Saturday 29 August 2015

Currency Wars: Why Did China Devalue Its Own Currency?

China's 3% devaluation of its renminbi currency in relation to the dollar over the 11th and 12th of August was the largest single shock to the currency since 1994. The question is, though: why would a country devalue their currency?

Doesn't it make more sense for a country's currency to be stronger than everyone else's? Is a strong currency not a sign of a strong economy?

Well, in a way it is. One of the major factors in a currency's strength is the amount of foreign trade attracted by the country using it. For example, if India is exporting far more produce than it imports, the demand for the Indian Rupee will increase as countries seek to use it to import from India. As demand increases, the value of the Rupee will also grow. In this sense, the strong Rupee would be a positive sign that India's foreign trade is going relatively well.

Having a strong currency means your citizens have a greater deal of purchasing power when travelling internationally. If the pound is much stronger than the dollar, for example, British citizens will be able to buy most goods more cheaply in the USA than at home.

But it's not all rosy- a strong currency has other implications on a country, particularly with regards to foreign trade, that make it not so appealing.

History is a great teacher, so let's take a look at a past example of when a strong currency has led to an economy's downfall: Britain, in the 1950s and 60s. Though the time of Empire was coming to a close, Britain's Pound Sterling currency remained strong. This was primarily due to the 1944 Bretton Woods Agreement, which artificially tied the value of the Pound to $4.03.

The Pound's strength brought a decade or so of general prosperity for most of the British public. A strong currency enabled British businesses to import goods far more cheaply, and these benefits were passed onto citizens primarily in the form of a consumer goods. Appliances we take for granted, like fridges, freezers, and washing machines were introduced into the British household for the first time, as was television- the first major broadcasted event being the Coronation of Queen Elizabeth II in 1953. Car ownership also increased, as parts became easier to import for British factories- by 250% between 1951 and 1961.

Go forward to 1967, however, and under-pressure PM Harold Wilson announced that the value of the Pound was to be lowered to $2.40. This was an incredibly difficult move to make- reducing the power of the nation's currency was a politically damaging move for any Prime Minister, and Wilson's predecessors had all shied away from doing it. And after all this prosperity brought about by a strong currency, why did he make this difficult decision?

Devaluation in 1967 sent a shockwave throughout Britain.
It turned out the prosperity was more short-term than most believed it would be. The strong Pound boosted imports to Britain to such an extent that Britain was importing far more than it could export. This gap between the value of exports and imports is called a balance of payments deficit- and while it is not necessarily harmful for a country to have such a deficit, Britain's had grown too large to sustain.

Imports from other countries had become cheaper for the British, but on the other side of the coin, imports from Britain became more expensive for other countries. This meant British business had lost a lot of foreign trade due to being just too expensive, meaning reduced profits in Britain and thus wages for workers. This effect began to kick in particularly in the 1960s. The lack of British exporting dug the economy deeper into the balance of payments crisis.

Therefore one of Prime Minister Wilson's primary motives in devaluing the Pound was to make the Pound more accessible, and China's motivations this August were pretty similar.

Chinese exports in July 2015 were 8.3% lower than in July 2014, and according to many, China's economic prosperity in the past decades has damaged its ability to provide cheap labour to other countries, as the value of the currency has increased, along with wages and regulation. Countries like Bangladesh and Vietnam have begun to emerge as competitors to China with regards to providing cheap labour- and China's devaluation of its currency is a move to undercut them.
Lone Editor

Saturday 22 August 2015

Why Is Donald Trump So Popular?

In one of the most interesting run-ups to a Republican Presidential Nomination Election in recent history, multi-billionaire property magnate Donald Trump has emerged as an unexpected leader for many in the party. 

Trump's initial announcement that he was running for President was trivialised by most commentators, as a publicity stunt by a man seeking to simply push further his name brand into the public spotlight. His failed 2012 campaign had also done little to convince anyone that Trump had the capacity to sustain a strong campaign to gain Republican nomination. 

