# Trump and May Set to meet

Today’s “off the wall” (pun intended) trade idea? – buy avocado futures! (More on Mexico below)

Later today President Trump and U.K. Prime Minister Theresa May will meet in Washington.

There will be a press conference following the meeting at which Trump is sure to praise and encourage the U.K.’s efforts over Brexit. He is also likely to take the opportunity to bash the EU much to the chagrin of Merkel, Junker et al.

Yesterday saw the release of Q4 GDP data in the U.K which showed that the inflationary effect of the weaker pound and a perceived slowdown in consumer spending is yet to have any effect on growth.

Sterling continues its recovery. Its performance since the Brexit vote could be characterized as “taking the lift down and is taking the stairs back up!”

The pound has recovered 5% of the “flash crash” Brexit fall against the dollar and continues to be steady against the Euro.

Next week sees “Super Thursday in the U.K. when the Bank of England will issue its Quarterly Inflation Report and the MPC will make its decision on interest rates. Bank of England Governor Mark Carney has already stated that the Bank are watchful and will act pre-emptively should inflation start to increase “outside the normal cycle”.

Mar. Carney has already announced his intention to leave his position in June 2019. Whilst he hasn’t, as yet, taken on the almost mythical status of a Greenspan or Bernanke he was certainly the right man in the right place to steer than Bank of England into calmer waters following the debt crisis.

It is to be hoped that his successor is already being groomed with the departure coming at a critical juncture in Brexit. The U.K. will need to be careful not to become “Manchester United after the departure of Sir Alex Ferguson!”

Later today (1.30GMT) sees the release of Q4 GDP data in the U.S.

This is expected to see a healthy increase from 1.4% in Q3 to 2.1%. Economic activity continues to pick up in the U.S. Jobless figures are at the level which equate to “full employment” below 5%.  The dollar index has fallen (slightly) every week since the turn of the year and we could see the uptrend recommence should this data surprise at all to the upside.

President Trump has done pretty much all he can other than to “invoke the Spirit of the Alamo” upset Mexico over the past week or so. It seems the wall will be built but the question remains “who will pay for it?

80% of Mexico’s exports are to the United States. America has an eighty billion dollar trade deficit with Mexico. To a certain extent, they need each other but the onus is on Mexico as President Trump is well aware!

A 20% tax on Mexican imports is a double edged sword. It will pass the burden onto the U.S. consumer but could also drive importers of Mexican goods to look elsewhere to source product.

# Why Are Economists Wrong?

Andy Haldane has recently come out to apologise about the forecasts the Bank of England and experts had made in the wake of the EU Referendum. After having missed the occurrence of the 2008 financial crisis and totally misjudged the Brexit vote, is the Bank in disrepute?

Claims made by leading economic thinkers include statements of ‘fact’ (when it comes to experts providing opinion, the average Joe Public will take this as fact) such as:

“Britain’s shock vote to leave the EU has unleashed a wave of economic and political uncertainty that likely will drive the UK into recession,” Samuel Tombs, Pantheon Macroeconomics.

David Owen, the chief European economist at Jefferies International, said a technical recession – two consecutive quarters of contraction – may now be a given, followed by a period of very slow growth. He also said the UK’s long-term economic potential, known as trend growth, would be lower, “which has to impact the valuation of assets, particularly equities”.

(Guardian, 24th June 2016)

George Osbourne tweeted:

…as a result of Mark Carney’s presser which can be seen here, where they also expected a 20pc fall in the pound, which, by the way, was totally not unexpected – you can read about this in an article I wrote a month or two ago. In actuality, post referendum, we are experiencing very good economic conditions. Business confidence is up in Q4 2016 vs Q3 2016, inflation is at the highest level in 2 years (yet Andy Haldane is now arguing that inflation is going to hurt British consumers, after being a dove for a long time – talk about flip flopping), one of the biggest industries, construction, is seeing a boom, even in the face of higher material costs for builders, and finally, UK Q4 growth was better than expected.

This isn’t meant to be a total critique specifically of the post referendum expectations from the Bank and many expert economists, but a critique of forecasting of many events by economists, as well as their decision making along the line.

Consistently through history, economists have misjudged or mis-forecasted events, from the Great Depression, to Reagan’s ‘Trickle-down economics’, which many still feel holds weight today, to the predicting the financial crisis of 2008.

