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When stock markets are at odds with the economists

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For those who believe financial markets are completely divorced from economic reality, the past few weeks have thrown up some conclusive proof for their case.

Just a couple of examples illustrate the point. Deutsche Bank has published a survey of the US jobs market showing that over the past four weeks, some 25 million jobs were lost in America as the pandemic-ravaged economy ground to a halt. That is more than have been created since the end of the global financial crisis in 2009.

Another example: Goldman Sachs has calculated that the world’s developed economies — the US, Europe and Japan — will shrink by as much as 35 percent in the current quarter compared to the first three months of the year, which were not exactly buoyant anyway. That is four times the previous record set for economic contraction during the global financial crisis.

Against the background of these figures — cataclysmic by any normal economic standards — the financial markets have been quixotic. The S&P Index, the Wall Street benchmark, last month suffered its biggest one-day fall in more than three decades, in a period of almost consistent declines.

Then, towards the end of the month, the index roared ahead again, with three consecutive days of big rises after the US Congress launched its financial “bazooka” in the form of a $2 trillion support package. President Donald Trump, who lives and breathes by the stock indices, was able to proclaim another triumph.

The S&P is still well off the exuberant levels of mid-February, which was the apex of the Trump bull run, but at least the downward plummet has been halted. Goldman Sachs, the same bank that came out with those awful economic statistics, recently said that stocks were unlikely to go any further, partly because of the “do what it takes” attitude of the Trump administration and Congress.

Goldman’s other reason for some optimism was that the virus curves were beginning to flatten out in some parts of the world, and more economic policymakers — not least Trump — were beginning to talk about when they might hope to open up their economies. The prospect of a complete economic collapse was “precluded,” Goldman said.

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Others pointed to flaws in both arguments. Having fired the big bazooka, the US authorities have little ammunition left to counter a second financial market threat, perhaps from the ballooning market in corporate debt, or some other aspect of the shadow-banking system.

The truly frightening historical perspective comes on calculating when shares finally recovered to pre-Black Monday levels. It was not until 1955, one economic great depression and one world war later.

______Frank Kane

While there have been some encouraging signs that the pandemic is starting to level out, especially in Asia and some European countries, there are huge parts of the worldIndia, Africa, South America — where there is no or insufficient evidence to make such a call. Large swathes of the global economy could be affected for many months to come.

For financial markets, there is a more immediate danger: Corporate profits for the first half of the year will be catastrophic. Many companies have just gone through the worst quarter of their existence, and profits will be non-existent.

Equity markets still pay great attention to the “price-earnings ratio” which values the shares according to a multiple of the earnings per share. It will be mathematically impossible to determine this when there is no “earnings” value to compute.

Stock markets may comfort themselves by looking to the future, in the hope of a sharp V-shaped recovery towards the end of the year.

But if they look to the past, the perspective is much scarier. In 1929, in the Great Crash — which some experts believe is a more accurate model for our current predicament than the 2008 crisis — shares crashed famously on Black Monday. But they continued falling for another two years, despite lots of little upward blips along the way. The final bottom was not reached until 1932.

The truly frightening historical perspective comes on calculating when shares finally recovered to pre-Black Monday levels. It was not until 1955, one economic great depression and one world war later.

  • Frank Kane is an award-winning business journalist based in Dubai. Twitter: @frankkanedubai
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Analysis

The Impact of Iran’s Inclusion in CPEC: A Strategic Analysis

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In recent years, the China-Pakistan Economic Corridor (CPEC) has emerged as a transformative project, reshaping the economic landscape of the region. With its focus on infrastructure development, energy projects, and economic cooperation, CPEC has garnered significant attention globally. However, the potential inclusion of Iran in this ambitious initiative has sparked new discussions and raised intriguing possibilities for regional connectivity and economic growth. This article delves into the implications of Iran’s participation in CPEC, exploring the strategic implications and potential benefits of this collaboration.