However, 'The Donald' has surprised his doubters so far and currently stands head and shoulders above his Republican competitors in the polls. According to Newsweek, he is almost two times more popular among Republicans than his closest competitor, Jeb Bush, with a stunning 32% approval rating.

So, why is Trump doing so well in this election, when he failed miserably in the last? From his first step on the escalator down to his announcement speech, to his challenging the Pope in a recent interview with CNN, here's a look at 4 reasons why 'The Donald' is coming up trumps in 2015.

1) He doesn't give a damn about PC, or general manners whatsoever.
To some, Donald Trump is a self-made business visionary to some, and to others a bombastic example of the evils of capitalism- but what is pretty much certain is that he is a bold, often divisive personality who is rarely afraid to say what is on his mind. 

Some truly hilarious moments have emerged out of Trump's campaign as a result of his apparent lack of limits in what he says and does. Whether it's giving out fellow Republican Lindsey Graham's personal number out during a speech, saying that he likes "people that weren't captured" when John McCain's time as a POW was being applauded by the public, or claiming that a female interviewer was on a period because she was asking him difficult questions, Trump's often wacky remarks have ensured him the public spotlight in recent months. 
But there is a more serious side to Trump's lack of restraint (and views in general). Certain statements of his, notably his claim that immigrants from Mexico are mostly rapists and criminals ("some, I assume, are good people" he brazenly claims), suggest a darker side to Trump that did turn off a large proportion of the population- but at the same time must have had the opposite effect on others.

2) He's rich.
Multi-millionaire 2012 Republican Candidate Mitt Romney became noted for his attempts to hide his wealth in the run up to the election, trying to shake off the 'Corporate Republican' image that turned many voters off. Donald Trump, on the other hand, couldn't care less about showing that he is a 'man of the people'- indeed, he believes his position high up in the economic ladder puts him in a perfect place to be President, and he's not afraid to show off the fact. 
"I'm proud of my net worth. I've done an amazing job," announced Trump in his announcement speech, before revealing his supposed net worth of almost nine billion dollars. 

The man is clearly unafraid to show off his wealth, and this works on many voters. Not only does it boost his image as a successful businessman (despite his numerous bankruptcies in the 1980s), thus reinforcing his claims to become the "greatest jobs president God ever created", but it creates an aura of aspiration, the American Dream, around Trump. Some people see Trump as a man who has succeeded in life, by achieving The Dream and becoming extremely wealthy, and these people take this to be a sign that he will be a similarly successful president.

Not only is his vast wealth helpful in this sense, but it proves a necessary boost in a political system in which money is king, for anyone who wishes to partake in it. For Trump, it seems his own money has come very handy indeed- during the second quarter of 2015, Trump's campaign raised $1.9m. Of this money, Trump had donated $1.8m. Yes, that's right. Just 1/19th of Trump's campaign donations came from people other than himself. More recently, Trump has announced that he would be willing to spend up to $1bn in his campaign to become President.

3) He's a celebrity.
Donald Trump really likes his name.
Donald Trump is not just a person, but he is really a brand; as anyone who has visited his flagship Trump Tower knows, his name and image is a massive part of who he is (of course, as well as his money). Trump T-Shirts, Trump Teddy Bears, Trump Mugs- you can find an abundance of Trump goods in his New York skyscraper. 

The man has also hosted the popular but also 'Celebrity Apprentice' on NBC, and was the owner of the 'Miss Universe' vanity competition. 

Compare this with Trump's competitors. Before entering politics, Jeb Bush had positions in banking and oil companies and Rand Paul was a doctor. Marco Rubio has basically always been in politics. Trump's career is by far the most glamorous, something that by default is likely to win him some voters. People who liked him from The Apprentice, for example, are by far more likely to vote for him rather than his competitors. 

Trump has for a long time worked in the television industry, one that relies almost entirely on approval, popularity. Therefore, he is likely to know what 'sells' in the arguably similar political arena. His divisive comments may mean that the audience he attracts is not always going to be the same, but his audience may see a shift rather than a shrinking.

4) His policies are popular among Conservatives.