In 1999, The Economist wrote to the UK’s leading academic practitioners of the dismal science to find out whether it would be in our national economic interest to join the euro by 2004. Of the 165 who replied, 65 per cent said that it would. Even more depressingly, 73 per cent of those who actually specialised in the economics of the EU and of monetary union thought we should join – the experts among the experts were the most wrong.

(The Telegraph, August 2016)

I believe that it is because although economists use varying models, these models are consistently going to be outdated where human behaviours change according to environmental, technological, financial and resource bases advances and evolution. Models used 70/80 years ago are still being used today. A model that worked in a post war world doesn’t necessarily work today. It could lead you to ask why have interest rates consistently been on a decline for 30 years? Why are real wages decreasing long term? Evidently something is wrong with our economic system and I believe that a key reason for this is the lack of credible forecasting from our central banks and government economists, as well as other variables such as increasing inequality, which I think can also be attributed to certain post war mechanisms (hint, baby boomer created mechanisms).

In trading, you can argue that an analyst can have a totally different view of the market to a trader. The issue is that one is well, analysing, and one is actually putting their balls on the line and aiding price discovery – and everything is based on price discovery or supply and demand equilibrium. What is the punishment for Andy Haldane saying that there is the ‘potential’ for a post referendum recession apart from having to make an apology? Not much apart from a red face and an article critiquing him by an MT4 FX trader. A trader would lose or gain. There is something on the line but this leads me onto something that I feel economists totally forget about markets.

