Zhang Jun writes  At a forum in Canberra last year, Andrew Sheng quipped, “China is transparent, but only in the Chinese sense.” The statement provoked laughter among those who view China’s decision-making processes as opaque; but it was laughter born of the recognition that Sheng was right. In the run-up to a major policy decision in China, editorials by high-ranking authorities in major publications, as well as reports and communiqués from official forums and meetings, almost always provide clues about what will happen. You just have to know how to read them.

Many interpreted last August as a last ditch effort by the People’s Bank of China (PBOC) to stave off an economic crash.  But China is not really on the verge of a currency crisis at all. Given that all of this activity is taking place in the offshore renminbi market, which is small in scale and has only limited connections to mainland China’s financial system – the result of China’s hesitancy about financial-market liberalization and capital-account convertibility – the situation remains controllable. Add to that China’s other strengths – annual GDP of over $10 trillion, a growth rate at least four percentage points higher than the global average, $3 trillion in foreign-exchange reserves, a savings rate of 40% of GDP, and a massive trade surplus – and an exchange-rate crisis seems highly unlikely.

But that does not mean that there are no risks. On the contrary, China has a strong interest in curbing the volatility – and, given China’s centrality to the global economy, so does the rest of the world. The key will be to get markets and policymakers on the same page.

Chinese policymakers have shown a clear commitment to minimizing government intervention and promoting a market-oriented approach for setting interest and exchange rates. And the authorities have made significant progress toward this end.

In fact, the devaluation last August was accompanied by the announcement of a more market-oriented mechanism for setting the renminbi’s exchange rate in the interbank market, with the daily fixing rate based on the previous day’s closing price. That move, was a prerequisite for the addition of the renminbi to the basket of currencies that determine the value of the International Monetary Fund’s reserve asset, the Special Drawing Right.

But even when China attempted to create a more reliably market-based system, investors’ responses were skewed, with unfounded expectations of a substantial and consistent devaluation fueling speculation in international markets. The subsequent attempt by China’s State Administration of Foreign Exchange to stabilize expectations by declaring that the renminbi would be valued against an undisclosed basket of currencies, instead of just the US dollar, failed to convince them. Short trades continued to rage offshore, putting the renminbi under increasing pressure.

The PBOC has been working vigorously to prevent further misunderstandings by designing policies that will safeguard exchange-rate stability, while taking care not to transmit any signal that monetary easing is in the cards.

The PBOC clearly remains committed to stabilizing the exchange rate, while advancing its market-oriented goals.

China’s leaders have plenty of challenges ahead, and improved communication with markets could help to overcome them. Fortunately, it seems that China’s leaders recognize this imperative, and are working to meet it.

 Between 1970-2014, rural counties with a lot of federal lands did better financially than those without as much federal control. That’s according to a new study by Headwaters Economics, a non-partisan think tank based in Montana.  Economist Megan Lawson led the study which drew averages from around the West. She says federal lands aren’t necessarily the reason why those rural counties were better off, but that having federal land doesn’t automatically spell economic ruin. The graphic does not show median income comparisons which would reflect on whether high concentrations of federal lands correlate with less income inequality or not. 

It was just over a year ago that Greece elected Alexis Tsipras and Syriza amid a flurry of anti-austerity sentiment.

Things didn’t exactly go as planned.

The new PM and his “radical” finance minister Yanis Varoufakis thought they could shake things up in Brussels and wrench Greece from the clutches of Berlin-style fiscal rectitude. As it turns out, Wolfgang Schaeuble is not a man who is easily bested at the bargaining table and after more than six months of negotiations, the imposition of capital controls, a referendum on the euro that Tsipras promptly sold down the river, Greeks ended up facing an outright depression.

In the end, Varoufakis unceremoniously resigned and Tsipras agreed to a third bailout before calling for snap elections that would ultimately see the PM re-elected albeit at the helm of a party that was completely gutted by the arduous bailout talks.

As we and quite a few others warned, the new bailout and the attached terms would do exactly nothing to turn the Greek economy around. We’re all for being responsible with the budget but you can’t very well implement fiscal retrenchment during a depression unless you intend to remain in said depression in perpetuity, but alas, that’s exactly what Brussels forced Greece to do and the country has slipped back into recession.

