Friday, April 22, 2016

Obama's warning

US President Barack Obama has responded to Boris Johnson's journalistic musings concerning the President's personal feelings about Britain. Johnson had been angered by, and was responding to, the President's strong endorsement of the campaign to keep Britain in the EU.

In his article, Johnson suggested that President Obama, on account of his family background, and specifically his Kenyan heritage, may well have less than positive feelings about the UK and its imperial past. He referred to a story that a bust of Winston Churchill had been removed from the Oval Office at the beginning of Obama's tenure.

The mainstream media came out strongly against Johnson, with accusations of racism, and various sources claiming that the removal of the bust was not Obama's decision at all.

Obama's subsequent comments confirm however that it was his decision.

"When I was elected as President of the United States my predecessor had kept a Churchill bust on the Oval Office. There are only so many tables where you can put busts otherwise it starts looking a little cluttered," he said.

“I thought it was appropriate and I suspect most people here in the UK might agree, that as the first African American president it might be appropriate to have a bust of Martin Luther King in my office to remind me of all the hard work of a lot of people who had somehow allowed me to have the privilege of holding this office.”

He claims to have warm feelings about Winston Churchill. "I love the guy," he said.

But his remarks also contained a warning about trade links with the US should Britons vote to leave the EU.

The Independent reports:

He said the US would rather the UK remained in the bloc, and said a unilateral free-trade deal between the two countries would not be a high priority for America.

He added that he was merely offering advice to a “friend” and that it was up to the British public which way they voted. [Britain votes on 23 June on whether to stay or leave the bloc.]

Sounds like a threat to me; and a curious one, given that the Obama administration will no longer be in place when decisions about a bilateral deal with a post-Brexit Britain would need to be made. [In the event of a vote to leave the EU, there would be an extended transition period during which Britain would remain within the trading bloc.]

In a piece written immediately after Boris Johnson's initial announcement of his support for the leave campaign, I suggested that his popularity and mainstream credentials could possibly swing the balance of probabilities towards Brexit. But the polls seem to indicate that a majority of Britons still favour remaining in the EU.

Friday, April 8, 2016

Stagflation on the way?

Whilst not necessarily endorsing Ambrose Evans-Pritchard's general approach to economics (too Keynesian for me), I always find his analyses worth reading. In a recent article he sounds a warning about equities and a stalling US economy, addressing the big question about how long disinflationary forces will persist.

What is clear is that the Fed and fellow central banks can do precious little to reverse a chronic decline in productivity. In this respect, we have reached the limits of central bank action.

Fed chief Janet Yellen is in a horrible predicament. She can keep running the economy 'hot' - and by her own admission real rates are 1.25pc below their 'neutral' or Wicksellian level - in a bid to build up momentum.

But in doing this she risks falling behind the curve on inflation, or more accurately 'stagflation', since that is where the US seems headed. She can pick her poison from one side or the other of the 1970s Phillips Curve - jobs or prices - but pick she must. “The longer the Fed dithers, the higher rates are eventually going,” said Paul Ashworth from Capital Economics.

Yellen has a revolt on her hands in any case. The heads of the Atlanta, St Louis, and San Francisco Feds have all been talking up the inflation threat. Even the ultra-dovish Boston chief has gently cautioned markets to expect more than the one solitary rate rise priced in by futures contracts for this year.

The Fed may succeed in stretching this cycle until 2017. But sooner or later it will have to grasp the nettle, and then we will discover how much monetary pain can be taken by a dollarized global economy with post-QE pathologies and total debt ratios some 36pc of GDP higher than in 2008...

There has been a lot of talk about stagflation recently. It seems like it may indeed be coming.

The scariest statement here is the remark by Paul Ashworth: "The longer the Fed dithers, the higher rates are eventually going."

And dithering they have been for years now.

For a slightly different perspective, emphasizing the current global deflationary situation and competitive currency devaluations (but equally critical of the role of central banks), note the latest – very bearish – views of Bob Janjuah of Nomura.

Sunday, April 3, 2016

Conservatives in the closet

In a recent piece for Bloomberg View, Megan McArdle recounts her experience as a student of the humanities at the University of Pennsylvania. It's a sad and oft-told tale of shameless political bias on the part of academics.

... “Conservatives can safely study ancient history but not modern American history, economics but not sociology,” writes my colleague [Virginia Postrel]. “Literature, largely a politics-free zone until the 1980s, has become hostile territory.” This resonates with me, and not just for ideological reasons.

The politicization of the humanities was well under way when I was an English major in the early 1990s, and my education suffered as a result. This wasn't because I was so oppressed as a conservative, but because in roughly half my classes, there was no easier route to an A than to argue that some long-dead author was a sexist pig, racist cretin or homophobic jerk. Being, like so many college students, not overfond of unnecessary labor, I’m afraid I all too frequently slithered along the easy path to the 4.0.

It's no wonder that academics have lost the general respect they once had. Far too many are mere ideologues and certainly not professionals serving the public. The only surprise is that the public has put up with this situation for so long.

And, as McArdle points out, in certain subject areas the few conservative academics left standing must keep their conservatism well hidden.

Every time I write about bias against conservatives in academia, I can count on a few professors writing me to politely suggest that I have no idea what I’m talking about. Sometimes they aren’t so polite, either. How would I know what goes on in their hiring meetings, their faculty gatherings, their tenure reviews? They’re right there, and they can attest firsthand that there ain’t no bias, no sir!

But none of them can explain why, if that bias doesn’t exist, so many of their conservative and libertarian colleagues feel compelled to hide in the closet. Deep in the closet, behind that plastic zip bag of old winter coats in mothballs, and sealed, with many layers of packing tape, in a box marked “Betamax Tapes: Jerry Lewis Labor Day Telethon 1981-1987.”