Sunday, June 4, 2017

Brexit Comes For Your Chocolate Bar and Customs Costs

The negative effects of the Brexit have been widely speculated, and the ultimate result of Britain's reactionary referendum are still unknown. But at least for now, the kingdom will be getting less chocolate for their pound as a weakening pound spurs sellers to offer smaller volumes at the same price to the island nation.

A weakening currency has a negative effect on the current accounts balance of a country as imports become more expensive relative to domestic goods. For a country that imports 48% of its food, this will translate to rising costs and fewer choices at the supermarket.

Ports also raise questions as the withdrawal date nears, with concerns about space and resources needed for performing the necessary customs activities being brought up in meetings. These needs would likely raise the cost of imports even further, taking a real cut of the value the U.K.'s citizens get from import goods.

In a few outside of class discussions, I've raised the topic of how isolationist policy could hurt domestic consumers through these kinds of currency devaluations. Do you think there is any threat to the power of the dollar as the Trump administration pursues similar isolationist lines? While Dr. Apps has noted that I "do not believe in American Exceptionalism," monetary policy is one place where I do begrudgingly accept the United States' seeming immunity to conventional theory. I don't expect a significant change in the dollar's strength or status as a global reserve currency as the administration takes its course. 

Moving The Goalpost - Haves and Have Nots Edition

Inequality is a common thread in our discussions of the post-Crisis world, but Richard Reeves at Brookings asks a demographic question about it: where does it begin? The Guardian reports on his new book, Dream Hoarders, that we aren't actually the 99%, but rather the 80% or so, as his research finds that increasingly opportunity is concentrated in the upper middle class, around the twentieth percentile of the income distribution.

Intuitively, this makes quite a bit of sense to me. Reeves argues that the 1%, even with all of their wealth, are not a large enough proportion of the population to crowd the lower classes out of opportunities such as higher education. Rather, it's incomes greater than or equal to $120,000 that have this effect through legacy programs in colleges, archaic zoning practices, and good old fashioned nepotism. He further criticizes the 99% slogan as obfuscating the problem, and allowing the other 19% to claim solidarity with the 80% they extract from.

Thursday, June 1, 2017

It Would Be Irresponsible to Not Talk About This Irresponsibility

First, the bad news: As you have no doubt heard, Donald Trump has pulled out of the Paris Accords, to much international criticism. The only positive words on the subject emanate from Republican congressmen and the fossil fuel industry.

Meanwhile, in the market, environmental ETFs are up as investors respond to climate woes by pumping money into funds that trade in "environmentally friendly" stock.

It almost makes one optimistic that a market-based solution to the climate crisis is possible, but this cuts both ways. Looking back at Streeck, it is further evidence that the power of policy is falling out of the hands of government and more and more the market determines what policy is. In this case, it is good for society, but I don't think we can count on that level of social consciousness in all cases.

In fact, I know we can't.

Bad News for Central Bank Independence

Of course, this particular rate hike saber rattle is one of many that has been sounded since the crisis, and as before the Fed has been show to be a toothless tiger. Once again, the negative pressure on the stock market caused by the impending rate hike has triggered the central bank to back off on the idea of rate hikes for yet another quarter. Read the market report following the meeting here.

This certainly fits with Streeck's assertions. For reference, here is a 10 year plot of interest rates:
There is some hope, as we slowly creep back up, but I remain cynical. Six years of the same rock bottom rate does not for faith in monetary policy make.

Less Tweeting, Lawyers Beg. 'Covfefe,' the President Says.

This article was way too long to put here, but Trump is at it again.... Thoughts on this whole situation??

Adidas selling golf equipment businesses, including Taylormade, to focus on clothes and shoes

Adidas AG said Wednesday that it will sell its golf brands TaylorMade, Adams Golf and Ashworth to a newly formed affiliate of private-equity firm KPS Capital Partners for $425 million.
About half of the sale price will be paid in cash and the remainder will be a combination of secured notes and other borrowing, according to a press release. The deal is expected to close in 2017.
Adidas ADS, +0.21% said it will record a one-time charge in the high double-digit to low triple-digit million euros range.
Adidas is following in the footsteps of its rival Nike Inc. NKE, +0.04% which announced last year that it would focus on golf clothing and move away from selling gear like golf clubs and balls.
“Within our long-term strategy ‘Creating the New,’ our focus is clearly on our core competencies in footwear and apparel and on our two major brands Adidas and Reebok,” said Adidas Chief Executive Kasper Rorsted, in a statement.

I don't know how much or if at all anyone follows golf, but Nike and Adidas have been two major companies in the golfing business, any thoughts on this?