China’s Economic Rebalancing – Key Readings

Entrepreneurial Chinese drive economic transition

http://www.bloomberg.com/news/articles/2015-11-29/meet-the-everyday-people-who-are-transforming-china-s-economy

Economist Stephen Roach on China’s economic rebalancing and reform process

http://www.project-syndicate.org/commentary/china-slow-consumption-growth-by-stephen-s--roach-2015-11

High levels of precautionary saving by Chinese are slowing the transition to a consumer driven economy

http://www.project-syndicate.org/commentary/china-economic-rebalancing-domestic-consumption-by-keyu-jin-2015-11

Income-Share Agreements - A Solution to the College Student Debt Problem?

A very interesting piece from the Washington Post notes a bold experiment in US higher education –

https://www.washingtonpost.com/news/grade-point/wp/2015/11/27/investors-buying-shares-in-college-students-is-this-the-wave-of-the-future-purdue-university-thinks-so/

“If college is an investment, students don’t have to be the only ones reaping the returns. Or for that matter, taking on the risks. In one novel alternative to private student loans, investors could front students the money to pay for college in exchange for a percentage of their future earnings. But what are the dangers to students who accept these so-called income-share agreements? Who would benefit the most? This week, Purdue University took a step toward answering some of those questions by partnering with Vemo Education, a Reston-based financial services firm, to explore the use of income-share agreements, or ISAs, to help students pay for college.”

Interesting suggestions for reducing cost of higher education at American universities -
https://www.washingtonpost.com/opinions/four-tough-things-universities-should-do-to-rein-in-costs/2015/11/25/64fed3de-92c0-11e5-a2d6-f57908580b1f_story.html

Weekend Readings - 11/28

Chinese Investors - Growing Influence in the US Real Estate Market
http://www.nytimes.com/2015/11/29/business/international/chinese-cash-floods-us-real-estate-market.html

China is building the world’s largest radio telescope

http://www.telegraph.co.uk/news/science/space/12021123/Amazing-pictures-show-finishing-touches-being-put-on-the-worlds-biggest-telescope.html

Economic Divergence amongst US Cities
http://www.theatlantic.com/business/archive/2015/11/cities-economic-fates-diverge/417372/

Applied History – A Valuable New Field of Study?

http://www.theatlantic.com/international/archive/2015/11/kissinger-ferguson-applied-history/417846/ 

Europe Isn't Doomed to a Clash of Civilizations by Pankaj Mishra

http://www.bloombergview.com/articles/2015-11-27/europe-isn-t-doomed-to-a-clash-of-civilizations

International Affairs - Recommended Readings

http://vivekjayakumar.blogspot.com/2015/11/international-affairs-recommended.html

Profile of Marco Rubio (likely Republican Presidential Candidate?)
http://www.newyorker.com/magazine/2015/11/30/the-opportunist

Profile of Sheikh Mohamed bin Zayed – Ruler of U.A.E

http://www.bloomberg.com/news/articles/2015-11-24/a-new-military-power-rises-in-the-mideast-courtesy-of-one-man

‘Spooky Action at a Distance’ and the Formation of Scientific Consensus

A fascinating piece by Adam Gopnik on how scientific consensus is attained and its societal implications –

http://www.newyorker.com/magazine/2015/11/30/spooked-books-adam-gopnik

Gopnik concludes rather wisely:

“One way or another, science really happens. The claim that basic research is valuable because it leads to applied technology may be true but perhaps is not at the heart of the social use of the enterprise. The way scientists do think makes us aware of how we can think. Samuel Johnson said that a performer riding on three horses may not accomplish anything, but he increases our respect for the faculties of man. The scientists who show that nature rides three horses at once—or even two horses, on opposite sides of the universe—also widen our respect for what we are capable of imagining, and it is this action, at its own spooky distance, that really entangles our minds.”

