The authoritarian wave reaches the west
When voters feel democracy is not serving their interests, freedom starts to falter
by: Gideon Rachman
After the fall of the Berlin Wall, there was a “democratic wave”. Political freedom spread from its traditional bastions in western Europe and the US — and countries as diverse as Poland, South Africa and Indonesia turned democratic.
But now the process seems to have gone into reverse. An authoritarian wave that began outside the established democracies of the west has spread to the US and Europe.
The resurgence of authoritarian attitudes and practices that first manifested itself in young democracies, such as Russia, Thailand and the Philippines, has spread into western politics.
Poland and Hungary have governments with authoritarian tendencies. The most dramatic development is the election of a US president who regards the free press as “the enemy” and has little respect for an independent judiciary.
This authoritarian wave threatens to undermine comfortable assumptions about how politics works. The belief that the politics of the rich, established democracies of the west are fundamentally different from those of Latin America or Asia may need to be rethought. The idea that the middle-class and the young will always be the most stalwart supporters of democracy is also looking increasingly rocky.
The erosion of democratic values in the west was outlined last year in a much-discussed article by the academics Roberto Foa and Yascha Mounk, writing before the election of Donald Trump. The article highlighted the rise of anti-democratic sentiments in both the US and Europe. One of their more eye-catching points is that one-in-six Americans now think that it would be a good idea for the “army to rule” — up from one in 16 in 1995. And while more than 70 per cent of Americans born in the 1930s think it “essential” to live in a democracy, only 30 per cent of those born in the 1980s agree. There has been a similar, if less marked, decline in faith in democratic institutions in Europe. Mr Foa and Mr Mounk conclude that “over the last three decades, trust in political institutions such as parliament or the courts has precipitously declined across the established democracies of North America and Western Europe”.
Mr Foa and Mr Mounk concentrate on the west. But the revival of soft authoritarianism is even more visible in countries that were once symbols of the democratic wave, such as the Philippines, which overthrew the Marcos regime in 1986, Russia, where Communist party rule ended in 1991, and South Africa, which ended apartheid in 1994. All three countries have retained key elements of democracy, such as elections. But they have seen an erosion of democratic norms and an embrace of personalised rule, which has allowed corruption to flourish.
In Russia, the economic collapse and lawlessness of the 1990s created the conditions for a revival of autocracy under Vladimir Putin. The Russian president has created a template for a soft authoritarianism combining nationalism, populism, corruption, a crackdown on the media and a close alliance between the presidency and a wealthy oligarchy. It may be no accident that some of the most articulate warnings against Trumpism have been issued by Russian dissidents, such as Garry Kasparov and Masha Gessen.
Rodrigo Duterte, the strongman president of the Philippines, has borrowed liberally from the Putin playbook. His embrace of vigilante justice has appalled Filipino liberals but has played well with a public that is frightened by crime and drugs. Mr Duterte also did well with young voters, who have few memories of the struggle to establish democracy in the Philippines.
The same pattern is threatening South Africa. The presidency of Jacob Zuma has seen a surge in corruption and growing pressure on the media and independent branches of government.
Many liberal South Africans hope that the end of the Zuma years will see a democratic revival. But things could go the other way. Simon Freemantle, senior political economist with Standard Bank, warns that “South Africa’s Trump moment is brewing”. He points to surveys showing that South Africa’s “born free” generation, born after the release of Nelson Mandela in 1990, are less supportive of democracy than people with memories of the struggle against apartheid.
There is also growing support in South Africa for a Trump-like deportation of illegal immigrants.
What is it that links the erosion of support for democracy in countries as diverse as Russia, the Philippines, South Africa and even the US? It is that for many voters democracy is a means to an end, not an end in itself. If a democratic system fails to deliver jobs, as in South Africa, or security, as in the Philippines, or is associated with a stagnation in living standards, as in the US, then some voters will be attracted to the authoritarian alternative. A drift towards authoritarianism will become more likely, in the context of rising inequality, when the political and economic system seems “rigged” in favour of insiders.