With opposition mounting to the government’s pension reform plan, the European Union pressuring it to stem the tide of refugees entering the country and the global market rout hastening the sell-off in Greek assets, dark clouds are gathering again.  Ironically, capital controls appear to have helped the economy perform better than expected: “The economy fared less badly than those initial expectations in part due to a 90 percent annualized increase in cashless payments since the introduction of capital controls in June, shifting activity out of the shadow economy.” Another justification for banning cash we suppose.

Earlier this month we noted that Greek bank stocks were cut in half in just a matter of 72 hours while Greek equities as a whole had fallen to their lowest levels since 1989. Yields on the Greek 10Y had spiked back above 10%.

Greece, sources told MNI, “seems unable to deliver” on a number of measures Brussels says Athens needs to implement an effective fiscal consolidation plan. “We agreed to disagree,” one official said. “Judging from (last week’s) talks, the negotiations could drag for months. Anyway, I don’t see any real funding needs for Greece until June,” the official went on to note.

Greek riot police fired tear gas at farmers protesting against pension reform plans on Friday who hurled stones at the agriculture ministry in central Athens ahead of a major demonstration outside parliament scheduled for later in the day,

Greece is not “fixed.” And even as the farmers swear “they won’t make us bend,” something will have to give because Grexit fears to resurface once again [if all sides adopt] a plan built on over-optimistic assumptions.

Throw in a couple of hundred thousand refugees that are lliterally arriving in boats and you’ve got a particularly precarious situation that will likely devolve into the type of chaos shown above on an increasingly frequent basis.

The world oil market is complex. Governments and private companies play various roles in moving oil from producers to consumers. Government-owned national oil companies (NOCs) control most of the world’s proved oil reserves (75% in 2014) and oil production (58% in 2014). International oil companies (IOCs), which are often stockholder-owned corporations, make up the balance of global oil reserves and production. Proved oil reserves consist of the amount of oil in a given area, known with reasonable certainty, that current technology can recover cost effectively. Worldwide proved oil reserves in 2014 were almost 1.7 trillion barrels, and global oil production averaged roughly 93.2 million barrels a day.

There are different types of oil companies

There are three types of companies that supply crude oil to the global market. Each type of company has different operational strategies and production-related goals:

1. International oil companies (IOCs): These companies, which include ExxonMobil, BP, and Royal Dutch Shell, are entirely investor owned and primarily seek to increase their shareholder value. As a result, IOCs tend to make investment decisions based on economic factors. These companies typically move quickly to develop and produce the oil resources available to them and sell their output in the global market. Although these producers are affected by the laws of the countries in which they produce oil, all decisions are ultimately made in the interest of the company and its shareholders, not in the interest of a government.
2. National oil companies (NOCs): These companies operate as an extension of a government or a government agency, and they include Saudi Aramco (Saudi Arabia), Pemex (Mexico), the China National Petroleum Corporation (CNPC), and Petróleos de Venezuela S.A. (PdVSA). These companies support government programs financially and sometimes strategically. These companies often provide fuels to domestic consumers at a lower price than the fuels they provide to the international market. These companies do not always have the incentive, means, or intention to develop their reserves at the same pace as investor owned international oil companies. Because of the diverse objectives of their supporting governments, these NOCs pursue goals that are not necessarily market oriented. The goals of these companies often include employing citizens, furthering a government’s domestic or foreign policies, generating long-term revenue to pay for government programs, and supplying inexpensive domestic energy. All NOCs belonging to members of the Organization of the Petroleum Exporting Countries (OPEC) fall into this category.
3. NOCs with strategic and operational autonomy: The NOCs in this category function as corporate entities and do not operate as an extension of the government of their country. This category includes Petrobras (Brazil) and Statoil (Norway). These companies often balance profit-oriented concerns and the objectives of their country with the development of their corporate strategy. Although these companies are driven by commercial concerns, they may also take into account their nation’s goals when making investment or other strategic decisions.

In 2014, 100 companies produced 82% of the world’s oil. NOCs accounted for 58% of global oil production.

