Financial Times Watch (January 14 & 16 2023)

Recession Watch

This weekend’s FT, 14/01/23, was in the middle on the worlds economic instability, First it noted that growth was up and inflation was lower in Europe while Emerging Market nation’s were looking better as they sold a lot more bonds in January. Promoting more confidence that slower rate rises from the Fed are on the cards. The only sour note being that a recession is still expected this year in the developed nations.

Yet, on today’s front page, 16/01/23, the FT is straight in to the bad news coming out of the World Economic Forum (WEF) in Davos. Several big multi-national corporations, MNCs, are writing down recent acquisitions (think media / healthcare p.10) while a third of the worlds economy is expected to go into recession. What they are calling a “polycrisis”. There is also good news here as the instability is stopping “empire building” by MNCs. Concentration of capital is a bad thing for everybody as MNCs normally leverage their monopolies to reduce democratic accountability and pay less taxes.

Regulator Watch

On page 2, the bad news for capital continuities as the insurance industry readies itself for a battle with the Bank of England over the government's new regulations. The insurers believe that the new regimes will cost them money and put future investment at risk because they didn’t get one of their key demands, lower capital requirements, included.

And while capital complains they should remember that it is their unregulated behaviour in the 2000s and policy making of Central Banks since 2008 that has put them in this positions. In particular, the withdrawal of cheap credit by CB’s has revealed the lack of liquidity by many companies and banks.

The first real test of the law will be in Feb, but some believe that the government's attention will be short-lived, and things may return to normal once that happens.

GOP green counter-revolution (GOP ROI) Watch.

Another new watch beginning to today. This one will detail the Republican Party’s, also known as the Grand Old Party (GOP), attempt to roll back Biden's promotion of the green energy transition with a host of subsidies. Some have even noted that the level of state assistance is another sign of the countries shift away from Neoliberalism and economic de-coupling

Either way the GOP counter-revolution is now starting to gain momentum. First, GOP controlled states last year turned against ESG investment funds (see BlackRock article FT 14/01/23 p.17). And now the GOP controlled House of Representatives, with an empowered libertarian leaning Freedom Caucus against big government, is stepping up. The goal being to help the US fossil fuel industry extract as much as possible before adverse global warming shuts down them down.

The FT, page 6, details one of the big weapons the lower chamber has: its power to control spending and the ever increasing deficit. But the GOP is far from united on how they will use the power, and cracks are already showing between the Chamber of Commerce and Republicans opposed to the GOP allied to the fossil fuel sector. Nevertheless, the House’s power to stymie Biden’s plans over the next 2 years, if nothing else, maybe be enough if a populist GOP candidate re-takes the White House in November 2024.

US EU War/ Regulator Watch

While the FT article on the GOP makes no reference to the green transition, on page 7 we have an article tackling the theme, and the policy position of the US/EU Central Banks to it. In the article the FT notes that both institutions are diverging due to their respective mandates.

Possibly, in recognition of the GOP’s position against the transition, Fed head Jay Powell claims his institution will not be “a climate policymaker”. Instead the US Central Bank is driven by restoring price stability, code for keeping wages down: and that requires interest rate raises.

The European central Bank, ECB, meanwhile is taking the opposite stand: pursuing policy in line with keeping global warming below 2 degrees Celsius. Further to this position, the ECB believes high interest rates will work against the transition as it raises investment costs.

While the ECB also wants to discipline labour, without the kind of energy reserves that the US has, the EU is in a more precarious position. The war in Ukraine, for instance, demonstrated the EU’s dependence on foreign fossil fuels. Yet Biden’s green subsidies has shown that ECB spending limits on EU members is not fit for purpose in in this environment (see FT 14/01/23 p.8).

In addition the EU needs to cosy up closer to China as that is where all its green tech will have to be built. Yet the US is also leading a de-coupling of capital from the Asian giant. Both US political parties appear to be united on this front, even if not on green energy.

All in all, it leaves the EU in an almost impossible position.

Resistance of interest (ROI) watch

Finally, we come to a new section where we will be highlighting the growing resistance around the world to capitalism. Certainly this is nothing new, but as inflation and subsequent interest raises hit, both of which can be blamed on CB policy decision from summer 2021, their has a notable rise in calls to reign in capital’s excesses. Today's paper highlights two countries, UK and Peru.

In the UK, the Tories are desperately trying to contain escalating domestic instability with harsh laws being considered that will make legal strikes harder (Ft 14/01/23 page 3), and today (page 2) they have announced a law that widens police powers to stop “disruptive protests”.

The Tories are so desperate to control the masses that in combination with high interest rates they are also thinking of ways to get older people (FT 14/01/23 p.2), who left work during the Covid crisis, back into work. This is off course in response to their poorly though out Brexit plans have left them without the cheap EU labour force that was so useful in depressing wages for so long.

Yet, with strong public support for the strikers and falling support for the government, the Tories appear to be going all out to suppress labour and fill their pockets, and their financial corporate backers, before they are booted out of power in May 2014.

Meanwhile in Peru a state of emergency has been declared again as the fall out from indigenous president Castillo continues. While Castillo flounders in prison awaiting his faith, his supporters, mainly indigenous rural populations, continue to demand the return of the democratically elected president. A president that the $ elite that runs the country, in league with the US, pushed into taking radical constitutional actions that they used to justify ousting him.

While Castillo was a naive president who in practice was more conservative than his campaign positions, in a nation were indigenous populations are the poorest group; his deposition resonates with many. To make matters worse the new government has responded with violence and oppression, at least 42 have died since the coup, deepening the crisis further.

All this in a nation that has had six presidents in five years, and where the disapproval rating for the new government stands at 71%; only bettered by the congress, which stands at 88%. How long this pro-capital state ran by a corrupt elite can remain like this is unknown, but the instability is not good for business. And that, along with racism, was one of the main reasons that they toppled Castillo in the first place.

Anyway that is enough from me for today, see you soon readers!