Economy: How Dangerous Is Trump`s New Trade Tariff?

(Drivebycuriosity) - If we believe CNN, President Elect Trump is considering imposing a 5% tariff on all imports into the United States. Business Insider comments this step could "put the economy on a path to 'global recession'" (businessinsider ). I think a new tariff is a bad idea , I would prefer zero trade barriers, but it would be no big deal either. Here my analysis:

A new 5% tariff would raise prices of imported goods about 5%. That could harm especially low income families in the US because they would have to pay more for many goods. But we also have to consider the exchange rate implications.

The effect of a new 5% tariff on import prices is comparable with a devaluation of the US Dollar of 5% because this would lift prices of goods priced in Euro, British Pound, Yuan and other foreign currencies about 5%. But this year we experienced a sharp raise of the Dollar. For instance the Euro lost about 5% in the recent 12 months. The new tariff would just equalize the Dollar revaluation. If Euro & Co. are falling deeper the price effect of the new tariff would be diminished.

Prices aren`t changing every second, as the currency rates do. The prices for imported goods didn´t necessarily fall as much as the values of the foreign currencies, in many cases exporters - and importers like Walmart - benefited from the dollar revaluation and earned higher profits. A new tariff might skim some of these profits which would reduce the influence on the US prices of foreign goods.

If Trump stays with a new 5% tariff - and does not imply further trade barriers - the effect on the global economy might be negligible.

Economy: Will The Art Market Reach New Records In 2017?

 

(Drivebycuriosity) - The US stock market climbed to new all-time highs, driven by better economic news & more optimism for the future. I reckon that the art market will recover from this year´s setback and will reach new  records in 2017 as well.

History shows that stock markets & art markets walk side by side. Besides the collectors, who buy art because they love it and want to own it, there are also investors & speculators, who purchase because they hope to sell later for a higher price. This year we saw a setback - sales of the big auction houses (Sotheby`s & Christie`s) are down and many mid-sized galleries are closing.

I think it is no coincidence that the art market had accompanied the US stock market which also had a weak period which lasted from early 2015 through this November 2016. Until recently many investors & speculators had avoided risky assets - including art works - because they were skeptical for the global economy (weak US, China & Europe).

But in the recent weeks we are witnessing a return of the global stock markets and many stocks are rallying. The rally shows that investors are getting more appetite for risky assets. This also should rekindle the art market and attract more speculative buyers. Maybe Sotheby`s & Christie´s may report new records in 2017.

Economy: Why Brexit Will Become A Success Story

(Drivebycuriosity) - There is much ado about Brexit. Many claim that Great Britain will fall into an abyss after leaving the EU. But I believe that the Britains did the right thing and Brexit will be a success story.

History shows that separations often go well. Taiwan separated in 1949 from Motherland China which led to a "period of rapid economic growth and industrialization, creating a stable industrial economy" (wikipedia). Today Taiwan has a per capita income of $39,600, about 5-times of China ($7,924). Hong Kong, which got separated in the 19th century, has a per capita income of $42,200. Singapore did even better. The tiny state had been a part of Malaysia, but got kicked out in 1965 after political conflicts (wikipedia). The independence brought Singapore swift economic growth. Today the state belongs to the most advanced economies of the world with a per capita income of $52,900.

There is more evidence: Europe became the world’s most dynamic civilization after around the year 1500 partly because of political fragmentation and competition between multiple independent states, wrote the historian Niall Ferguson (bostonglobe). Small countries like The Netherlands became global power. The Italian Renaissance is another example: A patchwork of independent city states, including Milan, Florence, Pisa, Siena, Genoa, Ferrara, Mantua, Verona and Venice, was competing against each other. This created a climate  which fostered businesses, sciences & arts. Today Switzerland & Norway aren`t member of the European Community - and both countries are doing well. People worldwide are buying Swiss products & services and don´t care whether the country is part of an union or not. 


                                              Shaking Off Eurosklerosis 


I suppose that the British economy will benefit from Brexit because the country will get rid of the EU over-regulation. "One of the very good things that could come of a Brexit: shaking off the Eurosklerosis that has held back growth in the Eurozone for many years", writes the economy blogger Scott Grannis  ( scottgrannis ). Eurosklerosis describes a pattern of economic stagnation in Europe that resulted from government over-regulation and overly generous social benefits policies.

According to EU law, the Brits couldn´t work for more than 48 hours a week, averaged over 17 weeks ( marketwatch ). 60% of Great Brtain`s laws came from the EU in Brussels rather than from Parliament in London ( marketwatch.). It's not hard to understand being pissed off at being subject to unaccountable bureaucrats in Brussels", writes Rolling Stone author Matt Taibbi ( rollingstone ).

Brussels has been gaining more and more power over the years - developing the EU Union into something like the defunct Soviet Union, a bundle of states ruled by a central government. The European Parliament and the EU committee, especially Jean-Claude Juncker, the President of the European Commission, treat the EU increasingly like a kingdom. Even after the Brexit decision they want to expand the power of the EU and demand more integration, meaning more power for Brussels ( spiegel.de).
It is highly unlikely that the rest of the world will curb trade with the UK and will invest there less when the country is on her own. Companies are doing business with the island because they are making profits there. Why should they give up these profits?

Great Britain will get more attractive for businesses when the country isn´t controlled by Brussels anymore and will become more liberal (in the sense of Thatcher & Friedman) and less regulated.

