Global Growth: Slow with lots of uncertainty (Up-Date 11)

Currently, lots of talk about economic growth & lots of worry about uncertainty. In economics, there is a concept called production possibility frontier and a graph is used to described the frontier. And there is a great deal on what happens inside this frontier & outside the frontier, meaning beyond the frontier, i.e. about expanding the production possibility frontier, beyond the current.

Global growth, also has a frontier, and usually, expanding growth beyond current frontier can be done in many ways, i.e. technological discovery, productivity gain, new natural resources exploitation, emerging new workers & markets, and so fourth.

Again, there are great deal of concern currently about global growth, and when one looks at the opportunity to expand the growth frontier, the situation looks bleak.

Overall, there are countries with failed governing, being run by tyrants, so bring various levels of dystopia all over the planet, i.e. Russia & China. Then also failed or near collapse state, i.e. Syria, Iraq & Yemen. And these dystopis & collapse state is a major drag on growth (see here for tyrant & growth relationship). Then environmental risks is way up, also dragging growth. Then the commodity bust had hurt the emerging markets, coupled with past over-expansion & bad investment choices. Then with countries with a more representative, democratic, open with freedom countries, many are still feeling the effect of the economic crisis, with high unemployment. Then other are in a trap, trying to get the balance sheet in order, and sacrificing income statement, meaning, overly focus on austerity, killing many opportunities, i.e. innovative ecosystem.

The following is from Innovation Files: We live in a global economy and society built on our investments in computer and network technology. Our connectedness—our ability to work and communicate easily with those outside of our borders–is the foundation of our digital economy. Policymakers are increasingly recognizing that the free flow of information online is important both for promoting democratic values (see Secretary Clinton’s remarks last year on Internet Freedom) and for promoting commerce (see the Department of Commerce’s Internet Policy Task Force examination of this issue). Yet barriers, both new and old, impair our connectivity and limit the potential of free trade. Especially from the commercial perspective, restrictions on the flow of information impact innovation, collaboration, trade, investment and economic activity.

Examples of barriers to the free flow of information include local data storage requirements for cloud computing, outdated regulations for voice-over-IP (VoIP) services, inadequate protect of digital copyrights, overlapping and conflicting data privacy regulations, restrictions on content and speech and liability for intermediaries, such as user-generated content sites. While these barriers and their origins have been explored in other contexts, I would like to address some of the potential solutions available to improve the free flow of information by looking at three specific issues: cloud computing, online copyrights, and electronic identities (See more at: http://www.innovationfiles.org/strategies-to-reduce-barriers-to-the-free-flow-of-information-online/#sthash.TI0JXFbV.dpuf).

(Up-Dated) Bank of England head, made a statement that environmental risk is a major risk to businesses, also out of England, some alarm on global manufacturing slow-down, being raised.

(Up-Date) IMF says, with many emerging economies, with currency tanking, that makes their products less expensive and will spur growth, meaning a big global sales by emerging markets, but where will the global buyers come from, with high unemployment with many regions, recessions in other & low commodity hitting other regions?

(Up-Date) IMF has warned of a global liquidits crunch. Meanwhile, a host of credible, analyst, remain cautious, of emerging markets, even with the rout, driving down price, coupled with tanking currency, meaning bargain hunting. Bloomberg has a survey, of economist, and about 80% say they expect a US rate rise in December 2015. And IMF, has long been warning emerging markets, of negative impact to them, from a US rate rise. However, many, continue to doubt if the US Fed will increase rate. Lastly, a renowned activist investor, criticized global CEO of firms, of being involved with financial modeling, at the expense of innovation & capital spending, both important growth drivers.

(Up-Dated) IMF sees some default risk with emerging economies, causing some contegent effect.

(Up-Date) Been a major up-tick, on news about innovation globally, and lets hope this trend continues. News out of San Francisco, sees venture capital fund valuation up, but deals and exits down.

(Up-Date) Currently, there is also a great deal of concern with markets about growth, and a recent US job report, did not meet stock market analysts expectation, causing a very high volatility & an after-burner of some strength in gold as a safe heaven. The attention on the job reports report, relates to the some-what firm position of the US central bank, to raise interest rates later this year. US growth continues to be strong overall, and inflation, a threat to price stability, may face some risk of spiking up. However, while analyst are disappointed with the job report, the question is, what does the US central bank think of the latest job report.

