Brexit may meet hard landing - Wall Street Journal

Oct. 9, 2016 5:30 p.m. ET

3 COMMENTS

Last week’s sterling flash crash was over in minutes. But the perception of instability that hangs over the U.K. after a week of political drama may be harder to dispel. 

Prime Minister Theresa May was successful in her first two months in office in restoring calm following the chaotic aftermath of the June Brexit referendum. By refusing to be rushed into quick decisions on Britain’s future relationship with the European Union, she raised hopes of a relatively smooth Brexit, which was reflected in the swift recovery in the economy and the markets from the initial referendum shock. But her speeches, and those of some of her colleagues, at last week’s Conservative Party conference have fueled anxieties among investors and companies over the direction in which the U.K. is now heading.

Those anxieties only partly relate to Brexit itself. Mrs. May has signaled what was already widely assumed: that the U.K. is heading for a hard form of Brexit in which it likely quits the EU customs union and single market. That is the implication of her pledge to reclaim full control of immigration to Britain and to remove the U.K. from the jurisdiction of the European Court of Justice.

Officially, the U.K. hasn’t made any decisions on what future relationship it wants to pursue with the EU, and there are still some in the government pushing for a softer form of Brexit, if only to avoid any fiscal damage should the U.K.’s financial-services industry lose unfettered access to the EU market. But a “soft Brexit” has never looked like a politically viable option, not least because the U.K. is unlikely to consent to abide by rules over which it has no control.

SEE MORE FROM SIMON NIXON

• Risk of Deglobalization Hangs Over World Economy Oct. 5, 2016 
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• No Quick Fix to City of London’s Brexit Conundrum Sept. 28, 2016 
• EU Pushes Back Against Protectionist Forces Sept. 25, 2016 
• Free-Movement Question Isn’t U.K’s Only Hurdle to Accessing EU MarketSept. 21, 2016 
• Brexit Revives Debate Over Irish Reunification Sept. 18, 2016 
• Britain’s Post-Brexit Trade Ambitions Run Up Against Protectionist ForcesSept. 14, 2016 
• French Centrist Plots Rebel Run for Presidency Sept. 11, 2016 

Mrs. May’s other Brexit-related announcement also points to a hard deal for the U.K. By committing to invoke Article 50 of the Lisbon Treaty—thereby setting the clock ticking on a two-year exit negotiation with the EU—by the end of March 2017, the U.K. has given up one of its few points of leverage over the Brexit process. That may have been politically unavoidable, given demands from factions of her party and from business not to prolong the uncertainty. But it does mean the U.K. will now go into the negotiations without any commitment from the EU to transitional arrangements or to extend the negotiating period beyond two years that some in the U.K. had wanted.

It also means the EU will now enter the negotiation holding the better cards. The U.K. has the most to lose if the two sides fail to reach a full agreement by the end of the two-year negotiating period and are obliged to trade on World Trade Organization terms. French finance minister Michel Sapin made clear the EU will press this advantage, telling The Wall Street Journal that France will insist on all aspects of the divorce and future trading relationship being agreed in two years.

What appeared to also rattle the markets last week was the vision that Mrs. May and other ministers set out for a post-Brexit Britain. Part of this vision seemed to hinge on reducing the number of foreigners: in schools, in the health system, and in British-based companies. Mrs. May also appeared to take aim at the international business and financial elite who have made their home in the U.K., telling them that “if you are a citizen of the world, you are a citizen of nowhere.”

Mrs. May also set out an economic vision designed to address working-class concerns over perceived failures of globalization that appeared to have been lifted from the opposition Labour Party. This includes a new industrial strategy that would identify and support “strategic industries,” a policy to add workers to corporate boards and controls on energy prices. She also appeared to take aim at the independence of the Bank of England with criticism of its quantitative-easing program. 