Pricing in is the notion that the market discounts everything. The price you view now is the price of all information known in the market. For example, one could look at the dollar rally we experienced from late summer to the December rate hike and consider the high of 118.5 as that being the market including all information based on the belief that a hike would have occurred, since we are now trading 200-250 ticks off of that price. The dollar tends to fall after US rate hikes anyway for about 6 months after. Slight tangent there, but the point is that economists tend to miss this a lot. Traders do not. A 15% fall in GBP was predicted by the IMF a year before Brexit. Traders knew this – they’d been shorting cable from $2.00 highs. They were just waiting for a catalyst to be able to capitalise on that fall – and in my opinion, it would have occurred anyway over time. It’s the same with the Trump vote. There were heavy predictions of a stock market crash… we are hitting all time highs on Dow and SP500, and we can see the same phenomenon among economists working. In both cases, we saw economists over-estimate the effect of negative events and totally underestimate the effects of anything positive that could be taken from these two political decisions. To be honest, I was guilty of this on Trump. I thought he would win, but I did not expect there to be such strong risk on behaviour in bonds and equities. Conversely, we saw the opposite occur with the 2008 financial crisis. There were probably mutterings of ‘it’s housing, how can that go wrong’? Well in this case, the negatives were discounted totally. Part of this was due to ratings agencies providing smoke and mirrors to the actual situation, and part of this was due to the belief that if anything did go wrong, it would be so staggeringly bad that it just… couldn’t happen. We also have the issue of data being provided sometimes 3 months too late (inflation forecasts for example). Economies are sensitive ecosystems. Supply and demand shocks can occur and change things very quickly during those periods. However, this is where I feel a more market analyst based approach has to be taken by economists rather than simply always adhering to macroeconomic models – humans aren’t rational beings all the time in relation to economics shocks, and the data lags don’t always reflect this. For example, I found it strange that the BoE cut rates by 25 BP back in August. You could say it was because they were trying to be accomodative, but then you have Andy Haldane coming out with statements that there are inflation risks, when we all know that monetary policy takes 12 months to take effect (however I think that just shows the Bank’s lack of forecasting ability and we go back in circles again). One thing that I think that certain economists are really understating is the effect that China blowing up will have. Balls on the line, January 2018 that credit bubble will go boom (I can edit this if it happens in Feb). # The 4 Best FREE Online Economics Courses Here are some of the best economics courses that I have found that are free to view. MIT have developed a huge library of free courses from economics to history subjects. This is the best in my opinion since it provides the absolute full undergraduate course, including econometrics and other economics related maths subjects. Well worth it if you are a Uni student studying economics. Alison provides more basic economics courses. Very good for beginners and not so intense as the MIT course, this will give a beginner-intermediate understanding once completed. All the others are great, but you don’t necessarily need to know all the theory which isn’t pertinent to the understanding of everyday economics. The capital markets and finance section pretty much solves all of those questions that people have (what is an interest rate, for example). Also a very interesting section on buying a home vs renting (I am of the same opinion as the host :)). Email me at dbelle@davidbellefx.com or catch me on Twitter if you have any questions! # Why can a test for breast cancer with a supposed very high positive accuracy rate yield in reality, a tenth of the accuracy? This article is from this website: https://betterexplained.com/articles/an-intuitive-and-short-explanation-of-bayes-theorem/ Please bear in mind that this is simply to examine probability outcomes and the biases we have when faced with a problem when deducing probabilistic outcomes. There are many medical variables to take into account with medical tests of any kind and this article doesn’t include outcome variance in age, environmental contributing factors, hereditary factors etc. Bayes’ theorem was the subject of a detailed article. The essay is good, but over 15,000 words long — here’s the condensed version for Bayesian newcomers like myself: • Tests are not the event. We have a cancer test, separate from the event of actually having cancer. We have a test for spam, separate from the event of actually having a spam message. • Tests are flawed. Tests detect things that don’t exist (false positive), and miss things that do exist (false negative). • Tests give us test probabilities, not the real probabilities. People often consider the test results directly, without considering the errors in the tests. • False positives skew results. Suppose you are searching for something really rare (1 in a million). Even with a good test, it’s likely that a positive result is really a false positive on somebody in the 999,999. • People prefer natural numbers. Saying “100 in 10,000″ rather than “1%” helps people work through the numbers with fewer errors, especially with multiple percentages (“Of those 100, 80 will test positive” rather than “80% of the 1% will test positive”). • Even science is a test. At a philosophical level, scientific experiments can be considered “potentially flawed tests” and need to be treated accordingly. There is a test for a chemical, or a phenomenon, and there is the event of the phenomenon itself. Our tests and measuring equipment have some inherent rate of error. Bayes’ theorem converts the results from your test into the real probability of the event. For example, you can: • Correct for measurement errors. If you know the real probabilities and the chance of a false positive and false negative, you can correct for measurement errors. • Relate the actual probability to the measured test probability. Bayes’ theorem lets you relate Pr(A|X), the chance that an event A happened given the indicator X, and Pr(X|A), the chance the indicator X happened given that event A occurred. Given mammogram test results and known error rates, you can predict the actual chance of having cancer. ## Anatomy of a Test The article describes a cancer testing scenario: • 1% of women have breast cancer (and therefore 99% do not). • 80% of mammograms detect breast cancer when it is there (and therefore 20% miss it). • 9.6% of mammograms detect breast cancer when it’s not there (and therefore 90.4% correctly return a negative result). Put in a table, the probabilities look like this: How do we read it? • 1% of people have cancer • If you already have cancer, you are in the first column. There’s an 80% chance you will test positive. There’s a 20% chance you will test negative. • If you don’t have cancer, you are in the second column. There’s a 9.6% chance you will test positive, and a 90.4% chance you will test negative. ## How Accurate Is The Test? Now suppose you get a positive test result. What are the chances you have cancer? 