Olympics: American Egalitarianism

(Drivebycuriosity) - It´s halftime in Sochi. While studying the current medal tables I made an interesting observation. The Americans are more egalitarian than the European.

Question: Has a gold medal the same value than a bronce medal?

If we believe the American Olympic medal tables the answer is yes (yahoo). At half time Russia is leading the table with 15 medals (gold, silver, bronce) followed by Netherlands & USA with each 14 medals. Norway with 13 medals is on place 4 and Germany with 12 medals is number 5.

All medals are the same?

The British newspaper "The Guardian" (theguardian) has a Olympic medal table structured in European style: Here Germany is leading with 7 gold medals, number 2 goes to Switzerland with 5 gold medals. Russia is on place 3 with 4 gold and 6 silver medals, Canada has place 4 with also 4 gold but 5 silver medals. Netherlands follows with 4 gold and 4 silver medals and than comes USA also with 4 gold medals but 3 silver medals.

So, the European (the German magazine "Der Spiegel" has the same table as the Guardian) recognize the values of a medal, but the Americans don´t.

All medals are equal - or aren`t they?.

Economy: Does An Independent Scotland Really Need The Pound?

(Drivebycuriosity) - Scotland wants to be independent. In September a referendum will decide if the region will separate from U.K. The British government isn´t amused. London warns Scotland if they choose independence they might not keep the pound as currency.

So what? I think an independent Scotland doesn`t need the British currency, they would even be better off with a currency of their own. In this case the Scots can choose if they want to be really independent and let their currency float freely on the currency markets.

With a free floating Scottish currency the country would get even more independence. If their economy is weak (shrinking GDP, rising jobless rate) they could lower interest rates which should lead to a devaluation of their currency. In this case Scottish exporters would benefit because they can sell their products cheaper on the global markets and foreign competitors would be handicapped because their prices would rise compared to the prices of Scottish products. This should boost exports and hamper imports resulting in a stronger Scottish economy.

If the Scottish economy is booming and heating up inflation the country could lift interest rates which would revalue their currency. A rising Scottish currency would make Scottish products more expensive on the global markets, imported goods would get cheaper. Both processes should slow down the Scottish economy and dampen inflation. 

Scotland also could bind their currency to the pound, the Euro or even to U.S. dollar. Would Scotland chose the Euro for instance, they would have to defend the price of their currency to keep the exchange rate to the Euro unchanged (fixed). If their currency would start falling they would would have to buy their own currency on the currency markets and pay with Euros. This requires of course sufficient supplies of Euros (currency reserves). Alternatively Scotland could raise interest rates which could make their currency more attractive and stabilize the exchange rate to the dollar.

The advantage of a currency peg - say to the Euro - would be that the country could avoid revaluations and devaluations which could hamper trade with the Euro zone. But in this case Scotland would have to give up a large part of their economic independence. If they would attempt lower interest rates than those of the Euro zone their currency would get under pressure and they would fast run out of Euro reserves, on the other hand higher interest rates would attract money from the Euro zone which would lead to a revaluation or foil the planned rate hikes.

Soon we will see how the Scots decides.

Emerging Markets - Throwing The Baby Out With The Bath Water?

(Drivebycuriosity) - Emerging Markets are out of favor. Less than two months into 2014, global investors pulled more money out of emerging-market stock and bond funds than the total amount they retracted last year, writes Bloomberg (bloomberg).

I believe this is an overreaction to crises in some countries like Ukraine, Thailand, Turkey and Argentina. I think the now ruling pessimism regarding the developing countries in general is overblown.


Since begin of this century the emerging markets, especially the giants China & India, have been the engine of the global economy. Most of the growth of the world economy in this period came from emerging countries. I believe, that they will continue doing so. Yes, emerging markets are far more risky than U.S., UK, Germany and other established countries. But the high volatility of their economies, stocks & currencies will be overcompensated by growth rates which are significantly above the economic growth in the U.S. and Europe.


There are 3 reasons for that:

1. Catching-Up Process:

China & Co. have a tremendous backlog demand because per capita income & wealth are much lower than in the western world. But there live billions of talented & diligent people who want to reach the US and European standard. Therefore these people are working hard, saving and investing to be able to expand their living standard in the near future. This is basic human nature.

2. Learning Process

The emerging economies can learn from the advanced countries, they don´t need to make their mistakes twice. This learning process - with the assistance of World Bank and other institutions -  helps them to develop agriculture, industrialization and the advance of the service sector (health care, banking, transport, tourism and much more).

3. Technological Progress:

Rapidly falling costs for computers, other electronic devices & further machines (constructing, agriculture & more) along with the brisk evolution in software helps the the emerging markets to quickly modernize their economies and to raise production & efficiency.