At last week’s annual meetings of the International Monetary Fund in Washington DC, there was widespread shock at the direction in which Mrs. May appears to be taking the U.K. To many observers, this apparent policy pivot has raised fears that post-Brexit Britain will turn inward, rather than taking the opportunity to embrace a future as an open, business-friendly economy.

The danger for Mrs. May if this perception takes hold is that she risks alienating three groups vital to her own success.

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The first is international businesses, whose investment is crucial to the long-term economic fortunes of a country that currently runs a near 6% current-account deficit. Many of these companies use the U.K. as a hub to serve European markets and rely on the EU’s current freedom-of-movement rules to ensure they can recruit the necessary foreign talent. 

The second is European governments, whose goodwill is vital to securing a good Brexit deal. Many EU governments, including France and Germany, have already reacted to signs of anti-foreigner sentiment in the U.K. by hardening their own rhetoric toward the British government. 

The third group is Mrs. May’s own parliamentary colleagues, who won a general election only 18 months ago. Many on both sides of the Brexit divide may wonder why they are now being asked to back policies that appear to have been borrowed from their defeated Labour and UK Independence Party opponents. 

With a parliamentary majority of only 17, Mrs. May’s reputation as a stabilizing force may fall victim to her ambitions.

Write to Simon Nixon at simon.nixon@wsj.com

Fallen Pound Sterling helps to cushion Brexit shock - Wall Street Journal

m. ET

5 COMMENTS

When the U.K. voted to leave the European Union in June, the pound took its worst beating in half a century. Many economists saw that as a good thing.

Despite the shock of Brexit, more than three months later there are few tangible signs of economic distress in Britain: Employment is steady. The stock market has held up. Government bonds are strong. Houses are still being bought and sold. Consumers are still consuming.

Credit, say economists, goes in large part to the decline of the British pound, which has acted as a giant shock absorber against Brexit. It fell 11% against the dollar in two trading days after the vote, and after another sudden slump last week is now down 16%.

Seen from abroad, British people are one-sixth poorer and their economy is one-sixth smaller. In the past week, figures from the International Monetary Fund suggest, Britain has slid from the world’s fifth-largest economy to sixth, behind its millennium-old rival France.

But suffering Brexit’s pain through the currency may be more comfortable than through higher unemployment or other ills—a luxury that wasn’t available to eurozone countries during the currency bloc’s debt crisis. Over the longer term, economic wisdom holds that a weaker currency will boost a nation’s sales abroad, so what the economy loses in the form of lower consumption—because consumers are poorer—will be recovered through higher exports.

“It is important that you have a live release valve like this,” said Tim Haywood, an investment director at GAM Holding.

Brexit is a significant test of that valve’s strength and reliability. In the short term, too chaotic and deep a plunge in a currency can trigger financial panic. 

On Friday, sterling plunged to its lowest level in 31 years against the dollar after briefly tumbling over 6% in Asian trade. It capped a rough week for the currency after U.K Prime Minister Theresa Mayset a date for Britain’s exit from the EU.

The largest recent hit to the pound happened the day after the Brexit vote on June 23, when it lost as much as 8%, the steepest single-day drop against the dollar since Nov. 18, 1967, according to FactSet.

Back in 1967, U.K. officials grappled to keep sterling pegged to the dollar amid a weakening economy and as foreign investors pulled out of the country. Finally, British Prime Minister Harold Wilson was forced to devalue the currency from $2.80 to $2.40, a 14% drop.

Britain was lucky not to be pegging the currency when Brexit happened, analysts say.

“If they had had a fixed exchange rate it would have blown up,” said Kenneth Rogoff, economics professor at Harvard University.

Flexible exchange rates allow economies to absorb shocks in two main ways: They let the currency bear the brunt of capital outflows, rather than stocks and bonds, while boosting the competitiveness of local businesses on the global stage.

A floating currency allows a nation to set interest rates, steering the price of financial assets. By contrast, under a pegged-currency regime, in times of turmoil, bonds and equities are left to crash. Banks are left scrambling for liquidity.

