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Graham Watson
onto International Economics: A-Level Economics September 23, 1:53 AM
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Republicans lawmakers have put pressure on the president to curb exports as diesel prices soar to record highs in the US.
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Unemployment rose slightly as American employers paused hiring with midterm elections just a month away.
Graham Watson's insight:
The latest US labour (labor) market figures indicate a slowdown in job creation and a slight rise in unemployment to 4.2% in the latest set of data before the mid-term elections. No doubt, there's rhetoric to follow - greatest of all time, greatest ever - not least because in the President's own words: "I've done a very bad job of explaining how good the country is doing,"
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A Wendover Productions clip that looks at how Botswana has bucked the trend and developed post-independence.
Graham Watson's insight:
How has Botswana avoided the resource curse, having discovered diamonds a year after gaining independence? It's relatively easy - a legal system based on the rule of law, and the development of appropriate institutions and ethnic homogeneity have to a large extent ensured stability.
Oh, that and the fact that 80% of its exports to South Africa help.
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Fears that US borrowing costs are unsustainable drive Britain’s 30-year bond yield to level not seen since 1998
Graham Watson's insight:
Global bond yields are up again, with concerns about US borrowing costs feeding through into concerns about other economies, such as the UK. As a result, the yield on UK 30-year bonds has reached 6%, its highest level since 1998. Other yields, on 5- and 10-year borrowing have also gone up, which will concern the Chancellor because of the opportunity cost of debt interest repayments.
The US President really is playing a blinder in his second term.
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What happens when women and young people gain access to skills, finance, and opportunities? Across 3,200 villages in Bangladesh, the Resilience, Entrepreneurship and Livelihood Improvement (RELI) Project is helping vulnerable households build sustainable livelihoods, strengthen resilience, and create new economic opportunities. The project is helping to create jobs and opportunities for women, youth, and vulnerable communities through skills development, access to finance, market linkages, and community-driven initiatives.
Graham Watson's insight:
This World Bank clip underscores why increasing opportunities for women and girls, especially among the most vulnerable, enhances development prospects. The Resilience, Entrepreneurship and Livelihood Improvement (RELI) Project has provided Bangladeshi women with education and training that has enabled over 800,000 people to transform their lives, making many of them entrepreneurs, running poultry farms, vegetable gardens and so on.
This has also be been backed up by support for education and infrastructure investment to increase the capacity of rural institutions.
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It is the latest escalation in the Canada-US trade war after negotiations collapsed in late August, with no word on when talks may resume.
Graham Watson's insight:
The Lord giveth...and the Lord taketh away - reductions on US-China tariffs, increases on US-Canada tariffs, with the latest escalation in the Us-Canada trade war seeing tariffs imposed on alcohol, dairy and motorcycles.
Trade talks remain on ice - unlike the Canadian wine - with 93% of Canadian wine exports going to the US, so a resolution of ongoing issues is clearly important to Canadian winemakers.
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John Healey said the government is in talks with the US over Donald Trump's threat to stop exports.
Graham Watson's insight:
Call me a contrarian, but I'd have adopted another approach: I'd have told him to crack on and impose a diesel export ban. It strikes me that the President isn't very good at taking advice, so telling him the opposite of what you want might be more likely to have the desired effect.
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A World Bank Group-supported project is turning Sierra Leone’s beaches, chimpanzee sanctuaries, and mountain viewpoints into engines of jobs and growth. The project contributed to the creation of over 35,000 direct and indirect jobs through tourism development, public investment, and small and medium enterprise support. With support from the World Bank Group's PROBLUE multi-donor trust fund, over $92 million in private investment was leveraged through project activities, helping to sustainably grow investment and enterprise in Sierra Leone's tourism sector.
Graham Watson's insight:
The World Bank's Sierra Leone Economic Diversification Programme is helping the West African economy exploit new opportunities in tourism and the creative arts to attract vital foreign investment and ensure sustainable growth. This brief clip shows how the initial project has created economic growth, supported jobs and helped development prospects.
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US president’s suggested 90-day export ban before midterm elections could bring even higher fuel prices across Europe
Graham Watson's insight:
Well, I never, a protectionist measure that damages both sides. Who would have thought it?
Tariffs? Quotas? And now President Trump's proposed ban of diesel exports. The reality is that for an economy like the UK, only 70% of the diesel sold here is refined in Europe. Thus, an export ban would mean greater competition for increasingly scarce diesel resources, and bid up the price. From a US perspective, could harm long-term diesel supplies.
But the President knows best.