80%? 99%? 1%? Here’s how I think about it: • Ok, we got a positive result. It means we’re somewhere in the top row of our table. Let’s not assume anything — it could be a true positive or a false positive. • The chances of a true positive = chance you have cancer * chance test caught it = 1% * 80% = .008 • The chances of a false positive = chance you don’t have cancer * chance test caught it anyway = 99% * 9.6% = 0.09504 The table looks like this: And what was the question again? Oh yes: what’s the chance we really have cancer if we get a positive result. The chance of an event is the number of ways it could happen given all possible outcomes: Probability = desired event / all possibilities The chance of getting a real, positive result is .008. The chance of getting any type of positive result is the chance of a true positive plus the chance of a false positive (.008 + 0.09504 = .10304). So, our chance of cancer is .008/.10304 = 0.0776, or about 7.8%. Interesting — a positive mammogram only means you have a 7.8% chance of cancer, rather than 80% (the supposed accuracy of the test). It might seem strange at first but it makes sense: the test gives a false positive 9.6% of the time, so there will be a ton of false positives in any given population. There will be so many false positives, in fact, that most of the positive test results will be wrong. Let’s test our intuition by drawing a conclusion from simply eyeballing the table. If you take 100 people, only 1 person will have cancer (1%), and they’re nearly guaranteed to test positive (80% chance). Of the 99 remaining people, about 10% will test positive, so we’ll get roughly 10 false positives. Considering all the positive tests, just 1 in 11 is correct, so there’s a 1/11 chance of having cancer given a positive test. The real number is 7.8% (closer to 1/13, computed above), but we found a reasonable estimate without a calculator. ## Bayes’ Theorem We can turn the process above into an equation, which is Bayes’ Theorem. It lets you take the test results and correct for the “skew” introduced by false positives. You get the real chance of having the event. Here’s the equation: $\displaystyle{\Pr(\mathrm{A}|\mathrm{X}) = \frac{\Pr(\mathrm{X}|\mathrm{A})\Pr(\mathrm{A})}{\Pr(\mathrm{X|A})\Pr(\mathrm{A})+ \Pr(\mathrm{X | not \ A})\Pr(\mathrm{not \ A})}}$ And here’s the decoder key to read it: • Pr(A|X) = Chance of having cancer (A) given a positive test (X). This is what we want to know: How likely is it to have cancer with a positive result? In our case it was 7.8%. • Pr(X|A) = Chance of a positive test (X) given that you had cancer (A). This is the chance of a true positive, 80% in our case. • Pr(A) = Chance of having cancer (1%). • Pr(not A) = Chance of not having cancer (99%). • Pr(X|not A) = Chance of a positive test (X) given that you didn’t have cancer (~A). This is a false positive, 9.6% in our case. It all comes down to the chance of a true positive result divided by the chance of any positive result. We can simplify the equation to: $\displaystyle{\Pr(\mathrm{A}|\mathrm{X}) = \frac{\Pr(\mathrm{X}|\mathrm{A})\Pr(\mathrm{A})}{\Pr(\mathrm{X})}}$ Pr(X) is a normalizing constant and helps scale our equation. Without it, we might think that a positive test result gives us an 80% chance of having cancer. Pr(X) tells us the chance of getting any positive result, whether it’s a real positive in the cancer population (1%) or a false positive in the non-cancer population (99%). It’s a bit like a weighted average, and helps us compare against the overall chance of a positive result. In our case, Pr(X) gets really large because of the potential for false positives. Thank you, normalizing constant, for setting us straight! This is the part many of us may neglect, which makes the result of 7.8% counter-intuitive. # Why do I dislike the Eurozone so much? You have probably seen me banging on about the Eurozone with words such as ‘toxicity’, ‘failed experiment’, and ‘f*cking stupid idea’. I previously wrote about why I voted out (because the EZ is failed and we need to be as far away from its alcoholic, abusive father as possible) but I want to go a bit further and break down why I feel the Eurozone is failed. A lot of excerpts will be taken from Rosa’s book, Euro Error, written in April 1999 (he almost predicts what would happen over the next decade). The root cause of the toxicity is the currency union. Using the same currency for 19 different varied economies cannot work. It would be akin to treating someone with a bruised leg and someone with a gunshot wound with the same dose of painkiller. It can’t work because monetary policy is adopted as a tool to accommodate and constrict to complement fiscal policy. In this way, you have to start asking why it was implemented, and from what I feel, it is to have Europe as a statist entity. The State’s expenditure is, in a way, the national economy’s overhead cost. We are reaching the point where these overheads prove to be excessive and drag down businesses’ potential to create wealth. Which is to say, in the final analysis, that the responsibility for Europe’s malaise falls on the policy that was chosen and the people who were responsible for implementing it. Contrary to the litany of governments that hide from any criticism behind the “tyranny of the financial markets” and the “constraints of globalization,” supposed to deprive them of any room for maneuver, it should be clearly recognized that the financial policy of the State, the “macroeconomic” policy, is not dictated by the international environment. It results, in fact, from a choice that is basically political and not economic: that of the construction of a European State, intended to superimpose itself on the national states. Dr Jean-Jacques Rose, Euro Error. This currency union forces governments to adopt very restricted fiscal policy which in turn forces them to adopt low productivity, low wages, low growth, high unemployment in certain states, while governments have to force more and more spending. As a key current theme in the wake of Brexit, Trump, Italy and Austria, I feel the next excerpt from Rosa is key: The rise of xenophobia in France and Germany, for example, is a particularly worrisome consequence of the loss of jobs and the declining growth. It now constitutes a political risk that cannot be overlooked. This political backsliding, traditional in difficult times, is explicitly tied to growing unemployment, as the foreigner is accused of stealing jobs from the nationals. Let us not forget that a similar phenomenon developed in Great Britain at the time of economic stagnation under the impetus of Enoch Powell, and in the United States in the years of uncertainty, when Governor Wallace and other politicians of the extreme right mobilized a considerable fraction of the votes. All this undercurrent was rendered inconsequential by the return of prosperity. This shows that moralizing speeches on their own have little chance of reversing the trend toward political extremism if the economy continues to drag, thereby destroying jobs. I tweeted this last night: Yes, people are using racism as anti-immigration rhetoric to support their so called ‘arguments’. But look at the reasons why people do this. I see a lot of words explaining how these people are hugely uneducated, which is why they voted out – then how do you expect them, if they are so uneducated, to be able to explain European stagnation? So they go to the thing that seems alien, and which must be the cause. Don’t get me wrong, I have absolutely no sympathy for these people when they are spewing hateful bullshit. But it’s absolutely brain dead not to recognise the reasons why, when the rise of populism has occurred in various different countries. I also wrote about the rise of Trump, and the same findings of rising unemployment amongst the working and middle classes were found. Note that unemployment rates in Greece, Italy and Spain are 23.4%, 11.6% and 18.1% respectively. Note further what Rosa says re mass unemployment: If the situation of the unemployed had remained that of the interwar years, today’s unemployment would be politically insupportable. At the time, the one who lost his job was often the only financial support of his family. The standard of living was low. Compensation was limited and offered neither systematic protection in old age nor health insurance. Under such conditions, unemployment that strikes more than 10 percent of the working population must cause an intense social mobilization and instigate a speedy revision of economic policies. One hears, particularly on the left, that well-compensated unemployment is better, after all, than poorly paid work. Better to be an unemployed person in Europe than a hamburger-flipper in the United States. This thesis is caricatured in the recently popularized idea suggesting that our time might see the advent of the “end of work.” Companies and markets would like that. This proposition suggests that there is no way to avoid it. The search for high productivity which international competition imposes on us will reduce the demand for low skilled labor. We should look to a new era of leisure. In essence, the availability of welfare payments to the unemployed (which combined with a fixed monetary policy increases fiscal spending) has put governments into a sense of security whereby a higher level of unemployment is socially sustainable, when in fact, it isn’t in the eyes of those it is hitting. E.L. Jones said that the reason why Europe has come so far in the last 60 years is that there is competition between states. Yet the introduction of the Euro has taken this competition away whereby again, fiscal spending cannot be complemented by changing monetary policy dependent on specific conditions. Having said all of this, I am not going to say that countries have been entirely fiscally responsible alongside the rigid monetary policy. Greece, for example, has a ‘rules are meant to be broken‘ mentality, almost. You notice that with many houses in the country, some are part finished. This is so they aren’t classed as a legal dwelling, and so do not have to pay as much tax as a finished dwelling. EUR 285bn remained unpaid in taxes in 2012 in Italy (18% of GDP). This fiscal irresponsibility had a huge part to play in why Greece required a bailout, with massive structural deficits and accounting measures which had hidden the levels of debt that they had (the Maastricht Treaty meant they could only have 3% of GDP as a budget deficit when Greece had upward of 10%). Troika then had to bail them out in order to allow for liquidity and spending so that they wouldn’t totally collapse, which has then caused further fiscal conservatism. But Greece could have been able to ease the impact of the financial crisis and a reduction in demand alongside the changing economic cycle – but this couldn’t happen because the ECB sets the rate of interest on the Euro. In essence automatic stabilisers require both flexible monetary AND fiscal policy to be able to work with changing economic cycles. Rosa also says something on macroeconomic responsibility: For the end of growth and the advent of permanent unemployment in Europe are, in fact, explained by this disinflationary policy implemented at the beginning of the Eighties and then reactivated, after a brief interlude of recovery at the end of the decade, by the Bundesbank’s restrictive policy. Conservative monetary policies have a secondary effect of driving up the currency exchange rate and penalizing exporters as well as domestic producers, who are then faced with increased competition from imports whose prices have gone down. That generates fear, an unfounded fear of “globalization.” Actually, competition from the poor countries is irresistible not because of their low wages. More to the point is that our products are too expensive, and our wages also, insofar as their domestic price does not change, or in any case not instantaneously, with the increase in the exchange rate. It is our currencies’ rates of exchange that penalize export, bolster imports particularly from emerging countries, and make our wages prohibitive compared to those of foreign countries. The fear of globalisation does sound quite familiar… This was very brief and there are more topics involved, but I just wanted to provide an explanation of why a currency union doesn’t work. # The economic costs of mental illness… The evidence gathered is compelling. Over the next 20 years, NCDs (non communicable diseases) will cost more than US$ 30 trillion, representing 48% of global GDP in 2010, and pushing millions of people below the poverty line. Mental health conditions alone will account for the loss of an additional US$16.1 trillion over this time span, with dramatic impact on productivity and quality of life. The above statistic found by the World Economic Forum is frightening. Mental illness is essentially being demonstrated as being one of the biggest global economic risks in our generation.$16tn is a huge figure. If we factor in other diseases, such as cardiovascular disease, diabetes, cancers, respiratory diseases etc, we reach a net potential GDP loss of $30tn. It has been found that cardiovascular diseases and mental illness will have the greatest economic burden, and there is no surprise since stress, anxiety, depression and cardiovascular problems are very closely linked. The WHO have said: These NCD-driven concerns are markedly higher than those reported for the communicable diseases of HIV/AIDS, malaria and tuberculosis. However, the ‘fix’ for non mental issues are in fact an economically ‘cheap’. A recent World Health Organization report underlines that population-based measures for reducing tobacco and harmful alcohol use, as well as unhealthy diet and physical inactivity, are estimated to cost US$ 2 billion per year for all low- and middle-income countries, which in fact translates to less than US$0.40 per person. Mental illness treatment, on the other hand, face much higher costs of scaling up to improve the situation drastically. The new study calculated treatment costs and health outcomes in 36 low-, middle- and high-income countries for the 15 years from 2016-2030. The estimated costs of scaling up treatment, primarily psychosocial counselling and antidepressant medication, amounted to US$ 147 billion. Yet the returns far outweigh the costs. A 5% improvement in labour force participation and productivity is valued at US$399 billion, and improved health adds another US$ 310 billion in returns.