Understanding CPEC: A Brief Overview

The China-Pakistan Economic Corridor (CPEC) is a flagship project of China’s Belt and Road Initiative (BRI), aimed at enhancing connectivity and promoting economic development in the region. Launched in 2015, CPEC encompasses a network of infrastructure projects, including roads, railways, ports, and energy facilities, with a total investment exceeding $60 billion. The corridor connects China’s western region to Pakistan’s Gwadar Port, providing China with a strategic gateway to the Arabian Sea and beyond.

The Significance of Iran’s Inclusion in CPEC

Strengthening Regional Connectivity

Iran’s inclusion in CPEC would significantly enhance regional connectivity, creating a corridor that spans from China to Iran and onwards to the Middle East and Europe. This expanded network would not only facilitate trade and transportation but also promote economic integration and cooperation among the participating countries.

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Energy Cooperation and Resource Sharing

Iran, endowed with vast energy resources, could play a crucial role in meeting the energy demands of the region. By integrating Iran’s energy sector into CPEC, the project could benefit from Iran’s oil and gas reserves, ensuring a stable and diversified energy supply for the corridor and its member countries.

Economic Diversification and Trade Expansion

The inclusion of Iran in CPEC would open up new markets and opportunities for trade and investment. Iran’s strategic location at the crossroads of Asia, Europe, and the Middle East makes it a pivotal player in regional trade, offering access to a diverse range of markets and resources.

Strategic Implications and Geopolitical Considerations

Balancing Regional Dynamics

Iran’s participation in CPEC could potentially reshape the geopolitical landscape of the region, creating a new axis of cooperation and influence. By forging closer ties with Iran, China and Pakistan could counterbalance the influence of other regional powers, fostering a more multipolar and stable environment.

Addressing Security Concerns

The inclusion of Iran in CPEC raises security concerns, given the volatile nature of the region. Ensuring the safety and stability of the corridor would require enhanced cooperation and coordination among the participating countries, as well as robust security measures to safeguard the infrastructure and investments.

Conclusion: Embracing a New Era of Cooperation

In conclusion, the potential inclusion of Iran in the China-Pakistan Economic Corridor (CPEC) represents a significant opportunity to enhance regional connectivity, promote economic growth, and foster greater cooperation among the participating countries. By leveraging Iran’s resources and strategic location, CPEC could evolve into a comprehensive network that spans across Asia, linking diverse economies and cultures. As the project moves forward, it is essential for all stakeholders to work together to address challenges, seize opportunities, and realize the full potential of this transformative initiative.

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As the world witnesses the evolution of CPEC and the potential integration of Iran, the future holds promise for a new era of cooperation and development in the region. By embracing this opportunity and harnessing the collective strengths of all participating nations, CPEC could emerge as a model for sustainable growth and prosperity, shaping the destiny of the region for generations to come.

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Analysis

Biden Boosts Pacific Diplomacy: Strengthening U.S. Engagement in the Indo-Pacific

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Introduction

In an era marked by shifting global power dynamics, economic interdependence, and regional security challenges, the United States under the leadership of President Joe Biden has placed a renewed emphasis on its engagement in the Indo-Pacific region. The Indo-Pacific has emerged as a geopolitical epicentre, where economic vitality, strategic interests, and diplomatic endeavours converge. President Biden’s commitment to boosting Pacific diplomacy underscores a strategic shift aimed at reinforcing America’s presence, fostering regional stability, and building enduring partnerships.

This blog post delves into the multifaceted aspects of President Biden’s Pacific diplomacy strategy, examining its objectives, key initiatives, and implications for the United States and its allies in the Indo-Pacific. As we explore the dynamics of this critical region, we will see how President Biden’s approach seeks to address complex challenges while capitalizing on the vast opportunities presented by the Indo-Pacific.

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Photo by Karolina Grabowska on Pexels.com

Understanding the Indo-Pacific

Before delving into President Biden’s initiatives, it is imperative to comprehend the significance of the Indo-Pacific region. Stretching from the eastern shores of Africa to the western coast of the Americas, the Indo-Pacific encompasses a vast expanse of land and sea, home to over half the world’s population and accounting for a significant share of global economic output. It is a region of immense strategic importance, characterized by diverse cultures, economies, and geopolitical interests.