(Up-Date) As expected, with Russia & Iran venturing into Middle East, in Syria, some firming up of oil, also as Putin leverage his militarism, into being open for talks with OPEC. And as expected, fossil leaders, are touting equations, of when does fossil start-up, will be viable, if and when oil price increase. In the mean time, more financiers of fossil, such as Citi Group, is promising less money for fossil, i.e. coal & the Paris, climate meet, is getting close, with activist, gearing up, for a battle & fossil, asking for a place at the table. While higher oil price can help many economies, so positive in some aspect, a low energy price also, help consumers, benefit growth.

(Up-Date) Some solidifying of gold and stock markets, re-bounds, mostly, on bets, of more stimulus and interest easing, in developing world, and on some strength with commodity. And also as a bet, on US interest rate situation.

(Up-Date) Some reports say overall global manufacturing is weak, particularly, with emerging Asia, but stronger in the developed economies. Currently, in more than in about a year, US trade deficit widened in recent months, probably relate to stronger dollar and weak global demand.

(Uo-Date) TPP negotiators reached a deal & apart from issues activist are concerned about, and potential weakening pressure on US based manufacturers to hire and increase wage, tariff comes tumbling down, & likely spur trade and comparative advantage.

(Up-Date) World Bank and IMF, lowered global growth forecast.

(Up-Date) Fed’s Fischer says U.S. economy may be strong enough to allow rate liftoff before year end.

(Up-Date) Other Fed members say no rate hike soon & overall, the Fed mad statement to down-play differences in Fed thinking.

(Up-Date) A persistent weak global economy and oil supply glut, is keeping oil price in check, so far, at about US$40.

(Up-Date) There is a major awakening of the thinking of global leaders, to help foster growth through disruptive innovation and related issues such as entrepreneurs, venture capital, crowd funding, SMEs, digitalization, big data and analytics and such.

(Up-Date) Another Euro zone bond rates went into negative, being Italy, meaning buyers of these bonds are paying to hold the bonds. Lots of concern from some market Gurus about risk of emerging market corporate debt.

(Up-Date) Many are starting to focus on global inflation, which show little sign of hardening & continue to move into negative, meaning deflationary direction, and in fact, pointing to macro level, global deflation which, apart from the economic & business consequences, in effect, what investors are looking at is the impact of this on US interest rates increase.

(Up-Date) The surprise, is in a global awakening to innovation and related issues such as scientific research, start-up & entrepreneurship, as a growth driver, continues to gain momentum. The tech sector in the US stock market just hit 15 years high.

(Up-Date) Germany’s industrial output, tanks moderately high & UK did not meet market expectation.

(Up-Date) Oil is hovering at about US$45 currently, based on a mix of factors, mostly, short-term, but we will have to wait and see, when the short-term, un-wind, what the real picture looks like, and gold, which tanked for the past few months, has some-what stabilized a bit.

(Up-Date) China’s market is up by about 25% since tanking into the abyss, however, the market is being manipulated and subsidized by China’s government, by several measures, and when investors knows, down-side risk is little, so a fake momentum into a bull market, in the short-term, but in the long -term, this is building a moral hazard & weak investment skill & culture, into the Chinese investing public.

(Up-Date) US continues its normal release of data, but with markets globally highly looking for some sign of certainty, for signal into the potential for near-term US Fed interest rates increase, these data release, are getting, heightened attention & focus. The latest UN employment numbers released is above market expectation.

(Up-Date) Quantitative Easing Will Run Until Sustained Adjustment in Inflation Path, Says ECB’s Praet.

(Up-Date) More easing for Eurozone, but again, weak and half attempt that will buy time but nothing much else.

(Up-Date) Some solidify of economy, as a result of Russia adventure in Middle East, but Iran wants to get rich so there is a cap to higher fossil prices. Also, the economics continues to favor alternative energy.

(Up-Date) USA begins to increase interest rates on strong job growth.