Of course, there will always be people who see political freedom as a value in itself — something that is indispensable to human dignity. But dissidents prepared to go to jail in support of free speech are relatively rare. Ronald Reagan, the US president who saw out the last years of the cold war, liked to boast that “freedom works”. Unfortunately, if ordinary people stop believing that, some may give up on freedom.
The Nexus between Politics and Economics
By: Michael Pento
To be a successful investor requires the knowledge that there exists a strong nexus between economics and politics. In just a few short weeks we will get Trump's details on the tax plan.
Understanding what form the tax plan takes shape, or if there is any such plan enacted at all, is essential to your portfolio's health because it will have a huge effect global currencies, bond prices, commodities and equities.
Getting tax reform passed is going to be complicated and will involve the following issues that need to be hashed out: border tax adjustments, trade tariffs, repatriation of foreign earnings, limiting the deductibility of net interest expense and eliminating other deductions, allowing companies to fully expense, instead of depreciating capital expenditures, an infrastructure spending package, and will the plan use dynamic or static scoring.
But the most important take away for investors is to determine which one of the following 3 scenarios the final plan entails: will it be neutral to the deficit, accretive to the deficit, or does the bill just die in the Senate.
The first outcome: Trump pushes through a simplification of the tax code that is done in a revenue neutral fashion through the use of a border tax adjustment or import tariffs. This may be a preferable course for Trump and the Republican Congress to pursue because it can be accomplished through budget reconciliation, which only requires a simple 51 vote majority in the Senate. In theory, this would lead to a stronger dollar because our trade deficits would shrink. Bond prices should fall (yields rise), but only moderately due to rising import prices and a bit more growth resulting from tax simplification. Stock prices should rise immediately after the passage of such reform but much of this has already been priced into shares. Precious metals could suffer from the rising dollar and the move into growth stocks. Finally, the Fed would remain on course for 2-3 rate hikes during 2017.
The second scenario is that Trump gets his tax overhaul done with the help of Democrats, which would require a 60 vote majority in the Senate. If the proposed reduction in corporate and individual tax rates were to be accompanied by infrastructure spending -- especially the type that would be most amenable to Senate Democrats -- he may get it through; even though he will lose the most fiscally conservative members. The major investment takeaway from this scenario is that deficits would absolutely surge and that bond prices would crash. Equity prices would most likely rise in the short-term because trading algorithms are programed to love fiscal stimulus that is not offset by a reduction in write-offs. However, stocks could run into a major sink hole once bond yields soared past 3% on the Ten-year Note. The dollar's value should get hurt by rising deficits but get a boost from the perceived rise in growth and the realized rise in bond yields. Therefore, I find this scenario slightly dollar bullish. Precious metals would benefit from rising debt and deficits but would at the same time get hurt by rising long-term rates and the impetus of the Fed to increase its planned 2-3 rate hikes to 3-4 hikes.
Although this is the least likely outcome it is still one that merits preparation.
The third possible outcome is that Trump's tax overhaul gets severely diluted, or that it cannot get passed through Congress. The market will perceive the paralysis in D.C. as extremely bearish for economic growth and that should put the Fed on hold for the rest of 2017. The investment strategy for this scenario is clear: Bond yields would crash along with the U.S. dollar. But perhaps the most salient ramification for the inability to push through tax reforms will be that equity prices plummet just as precious metals soar.
Why will stocks crash and gold skyrocket? Because the stock market rally is predicated on the hype and hope provided by President Trump that the U.S. economy can finally escape the anemic 2 percent GDP growth experienced over the past eight years.
Just how extended have stock market valuations become riding this anticipation of surging growth?
According to famed investor John Hussman, the median price/revenue ratio of individual S&P 500 component stocks now stands just over 2.45, which is easily the highest level in history. The longer-term norm for the S&P 500 price/revenue ratio is less than 1.0. Even a retreat to 1.3, which we've observed at many points in recent cycles, would take the stock market to nearly half of present levels.