Take the FTSE 250 stock-market index, which lists medium-size companies doing a lot of business in the U.K. For dollar-based investors, it has plunged 13% since the Brexit vote, but for locals measuring it in pounds, it has risen almost 4%.

Furthermore, the U.K.’s largest companies, such as British American Tobacco PLC, GlaxoSmithKline PLC and AstraZeneca PLC, make most of their income abroad. Their shares have surged because with a weaker pound, their revenues look much beefier. The FTSE 100 index, which comprises mostly such multinationals, is up 11% since the vote—although that rise is less than the pound’s fall against the dollar.

By possessing its own currency, the U.K. is able to deploy monetary and fiscal stimulus at will. U.K. Treasury chief Philip Hammondrecently signaled that the government would ramp up spending in infrastructure to offset the possible impact of Brexit on consumer and business confidence.

Britain also has the advantage of a strong local financial system, meaning both the government and private companies can easily borrow in pounds. In contrast, in many developing economies borrowing happens in foreign currencies. When the local currency depreciates, foreign-currency debts balloon and often become unsustainable, which happened in the Asian financial crisis of 1997.

In 1970, almost every country in the world had a pegged exchange rate. Despite a certain rebound since the mid-1990s, now about 47% do, according to IMF data. The world’s leading advanced economies have all embraced floating rates.

What is more, financial panics in emerging-market economies, including Russia, Brazil and South Africa, have been mellowed over the past few years by the exchange-rate flexibility governments have mustered.

The eurozone, whose countries share a currency, offers an example of the danger a fixed currency can pose. In 2011 and 2012, stock markets in Spain and Italy plummeted more than 40% and investors dumped those countries’ sovereign bonds.

Being part of the eurozone also meant Southern Europe couldn’t control monetary and fiscal policy. Public spending was cut, taxes went up and unemployment soared. Unlike Britain, the troubled eurozone countries, which incurred a lot of debt during the crisis years, now face the hardship of paying back that debt in a currency that they can’t print.

The alternative was growth through higher exports. But for poorer nations to make their products more competitive is hard when sharing a currency with richer nations like Germany and the Netherlands. In Greece, the hardest-hit country, a faction of the now-governing Syriza party pressed the virtues of a flexible currency during the apex of the nation’s crisis. Syriza, and Greece, ultimately stuck with the euro.

“It’s the lack of currency flexibility that has been one of the fundamental problems that Europe has,” said Derek Halpenny,economist at Bank of Tokyo-Mitsubishi UFJ Ltd. “The flexibility of exchange rates is the big positive that the U.K. has going forward.”

According to most economic textbooks, a cheaper currency makes local companies more internationally competitive, while curbing imports in favor of local production. Some see tentative signs this is already happening in the U.K., crediting the weaker pound for a small summer rebound in manufacturing.

Manufacturers like Nissan Motor Co., which owns the U.K.’s largest car factory, in Sunderland, England, may be the main beneficiaries of a weaker currency—assuming they can handle whatever new tariff barriers they face in the EU once the U.K. leaves.

For the tourism industry, a weaker pound makes U.K. hotels cheaper for foreigners. InterContinental Hotels Group PLC, which has long been optimistic about the effects of Brexit, said it got a boost in the first half of the year because a weaker sterling slashed its costs.

But debate remains over how much a weaker sterling can offset the longer-term effects of Brexit, since exports don’t move on currencies alone. Also, it is possible that economic malaise from Britain’s leaving the world’s largest free-trade bloc will set in later, when Brexit actually occurs. Many economists are skeptical the pound can ever offset the trade impact of withdrawing from the EU. Tariffs with the EU would hurt exporters, and the British government’s attempts to curb migration, economists say, will dent the U.K.’s long-term productive capabilities.

“The currency offers some cushion in the near term,” said Allan Monks, U.K. economist at J.P. Morgan Chase & Co. “But the weaker currency doesn’t necessarily give such a strong boost to manufacturers’ exports and output.”

