Latest news with #JohnMaynardKeynes
Telegraph
a day ago
- Business
- Telegraph
Bond markets are waking up to Trump's chaotic tariffs regime
If you didn't already fully understand the meaning of 'uncertainty', last week should have provided you with plenty of learning material. The concept of uncertainty relates to a situation when there is no known calculus for anticipating future outcomes. This contrasts with the concept of risk – when you can gauge the probabilities. Perhaps the purest case of risk concerns the chance of a ball sent spinning by a roulette wheel landing on a particular number. One hundred years ago, John Maynard Keynes made much of this distinction but it is still given insufficient attention. Financial and economic analysis is usually conducted solely on the basis of risk. The world is full of people who seem to think that they can calculate risks when, in reality, they haven't a clue. Keynes thought that the financial and business worlds were beset with endemic uncertainty. Sometimes economic agents would be immobilised by it. At other times, they might simply put it out of their mind, or assume the best, or press on regardless. This is why he thought market participants' 'animal spirits' were so important. In general, financial markets hate uncertainty and so do the managers of financial and non-financial businesses. Last week, the uncertainty quotient leapt up thanks to the still developing consequences of Donald Trump's trade policies. The fun and games last week started when the US Court of International Trade (CIT) blocked two of Trump's key tariff measures, that is to say, 'trafficking tariffs' – i.e. those related to fentanyl on Canada, Mexico and China – as well as his 'worldwide and retaliatory tariffs' on most countries. It took this action because it believes that the US president didn't have the authority to impose these tariffs under the International Emergency Economic Powers Act. You might imagine that this would have an extremely favourable impact, as it seemed to imply a yet further unravelling of Trump's tariff shock. After all, the markets were badly hit when Trump first announced his tariffs on 'liberation day'. So you might reasonably think that markets would surge on news of their undoing. Indeed, the US and other equity markets did react favourably at first. But then the euphoria fizzled out. Partly, this was because equity markets had already regained most, if not all, of the ground they had lost on the initial tariff announcements – due mainly to Trump's backtracking and apparent second thoughts. The lukewarm reaction was also partly because it is widely assumed that the Trump administration would find a way round this. Indeed, on Thursday a US appeals court granted at least a temporary reprieve. The next stop will be the Supreme Court, which is dominated by Republicans. Moreover, even if the Supreme Court upholds the CIT's ruling, the Trump administration would probably try to find other ways of increasing tariffs, such as ramping up Section 301 and 232 investigations into various countries' trade policies, or trying to get Congress to pass legislation imposing tariffs. It was striking that the CIT's ruling wasn't warmly welcomed by the US Treasury market. Indeed, the 10-year bond yield initially edged up to over 4.5pc. The dominant thinking here concerns the possible fiscal implications of a failure by the Trump administration to enact widespread tariff increases. This is because the extra tariff revenue to be raised by Trump's measures was intended to largely offset the loss of tax revenue resulting from Trump's 'big beautiful bill', introducing or extending substantial tax reductions, which has now passed the House of Representatives. If the president presses on with tax cuts but is unable to push through substantial increases in tariffs then the implication would be a significant increase in the budget deficit – hence higher bond yields. Admittedly, if Trump's tariffs are blocked, then there would be much less upward pressure on inflation and that would make it easier for the Federal Reserve to cut interest rates sooner and by more than would otherwise have been the case. Ordinarily, the bond market would like this. But if Trump is prevented from using tariffs as a way of closing the American trade deficit, then he may well want to substitute policies that would cause the dollar to fall substantially. That would renew inflation worries at the Fed – as well as causing widespread consternation among international holders of dollar assets. Actually, a depreciation of the currency, rather than tariffs, is the textbook way of addressing a trade deficit. But, of course, currency depreciation doesn't discriminate between countries and it affects both imports and exports of all types of goods, as well as services. That is precisely why economists tend to favour it. Importantly, though, unlike the imposition of tariffs, a currency depreciation does not produce any extra revenue for the government. That is the key reason why the Trump administration has favoured tariffs. As well as the potential impact on US financial markets and the American economy, these tariff shenanigans potentially have major effects on the world economy. If the proposed tariffs are rescinded, the countries set to gain the most are those heavily exposed to trade with the US – Canada, Mexico, Vietnam, Korea and Japan. Importantly, with tariffs on automative, steel and aluminium imports still in place, Canada, Mexico, Japan and Korea are heavily at risk – unless they can negotiate further concessions as the UK did. lose patience with Vladimir Putin. He may well impose tougher sanctions on Russia and those countries dealing with it, or even step up military aid for Ukraine.