(Up-Dated) Russia’s activity in Middle East ended with a bit of a rebound in fossil prices, but Iran wants to get rich and renewable energy is coming on strong.

(Up-Date) China’s as a society or people, drift massively into dystopia.

(Up-Dated) Several global planners have lowered global outlook

Lets to look at specific countries & region:

Western Europe:

Europe is still recovering from the economic crisis and is cautious on spending so injecting funds into the economy, is slow and cautious, so pretty much having a muted impact, reforms for increase competitiveness, from increased efficiency, limited by impact to humanities issues, innovation & creativity that disrupt greatly, is not much in Europe’s recent history, the region is uncompetitive in a great many of industry & services, the people demographic is aging, and un-employment extremely high.

(Up-Dated) WSJ reports some solidifying of confidence in some parts of Europe, and other reports say, the weakening of the Euro, compared to some currencies, have made the regions exports more competitive. Also some reports out of Europe, about a more powerful, injecting stimulus funds into Eurozone & some data supports a continuing ease of credit.

(Up-Date) European Central bank defer the question of stronger stimulus to later  in 2015.

(Up-Date) The problem with the Greek crisis seems to have been put to rest, for now, with something sort of a rolling plan to keep the crisis in control.

(Up-Dated) EU is pumping billions into an innovation drive.

(Up-Date) As expected, with weak and half-attempt approach to easing & little focus on directing where that eased money will head to, Eurozong economy continues to recover at a disappointed pace. And with crisis mentality still grip many planners, some form of austerity remain entrenched, with the good news is, another banking crisis looks less likely than ever.

(Up-Date) More easing coming, but again, weak and half attempt that will buy time but nothing much else.

(Up-Date) Some solidify of economy, as a result of Russia adventure in Middle East, but Iran wants to get rich so there is a cap to higher fossil prices. Also, the economics continues to favor alternative energy.

Japan & South Korea:

Japan and South Korea, that have rode a boom in gadgets of all types, from computer games, to hand-phones, to electrical appliances, but now seems in-capable to develop anything that can greatly expand growth frontier as in the past. And Japan still mared from a collapse years ago. Abenomics, or stimulus plus, pushing currency down, so export will be more competitive, does not seem to be working, likely, because Japanese manufacturing base has gone global, looking for competitiveness, leaving, what is left in Japan, needing significant, re-tooling, such as with robotics, but this drive has not greatly taken effect.

(Up-Date) Some reports of further stimulus from Japan.

(Up-Date) Some reports says investors are betting on Abe’s further stimulating the Japanese economy, hoping this time, it works & we will just have to wait and see, some economic data, in the future, to know if Abenomics will ever work, but without, some concrete re-engineering, of how business and industry left in Japan, for better competitiveness & also showing some, signs of innovation and creativity break-through, perhaps, only, mostly, monetary stimulus will not work well.

(Up-Date) The commodity collapse pretty much wipe Abenomics off the map, in terms of likely working. But commodity is re-bounding to a certain level so who knows, but Abe has come far with Abenomics and now is pretty much stuck with it, so more easing for sure. Japan’s currency also on a roller coaster ride somewhat, as a safety bet, but that stimulus is going to eventually weaken Japan’s fundamentals to the point that the Yen will start heading and staying down.

(Up-Date) Japan and South Korea are trying be as innovative and bring out new products to excite the market and so up sales, but at this point, not too many opportunity & competition is fierce.

India:

India, first looked like it was flat-lining & weak, like other BRICS, but may are arguing that India is in a much better position, for a variety of factors, and India’s leaders been making statements that India will not need stimulus and interest rate reduction. India, also has quite a significant high-tech sector, and should be a good foundation, to jump,m into disruptive innovation and benefit. Strategically, apart from facing national-security threats from China, India is quite diversified, in its economic and business interest. There are some political fundamentals, that activist are pointing out, that points to a certain level of dystopia.

(Up-Date) India has called on the BRICS grouping to jointly, explore the opportunity in research, technology & disruptive innovation.

(Up-date) India, is becoming a must-stop & get involved point, for global disruptive innovation oriented people.