Indeed, the pound fell sharply after the 2008 global financial crisis, but British exports didn’t bounce back meaningfully. In Japan, ultraloose monetary policy has driven the yen down 25% against the dollar in the past five years, but exports have remained much lower than before.

Because supply chains are global, manufacturers increasingly use components from abroad to make products, so higher import prices matter to exports, too. IMF and World Bank research found that for countries that integrated themselves in global supply chains between 1997 and 2012, the currency lost 22% of its impact on exports.

That means currencies have to fall further to help buffer the economy, said David Bloom, global head of foreign exchange research at HSBC Holdings PLC, who forecasts the pound will sink to $1.10 against the dollar and to parity with the euro by the end of next year.

The outlook for U.K. exporters, however, remains strongly dependent on whether its trading partners—chiefly the eurozone—start growing at a faster pace. So far, their performance has been disappointing.

“No matter how much the currency goes down, people still don’t want to buy things,” said Mr. Bloom.

“I don’t think there’s any amount of sterling depreciation that can shock-absorb for the loss of economic potential,” said George Magnus, senior economic adviser at the Swiss bank UBS Group AG.

Write to Jon Sindreu at jon.sindreu@wsj.com and Christopher Whittall at christopher.whittall@wsj.com

How will Latin American countries react to Trump's protectionism ? - Economist

future bully

Anti-yanqui feeling is in remission in Latin America. Could Donald Trump revive it?

Oct 8th 2016 

“YOU are the United States, you are the future invader of the guileless America of Indian blood, which still prays to Jesus Christ and still speaks Spanish.” So goes the ode “To Roosevelt” of 1904 by Rubén Darío, a Nicaraguan writer. His poem was occasioned by the seizure of Cuba and Puerto Rico by the United States in the Spanish-American war of 1898, in which Theodore Roosevelt played a minor role that helped him win the presidency, and by his subsequent grabbing of Panama, a province of Colombia.

Darío was prescient: in the next three decades there would be more than 30 military interventions by the United States in the Caribbean basin, in the name of what Roosevelt called “the exercise of an international police power”. These events, and the asymmetry of power and wealth that underlay them, gave rise to an enduring tradition of anti-Americanism (or “anti-yanquismo”, since “América” to Spanish-speakers means the entire land mass). In recent times this has been identified with the left—with Fidel Castro of Cuba, the late Hugo Chávez of Venezuela and Evo Morales of Bolivia. But there is a conservative, Hispanicist strain of anti-Americanism, too, expressed by Darío and others, which claims a superiority of culture and values for Latin America in the face of the bullying and vulgar materialism of the United States.

America has been to dispel anti-Americanism. From the outset of his presidency he said he wanted “an equal partnership” in the Americas. His boldest stroke was the diplomatic opening to Cuba, which was applauded by both left and right across Latin America. And on issues such as Venezuela’s crushing of democracy, the United States has sought to work through partners in the region, though without conspicuous success.

Mr Obama has had an impact in regional opinion. When he was elected in 2008 only 58% of respondents to Latinobarómetro, a region-wide poll, had a positive view of the United States. This year that figure was 74%. Governments’ attitudes have changed, too. Chávez and Argentina’s Cristina Fernández de Kirchner have departed. Brazil’s new government does not place the hopes that its predecessor did in “south-south” ties. Across Latin America, many governments are now seeking to draw closer to the United States.

That means Latin Americans are especially alarmed by the prospect of Donald Trump occupying the White House. Along with Canada, as neighbours of the United States they have more to lose than anyone else from Mr Trump’s protectionist nationalism. Many Latin Americans see him as a racist who derides “the guileless America of Indian blood”, in Darío’s words. Latin American commentators see in Mr Trump a likeness to the region’s own populist leaders, such as Chávez. Some fear that his advent would prompt a revival of anti-Americanism in the region just when it was going into remission.

