EconVue Spotlight

A hat tip to EconVue contributor Nicholas Benes for one of our favorite articles this week, on the “quiet life.” The thesis of this Harvard Business Review study is that managers are likely to put off hard decisions, preferring the "quiet life” to confrontation and change in the absence of competition. As our New Year’s resolutions fade away, worth keeping in mind!

As promised, you will find the full forecasts of several EconVue experts that were summarized in our forecasting issue earlier this month. I’ve also included some papers from the event that opens the year for academic economists, the American Economics Association annual meeting. Held the first weekend in January, sadly in snowbound Philadelphia, key themes were the lack of opportunity for female economists, and of course productivity.

One subject was significant by its omission- out of hundreds of papers and sessions, only a single panel on Fintech, and nothing on cryptocurrencies. Through a Twitter exchange I found out that Trinity Prof. Gina Pieters did submit a paper that was not selected for presentation. The list of academics working on this issue fits on a single page, which Prof. Pieters has kindly compiled here: http://www.ginapieters.com/crypto-academics.html

In a world bereft of volatility, I find this subject fascinating.  Market capitalizations are exaggerated: they are based upon the total number of coins outstanding multiplied by the most recent price.  In these thinly-traded markets, a single transaction can change prices. However, cryptocurrencies are beginning to affect the real economy.  It is estimated that bitcoin is now .3% of Japan’s GDP. For a discussion about crypto as an asset class, the article below by economics professor Lawrence White about how it is and is not like gold is illuminating.

RESEARCH BY ECONVUE EXPERTS

5 Days that Shook the Healthcare World
David Johnson

In early December, a series of blockbuster transaction announcements rocked the healthcare industry. Major healthcare payers, providers and retailers signaled their intention to reconfigure business models to compete effectively in the post-reform marketplace. Their common mantra is that status-quo operations are insufficient to meet customer demands for higher-value healthcare services. It’s not enough to get bigger, health companies must also become better. American healthcare may never be the same.

China on the Rebound
Karim Pakravan

China’s more robust foreign position comes at a time when President Xi Jinping is taking a much bolder stance in promoting China as the “other” superpower. Furthermore, with the United States under President Trump is retreating from its global leadership role, China is positioning itself as the guardian of a multilateral-based world order. 

Data Round-Up: Real Consumption Likely Grew a Solid +3.75% in 17Q4
Michael Lewis

Upward revisions saved the holidays. Even with so-so December sales and a rebound in goods inflation to more than +2% annualized in 17Q4 (mostly gasoline prices, despite a turn down at the pumps in December), real consumption likely grew +3.75% in 17Q4, more than a percent above the 17Q1-Q3 pace. Note, tax reform bonuses being issued by firms should boost early 2018 spending, though history indicates consumers will bank much of their windfall.

Chicago Rising
Collin Canright

Chicago's FinTech development and investment reputation has been on the rise, and we're expecting big things in this city for 2018. Crain's Chicago Business suggests that Google is planning a major new center here, while city officials remain hopeful that it will make the first cut for Amazon's HQ2. 

Data Round-Up: Labor Markets Still Look Very Healthy, Will Tighten Further in 2018
Michael Lewis

The December jobs report marked a fairly tepid end for the year. Nonetheless, trends point to the labor markets tightening further in 2018.  The FOMC has already decided, we believe, to pause in January, Yellen’s final meeting. By March, with Powell at the helm, labor market and other data should easily justify the next rate hike.

Confronting Complex Multidimensional Security Challenges in Trinidad and Tobago
R. Evan Ellis

Dr. Ellis’ latest report on security challenges facing Trinidad and Tobago, two small and relatively unknown nations which have significant strategic importance from the perspective of the United States and the Western Hemisphere.  

2018 ECONVUE PREDICTIONS

Highlights of the more non-intuitive analysis of our experts on their forecasts for 2018.

The Year in FinTech 2017 to 2018
Collin Canright 

FMI January 2018 Economic & Investment Outlook
Michael Lewis

The Year of the Dictators
Robert Madsen  

The Key Challenge and Issue for the United States in 2018 is Donald Trump
Robert Shapiro

2018 Global Outlook
Nikolai Tagarov 

Whither the US in 2018? US and the Americas and Globally
Marsha Vande Berg

STORIES IN OUR SPOTLIGHT

Productivity & Labor

The “Quiet Life” Hypothesis Is Real: Managers Will Put Off Hard Decisions If They Can
Kotaro Inoue 1/9/2018 Harvard Business Review

As our New Year's resolutions fade away, an intriguing study just published in the Harvard Business review. Managers, and people in general, are likely to put off hard decisions and hard work, preferring the "quiet life." Competition is the cure.

Automation and Jobs: When technology boosts employment
James Bessen November 2017 Boston University School of Law

A thought-provoking paper from the American Economics Assoc meeting in Philadelphia this weekend. Does productivity have and an end game in terms of jobs, and are we there yet?

How Widespread Is Labor Monopsony? Some New Results Suggest It’s Pervasive.
Marshall Steinbaum 12/18/2017 Roosevelt Institute

Or do large firms offer non-wage benefits that employees take into account on a rational rather than coercive basis?

Illinois Saw Net Loss of 101,000 People to Neighboring States Since 2010 
Vincent Caruso 1/10/2018 Illinoispolicy.org 

Since this outflow number is only for neighboring states, in effect metro Chicago, it clearly demonstrates the effects of laws and policy on residential choice. Neighboring towns in Indiana and Wisconsin don't have different climates, or a significantly different economic base.

