Britain says EU no more in historic referendum

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In a surprising and historic move, Britain has voted to leave the European Union. It is important to note that this has been the decision of ordinary Brits and not by those Eurocrats whose leadership is unpopular across Europe.  EU bureaucrats be warned: if Britain who’s not as affected by the so-called peripheral countries can do it, all the more by those countries that are at the mercy of severe austerity and left to guess what Brussels is up to next.

For the uninformed, how important was this decision? Remember that the European Union project has its roots in the post-World War II economic integration, with the goal of avoiding conflict in Europe. The EU project has fulfilled this purpose quite decently in the past 60 years. It has allowed the free movement of people within the Eurozone, created a common currency (not joined by Britain), established preferential trade among member states, and most importantly the preservation of peace in the continent.

But as the unelected predatory capitalists leaders in Brussels became increasingly more focused on unnecessary bureaucracy and squeezed the life out of ordinary Eurozone citizens as banks “too big to fail” have received privileges despite their enormous failures, the Brits in this Brexit referendum clearly confirmed they have had enough.

To be fair with the British people, they have been half-footed in the EU from the beginning. Perhaps the most obvious indication is their separate currency from the Euro, as well as its non-observance of the Schengen Agreement, which allows the free movement of EU nationals without the usual hassle of traveling to other countries.

The decision to leave the EU will be not be smooth for sure. The initial euphoria the referendum created will have to come to terms with the consequences of opposing the Remain vote. Already, for instance, the conservative party in Britain has hinted it will invoke Article 50 where Britain will be faced with years of ‘proper exits’ through possibly endless renegotiations.

Elsewhere in Europe, German Chancellor Angela Merkel called the Brexit referendum “a break in Europe’s history” and that it reflects “a fundamental doubt about the current direction of European integration.”

Some British mainstream media have already propagandized a few interesting points in the Brexit referendum. For instance, some news outlets have already downplayed the public’s decision as uninformed with headlines like “Brits frantically searched what the EU means hours after voting out of the EU” and that the “EU will treat Britain like Greece.” Such fear mongering should not be surprising as before the referendum London’s mouthpiece media have already done their part to dissuade the British public from bailing out of the EU.

And of course, Mr. David Cameron, the British Prime Minister, has already intensified the drama when he resigned the next day. In a visibly emotional speech, Cameron stated that “I was absolutely clear about my belief that Britain is stronger, safe and better off inside the EU… (But) the British people made a different decision to take a different path. As such I think the country requires fresh leadership to take it in this direction.”  Indeed, the man who proclaimed “Assad must go” became the man who would go first.

2016: What’s ahead for the world?

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By and large the previous year was a year of crisis escalation, brought forth by the emergence of new sources of tension not only in diplomacy but also in actual military conflict. On the one hand, fresh sources of armed engagement and humanitarian issues had world leaders worried overnight (ISIS beyond Syria and Iraq, Russian intervention in Syria, migrant crisis in Europe). These events were not predicted before 2015.

2016 will be marked by an increase in local conflicts, like in Ukraine and in the Arabian Peninsula where the rift between Sunni and Shia Muslims will intensify. In fact, as of press time, Saudi Arabia has cut off all diplomatic ties with Iran, the latter infuriated over the execution of a prominent Shia cleric. It is expected to be joined by other Sunni majority countries in the Middle East. This year might just be the time for the spreading of these conflicts to more states.

The presidential elections in the United States will put on hold major foreign policy decisions, as the American public gets distracted by the convoluted race to the White House. As for the exiting American president, Obama will protect what he has accomplished in 2015, including the rapprochement with Iran and Cuba.

As the United States continues to be rejected in many areas of the world, the leadership vacuum that it will create will give opportunities to other major powers, and with it, a new era of anti-West geopolitics will emerge. The post-American century is an irreversible occurrence now as other major powers like Russia, China, and Brazil take on responsibilities beyond their typical spheres of influence. In the military sphere, Russia has re-entered the Middle East in a big way, while China will now formally launch the Asia Infrastructure Investment Bank (AIIB), aimed at rivaling the IMF and World Bank.

The global economy is expected to be ‘disappointing and uneven’ in 2016 because of the continuing slowdown in China, sluggishness in world trade, the threat of rising interest rates in the US, the ongoing fall of oil prices, and the vulnerability of emerging economies to absorb economic shocks, according to the IMF.

General elections will take place in Taiwan, a Western-backed state that is unsure about its identity vis-à-vis China. The emerging leader might give Beijing fresh fears regarding the longstanding One-China policy. The UK public will go to the polls to decide whether to stay or leave the European Union, while in the Philippines, presidential elections will decide whether a future leader will continue to provoke China and further impress the United States for its own benefit.

