Into the Brexit Labyrinth

Oct 12, 2018 Jacek Rostowski, Project Syndicate

Jacek Rostowski was Poland’s Minister of Finance and Deputy Prime Minister from 2007 to 2013.

After a year and a half of negotiations with the European Union, the British government is no closer to a divorce agreement than it was when it invoked Article 50 of the Lisbon Treaty in March 2017. Sooner or later, Britons will have to choose between self-destruction and no Brexit at all.

LONDON – Anyone familiar with M.C. Escher’s famous illustrations knows what it is like to lose oneself in the haunting infinitude of an eternally recurring maze. The British people are now enduring something similar, only without any of the Escherian precision or wonder.

Call it the Brexit Impossibility Maze. Prime Minister Theresa May marched boldly through the main entrance on March 29, 2017, when she triggered Article 50 of the Treaty of Lisbon. She has been wandering through a political and logistical labyrinth ever since.

Seeking a Direction

When one first steps into the darkness of the Brexit Impossibility Maze, one must walk forward until encountering a sturdy cross-hedge. At that point, one has a choice: take a sharp turn to the left, or follow a gentle curve branching off to the right. The first path leads toward the “framework for the final relationship” section of the maze; the second toward an “exit treaty” – which deals solely with the conditions of the UK’s divorce from the EU.

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Can Eurozone Reform Help Contain Trump?

Oct 12, 2018 Jochen Andritzky, Project Syndicate

Jochen Andritzky, a former Secretary-General of the German Council of Economic Experts, is a visiting fellow at Bruegel, a Brussels-based think tank.

The Trump administration knows that a key source of US economic leverage is the dollar’s role as the world’s dominant reserve currency. Countering America’s disproportionate power to destabilize the global economy thus requires reducing the share of international trade conducted in dollars.

BRUSSELS – US President Donald Trump is using economic warfare to pursue his foreign-policy objectives. In August, his administration announced that it would double tariffs on steel and aluminum imports from Turkey, in order to pressure the Turkish authorities to release an American pastor detained for two years on espionage charges. At the beginning of next month, the United States will also ratchet up unilateral sanctions against Iran.

The Trump administration knows that a key source of US economic leverage is the dollar’s role as the world’s dominant reserve currency. Countering America’s disproportionate power to destabilize the global economy thus requires reducing the share of international trade conducted in dollars. Can the euro serve as a credible alternative?

Red Hot China Mailbag

By John Mauldin

October 12, 2018

Predatory Practices
War Talk
Quality Control
Manifest Destiny

An odd aspect of being a writer is you never know in advance what will excite readers. I’ve written letters I thought very provocative only to draw mostly yawns.

Last week’s trade deficit letter lit some fireworks. The response was immediate and, in many cases, quite passionate in both directions. I got emails from old friends and longtime readers saying it was my best letter in years. Others said I had lost my marbles or gone over to the dark side. In fact, my whole China series has generated a lot of response. Evidently, I kicked the anthill.

I always appreciate feedback, even when it’s negative. Our staff collects feedback from social media, the comment threads on our website, email, and probably other ways unknown to me. They dutifully assemble it into one document and distribute it to the team. When that email hits my inbox, it gets top priority and I read them all. I always learn a great deal. An amazing number of intelligent, articulate people read these letters. So today, I’ll feature some reader comments from recent weeks and explain further where my point perhaps wasn’t clear.

Another economic downturn is just a matter of time

Date: 13-10-2018
Source: The Economist

It will be harder to fight than the last one, says Ryan Avent

JUST SOUTH of Indiana’s border with Michigan lies the city of Elkhart, with a population of just over 50,000. Apart from a small, shop-lined high street near where one river, the Elkhart, flows into another, the St Joseph, the city is mostly shapeless, tree-lined and suburban. Scattered around the outskirts are the factories of several of America’s largest producers of recreational vehicles (RVs). Rows of the finished products rest outside the giant sheds in which they are made.

Modern RVs are impressive, leather-upholstered land yachts fitted with flat-screen televisions and gas fireplaces, the perfect vessels in which to navigate the American continent. The RV business is one of the economy’s most strongly cyclical. Sales of big-ticket items like homes and cars inevitably rise and fall with the business cycle, but RVs are especially susceptible to such swings. It is only once cars and homes have been upgraded that consumers consider splashing out on rolling living quarters. And when financial fear stalks the land, RV-makers have a particularly hard time.

