EconVue Spotlight

I’m beginning to think that political events, no matter how explosive, no longer have the power to affect the economy, financial markets, or even oil prices. Technology, while entertaining, seems to have lost its ability to create productivity gains. Structural reforms have become stuck in many economies, and needed infrastructure improvements just aren’t happening. Income inequality does not seem to be reversing anywhere, and so one wonders how global consumption can rebound. Automation has negatively impacted jobs and nothing seems likely to stop that momentum. Global risks to the environment, and to health, seem likely to increase. 

Where can we find optimism, and new leadership? As has been the case throughout human history, the answer could be technology rather than political leadership. My hometown of Chicago is the only top 20 city in the US that is losing population, in a state whose bonds are rated close to junk. However, like other cities in “flyover country” the Midwest might be in a state of transition that the bicoastal media has not yet understood—just like they misunderstood Trump. 

AOL founder Steve Case’s efforts (see article below) to push against the consolidation of innovation in Silicon Valley and the East Coast are at the forefront of a new movement. One of the strengths of the US economy has always been healthy geographic distribution. I’ll be in NYC next week to attend meetings at the Council on Foreign Relations, which will likely be sobering.  When I return I am excited to attend both TechWeek Chicago and Technori, a start-up showcase founded by one of our EconVue experts, Seth Kravitz. I believe events such as these are where hope can be found that will take us beyond the current stagnation.

STORIES IN OUR SPOTLIGHT

Middle East

Will Qatar’s diplomatic exile spark the next Great War?
Simon Henderson 6/5/2017 Foreign Policy

Sarajevo 1914, Doha 2017? We could be at a historic moment akin to the assassination of the heir presumptive to the Austro-Hungarian Empire, which resulted in what became known as the Great War. This time, though, the possible clash is between a Saudi-United Arab Emirates force and Iran. Washington is going to have to act quickly to stop the march to war, rather than wait for the carnage to begin.

Feud Between Brothers: the GCC rift and implications for oil and gas markets
Natural Gas World 6/7/2017

What are the long-term implications of the recent sanctioning of Qatar? Based upon research by the Oxford Centre for Energy Policy, full pdf: http://eda.ac.ae/images/pdf/EDA_Insight_Global_Energy_Trends_EN.PDF 

Iran unites as Tehran struck by Middle Eastern proxy wars
Ali Vaez 6/10/17 Lobelog  

U.S.

The House just passed the biggest banking deregulation bill in history
6/8/17 Vox

At least some of this will become law, because all politician have bankers in their districts.

After Yellen, an all-white male Fed board ahead?
John Vail 6/6/2017 Forbes

Or after Yellen, could we find another woman at the helm of the Fed? The case for Loretta Mester, and Midwestern diversity.

Trump's economic agenda is almost dead
Barry Ritholtz 6/9/17  Bloomberg View

Has a once-in-a generation opportunity to reform taxes, repatriate profits, and improve US infrastructure been lost? Ritzholtz puts the odds of implementing the Trump agenda at 25%-he was at 96% last November. 

Robert J Gordon, prophet of pessimism
IMF June 2017

What NU economist Robert Gordon could tell Trump about growth: quick fixes won't last

Labor productivity growth, G-7 countries (chart)
Jason Furman 6/7/2017 (Twitter)

Productivity has slowed in the United States, as it has in nearly all advanced economies.

Global

The true cause of hunger and famine? War and weak governance
World Economic Forum 6/9/2017 (Twitter)

Amartya Sen won his Nobel Prize for his work on famine in India: he said its real cause is lack of information-- which is disrupted by war and bad government. After virtually disappearing for the past two decades, the threat of famine is reappearing.  Simon O’Connell at Mercy Corps Europe explains the complex nature of food insecurity, and why crisis appeals won’t solve the problem. 

Prime Minister May error "worst since Heath in 1974"
David Marsh 6/9/2017 OMIFF

Snap election leads to hung Parliament and some are questioning whether May will survive the week. She’s already thrown her two closest advisers overboard. Could one of the unintended consequences be a softening of UK-EU negotiating stance? 

In China, whether or not you go to university depends a lot on where you're from...
Sixth Tone 6/8/2017 (Twitter)

This is gaokao season in China, when millions take university entrance exams. Where you're from affects university admissions, further solidifying income inequality, another challenge to hukou reform. Structural reforms in China are very hard to implement, and this is one example. This matters because China’s growth is key to re-up global growth.

Technology

Google is as close to a natural monopoly as the Bell System was in 1956
Asher Schechter 5/7/2017 Pro-Market

Is a breakup of the technology behemoths inevitable? Nasdaq suffered a setback on Friday as giant tech stocks took a dive. Perhaps proactive splits could stave off regulatory backlash.

How Steve Case became Washington's tech whisperer
Miles Donovan 6/9/2017 Politico

Can flyover country share the prosperity of Silicon Valley? The AOL billionaire is making it his cause.

The billion dollar war over maps
Seth Fiegerman  6/7/2017 CNN

Self-driving cars will demand a new generation of maps, in another example of the infrastructure buildout necessary for autonomous vehicles.

Chinese automakers seek ways to kick-start sputtering growth
Shunsuke Tabeta 6/7/2017 Nikkei Asian Review

Will China have driverless cars first, by 2025? 

Uncertainties shadow combustible ice mining breakthrough
Yu Dawei and Teng Jing Xuan 6/6/2017 Caixin Global

The snowcapped Qilian Mountains in Qinghai province seem a world apart from the subtropical South China Sea – yet both are home to a curious, methane-containing substance known as “combustible ice” that could replace traditional fossil fuels.

ECONVUE RESEARCH

Data Round Up: U.S.household net worth rises again; UK's May clings on; Dodd-Frank wounded
Michael Lewis   ($ but send me an email if you would like a copy of this report and are not yet a subscriber)

While household net worth has been rising at around a +5% pace in recent years, real per capita gains in net worth in this expansion have been much less impressive given population growth and inflation. This is especially true since households will ultimately be responsible for elevated government debt.

There’ll be no records set this week by Australian economic growth figures
Saul Eslake

Australia hasn’t had a recession – defined as consecutive quarters of ‘negative growth’ in real GDP since the first half of 1991. Some have claimed that, with the release of first quarter GDP figures on 7th June 2017, Australia will have surpassed a ‘record’ for recession-free growth established by the Netherlands between 1981 and 2008. In this piece published on the Conversation I look at whether this is in fact a valid claim.

FinTech Favorites
Collin Canright

This week's report focuses on some of my long-time favorite sources of banking and FinTech news and insight. I follow the industry through reports from media organizations and industry experts I respect and trust. I started thinking about my sources and methods after reading Ron Shevlin's post "FinTech influencer lists have jumped the shark."

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