places, we only have scarce drinking water. Imagine what will be possible if anyone can have as much clean water as he wants, for nearly no cost.
Health: The Tricorder X price will be announced this year. There are companies who will build a medical device (called the “Tricorder” from Star Trek) that works with your phone, which takes your retina scan, your blood sample and you breathe into it.

It then analyzes 54 biomarkers that will identify nearly any disease. It will be cheap, so in a few years everyone on this planet will have access to world class medical analysis, nearly for free. Goodbye, medical establishment.

3D printing: The price of the cheapest 3D printer came down from $18,000 to $400 within 10 years. In the same time, it became 100 times faster. All major shoe companies have already started 3D printing shoes.

Some spare airplane parts are already 3D printed in remote airports. The space station now has a printer that eliminates the need for the large amount of spare parts they used to have in the past. At the end of this year, new smart phones will have 3D scanning

possibilities. You can then 3D scan your feet and print your perfect shoe at home.

In China, they already 3D printed and built a complete 6-storey office building. By 2027, 10% of everything that’s being produced will be 3D printed.
Business opportunities: If you think of a niche you want to go into, ask yourself, “in the future, do you think we will have that?” and if the answer is yes, how can you make that happen sooner?

If it doesn’t work with your phone, forget the idea. And any idea designed for success in the 20th century is doomed to failure in the 21st century.
Work: 70-80% of jobs will disappear in the next 20 years. There will be a lot of new jobs, but it is not clear if there will be enough new jobs in such a small time.

Agriculture: There will be a $100 agricultural robot in the future. Farmers in 3rd world countries can then become managers of their field instead of working all day on their fields.

Aeroponics will need much less water. The first Petri dish produced veal, is now available and will be cheaper than cow produced veal in 2018. Right now, 30% of all agricultural surface is used for cows. Imagine if we don’t need that space anymore. There are several

startups who will bring insect protein to the market shortly. It contains more protein than meat. It will be labeled as “alternative protein source” (because most people still reject the idea of eating insects).

There is an app called “moodies” which can already tell in which mood you’re in. By 2020 there will be apps that can tell by your facial expressions, if you are lying. Imagine a political debate where it’s being displayed when they’re telling the truth and when they’ re not.
Bitcoin may even become the default reserve currency. Of the world.

Longevity: Right now, the average life span increases by 3 months per year. Four years ago, the life span was 79 years, now it’s 80 years. The increase itself is increasing and by 2036, there will be more that one year increase per year. So we all might live for a long, long time, probably way more than 100.

Education: The cheapest smart phones are already at $10 in Africa and Asia. By 2020, 70% of all humans will own a smart phone. That means everyone has the same access to world class education.

Every child can use the Khan Academy for everything a child learns at school in First World countries. The software is already released in Indonesia and will soon be available in Arabic, Swahili and Chinese. The potential is staggering. They will give the English app away for free, so that children in Africa can become fluent in English within half a year.

For the record, Khan Academy is a non-profit educational organization created in 2006 by educator Salman Khan with a goal of creating an accessible place for people to be educated. The organization produces short lectures in the form of YouTube videos.

Please note: The title I gave this post, the reference to explain the Kahn Academy, and considerable additional editing, is my product. The idea itself arrived on my computer several days ago from an unknown source. I was intrigued by the idea, frustrated by not knowing the original source, but decided to check some of the claims and found several factual mistakes. I didn’t want to promote errors so began an editing process before sharing it. The Kodak numbers were clearly wrong so I corrected those and expanded on what happened to Kodak. A significant number of other edits were necessary, some just syntax or grammer and context. The image that accompanies the article was my contribution. My guess is that about 30% of this is mine, and 70% from someone/somewhere else. My apologies for not making this attribution comment before sending it out as a blog post. I was called on this by Dale Smith, for whom I thank for catching what was not an effort to mislead, but a rush to get something done between phone calls.