(Up-Date) India lowered its interest rate to help out a not up to satisfactory economy growth performance, and the market was disappointed by the limited reduction, setting stage for future reductions.

Russia:

Russia is on a trip to become a Super-Power that rivals US again, and have sacrificed economic development, so little need to talk about growth, and also hit with dystopia. Then the commodities rout, i.e. oil and gas, has halted, Russia dream, of sustainability, involved with rivaling the US. Then the sanctions, from Russia’s military adventures, is causing all sorts of shock to the system.

(Up-Date) As expected for a long time, Putin love of military adventures & causing havoc and instability, internal Russia and external of Russia, has been exported again, this time to Syria & who know where the whole thing will go, with more havocs from Putin on old havocs. But the whole middle east and greater, has been such a mess for a very long time, and energy in abundance and start-ups ready to go & alternative energy coming on strong, who cares & good riddance & hope the planet end up relying less on energy, from a region, that is so horrific on humanity, as a result of humanity’s addiction to fossil. The concentration, on the region should be focus on the helping civilians caught in all that conflict & also refugees, fleeing the region.

(Up-Date) Russia GDP continues it drift deep into negative growth territory, and with Putin’s new military adventures and other provocation, the sanction on Russia is un-likely to be lift soon.

(Up-Date) Initially, Putin made concessions in Asia, to be a positive player, to boost Russia Far East economy, but have since deteriorated into an hostile posture again, and so, this Russian Far East economic initiative likely, to evaporate away.

(Up-Date) Russia’s adventure in the Middle East gave Russia some clout, but the entire region is such a mess, who knows what Russia really has in its hands and Iran wants to get rich, and Europe is going renewable in a big way, so things does not seem to stack up that great for Russia & weakness should continue, even with a tentative & weak recovering of fossil.

China:

China’s labor cost is up, up & away, workers productivity lost in a black hole, industrial risks of all types, i.e. pollution is everywhere, and all that coming on top of past, of massively over expansion, leaving a population with higher expectation, now disillusioned & hit with a tyranical governing system, so dystopia, like Russia. Money is leaving & China is known as a copy-cat and reverse engineering, not much about innovation & creativity. Then on top of all of that, many countries are emerging to compete with China’s core ability, in being a manufacturing center, and China’s central planned and control economy, face demand for lots of liberal free market principles that China Communist Party cannot deliver.

(Up-Date) News reports, China’s industrial profitability, has been tanking, on a medium to long-term basis. Also China is trying to stimulate the economy.

(Up-Date) Futures Magazine reports China’s economic data, is getting to be even more non-transparent, indicating, China’s brand of Capitalism, is heading into a nasty, Capitalism Dystopia.

(Up-Date) China continues to ease interest rates & inject stimulus into the economy, with some sign of success, as the stock market, which is also being manipulated, been rising recently.

(Up-Date) China gave some key points to the country’s long-term plan, settling to say that it is targeting GDP growth of 6.5% a year, targeting to double the size of its economy in some medium-term involved, number of years. China, like other is also focusing in on innovation.

(Up-Date) Politics in China spells crazy national security and so oppression and suppression is up massively in China to the point many Chinese now probably realize what a pathetic system they live under. So to many Chinese who makes it rich, leaving China is a dream and a life target. China cannot survive that in the long-term.

(Up-Date) Shift to service based economy requires the type of planning ans sensitivity that the Chinese ruling regime have shown to be not so skillful at.

Middle Emerging Economics:

And from Africa to South & Central America, to Middle East and greater, a host of problems, ranging from slow global growth hitting commodities, i.e. energy, that price rise is capped by an abundance & ready to start-up, to governance systems failure, to seriously need economic and business reforms, and again tyrants and dystpia. ASEAN, once a fast emerging region tied to global trade and commerce, in many ways, has also slowed, on slowing global trade and commerce, and like many other, hit with governing failure, of tyrants and dystpia.

(Up-Dated) Several emerging markets guru, such as Mark Mobius, says bottom in emerging markets not reached yet, and commodity prices, looks to be weak in the medium-term, and perhaps also long-term.