Robert Shiller, the esteemed economist from Yale indicates that the S&P 500 now trades at 28x their trialing 10 year average earnings. This is the same level as seen in 1929 and far higher than it was in 2007, just before the Great Recession began. The average 10 year trailing earnings PE ratio is just 16.7, which according to the professor's data would require a 60% haircut in prices just to put the market back to historical norms. In addition, the tailing 12 month PE ratio of the S&P 500 is at the 90th percentile; meaning that 90% of the time observed over the past 80 years the PE ratio was lower than it is today.
One last overvaluation metric to share. The total market cap to GDP ratio now stands at 130 percent.
The normal level is closer to 50 percent. The stock market stands at a precipice virtually unparalleled in history that absolutely requires radical growth measures to be adopted in order to keep the air flowing into this bubble.
Investors have to pay close attention to both the economics and the politics if you want to get your investment allocations correct. This has never been truer than now.
Searching for God at the Center of the Big Bang
What quantum mechanics can tell us about the possibility of life after death and resurrection. Peter Woit reviews “A Big Bang in a Little Room: The Quest to Create New Universes” by Zeeya Merali.
By Peter Woit
Photo: Science Source
Human beings have always been fascinated by the question of the origin of the universe. The past hundred years have seen a dramatically successful effort by physicists and astronomers to move this question from untestable philosophical and theological speculation to solid science. We now have a relatively well-understood theory that allows us to trace the history of the universe back to some moments after a “Big Bang.” What happened at the Big Bang—or before—is an irresistible question but one that, for now, as science, lies in the realm of the purely speculative.
In “A Big Bang in a Little Room,” science writer Zeeya Merali turns the question around, asking instead whether physicists can create a “baby universe,” born in its own Big Bang. Indeed, one prominent theorist she interviews has suggested that our own universe might be a baby universe created by a “physicist hacker,” with the complex pattern of fundamental particle masses intended as some sort of message to us. thereby learning more about the beginnings of the “old” one.
Ms. Merali, who has a Ph.D. in cosmology from Brown University, explains that her interest in this topic is tied up with her religious beliefs: If we ourselves could play God and create a new universe, wouldn’t that creation amount to a theological discovery, showing the likelihood that some higher intelligence was responsible for the Big Bang? She structures her narrative around interviews with prominent theoretical physicists; they mostly discuss science, but religious questions sometimes play a role, with often fascinating results. While some refuse to engage, she gets others to discuss such topics as the relation of the laws of physics to God’s happiness, the possibility of a physical “consciousness field,” and what the quantum mechanics of the Big Bang might indicate about the possibility of life after death and resurrection.
Whether or not you believe in a “physicist hacker,” you have to have some sort of theory that applies to the era before the Big Bang. Around 1980 various “inflationary universe” models were proposed, in which a very short period of exponential growth at the time of the Big Bang provided a possible explanation for some observed large-scale properties of the universe. These models invoked a new, speculative “inflaton” field (and, no, that’s not a typo—it’s analogous with boson, muon, etc.) responsible for the expansion; but the properties of these models had to be carefully chosen to match observations. Ms. Merali does an excellent job of describing the early history of such work, interviewing important figures like the theorists Alan Guth and Andrei Linde, who along with others investigated the issue of whether such models would allow us to make extrapolations about what things were like back before the Big Bang. They also began discussing models of baby-universe creation; by 1992 Mr. Linde had published a paper he first titled “The Hard Art of Universe Creation.”
Mr. Linde is the central figure in this story, and Ms. Merali describes him as “a showman: bombastic, passionate, and fueled by the certain belief that inflation theory, which he helped to invent, is correct.” While Ms. Merali takes all of this seriously, there are very good reasons why most physicists don’t. Readers of “A Big Bang in a Little Room” would be well-advised to enjoy the ride but stay skeptical. Inflationary models can to some degree be confronted with observation and tested (a topic covered in other books but not this one). Attempts to give these models theoretical grounding (such as string theory) also cannot be independently tested: They involve a morass of many different unobservable new entities, inflaton fields among them, with no understanding of the physics of such a system.