America’s Student Loan Bubble – A Case Study

An illuminating case study from the NYTIMES looks at “the plight of Liz Kelley, a Missouri high school teacher and mother of four who made a series of unremarkable decisions about college and borrowing. She now owes the federal government $410,000, and counting.”

http://www.nytimes.com/2015/11/29/upshot/student-debt-in-america-lend-with-a-smile-collect-with-a-fist.html

From Brain Drain to Brain Circulation

African Expats Head Home in Increasing Numbers –

http://www.bbc.com/news/world-africa-34924351

Diaspora and the Motherland

http://www.economist.com/news/international/21656176-governments-believe-their-diasporas-can-solve-all-sorts-problems-they-are-picky

Migrant Brainpower

http://www.economist.com/news/international/21656175-migrant-brainpower

Pros and Cons of Worker Remittances

http://www.imf.org/external/pubs/ft/fandd/2009/12/pdf/ratha.pdf

Carbon Imperialism versus Economic Development

Eco-Modernism and Economic Development – An important NYT piece notes:

http://www.nytimes.com/2015/04/15/business/an-environmentalist-call-to-look-past-sustainable-development.html

“The “eco-modernists” propose economic development as an indispensable precondition to preserving the environment. Achieving it requires dropping the goal of “sustainable development,” supposedly in harmonious interaction with nature, and replacing it with a strategy to shrink humanity’s footprint by using nature more intensively.”

Carbon Imperialism

A great op-ed in the Financial Times by Arvind Subramanian (Chief Economic Adviser to the Indian Government and former Dennis Weatherstone Senior Fellow at the Peterson Institute for International Economics)

http://www.ft.com/cms/s/0/0805bac2-937d-11e5-bd82-c1fb87bef7af.html

Western Hypocrisy and the Climate Change Talks

Edward Luce of FT wisely notes the obvious hypocrisy of Western leaders who are pushing poor countries to curtail their carbon emissions:

http://www.ft.com/cms/s/0/c5582550-8f7d-11e5-a549-b89a1dfede9b.html

“Of the major economies, America’s per capita carbon dioxide emissions are the highest and will remain so for some time. Even if China continues to build new coal plants at its current rate, the average American pumps out three times more carbon every year than the average Chinese and more than 10 times the average Indian. …

This is where the surge in US car sales comes in. It was common in 2009 to read about the SUV’s demise. The petrol-guzzling car was heading for that “great junkyard in the sky,” said one analyst. They were too expensive, and too politically incorrect, to survive a recession and an Obama administration. For a while, sales did fall. But in the past 18 months, they have broken all records. The tipping point was falling oil prices. Once a gallon of petrol dropped below $3 last year, consumers reverted to pre-recession tastes.”

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The excellent book New Old World: An Indian Journalist Discovers the Changing Face of Europe by Pallavi Aiyar also provides great coverage of the Western double standards regarding climate change.

http://www.amazon.com/New-Old-World-Journalist-Discovers/dp/125007231X/

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Update:
India and France wisely push for a global solar alliance -
http://in.reuters.com/article/2015/11/29/climatechange-summit-solar-idINKBN0TI0QR20151129

International Affairs – Recommended Readings

World War III - Another brilliant piece on international affairs from Roger Cohen:

http://www.nytimes.com/2015/11/27/opinion/world-war-iii.html

Roger Cohen’s classic op-ed on the Middle East can be found here:

http://www.nytimes.com/2015/08/28/opinion/roger-cohen-middle-eastern-zen.html

The Turkey-Russia Fracas – Hypocrisy from all sides:

http://www.theguardian.com/world/2015/nov/26/russia-turkey-jet-mark-galeotti

Turkey’s Duplicitous Policies:

http://www.thenation.com/article/turkey-brings-nato-to-the-precipice-of-war-with-russia/

A highly informative read on the Syrian mess: The Rubble-Strewn Road to Damascus BY ROBIN WRIGHT

http://www.newyorker.com/news/daily-comment/the-rubble-strewn-road-to-damascus

“Can anything be done to save Syria from itself? Modern Syria has always been a fractious place. After independence from France, following the Second World War, the country went through twenty coups in twenty-one years—some successful, some not—until Hafez al-Assad, a former Air Force general, seized power, in 1970. He was initially embraced, at home and abroad....

Can a population so divided ever forge a stable political system that doesn't entail a dictatorship?”

Saudi Arabia’s Role in the Rise of ISIS

http://www.nytimes.com/2015/11/21/opinion/saudi-arabia-an-isis-that-has-made-it.html

“The West’s denial regarding Saudi Arabia is striking: It salutes the theocracy as its ally but pretends not to notice that it is the world’s chief ideological sponsor of Islamist culture. The younger generations of radicals in the so-called Arab world were not born jihadists. They were suckled in the bosom of Fatwa Valley, a kind of Islamist Vatican with a vast industry that produces theologians, religious laws, books, and aggressive editorial policies and media campaigns.”