The World Is Getting Better and Nobody Knows It

CharityMy Comments: For me, the glass is always half full. I try to live today and worry only about the future. I am easily ticked off by those who try to live in the past, or try to re-litigate the arguments of history. It’s a waste of time in a world, that for me, is getting shorter. You can argue that I see the world through rose colored glasses, and maybe I do, but I am who I am and will probably remain so.

Johan Norberg | Friday, October 14, 2016 |

A couple of years ago, I commissioned a study in which 1,000 Swedes were asked eight questions about global development. On average, every age group and every income group was wrong on all eight questions – because they all thought the world was in bad shape and getting worse. Large majorities, for example, thought that hunger and extreme poverty have been increasing, when they have in fact been reduced faster than at any other point in world history. And those who had been through higher education actually had less knowledge than the rest.

It’s not just Sweden. In Britain, only 10 per cent of people thought that world poverty had decreased in the past 30 years. More than half thought it had increased. In the United States, only 5 per cent answered (correctly) that world poverty had been almost halved in the last 20 years: 66 per cent thought it had almost doubled.

Bad News and the Media

Why do we make these false assumptions? Many of them are formed by the media, which reinforces a particular way of looking at the world – a tendency to focus on the dramatic and surprising, which is almost always bad news, like war, murder and natural disasters.

A study from Baltimore, where crime has been falling rapidly, showed that 73 per cent of those who watched the news every day were careful not to stay out too late in the city, compared to 54 per cent of those who watched it no more than twice a week. Almost everybody thought that crime was prevalent – but they all thought it occurred somewhere other than where they lived. The environment they had first-hand knowledge of felt safe, but the places they heard about on the news seemed very risky.

Many journalists and editors acknowledge this tendency. The American public radio journalist Eric Weiner says: “The truth is that unhappy people, living in profoundly unhappy places, make for good stories.” When the Swedish TV journalist Freddie Ekman was asked about the biggest news stories during his half a century in the trade, he responded by listing the murder of Prime Minister Olof Palme in 1986, the sinking of the cruise ferry Estonia in 1994, and the terror attacks of 9/11. When asked about any positive stories during this period, he answered, “One doesn’t remember them, because they never get big.”

Data vs Emotion

From a broadcaster’s perspective, this makes sense. If a plane crashes, we want to hear about it. But this also means that we shouldn’t be content with getting our information from the news alone; we need background and context, history and statistics. What is really impressive is the fact that 40 million planes take off every year, and almost every one of them lands safely. Since the 1970s, the number of passengers has increased more than ten-fold, and yet the number of accidents and fatalities has halved – but you would never know it from following the news.

Max Roser, an economist at Oxford University who collects data on the world’s development, puts it this way: “Things that happen in an instant are mostly bad. It’s this earthquake or that horrible murder. You’re never going to have an article on the BBC or CNN that begins by saying: ‘There’s no famine in south London today’ or: ‘Child mortality again decreased by 0.005 per cent in Botswana’.

There are many benefits to the kind of instant news that global TV networks and the internet have brought us. At last we have learned about the conditions under which people live in other parts of the world. But it also makes it easier for someone, somewhere to find something truly shocking to report on. There is always a war, and there is always a child murderer on the loose, and that is what will top the news cycle – all the time. And, of course, political parties, campaigners and pressure groups always exploit our fear to promote their own ideologies.

It is our own fault. If we didn’t want to read about, listen to and watch bad news, journalists would not report it. Indeed, when something terrible happens anywhere, two billion smartphones will nowadays make sure that we find out, even if no reporters are on the scene.

It’s Evolution

This obviously has long-term consequences. The psychologists Daniel Kahneman and Amos Tversky have shown that people do not base their estimates of how frequent something is on data, but on how easy it is to recall examples from memory. This “availability heuristic” means that the more memorable an incident is, the more probable we think it is, so we imagine that horrible and shocking things, which stay in our thoughts, are more frequent than they are. We are built to be worried. We are interested in exceptions. We notice the new things, the strange and unexpected. It’s natural. We have been hardwired this way by evolution. Fear and worry are tools for survival: the hunters and gatherers who survived sudden storms and predators were the ones who had a tendency to scan the horizon for new threats rather than those who were relaxed and satisfied. If the building is on fire, we need to know about it immediately.

