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Global Affairs

Breakfast Briefing: McKinsey Elections Begin, Hammond Under Pressure, and Google in China

 4 min read / 

McKinsey to Elect New Head

The world’s pre-eminent consultancy firm has commenced its unique election procedure.

Editor’s Remarks: Last week, over 500 of McKinsey’s partners descended upon the Grosvenor House Hotel in London to begin the process of electing their new managing partner. Outgoing head, Dominic Barton, has led the firm since his initial appointment in 2009 and was uncontested in both 2012 and 2015. Firm insiders report that McKinsey is caught between pursuing a more entrepreneurial vision that seeks to diversify its business by straying into digital and analytics services, and remaining true to its traditional focus on consulting. Unlike other firms, McKinsey does not allow formal candidates, manifestos or campaigning for the top role. Instead, partners simply vote for whoever they want to install and names are whittled down in several rounds of voting.

Bitcoin Surges After Announcement

The world’s largest exchange operator, CME Group, has said it intends to offer bitcoin futures.

Editor’s Remarks: Bitcoin came within a hair’s breadth of $6300 on the news, following a recent rally that saw it shatter its previous high of $5000. The latest surge means that bitcoin has gained 809% this year, and shows no sign of slowing despite repeated warnings of an asset bubble. The prospect of hedging bitcoin’s enormous price fluctuations through futures contracts offers institutions, who have so far been wary of entering the digital currency space, a considerable opportunity to mitigate risk. For retail investors, the prospect of bitcoin futures is also enticing because it might open up the possibility of crypto-ETFs.

Google Aims to Re-enter China

Seven years after leaving China, Google intends to return to the country with an AI offering.

Editor’s Remarks: Google’s TensorFlow is a piece of software that makes it easier to build AI systems. The US tech behemoth wants to market the software principally to Chinese academics and local rivals Baidu, Tencent and Sina with the aim of making a return to the world’s largest internet market. However, there is no guarantee that Google will succeed in this endeavour, even if demand proves buoyant. Currently, Google’s cloud-computing business is blocked by the country’s Great Firewall and prohibited by laws against foreign internet giants. Yet, over the past month, Google has held three TensorFlow developer events in China in the hope that it will find support at the ground-level, which will permeate upwards.

Puigdemont Flees to Brussels

The Spanish government has taken over the Catalan police force and government ministries.

Editor’s Remarks: The Spanish government faced virtually no opposition from Catalan separatists as it asserted its rule over the region. Spanish prosecutors have also brought charges of misuse of public funds, sedition and rebellion against the province’s former politicians, who were removed from office over the weekend. Carles Puigdemont has travelled to Brussels, though he denies he is seeking asylum and is willing to return to Spain once he receives guarantees for his presumed trial. In response to the peaceful takeover, Spanish stocks and bonds rose handsomely with yields on Spain’s 10-year bonds falling to a seven-week low.

Philip Hammond Under Pressure

The chancellor is being pressured to depart from his fiscal targets amid calls for more NHS funding.

Editor’s Remarks: The Institute for Fiscal Studies has argued in a new report that the Chancellor of the Exchequer is stuck between either abandoning his deficit reduction targets or ignoring calls for greater public spending. Currently, the government intends to continue reducing public spending for the next four years, but weak productivity is leading to expectations of greater public borrowing amid a weakening outlook for the UK economy. Despite the Conservatives’ image of fiscal responsibility, many are wondering whether it is indeed irresponsible to further slash spending at this juncture. So far, Hammond has stated that he will not give in to Cabinet pressure and break his fiscal rules.

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Global Affairs

BP and Iraq Sign Development Deal for Kirkuk Oil Fields

 2 min read / 

BP Kirkuk deal

Iraqi Government and British energy giant BP have signed an agreement for the future development of the Kirkuk oil fields in Northern Iraq.

A statement on the Iraqi Oil Ministry’s website said the “memorandum of understanding” between the government and the London-based oil company would enable further development of the oil fields as well as “to open a new page of work” for the North Oil Company, a subsidiary of the Oil Ministry, on “solid foundations”.

BP Director, Michael Townsend, said the company would conduct the necessary surveys and prepare the required statistics.  He claims the company will increase production by 750,000 barrels of oil a day.

The Kirkuk Oil Field, discovered in 1927, is one of the largest oil fields in the world, producing half of Iraq’s oil exports, a reported million barrels a day. However, it has also been a wellspring for local instability: the fields had been seized in 2014 by the Kurdistan Regional Government, who piped oil across the Turkish border, a few hundred kilometres to the north. The fields were only retaken by government forces in October 2017.

Baghdad is attempting to reassert its authority throughout its provinces and according to Iraq’s Minister for Oil, Jahbar Ali al-Allaibi, Thursday’s announcement will “speed up the rehabilitation process”.

