posted by Lyric Hughes Hale on February 20, 2018 - 12:00am
In my last newsletter, I said that global economic fundamentals seem to be positive, and in spite of market turmoil in the interim I am going to reiterate that statement. Volatility has returned, which will bring opportunities for those who are not faint of heart. This is an exciting time, never dull, never boring.
In the past week, I attended three diverse conferences, one virtually. Alan Greenspan appeared on the stage of the American Enterprise Institute, and although his speech has slowed, the audience hung on every word. The title of the conference was (full video here) The Bubble Economy Is This Time Different? Greenspan’s behaviorialist answer: “No, it never is, if you’re dealing fundamentally with human nature.” I especially enjoyed the comments of Vincent Reinhardt and Adam Posen, which smoothed out the discussion.
At the Chicago Mercantile Exchange, I was privileged to attend the CME/MSRI event which awards an annual prize for innovative quantitative applications in economics. The winner was Stanford economist Paul Milgrom, who was introduced by his former Northwestern colleague Roger Myerson. He was honored for his work which began with the creation of FCC spectrum auctions in 1993. The program featured thought-provoking presentations by his students of their research on creating fair auctions. One key conclusion was that time-based auctions, such as high frequency trading, create inefficient allocations. However, real world exchanges such as the CME derive income from collocation of servers by HF traders. It is hard to see widespread adoption of alternative frequent batch auctions, absent regulatory intervention. One of the most intriguing presentations was about creating a market for human organs, now mostly a priceless auction with huge and devastating inefficiencies. Blockchain is certainly something that could be utilized in all of these use cases.
The CME conference was pretty much all academics and a sprinkling of traders, but the 14-hour Fintank Blockchain/Cryptocon conference was full of the animal spirits that Greenspan described. My biggest takeaway is that if you think that bitcoin blockchain is a fad, you are wrong-bitcoin is a technology, not a currency but the two are inextricably linked. Adoption could take place not in ten or twenty years, but in two or three, opening up opportunities for massive creative destruction. Just a few examples: the end of counterparty risk, the Internet of devices that do not just communicate but transact with each other, a new insurance industry to protect private keys, crypto lending and the disintermediation of banks. And just to mention, the banner on the venerable CME website is now the price of bitcoin.
I hope you enjoy the articles below by our EconVue experts and others that piqued our interest.
RESEARCH BY ECONVUE EXPERTS
With the government open for business as usual this morning, book-valuewholesale inventories were reported up +0.4% in December. Including revisions, these data were in-line with BEA’s estimates in the Advance Report of 17Q4 GDP. FMI is still tracking no net change to 17Q4’s +2.6% real GDP growth in the Second Report on February 28.
If you have a bully pulpit, use it. That’s precisely what BlackRock’s CEO Larry Fink did when he championed corporates’ engagement with purpose to staunch the pace of climate change and embrace the preservation of the public commons together with its specific stakeholders.
Dr. Ellis' new editorial that examines the PRC's expanding, increasingly self-confident engagement with Latin America and the Caribbean, as manifested in the recent China-CELAC summit in Santiago Chile. The work notes China's growing pursuit of political and security engagement with the hemisphere, as well as its surprising willingness to acknowledge its intention to move the region away from its relationships with the US and other "great powers."
Expect state government agencies and legislators to move most quickly on providing regulatory clarity on FinTech regulation in the United States. U.S. federal regulatory agencies have initiated enforcement actions against some of the most egregious cryptocurrency investment practices and are watching the industry closely.
STORIES IN OUR SPOTLIGHT
The bubble economy — Is this time different?
The panic of 1918 marked a transition in the US economy. Do rapid boom and bust cycles in credit and equities signify adjustment to larger changes?
Slowing down (@simongerman600)
The world's population has grown rapidly over the past century. But the rate of growth is slowing down. We may never reach 12 billion people.
IRS paid private debt collectors $20 million to recoup $6.7 million from low-income Americans
Luke Barnes 1/10/2018 ThinkProgress
Math does not appear to be their strong suit.
Euro hoarding on the increase, Bundesbank says
Olaf Storbeck 2/14/2018 Financial Times
Zero bound behavior.
The shift in dynamics between the RMB and USDX in the past week is enormously important. Not sure if the PBOC on vacation but longer it persists you have to think the PBOC has informally ended the basket. @BaldingsWorld
Someone is wrong on the Internet, wages and the stock market edition
2/10/2018 Financial Times
Someone is wrong on wage inflation and that matters for financial markets. Take a closer look and wages have actually weakened, especially for non-managerial positions and jobs outside the financial sector.
Few things are as dangerous as economists with physics envy
John Rapley 2/9/2018 Aeon
The macroeconomic effects of student debt cancellation
2/2018 Levy Economics Institute
Student debt cancellation: best US stimulus idea ever. Debt forgiveness has been part of the ebb and flow of economic history since money was first lent. Time to hit the reset button.
Cryptocurrencies Surging in Africa as Alternatives to Traditional Banking
Thomas Delahunty 2/18/2018 News BTC
Blockchain Proof-of-Work Is a Decentralized Clock
Gregory Trubetskoy 1/23/2018 Grisha.org
It’s about time: is bitcoin block chain technology really a distributed and decentralized clock? Elegant and fascinating explanation of “proof of work”. @humblehack
The Quantum Internet Has Arrived (And It Hasn't)
Davide Castelvecchi 2/14/2018 Nature.com
Entanglement and teleported information - quantum computing seems mind-boggling Diane Coyle @dianecoyle1859
Instead of Selling Natural Gas, This Canadian Company will Mine Bitcoin
Priyeshu Garg 2/14/2018 BTC Manager
One of Canada’s largest oil and gas companies, has announced that instead of selling natural gas at stubbornly low prices, it will utilize a part of its production to generate electricity and use the same to operate a bitcoin mining facility.