Wahhabism and Extremism
http://www.newstatesman.com/politics/uk/2015/11/spread-wahhabism-and-west-s-responsibility-world

Shanghai Stock Exchange Turns 25

A good read on Chinese equity markets:

http://www.bloomberg.com/news/articles/2015-11-25/in-land-of-3-500-stock-returns-crashes-are-quickly-forgotten
Bloomberg reports:
“Twenty-five years to the day after the founding of the Shanghai Stock Exchange, the bourse’s benchmark index has delivered a 3,548 percent gain, excluding dividends. That compares with 348 percent for the MSCI Emerging Markets Index and 533 percent for the Standard & Poor’s 500 Index over the same period.”

Douglas North – Economic Historian and Nobel Laureate

A NYT piece on the Douglas North (who passed away this week at the age of 95):

http://www.nytimes.com/2015/11/25/business/economy/douglass-c-north-nobel-laureate-economist-dies-at-95.html

Highlights from North’s Nobel Prize lecture:

http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1993/north-lecture.html

“Institutions form the incentive structure of a society and the political and economic institutions, in consequence, are the underlying determinant of economic performance. Time as it relates to economic and societal change is the dimension in which the learning process of human beings shapes the way institutions evolve. That is, the beliefs that individuals, groups, and societies hold which determine choices are a consequence of learning through time - not just the span of an individual's life or of a generation of a society but the learning embodied in individuals, groups, and societies that is cumulative through time and passed on intergenerationally by the culture of a society….

Institutions are the humanly devised constraints that structure human interaction. They are made up of formal constraints (rules, laws, constitutions), informal constraints (norms of behavior, conventions, and self imposed codes of conduct), and their enforcement characteristics. Together they define the incentive structure of societies and specifically economies. Institutions and the technology employed determine the transaction and transformation costs that add up to the costs of production. ”

International Monetary Coordination and Global Currency Markets

Harvard economist Jeffrey Frankel discusses the factors preventing international monetary coordination:

http://www.project-syndicate.org/commentary/international-policy-coordination-constraints-by-jeffrey-frankel-2015-11

The advantages of having a currency symbol

http://www.imf.org/external/pubs/ft/fandd/2015/12/pdf/currency.pdf

Are Brighter Days Ahead for Argentina?

There is growing optimism about Argentina’s prospects. Columbia University economist Andrés Velasco notes:

http://www.project-syndicate.org/commentary/macri-argentina-after-kirchner-by-andres-velasco-2015-11

“The current account is roughly in balance, so there is no need for further import compression. And because no one would lend to Argentina after it defaulted in the early 2000s, the government has relatively little debt. By allowing the peso to depreciate, Macri could achieve two goals at once. A weaker currency would stimulate exports and allow imports to grow as foreign-exchange controls are lifted. Meanwhile, because a significant share of government revenues are dollar-linked, while its expenditures are mostly in pesos, devaluation would reduce the budget deficit.”

Related:

http://vivekjayakumar.blogspot.com/2015/11/a-big-political-shift-in-argentina.html

FEC, Money and Politics

Get More: Comedy Central,Funny Videos,Funny TV Shows

Chinese Investment in Africa

A realistic appraisal of the extent of China’s economic involvement with the African continent:

http://www.imf.org/external/pubs/ft/fandd/2015/12/pdf/chen.pdf

Decline in Institutional Quality - Turkey

The Ups and Downs of Turkish Growth, 2002-2015: Political Dynamics, the European Union and the Institutional Slide by Daron Acemoglu and Murat Ucer

NBER Working Paper No. 21608; Issued in October 2015

http://www.nber.org/papers/w21608

We document a change in the character and quality of Turkish economic growth with a turning point around 2007 and link this change to the reversal in the nature of economic institutions, which underwent a series of growth-enhancing reforms following Turkey's financial crisis in 2001, but then started moving in the opposite direction in the second half of 2000s. This institutional reversal, we argue, is itself a consequence of a turnaround in political factors. The first phase coincided with a deepening in Turkish democracy under the prodding and the guidance of the European Union, and witnessed the waning of the military's influence and the broadening of effective political participation. As Turkey-European Union relations collapsed and internal political dynamics removed the checks against the domination of the governing party, in power since 2002, these political dynamics went into reverse and paved the way for the institutional slide that is largely responsible for the lower-paced and lower-quality growth Turkey has been experiencing since about 2007.

