Calexit or Calicadia Here’s how it Rolls

Bas St Laurent

There are few countries unaffected by the surprise win of President Elect Donald J Trump. His campaign spared no one the divisive proclamations meant to frighten, divide to conquer and gain attention.

For millions of Progressives and Liberals of every faith and nationality there is a feeling that can only be described as a dis-ease. What other explanation can explain the sense of anxiety and hopeless malaise in anticipation of what is to come in a Trump America.

The political arc now bends toward the extreme right in Washington DC. Global tribalism has set up shop in America. Bringing with it an anticipated rolling back of decades of struggle to win policies friendly to the disenfranchised and suppression of the science of climate change. His disavowing of hard-earned trade agreements seduces the dark specter of isolationism.

As we draw closer to Inauguration day, people are increasingly convinced that the campaigner Donald Trump will make good his harsh populist promises. In the days following his election victory, each choice of cabinet appointee reinforces the need for millions of Americans to join the world in exploring places for safe harbor, a place for what Tony Blair calls the “political homeless”, or perhaps a Calexit or Calicadia.

Insolence Incarnate

Perceived wealth is what the PEOTUS has used to sway political power. The same holds true for the value of American currency. Wall Street is a thin-skinned warrior that takes offence at the slightest uncertainty. We are the world’s largest consumer market with the biggest most successful economic experiment. Renegotiating our export and import agreements as well as threatening the efficacy of our immigration policy threatens to rip the socio- economic fabric of states like California. Nevertheless, just a scent of a successful coming of a split between Washington and a quarter of the country and its contributing GDP will send global markets reeling. Because the states demanding release from their agreements to stay as part of the union will own a GDP placing them 5th or 6th on the list of world economies, tied to France.

We have become a nation of political hegemony.

We are no longer a country of dual political parties. We have elected the gatekeepers away. Democracy has declined. Xenophobia’s influence on our economy will soon bear the costs of following its political dictates. Middle income and impoverished Americans will feel the outcomes first as social programs intermittently experience privatization.

SCOTUS will soon have the ability to reinterpret constitutional language for a host of political reasons. So to expect a country that is largely progressive to remain silent is not realistic. If California has its way, other states sitting on the fence will be compelled to follow suit and enact their own solutions to exit the union. This will definitely create a nation of independent states that may resemble a redefined EU, each with its own ideologies and sovereign laws. The loser in the final analysis will be the United States of America. Here is why it would be so very hard to achieve a Calexit or Calicadia.

Campaign Rhetoric laced with racial animus fueled an election while dividing a country along huge fault lines between Liberal and extreme Conservative ideologies.

The GOP party’s denouncement of lenient immigration policies was a successful distraction in winning control of Washington DC. But they failed to take into account the populace views in the successful states of Silicon Valley and Washington State. They take these conservative pronouncements seriously. Comprehensive immigration feeds the wealth of talent that created the cash cows of tech industries. They also happen to be the bastions of Liberal think tanks. Loosing these states from the union would constitute a huge brain drain while dealing a hard blow to the national GDP.

If California and other states achieve an exit from the union, an added benefit would be a clear path to renegotiate their own version of TPP. Emerging markets and the EU would welcome the opportunity to reignite a new and different trade deal, if assured that a mature government and a strong emerging economy was forming. Calexit or Calicadia would become a major avenue into the globes largest and fastest growing consumer markets in Asia. There will be little to restrain negotiating open borders between Mexico and Canada.

Consider this. California is part of a group of states that lies between the Pacific Ocean and the rest of the world. Almost 62% of Californians voted for Hillary Clinton in 2016. Median Income is $61,000. Californians pay more federal taxes than any state in the union. Their GDP places them at 6th in global economies.

Their bank of technical brains bracing for the coming of a cultural regression in science and shrinking liberal democracy makes this large productive diverse culture convinced that their government holds little resemblance to the values held by its statehood. California’s exit has been in the planning for years.

The national GDP without California in 2015 was $15.5 trillion. California’s GDP is $2.4 trillion with a growth rate of 3.2%. A proposal from neighboring states to join in a succession or Calicadia would have a combined GDP, using 2015 numbers, of close to $3.2 trillion. This assures a very self-sustainable sovereign.

In order to achieve the feat of creating Camelot there must be a successful referendum vote and ratification from 38 states. But consider this. The impact on sovereign treasuries and loss of income to the United States would be hard. Only with some arbitrary leave buy out and/or a systematic reparation of loss of inherent commodities and tax incomes could we hope to unlink California and her neighboring states, not an impossibility but a strong disincentive. The US government can never willingly allow these exits to occur. Nevertheless, religious and racial tolerance has been the hallmark of our constituted group of states.