In fact, responses are likely to be more considered. Take Mexico. Polls suggest that some 85% of Mexicans abhor Mr Trump. But they also suggest that Andrés Manuel López Obrador, a populist leftist hopeful for the 2018 election, who is in some ways a mirror image of Mr Trump, is not profiting from this anger. A poll by Reforma, a newspaper, found support for Mr López Obrador stable at around 28% in August. It is Margarita Zavala, a pro-American conservative, who has received a bounce. “If you have the biggest bully in the world across the border perhaps you don’t want your own bully” but rather a “softer style of leadership”, says Juan Pardinas of the Mexican Institute for Competitiveness, a think-tank.

Mr Trump’s effect on Cuba, if he carries out his threat to annul Mr Obama’s diplomatic opening, might be different. That could remove any hope that the transition to a post-Castro leadership, which is due to start in 2018, will involve a loosening of political control. And it is hard to know what will guide Mr Trump’s approach to Latin America. His name is on businesses in Brazil, Panama and Uruguay, and has been linked to other ventures in the region.

Although a President Trump’s blustering and protectionism would prompt anger and disappointment, they are more likely to be met in today’s Latin America with calm rationality than to be copied. Both Mexico and Brazil have experience of responding successfully to American violations of trade rules, for example on cotton, with sanctions targeted for maximum political effect in the United States. Latin American governments are anti-Trump, but that won’t necessarily make them anti-American.

Lewd comments on women tape is fatal wound to Trump campaign - Financial Times

Could it get any worse than this? It is a question posed countless times before about Donald Trump’s candidacy. Each time the flak somehow bounces off him. But the 2005 tapes revealing the repugnant way he talks about women — having just embarked on his third marriage — is fatally wounding. 

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Short of a character transplant, it is hard to see how he could win the presidency from here. It also looks to be the start of the dirtiest phase from the most tawdry nominee in history. Instead of offering a sincere apology for his remarks, Mr Trump lashed out at Hillary Clinton for having “bullied, attacked, shamed and intimidated his [Bill Clinton’s female] victims.” This suggests Mr Trump will try to save his skin at the second debate on Sunday by claiming Mrs Clinton is even worse. If he has to go down, then he will take her with him. The logic is pure scorched earth.

Most observers are long past the point of believing Mr Trump is capable of donning a different mask for a few weeks without letting it slip — even assuming suburban Republican women, or other wavering voters, would believe a word of it. Mr Trump is who he is. Few are buying the claim Mr Trump is a different person to the one who was recorded talking about grabbing women’s genitalia 11 years ago. 

Just last week he was up at three in the morning fat shaming a former Miss Universe from two decades back. All it took was an artful jab from Mrs Clinton — how Mr Trump liked “hanging around” these beauty contests — to set him off. Four nights later he was still in a sleepless rage. It is safe to assume Mrs Clinton will have the discipline to keep calm with whatever he throws her way on Sunday night. She has had decades of practice. Nor is there much doubt she will have rehearsed a few more choice phrases to trigger Mr Trump’s id.

The bigger question is whether he can survive as Republican nominee until election day. There is no historic precedent for this situation. At any time, Paul Ryan, the Republican Speaker, and Mitch McConnell, the Republican Senate majority leader, could call on Mr Trump to step down. The fact that they have not so far does not mean they will not be goaded into doing so. The more Mr Trump drops in the polls, the greater the temptation to sever their connection to him. 

Republican control of both houses of Congress could be in question. Mr Ryan has already pulled out of a joint event with Mr Trump following the leaked tapes, which he described as “sickening”. A growing trickle of elected Republicans have said they can no longer support his candidacy. Mark Kirk, the embattled Republican senator from Illinois, called Mr Trump a “malignant clown”. It will be interesting — and revealing — to see whether any of the big evangelical Christian figures, such as Jerry Falwell Junior, feel obliged to follow suit. Failure to do so could expose irredeemable double standards.