Steven Pinker mentions three particular psychological biases that make us think that the world is worse than it really is. One is the well-documented fact that “bad is stronger than good” – we are more likely to remember losing money, being abandoned by friends or receiving criticism than we are to remember winning money, gaining friends or receiving praise.

Another emotional bias is the psychology of moralisation. Complaining about problems is a way of sending a signal to others that you care about them, so critics are seen as more morally engaged. A third bias is our nostalgia about a golden age when life was supposedly simpler and better. As the cultural historian Arthur Herman observed: “Virtually every culture past or present has believed that men and women are not up to the standards of their parents and forebears.”

The fact that things have in fact been getting better – overwhelmingly so – does not guarantee progress in the future. After years of easy money and debt financing of companies and governments, a large-scale financial crisis is possible, when all the bills come due. Global warming may threaten ecosystems and affect the lives of millions. Large-scale war between major powers is possible. Terrorists could wreak havoc on a massive scale if they get access to our most powerful technologies, but they could also co-ordinate a large number of smaller attacks on civilians.

But more than that, people led by fear might curtail the freedom and the openness that progress depends on. When Matt Ridley, author of The Rational Optimist, is asked what he is worried about, he usually responds, “superstition and bureaucracy,” because superstition can obstruct the accumulation of knowledge, and bureaucracy can stop us from applying that knowledge in new technologies and businesses.

Yet in our era of globalisation, more countries, in more places, now have access to the sum of humanity’s knowledge, and are open to the best innovations from other places.
In such a world, progress no longer depends on the whim of one emperor. If progress is blocked in one place, many others will continue humanity’s journey.

Solar Power Capacity Tops Coal for the First Time Ever

My Comments: Yes, this is only in China. But I grew up when coal was virtually 100% (in England). While China is newly industrialized compared to our status in the world, this headline has huge implications.

Also, keep in mind as a Florida voter, to vote NO on Amendment 1. This was promoted by the oil and gas industry to limit flexibility with respect to solar energy. And while you’re at it, don’t automatically re-elect the three judges on the Florida Supreme Court that allowed Amendment 1 to appear on the ballot. They are Charles Canady, Jorge LaBarga and Ricky Polston.

by Geoffrey Smith | October 25, 2016

China alone installed two wind turbines per hour and 500,000 solar panels a day last year.

Solar power now accounts for more installed capacity than any other form of electricity generation, according to new data out Tuesday.

“About half a million solar panels were installed every day around the world last year,” the Paris-based International Energy Agency said in a new report on the renewables sector, as emerging markets in particular bet heavily on green power. China also installed the equivalent of two wind turbines every hour last year.

In total, over half the new power capacity installed last year—153,000 megawatts, or 153 gigawatts—was renewable-sourced. That’s a 15% increase from the previous year, and three-quarters of it came in the shape of wind (66 GW) or solar photo-voltaic (49 GW).

Capacity is what a plant can theoretically produce. Actual generation remains much lower, due to the basic unpredictability of resources such as sunlight and wind. But even on levels of actual generation, the IEA said renewables would close the gap rapidly going forward.

“We are witnessing a transformation of global power markets led by renewables and, as is the case with other fields, the center of gravity for renewable growth is moving to emerging markets,” said Dr. Fatih Birol, the IEA’s executive director.

The IEA said the share of renewables in the generation mix would rise to 28% within six years, from 23% at the end of last year. It raised its forecast for green power output in that timeframe by 13% “due mostly to stronger policy backing in the U.S., China, India and Mexico.”

Another factor expected to help is a continued fall in costs: the IEA reckons the cost of solar PV will fall by a quarter, and the cost of onshore wind will fall by 15%. Lower capital costs mean that an installation can break even with lower load rates.

While climate change policy plays a large role in countries’ policy choices, especially in the wake of the Paris summit last year, the IEA pointed out that cutting air pollution and diversifying energy supplies are just as important some some countries. In China, in particular, renewables are helped by the fact that overall energy demand is growing rapidly, and renewables are the only option for meeting demand in places where pollution is already a hard constraint.