(Up-Date) The Trans Pacific Partnership (TPP) initiated by US, to spur closer Pacific Rim trade, and also to counter China’s Silk Road and other scheme, continues to get DC & Wall Street backing. TPP itself, brings a host of questions that activist are challenging & China’s Silk Road scheme and other, are pretty much just a political & hegemony expression, from the start, now hit with low commodity price, tanking global trade, to fast changing geo-political and national-security posturing.

(Up-Date) Ministers, in the countries of the TPP grouping agreed on the deal, with the latest Indonesia, saying the country will join TPP.

(Up-Date) Most analysis, that I saw, say India is in a best position of the now much weakened BRICS grouping, with India, also jumping on the innovation driver of growth rationale. Brazil, China, Russia & South Africa are economically in a mess, for a variety of reasons.

(Up-Date) Latin America as a whole, is heading towards a serious economic recession, and about the only thing that can pull the area back, is tourism, renewable energy, and some strength in commodities, & also a new mind-set with North America people, to focus on the region, instead of leaving the region on the back-burner, while other region like Asia, gets attention.

(Up-Date) ASEAN, is moving closer to form an more comprehensive economic integration, with a mile-stone coming up, in the near-term. But TPP has took away a great deal of shine for ASEAN, and the latest is that Indonesia will join TPP and Japan is helping Thailand join TPP as well. Overall, the ASEAN region, like most emerging markets, is also slowing, but ASEAN, as a whole, is highly exposed to the global economy. Thailand and Myanmar politics continues to be a serous cause of risks, with some in Malaysia.

(Up-Date) Commodity, particularly fossil recovering somewhat is great news, but one thing is for sure, the collapse has really exposed Middle Easy and Emerging Economics to have some very very serious “Structural” problems.

USA:

About the only region left globally, that is still a potentially, a medium to long-term, vibrant place for growth is the US, and a few other. And the US & these other, certainly cannot carry the planet.

(Up-Date ) Some reports says, for a variety of reasons, US, has been able, to remain, as a sustainable, long-term base, for innovation and creativity, spurring a continuous supply of highly valued and competitive firms, breaking open, new growth frontier. Also, reports, say, US corporations, are among the best managed globally & high in numbers, and also innovative. Reports say, with US currency hardening, pricing competitiveness of products made in US, will fall. Some debate on productivity gain, in the US, some say strong while other say weak, but overall, US productivity, has been edging up, on a long-term basis.

(Up-Date) Some economic data from the US came out, i.e. job report, while continues to point to US growth, have disappointed some investors & Ok with other, perhaps indicating, the bull and bear, are greatly, diverge.

(Up-Date) The US stock market is highly volatile and reading the market is currently difficult, as good news becomes bad news overnight and bad news becomes good news overnight.

(Up-Date) US continues its normal release of data, but with markets globally highly looking for some sign of certainty, for signal into the potential for near-term US Fed interest rates increase, these data release, are getting, heightened attention & focus, perhaps, more than the data themselves imply. US stock market continues hardening, but very difficult to read, what is going on, as again, good news can become bad news and bad news can become good news, overnight.

(Up-Date) US stock market Tech Sector, hit a 15 years high, perhaps reflecting the global awakening to disruptive innovation, where US is a global leader in this area.

(Up-Date) Job growth and wage continues to rebound strongly under Obama. The TPP looks to pass in the long-term, despite political campaigning, because the institutions and business are in favor of TPP. TPP should add growth momentum to global growth eventually, but the balance of who benefit at what will be shifting a bit.

(Up-Date) As long expected, the USA Fed has started to increase USA interest rate, with market pundits going wild saying all sorts of things.

New Growth Frontier:

And about the only new emerging industry are re-newable energy, i.e. solar. Then robotics, nano, some bio-science, life-science & overall, the best hope is in internet of things, i.e. anything related to innovation in the area. Some opportunities in food and service also exists. TPP will also bring growth from comparative advantage, but there are some cost that activist are pointing at, such as high health care cost. Then there is still the US and Eurozone trade deal.

(Up-Date) Globally there has been a re-awakening to innovation and we will just have to wait for the benefits to bear fruit. But most are pointing to Big Data and Analytic, Artificial Intelligence & Robotics and Social Media, as the places that will be getting lots of investments.

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