As we push our country further to an extreme regressive culture, its policies will force many to rethink where to live and survive. States that offer a more forgiving social climate will reap the economic rewards of talented and youthful communities. But the shear headwinds of creating a nascent nation’s economic policies, constitutional and social constructs and monetary policies will be dreadful to untangle from the United Sates and then reassemble. This would completely upend the US economy.

Since the end of the Civil War, no state has succeeded, let alone an entire block of states. Agreements struck at the end of the war were meant to keep sealed the union. Becoming self-governing is the easy part. Becoming a separate entity reflecting all the social nuances of Camelot is another thing altogether.

Part of the composition of what makes our country great is the maturity and stability of governance. Without that, the impact on global markets would be bad. Just a hint to the financial markets that such a thing is possible would forever change all things. The nominal value of our dollar (globally used as the currency of choice) would plummet. It would mean the end to the American powerhouse, as we know it. We have already signaled an enabling of a stronger China by threatened withdrawal from trade agreements. But the desire for an exit from the union serves as a reminder of other countries who chose a leave referendum.

At this writing, the UK’s Autumn Statement detailed the fact of an 82.6 percent to 87.3 percent increase to debt and a lowered GDP due to economic uncertainties from the Brexit.

Unexpected turns of political events driven by tribalism have become a real and present danger to global stability. Where aggressive and progressive fiscal policies have been lacking monetary policies have supported.

Bad actors are influencing our politics and the growing conservatism populace is upending economies. Is a Calicadia possible? Britons asked the same about a Brexit five years ago. Thanks to isolationists right-wingers like UKIP’s Nigel Farage, it became a reality. That same sentiment brings into stark relief all aspects of a Donald J Trump administration.

The uncertainty of isolationism haunts Europe as well with the alt-right populisms of France’s Marine Le Pen, and Francoise Fillon, Germany’s alt-right leader of Alternative für Deutschland Frauke Petry, and Austria’s Norbert Hofer promoting “Oexit”. Their isolationist movements once living on the fringe now threaten liberal democracies.

With renegotiations of tariffs, customs taxes, loss of wages, devaluing of currencies and migration of human capita. The distracting politics of xenophobia and isolationism carries a high economic price tag.

Mashable – “Today, we woke up feeling like strangers in a foreign land, because yesterday Americans expressed their views on a pluralistic and democratic society that are clearly inconsistent with the values of the people of California,” California Senate President Kevin de Leon and Assembly Speaker Anthony Rendon said in a joint statement. “We have never been more proud to be Californians.”

They added that the state would continue being a “refuge of justice and opportunity for people of all walks, talks, ages and aspirations – regardless of how you look, where you live, what language you speak, or who you love.”

“Any access to the common market comes with rules and obligations and one of those is freedom of movement for people,” Ayrault said at a press conference of Paris. “It is not a la carte.”

7 Ways Forex can make a Difference in Managing Your Projects.

Forex the smart tool

If you think that Brexit outcomes will have little effect on small and/or midcap projects…consider this. Using Forex to forecast foreign currency behavior can keep managing costs of projects agile. Coping with the unforeseen or getting to know currency market unknowable(s) in an age where the global paradigm rewards anticipators of currency shifts, is smart. But ignoring market sentiment’s influence on currency punishes those who rely on the traditional quantitative malaise. Brexit stands as an example of how social outcomes are factors that can shift project costs.

1. Shadow banking influences 85% of daily loan activity and is a major participant in traditional short-term commercial paper trade. Currency rates fluctuate at any moment and influence financial market behavior. Whether an upscale clothing and accessories chain or a business that provisions global services. The price of renting money to meet daily operational cost and or fund a project may change in a heartbeat due to changes in global currencies and the interpretations of Forex trading. Phenomenon like Brexit will alter the behavior of shadow banking and its partnerships.

2. No matter the size of our project funds, the troubles of large global banking institutions, like Germany’s Deutsche Bank, can influence the availability and cost of preserving global liquidity.
There is anticipation of a Brexit led relocation of banks with the accompanying brain drain from the UK. It will have a ripple effect throughout local economies.

Contrary to current indicators of sustained economic growth, a recession will rear its head. A delimited pound will play itself out within the next year and will influence other global monies.

3. Realignment of trade agreements, influences of tariffs and the costs of imports play an important role in cost of supply. Will your supplier pass that additional cost down to you?

4. Even after finalization of the Article 50 agreement, the years of negotiating the messy divorce will and has diverted energy from the economy as it realigns trade agreements. Nervous businesses are already looking to reassert old trade agreements and create new ones inside and outside of the EU.

5. While the Brexit event has lowered pound value, making exports cheaper, supply side economics will soon slow the pace of good news markets.

