Sunday, July 24, 2016
UK explores free trade deal with China; How hesitation is stifling global economy; Jeep celebrates 75th anniversary
1 UK explores free trade deal with China (Kamal Ahmed on BBC) Chancellor Philip Hammond has begun discussions with China on an ambitious free trade deal which could see greater access for major Chinese banks and businesses to the UK economy.
The Chancellor said it was time to explore "new opportunities" across the world, including with China, one of the UK's biggest inward investors. That is despite a short term economic shock from leaving the European Union. He added that the EU is not in "punishment mode" over the Brexit vote.
"What we now need to do is get on with it in a way that minimises the economic impact on the UK economy in the short term and maximises the benefit in the long term," Mr Hammond said, admitting that there had been "global disappointment" about the Brexit vote. Chinese state media reported that the Chinese Ministry of Commerce wants to do a UK free trade deal.
Mr Hammond has now revealed that Britain is also keen. It will be the first time the UK has embarked on such a major project with the second largest economy in the world. And will raise concerns about cheap manufactured goods entering the UK more easily.
2 How hesitation is stifling global economy (Robert Shiller in The Guardian) Economic slowdowns can often be characterised as periods of hesitation. Consumers hesitate to buy a new house or car, thinking that the old house or car will do just fine for a while longer.
So how does such behaviour become sufficiently widespread to bring about an economic slump? Loss of economic confidence is one possible cause. Uncertainty about economic policy is another possible source of hesitation. If businesspeople don’t know what regulations, taxes, or worse, nationalisations, will be coming, they may dither.
In a 2015 working paper, the economists Scott R Baker, Nicholas Bloom, and Steven J. Davis constructed Economic Policy Uncertainty (EPU) indices for a dozen countries using digital news archives. The indices (covering Canada, China, France, Germany, India, Italy, Japan, Russia, South Korea, Spain, the UK, and the US) were created by counting the number of newspaper articles in each country and each month that had the trifecta of terms economy (E), policy (P) and uncertainty (U).
They found that their EPU index foreshadows economic contractions in the 12 countries, and that for the two countries with long-term indices, the EPU values were high during the Great Depression. But do contractions cause uncertainty, they ask, or does uncertainty cause contractions? Given that we know that people are highly reactive to each other, the causality most likely runs both ways, in a feedback loop.
The Brexit vote in the UK last month has been viewed worldwide with extraordinary alarm as a signal of political instability. The rising incidence of terrorism has added a vivid emotional edge to such developments.
Will these fears fuel enough economic hesitation to bring on another worldwide recession? Any answer at this time would be impressionistic and imprecise. Given the importance of the consequences, however, we should not shrink from considering how such fears are affecting economic decision-making.
3 Jeep celebrates 75th anniversary (Heather Leighton in San Francisco Chronicle) Jeep celebrated its 75th anniversary for building military vehicles the only way a car brand knows how: build an epic military-themed concept vehicle.
In 1941, Jeep made vehicles for the military, but has slowly transformed itself to the commercial go-anywhere, do-anything vehicles for civilians. And to celebrate the three-quarters of a century anniversary, Jeep built a concept vehicle that is true to its rugged beginnings.
The Wrangler 75th Salute concept vehicle pays tribute to the brand's legendary history and military heritage. "We are creating this unique Jeep Wrangler 75th Salute concept vehicle in celebration of the brand's legendary history," said Mike Manley, head of Jeep Brand FCA Global. "And to demonstrate that 75 years later, today's iconic Jeep Wrangler is instantly recognizable and clearly connected to the original Willys MB."