Mr. Guth was initially fascinated by the idea of baby universes getting produced and making up a multiverse, though he imagined these other universes would all have the same physics as ours. Ms. Merali relates that he quickly lost interest: Why care much about cosmological models producing not just our universe but other copies we can never observe? Over the past 15 years, however, Mr. Linde’s slightly different argument—for a multiverse of universes, each with different physics, has become very popular. Such a multiverse even provides an explanation for the lack of progress in recent decades toward a better understanding of where fundamental laws of physics come from: The laws we observe are just artifacts of where various inflaton fields happened to randomly end up after our Big Bang; in other universes, the laws are different. Ms. Merali gives a disturbing version of this, contemplating the possibility that “string theory and inflation may be conspiring against us in such a way that we may never find evidence for them, and just have to trust in them as an act of faith.”
Science, however, is fundamentally not about faith but about evidence. One section of “A Big Bang in a Little Room” describes well-advertised hopes from 10 years ago that the new Large Hadron Collider in Geneva might somehow find evidence for extra dimensions, magnetic monopoles or other extremely exotic new physics. Based on this, the jacket copy tells us that “within the next few decades” physicists may be able to use this new physics to create baby universes. This is nonsense, for a list of reasons, beginning with the implausibility of such ideas in the first place and going on to the fact that data from the LHC is now here, and has shown no evidence at all for any of them.
In an era where “post-truth” was the word of the year, scientists and science writers need to make clear that science is not a species of theological or philosophical speculation and not about belief or entertainment value. Legitimate scientific claims are those that can be backed up with evidence, and unfortunately the wonderful and exciting story told well here contains none at all.
—Mr. Woit is the author of “Not Even Wrong: The Failure of String Theory and the Search for Unity in Physical Law.”
The Price of Empire
I learned that firsthand in the summer of 2015, when I delivered a speech at the Oxford Union decrying the iniquities of British colonialism – a speech that, to my surprise, inspired a powerful response across India.
Several British historians have written hugely successful books extolling the supposed virtues of empire.
Turkey and the United States Groping to Accommodation
Despite past differences, the two countries are getting closer.
By George Friedman
The Munich Security Conference is a place where senior leaders make speeches and hold meetings with each other. Sometimes, the meetings are merely formal, sometimes they are substantive. It is not always easy to figure out which is which. This year’s meeting was held last week, and everyone was focused on the United States delegation.
The delegation was headed by Vice President Mike Pence and Secretary of Defense James Mattis, who were accompanied by aides and less prominent figures. The focus on this delegation was reasonable. The world wants to know what U.S. foreign policy will look like. Mattis and Pence, at the end of the day, emphasized continuity. This always soothes diplomats, for a reason that escapes me. No matter how incoherent the situation, the promise that the incoherence will continue unabated makes you a statesman. Pence and Mattis played the role well, effectively buying time while President Donald Trump’s administration defines U.S. foreign policy.
Les doy cordialmente la bienvenida a este Blog informativo con artículos, análisis y comentarios de publicaciones especializadas y especialmente seleccionadas, principalmente sobre temas económicos, financieros y políticos de actualidad, que esperamos y deseamos, sean de su máximo interés, utilidad y conveniencia.
Pensamos que solo comprendiendo cabalmente el presente, es que podemos proyectarnos acertadamente hacia el futuro.
Gonzalo Raffo de Lavalle
Las convicciones son mas peligrosos enemigos de la verdad que las mentiras.
Quien conoce su ignorancia revela la mas profunda sabiduría. Quien ignora su ignorancia vive en la mas profunda ilusión.
“There are decades when nothing happens and there are weeks when decades happen.”
Vladimir Ilyich Lenin
You only find out who is swimming naked when the tide goes out.
No soy alguien que sabe, sino alguien que busca.
Only Gold is money. Everything else is debt.
Las grandes almas tienen voluntades; las débiles tan solo deseos.
Quien no lo ha dado todo no ha dado nada.
History repeats itself, first as tragedy, second as farce.
We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.
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