In a way (other than just his hair), Donald Trump reminds me a little of Boris Johnson. Behind all the buffoonery and show, there is a functioning Conservative mind that is proposing policies that do actually appeal to those on the right as much as they infuriate the left.

One of the things that really puts Trump on the map in the Republican Party is his stance on immigration, for example. This is clearly something he wants at the forefront of his campaign; as he stated in his announcement speech, he would "build a great, great wall" on the southern border between the USA and Mexico, to supposedly end the illegal immigration issue.

Putting aside the logic of his proposal beside (he claims he will build it "inexpensively", yet he will "have the Mexicans pay for that wall"- so what's the point of making it cheaply?), this solid anti-immigration approach has great appeal on the Conservative side. 

His economic policies are also textbook Republican- push for lower taxes and less regulation on businesses.

And of course, a Republican candidate is incomplete until they make the typical announcement to put their mark on the Middle East- "Nobody will be tougher on ISIS than Donald Trump", according to the man himself.

With such issues in which there is a danger of anti-immigration proponents being branded 'politically incorrect', Mike Adams from Natural News comes to an interesting conclusion- that Trump is so popular because he is "the surrogate mouthpiece for the things most Americans deeply believe (but are too afraid to say)". While I am not so sure whether most Americans agree with him, it seems apparent that there are many in the USA who are in such a position.

But in being so honest and bold in his Conservative statements, Trump is running a dangerous risk of alienating even his supporters- his feud with his previous supporter Bill O Reilly, who now warns Trump will turn the Republican Party into one of 'racist brutalisers', suggests that Trump may be about to fall off his peak.

Read Donald Trump's announcement of his running for the Republican Presidential nomination here:
Lone Editor

Tuesday 11 August 2015

The Labour Leadership Election: Who Are The Candidates, And Who Will Win?

Who are the candidates? What do they stand for? Should I vote for them? Today, we take a quick look at these questions, and more.

NAME: Andy Burnham

THE ONE WHO... is constantly waging war on the 'Westminster Bubble' every time he speaks.

LEFT OR RIGHT?: He's swayed about a bit, but his campaign has generally been slightly left of centre.

- Plans to reduce the deficit, but "not through the Tory approach of exclusively relying on spending cuts".
- Renationalisation of railways (a move supported by as much as 60% of the British population)
- Introduction of votes for 16 and 17 year olds in future general elections.
- Abolition of student loans, replaced with a 'graduate tax'.
- Further government support for housing- notably 'Rent to Own', allowing zero-deposit mortgages to be taken.

WILL HE WIN?: In the most recent YouGov poll, Burnham came second, with 21% of the vote. Born to a working-class family in Liverpool, he claims regularly that he's never been one of the disconnected career plutocrats of Westminster, and for many this has a rather charming effect. Many see Burnham as just plain nice and pleasant- Jon Elledge of The New Statesman describes him as "unfailingly pleasant and courteous".

However, others see him as more of the same for Labour- not a significant enough change from Ed Miliband to win at the next election- but, to be fair, this is the case for some of his opposition too. Some also see his past support of Tony Blair as an indication he will be too centrist for Labour.

NAME: Yvette Cooper

THE ONE WHO... was part of the first ever married couple in Cabinet.

LEFT OR RIGHT?: More towards the centre than Burnham- she has stated herself the need for Labour not to "veer to the left or the right".

- She seeks to address the vast socio-economic gap between the rich and poor, but without returning to "the remedies of the past, of Gordon Brown or Tony Blair".
- Reversing this Tory government's abolition of tax credits for third children.
- Creation of a 'Welfare Reform Commission' that will overhaul Universal Credit, reform housing and ensure easily accessible childcare for working parents.
- Boosting vocational education, to help Britain's tech industry. Cooper has proclaimed her belief in taking advantage of the 'white heat of the technological revolution', a reference to 1960s Labour PM Harold Wilson.
- Reduction of corporation tax- Cooper is of the belief that Labour must "reset our relation with business".