Yahoo
3 days ago
- Business
- Yahoo
Why Wall Street downgrades of Apple stock are about to pile up
Shares of Apple AAPL — already down 20% since the beginning of the year — are likely to fall even further in coming months. That prediction is based on the behavior of Wall Street analysts, who tend to react slowly to developments. Seven of the almost 50 analysts who regularly follow Apple's stock have downgraded it this year. That leaves a large group of analysts who potentially could join this group of seven, and whose downgrades could cause Apple's stock to fall even further. 'You never know what might happen': How do I make sure my son-in-law doesn't get his hands on my daughter's inheritance? Five emerging pillars of stock-market support that should keep investors from rushing the exits My ex-wife said she should have been compensated for working part time during our marriage. Do I owe her? My daughter's boyfriend, a guest in my home, offered to powerwash part of my house — then demanded money S&P 500 scores best May since 1990, but stocks end month with fresh tariff worries Analysts' sluggishness in responding to new information is tied to their career and compensation incentives. It's risky for them to deviate too far from the Wall Street consensus. If they're wrong, their reputation will suffer and they possibly could lose their job. As such, they are inclined to keep their earnings estimates and buy-hold-sell ratings in the middle of the pack. This herd instinct was famously described by the late British economist John Maynard Keynes as 'worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.' This theory of analyst behavior leads to a number of empirical predictions that have been borne out by research. One, as confirmed by this study, is that a downgrade of a given stock is more likely to be followed by another downgrade rather than an upgrade — and vice versa. This phenomenon is illustrated by the chart above, which plots the number of downgrades and upgrades of Apple stock over the trailing six months. Notice the preponderance of downgrades (the red columns) over the past few months. Another consequence of analyst sluggishness is that the stock market reacts more quickly than analysts to developments that affect a company's prospects. One study, for example, found that the analyst consensus on a given stock reflects just two-thirds of the information that the market itself has already taken into account. You might conclude from this result that equity analyst upgrades and downgrades should simply be ignored, since there would be no role for them to play if the stock market has already discounted all relevant new information. But the stock market isn't that perfect. Researchers have found that as analysts finally take into account the information the market has already incorporated, prices move even more. This is why it's a good bet there will be more downgrades of Apple stock in the coming months — and why shareholders will suffer even more than they have already. Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at More: Apple has been the worst Big Tech stock lately. Here's why investors are missing the big picture. Also read: Here's why Nvidia's stock is climbing despite a disappointing forecast It's my dream to travel to Africa. My husband says it's not on his bucket list. Do I pay for him or go alone? My friend is getting divorced. Her husband kindly said, 'Take the house.' Is there a catch? My husband used my money to renovate his house. Will I now get half of his property in a divorce? 'Is this a good tax strategy or a sham transaction?' My mother wants to give me her home. I have a plan to avoid taxes. Nvidia results are proof the tech sector is worth investor loyalty, says strategist who recommended buying at April lows Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
New York Post
3 days ago
- Business
- New York Post
Don't fear the AI reaper — jobs panic is way off base