Mr Trump has made it clear he has no intention of stepping down. People around Mr Trump, such as Roger Stone, one of his oldest henchmen, describe Bill Clinton as a “serial rapist” — and Mrs Clinton as his enabler. Such thoughts will be on the tip of Mr Trump’s tongue on Sunday night. It is clear he feels no contrition for what he expressed. The Republican Party — and America as a whole — will puzzle for years over how such a man could have come so close to power.

More Trump lewd comments on women tapes surfaced - ABC News

Donald Trump agreed to let radio personality Howard Sternrefer to his daughter Ivanka as a "piece of a--" and made other lewd remarks about women in recordings uncovered by CNN's KFile from the GOP presidential nominee's various appearances on "The Howard Stern Show" in the 1990s and 2000s.

CNN published 18 clips today from Trump’s appearances on the radio show. The exchange about Ivanka’s attractiveness came during an appearance in 2004 in which Trump was asked by Stern, “Your daughter ... can I say this? A piece of a--?”

“Yeah,” Trump responded, later adding that Stern would be “the last person I would introduce her [to].”

In another recording from 2006, Trump noted that Ivanka's "always been voluptuous" after Stern asked whether she got breast implants. "She's tall, she's almost 6 feet tall and she's been, she's an amazing beauty," said Trump.

More: Despite Lewd Remarks, Trump Retains Support of Conservative Christian Leaders.

Melania Trump: Husband's Words 'Unacceptable' and Don't Represent Man She Knows

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The "Howard Stern Show" recordings were surfaced amid fallout over lewd remarks Trump made in a separate 2005 recording that was published Friday by The Washington Post, in which Trump is heard talking about how he tried to have an affair with a married woman and describing how he makes moves on women.

Ivanka was not the only female to be the subject of discussion in Trump’s appearances on "The Howard Stern Show."

In one clip from 2002, Trump discusses feeling embarrassed being seen on dates with younger women, saying, “Over the past couple of years, I’d go out with somebody and she’s like 21, and she’s talking about you know, ‘What are you doing?’ and she’s studying algebra.”

He used the anecdote to explain why he believed 30 was “the perfect age” to date, going on to describe age 35 as “check-out time.”

In another appearance in 2006, Trump was asked if “could now be banging 24-year-olds?” to which he replied, “Oh absolutely. I’d have no trouble.”

Stern asked: “Would you do it?”

“I’d have no problem,” Trump answered.

In the same interview, Trump said: “If I weren’t married, I’d be able to get all of the girls I want.”

Trump has not commented on the recordings uncovered by CNN.

ABC News' Candace Smith contributed to this report.

Destiny of our universe - Forbes

Our universe is being pushed away by dark energy. Could this force have a connection to the inflationary phenomena that started everything in the first place? Image credit: NASA, ESA, R. Windhorst and H. Yan.

The very earliest stages of the Universe as-we-know-it began with the hot Big Bang, where the expanding Universe was filled with high energy particles, antiparticles and radiation. But in order to set that up, we needed a time where the Universe was dominated by energy inherent to space itself, expanded at an exponential rate and eventually decayed, giving rise to a matter, antimatter and radiation-filled Universe. Today, 13.8 billion years after the end of inflation, the matter and radiation in the Universe has become so sparse, so low in density, that it’s revealed a new component: dark energy. Dark energy appears to be energy inherent to space itself, and is causing the Universe to expand at an exponential rate. Although there are some differences between dark energy and inflation, there are some unique similarities, too. Could these two phenomena be related? And if so, does that mean the beginning and end of our Universe are connected?

scale get stretched across the Universe during inflation, giving rise to imperfections in both density and gravitational waves. Image credit: E. Siegel, with images derived from ESA/Planck and the DoE/NASA/ NSF interagency task force on CMB research.