Philip Angelides, a former Treasurer of California, headed the commission which issued a report which was widely criticized, both by those who felt is didn’t go far enough (see references below) and by some commission members who felt it went too far and resulted in conflicting minority reports.  

“I ask a simple question: how could the banks have engaged in such massive misconduct and wrongdoing without a single individual being involved? In a sense, it’s the immaculate corruption. It defies common sense, and the people of America know this.”     Angelides Letter to Department of Justice

Philip Pilkington writes: Does mathematics, due to its formal nature, provided economists with clarity? This was then typically followed up with appeals to how economics might become a science by increasingly mathematising.

A good example of mathematics providing clarity is the case of the Keynesian multiplier. Even without inputting any numbers into the equation we can immediately discern the factors that will generate equilibrium income. It will be a component of autonomous consumption, investment, I, government spending, and exports, minus autonomous imports. It will also be positively multiplied by the consumption multiplier, and negatively multiplied by the import multiplier.

We know this because the components of income are in the numerator of the equation, while the multipliers are in the denominator. The multipliers are also being subtracted from/added to 1. The larger the denominator, the smaller the numerator and vice versa. So, anything that “subtracts” from the denominator — e.g. the consumption multiplier — will increase the ratio (same directional effect as adding to the numerator), while anything that “adds” to the denominator — e.g. the import multiplier — will decrease the ratio (same directional effect as subtracting from the numerator.

Compare this presentation, however, with your typical econometric study. Such studies contain innumerable “black boxes” in that the reasoning behind the assumptions made is often entirely unclear.

One thus spends hours attempting to interpret and reconstruct such a study and, all too often, one comes away realising that the assumptions lead one inevitably to interpret the results as being almost entirely arbitrary.

One recognises the labour that goes into such studies but at the same time untangling it becomes “a nightmare to live with”. Why? Because such studies do not promote clarity at all. Instead they promote complete and total obscurantism.

This is not to say that econometrics is entirely useless. As Keynes says in the Tinbergen critique: This does not mean that economic material may not supply more elementary cases where the method will be fruitful. Take, for instance, Prof. Tinbergen’s third example-namely, the influence on net investment in railway rolling-stock of the rate of increase in traffic, the rate of profit earned by the railways, the price of pig iron and the rate of interest. Here there seems a reasonable prima facie case for expecting that some of the necessary conditions are satisfied.

Alas, however, these mathematical techniques have a tendency, not to clarity at all, but to obscurantism and the moment one gives people a ticket allowing them to engage in obscurantist practices one runs the risk of spiking the proverbial punch.

It is far, far more difficult to engage in obfuscation and magical nonsense when using plain English than it is when using mathematics; not to mention the fact that it is far easier to catch people out. And as a general rule-of-thumb it is probably not unfair to say that as the number of equations grows, the lack of clarity tends to increase and so too do the difficulties in sorting the wheat from the chaff. It is thus the multiplication and proliferation of equations that tends to give rise to nightmares.

The negative-rates club is growing. But there is a limit to how low rates can go, according to the economist.  But they do not define what that limit is.

The Economist suggests: Let’s take a different look at what negative interest rates mean from the point of view of supply and demand.  The -1% deposit rate for Switzerland indicates the expectation that the Swiss franc will buy about 10% more than it will today in 10 years.  (To be exact, the expectation is for 10.46% more value.)  Why will it buy more?  Well, for just the opposite reason that +1% interest rates indicate a 10% loss of value expectation over 10 years.  With the loss of value the effect is known as inflation which is generally considered due to too much money chasing too few goods.  The solution for inflation is to make money more expensive or less available.  The opposite applies for monetary deflation implied by negative interest rates:  There is not enough money available to buy the goods available.  In the current environment the shortage results from an excess of “debt goods” to be bought.  So the solution to deflation is either to make the goods more scarce (write off debt) or increase the amount of money available.  QE is a process attempting to make debt instruments more scarce in the economy, although the scarcity may be temporary if the central bank later sells debt securities, as opposed to debt write-off which is forever permanent.  (“Forever permanent ” is a deliberate redundancy, for emphasis.)  See the preceding article for a view that rising wages and incomes are going to supply the money that will reduce deflation (or increase inflation).