These processes are accelerated by the Internet which permits access to trillions of cheap information. Cheap smart phones for instance open people in Asia, Africa & Latin America many business opportunities. Cloud computing (Internet access to huge data centers) reduce the costs of running a modern business significantly.


My favorite emerging country is China. Yes, it is still ruled by the Communist Party, but the high growth rates over more than 2 decades show that the giant is transforming, helped by the 3 processes mentioned above. I also believe in the perspectives of India, in spite of a xenophobic government (restrictions for foreign companies and investments), huge bureaucracy and influence of fundamentalistic religious  groups. Latin America & Africa are also transforming and benefitting from the above mentioned factors. Success in one country also is infectious, benefitting economies in the neighborhood.

Thanks to global trade - for instance between commodity rich Brazil and commodity hungry China - and modern communication techniques the whole group could stay the locomotive of the world.

New York City: Snow Storm Over Manhattan

(Drivebycuriosity) - This morning New York City experienced one of her infamous snow storms that turned Manhattan into an arctic land scape - a tribute to the polar vortex that rules the U.S. for weeks.

New York’s Central Park had 7 inches by 9 a.m., according to AccuWeather. Streets, places and parks are now in Siberian mode. It`s very slippery outside.

But New Yorker´s seemed to take it easy. Traffic is still flowing, albeit less swift than usual. And public schools are still open, the socialist mayor doesn´t`t care about the risks, he wants to feed his minority clientele there.

And it is still Fashion Week. On Broadway in downtown Manhattan I spotted a model doing her job. One of the surprises the metropolis daily provides. I am afraid that her thin blouse didn`´t protect her from the chill. Very professional.

Here is a little collection of my arctic impressions from today.

Enjoy!

Economy: Another Setback For The China-Crash Callers

(Drivebycuriosity) - Today was another setback for the China-crash callers (bloomberg  businessinsider). This morning we learned that China's trade growth accelerated in January: exports grew 10.6% (December plus 4.3%) and imports advanced 10.0% (December plus 8.3%). It seems that the Asian economy is benefitting from the strength of the U.S. economy and the recovery of Europe.

As usual, these numbers were dismissed and denied by a lot of commentators. There is a tradition to call all positive China data "false" and "faked". For years China bears like New York Times correspondent Paul Krugman and Jim Chanos, a hedge fund manager and notorious short seller, have been banging the "China crash drum"  (driveby). The China crash callers claim that China is suffering from huge structural problems like too high debts and too huge investments into real estate which would cause a "hard landing" of the Chinese economy.

But the reality doesn`t confirm the crash scenario. Last year China´s economy grew 7.7%, the same rate as in 2012. Retail sales have been growing around 13%. I think that the solid trade numbers are a sign that China`s economy is getting stronger in the coming months.

I expect that the second largest economy of the world will deliver additional tailwinds for the global economy in the coming months - besides the recovery of Europe. This also could boost China´s stock market which has been flatlined since summer 2012.

New York City: Spring Fashion Week 2014 - Flowers On Ice

 

(Drivebycuriosity) - New York City is under the spell of winter. But arctic vortex or not - it´s Fashion Week again (February 06 through February 13).

In spite of the freeze this bi-annual event allows a glance to the fashion of the upcoming spring season and transforms the metropolis again into a mecca for the world of glamour (mbfashionweek).

                             $98 billion industry

 
Fashion in NYC is a $98 billion industry and the semi-annual New York Fashion Weeks yield an $865 million economic impact per year (NYCEDC).

Like in the last years I pilgrimaged to the Lincoln Center at the Metropolitan Opera - where the sponsor Mercedes-Benz has a tent serving as the center of the fashion spectacle. The crowd of onlookers and photographers was a bit smaller as usual and the models walked faster to escape the chill. But some found time to pose anyway.

Fortunately the camera wasn`t frozen. So I could collect some impressions of the glamour (you might also take a look at my extensive & elaborate collection from last summer driveby). 

Anyway. Enjoy!

Culture: Hirshhorn Museum, Washington D.C.

 

(Drivebycuriosity) - Washington D.C. is a paradise for museum lovers. There is so much to discover. The Hirshhorn Museum beside the National Mall shows an interesting collection of contemporary art (wikipedia  hirshhorn.si.edu). 

One of their displays, a lcd screen, shows the explosion of a flower vase in extreme slow motion - a fascinating psychedelic show. On another screen you can see a video about a Stratocaster guitar which is drawn over the ground creating a lot of noise like a heavy metal concert.

Unfortunately their supervisors don´t permit taking pictures - contrary to other museums in Washington D.C. Therefore I can show just some examples. But anyway, enjoy.