However, current investment in mental health services is far lower than what is needed. According to WHO’s “Mental Health Atlas 2014” survey, governments spend on average 3% of their health budgets on mental health, ranging from less than 1% in low-income countries to 5% in high-income countries.

The scaling up figure adds up to roughly $3.7bn extra having to be spent (merely an average of the sample and not country specific). The Lancet found the following: The net present value of investment needed over the period 2016–30 to substantially scale up effective treatment coverage for depression and anxiety disorders is estimated to be US$147 billion. The expected returns to this investment are also substantial. In terms of health impact, scaled-up treatment leads to 43 million extra years of healthy life over the scale-up period. Placing an economic value on these healthy life-years produces a net present value of $310 billion. As well as these intrinsic benefits associated with improved health, scaled-up treatment of common mental disorders also leads to large economic productivity gains (a net present value of$230 billion for scaled-up depression treatment and $169 billion for anxiety disorders). Across country income groups, resulting benefit to cost ratios amount to 2·3–3·0 to 1 when economic benefits only are considered, and 3·3–5·7 to 1 when the value of health returns is also included. Note that the above figures are per year. These figures are also only for 36 of 195 countries. What are the actual economic effects of mental illness on the economy? The first and most important is that people take themselves out of work. This firstly decreases productivity whereby you have output decreases, whether short term absenteeism or longer term removal from the workforce, but also increases the dependency on the welfare system, whereby the government spends more on healthcare, receives less in income tax (assuming the person has taken themselves fully out of work), spends more on unemployment welfare and receives less on VAT where those out of work have less disposable income to spend on goods and services. In a previous article, about why Trump won, I wrote about the increase in pain killer medication consumption between 2008 and now: 43.5% of men not in labour participation had taken pain killer medication the day before surveyed. This is over double those of employed men. The stat among women is not as great, but employed women are on long term pain killer medication at a greater proportion when employed, lesser so when not in the labour force. Staggeringly, 2/3 were complaining of emotional pain, depression or tiredness. 6% of prime age working men, therefore, believe that they are too ill to be able to work. Since 1968, that figure has quadrupled, where the rate was 1.8%: The trend for women is different. We have seen a social change where women have dropped out of housework and entered the labour force which has masked the rise in women reporting being ill or disabled and taking themselves out of the labour force: I would argue that there is a strong causation between being long term unemployed, depression and the consumption of prescription pain medication. However please don’t take this as fact, as it has not been tested. For the Lancet Commission on Investing in health, the value of a 1 year increase in life expectancy in low-income and middle-income countries was estimated to be 2·3 times per person national income, and 1·6 times per person national income worldwide Previously I had compared cost of treatment to other NCDs such as treatment of obesity and smoking & drinking. However, individual treatments for mental illnesses are still quite low when compared to country health budgets: After standardising for population size, the cost is actually quite low; for depression treatment, the average annual cost during 15 years of scaled-up investment is$0·08 per person in low-income countries, $0·34 in lower middle-income countries,$1·12 in upper middle-income countries and \$3·89 in high-income countries (table 2). Per person costs for anxiety disorders are nearly half that of depression.