But we ask the following question:  Where will the money come from to pay the higher wages?  The choices we suggest are (the third is not done today with the existing monetary system):

1. Fewer people employed.
2. More debt to create additional money.
3. Infusion of money without the creation of debt.

Any country’s main asset is its workforce, and Norway, with its oil wealth, is no exception. Sustainable policies for low unemployment and high participation rates for women, men and young people are predominant and the burden sharing of the cost of the welfare state is carried on the back of the labour force.

New research from The Peterson Institute for International Economics and Ernst and Young shows that having more female leaders in business can significantly increase profitability. The report, Is Gender Diversity Profitable? Evidence from a Global Study, reveals that an organization with 30 percent female leaders could add up to 6 percentage points to its net margin. This in-depth new study analyzes results from approximately 21,980 global publicly traded companies in 91 countries from a variety of industries and sectors.

“The impact of having more women in senior leadership on net margin, when a third of companies studied do not, begs the question of what would be the global economic impact if more women rose in the ranks?” said Stephen R. Howe, Jr., EY’s US Chairman and Americas Managing Partner. “The research demonstrates that while increasing the number of women directors and CEOs is important, growing the percentage of female leaders in the C-suite would likely benefit the bottom line even more.”

The research uncovered that nearly one-third of companies globally have no women in either board or C-suite positions, 60 percent have no female board members, 50 percent have no female top executives, and less than 5 percent have a female CEO. Yet, the positive correlation between women in C-level ranks and the bottom line is demonstrated repeatedly, and magnitude of the estimated effects is substantial.  Although the study found that there is no statistically observable impact of having a female CEO on organizational profitability, and the impact of women’s presence on the board is not statistically robust, the importance of having female management and presumably a pipeline of female future leaders is both robust and positive.

“As many companies and governments have rightly increased their focus on gender diversity in corporate leadership, The Peterson Institute and EY wanted to explore what key areas in business roles and in societal support for women in those roles, have the greatest return for revenue and economic growth,” said Adam Posen, President, The Peterson Institute for International Economics. “We have found that some policy initiatives are more promising than others to deliver benefits while promoting gender equality, and that the emphasis should be on increasing diversity in corporate management. At a minimum, the results from our unique global study strongly suggest the positive impact of gender diversity on firm performance and identify in which sectors and countries the most progress on diversity needs to be made.”

While no country has reached gender parity, there is substantial international variation in women’s representation. National averages for women’s participation on boards range from 4 percent in the case of Mexico to roughly 40 percent in Norway, with Latvia and Italy next in line at 25 and 24 percent, respectively. Similarly, fewer than 11 percent of Mexican executives are women, while women account for more than a third of Latvian and Bulgarian executives.

The research reveals differences across industry sectors, with the financial, healthcare, utility and telecommunications sectors exhibiting the highest rates of female executive and board representation, ranging from 16-18 percent for women executives, and 12-14 percent for women directors. Basic materials, technology, energy and industrials are the sectors exhibiting the lowest representation of women in top positions, ranging from 10-12 percent for women executives and 8-10 percent for women directors.

The research addresses other issues that impact women’s presence in corporate leadership, which is positively correlated with firm characteristics such as size, as well as national characteristics including policies for women’s education and family leave. The research’s statistical results suggest that at the firm level, the size of the company and the size of the board are robustly correlated with the presence of women on boards and in upper executive ranks (though not as CEOs).

This research sheds light on the importance of establishing modern workplace benefits, providing equitable sponsorship opportunities, and creating inclusive work environments.

The data points to other policy indicators positively correlated with gender diversity in management, and thus profitability, that  are often overlooked, including the importance of paternal (not just maternal) leave, and openness to foreign investment, which could be interpreted as a sign of broader tolerance for new ways of doing business. Paternity leave – resources that would allow, and even encourage, fathers to participate more equitably in taking care of children – is significantly greater in the economies with more gender-balanced corporations: the top 10 economies had 11 times more paternity leave days than did the bottom 10.