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Harvard economist Dani Rodrik on Turkey

http://www.project-syndicate.org/commentary/markets-misread-erdogan-victory-by-dani-rodrik-2015-11

Global Debt Binge and Corporate Defaults

Given the endless stream of articles in the media about rising debt related problems in China and other emerging markets, it may come as a shock to many when they realize that US corporations account for the majority of the debt defaults that have taken place so far in 2015.
According to the FT:

http://www.ft.com/cms/s/0/40146b80-91bf-11e5-94e6-c5413829caa5.html

“Global debt markets are on the cusp of an unwelcome development with the number of companies defaulting on their obligations set to reach the century mark, driven largely by struggling US shale gas providers. Currently, 99 global companies have defaulted since the year began, the second greatest tally in more than a decade and only exceeded by the financial crisis which saw 222 defaults in 2009, according to Standard & Poor’s. US companies account for 62 of this year’s defaults.”

A Big Political Shift in Argentina

Argentine voters decide to bring to an end the disastrous reign of the Kirchner family. The Washington Post reports -

“The stunning opposition victory marks a major shift in Latin American politics, ending a dozen years of leftist rule, first by Nestor Kirchner and then his wife, Cristina Fernández de Kirchner, a tenure marked by increasingly fiery anti-American rhetoric and protectionist policies that isolated Argentina and diminished its influence in the hemisphere.”

UPDATE:

Can Argentine President-elect Mauricio Macri deliver on his promises?
http://www.dw.com/en/macri-the-argentine-neoliberal-who-promised-a-lot/a-18870142

M-Pesa and Africa’s Mobile Payment Revolution

An excellent report from CBS 60 Minutes:

http://www.cbsnews.com/news/future-of-money-kenya-m-pesa-60-minutes/

View More: 60 Minutes News|Live News|More News Videos

Related:

Africa’s impressive mobile technology revolution continues –

According to the WSJ:

http://www.wsj.com/articles/startup-fuels-africas-mobile-payment-boom-1447876256

“A 30-person startup in an artsy corner of this city’s gritty core is making it easier for millions of Africans to send and receive money across borders by using their phones. Founded in 2009, MFS Africa has pioneered a mobile payment platform embraced by the continent’s biggest telecommunications operators, which count about 500 million customers combined.

Mobile phones are emerging as an essential payment device for Africans who increasingly trek across the continent and beyond seeking work. As they earn more money, they are looking for ways to move their cash quickly and easily.”

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As noted in the CBS 60 Minutes piece, the financial industry in the West is opposed to competition from mobile payment platforms that they don’t fully control, and they lobby hard to prevent fresh competition.

The Power of the Financial Industry Lobby in the US

http://www.imf.org/external/pubs/ft/fandd/2011/06/pdf/igan.pdf

A Good Investment Bet for 2016 – Emerging Markets

As reported by Bloomberg –

http://www.bloomberg.com/news/articles/2015-11-19/goldman-says-three-years-of-emerging-markets-doldrums-is-over

“After three years of disappointment, emerging markets are about to turn the corner, Goldman Sachs Group Inc. predicts….

Some countries are better positioned than others. While Colombia, South Africa, Turkey and Malaysia still need to tackle their current-account imbalances, Russia, India and Poland are among nations that have improved enough for their assets to rally, according to Goldman Sachs. Emerging-market currencies, which have tumbled this year, are no longer “expensive.”
The New York-based firm is joining a handful of investors who have become more upbeat about developing economies after their currencies fell to record lows and stocks trailed developed-market peers by 51 percentage points over the last three years. Franklin Templeton has said the selloff has opened up buying opportunities not seen for decades.”