ChatGPT is coming for your job. That's the fear about the rapid advances in artificial intelligence. In a headline the other day, Axios warned of a 'white-collar bloodbath.' Advertisement The CEO of the artificial intelligence firm Anthropic told the publication that AI could destroy half of all entry-level white-collar jobs in the next one to five years and drive the unemployment rate up to 10% or 20% — or roughly Great Depression levels. This sounds dire, but we've been here before. In the 1930s, John Maynard Keynes thought that labor-saving devices were 'outrunning the pace at which we can find new uses for labor.' Advertisement Analysts thought the same thing in the 1960s, when President John F. Kennedy warned 'the automation problem is as important as any we face' — and in our era, too. If a prediction has been consistently wrong, it doesn't necessarily mean that it will forever be wrong. Still, we shouldn't have much confidence in the same alarmism, repeated for the same reasons. If technological advance was really a net killer of jobs, the labor market should have been in decline since the invention of the wheel. Advertisement Instead, we live in a time of technological marvels, and the unemployment rate is 4.2%. Rob Atkinson of the Information Technology and Innovation Foundation points out that the average unemployment rate in the United States hasn't changed much over the last century, despite productivity — the ability to produce more with the same inputs — increasing by almost 10 times. Technology increases productivity, driving down costs and making it possible to invest and spend on other things, creating new jobs that replace the old. This is the process of a society becoming wealthier, and it's why nations that innovate are better off than those that don't. Advertisement The rise of personal computers collapsed the demand for typists and word processors. These positions were often held by women. Did this decimate the economic prospects of women in America? No — they got different, and frequently better, jobs. Spreadsheets drastically reduced the demand for bookkeepers and accounting clerks. Did this end the profession of accounting? No — there was an increase in more sophisticated accounting roles. Advertisement The job market has never been stuck in amber. The MIT economist David Autor co-authored a study that found the majority of current jobs are in occupational categories that arose since 1940. It's true that artificial intelligence is projected to affect white-collar jobs — computer programming, consulting, law and the like — more than prior waves of technological change. But these kind of jobs shouldn't be immune from the effects of automation any more than factory work has been. Advertisement AI will end up augmenting many jobs — helping workers become more efficient — and there will be a limit to how much it can encroach on human work. It's hard to imagine, say, Meta ever giving over its legal representation in an antitrust case to artificial intelligence. Lawyers handling such a case will, however, rely on AI for more and more support, diminishing the need for junior lawyers. This will be a significant disruption for the legal profession, yet legal services will also become cheaper and more widely available, in a benefit to everyone else. Advertisement There's no doubt that the changes wrought by technology can be painful, and it's possible that artificial intelligence eventually gets so good at so many tasks that people have no ready recourse to new, better jobs, as has always happened in the past. The potential upside, though, is vast. After strong productivity growth for about a decade beginning in the mid-1990s, we shifted into a lower gear in the mid-2000s. Advertisement It will be a boon if artificial intelligence puts us on a better trajectory. An era of high productivity growth will, among other things, make it easier to deal with the budget deficit and the fiscal strain of retiring Baby Boomers. Like anything else, AI will have its downsides, but it's not an inherent threat — any more than computers or the internet were. Twitter: @RichLowry
Mint
22-05-2025
- Business
- Mint
India needs a way to resolve cross-border insolvency cases
India's budget proposal in 2022 to promulgate a cross-border insolvency law remains unimplemented. The mechanism to implement it was recommended by the Insolvency Law Committee, which suggested adoption of the UNCITRAL Model Law on Cross-Border Insolvency (MLCBI), with a few tweaks, including the introduction of 'reciprocity' as a principle. The reciprocity clause meant that Indian courts would only recognize and enforce decisions taken by foreign courts if those countries granted India similar rights. Most experts in India's insolvency ecosystem were concerned about this. Instead, they recommended that India adopt the MLCBI in full to ensure seamless cooperation in cases of cross-border insolvency. Also Read: Do creditor committees in insolvency cases need an oversight body? Like many other soft-law treaties, the MLCBI emerged from a US-anchored liberal world order that fostered mutual benefit among nation states. However, this world order has undergone a fundamental shift. The changed world order provides us with an