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Campaigners say plan marks notable shift away from oil and gas as previously pledges were only for carbon neutrality
Graham Watson's insight:
Despite a great deal of debate about whether or not its appropriate, Germany has re-affirmed its commitment to phasing out fossil fuel use, setting a target of 2045. This is seen as significant because it had only previously pledged to be carbon neutral by then. It is also intending to ramp up its target for renewable electricity generation from 55% to 80% by 2030, as well as cutting methane emissions by 30% by then.
This comes against an increasingly fraught background, with German economic performance in the spotlight, with the economy seemingly having stalled, in part as a result of higher energy costs.
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In an interview with the BBC, Kristalina Georgieva says economic shocks had pushed "debt levels up like a staircase not to heaven".
Graham Watson's insight:
The Head of the IMF, Kristalina Georgieva, has warned that the developed world must look to cut its debt levels as borrowing costs rise, otherwise they risk financial crises. The reality is that because of competition for investors money, and increased uncertainty, bond yields have gone up and Georgieva is arguing that politicians seem to be a bit complacent about this.
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Some of continent’s biggest pharma firms write to national leaders calling for action to safeguard their futures
Graham Watson's insight:
And here's an example of a sector of industry worried about its ability to compete with both the US, and given the last article, China. European drugmakers are calling for action to safeguard their futures. The firms are arguing that they have 'strategic' importance, which, to me, looks like an argument for protectionism.
Watch this space.
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Rafael Moreno, whose company has opened demo plant in Brazil, says market is ‘nervous’ as Trump-Xi summit looms
Graham Watson's insight:
This article highlights the stranglehold that China has over the supply of rare earth metals, and the attempts of one firm, Viridis Mining and Minerals, that is looking at developing the capacity to mine rare earth metals at its sites, notably in Brazil.
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Aid to lower-income countries fell by almost 7%, while higher-income countries saw their share of Britain’s aid budget increase
Graham Watson's insight:
The decision to cut the UK's aid budget has, like all things in this regard, hit the most vulnerable hardest. Whereas a decade ago the UK was giving the UN target of 0.7% of its GDP in foreign aid, last year that figure fell to 0.44%, down from 0.5% a year earlier.
That equates to a cut of £118m for the least developed, low-income countries, whereas aid to middle income countries actually increased. Of course, some will argue that given that the bulk of the money classified as aid goes on asylum seekers - nearly 20% - there's a simple solution but that is entirely wrong-headed.
The net result of collective aid cuts by the developed world, not least the US is such that some fear that aid is now almost exclusively focused on immediate life saving support, to the detriment of programmes designed at promoting development.
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The co-ordinated release is aimed at heading off further price spikes and avoiding a ban on US diesel exports.
Graham Watson's insight:
The co-ordinated release of 100 million barrels of oil and diesel from the strategic reserves of the G7 nations is designed to calm markets and put downwards pressure on diesel prices and avoid the possibility of President Trump imposing a diesel export ban.
It seems to have done the latter, but it will be interesting to see if it affects the former - watch for the phenomenon of 'rocket and feather' pricing at the pump.
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President Donald Trump has threatened to ban diesel exports in a bid to ease prices in the US ahead of the November elections.
Graham Watson's insight:
I'm amazed that the world's media haven't interpreted this better: whilst the US calls on Europe's economies to release some of their diesel reserves, faced with the prospect of diesel shortages and a US export ban, no-one has come and and suggested that the problem is entirely of US making.
As the article states: Treasury Secretary Scott Bessent stated "that US 'farmers, truckers, and businesses should not be left carrying the burden' as prices soar. It's almost as if the Trump regime is frightened of taking responsibility for their own idiocy.
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Traders see about a 35% chance of an October rate hike, down from about 45% following White House pressure
Graham Watson's insight:
Similarly, US data seems to imply that inflation is more muted than expected and growth still decent - all of which puts less pressure on the Federal Reserve to increase interest rates next month. That may please President Trump - however, he, of course, wants them lowered. Quite how he squares that with the US public finances, is anyone's guess, although I suspect he's not that into the detail.
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Michele Bullock said board knows decision will hit some people hard but hopefully in the next few years ‘this will all have been worth it’
Graham Watson's insight:
Monetary policy across developed economies is broadly contractionary, with the news that the Reserve Bank of Australia has raised rates to 4.6%, faced with the prospect of inflation in the economy reaching 3.6% for the 3rd month running, well above the 2-3% target rate.
You might want to think about the trade-offs involved here, as well as how the monetary transmission mechanism will see these change affect real variables in the Australian economy.
