RTHK3 Radio Show Notes: Amazon customers are more powerful than union members!


Thursday, February 08, 2018 // Written by Enzio von Pfeil

"If you don't like change, you will like irrelevance even less.".  Well, things have changed. For instance, retailing vs union members. Shoppers are more powerful than union members, meaning that shoppers disallow strong inflation.

 

MARKETS

The wild swings in global stocks have continued on Wall Street overnight. There have now been four sessions in a row in which fears of rising inflation have sent bond yields higher pressurising equites, wiping almost $3 trillion from stock value. Stocks initially slipped back last night before rebounding and then falling again as bond yields rose to levels seen just before the latest sell-off began. Traders also blamed computerized trading and sharp declines in short volatility funds that use leverage for the market's recent swings.

Billionaire investor Carl Icahn says the increased volatility is the first “rumbling” of an earthquake ahead. He also warned of a dangerous bubble in passive investing saying that eventually, that will implode and could lead to a crisis bigger than in 2009.  “When you start using the market as a casino, that’s a huge mistake,” Icahn said.

 My responses

  1. Good Economic Time®.  The global Economic Clock® reveals that there is an excess supply of money and an excess demand for goods.

  1. But it is losing a little steam. However, when I look at my favourite freight indicators, they all show that the global Economic Time peaked this October, and has been waning a little since then.
    1. What to watch out for.  Just recently, the world’s supra-nationals – the World Bank, IMF and OECD – all issued reports lauding our strong global growth.  The problem is that these bureaucrats cheat: they fudge what the private sector already has prepared for them – 6-9 months before hand!  Thus, when these supra-nationals proclaim that the world economy is going from strength to strength , just bear in mind that these groups’ thinking is about six months behind the curve. I am sure that by now, a few of us economists are sensing somewnat less steam in the economy than it had, say, a year ago.

  1. Driving by staring at a rear view mirror. Listeners inow that I am very leery of the “inflation  is just around the corner” myth.
    1.  Globalisation, technology and demography are braking global growth.

                                                               i.      No more wage-price inflation.   This means that the power of the unions has been virtually broken and thus, that they cannot incite those wage-price spirals which we all got used from the  1960s to 2017.

                                                           ii.      No more union power è flat yield curve.  We all know that bond yields have risen strongly. But for how much longer?  Our newer paradigm is that Amazon and the new tech firms are far more powerful when depressing wage-push inflation.  This means that inflation will weaken again: the deflationary impact of lower AMAZON is stronger than the inflationary impact of UNIONS

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TRADE

China has responded to the US Trump administration’s slapping of tariffs on imports of solar panels and washing machines by filing a complaint with the World Trade Organisation. China says the tariffs are not consistent with international trade rules and under the WTO process, 30 days of “consultations” will now begin between the 2 countries. China’s pushback against the United States’ more aggressive stance on trade follows an announcement on Sunday by the Chinese Commerce Ministry that it was launching an anti-dumping and anti-subsidy  probe into U.S. sorghum imports, a grain used in livestock feed.

 The official Xinhua News Agency also added to criticism of America’s trade policies saying: “It's obvious who is creating trade barriers when you see iPhone with "US chip" can be sold freely in China while Huawei mobile phones with "Chinese chip" are prohibited from entering the US market."

My responses:

  1. CATS.   Reminds me of villainous and brash Macavity in the musical,  “CATS”: his evil deeds have anointed him the “Napoleon of crime”.  Trump is just a pugilistic thug who wants to create havoc without thinking things through.
  2. Meaningless measure. So, Kaiser Trump slaps tariffs on American imports from China of solar panels and washing machines – great headline stuff to appeal to his dumb, hillbilly electorate – but not material enough to make a dent in America’s trade deficit with China.
  3. Tit for tat. Now the Chinese are responding by initiating anti-dumping and anti-subsidy probes into  their imports of sorghum from the United States.
  4. Pugilistic  bun fight to heat-up.   
    1. “Foreigners are for free”. This was the single most important “take-away” of my many years’ working with Capitol Hill on trade politics.  The same attitude will apply to the Chinese “electorate”
    2. “All politics are local.” This is my “take-away” from my daily geo-political reading.
    3. Bun fights heat up.  Trump is positioning himself and his party for victory in the 6th November 2018 “mid-term” elections in America.  Listeners and readers MUST evaluate EVERY UTTERANCE of Kaiser Trump as being geared towards a Republican election victory this Fall.

  1. Lambaste foreigners. Naturally, he will pick on foreigners’ “unfair trade practices “
  2. “Wartime President”? More ominously, he also will seek to antagonise N Korea even more- in order to deflect from his domestic policy issues at home – such as the Russia probe…

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