Barclays is also suggesting that EM assets and commodities may have bottomed out
http://www.telegraph.co.uk/finance/12008830/Barclays-bets-on-stock-boom-as-world-money-growth-soars.html

Wall Street Tries to Attract Computer Scientists

The Financial Times reports:

http://www.ft.com/cms/s/0/856bd92c-8fb0-11e5-8be4-3506bf20cc2b.html
“So-called quantitative financiers, or “quants”, have for years come up with innovative, complex ways to analyse and trade on company earnings or economic releases. But thanks to huge gains in computing power and algorithmic research, they are now pushing into “unstructured data” like internet searches, social media, satellite images, earnings calls or weather patterns to find market signals and overlooked trading opportunities. To do so they need to deploy innovative, increasingly powerful quasi-artificial intelligence algorithms, ratcheting up demand for computer scientists to do coding that is beyond mathematicians and physicists. “Traders used to be first class citizens of the financial world, but that’s not true any more. Technologists are the priority now,” says Jared Butler, a headhunter at Selby Jennings. “It’s easier to hire a computer scientist and teach them the financial world than the other way around.””

Artificial Intelligence and the Future of Humanity

A fascinating piece from the New Yorker:
http://www.newyorker.com/magazine/2015/11/23/doomsday-invention-artificial-intelligence-nick-bostrom

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The Information Theory of Life: Polymath Christoph Adami on living things as self-perpetuating information strings.

https://www.quantamagazine.org/20151119-life-is-information-adami/

Global Currency Market Developments

Dollar’s Global Dominance as an Invoicing Currency
Harvard economist Gita Gopinath on dollar strength and US inflation:

http://www.project-syndicate.org/commentary/fed-interest-rates-dollar-appreciation-by-gita-gopinath-2015-11

Mrs. Watanabe and the Currency Carry Trade

Japanese retail investors shift focus to India:

http://in.reuters.com/article/2015/11/20/india-japan-investment-idINKCN0T905Q20151120

The Economist on the carry trade phenomenon –

http://www.economist.com/news/finance-and-economics/21583294-why-nominal-interest-rate-differentials-are-important-currency-markets-carry
UPDATE:

http://www.economist.com/news/finance-and-economics/21678813-monetary-policy-could-drive-currency-volatility-what-carry

Growth in Emerging Asia

Growth in Emerging Asia
Fed Vice Chairman and Former MIT Macroeconomist Stanley Fischer on Emerging Asia:
http://www.federalreserve.gov/newsevents/speech/fischer20151119a.pdf

China’s Economic Rebalancing

Yale economist Stephen Roach notes:

http://yaleglobal.yale.edu/content/china’s-new-economic-plan-tackles-rebalancing-puzzle

“… But there is a third area of focus in the new 13th Five-Year Plan that breaks from the recent past – a willingness to up the ante on the social safety net as a catalytic force in turbo-charging consumer-led rebalancing. While the 12th Five-Year Plan was effective in laying the groundwork for this transformation – mainly by boosting the personal income share and fostering an increasingly services-based industrial structure of the Chinese economy – it was not effective in moving the needle on private consumption. Services are now more than 51 percent of Chinese GDP – up markedly from the 44 percent share at the onset of the 12th Five-Year Plan in 2011 – but private consumption has only inched up to 37 percent of GDP from 35 percent over the same time period. The disconnect between solid growth in services and labor income generation, juxtaposed against minimal growth in discretionary consumption, stems largely from understandable fears of an insecure future which continue to grip Chinese families. As a result, newfound income continues to be skewed more toward saving rather than spending; the saving rate of urban households exceeded 30 percent in 2014 – up significantly from the 24 percent rate a decade earlier.”

Mexico-US Migration Issue – An Extraordinary Development

As reported by the Wall Street Journal –

http://www.wsj.com/articles/mexican-immigration-to-u-s-reverses-1447954334

“Mexican Immigration to U.S. Reverses: More Mexicans are leaving the U.S. to return home than arriving, ending the largest wave of immigration in modern American history

For the first time since the 1940s, more Mexicans have been leaving the U.S. to return home than arriving, a reversal that brings down the curtain on the largest immigration wave in modern American history, according to a new study.

Mexican migration has been falling for some time. But the Pew Research Center figures released Thursday suggest that the surge in legal and illegal Mexican immigration that helped transform America—and remains a contentious issue on the presidential campaign trail—may have peaked for good.”