Street Art New York: My Top Twenty 2016

(Drivebycuriosity) - I am connoisseur of street art. I like murals, graffiti, stencils and other incarnations of this elusive art form and take pictures when ever I can. Therefore I shot a lot of street art pictures, especially in New York`s neighborhoods Lower East Side, East Village & Soho.

Here are my top 20 of 2016 (here of 2015 ). Actually I got 24, but I couldn´t resist.

On top of this post & above this paragraph you can see some murals I spotted on the wall of rag & bone at the corner of Elizabeth & Houston. This fashion shop impresses with frequently changing art work of high quality.

The photographed murals above were on Orchard Street between Delancey & Broome Street. There is another place for spotting funny street art, commissioned by another fashion shop.

The kid - who reminds me of Mao posters - is still at home on 11th Street/1rst Avenue.

Above more wall covering murals found on the Lower East Side & East Village.

The famous graffiti wall on Bowery & Houston Street got a mural (stencil painting) by Logan Hicks (here more by this artist driveby).

I discovered more impressive murals on Houston Street, the funny faces were on corner Houston/Second Avenue, the black-and-white work was on Crosby Street, which can be seen from East Houston Street.

I detected the interesting faces somewhere on the Lower East Side.

Some more nice street art works.

Stay tuned.

Movies: Nocturnal Animals

 

(Drivebycuriosity) - Tom Ford is a multi talent, one of the last Renaissance men. The American made his name as a fashion designer & as an entrepreneur, he saved Gucci from near bankruptcy and transformed it into a fashion powerhouse (wikipedia ). Ford is also a successful movie maker. He earned an Oscar for his debut film "A Single Man" and his new film "Nocturnal Animals" started with much acclaim (imdb).  So, I had to see this movie and I got thrilled by it. I think Ford, who also wrote the script based on a novel by Austin Wright, deserves the praise. Ford`s newest work -  which also benefited from cinematographer Seamus McGarvey - is one of the best movies of the year, maybe of the decade so far (this is a spoiler free blog. You can find a synopsis here wikipedia).

The film has two intermingled story lines: One track focuses on Susan, an ambitious owner of an upmarket art gallery in Los Angeles. This tale is mixed with the plot of a book, which Susan`s ex-husband had written and send to her, a horror novel set in Texas. So the movie connects two separate & very different worlds.

I got mesmerized by very sharp & frequent contrasts: Scenes with obnoxious ugliness are followed by sheer beauty, utter terror is replaced by classy leisure live, raw nature changes with impressions of the ritzy art world, repulsion mixes with awe, aesthetic with filth and so on. Ford creates a high tension which keeps the audience on the hook. The film certainly represents the director´ s sophisticated tastes & talents which he had cultivated as a fashion designer. You can spot amazing art works by Jeff Koons, John Currin,  Alexander Calder and others, which are partly owned by Ford himself (townandcountrymag). And even the rough landscape of Texas, where he grew up, fits well to the stylish looks of Susan`s sleek & artsy world.

The film has an amazing cast of course. I indulged in watching the gorgeous Amy Adams, who belongs to Hollywood` brightest stars. And I enjoyed the performances of Jake Gyllenhaal, Michael Shannon & Aaron Taylor-Johnson as well. 

Watching "Nocturnal Animals" can be challenging, but the audience gets plentiful rewarded - highly recommended.

Art Market: A Revival Is In The Air

(Drivebycuriosity) - There is a lot talk about the chilling market for art. Yes, this year´s sales of the big auction houses (Sotheby`s & Christie`s) are down and many mid-sized galleries are closing. But I think, there is a revival in the air. Why that?

The art market follows the stock market - or it walks side by side at least. The art market flourished before 2015 parallel to the booming global stock markets (forbes). Many investors put their money into risky assets - including pricey art works - hoping on further rising prices (above a chart of the SP500, which represents the US stock market).

The US stock market paused from early 2015 through this November 2016 - and so did the market for art. Investors avoided risky assets - including art work - because they were skeptical for the global economy (weak US, China & Europe). But in the recent weeks we are witnessing a return of the global stock markets and many stocks are rallying.

It seems that the investors got more appetite for risk. They respond to better news from the economic front and it looks like that they are becoming more optimistic for the future & the economy. As a result they are buying risky assets like stocks again. I assume that they are purchasing art as well. The coming auctions will show.

Economy: The Rise Of The Chinese Consumers

(Drivebycuriosity) -  If we believe the media China is about to crash. But the reality refutes the gloomy predictions. Quite contrary, the recent economic data suggest that the Chinese economy is gaining traction again. Last week I reported about strong import & export numbers (driveby). Last night we we learned that the Chinese retail sales grew 10.8% in November, faster than in October (plus 10.0%  tradingeconomics). This is the strongest retail growth this year.

All categories participated, especially communication equipment (+17.8%), office supplies (+15.4%), home appliances (+14.7%), automobiles (+13.1%), building materials (+11.0%), personal care (+10.7%). Growing retail sales are driving the consumer spending, the engine of the economy. As long as the consumer spending maintains the high growth rate China will avoid any crash.





                                      Secular Catching-up Process

The numbers prove that the huge country is continuing her secular catching-up process, which is fueled by extreme income & wealth differences to the US and other Western nation values. Today China has about $7,920 income per capita, the US number is  $55,840 (worldbank).

China is transforming into a modern service economy, fostered by the technological progress (E-Commerce, Fintech). People are flooding into the big cites. The rapid urbanization creates millions of jobs and is driving income growth for the whole nation. Swift rising incomes are fueling consume and so the economic growth of China.

The swift retail growth also is raising China´ s importance for the global economy, which is increasingly fueled by Chinese imports. Don`t mess with China!