opportunity to introduce the MLCBI with a reciprocity clause as an enabler. As John Maynard Keynes is often cited as saying, 'When the facts change, I change my mind. What do you do, sir?" Changed geo-economics has made India fast-track its trade pacts. It has finalized an agreement with the UK and negotiations are underway with the US, EU and the Gulf Cooperation Council. This is an opportune time to introduce the MLCBI on a reciprocal basis with major trade partners. Clauses related to insolvency and bankruptcy have found passing references in trade and economic agreements, albeit not in an MLCBI context. Our economic cooperation pacts with Asean, Singapore, Malaysia and Korea include a clause on insolvency. This clause states that countries retain the right to restrict or delay the free transfer of funds, if necessary, to enforce their domestic laws on bankruptcy and insolvency, or to protect the rights of creditors, provided that these restrictions are applied in good faith and a manner that is equitable and non-discriminatory. Also Read: JSW-Bhushan case: Time to rewrite India's insolvency code? The next evolutionary phase of trade agreements may consider MLCBI adoption. In a world of zero-sum games, where every facet of trade is being re-negotiated, this could serve not only as a bargaining chip, but also strengthen investor confidence. One might argue that reciprocity clauses for insolvency have never been part of trade agreements. However, this should not be a limitation. India can set the agenda, as it did with the International Solar Alliance without the backing of the United Nations or World Trade Organization. This unconventional approach helped mobilize funds for member countries and earned India goodwill and leadership status. Similarly, the recent India-UK free trade agreement has a novel Double Contributions Convention and a chapter on anti-corruption as well as anti-bribery. Precedents exist of bilateral treaties that acquire global influence. Singapore pioneered digital economy agreements that are now being used as a template by other countries. Also Read: The SC's JSW-Bhushan ruling will hit both the IBC and investor confidence Though the MLCBI will address corporate insolvencies and personal insolvencies of corporate guarantors, digital-economy aspects will also be crucial components of India's trade negotiations. These negotiations are likely to focus on privacy and data localization. However, ease of data accessibility will be key for the efficient resolution of insolvencies. An increasing number of Indian enterprises are storing their data and applications on the cloud, with most large cloud service providers based in the US. If payments to cloud service providers are suspended, the data is permanently deleted shortly after. It is highly probable that during periods of financial distress, a company may be unable to pay its cloud service provider. Consequently, the likelihood of data deletion is high when a resolution professional takes control, given the lengthy process from distress to default and the time required to admit an insolvency case. Bereft of data, the professional would be unable to perform his duties. Trade agreements enabling restoration of such deleted data would ease the insolvency process. This issue becomes more pertinent in cases where the promoter or management intentionally withholds payment to a cloud service provider to conceal mischief and dodge accusations of data-evidence destruction. Also Read: Mint Explainer: The Supreme Court's Bhushan Power ruling that has stunned India's insolvency ecosystem Even for finalized trade treaties, the incorporation of an MLCBI addendum would support insolvency resolution, as many personal guarantors reside in the UK and UAE. The UK is also a major gateway for fund-raising and an MLCBI-including pact with London can annul its restrictive Gibbs Rule. The rule implies that a creditor cannot be bound by reorganization proceedings taking place in a jurisdiction other than the one whose law governs the debt contract. This effectively negates the jurisdiction of foreign insolvency proceedings. The World Bank Principles on Effective Insolvency and Creditor/Debtor Regimes state that an effective insolvency system should respond to national needs. MLCBI inclusion in trade agreements with clear rules on jurisdiction, recognition of foreign judgments, international court cooperation and the choice of law will help India attract supply chains. If and when geo-economic conditions change, India could roll out an unconditional MLCBI. The author is an INSOL fellow & interim leader.