Fintech

Bitcoin could be adding 0.3% to Japanese GDP
Jim Edwards 1/1/2018 Business Insider

Cryptocurrencies are beginning to have an effect on the real economy.

One Bank Is Unsure If Any Humans Still Trade Stocks In Japan, Or Have All Moved To Bitcoin
Tyler Durden 12/26/2017 Zero Hedge

40% of cryptocurrency trading is Yen-denominated. Are Japanese housewives driving bitcoin?

How a Bitcoin System is Like and Unlike a Gold Standard
Larry White 1/11/2018 Alt-M.org

Blockchains Use Massive Amounts of Energy—But There’s a Plan to Fix That
Mike Orcutt 11/16/2017 MIT Technology Review

Terrific explanation of why mining for cryptocurrencies uses so much energy, and what mining actually is.

Here’s the one currency worse for the environment than bitcoin
Steve Goldstein 12/7/2017 Market Watch

Yes, creating 1.2 million pennies is worse for the environment than mining a bitcoin.

95 Crypto Theses for 2018
Ryan Selkis 1/2/2018 Medium

Great write up-a must read on cryptocurrencies.

Beyond Price: Bitcoin’s impact on the future
Andreas Antonopoulos 12/23/2017 YouTube Video

PayPal only operates in 19 countries. Imagine an internet of money with no boundaries, and companies like PayPal disintermediated: video with industry guru Andreas Antonopoulos. 

ECB Official Calls for Tax on Bitcoin Transactions
Nikhilesh De 1/3/2018 Coin Desk

Of course they did.

The VERY simple bear case for bitcoin
Savneet Singh, Tera Holdings 12/17/2017 

Most Bitcoin Exchanges Start Refusing New Investors
Timothy Olagoke 12/27/2017 Cryptona

While bitcoin exchanges upgrade their systems, they are refusing new customers. In 2018 they will create more capacity to meet this demand.

The Criminal Underworld Is Dropping Bitcoin for Another Currency
Olga Kharif 1/2/2018 Bloomberg

Criminals are by definition unintelligent. Bitcoin can't be and never has been hacked.

World 

18 Exponential Changes We Can Expect in the Year Ahead
Azeem Azhar 12/31/2017 MIT Technology Review

On annual forecasts-absolutely true that we overestimate what can happen over one year, and underestimate what can be accomplished in ten. Self driving electric cars for example won’t be the norm in 2018, but by 2028 they will be ubiquitous.

Interview with Anne Case
Douglas Clement 12/12/2017 Federal Reserve Bank of Minneapolis

An extraordinary mind on why there are so few women in economics.

Can secular stagnation morph into secular expansion?
Avyn Davies 1/7/2018 Financial Times

A slight uptick in productivity, and signs are hopeful that the broad global expansion we are now enjoying will continue in 2018. The known unknown-will rising interest rates dampen growth?

The Marxist Case for the Nintendo Switch
Ryan Cooper 1/9/2018 The Week

Nintendo trusted their rational analysis of their customer base rather than blindly trusting market outcomes — and it paid off.

US

Consumer Credit 
Federal Reserve 1/8/2018

In November, consumer credit increased at a seasonally adjusted annual rate of 8-3/4 percent. Revolving credit increased at an annual rate of 13-1/4 percent, while non-revolving credit increased at an annual rate of 7-1/4 percent.

Kicking the can down the road...

America’s ‘Retail Apocalypse’ Is Really Just Beginning
Matt Townsend, Jenny Surane, Emma Orr, Christopher Cannon 11/8/2017 Bloomberg

Just $100 million of high-yield retail borrowings were set to mature in 2017, but that will increase to $1.9 billion in 2018. From 2012-2025, it will balloon to an annual average of almost $5 billion. Consumer debt rising, confidence falling.

Neat results from Emi Nakamura. Why didn't aggregate consumption-housing wealth elasticity change over fin. crisis?
Ethan Feilich @1EquationShort 1/6/2018

Recovery has been uneven. For households with underwater mortgages, it is like driving with a flat tire down a road without a shoulder and no off ramp.

Asia

China Is Heaping Debt on Its Least Productive Companies
Council on Foreign Relations 1/11/2018

Loans are given to unproductive Chinese firms in lieu of of allowing the market to enforce needed structural changes. This misallocation of capital could be more onerous over the long run than the risk of rising debt.

The global decline of extreme poverty – was it only China?
Max Roser 3/7/2017 Our World in Data

In a word, no. The decline in extreme poverty is worldwide.

Rising Japan inflation: a possible shock
Akinari Horii 1/8/2018

In defense of the Philip’s Curve by former Bank of Japan official Akinari Horii, who says rising Japanese inflation could surprise in 2018 due to labor constraints. But what about automation?

China’s debt trap diplomacy
Brahma Chellaney 1/23/2017 Project Syndicate

Worth another read based on recent events, in case you find any aspect of the China's One Belt One Road initiative troubling.

How people in Asia-Pacific view China
Laura Silver 10/16/2017 Pew Research Center

I would like to see a similar poll for views on the US impact in Asia for comparison purposes. These results will surprise the myriad of commentators focused on the China is replacing the US story.

USDX and USDCNY
Comrade Balding 1/9/2018 @baldingsworld 

How anyone can claim that CNY is not still effectively pegged to the USD is beyond me.