In Elkhart, more than a quarter of people in employment work on RVs. When the global financial crisis in 2007-08 plunged the world economy into its worst downturn since the 1930s, employment in the city’s factories fell by nearly half. The unemployment rate almost quintupled, to 20%. Incomes and population dropped. Elkhart was among the first places President Barack Obama visited after his inauguration in 2009: it exemplified the extraordinary economic challenge facing his administration.

Next time will be different: In fighting the next recession, politics will be crucial

Date: 13-10-2018
Source: The Economist

But are political leaders able and willing to co-operate?

IN THE DARK days of the Great Depression, the balance of economic terror was measured out in movements of gold from one country to another. Physically, though, the gold more or less stayed put. Most central banks kept their gold in the vaults of the Bank of England. Flows were accomplished by placing gold bars on a trolley and wheeling them from one pile to another a few feet away. Told that the economic cataclysm was the product of too much gold on one side of the vault rather than another, Britain’s ambassador to Germany sighed: “This depression is the stupidest and most gratuitous in history.”

Once again, the world is at risk of bumbling into an unnecessarily painful economic mess. If the next global slump takes a turn towards the catastrophic, it will not be because of a dearth of ideas for how to pry an economy out of a rut. Rather it will be because politicians given a long list of ways to pump money into an economy badly in need of it proved unwilling or unable to choose any. Sadly, such an outcome is all too real a possibility.

40 Prozent der Wiener Unternehmer haben Migrationshintergrund

Regina Bruckner, 13. Oktober 2018, 12:00 derstandard.at

Die Zahl der ausländischen Entrepreneure in Österreich steigt. Nicht alle nehmen freiwillig diesen Weg

„Als Friseur musst du ein bisschen verrückt sein. Ich will wie Zohan sein.“ Noch ist Hasan Ali Duran nicht so weit, dass die Damenwelt vor dem eigenen Salon Schlange steht wie bei Zohan – seinem boratähnlichen Vorbild aus dem aberwitzigen Klamaukfilm Leg dich nicht mit Zohan an. Noch hat er Lehrjahre vor sich – bei Joel’s Dreamhair im fünften Wiener Gemeindebezirk. Bis er, wie sein vom US-Blödler Adam Sandler verkörpertes Vorbild, Frauen mit seinem „silky smooth“-Stil glücklich macht, wird der 19-Jährige wohl noch viele Haare vom Boden aufkehren. Schicke schwarze Maojacke, aschblondes, akkurat geschnittenes Haar, fein säuberlich gestutzter Schnurrbart, seine Profession trägt der junge Mann schon jetzt mit Stolz und Lausbubenhaftigkeit vor sich her. Kunden hält er mit überschwänglicher Geste und angedeuteter Eleganz die Tür zur Gasse auf – Zohan lässt grüßen.

Sein eigener Herr

Analyse this: what Freud can teach us about Trumpism

Date: 13-10-2018
Source: The Guardian By Gary Greenberg

As a psychotherapist, here’s what I’ve learned in the two years since Donald Trump moved into the White House.

It will be left to future historians, if there are any, to explain to their contemporaries why a profession came into existence in the 20th century whose well-paid practitioners sat in an office while people otherwise unknown to them talked about their unhappiness, one after the other, for an hour at a time. I have been a therapist for 35 years, and I still don’t really understand it. I don’t speak in delphic tongues or offer holy absolution or perform shamanic hocus pocus; I really don’t do much of anything but sit there, listen and try to tell the truth. Not that it is easy; it is taxing to spend your days immersed in other people’s misery, and whatever is wrong with me that prompted me to do this with my life, and left me able to withstand it, is not improved by the exercise. Still, I am grateful to the marketplace for providing me with such an improbable way to make a living.

I suppose those historians will also note the inexhaustible genius of a political economy that created this marketplace and ensured a robust supply of the pathologies for which renting a rapt audience by the hour was the cure. Still more impressive, in retrospect, will be the imposing professional infrastructure – offices, licences, the monetisable unit of time – for legitimising the listening caste.

