‘News’ Category Archives
by admin in News
It’s been a while since I or any of my contributors posted on this site. Sometimes life just happens. It is our goal to post more in the coming year. We are entering a new era in the global political economy. The world political economy is undergoing significant structural shifts. In this post we want to focus on the outlook for global capital markets by LPL Financial’s Research Department.
by Riaan Nel in Global Economy, Global Investments, News
This coming Thursday, June 23rd, is the date of the much anticipated British referendum on whether the United Kingdom should remain a member of the European Union or leave. As of today polls suggest that voters are evenly split. The Economist magazine in a recent article made the case for how bad Britain’s exit or Brexit would be, not only for the United Kingdom, but for Europe and the West. The argument goes that in both the economic and security spheres the West and Britain would be harmed if the electorate votes for a Brexit.
I agree from an economic standpoint there seems to be a strong case that a Brexit would be disadvantageous for the United Kingdom. The capital markets would probably be negatively impacted in the short-term by a Brexit, which would not be good for America or American investors. However, my sense is that it would be a short lived “market dislocation” and that the Brexit won’t have a long-term negative impact on global capital markets nor American capital markets.
Financial markets are currently jittery in the run up to the election on Thursday. The British pound has fallen to its lowest level against the dollar since 2009. Markets like predictability and stability. The prospect of the uncoupling of the world’s fifth largest economy from the European Union, and the unmooring of the strongest military power within the Union, as well as the world’s fifth largest defense spender, causes nervousness in the financial markets.
I don’t believe that global markets would be harmed by Britain leaving the EU. I could see where it would damage the British economy in the long run, but I don’t see where it would hurt the United States economically. We have to be concerned about the short-term market dislocations that might occur if the “leave” vote wins. It very well might be a buying opportunity for investors. I am concerned that Brexit might be another factor that could, in conjunction with other issues, signal an end to the 7 year bull market in US equities.
From a security perspective, the Economist magazine makes numerous arguments why a Brexit would diminish Europe and the West’s security. However, the West’s security is solidly anchored in American military supremacy and NATO. Britain’s exit does not threaten NATO’s cohesiveness. I don’t find the security arguments compelling. Not for us, not for Britain, and not for NATO.
My conclusion is a Brexit is neither bad nor good for America.
by Riaan Nel in News
I’m currently reading Zeihan’s book. It is pretty compelling. Although I am always skeptical of peering too far into the future and making bold conjectures. However, it is something that is essentially human – our ability to think forward. The future is where we’re going to spend the rest of our lives. Although I, like most people, worry too much about the future, I believe it is indispensable to think about the future in a rational way. Zeihan’s book so far is compelling and thought provoking. I agree that North American energy independence and dominance are probably inevitable. I also agree that we are probably many decades away from the United States’ decline. However, are we entering an Hobbesian world?
Thomas Hobbes was an English philosopher writing his famous Leviathan in 1651. In Leviathan Hobbes postulates what life was before governments. He calls this a “state of nature” – basically a world where each person pursues his own survival and interest. Over time humans formed groups, tribes and eventually nation-states. Individuals ceded power to an authority for protection and other utilities of organizing as societies. Hobbes, though saw the international order as in a “state of nature” where states/countries all vie for their own interest.
After World War II an international order came into being protected by the United States. Zeihan sees a fracturing of this world order. I do think there is merit to this argument. But I believe it is in the US’s interest to continue to protect and guarantee the current world order of relative free markets, free trade, and in integrated global capitalist system. I’m skeptical to the disintegration predicted.
Below I’ve pasted an excerpt of a review from The Wall Street Journal by Liam Denning. The entire review can be read here: http://www.wsj.com/articles/book-review-the-accidental-superpower-by-peter-zeihan-1417653112
Peter Zeihan begins “The Accidental Superpower” by declaring that he has “always loved maps.” From this unremarkable claim springs a lively, readable thesis on how the success or failure of nations may rest on the very ground beneath their feet. Rather than focusing on charismatic leaders or lofty ideals, Mr. Zeihan stresses the more prosaic forces that shape world events: topography, soil quality, access to water. Water especially, he says, sorts winners from the rest. It can be a highway, a barrier, a larder and a battery. Rivers make it cheap to transport goods and people, enabling the efficient mixing of ideas and markets. The capital that might otherwise be spent on, say, building a road may be used for other purposes.
It happens that the United States—the “superpower” of Mr. Zeihan’s title—is blessed with 12 major navigable rivers, including the Mississippi. Much else flows from this happy accident. A less pressing need for grand, land-based infrastructure projects, for example, may lessen the need for centralized coordination, encouraging small government.
by Riaan Nel in News
I thought Tim Geithner’s book “Stress Test: Reflections on Financial Crises” was an impressive contribution to the understanding of the 2008 Great Recession. I think Paul Krugman’s review was a little harsh on Geithner. Then again, Paul Krugman has no problem hammering people for being “wrong” according to him. Krugman always being so adamant irritates me sometimes; however, he does make very good points in the review worth considering.