In China and India, where the fastest growth in green power is expected, it will still cover less than half of the overall increase in electricity demand. By contrast, in developed economies, renewables will grow faster than overall generation.

Would The Donald Be Good For Business?

US economyMy Comments: Clients ask me what is likely to happen to their investments if Donald achieves the White House. Frankly, I have no idea. You might as well ask me what I’m having for lunch next Monday; I have no idea.

But his candidacy and his expressed values will influence how he might think and act on economic issues over the next four years. It is already having an effect across the world. And it’s not good.

This article came from a news feed I follow and was originally published by the Foundation for Economic Education. ( )

By Jeffrey A. Tucker | 10/15/16

The public-relations disaster that Trump has caused the GOP won’t soon be repaired.

But I’m worried about another, and ultimately more serious problem: the damage that Trump has inflicted on the reputation of capitalism, business and commerce – the very basis of our standard of living that is forever under attack. Trump has given no one a reason to support capitalism and every reason to regard it as dangerous, hateful and aggressive.

Think of it. At long last, a successful businessman with no prior political experience received the nomination of a major political party. For those of us who celebrate markets and entrepreneurship, you might think this would be something to celebrate.

Except that it’s not. The whole Trump phenomenon has created a terrible mess for the reputation and cause of economic liberty. It’s a correctable setback in the PR war, to be sure, but active explanation is necessary.

The Cartoon Capitalist
The point was underscored by the first presidential debate. Clinton cited the many instances, now heavily documented, in which Trump had stiffed workers.

Clinton: I have met a lot of the people who were stiffed by you and your businesses, Donald. I’ve met dishwashers, painters, architects, glass installers, marble installers, drapery installers, like my dad was, who you refused to pay when they finished the work that you asked them to do.

We have an architect in the audience who designed one of your clubhouses at one of your golf courses. It’s a beautiful facility. It immediately was put to use. And you wouldn’t pay what the man needed to be paid, what he was charging you to do.…

Trump immediately shot back without thought: “Maybe he didn’t do a good job, and I was unsatisfied with his work.”

The response seemed to concede the truth of what she said. The message here is that capitalists have all power and pay when they want, as if contracts have nothing to do with it. The rich have all the power to decide whether to pay, he implies.

We’ve all known people, rich and poor, who fail to live up to their commitments. This is not something markets reward; indeed the opposite is true. Markets reward promise keeping, even mandate it.

The truth is that in the world of business, Trump has a very bad reputation. Many institutions and people will not deal with him. In retrospect, it makes sense why he would choose politics, a terrain where you can fool more people for longer than you can in the business world.

Next during the debate Clinton accused him of not giving to charity (he didn’t dispute it, and there’s been no documented record of his charitable giving) and claimed he paid no taxes. Trump’s instant response: “That makes me smart.”

For those who claim that the rich are getting a free ride at the expense of everyone else, this response was the vindication of their most paranoid fantasies.

Finally, Clinton accused Trump of profiting from the housing collapse. Trump shot back: “That’s called good business,” seeming to show zero sympathy for the millions who lost their savings during that disaster.

The real story of that crash is that Wall Street paid a heavy price and got bailed out by the political system just as the markets were working to punish bad judgment.

Looking at Trump’s behavior that night, you have the leftist caricature of a rapacious looter who cares about no one, wins as everyone else loses and pays nothing back to the society he loots. It’s straight out of Marxian central casting.

Not True
For decades, advocates of market freedom have worked to change this impression of capitalists and capitalism. Milton Friedman rightly pointed out that the main beneficiaries of capitalism are the poor and the workers. The natural state of humanity is desperate poverty; creating wealth to lift everyone out of the muck requires enterprise and private property.

Ludwig von Mises worked mightily to demonstrate that if anyone has power within the capitalist economy, it is consumers, not producers. It is their decision to buy or not to buy that determines how resources are used and who profits.

The real story of markets is that profits are extremely hard to maintain in a highly competitive environment; the innovation and service to society must never stop.