Next to the US dollar and Euro, the pound is widely used globally as legal tender for goods and services. Sovereign currencies pegged to the Euro and the sterling will experience the slowing markets first. Costs to ongoing projects will be at the whim of changes in expenditures to supply and will influence demand.

6. In 2013, the EU had a population of 210 million making it the second most traded currency in the world. According to the IMF, the Eurozone has the second largest economy in the world. Because UK is a major trader within the single market, the Brexit will have implications to global monetary markets for generations. It would be pure folly to ignore Forex forecast of currency trends.

7. By reciprocal agreements with larger global banks and shadow institutions, all US banks have some exposure to European financial systems. Hedging rules apply. The further out to completion of project the heavier the risks to rate changes. Forex can alert project managers of changes in the fundamentals effecting rate changes.

Think about this. A sovereign’s coin is like a living organ that is reactive to any social or political irritant. While tracking hourly journals of Forex markets will not satisfy all of your quantitative efforts, it is an excellent bell weather of how foreign currencies may influence your project scope.

The science of Forex forecasting offers the advantages of anticipating trending costs over the life of a project. That keeps a Project Manager nimble. Consider this. Market sentiment will increasingly shift global monetary performance. As in the Brexit, which has forever changed how we anticipate human economic behavior and its influence on money.

WILL GERMANY’S CHANCELLOR ANGELA MERKEL AND THE EUROBONDS BE THE ANTIDOTE TO FINANCIAL CONTAGION?

Posted by Barbara Cerda
This entry was posted on Sunday, November 27th, 2011 at 12:05 PM for Surface Earth

An amazing turn of global events is happening in the Euro Zone that is threatening to infect the world. Germany and her first female Chancellor Angela Merkel, is leading the efforts in economic reform in Europe. The only woman currently serving on the G8 second only to Margaret Thatcher is leading the charge that will fundamentally shape the solutions that will prove antidotal to the financial contagion that threatens a global recession. The Bundesrepublik Deutschland has become the voice of reason and substance in a European world of budding chaos and monetary want. Chancellor Angela Merkel has stood her ground and refuses to bend to quick fixes in the face of the decisions needed on how to monetize Greece and eventually Italy; an advent that few predicted a generation ago. Nor will she retreat from her stance on the moral hazards of issuing the Eurobonds with certain liabilities. It is hoped that Eurobonds and Chancellor Merkel may be the antidote to financial contagion that threatens global economies.

The issuance of Eurobonds or blue bonds is receiving split reviews amongst the players in the Euro Zone. The final decision would have the potential of acting as a global stimulus fund. Many have named this debt instrument debuting in 2013 as the “stability bonds”. Its created purpose is to sustain and make balance an economically unstable climate for investors and governments. In consideration of its impact as an instrument of debt, it will be issued in euros as a joint obligation of the 17 participating Euro Zone countries. Its biggest critics’ voice concerns of the absence of credible common governance.

As a progressive concept in monetization its lack of consensus is a result of a need for a central debt office, which is not the domain of the ECB. The primary mandate of the European Central Bank is to maintain price stability or to keep inflation low (2%) within the states of nations. The ECB does not function like our Federal Reserve. Our FOMC governs monetization in a homogenized political and financial culture.

Consensus is split over the concept of joint liabilities, which is divided into three versions within the green paper, detailing its guidelines. Chancellor Merkel struggles to narrow the crucial gap, creating a convergence of ideologies. It will mean a change in treaties or adaptations in how sovereigns may fiscally self-manage.

Diversification of the Euro Zone is more than just its charm, it is their Achilles heel. Chancellor Merkel’s largest fear is that a joint debt with shared responsibilities will only encourage some Euro Zone countries to shirk their obligations in correcting deteriorating governance and fail to institute better fiscal discipline. A case in point would be the recent unsustainable cost of borrowing money for the Italians. Presuming to borrow at such a rate, essentially on preconceived future value as a nation, is inconsistent with the actualities of having the ability to repay. Others in the world have sided with Chancellor Merkel in her unwillingness to quickly embrace Eurobonds. Making this final decision is daunting. In addition there are the private sector investors to consider.

Germany is insisting that the insurance companies, banks and general private sector investors must share in the losses resulting in the Greek bailout. This is a progressive leaning concept that has garnered some outspoken opposition from within the Euro Zone. It was part of the original agreement of the ESM (the European Stabilization Mechanism).

The Eurobonds must contain scale of maturities. The issuance is still unconstructed and the enforcement of conditionality among stakeholders is necessary. Yet perhaps Germany’s Chancellor Merkel’s antidote to the financial contagion will create the needful outcome