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World’s biggest economies release lists of products in latest move away from trade war – but no strategic goods are included
Graham Watson's insight:
Some relief in the ongoing US-China trade war, with the protagonists agreeing to scrap reciprocal tariffs on nearly $30bn worth of goods, everything from foie gras to trade in live animals, including dolphins. It gives some insight into the complexity of tariffs.
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In the first article in a series on the Polish economy, we look at the country’s defence boom and its implications
Graham Watson's insight:
The rise in defence spending in response to the attack on Ukraine has been termed military Keynesianism. In this article, Richard Partington looks at the implications of this for the nation that has seen the greatest increase in its defence budget: Poland.
A number of foreign arms manufacturers have invested in the economy and resulted in annual growth of 3.9% in the second quarter of the year, among the fastest in Europe.
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As Brazil heads into an election, its debt problems are becoming harder to ignore. Consumers and businesses are struggling with sky-high borrowing costs as the country’s deteriorating fiscal outlook alarms investors. President Luiz Inácio Lula da Silva has rolled out measures aimed at easing the pressure on families and businesses while his main rival, Flávio Bolsonaro, has promised tighter spending controls, albeit with few details. Whoever wins the presidency is likely to face difficult choices over how to bring the country’s debt to heel.
Graham Watson's insight:
This Bloomberg clip looks at the implications of growing levels of debt in Brazil - both for the government and individuals, not least because of the deregulation of financial markets and increased use of credit cards. As interest rates have climbed, this has burdened the economy with increased debt repayments and some high profile firms have filed for bankruptcy.
Interestingly, President Lula da Silva has banned all online gambling overnight, hoping to tackle one aspect of the ongoing cost of living crisis.
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Explosive growth in imported vehicles omitted from EV tariffs fuels concern for future of European carmakers
Graham Watson's insight:
More bad news for EU car manufacturers with data for the last four years highlighting how Chinese manufacturers have adapted to EV tariffs by switching their attention to the market for hybrid cars.
The data is staggering, and highlighted by the article: "In 2022, just 659 Chinese-made fully hybrid cars were sold in the EU. However, in the first seven months of this year, sales of Chinese hybrids have shot up to 160,662.
As I said the other day; I fear that established European car maker have missed the boat.
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Republicans lawmakers have put pressure on the president to curb exports as diesel prices soar to record highs in the US.
Graham Watson's insight:
It seems that the Trump administration is considering a ban on diesel exports in the hope that it will bring domestic diesel prices down. It's not a great idea, it will distort markets - but it appears that the President's free market rhetoric doesn't apply if he thinks an idea might improve his prospects in the mid-term elections.
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Auto executives across Europe hope rearmament can help them flex their industrial muscles once more.
Graham Watson's insight:
Excellent article by Simon Jack and Theo Leggett that looks at the challenges facing European car makers. The brutal truth is that they have been complacent, both in the face of Chinese competition and the pivot toward electric cars, thinking that their legacy status would save them. Frankly, if I were a shareholder, I would be pretty bloody cross.
However, it seems as though they are now looking towards diversification, in the form of military vehicles, to save their bacon. It's a high risk proposition; they're not experts in this field and they are sometimes competing against one another. Equally, they are diversifying into engine manufacturing and starting to ally with Chinese firms too. I have to save, I think that they've missed the boat.
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Days before Xi Jinping’s summit with Donald Trump, new study shows trade deficit ran at more than €1bn daily in July
Graham Watson's insight:
I'm currently looking at international trade, trade patterns and trade imbalances, and this article covers all three. It seems as though the EU is importing three times more from China than it exports there, with the daily trade deficit now in excess of €1bn per day in July.
The worry is that such is the the size of this that the EU is going to erect protectionist barriers, not least in the EV market, where it has already asked China to limit the export of hybrid vehicles.
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Fed chair presided over unanimous decision to raise interest rates despite intense campaign from White House
Graham Watson's insight:
Eduardo Porter is right in identifying Kevin Warsh's policy stance as 'adult' and right to point out the extent to which the White House is increasingly spouting economically incoherent nonsense, in failing to acknowledge its role in sustaining inflation and keeping interest rates high, and in continuing to run budget deficits and increasing bond yields as a result.
It feels as though the next few months will be a real test of central bank independence in the US.
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It seems that the Trump administration is considering a ban on diesel exports in the hope that it will bring domestic diesel prices down. It's not a great idea, it will distort markets - but it appears that the President's free market rhetoric doesn't apply if he thinks an idea might improve his prospects in the mid-term elections.