Finland and the Euro

Finland is facing intensifying economic challenges and the Euro may be partly to blame -
http://www.telegraph.co.uk/finance/12001895/Finlands-depression-is-the-final-indictment-of-Europes-monetary-union.html

The Global Economy - EMs, The Dollar and Global Growth

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Don't Rule Out the BRICs by Mohamed A. El-Erian

http://www.bloombergview.com/articles/2015-11-17/don-t-rule-out-the-brics

El-Erian observes:

“If anything, the BRICS concept (expanded to include South Africa a few years ago) is becoming more notable because these countries are demonstrating an increasing willingness to take on a global system that they consider to be excessively (and unjustifiably) dominated by Europe and the U.S. And when they repeatedly fail in working with other powers to secure reasonable changes -- such as the long-delayed reforms to the governance, representation and some of the nationality-driven practices of the International Monetary Fund and the World Bank -- they no longer hesitate to pursue change by establishing new institutions (the Asian Infrastructure Investment Bank).”

Big Buildup in US Business Inventories

American businesses are building up their product inventories – this might reduce production in the fourth quarter and reduce GDP growth rate:

http://blogs.wsj.com/economics/2015/11/13/businesses-are-stocking-more-than-theyre-selling-what-does-it-mean/

The WSJ is also reporting that:

http://www.wsj.com/articles/quiet-u-s-ports-spark-slowdown-fears-1447583406

“America’s busiest ports are sending a warning about the U.S. economy.

For the first time in at least a decade, imports fell in both September and October at each of the three busiest U.S. seaports, according to data from trade researcher Zepol Corp. analyzed by The Wall Street Journal. … The declines came during a stretch from late summer to early fall known in the transportation world as peak shipping season, when cargo volumes typically surge through U.S. ports. It is a crucial few months for the U.S. economy as well: High import volumes can signal a confident view on the economy among retailers and manufacturers, while fears of a slowdown grow when ports are quiet.”

Enlightened Analysis of the Middle East Mess and the Global Terrorism Challenge

Brahma Chellaney’s call for review of strategic thinking in the West

http://www.project-syndicate.org/commentary/intervention-fuels-anti-west-terror-attacks-by-brahma-chellaney-2015-11

Chellaney wisely notes:

“More important, they [the West] should recognize that the war on terror cannot credibly be fought with unsavory allies, such as Islamist fighters or fundamentalist-financing sheikhdoms. The risk of adverse unintended consequences – whether terrorist blowback, as in Paris, or military spillovers, as in Syria – is unjustifiably high.”

Roger Cohen’s take on the Middle East mess:
http://www.nytimes.com/2015/08/28/opinion/roger-cohen-middle-eastern-zen.html

Japan – Back in a Recession (It is No Big Deal)

Given that Japan's potential GDP growth rate is only around 0.5%, the fact that its economy often falls into negative growth territory should not be shocking:
http://www.telegraph.co.uk/finance/economics/11997884/Japan-returns-to-recession-but-hopeful-signs-suggest-recovery-is-on-its-way.html

There are, however, long-term structural challenges facing the Japanese economy:
http://www.economist.com/news/finance-and-economics/21677648-despite-shinzo-abes-best-efforts-japans-economic-future-will-be-leap

A 21st Century English Degree

At Purdue, even the English majors are quants –

http://fredrikdeboer.com/2015/11/14/what-goes-on-in-english-departments/

Fredrik deBoer writes:
“Within Purdue’s English department, you have people who, like me, are primarily quantitative researchers. I spent my last several years there working in assessment theory, spending a healthy amount of my time taking graduate statistics courses and learning the ins and outs of algorithmic approaches to language research. This learning was not only not resisted by my faculty or department, but was widely and enthusiastically supported. My friend Xun, one of the most brilliant quantitative minds I’ve ever interacted with, spent his career as an English PhD student at Purdue almost exclusively working in testing theory, psychometrics, and statistics. He’s since gone on to a great job in another Big Ten school. My friend Ploy is working on her dissertation now, having pursued a similar path. Many other students in the department pursue some engagement with quantification, mixing it with more traditional English methodologies, learning skills that they may have to apply in their research or their administrative service in the future. Though I have occasionally received skepticism from people in my broader field about this work, I in fact find that the overwhelming response has been positive and receptive.”

India versus China – Who Will Lead the EM Growth Race?