Business Times
16-05-2025
- Business
- Business Times
Europe can't rearm its way to security
[LONDON] As Russia's war on Ukraine rages on Europe's eastern frontier, the continent's leaders are finally willing to admit they have the power to revive their ailing economies. After decades of austerity, they are ready to spend again – but not to end poverty, accelerate decarbonisation, or reverse the collapse of essential public services. Instead, Europe's fiscal firepower is being directed towards tanks, missiles and fighter jets. Reorganising the economy around state-supported defence spending is known as military Keynesianism, though John Maynard Keynes – who rose to prominence by condemning the punitive post-World War I peace treaty that was imposed on Weimar Germany, which ultimately helped set the stage for Hitler's rise and another war – would probably not have endorsed the term. The reasoning behind the resurgence of military Keynesianism is not entirely without merit, as the pursuit of austerity policies has left many European economies punching below their weight. European productivity, which has grown at half the pace of the United States over the past decade, declined by 1 per cent in 2023. Real wages fell by 4.3 per cent in 2022 and 0.7 per cent in 2023, following a decade of stagnation. Meanwhile, investment is nowhere near where it needs to be to tackle the twin crises of inequality and climate breakdown. Europe's self-defeating commitment to austerity is epitomised by the German doctrine of 'schwarze Null' ('black zero'). Even when Germany's economic miracle was in full swing, politicians refused to invest in long-term growth. As a result, Germany – like most of the continent – has suffered from chronic underinvestment in physical and social infrastructure, constraining productivity. Against this backdrop, rearmament may look like an easy fix. Unlike social expenditure, defence spending faces little political resistance. It enables politicians to appear tough – a valuable asset in an age of strongman politics – and keeps the arms industry, a powerful lobby with deep ties to political elites, flush with public money. But military Keynesianism is a dead end – both economically and politically. For starters, it's a weak engine of long-term growth. Modern weapons production relies on advanced manufacturing processes that use relatively little labour, so the industry has low multipliers compared to investments in health, education or green energy. It creates fewer jobs per euro spent and contributes little to the broader economy's productive capacity. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Military Keynesianism also deepens Europe's dependence on fossil fuels, given that modern militaries are among the planet's largest institutional fossil-fuel consumers. Expanding defence capabilities means locking in demand for carbon-intensive technologies at a time when Europe should be phasing them out. Worse still, prioritising defence over decarbonisation sustains the very system of petropolitics that gives regimes such as Russian President Vladimir Putin's the resources to wage war in the first place. As the Guardian reported earlier this year, the European Union has spent more on Russian fossil-fuel imports over the past three years than it has on financial aid to Ukraine. If the EU is serious about defeating Russia – not just on the battlefield, but geopolitically – then the bloc must confront the real source of the Kremlin's power: oil and gas exports. Russia, after all, is a petrostate, and its war machine is financed by the revenues that flow from Europe's addiction to fossil fuels. Oil and gas revenues have accounted for 30 to 50 per cent of Russia's federal budget over the past decade and still represent roughly 60 per cent of its export revenues. These industries provide the vital dollars that enable Russia to import military technologies and other critical inputs. Without that income, the Russian economy would quickly collapse under the weight of hyperinflation. The most effective long-term strategy for countering Russian aggression, then, is not to ramp up military spending but to accelerate the green transition. What Europe needs is a real Green New Deal: a democratic, continent-wide mobilisation to decarbonise the economy, ensure energy security, and create millions of well-paying green jobs. To be sure, this would require massive investment in renewable energy, public transit, retrofitting, and industrial electrification. It would also mean reshaping supply chains, restoring public ownership of key infrastructure, and breaking the stranglehold of fossil-fuel capital on European politics. But a Green New Deal would do more to strengthen the EU's geopolitical standing than any number of new tanks and artillery shells. A Europe that produces its own clean energy, builds resilient green industries, and reduces its dependence on volatile global commodity markets is a Europe that cannot be held hostage by petro-tyrants. Europe's political elite faces a stark choice: continue propping up a broken growth model by funnelling public money into the military-industrial complex, or invest in a livable future rooted in solidarity, sustainability and democratic control. In the long run, building an inclusive green economy is the only way to counter the rage and alienation fuelling the rise of far-right forces – the greatest and most immediate threat to Europe's democracies. PROJECT SYNDICATE The writer, a former research fellow at the Institute for Public Policy Research, is the author of several books, including Vulture Capitalism: How to Survive in an Age of Corporate Greed (Bloomsbury Publishing, 2024) and The Corona Crash: How the Pandemic Will Change Capitalism (Verso, 2020)
