EconVue Weekly Spotlight July 2, 2016

posted by Lyric Hughes Hale on July 2, 2016 - 3:07pm

Markets stopped their free fall this week, as analysts struggled to understand the impact of Brexit, and UK politics boiled over.  We continue our coverage and expect that Brexit is the very definition of what journalists call a story with legs.  Anything could happen, as we said prior to the Brexit vote, but it is not likely the vote will either be recalled or ignored.  Europe is on a new trajectory.
Political splits and convulsions continue. In the US, it has just been announced that Hillary Clinton has been questioned by the FBI regarding her private email server.  Australia’s election today has ended with a hung Parliament.  Japan too faces an election this month, and we have a high degree of concern over a possible revolt by Japan’s banks against profit-destroying negative interest rates.  In addition, Japan’s government pension fund, the largest in the world, has experienced huge losses after its portfolio shift from bonds to equity investments.  The strong yen will continue to dampen prospects for Japanese exporters while simultaneously lowering import prices, which will not help to create much-needed inflation. 
Stories in our Spotlight This Week: Brexit Coverage  
1. Economic Implications of Brexit
Ben S. Benanke  6/28/16 Brookings
A former Fed Chair worth listening to. Not worth listening to: Greenspan on inflation.
2.  Europe After Brexit: Never Waste a Good Crisis
 Matteo Garavoglia 6/27/16 Brookings
A Brookings expert says that Britain's exit could reinvigorate the EU.
3. Brexit is Being Driven by English Nationalism. And It Will End in Self-rule
Fintan O'Toole  6/18/16 The Guardian
Nationalism is on the rise but is not necessarily a bad thing. Provocative and original essay.
4.  How a Quest by Elites is Driving 'Brexit' and Trump
 Neil Irwin 7/1/16 NY Times 
But what if the gaps between the economic elites and the general public are created not by differences in knowledge and expertise, but in fundamental priorities?
5.  The "Greatest Catastrophe" of the 21st Century? Brexit and the Dissolution of the UK 
 Fiona Hill 6/24/16 Brookings 
Comparing Gorbachev and Cameron.
6.   Brexit Wagers Set New Record for Non-Sports Bets
Paul McClean 6/26/16 FT
Betting odds favored Remain by 75%-why were they so wrong? More people actually bet on Leave than Remain. They just made smaller bets. Professional bookmaking  odds are determined by the total amount wagered, nothing else. Those betting on Remain placed larger wagers. So much for bookies predicting elections-- we should remember this come November.
More Stories in our Spotlight This Week 
7.  The Euro: Monetary Unity to Political Disunity?
Milton Friedman 8/28/97 NY Times
Worth reading nearly 20 years later. Friedman said it all about the the Euro and its eventual demise. In 1997.
8.  This Economist Thinks China is Headed for a 1929-style Depression
Sue Chang 7/1/16 MarketWatch
Analyst Andy Xie is uber smart. And honest. His report explains why China could be heading to a hard landing.
9.  Rome Elects First Female Major in 2800 Years
Rose Donohoe 6/25/16 The New Daily
37-year old Virginia Raggi could be a player in Italy's exit from the EU.
10.  The Collapse of the Liberal World Order
Stephen M. Walt 6/26/16 Foreign Policy
The US seems to have limitless interests worldwide, and perhaps fears. But we just don't have limitless resources.  
11.  The State of the World's Children 2016 Report
UNICEF 6/27/16 
UNICEF's sobering, just-released flagship report on the world’s children. The statistics presented in this report, by topic and country, will surprise you. Income inequality creates an irreversible cycle for our most innocent citizens. 9 out of 10 children living in extreme poverty live in Sub-Saharan Africa.  There are now 750 million child brides.  A must-read for anyone thinking about the future of this planet.
12.  Stop Bashing GMO Foods, More Than 100 Nobel Laureates Say
Niraj Chokshijune 6/30/16 NY Times
Political correctness isn't always evidence-based. Malnutrition is an enormous issue, especially in a slowing economic environment that impacts the poor, the young, and the elderly disproportionately.
13.  Google-backed Undersea Cable Between US and Japan Goes Online Tonight
Frederic Lardinois 6/29/16 TechCrunch
Richard McGregor explains the Google-backed 9,000km undersea cable between US + Japan that has just gone online; “about 10m times faster than your cable modem”.  Which begs a larger question:  Who should pay for high speed access globally, especially in rural regions?  How will speed affect competitiveness worldwide?
EconVue Research and Insights

The Brexit Debacle Discussion Panel   Robert Madsen, Michael Lewis, Lyric Hughes Hale, Marsha Vande Berg

Brexit has been the biggest shock to global markets since the Global Financial Crisis in 2008.  EconVue experts weigh in on the likely path of this new crisis. Login or Register to post your comments to their responses. 

July 2016 Economic and Investment Outlook    Michael Lewis
"The pound remains weak, and the dollar has been bolstered by the ‘flight to safety’ amid uncertainty. As the UK-EU relationship is clarified in coming months, currencies will revert to pre-Brexit norms."
Q&A with David W. Johnson and His New Book, Market vs. Medicine: America's Epic Fight for Better, Affordable Healthcare    David Johnson