An interesting piece by Tom Stevenson in The Telegraph:

http://www.telegraph.co.uk/finance/economics/11996092/Why-does-India-still-play-second-fiddle-to-China.html

Tom Stevenson notes:

“For a few reasons, I think investors are right to view India as the emerging market of choice. First, unlike many developing countries, India is not a hostage to the ebb and flow of the Chinese economy. As a net importer of commodities, India is a beneficiary of today’s low metal and energy prices. China may be India’s second-biggest destination for exports but it is way behind the US as a destination for Indian goods and services. Second, India’s economic development is years behind China’s, with enormous potential for catch-up. While the Middle Kingdom suffers slowing growth as it navigates a difficult transition from an export and investment-led economy to one fuelled by domestic consumption, India’s potential growth keeps rising. Goldman Sachs recently predicted that India could grow at an average of 9pc between 2016 and 2020 if it makes progress on structural reforms to its labour market, infrastructure and education.”

The Flattening of the Phillips Curve

The Economist observes –

http://www.economist.com/news/united-states/21678231-wage-growth-last-accelerating-living-standards-will-continue-stagnate-looking

“This has cast doubt on the conventional wisdom that a tight labour market leads firms to bid up wages, resulting in higher inflation. Lael Brainard, a Fed governor, recently declared that, unlike some of her colleagues, she views the labour market as an insufficient bellwether for price rises. The link between unemployment and wage growth—the so-called “wage Phillips curve”—has flattened in recent years, for several reasons. One is low participation in the labour market. At just under 81%, the proportion of 25- to-54-year-olds in the labour force is lower than at any time since 1984. For men, the labour-force participation rate is lower than in supposedly sclerotic France or social-democratic Sweden. Many of these potential workers gave up looking for a job during the long hangover from the financial crisis. As a result, the fraction of 25-to-54-year-olds with jobs has recovered only about halfway to its pre-recession peak. Inactive folk act as a brake on wage growth if better prospects can tempt them back into the labour force.”

Related:

Phillips Curve and Fed Monetary Policy

http://www.nytimes.com/2015/10/25/upshot/the-57-year-old-chart-that-is-dividing-the-fed.html

Phillips Curve in Recent Decades

http://www.wsj.com/articles/the-fed-has-a-theory-trouble-is-the-proof-is-patchy-1440352846

Fed and the Long Term Unemployed

http://www.wsj.com/articles/the-feds-conundrum-will-holding-down-rates-spark-inflation-without-helping-the-long-term-unemployed-1403059133

Influential Central Bankers

Bloomberg Markets Magazine profiles Fed Chairwoman Janet Yellen http://www.bloomberg.com/features/2015-markets-most-influential/#yellen

An older (2014) profile of Yellen in the New Yorker:

http://www.newyorker.com/magazine/2014/07/21/the-hand-on-the-lever

Yellen’s important speech on inflation dynamics:

http://www.federalreserve.gov/newsevents/speech/yellen20150924a.pdf

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Bloomberg Magazine profile of Bank of England’s iconoclastic chief economist Andy Haldane:

http://www.bloomberg.com/news/articles/2015-07-22/boe-s-haldane-plays-the-contrarian-to-carney-in-u-k-rate-debate

Three thought-provoking speeches by Haldane:

Labor Share of Income:

http://www.bankofengland.co.uk/publications/Documents/speeches/2015/speech864.pdf

Long-Term Growth:

http://www.bankofengland.co.uk/publications/Documents/speeches/2015/speech797.pdf

Who Owns a Company? http://www.bankofengland.co.uk/publications/Documents/speeches/2015/speech833.pdf

Inequality, Economic Growth and Redistribution - Complicated Issues

Why focus on inequality?

According to noted NYU development economist Debraj Ray:

http://www.econ.nyu.edu/user/debraj/Papers/Uneven.pdf

“Albert Hirschman’s tunnel parable is useful (Hirschman and Rothschild, 1973). I present a slightly altered version. You’re in a multi-lane tunnel, all lanes in the same direction, and you’re caught in a serious traffic jam. After a while, the cars in the other lane begin to move. Do you feel better or worse? At first, movement in the other lane may seem like a good sign: you hope that your turn to move will come soon, and indeed that might happen. You might contemplate an orderly move into the moving lane, looking for suitable gaps in the traffic. However, if the other lane keeps whizzing by, with no gaps to enter and with no change on your lane, your reactions may well become quite negative. Unevenness without corresponding redistribution can be tolerated or even welcomed if it raises expectations everywhere, but it will be tolerated for only so long. Thus, uneven growth will set forces in motion to restore a greater degree of balance, even (in some cases) actions that may thwart the growth process itself.”