The cost:benefit of treating mental illness, however, is far less that communicable disease:

For example, a return on investment analysis for malaria, also for 2016–30, but using the full value of a statistical life-year, estimated benefit to cost ratios in the range of 28:1 to 40:1.37 An investment case done for maternal, reproductive, neonatal, and child health obtained a benefit to cost ratio of less than 10:1 for 2013–35,36 which is closer to the results obtained in this study. Inclusion of other benefi ts arising from scaled-up treatment of common mental disorders that could not be captured though the present modelling exercise, notably reduced welfare support payments, and improved outcomes for other affected people (eg, partners and children of women with perinatal depression) would generate higher ratios of benefi t to cost

Source: World Health Organization on behalf of the Roll Back Malaria Partnership Secretariat. Action and Investment to defeat Malaria 2016–2030: For a Malaria-Free World. 2015. World Health Organization, Geneva

This could be one reason a to why more isn’t spent on mental illness treatment. Governments are unable to see black and white statistics based on cost:benefit analysis. With malaria, you can treat with vaccines; to decrease infant mortality, you improve the post natal care, ensure the child is vaccinated and improve the conditions of which the mother gives birth in. But with mental health it is no where near as binary. You cannot simply take a pill and be cured. There are various different ways in which people can be treated, and some cost more than others. A government policy maker would look to optimise as best possible, and at the current stage, there are a lot of external unseen variables that are hard to factor in to health care provision (as horrible as that sounds).

However, I believe that government spending on mental illnesses will increase when the benefits of treating a mental health condition is proven to provide benefit to other non communicable diseases such as cardiovascular disease.

From the data shown, it is clear that we are faced with a burden of non communicable disease. One criticism that I would have of what I read is that I think that mental illness can have a greater causation toward other NCDs in which the cost:benefit ration should be greater. I know it was mentioned in once of the sources but I feel the link could go further, especially as a stream to push policy makers to spend more on mental health.

# 6 Best Economics & Trading Podcasts

There are some really great finance & trading podcasts out there. Whether experienced or know nothing about economics/trading, I’m sure you can find some value in the following.

In no particular order…

Great podcast where the host, Aaron Fifield, interviews a different trader each week. Really good for insight and opinion on how professional traders do business.

One of my favourites from Think Or Swim founder Tom Sosnoff

Two Blokes Trading is run by Tom and Owen, two guys that I personally know who in June began a journey to learn to trade, with the end goal of becoming profitable. They record interviews and their progress each week. Very funny and good podcast to listen to as everyone can relate to their experiences.

If you ever studied Economics at any level, one of the more interesting books was Freakonomics. One of my favourite topics by these guys was ‘Why do drug dealers stil live with their moms?’ which explores the economics behind drug dealing in south side Chicago during the 90s. Now, Levitt & Dubner write articles on various topics (one I included in my recent Articles of the Week section on the truth behind the gender pay gap…

Exchanges at Goldman Sachs is a podcast in which people from across the firm share their insights on developments shaping markets, industries and the global economy. As long as you trade against their ‘Top Trades of 20xx’, this podcast is well worth listening to.

