EconVue Spotlight

posted by Lyric Hughes Hale on May 13, 2017 - 12:00am

Last year at this time, I was attending the G7 finance meetings in Sendai, Japan.  Sadly I missed this year’s event in Italy, but Angus Deaton's interview for Bloomberg today after his lecture in Bari makes me hope that the G7 ministers listened to him. Deaton's key points:

- As a non-believer in the Laffer curve, he is not supportive of the Trump tax plan,  calling it massively redistributional without benefit to those most in need. 

- US manufacturing is not in trouble, it is growing, but manufacturing employment is shrinking and no one really knows how much of that is due to technology and how much is due to trade. 

- He is a convert to a single payer health care system, taking Warren Buffett’s analogy that it is a tapeworm one step further to say that $1 trillion in annual health care expenditures is a cancer on enterprise in America-especially when life expectancy is actually falling for some demographic groups. 

Post our French election edition,  in this week’s Spotlight we focus on the zigging and zagging of the US-China relationship.  The joint release of the 100-Day Action Plan by the US Commerce Department was met with applause from some sectors, but one has to question whether it can or should do anything to address US-China trade imbalances.  Details are scarce, but on the same day, it was announced that the US will now export LNG to China.

It is likely that all this was timed for announcement before China’s huge summit this weekend, the Belt and Road Forum which will be attended by numerous heads of state including Teresa May, but on the US side will be represented by Matt Pottinger.  All of which will deflect attention from China’s equity markets, which have been dropped since April, and its looming debt debacle, at a level that now approaches Greece, keeping in mind that Greece's population is 10 million people, and China's is over 1.3B.

Finally, the US seems to be holding its own, and EconVue expert Michael Lewis writes that hard and soft data is now in general alignment and a June rate hike is virtually assured. 



JOINT RELEASE: Initial Results of the 100-Day Action Plan of the U.S. - China Comprehensive Economic Dialogue
U.S. Department of Commerce 5/11/2017

President of the United States Donald Trump and President of the People’s Republic of China Xi Jinping agreed at their Mar-a-Lago meeting to advance U.S. - China economic cooperation with a 100-day action plan under the framework of the U.S. - China Comprehensive Economic Dialogue.

Trump administration hails US-China trade deal
Shawn Donnan & Tom Mitchell 5/10/2017 Financial Times 

Is this breakthrough due to Chinese strength and American weakness, or US strength and Chinese weakness?

US allow LNG exports to China
Natural Gas World 5/12/2017 

US allows export of LNG to China- will impact competitors in Australia, Canada, and big oil intermediaries who won’t be needed under the new agreement.

China 'Belt' plans criticised
John West 5/10/2017 OMFIF

Should China tighten its Belt to concentrate on domestic expansion in Western China?

China's rising leverage is a growing risk
Alicia Garcia-Herrero 5/11/2017 Nikkei Asian Review

Worries over China's rising leverage have been growing, especially since the country's ratio of debt to gross domestic product surpassed 250% in 2016. 

What Deleveraging?
The Long View 5/10/2017

Debt to GDP ratios around the world. China is approaching Greek debt levels.

Listing Chinese Companies & Wealth Management Products, Good or Bad Luck? (in Chinese) 
Cao Wenjiao 5/9/2017 Caixin Online

3,204 of domestically listed zombie firms are involving in wealth management products, 814 billion yuan in 2016, a jump of 48% from 2015. 

Friedrich Engels is still shaping Chinese cities, 120 years after his death
Andrew Batson Blog 5/11/2017

China's urbanization policy is not just arbitrary choices of authoritarian governments, but part of the intellectual heritage of socialism itself. It goes all the way back to the founding fathers.

China cracks down on coastal fisheries
Dennis Normile 5/12/2017 Science Magazine

Once this ban is lifted, will overfishing resume? China, which has the world's largest fishing fleet, cracks down on coastal fisheries


Trump's Biggest Hurdle on Tax Cuts? Congress's Daunting Calendar
Sahil Kapur 5/8/2017 Bloomberg

President Donald Trump faces many hurdles in delivering his promised tax cut, but none may be more formidable than the congressional calendar.

‘Competitive’ distractions
Josh Bivens and Hunter Blair  5/9/2017 Economy Policy Institute

Cutting corporate tax rates will not create jobs or boost incomes for vast majority of American families

Safety, Liquidity, and the Natural Rate of Interest
Federal Reserve Bank of New York 5/2017

The US role as a safe haven keeps interest rates down. New paper by the NY Fed. 

Advocates say bump-up for Census Bureau won’t keep it on track for 2020
Jeffrey Mervis 3/20/2017 Science Magazine

2020 census-the biggest US civilian undertaking- was in trouble before its director resigned. Critical for economic data and analysis.

The American Obsession with Lawns
Krystal D'Costa  5/3/2017 Scientific American

It’s finally spring! US lawns cover more land than the entire state of Texas. Grass is not native to America; it was imported from Europe, and over time acquired the socioeconomic status it has today. Is it a waste of resources however? Something to think about as mowing season begins.

Cyber Security

Fixing the Cell Network Flaw That Lets Hackers Drain Bank Accounts
Lily Hey Newman 5/9/2017 Wired

Security researchers have warned about SS7 for years. Now hackers have used to rob banks, here is how telecoms can finally fix it.

Cyberthreat Real Time Map
Kaspersky Lab

Britain's health care system was hacked today. Expect more of this-you can use this map as your screensaver if you are not easily distracted.

Rest of the World

Moody’s takes Canadian banks down a notch
Barbara Shecter 5/11/2017

The slowing of capital outflows from China is impacting Canada.  House prices, retail credit problems, all could come together at just the wrong time. 

Africa 'attracting worldwide pension funds'
5/11/2017 OMFIF

Will the savings of workers in developed markets be used to finance infrastructure in Africa? The search for yield continues.

This Infographic Shows How Only 10 Companies Own All The World’s Food Brands
Kate Ryan 3/31/2017 GoodFood

10 companies own almost all of the world's food brands. Brands are goods.

EconVue Research

Data Round-Up: Core CPI Lull Continues (for Now); Retail Sales Spring Forward Gradually (subscriber content)
Michael Lewis 

Today’s core CPI results came in below expectations for the second month; at first glance, the rebound in retail sales also seemed light, but upward revisions more than compensated (especially with the lower inflation). We continue to expect a solid rebound in 17Q2 real GDP, e.g., real consumption growth above +3%. 

The Evolution of Transnational Organized Crime in Peru
R. Evan Ellis

Dr. Ellis's newest article on the evolution of transnational organized crime in Peru, and the efforts of the Peruvian government of Pedro Pablo Kuczynski to combat it.  The article is based on his recent research trip to Lima, including conversations with a number of persons in that nation's security sector.

The 2017-18 Budget and the Australian Economy
Saul Eslake 5/11/2017

A presentation by EconVue expert and eminent Australian economist Saul Eslake.