The Indo-Pacific hosts major global players, including China, India, Japan, and Australia, each with its own vision for the region’s future. China’s rapid economic rise, military modernization, and assertive behaviour in the South China Sea have sparked concerns among its neighbours and the broader international community. India’s burgeoning economy and growing influence further add to the region’s complexity.

The United States has long maintained a security presence in the Indo-Pacific through its alliances and partnerships, notably with Japan, South Korea, and Australia. However, in recent years, concerns arose about the sustainability of this commitment, prompting a reassessment of U.S. priorities in the region.

President Biden’s Pacific Diplomacy: Objectives and Initiatives

President Biden’s Pacific diplomacy strategy is rooted in a clear set of objectives aimed at promoting a free, open, and inclusive Indo-Pacific. These objectives can be summarized as follows:

  1. Strengthening Alliances and Partnerships: The cornerstone of President Biden’s Indo-Pacific strategy is the reinforcement of existing alliances, such as the U.S.-Japan alliance, and the cultivation of new partnerships. The Quad, a strategic forum comprising the United States, Japan, India, and Australia, has gained prominence as a mechanism for enhancing cooperation in the Indo-Pacific.
  2. Countering China’s Assertiveness: While the Biden administration has emphasized competition with China across various domains, it also seeks areas of cooperation, such as climate change and global health. The administration’s approach balances competition with engagement, recognizing that competition does not preclude cooperation.
  3. Economic Engagement: Recognizing the economic significance of the Indo-Pacific, President Biden has underscored the importance of trade and investment in the region. His administration has explored opportunities for economic partnerships and infrastructure development, such as the Build Back Better World (B3W) initiative.
  4. Promoting Democracy and Human Rights: Upholding democratic values and human rights is integral to President Biden’s foreign policy approach. In the Indo-Pacific, this translates into support for democratic institutions, civil society, and the rule of law.
  5. Addressing Climate Change and Environmental Challenges: Climate change poses a significant threat to the Indo-Pacific, with rising sea levels and extreme weather events affecting many countries in the region. President Biden’s commitment to addressing climate change aligns with the region’s urgent need for environmental resilience.
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Key Initiatives and Partnerships

  1. The Quad: The Quadrilateral Security Dialogue, or Quad, has emerged as a critical platform for security and strategic cooperation in the Indo-Pacific. President Biden has reaffirmed the United States’ commitment to the Quad, which includes regular meetings among the leaders of the United States, Japan, India, and Australia. The Quad’s agenda covers a wide range of issues, including maritime security, cybersecurity, infrastructure development, and vaccine distribution.
  2. AUKUS: The Australia, UK, and US (AUKUS) security partnership has garnered significant attention for its focus on enhancing defence capabilities and technology sharing. AUKUS aims to bolster Australia’s naval capabilities, particularly through the acquisition of nuclear-powered submarines. This initiative signals a deeper commitment to regional security in the Indo-Pacific.
  3. ASEAN Engagement: The Association of Southeast Asian Nations (ASEAN) plays a central role in regional diplomacy. President Biden has actively engaged with ASEAN member states to strengthen ties and address common challenges. The United States is also working to advance the ASEAN Outlook on the Indo-Pacific, which emphasizes ASEAN centrality and principles of inclusivity and transparency.
  4. Infrastructure Investment: The Indo-Pacific is in dire need of infrastructure development to support economic growth and connectivity. President Biden’s administration has introduced the Build Back Better World (B3W) initiative, aimed at mobilizing private sector investment in areas such as climate-resilient infrastructure, digital technology, and health security. This initiative complements China’s Belt and Road Initiative (BRI) and offers an alternative approach to infrastructure development.
  5. Climate Change Mitigation: Recognizing the existential threat posed by climate change, President Biden has prioritized climate action as a cornerstone of his foreign policy. The United States has engaged with Indo-Pacific nations to promote clean energy, reduce greenhouse gas emissions, and enhance climate resilience in the region.
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Implications and Challenges

President Biden’s emphasis on boosting Pacific diplomacy carries profound implications for the United States, its allies, and the broader Indo-Pacific region. Some of the key implications and challenges include:

  1. Balancing Competition and Cooperation: Striking the right balance between competition and cooperation with China is a delicate task. While competition in the Indo-Pacific is inevitable, the United States and its allies must identify areas of common interest where cooperation is possible.
  2. Enhancing Regional Stability: The Indo-Pacific faces numerous security challenges, including territorial disputes, North Korea’s nuclear ambitions, and the rise of non-state actors. President Biden’s strategy aims to enhance regional stability through strengthened alliances and partnerships.
  3. Economic Opportunities: The Indo-Pacific offers immense economic opportunities, but it also presents challenges related to market access, trade disputes, and intellectual property protection. President Biden’s administration must navigate these complexities to promote economic growth.
  4. Geopolitical Shifts: The Indo-Pacific is witnessing shifting geopolitical alignments, with countries reassessing their strategic priorities. President Biden’s approach seeks to align the United States with like-minded nations while preserving flexibility in response to evolving dynamics.
  5. Human Rights and Democracy: Upholding democratic values and human rights is a central component of President Biden’s Pacific diplomacy. Balancing this commitment with pragmatic diplomacy may require careful navigation in situations where U.S. interests intersect with autocratic regimes.

Conclusion

President Joe Biden’s commitment to boosting Pacific diplomacy represents a strategic shift aimed at reinforcing America’s presence in the Indo-Pacific and fostering regional stability. His multi-pronged approach, including strengthening alliances and partnerships, countering China’s assertiveness, promoting economic engagement, and addressing global challenges, reflects a nuanced understanding of the region’s complexities.

The Indo-Pacific is a dynamic and consequential theater, where the United States, its allies, and partners must navigate a complex web of geopolitical, economic, and security interests. President Biden’s initiatives, such as the Quad and AUKUS, signal a renewed American commitment to the region’s security and prosperity. Moreover, his emphasis on climate change and infrastructure development underscores the broader global challenges that require collective action.

As the Indo-Pacific continues to evolve, President Biden’s Pacific diplomacy provides a framework for addressing challenges, seizing opportunities, and shaping the region’s future. In doing so, the United States aims to promote a free, open, and inclusive Indo-Pacific that benefits all nations in the region and contributes to global stability and prosperity.

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Democracy

From Gerontocracy to Youthcracy: The Dilemma of Political Parties in Pakistan

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Introduction

The political landscape of Pakistan is undergoing a profound transformation, marked by a shift from gerontocracy to youthcracy. This article provides an in-depth exploration of this transition, its implications for political parties, and the evolving dynamics of power in the country. In a comprehensive examination, we delve into the challenges and opportunities faced by political parties as they adapt to this rapidly changing political landscape.

Understanding Gerontocracy

Gerontocracy, a term that has been frequently used to characterize the Pakistani political system, describes a situation where the elderly wield considerable power and influence in the governance of a nation. In Pakistan, this phenomenon has prevailed for decades, with senior politicians dominating the political stage. However, as the demographics of the country evolve, with a growing population of young citizens, political parties are confronted with a complex dilemma.

The Emergence of Youthcracy

The Power of the Youth Vote

Pakistan boasts a vibrant and youthful population, with a significant percentage under the age of 30. These young individuals are increasingly becoming politically aware and active, wielding the potential to reshape the nation’s political landscape. The emergence of youth power, often referred to as youthcracy, has become a defining feature of contemporary Pakistani politics.

The power of the youth vote cannot be overstated. The sheer number of young voters makes them a formidable force to be reckoned with. Political parties are beginning to recognize that winning the allegiance of this demographic is no longer an option but a necessity.

Challenges Faced by Political Parties

Balancing Experience and Fresh Perspective

One of the foremost challenges confronting political parties in Pakistan is how to navigate the delicate balance between the seasoned politicians who have long held sway and the energetic yet relatively inexperienced youth. The interplay between experience and fresh perspectives has become a pivotal factor for the success of any political party.

While experienced politicians bring a wealth of knowledge and a deep understanding of the intricacies of governance, they may also be associated with entrenched interests and resistance to change. In contrast, the youth represent innovation, fresh ideas, and a desire for reform. Striking the right equilibrium between these two demographics is crucial for political parties seeking to remain relevant and effective.