Approaching the summit: Filling in the gaps in the Brexit deal

Date: 11-10-2018
Source: The Economist

The chances of an agreement have risen. But getting it through Parliament will be a huge challenge

THERESA MAY certainly has her downs and ups. The prime minister bounced back from last month’s humiliating rejection of her “Chequers” plan for Brexit by European Union leaders in Salzburg, to what felt like a relative triumph at the Tory party conference in Birmingham a fortnight later. Next she will go to Brussels for an EU summit beginning on October 17th, widely trailed as the crunch moment for Brexit. Despite Salzburg, the mood music has improved. But time is running out, and rebellious MPs could yet blow up any deal.

For all the rebuffs to Chequers at home and from the EU, Mrs May’s advisers are quietly confident. Their reasoning starts from the point that the immediate negotiation is not about Chequers or future trade relations at all, but about a withdrawal agreement. Almost all of this is settled, except for the hardest part: a “backstop” designed to avert controls at the Irish border under any circumstances.

The principle of the backstop was accepted by Mrs May last December. Yet putting it into practice has proved tricky. The EU wanted Northern Ireland to stay in a customs union and in regulatory alignment with the single market, implying a border in the Irish Sea. Mrs May, backed by the Northern Irish Democratic Unionist Party (DUP), on which her government relies for support, roundly rejected this. Her Chequers plan proposed instead that the entire United Kingdom stay in alignment with the single market for goods, with customs controls avoided by fanciful high-tech wheezes. But the EU said no.

What if Obama Voters Remember How Lousy the Obama Era Was?

Date: 13-10-2018
Source: The Wall Street Journal By James Freeman

The left worries that young people and minorities don’t hate Trump enough.

During the Obama administration there was much confident chatter on the left about the “coalition of the ascendant.” This rising population of young people, social liberals and minority voters not only carried Barack Obama to two national victories but was allegedly destined by demography to exert an increasing leftward tug on American politics. The potential problem for leaders of this coalition is that along the way some of their followers may have noticed the results of their policies.

A few warning signs have been appearing lately as the Obama generation makes it way into the workplace and as minority voters seem unwilling to hate President Donald Trump as much as Democratic politicians and the press expect them to do.

“It’s time for some alarm about the midterms,” writes David Leonhardt of the New York Times. “The most recent polls have underscored the real possibility that Republicans will keep control of both the Senate and House.” According to Mr. Leonhardt:

Marine Le Pen is hoping to come top in next year’s Euro-election

Date: 11-10-2018
Source: The Economist

After a poor showing last year, the nationalists are resurgent

LESS THAN 18 months ago, Marine Le Pen was beaten and exhausted. She had lost the French presidential run-off to Emmanuel Macron, after a wild-eyed debate performance that left her fans aghast. Her leadership of the National Front, a party of blood-and-soil populists, was strained, and she was said to be depressed. Within months, she lost her closest ally, Florian Philippot, and found her party’s French bank accounts unexpectedly closed.

Yet there she was in Rome on October 8th with a new glint in her eye. Alongside Matteo Salvini, Italy’s interior minister, a beaming Ms Le Pen railed against “totalitarian” Europe and proclaimed the start of a new “history with a capital H”. Populism and nationalism may have been defeated at the ballot box in France in 2017. But Ms Le Pen is hoping that next May’s elections to the European Parliament will show that her party, renamed the National Rally, is still a force to be reckoned with.

Thanks to a turnout that is usually low, and the opportunity for a low-risk protest vote, the French far right has often done well at European polls. In 2014 the National Front came out on top in France, with 25% of the vote. Next year’s ballot will be the first mid-term electoral test for Mr Macron. After a summer of poorly handled scandals and offensive remarks, the president’s popularity ratings have tumbled. This week Mr Macron was struggling to reshuffle his government, more than a week after his interior minister, Gérard Collomb, resigned after complaining that the president lacked humility. Next May’s election will be “very complicated”, says one of his deputies. “The risk is that the vote turns into a referendum on him.” As it is, one poll puts Ms Le Pen’s outfit neck-and-neck with Mr Macron’s La République en Marche, on about 20%, comfortably ahead of all other parties. Ms Le Pen could well come out on top again. “The populist wind is blowing everywhere,” warns Xavier Bertrand, president of the Hauts-de-France region, who beat Ms Le Pen to that job in 2015.