During the Saddam Hussein era, the fields suffered irrecoverable damage due to poor management. Excess production was reinjected back into the ground making Kirkuk’s oil thicker and therefore harder to extract.

On Wednesday al-Allaibi met with Britain’s ambassador, John Wilkes, where according to the ministry’s website, they talked about joint cooperation between the two countries in the oil and gas industry.

Keep reading |  2 min read

America

Trump’s Presidency and Russian Relationship: The Future

 4 min read / 

Trump Russia

Much has been contested about Donald J. Trump’s love affair with Russia. Questions deserve a thorough and honest investigation. As distasteful and risky it may be, the best outcome of the enquiry is accusations continue to swirl, Trump limps through three more years, and in 2020, he is crushed at the ballot box. The world moves on. If removed from office, odds are Trump whips his base into a frenzy. Only the height and duration of civil unrest is in question. A worse case is that Trump emerges emboldened, eager to settle Putin’s longstanding challenge.

Putin Mocks Trump

The competition is real. Putin’s economic and political dominance gnaws Trump. Putin knows this. So, he taunts the President and dares Trump to employ the same ruthless tactics he exploited to consolidate power and possibly become the world’s richest man. Since Trump only sees green, he took the bait. The race is on to be the world’s first trillionaire.

Russia’s population is 142 million. Its $3.86trn translates into a measly $26,900 per capita GDP. In contrast, the 326 million people of the United States generate $18.62trn in GDP, nearly five times Russia’s total. The US per capita GDP of $57,600 more than doubles Russia’s. Despite Russia’s meek economy and reports  that Putin has embezzled up to $200bn in assets, Putin remains incredibly popular in Russia.

The apathy regarding this unparalleled heist makes Trump and Putin salivate over what they could jointly pilfer from the world economy. To advance their contest, the pair will identify a common threat. US-Russia relations will warm. Under the guise of “Peace through strength,” Russian sanctions will be lifted, and the Magnitsky Act repealed.

The administrative state in retreat, animal spirits will run wild. Trump’s name will be emblazoned across the globe. Countries desperate for jobs will be compelled to forge deals sponsored by Putin and Trump. Ethics be damned, the race to the bottom of the $120trn global economy will prompt a wave of corruption never seen before. Every facet of human decency will be compromised: environmental regulations, free and fair-trade by-laws, intellectual property, and human rights protections. The collusion is real.

In time, complicity will turn to double-crossing. It’s the Trump-Putin way. Makeshift “me-first” trade deals will collapse. Boycotts, divestitures and sanctions will be commonplace. Cooperation will evaporate. New political boundaries will be drawn with little world condemnation.

It doesn’t have to happen this way. Patience is a virtue. The checks and balances of the three branches of government are powerful mechanisms to thwart overt corruption.

Yet, for the impatient who seek Trump’s impeachment or removal via the 25th Amendment, be careful what you wish for. Only Trump can tame his army. To assume Trump will plead mercy at the feet of the administrative state contradicts Trump’s lifelong persona. He will relentlessly counterpunch and encourage his followers to do likewise. The short and long-term political and social risks are astronomical.

If Trump stems the tide, consolidates power and aggressively partakes in Putin’s race for two terms, the risks outstrip his forced removal. The consequences will be multi-generational.

Rope-a-Dope is the Key to Containing Trump

The only path that possibly prevents extensive collateral damage is to check Trump into policy oblivion. Legislators must play rope-a-dope for as long as it takes, even three years if necessary. If Democrats take back both houses in 2018, the tactic will not set up Trump and his base for a final knock-out punch in 2020. For that to occur, numerous members of the GOP must join the effort. They too must throw periodic jabs at Trump then absorb a barrage Trump’s counterpunches.

With foes in every corner, even Trump – the self-proclaimed greatest counterpuncher in history—and his base will wear themselves out well before 2020. Then the decisive knockout punch can be delivered at the ballot box—without collateral damage.

Trump is severely wounded. If he gracefully and peacefully surrenders the Presidency, great. But don’t expect it. Rope-a-dope deployed by both parties is the countries best hope for a peaceful end to the Trump Presidency. Any other scenario risks the once unthinkable; an ‘American Spring’.

Keep reading |  4 min read

Europe

May Meets Macron

May Macron

The UK prime minister agreed to pay £44.5m towards tighter border security at Calais.

Editor’s Remarks: The French president arrived in the UK for the Anglo-French summit amid widespread complaints from the Tory party about just why Britain is paying another £44.5m for tighter security in France. One Tory MP pointed out that this addition brings the total figure the UK has paid to France in recent years up to £170m. France, meanwhile, says that the amount is necessary because the migrants in Calais are trying to get to the UK, who must, therefore, contribute towards their costs. The talks were also consumed by the imminent task of reaching consensus over the UK’s trade deal with the UK after Brexit goes through.

Read more on Europe:

Keep reading |  1 min read

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