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Adapting to Modern Communication

The youth are digitally connected, and their political awakening often happens on social media platforms. Facebook, Twitter, Instagram, and TikTok have become powerful tools for mobilization and advocacy. Political parties must adapt to these changing communication dynamics to engage with the younger generation effectively.

Traditional campaign methods, such as door-to-door canvassing and rallies, are no longer sufficient. Digital campaigns, online debates, and viral content creation have become the norm. Political parties must invest in sophisticated digital strategies, engaging with the youth where they are most active and receptive.

Strategies for Political Parties

Navigating the transition from gerontocracy to youthcracy requires strategic foresight and adaptability. Here are key strategies that political parties can employ to thrive in this evolving political landscape:

Encouraging Youth Participation

To embrace youthcracy, political parties must actively encourage young individuals to participate in politics. This goes beyond tokenism and superficial youth wings within parties. It involves offering substantial leadership roles to young politicians, mentorship programs, and providing platforms for the youth to voice their concerns.

Moreover, political parties should prioritize issues that resonate with the youth, such as education, employment opportunities, and environmental sustainability. Addressing these concerns demonstrates a commitment to the aspirations of the younger generation.

Embracing Technological Advancements

Utilizing technology for outreach, campaigns, and information dissemination is no longer optional—it is imperative. Political parties need to harness the power of data analytics, targeted advertising, and social media engagement to connect with the younger audience effectively.

Digital platforms provide an opportunity for direct interaction with voters, allowing parties to gauge sentiment, address concerns in real time, and tailor their messaging to specific demographics. This digital transformation also extends to fundraising efforts, which can now be conducted online with greater efficiency and transparency.

Promoting Transparency and Accountability

The youth are often more critical of corruption and inefficiency in government. Political parties must prioritize transparency and accountability to gain the trust of this demographic. Implementing robust anti-corruption measures, disclosing sources of funding, and holding party members accountable for misconduct are essential steps.

Furthermore, political parties should adopt a culture of inclusivity, where decisions are made collectively, and policies are developed through open dialogue. This approach not only fosters trust but also ensures that the concerns of diverse segments of the population, including the youth, are considered.

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Conclusion

The transformation from gerontocracy to youthcracy is reshaping the landscape of Pakistani politics. This paradigm shift presents both challenges and opportunities for political parties. Those who successfully adapt to these changes will be better positioned to address the evolving needs and aspirations of the Pakistani population.

As we move forward, the key to political success in Pakistan lies in embracing the demographic realities of the country. The youth are not merely the future; they are the present. Their voices, aspirations, and demands must be at the forefront of political agendas.

In conclusion, the era of youthcracy in Pakistan signals a new dawn in the nation’s political history. It is a testament to the vitality and dynamism of the country’s youth. Political parties that understand this transition and respond proactively will not only survive but thrive in the evolving landscape of Pakistani politics.

Frequently Asked Questions (FAQs)

  1. What is gerontocracy in the context of Pakistani politics? Gerontocracy refers to a political system where older individuals hold significant power and influence in the government.
  2. What is youthcracy, and how is it affecting political parties in Pakistan? Youthcracy represents the growing influence of the younger generation in politics, challenging traditional power dynamics within political parties in Pakistan.
  3. Why is the youth vote important in Pakistani politics? The youth vote is crucial because Pakistan has a significant young population, and their political engagement can shape the country’s future.
  4. How can political parties in Pakistan encourage youth participation? Political parties can encourage youth participation by offering leadership roles, mentorship programs, and creating platforms for young voices.
  5. What role does technology play in the transition to youthcracy? Technology is essential for reaching and engaging with the youth. Political parties need to utilize digital strategies for effective communication.
  6. Why is transparency and accountability important in attracting the youth to vote? The youth often demand transparency and accountability in politics, and parties that prioritize these values are more likely to gain their trust.
  7. What are the benefits of a political party embracing both experience and fresh perspectives? Embracing both experience and fresh perspectives allows a party to draw on the wisdom of seasoned politicians while also tapping into the energy and innovation of the youth.
  8. How can political parties effectively use social media to engage with the youth? Political parties can use social media by creating engaging content, participating in online discussions, and addressing the concerns and issues that matter most to young voters.
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