WILL SHE WIN?: Cooper arguably has the most impressive CV of the candidates. A graduate of Oxford, Harvard and the LSE, she has had a lengthy career in politics, beginning in researching roles, going on to help Bill Clinton's presidential campaign in the 90s, and returning to the UK to continue in various roles in government. She is proud of her instrumental part in rolling out Sure Start, believed by many to be one of Labour's most effective policies in recent times. However, she can be equally labelled a career politician, having spent little time out of the political sphere after graduation.

Many also see her as lacking definition- she has given very few indications of what her real policies would be as leader (the section above this took a long, long time for me to collect). Some say Cooper is playing it too much like a politician, too safe, by not making specific indications of her policy.

NAME: Jeremy Corbyn

THE ONE WHO... Part of 'bats**t Labour' according to many a Conservative, the "real deal" to those further on the left, and is simply 'OK' to Donald Trump.

LEFT OR RIGHT?: The furthest on the left out of these candidates by far.

- An end to austerity (the cutting of government expenditure), in order to protect and improve state health, education and transport systems and help those reliant upon welfare. This will be counterbalanced by an increase in the tax on wealthy individuals and corporations.
- One government expenditure that would be cut, however, would be on military. The scrapping of the Trident nuclear system and reduction in international intervention would free money for other plans, such as scrapping of university tuition fees.
- A refocus of 'Quantitative Easing'- a government under Corbyn would continue to print money, but this would go to a pot supporting "new large scale housing, energy, transport and digital projects" rather than investment banks.
- No military intervention in the Middle East- Corbyn is a staunch opponent of the tactic.
- Renationalisation of energy companies and the railways.

WILL HE WIN?: If you asked this to anyone a couple of months ago, you'd get a definitive 'no'. But, in typical British fashion, as the underdog he has surged in popularity, now in first place by as much as 32%. His being far further on the left than his opponents is deeply appealing to those disenchanted by the current right-wing state of British politics, those who see the main cause for Labour's defeat in May as their being simply 'Tory-lite' rather than a true alternative.

Jeremy Corbyn has equally been savaged by the right and even centre, both by individuals and the press. Tony Blair has described fans of the left-wing candidate as 'in need of a heart transplant' and the Daily Mail has frequently described him as the 'bearded loony' of the Labour Party, and some Labour MPs have voiced concern over Corbyn's leadership. MP Barry Sheerman has even called for the vote to be paused, to prevent him winning. This comes from a belief in both the Conservative and some of the Labour camp that Corbyn's election as leader would condemn Labour to a defeat in the 2020 General Election.

But for now, with his 30% lead, Jeremy Corbyn seems set to take hold of the Labour leadership. However, the pollsters were wrong in the General Election, and they could well be the same this time.

NAME: Liz Kendall

THE ONE WHO... some see as Labour's Margaret Thatcher.

LEFT OR RIGHT?: The most right-wing of the Labour leadership candidates. She is a great supporter of Blair's 'New Labour', an ideology largely shaped by the right-wing leadership of Thatcher and John Major in the 1980s and 90s.

- Increased support of business by the Labour Party- Kendall has announced that she wants "to lead a Labour Party that's genuinely as passionate about wealth creation as we are about wealth distribution".
- Continuation of the current government's spending target of 2% of the GDP on defence, and maintaining commitments to NATO.
- Investment of funds into improving early education for children, rather than cutting tuition fees.
- Backing of free schools and academies- something no other Labour candidate has promised.
- Kendall has implied strongly that she would make compulsory worker representation on company boards.

WILL SHE WIN?: It seems rather unlikely. Kendall's political position is certainly further to the right than any of her opponents, and thus is unlikely to appeal to a great deal of the Labour Party, a party dispositioned to the left. Andy Burnham and Yvette Cooper have occasionally sought to present themselves as left wing candidates to compete with Jeremy Corbyn, but Kendall has made no such move.

However, it could be argued that Liz Kendall is the leader that Labour need, judging the current political climate of Britain. Some people believe the public is in favour of the right-wing Conservative policies, and thus in order for Labour to have a chance of winning in 2020 they need someone to compete. In this case, Kendall would be the ideal candidate to take away some of the centre-right votes of the Tories. 
Lone Editor