1. The global negative yielding debt rose to an all-time high of $12.5 trillion, up from $6 trillion last year.
The resultant search for yields by insurers, pension funds, and asset managers is keeping up both the equity markets and the alternative funds industry.
2. On how costs have fallen,
Since 1950 the real cost of new vehicles has fallen by half, that of new clothing by 75% and that of household appliances by 90%, even as quality has got better.
3. The Economist on HR promotions,
In a recent article for Voxeu, an online portal, the records of almost 40,000 salespeople across 131 firms were studied by Alan Benson, Danielle Li and Kelly Shue. They found that companies have a strong tendency to promote the best sales people. Convincing others to buy goods and services is a useful skill, requiring charisma and persistence. But, as the authors point out, these are not the same capabilities as the strategic planning and administrative competence needed to lead a sales team. The research then looked at what happened after these super-salespeople were promoted. Their previous sales performance was actually a negative indicator of managerial success. The sales growth of workers assigned to the star sellers was 7.5 percentage points lower than for those whose managers were previously weaker performers.
Scott Adams, the cartoonist, described this problem in his book, “The Dilbert Principle”. In his world, the least competent people get promoted because these are the people you don’t want to do the actual work. It is foolish to promote the best salesperson or computer programmer to a management role, since the company will then be deprived of unique skills. That is how the workers in the Dilbert cartoon strip end up being managed by the clueless “pointy-haired boss”.
4. Indian Express has a series of articles that point to the magnitude of the ground water depletion problem in India.
One kg of rice requires 2,000-5,000 litres of water depending upon the paddy variety, soil type and the time of sowing. With paddy production jumping from 39.89 lakh tonnes in 2014 (is this figure correct?) to 45.16 lakh tonnes in 2018, the number of tubewells in the state also shot up from a few thousand to 8 lakh, resulting in overdrawing of groundwater... In the last two decades, the farmers have pumped out much as 74% of the groundwater reservoirs.
With the weather department forecasting a delayed onset of monsoon, the state government has now deployed the highest ever number of water tankers — 6,597 as of June 10 — to meet the drinking water needs of parched regions. This is over three times the number of tankers deployed around this time last year (1,777)... Out of 17 major reservoirs listed by the Central Water Commission (CWC), with a total live capacity of 14.073 billion cubic metres, the live storage until June 6 is just 0.778 BCM, or 5.5%... The latest survey of the Groundwater Survey and Development Agency found that of Maharashtra’s 353 talukas, 279 have experienced depletion in ground water levels.
5. This FT article by Amy Kazmin is among the most appalling and asinine articles I have read in recent times, so much so that it seriously undermines FT's credibility. The same cherry-picked portrait could have been strung together for any country. It really is the revealed mind, laid completely bare, of a very biased observer.
6. The developments in Ethiopia highlights the challenges of bringing liberalism and democracy into societies without the conditions to embrace it. President Abiy Ahmed, a former military man, assumed leadership of Ethiopian People's Revolutionary Democratic Front (EPRDF), the part which has ruled the country since 1991, and became President of the country last year. He has abruptly embraced values of liberal democracy, freed up the press, unbanned political parties, released political prisoners, promised elections in 2020, and made peace with Eritrea. Being the first Oromo leader of the country, the largest ethnic tribe, he has made common cause with the second largest tribe and traditional ruling class, Amhara.
Sample the latest developments,
Brigadier General Asaminew Tsige was released last year from a life sentence for plotting to overthrow Ethiopia’s government — one of tens of thousands of political prisoners to be freed by prime minister Abiy Ahmed. Last weekend, the brigadier was named as the alleged ringleader of another coup, this one aimed at toppling the regional government in Amhara. By Monday, security forces had shot him dead. Asaminew’s story encapsulates the high-wire act of Mr Abiy, who is attempting to turn one of Africa’s most authoritarian but effective states into a liberal democracy. The 42-year-old former army intelligence officer, the most exciting leader in Africa, may yet succeed. But this weekend’s events show the perils of his enterprise.
7. Facebook's announcement of the plans for a global digital currency Libra backed 1:1 with physical currency reserve is interesting on multiple counts. For a start, the timing of the announcement and that too by Facebook, given all that has happened in recent times around Facebook, is so questionable on multiple grounds. Two, despite all the concerns around Facebook and also issues about data security, the general commentary around this announcement has largely been surprisingly appreciative. Three, amidst all these discussions, there is little deep enough exploration of the idea's likely impact on the national and global financial system. In fact, the Libra white paper itself has nothing meaningful to say about the concerns that are likely with such an idea.
Martin Wolf, surprisingly, has a good cautionary note. As he says, this idea, even without Facebook, should not be allowed without serious exploration of the implications. Barry Eichengreen too raises concerns.
8. The transhipment route to skirt around the trade sanctions on China,
The Trump administration has for more than a year sought to weed out the practice known as transshipment, in which Chinese exports typically are minimally processed or altered during a brief stop in a third port and then re-exported as a product originating from the third port. Such circumvention threatens to crimp U.S. plans as it prepares to add tariffs on to $300 billion of Chinese exports, from toys to electronics, essentially covering all its China trade. The U.S. already has placed 25% tariffs on some $200 billion of Chinese exports. In the first five months this year, exports to Vietnam from China of electronics, computers, and machinery and other equipment have sharply increased compared with a year earlier. In turn, so have exports of such goods from Vietnam to the U.S., Vietnamese trade data show.
9. Ananth points to this detailed investigation of how AMD, in pursuit of corporate profits, transferred cutting-edge x86 chip technology to China by skirting around US regulations on transfer of such technologies.
Three things come out from this. One, capitalists elevate the pursuit of profits above all else, including patriotism and national interests. As the stakes go up and capitalism becomes more global in nature, this trend will get amplified. Two, as the manner in which the joint venture between AMD and Sugon Information Industry Co was engineered, the Chinese have been very strategically pursuing the model of "introduce a foreign technology to the market, absorb it, and then innovate to make China a leader". Three, the US government at various levels played along, even connived in the subversion of the Committee on Foreign Investment in the US (Cfius) which scrutinises foreign investments for national security issues. This is only to be expected given the pervasive institutional capture in the US by corporate interests.
10. Finally, a fascinating essay on the Indian monsoon in the Economist.