Drivers of Income Inequality – Branko Milanovic considers the reasons “why income inequality has risen over the past quarter-century instead of falling as expected”

Original 1965 Simon Kuznets paper: https://www.aeaweb.org/aer/top20/45.1.1-28.pdf

2014 IMF Discussion Note - Redistribution, Inequality, and Growth by Jonathan D. Ostry, Andrew Berg, and Charalambos G. Tsangarides

Rethinking Economic Growth in a Globalizing World: An Economic Geography Lens by Anthony J. Venables

Redistribution is tricky – Inequality vs. Growth

http://www.economist.com/news/finance-and-economics/21597931-up-point-redistributing-income-fight-inequality-can-lift-growth-inequality

The Political Economy of Redistribution

Hypothesis: As income inequality rises, support for redistribution falls.

http://www.newyorker.com/news/john-cassidy/is-support-for-income-redistribution-really-falling

Ethics of Redistribution – It’s Complicated

Economists V. V. Chari and Christopher Phelan examine the ethics of redistribution

https://www.minneapolisfed.org/~/media/files/pubs/region/15-09/region-sept2015-epp-on-the-ethics-of-redistribution.pdf

Global Economic Developments

The World Economy – Still Stuck in Crisis Mode

http://www.economist.com/news/briefing/21678215-world-entering-third-stage-rolling-debt-crisis-time-centred-emerging

Global Commodity Markets

http://www.economist.com/news/finance/21678198-once-prices-are-responding-supply-and-demand-not-opec-why-market

India’s Property Sector - Easier Entry for Foreign Investors [India’s Most Significant FDI Reform of 2015]

http://www.bloombergview.com/articles/2015-11-11/modi-s-festive-offering-can-revive-indian-property

International Monetary Issues

Chinese Renminbi to gain reserve currency status

http://www.bloomberg.com/news/articles/2015-11-13/imf-staff-recommend-yuan-be-included-in-reserve-currency-basket

Why a Return to Gold Standard May Not be Feasible [Commentary by Greg Ip of WSJ]

http://blogs.wsj.com/economics/2015/11/12/greg-ip-what-republicans-get-wrong-about-the-gold-standard/

Puerto Rico’s Debt Tragedy

Puerto Rico is short of options as it faces a mounting debt crisis:

http://www.bloomberg.com/news/articles/2015-11-12/puerto-rico-is-running-out-of-options

Related:

http://vivekjayakumar.blogspot.com/2015/08/puerto-rico-debt-crisis-primer.html

http://vivekjayakumar.blogspot.com/2015/04/puerto-rico-in-search-of-new-growth.html http://vivekjayakumar.blogspot.com/2015/11/puerto-rico-and-americas-antiquated.html

ECB Tries to Drive Down the Value of the Euro

ECB is hoping that a cheaper currency will boost exports to the rest of the world:

http://www.cnbc.com/2015/11/12/fed-draghi-smacks-down-the-euro.html

Apparently, American politicians are not offended when Europeans actively seek to depreciate their currency:

China’s Singles Day – World’s Biggest Online Shopping Event

A made up holiday becomes an economic event of note:

http://www.nytimes.com/2015/11/12/business/international/china-singles-day-shopping-alibaba.html

The World's Most Expensive Gas Station

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Asset Bubbles in the 1800s

Electricity and the Asset Bubble of the late 1800s

http://www.theatlantic.com/technology/archive/2015/11/light-bulbs-tech-bubble/414966/

International Affairs - Interesting Items

Is EU Headed for Disintegration?

http://www.newstatesman.com/politics/uk/2015/11/crisis-without-end

Dani Rodrik on Turkey and the Financial Markets

http://www.project-syndicate.org/commentary/markets-misread-erdogan-victory-by-dani-rodrik-2015-11

Shlomo Ben-Ami on the Israeli-Palestinian Conflict

http://www.project-syndicate.org/commentary/palestine-knife-attacks-temple-mount-by-shlomo-ben-ami-2015-11

India Undertakes Eases FDI Rules

http://www.livemint.com/Politics/hFxrlK1WGYX2oZ0Iplw4BM/Govt-eases-FDI-norms-in-15-major-sectors.html