Tastytrade is run by Tom Sosnoff and is a live online TV channel by real traders (unlike CNBC and Bloomberg). They take trades live on the channel. However, they also offer podcasts via Apple and RSS feeds.

Planet Money by NPR is the most comprehensive on the list. Really gives great up to date insight on the global economy, and has highly interesting topics that don’t become TOO technical.

# Student loans – a major crisis brewing…

This is an interview I did on the issues with the US student loans market with Zak Mir on TipTV (thoroughly recommend watching daily). Pretty important topic as there is a bubble forming, and it also has some parallels with our system here.

# Why I voted out and for relatively unheard reasons…

We have seen a pretty revolutionary moment in our history. This is the first time that a country has voted to leave the European Union… and I am quite pleased.Let me make myself clear. Whether we left the EU or remained, the key issue is that we need to make the most of the situation that arose. If we had remained, we would have had to be proactive in assuring that we were in a position to enact reform. Now that we have left, we must be proactive in achieving the best terms that we can. In my opinion, we would have accepted the status quo had we remained and we would have been a part of a ‘sick’ organisation had we remained, not just because of EU bureaucracy, but also because of the nature of the relationship between the EU and the Eurozone.

Look, you cannot be a part of an organisation whose vested interests are tied closer with countries within the currency union and not with those outside of it. It simply cannot work. Take a look at the peripheral countries.

Italy:

• Debt:GDP = 133%.
• 11.7% Unemployment
• -0.3% Inflation (MoM)
• 36% Youth Unemployment

Spain:

• Debt:GDP 99%
• 26% Unemployment
• -1% Inflation (MoM)
• 45% Youth Unemployment

Greece:

• Debt:GDP 177%
• 25% Unemployment
• -0.9% Inflation
• 50% Youth Unemployment

To have a comparison, let’s fix for Germany and the Eurozone as whole:

Germany:

• Debt:GDP 77%
• 4.2% Unemployment
• 0.1% Inflation
• 7% Youth Unemployment

Eurozone:

• Debt:GDP 90%
• 10.1% Unemployment
• -0.1% Inflation
• 21.1% Youth Unemployment.

Look at the data. The point I am trying to make here is how can you have so many varying economies within the Eurozone, firstly with the same monetary policy being attributed by the ECB, but secondly, invoking the same laws from Brussels (which also have a heavy impact on the economy; trade deals, free movement of labour etc)? It cannot work, and it has been proven to be ‘sick’. You need to have fiscal AND monetary policy mobility to truly be able to efficiently run government budgets, otherwise you create huge deadweight loss if policies are counter effective.

What I find ironic is that Germany is the best performing country. They also have a massive trade surplus. I wonder why Merkel wants to keep the UK in the EU, as well as all other states (800,000 cars are exported to the UK per year…). Contrast this with the Eurozone as a whole and you can see that Germany are way above the average, while the peripheral countries are well below it.

Jean Jacques Rosa wrote a book called Euro Error which predicted this conservative austerity and far right uprising due to unemployment. What have we seen? Far right uprising in the Netherlands, Poland, France, Greece and Austria. They hide behind the veil of being racist, which they are, but the true problem always comes down to a group of individuals’ economic positioning within a country. The Eurozone has failed these people. It was doomed from the start in my opinion.

As a side note, immigration is not an issue for me. Immigrants since 2000-2011 have contributed a net surplus of £20bn to UK finances. Indigenous British people have a net deficit of £150bn to the welfare system.

What has really been made apparent as well, is the political fragility we have faced since 2008. We’ve had David Cameron resign, a huge split in the Tory Party with no real strong candidate for leadership being made apparent, 14 Labour Cabinet ministers resignations after Hilary Benn’s sacking and a call for Corbyn to step down, something which I feel he has to do firstly because he really didn’t argue his side during the campaign for remain and furthermore, was remain really his true feelings on the Brexit issue? I don’t think so, and this is why a vote of no confidence has been made. In terms of this, I feel that Brexit would allow for a new swathe of sovereign thinking to enter the House of Commons. We wouldn’t have Eurocentric opinion on trade and laws. What we would have is the independence to strike deals with China, India, South America, the US and Canada… which won’t take 7 years to complete…

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