And countless activists in our own time are working to free the lives of small entrepreneurs who have their innovations blocked by regulations, taxes, zoning controls and trade restrictions.

Now Trump comes along and seems to undermine the whole message in one fell swoop. We should not underestimate the potential damage a person like this does to a wonderful cause.

He Is No Capitalist
It’s not just Trump’s policies, but those matter. He jumped into the campaign advocating (as a first principle) not market competition but the opposite: protectionism. His tariff proposals are about taxing American consumers in order to block competitive goods and services from outside the country—the classic mercantilist policy that real capitalists have battled for centuries. His immigration ideas apply that same policy to people.

Beyond that, his infrastructure and military ideas are all about huge government spending. Even the Wall is little more than a public-sector boondoggle (the building of which will result in mass theft of private property). It’s a major opportunity for countless sweetheart deals that give well-connected contractors a free ride.

In terms of the digital economy today, he has no sympathy. He has advocated busting up Amazon with antitrust laws and imposing speech restrictions on The Washington Post.

His knowledge of the greatest innovation in the history of technology is near zero. The entire debate, he kept referring to the entire digital realm as “the cyber.” Incredible.

Not the Capitalist Way
None of this is the capitalist way. To be very clear, what market liberals favor is full freedom for everyone in the commercial sphere of life, and privileges for none: no bailouts, no subsidies, no favors, no special access to power. No matter how rich or powerful or connected you are, a society of commercial freedom gives no one a legally enforced advantage over anyone else.

This, not monopolistic protection for cronies, is the way the free market operates.

If this weren’t enough, in his business dealings, which are now under heavy scrutiny, Trump has become the caricature of the connection fat cat that the Marxists have dreamed of, and always claimed to be the norm under capitalism. He is their ideal, not ours, of what it means to be successful and rich.

Think of the capitalist that the fevered Marxist imagination has conjured up since the 19th century. He sells illusion to unwitting buyers and then the dream fails to materialize in any substantial way. He doesn’t pay his workers. The dream dies but the initial promoter makes off with millions. And with that the community suffers.

He Plays One on TV
The more we learn about Trump’s business successes, the more we see not the market at work but the kind of tainted success generated by state intervention in the market.

He uses eminent domain, litigious methods of contract enforcement, zoning regulations, subsidies of all sorts, to drive his business. He has learned to work a state-dominated, politically manipulated system. This is not the same as market success.

What’s more, deeper research into his history of enterprises reveal the surprising truth that Trump is not a winning builder and investor so much as a brand name that he sells to stamp on other people’s projects.

The most successful thing he has ever done is a television show. There’s nothing wrong with being an entertainer but he is not the successful real estate investor he claims to be.

It’s also true that bad businesspeople exist even within a market setting. No system of economics can change human nature. A wonderful feature of the market (and not government), however, is that it adapts to punish such people over time and deny them a free ride. Trump’s now-famous $1 billion loss is a better indication of what the market is capable of imposing on such people.

Truly, even though the Trump case might indicate otherwise, the justly rich are worth defending. A free society needs them. Capital accumulation is meritorious, an essential feature of a prosperous society.

But let’s never forget that capitalism is also about the Etsy seller, the Uber driver, the hair braider, the small contractor and the tens of millions of small-scale entrepreneurs who find personal joy and fulfillment in the service of others through the opportunities capitalism provides.

Real capitalism is not about ripping people off and bragging about it. It’s about freedom, serving others, realizing dreams, spreading opportunity, better lives, and a beautiful world that is prosperous and free.

If you see something or someone who looks like a different animal, it probably is.

Prepare yourself, market apologists: We are going to be digging out from under the Trump rubble for years to come.

Jeffrey A. Tucker is director of digital development at the Foundation for Economic Education and chief liberty officer of

About Your Money Market Fund

My Comments: We take them for granted. A place to park money that earns a little bit and can be used to buy stuff or used to invest somewhere else. If you’re bored by finance and economics, this post is not for you, even though it may affect your wallet along the way.

by Bob Bryan | October 15, 2016

On Friday, money market funds underwent a huge shift in how they will be regulated, resulting in a sea change for the $2.65 trillion money market fund industry.