Islamic State (ISIS) is expected to be put on hold territorially in Syria and Iraq, thanks to Russia’s military intervention. However, it might gain influence beyond the region as other terrorist groups (like Boko Haram in Nigeria, and other groups from Somalia to terror groups in South East Asia) pledge their allegiance to Daesh.

The United States and NATO will further infuriate Moscow as it decides on sending nuclear weapons to Poland, a former Warsaw Pact member. As a result of Washington’s antagonizing policies in Europe, Russia will further invest in its armed forces, which might trigger a new, expensive, and unnecessary arms race in continental Europe.

Europe’s most powerful leader, Angela Merkel, is expected to leave office after three successive terms. What this might mean for Europe is a change in policy towards Russia (sanctions), the migrant crisis, the German commitment to the entire Eurozone project and Berlin’s attitude towards economically and socially troubled states like Spain, Greece, and Italy.

China’s stock market troubles sends shivers across the world

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China’s capital market trouble is now all over the headlines. Despite being at the center of mockery by the Feds in the US, Beijing’s economic convulsion is affecting markets everywhere — and this gloomy story should put some breaks to the West’s China-bashing indulgence for this issue will affect them just as badly.

Although it is too early to point to a specific cause for the global ‘panic’, Western outlets are already spreading the blame on China’s recent currency devaluation, a policy implemented to beat lower market expectations for its economy.

For a while now, China’s economic team have figured that the way forward is to pivot away from exports and investments and instead focus on a consumer-driven economic activity. But this rebalancing has had the effect of less industrial output, and thus led to the propping-up policies. What followed was the devaluation of the Yuan to help China maintain its manufacturing competitiveness.

This policy has caused problems for analysts in the West where they insist that China is playing the currency manipulation game. But guess what? Since the 2008 financial crisis, Washington has repeatedly printed more money (euphemistically called Quantitative Easing) to artificially manufacture ‘recovery’, the consequences of which have helped undercut global competition.

The US Federal Reserve has a problem with China’s currency devaluation policy, but not with its own reality-distorting stimulus.  Not many realize that this inflated money-printing policy is actually just a bubble: zero interest rates have artificially propped-up the US economy. That is why those in the know worry what may happen once the Feds take away zero percent interest rates (running for 7 years now).  Once this fake shroud blows away, the United States will be sent back to recession once more.

According to Western market ‘analysts’ and commentators, China’s present capital market strain has caused people to panic. But who are those people anyway? They are the investors and analysts who recklessly took risks that led to the 2008 financial meltdown and then quickly spread the propaganda of economic recovery.

They are the same people who always screamed wolf on everything Chinese.  As they see it, Beijing’s present trouble presents an opportunity to further deepen the country’s political chasm anyway.  Indeed, in their view, economic woes translate to more political accountability, which in turn gives way to mass discontent. It will be only a matter of time before we see Western media headlines cry Occupy Hong Kong 2.0, but on a much larger scale this time.

Emerging economies and realities: Despite their reliance, US keen on halting China’s economic influence

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The recent Asia Pacific Economic Cooperation (APEC) meeting in Beijing has once again highlighted the United States’ fervor for grandstanding acts of stealing the spotlight away from its rivals, or at least halting the advances of emerging economies and political powers beyond the Western hemisphere, whether it be at home or abroad.

Just a day before the APEC summit, US President Obama gathered participants to the US-led but China-excluded Trans Pacific Partnership (TPP) held in the US embassy in Beijing. The TPP is essentially a regional trade agreement that aims to undermine China’s own Free Trade Area of the Asia Pacific, which is a broader framework for bringing closer integration of Asian economies.

This display of intent comes at a time when the TPP is yet to resolve long standing issues that has halted it from becoming a fully functional economic bloc. There are still protectionist issues to be settled between Washington and Tokyo, for instance, and New Zealand’s intention to “pull out of the negotiations if politicians in the US used them as a vehicle to try to contain the rise of China.”

IMF and World Bank: Tired economic powerhouses

As the United States’ economic and military influence further erodes, the vacuum it is creating is more and more being filled by emerging powers consisting of China, Russia, Indian, and Brazil, which together in July 2014, account for roughly 20% of the world’s economy based on GDP and 30% based on Purchasing Power Parity, which is a more accurate measure of world economy. In July, BRICS proposed a $100bn New Development Bank to meet infrastructure and development projects at a time when the West continues to erode its role in global trade.

The ongoing shift in global influence from West to East has rendered the traditional economic clout of the West, through the World Bank and International Monetary Fund, unable to meet the enormous investments that are required by developing economies in the Asia Pacific region and Latin America. Indeed, both lending institutions have become hostage to their colonialist approach to development, such as in leadership, voting rights, capitalization, headquarters, and staffing, which are all dominated by the United States.

The perception that emerging economies are still heavily reliant on advanced economies for market access and demand is quickly coming to a pass. In its International Trade Statistics 2014, the World Trade Organization concluded that “more than half the exports from developing economies were sent to other developing economies in 2013.” It also revealed that “countries in Asia sent more than 60% of their exports to other nations in Asia and to Africa and the Middle East, compared with just over 15% each to North America and Europe.”

As has been observed in the past decade, this tectonic shift in global economic activity will only continue to progress to reach other economies not held hostage by the traditionally two-edged economic and political policies of the West.

Four Years On: Did We Really Recede from the Recession?

As much as the political elite in the US and EU would like us to believe we ‘recovered’ from the great economic meltdown of 2008, so much of it is actually the reciprocal: unending  declines in investor confidence, clipping of businesses, credit downgrades, social spending cuts, protracted unemployment, very minimal hiring, housing still puling the economy down, and the default predicaments haunting the EU.

All these seem to point to a double-dipped recession, although unsurprisingly, policy makers, especially the ones supporting wars abroad do not admit to this. It is reasonably to state that unemployment in the US is the biggest hindrance to a ‘real recovery’. For one, a high unemployment rate directly affects two things: without jobs, people dramatically cut their spending. As an effect, the government then spends billions to save these people from becoming destitute. This means a reduction in GDP, a tighter government budget, and more deficits. Although some sectors have recovered, such as the auto industry, they arrived at recovery via the layoff route.

Add to that the rise in oil prices this year due to the new Arab Spring and you get inflation back in the picture. Consumers spend even less when confronted with high prices: cotton price has gone up this year thus increasing the price of basic clothing by at least 20%, and the same goes for food like sugar, meat, and corn-based products.

Real estate and housing could be the real drag to US recovery from the 2008-2009 recession. Home equity continues to decline since 2006, so worse today than before that companies are tearing down unsold homes to avoid taxes. As a result, uncertainty in the housing sector also drags finance and net wealth sectors and most especially construction.

Also less obvious is the fact that non-financial companies are holding on to their stimulus money at near record levels, and the consumer is not far from doing so as well. What does this mean? This means that they are more nervous about the future, much like saving up for the stormy days, as they say.

Did we just record a 1.3% GDP growth and 9% unemployment this year? As such, it is hard to see whether Bernanke and his economists were too quick to declare the end of the economic meltdown. In addition to confidence, economic indicators really do point to a recession that really never ended.

On the one hand, as well all know, the NBER (responsible for calling the shot on the start and end of a recession) was unsure to declare that the 2008-2009 recession was really over during 2009. It’s been two summers since, and same as in 2010, this year, more people are convinced that we really didn’t recover and that we are headed to another disaster. Historically, it took the NBER almost 1 year to admit that the recession started in December 2007 and that it took almost 2 years to announce that the IT bubble of 2001 was over. Who knows when the NBER will announce the end of this present recession?

EU ‘quietly’ Seeking BRIC Assistance Regarding Greece Debt

Early this week, a news headline from Bloomberg and The Wall Street Journal caught my attention regarding lobbying the BRIC countries (Brazil, Russia, India, China) to ‘quietly’ assist the EU, specifically Greece.

In seeking for the quiet assistance, in a telephone interview, The Institute of International Finance Inc. (IIF) Deputy Managing Director Hung Tran said that “If you have the extra 20 billion which we are seeking from other countries, that of course would increase the amount of debt retirement that Greece can have.” He also added that “We have been in preliminary discussions with some countries and the reaction we received is an open mind and request for more information and discussion.” the IIF represents 440 of the world’s largest banks, insurance companies and investment firms.

Basically, this allows BRIC countries to pool their resources into a new account via the IMF, which in turn would be loaned to the Greek government. The goal is to allow lower Greece’s burden by as much as $25 billion and lower the country’s debt-to-GDP ration to about 91% by 2020, assuming the world is headed on a better economic climate.

It is quite lamentable that the IMF and World Bank cannot continue to support a faltering economy such as Greece’s. As the EU financial juggernaut becomes exhausted, so as the countries that it persuaded to join this exclusive ‘club’ of supposedly advanced economies.

Just last May, when the IMF chief Dominique Strauss-Kahn was on the headlines, concerns about who should head the IMF cropped up. Despite the fact that the global economy is now concentrated in the East (BRIC), we still failed to see a BRIC leader in the IMF. Indeed, the West has a short memory, having forgotten Strauss-Kahn’s statement just a few months ago that India and China’s economy are the ones that really lifted the global economy out of the recession.

Fast forward to this day, how hypocritical is it to witness that the West is asking for assistance, albeit quietly? Why be quiet about a matter that will save the Euro zone? If the economies of Portugal and Spain crashes as well, do you really need to ask for assistance, discretely? Financial ministers from BRIC countries will be meeting with the IMF today; for now, let us standby and wait for further developments.