EconVue Weekly Spotlight August 15, 2016

posted by Lyric Hughes Hale on August 17, 2016 - 11:26am

The Olympics have given us relief from the meteorological and political summer heat. This fascinating video compares and contrasts Olympic achievements in the 1930’s to the present, and the progress has been stunning. Given improvements in training and technology backed by enormous financial resources, have our best athletes now reached the limits of human biology? And is this a metaphor for economic achievement as well?

There seems to be growing acceptance of a new norm of slower global growth. In our last newsletter I mentioned Northwestern economist Robert Gordon’s new book, The Rise and Fall of American Growth. I had a chance to see him last week and discuss his book. He cites an example that traveling by air from Chicago to New York takes about the same time today as it did in 1940, the difference being more time spent on the ground and less in the air. I would imagine that the experience was far more pleasant then too.  

Japan is the leader of the developing world’s Club of Slow Growth. In 1972, the Club of Rome famously published a report The Limits of Growth which explored several scenarios for the world economy, including an exponential increase in the utilization of natural resources forecast to result in disaster. That has not come to pass, in spite of continued population growth worldwide. Rather what has occurred is slower trend growth overall, and unimaginable in 1972, negative interest rates in major economies. What does this mean for policy, markets, and for business? It is an entirely new mindset for long-term planning. Continued weakness in China, commodities, and recent US retail sales underline the trend, in spite of stock market highs. We highlight some of the most intriguing discussions about risks and opportunities below.



1.  We’re in a Low-Growth World. How Did We Get Here?
Neil Irwin 8/6/16 NY Times

This trend helps explain why incomes have risen so slowly since the turn of the century, especially for those who are not top earners. It is behind the cheap gasoline you put in the car and the ultralow interest rates you earn on your savings. It is crucial to understanding the rise of Donald J. Trump, Britain’s vote to leave the European Union, and the rise of populist movements across Europe.

2. Low long-term interest rates as a global phenomenon
Peter Hördahl, Jhuvesh Sobrun, Philip Turner August 2016 Bank for International Settlements

Low long-term interest rates as a global phenomenon-a new BIS working paper.

3. How Global Elites Forsake Their Countrymen
Peggy Noonan 8/11/16 WSJ

Focused on Angela Merkel’s decision to allow a million refugees into German, President Reagan’s speechwriter Peggy Noonan takes a controversial stand.  "From what I’ve seen of those in power throughout business and politics now, the people of your country are not your countrymen, they’re aliens whose bizarre emotions you must attempt occasionally to anticipate and manage.” Political and economic implications. 


4.  The Fed’s shifting perspective on the economy and its implications for monetary policy
Ben S. Bernanke 8/8/16 Brookings

Bernanke says watch the numbers not the Fed participants. Because that is what they are watching.

5.  U.S. Health Care Ranked Worst in the Developed World
Melissa Hellmann 6/17/16 Time 

Perhaps, but we need to focus our efforts on the worst in the developing world. That is what will come back to bite us.

6.  Americans Are Skipping Obamacare So They Can Smoke
Sy Mukherjee 7/7/16 Fortune

Unintended consequences of a 50% surcharge on insurance for smokers-- and ironic given that President Obama is a smoker himself.

7.  Review: In ‘Hillbilly Elegy,’ a Tough Love Analysis of the Poor Who Back Trump
Jennifer Senior 8/10/16 NY Times

For everyone on both sides of this election trying to understand what is causing our deep divides here in the US. Here is a deep dive perspective worth reading.


8. Russia Expert Stephen Cohen: Trump Wants To Stop The New Cold War, But The American Media Just Doesn't Understand
Tim Hains 7/30/16 Real Clear Politics

This is about the media more than the candidates. Much discussed interview that unpacks allegations that the Russians are trying to control or influence the US presidential election.

9.  BRUSSELS FURY: Massive wave of anti-EU sentiment in nations including France and Germany
Caroline Wheeler 8/1/16 Express UK

It is not just Great Britain.

10.  Portugal Gaining On Italy In The European Banking "Doom Loop"
Tyler Durden 8/15/16 Zero Hedge

11.   A tiny bank in Italy could decide the future of Europe
Harold James 8/3/16 Business Insider

"If we want things to stay as they are, things will have to change."

12.  What If Saudi Arabia Collapses?
Theodore Karasik, Joseph Cozza 8/10/16 LobeLog

A big, big what if.


13.  The Seven-Year Short 
Bloomberg 8/7/16

Mark Hart was right about mortgage-backed securities and Eurobonds. Is he right about China now?

14.   Beyond Structural Reform in China
 Andrew Sheng, Xiao Geng 7/30/16 Project Syndicate

Always worth reading What's Next? author Andrew Sheng for the best analysis of China's financial system.

15.   Major Chinese state paper calls for a military strike on Australian ships that enter the South China Sea
Greg McKenna 7/30/16 Business Insider Australia  

Official Chinese state newspaper Global Times calls Australia a "paper cat" with an "inglorious history" and threatens military action against her ships in the SCS. 

16.   Statement by Glenn Stevens, Governor: Monetary Policy Decision
Reserve Bank of Australia 8/2/2016

25 bps rate cut by Reserve Bank of Australia was widely expected.

17.  Is the BOJ just getting warmed up?
Yoichi Takita 8/4/16 Nikkei Asian Review

September could be key.

18.  At 82, Emperor Akihito of Japan Wants to Retire. Will Japan Let Him?
Jonathan Soble 8/7/16 NY Times

Excellent article on the subject of the possible abdication of Emperor Akihito. Before the 19th century, it was common for emperors to abdicate. Against a background of Japan's aging demographics, a slow-growth economy, and rising tensions in North Asia, this is a delicate moment in Japanese history.

19.  Gov. Koike -- I will bring financial institutions back to Tokyo
Ken Moriyasu 8/8/16 Nikkei Asian Review

Making Tokyo great again.


20.  The Bandwidth Bottleneck That Is Throttling the Internet
Jeff Hecht 8/10/16 Scientific American

"Digital traffic jams threaten to throttle the information-technology revolution."

21.   Bitcoin Drops Nearly 20% as Exchange Hack Amplifies Price Decline
Charles Bovaird 8/2/16 Coin Desk


Data Round-Up: Real Consumption on Track for +3% Gain in 16Q3    
Michael Lewis 08/12/16

After the three strong prior reports, retail sales came in somewhat light. Total sales were unchanged in July (+0.2% with revisions); the consensus was looking for +0.4%. The drop in gasoline prices was a major drag, as expected: service station receipts fell -2.7%.

Where's the Beef? Employers Question the Value of Hospital Mergers      
David W. Johnson 08/10/16

How healthcare service providers should respond to negative views perceived by self-insured employers on hospital mergers.

Blockchain Watch  
Collin Canright 08/08/16

Insight on blockchain technology that will change digital banking. 

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