Let’s recap quickly. Money market funds are mutual funds that invest mostly in short-term assets such as US Treasurys and short-dated corporate bonds with maturities under one year. These funds are generally thought of as safe, but yield low returns.

The net asset value [(market value of all of its shares – fund’s liabilities) / number of issued shares] of money market funds is designed to remain around $1, but should not go below. Only three money market funds have fallen below $1 in NAV, or “broken the buck,” the most recent in 2008. This caused a run on money market funds and contributed to the financial instability of the time.

To try to prevent this from happening again, the federal government passed regulations in 2014 that mandated changes to make these funds safer. Now all money market funds are required to maintain an average maturity for their assets of just 60 days, and the ratings criteria for the types of assets the funds can hold have increased as well.

The new regulations have made investors shift large amounts of money out of prime market funds, which invested in all types of short-dated assets, and into government funds which only invest in government debt. In fact, prime market funds have seen massive outflows.

“More than half a trillion dollars have fled the prime money market fund complex since this summer,” said Dominic Konstam, an analyst at Deutsche Bank. “In recent weeks, the pace of outflows has also picked up considerably – prime funds lost on average $60 billion of assets per week in September and an eye-popping $110 billion last week, with their total assets now below $500 billion for the first time.”

In total, more than $700 billion has flowed out of prime market funds, according to Barclays, since the reforms were announced, with much of it heading to government funds.

With fewer funds holding non-government short-dates assets, the liquidity in trading for things such as commercial paper and certificates of deposit have increased. With less liquidity, interest rates for near-term lending products such as the London Interbank Offering Rate, or Libor, have increased to their highest levels since the financial crisis.

This increase in Libor, however, may have run its course according to Konstam. The gap between the Federal Reserve’s fed funds rate and the Libor rate, which is used as a proxy of stability for the banking system and the benchmark for how expensive short-term leaning is, has tightened in recent weeks after exploding over the summer.

“Despite this, 3-month Libor and the Libor bases have been relatively well behaved during this stretch, and FRA/OIS spreads are actually now ~5 bps tighter from three weeks ago,” said Konstam.

“We are inclined to think that the midsummer Libor pain has fully run its course, and 3-month Libor could begin to set tighter against Fed expectations (OIS) after next week’s SEC money market reform deadline.

All in all, these changes aren’t going to impact retail investors very much and the long lead time has allowed many fund managers to make the shift in portfolios ahead of time.

Jim O’Connor, senior portfolio manager for money market funds at BNY Mellon’s subsidiary The Dreyfus Corporation, told Business Insider that most of his clients’ portfolios had been shifted away from prime funds well before the date of the regulation implementation and the only changes made in the run-up were to back-end maintenance.

The jump in rates such as the Libor, however, may impact some borrowers. Floating rate mortgages and other types of floating rate loans can be pegged to the Libor, thus as it increases the interest costs for those borrowers will increase.

The move has been a massive multi-year shift of billions of dollars, but for many investors it will likely not even move the needle.

The 19 Most Productive Countries In The World

My Comments: Computers and the internet have been the major drivers of worker productivity across the planet over the past three decades. Here in the USA, we think of ourselves as being the best and throw scorn on anyone who suggests otherwise. And like with so many things, we don’t let facts get in the way. These facts suggest we’re OK, but so are a lot of other countries.

Will Martin,  Jul. 24, 2016

Productivity is one of the key drivers of economic success. The more productive a country’s workers are, the more value they can bring to their employers and therefore their home nation’s economy.

New research from business-to-business marketplace Expert Market has shed some light on where in the world people are the most productive. Expert Market compared data from 35 of the world’s biggest economies before compiling their ranking.

To do this, they looked at the GDP per capita of nations and divided that by the number of hours worked per person, giving a rough guide to which nations make the most money in the least amount of time, and are therefore the most productive.

Numbers quoted below are the amount of value each worker brings to their country’s economy per hour worked. Check out the ranking underneath:

See all 19, ranked in reverse order, here: