It’s been nearly a year since Janet Yellen, in her first testimony press conference after a Fed Open Market Committee (FOMC) meeting, told the world just what she was looking for before raising the Fed Funds Rate (and everything that rises along with it). The openness was remarkable for a Fed Chair and a sign of a new era as a woman took control of what is arguably the most power job in the world.
Since that time, we have followed “Yellen’s Dashboard” with periodic updates to just just how we’re doin’. Nearly everyone agrees that interest rates will rise sometime this year, probably around June, as she has told us. But how does that stack up against her very public criteria? It’s worth checking in with some math to see where we are with rates and what we can expect.
Is technology a net creator or destroyer of jobs? The question is as old as the Industrial Revolution, when workers in mills found themselves put out of work by large industrial looms. In France, they threw their shoes (sabots) into the weaving machines to destroy them – the origin of the term “sabotage”. The protests didn’t stop the machines, however, and the workers had to find something else to do in an ever-changing economy where machines did more and more work.
Today, the pace of technological change is faster than ever, with new gadgets coming into our lives constantly. Automation is also transforming our lives, with new robots and artificial intelligence replacing workers constantly. Are today’s productivity gains tomorrow’s unemployment? Increasingly those who study technology in our lives and the popular media are coming to the conclusion that yes, workers are net losers in the race against tech. And this is not a partisan issue.
Greece and Europe managed to find a way to kick the can down the road a bit, giving them four months to come up with a larger agreement. It’s exactly the kind of solution that we cynically expected here in many ways. But is there more to it than that?
The letter sent by Greek Finance Minister Varoufakis to the EU outlines exactly where Greece is coming from, and it tells us a lot more about the problem at hand. What he asked for was nothing more than the kind of consideration any other nation would want in this situation. That it was received so badly at first, then ultimately accepted in at least some form, speaks volumes about either the dysfunction of the EU or how bankrupt Greece is.
I believe it is the former, and the EU is nowhere near developing a stable process for dealing with issues like Greece or even calling themselves a real political or financial arrangement for the long haul.
Twenty years ago I was working in Germany, staying in the small town of Burghausen on the Austrian border. The cycle of holidays that mark the progress of the daily life of the town festooned red, white and blue as they turned towards “French Week” early in the Bavarian Spring. Buses of people from their sister city of Fumel, France came in and the menus in all the restaurants were replaced with copies in French. Burghausen celebrated the arrival of their guests as a family reunion of sorts.
I asked Herr Miterer, owner of the Hotel Post where I was staying, if this “European Union” was going to be successful. His piercing Teutonic glance betrayed the seriousness before he said a word. “It has to,” he said quietly, “We’ve seen the alternative.” Without moving his eyes he pointed to a picture of on the wall of this beautiful little inn that he and his family ran, taken in 1945. The top floor had been blown off and rubble littered what had become the biergarten.
The earnestness of Miterer comes back to me as the latest round of Greek crisis bubbled through the news this week. We’ve seen the alternative. Yet, somehow, it is never quite enough for Europe, this strange forced marriage that stays together for the kids, for the ideals, and for the sheer obligation of it all.
A game of chess has been waged for decades over a part of the world that has seen more than its share of similar games over the last 2,000 years. Turkey, as the crossroads between continents, has always been at the heart of many games of geopolitical intrigue that have sometimes flared into war. Lately, however, the flares have been gasflares ignited along its periphery – valuable fuel often burned as a by-product with nowhere to go.
The game this time is all about putting a pipeline across Turkey to bring that natural gas into Europe. And for a variety of odd reasons, March is a critical month for how it will be played out. The key players are all sources of natural gas – Russia, Iran, and Israel. We will likely know in a month just who wins and who loses.
Investment is a tricky thing. You put up a lot of money in the expectation that you’ll have a small return year over year. Currently, the expected rate of return is historically small in the developed world, on the order of a few percent. It has to be weighed against the risk that the initial investment will never be paid back, winding up in default.
The slowdown in the global economy is not actually a decline in output all over the world, but a pause in the rate of growth. It wasn’t expected, either, which is the real problem. The developed world is largely stagnant, save some hope in the US for better times ahead. The developing world need to catch up, but appears to be taking a breather after a tremendous run.
As we consider the next few years and the potential for a genuine boom ahead, it is becoming clearer that we aren’t ready for anything more than muddling through until there is a reckoning and a realization of how the next economy will work – for everyone. That will take some patience and public investment all over the world.
Oil is the most traded and shipped commodity in the world, amounting to a total of 90M bbl per day total production – 33B bbl per year or nearly $1.5T even at today’s low price. There is nothing more critical to a developed or developing economy than to keep things moving, which is to say this vast ocean of oil is critical to the economy as we know it today.
You’d think with such a steady supply and critical demand that the price would naturally stabilize according to the natural laws of supply and demand. Apparently, oil greased its way through that semester of economics.
Where will the price of oil go from the decades-long low of $45 per bbl that it is today? The short answer is that no one knows. The long answer is that anyone who hasn’t been cashed out of the game is betting that it has to go higher, but no one know when or how high.