If globalization is to succeed, it must succeed for poor and rich alike. It must deliver rights no less than riches. It must provide social justice and equity no less than economic prosperity and enhanced communication.” - Kofi Annan

Only a few links this week and one important article below comes from bank research. Deutsche Bank apparently released a paper tellingly titled “Deglobalization Is Here: What It Means for Global Macro”. Since banks’ job is to look after money (and keep ahead of others), you can bet they have been worried for some time.

In fact, it is now possible to forecast a world with a few competing trade blocs and increased barriers to international trade and capital flows. Regional powers are working to establish their influence in their neighborhood while the USA is unable to police the whole world at the same time. Given the poor growth prospects, high debt levels and increasingly agitated domestic opinion, deglobalization is rapidly becoming a great political slogan and rally cry against failed ‘neoliberal’ economic policies.

world-trade-value

In fact, until recently, globalization was rather forced onto countries who were pressured from outside and inside to open their economies. But since 2008, an increasing number of protectionists policies have been established by governments to protect their home markets. In key consumer markets, unemployment is now above the last 10 years average, or in the case of China, trending upward.

unemployment

As a result, we believe that deglobalization is driven by powerful forces that are unlikely to abate in coming years. Brexit and Trump are examples of what happens when citizens who feel neglected translate their anger into their voting intentions. It may trigger further ‘shocks’ if the governments are unable to alley their populations’ concerns.

History & Geopolitics

USS Trump pivots to Asia – “US Pacific alliances are going to become more […] active […] and generally makes demands along the lines of ‘why are you supporting our strategic rival’, perhaps even on such things as Aussie iron ore building Chinese aircraft carriers; demands for military build-ups in allied militaries will accelerate […] the US is quite likely to be tough on Chinese trade as well […]”

$100 Billion Chinese-Made City Near Singapore ‘Scares the Hell Out of Everybody’ – “While Chinese home buyers have sent prices soaring from Vancouver to Sydney, in this corner of Southeast Asia it’s China’s developers that are swamping the market, pushing prices lower with a glut of hundreds of thousands of new homes.

Finance & Economics

Why Economic Recovery Requires Rethinking Capitalism – “Looking at the economy through an investment lens is indeed instructive. Weakness in investment in part explains the persistence of output gaps across advanced economies, but also the slowing in growth of the volume of international trade. But the key question is, what kind of investment is needed? Would simply digging ditches and constructing bridges and roads suffice?

Deutsche Bank on a ‘Once in a century event’ – “The weakness in global trade, the rise of anti-globalization politics and the decrease in capital mobility all point towards a reversal of the neo-liberal word order constructed since World War II.

Picture of the day: Signs of reaction

us-trump-protest

About Carlito Riego

"Great perfection may appear imperfect, but its usefulness is inexhaustible. Great abundance may appear empty, but its usefulness cannot be exhausted. Great correctness may appear twisted, great skills appear crude, great eloquence appear awkward. Activity conquers cold; inactivity conquers heat. Clear serenity governs the world." - Lao Zi