It would seem very strange to us if there were two entirely different forces or mechanisms at play to cause the Universe to expand: one billions of years ago and one today. When it comes to the Universe, however, there’s a lot going on that appears very strange to us.  First off, the Universe very, very surely is expanding. But it didn’t need a force of any type in order to do so. In fact, when you take a Universe like our own, a Universe that is:

• governed by Einstein’s General Relativity,
• filled with matter, radiation and any other “stuff” you like,
• and that’s roughly the same, on average, at all locations and in all directions,

you wind up with a funny, uncomfortable conclusion. That conclusion was first reached by Einstein himself back in the first few years of relativity itself: that such a Universe is inherently unstable against gravitational collapse.

A nearly uniform Universe, expanding over time and under the influence of gravity, will create a cosmic web of structure. Image credit: Western Washington University, via http://www.wwu.edu/skywise/a101_cosmologyglossary.html.

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In other words, unless you concocted some “magic fix” for the problem, your Universe was going to have to either expand or contract, with both solutions being possibilities. What it couldn’t do, unless you cooked up some new type of force, was remain static.

Of course, the work of Edwin Hubble hadn’t yet come along. In addition to not knowing that the Universe was expanding, we didn’t even know whether those spiral shapes in the sky were objects within our own Milky Way or whether they were entire galaxies themselves. Because Einstein favored a static Universe at the time (like most), he made such an ad hoc fix to keep the Universe static: he introduced the idea of a cosmological constant.

The Einstein field equations, with a cosmological constant included as the final term on the left-hand side.

The central idea of Einstein’s relativity is that there are two sides to the equation: a matter-and-energy side, and a space-and-time side. It says that the presence of matter and energy determines the curvature and evolution of spacetime, and that the way spacetime curves and evolves determines the fate of every individual quantum of matter and energy within it.

What the addition of a cosmological constant did was say, “there is this new type of energy, inherent to space itself, that causes the fabric of the Universe to expand at a constant rate.” So if you had the force of gravity due to all the matter-and-energy working to collapse the Universe, while you had this cosmological constant working to expand the Universe, you could wind up with a static Universe after all. All you would need was for those two rates to match, and to exactly cancel one another out.

expanding, and there didn’t need to be a cosmological constant there to counteract the force of gravity. Instead, there was an initial condition, that the Universe began expanding very rapidly, that counteracted the force of gravity from all the matter and energy. Instead of contracting, the Universe was expanding, and that expansion rate was slowing down.

Now, there are two questions that are natural to ask — and in fact were natural to ask since this discovery in the 1920s — in the aftermath of this:

1. What caused the Universe to begin expanding at this rapid rate early on?
2. What will the fate of the Universe be? Will it expand forever, will it eventually reverse and recollapse, will it be on the border of these two, or something else?

The different possible fates of the Universe. The actual, accelerating fate is shown at the right; the Big Bang itself offers no explanation for the origin of the Universe itself. Image credit: NASA and ESA, via http://www.spacetelescope.org/images/opo9919k/.

The first question went unanswered for over half a century, although interestingly enough there was an initial proposal by Willem de Sitter almost immediately that it was a cosmological constant that caused this expansion to begin.

Previously thought to only occur from a cosmological constant, Alan Guth’s revelation at the end of 1979 led to the birth of cosmic inflation as a way to “blow up” the Universe at its inception. Image credit: Alan Guth’s 1979 notebook, tweeted via @SLAClab, from https://twitter.com/SLAClab/status/445589255792766976.

Finally, in the early 1980s, it was the theory of cosmological inflation that came about, proposing that there was an early phase of exponential expansion, where the Universe was dominated by something very much like a cosmological constant.

Now, it couldn’t have been a true cosmological constant — also known as vacuum energy — because the Universe didn’t remain in that state forever. Instead, the Universe could have been in a false vacuum state, where it had some energy inherent to space itself that then decayed to a lower-energy state, resulting in matter and radiation coming out: the hot Big Bang!

There are a number of other predictions that came out of inflation, all but one of which has been confirmed, and hence we accept that this early phase in the Universe did exist.

Yet, when we turn to the second question — about the Universe’s fate — we find something very strange. While we had expected that there would be a sort of race between the initial, rapid expansion and the force of gravitation acting on all the matter-and-energy in the Universe, what we found was that there was a new form of energy that was quite unexpected: something dubbed dark energy. And wouldn’t you know it? This dark energy, to the best of our knowledge, appears to take on the same form as a cosmological constant.

The far distant fates of the Universe offer a number of possibilities, but if dark energy is truly a constant, as the data indicates, it will continue to follow the red curve. Image credit: NASA / GSFC.

Now, these two types of exponential expansion, the early kind and the late kind, are very, very different in detail.

• The early Universe’s inflationary period lasted for an indeterminate amount of time — possibly as short as 10^-33 seconds, possibly as long as near-infinite — while today’s dark energy has been dominant for around six billion years.
• The early inflationary state was incredibly rapid, where the cosmological expansion rate was some 10^50 times what it is today. By contrast, today’s dark energy is responsible for about 70% of what the expansion rate is today.
• The early state must have coupled, somehow, to matter and radiation. At high enough energies, there must be some sort of “inflaton” particle, assuming quantum field theory is correct. The late-time dark energy has no known couplings at all.

That said, there are some similarities, too.

indistinguishable) equations-of-state, meaning that the relationship between the Universe’s scale and time is identical for both.

They both have identical relationships between the energy density and pressure they cause in general relativity.

And they both cause the same type of expansion — exponential expansion — in the Universe.

The “open funnel” portion of these illustrations represents exponential expansion, which occurs both at the beginning (during inflation) and at the end (when dark energy dominates). Image credit: C. Faucher-Giguère, A. Lidz, and L. Hernquist, Science 319, 5859 (47).

But are they related? It’s very, very difficult to say. The reason, of course, is that we don’t understand either one very well at all! I like to imagine a 2-liter soda bottle, partway filled, when I think about inflation. I imagine a drop of oil floating on the top of the liquid inside. That high energy state is like the Universe during inflation.

Then something happens to cause the liquid to drain out of the bottle. The oil sinks to the bottom, of course, in a low-energy state.

If inflation is like starting off at the “top” of a full soda bottle, then dark energy is like realizing the bottom of your bottle isn’t totally empty. In both cases, there’s an energy inherent to space itself; inflation’s was much larger, but dark energy’s is non-zero. Public domain images.

But if that drop winds up not at the very bottom — not at zero, but at some finite, non-zero value (like the Higgs field when its symmetry breaks) — it could be responsible for dark energy. Models that tie these two fields together, the inflationary field and the dark energy field, are known generically as quintessence.

It’s pretty easy to make a quintessence model that works. The problem is, it’s pretty easy to make two separate models — one for inflation and one for dark energy — that work, too. We have two new phenomena and they require the introduction of at least two new “free parameters” to make the theory work. You can tie them together or not, but in no way are these models distinguishable from each other.

The models that have dark energy evolving too much (i.e., w ≠ -1 always) can be ruled out with data. Image credit: Pantazis, G. et al. Phys.Rev. D93 (2016) no.10, 103503.

All we’ve been able to do, to date, is rule out certain classes of models where the early-time or late-time rates of expansion don’t agree with observation. But observations are also consistent with inflation is a thing on its own, and dark energy arises from a completely different source. I hate having to go through the full explanation of what we know, to have one phenomenon (inflation) occurring at an energy scale of around 10^15 GeV, to have another phenomenon (dark energy) at an energy scale of around 1 milli-eV, and then to have to say “we don’t know if they’re related,” but that’s the situation here.

Unfortunately, even with all the proposed missions we have — James Webb, WFIRST, LISA and the ILC — we don’t anticipate this question being answered from the data anytime soon. Our best hope is for a theoretical breakthrough. And as someone who’s worked on this problem myself, I have no idea how we’ll get there.

Astrophysicist and author Ethan Siegel is the founder and primary writer of Starts With A Bang. Follow him on Twitter, Facebook, G+, Tumblr, and order his book: Beyond The Galaxy, today!