International Affairs and the Global Economy

Is global economic coordination feasible?

Raghuram Rajan - The global monetary non-system

China’s – A Global Power?

Justin Yifu Lin - China’s grand Silk Road vision

Can China’ economic development model be exported?

Francis Fukuyama - Exporting the Chinese model of development

Are international sanctions effective?

Kofi A. Annan & Kishore Mahbubani - Rethinking the sanctions regime

Year End Review

An interesting historical perspective from Ambrose Evans-Pritchard:

http://www.telegraph.co.uk/finance/economics/12074226/The-worlds-political-and-economic-order-is-stronger-than-it-looks.html

AEP notes –

“Yes, the world is a mess, but it has always been a mess, forever climbing the proverbial wall of political worry even in its halcyon days. So let us drink a new year's toast with a glass at least half full.”

A hilarious take on the major events of 2015 by Dave Barry:

https://www.washingtonpost.com/lifestyle/magazine/dave-barrys-year-in-review-the-sad-thing-is-were-not-making-this-up/2015/12/20/5a55390a-993c-11e5-94f0-9eeaff906ef3_story.html

Bad Weather Adds to Puerto Rico's Woes

Personalized Tax Rules for the Rich

A NYT piece notes:

http://www.nytimes.com/2015/12/30/business/economy/for-the-wealthiest-private-tax-system-saves-them-billions.html

“With inequality at its highest levels in nearly a century and public debate rising over whether the government should respond to it through higher taxes on the wealthy, the very richest Americans have financed a sophisticated and astonishingly effective apparatus for shielding their fortunes. Some call it the “income defense industry,” consisting of a high-priced phalanx of lawyers, estate planners, lobbyists and anti-tax activists who exploit and defend a dizzying array of tax maneuvers, virtually none of them available to taxpayers of more modest means.”

Related: http://www.nybooks.com/articles/2016/01/14/parking-the-big-money/

Economics of Star Wars

A great column by Michael Hiltzik in The Los Angeles Times:

http://www.latimes.com/business/hiltzik/la-fi-mh-star-wars-the-force-awakens-stinks-20151226-column.html

Hiltzik observes:

“ …"Star Wars" transformed Hollywood economically, by establishing a blockbuster mentality--and especially a mentality based on blockbusters made for teens. It wasn't the first film to do so; "Jaws," released in 1975, was a pioneer. But "Star Wars" outdrew "Jaws," and the opportunities to exploit the product commercially were much greater.

Ever since then, blockbusters have dominated studio economics and big mainstream movies have gotten stupider. "Titanic," "Avatar," and "Prometheus" are professionally turned-out and entertaining enough for the two to three hours that one sits in the theater watching them and they mint money. But they don't have a coherent thought in their heads, despite the intellectual veneer decorating some of them.”

Technology and the Future

Growing Uneasiness Regarding Artificial Intelligence

http://www.washingtonpost.com/sf/national/2015/12/27/aianxiety/

The Digital Dissenters -

http://www.washingtonpost.com/sf/national/2015/12/26/resistance/

Sunday Readings

FT Weekend Interview - Jeremy Clarkson (former host of Top Gear)
http://www.ft.com/intl/cms/s/2/51d53176-a4be-11e5-97e1-a754d5d9538c.html

Summary of recent psychology research:
http://www.newyorker.com/science/maria-konnikova/the-six-most-interesting-psychology-papers-of-2015

Currency Depreciation and Net Exports

An interesting WSJ piece - Why Weak Currencies Have a Smaller Effect on Exports

http://www.wsj.com/articles/why-weak-currencies-have-a-smaller-effect-on-exports-1451243289

Related:

Paradigm lost: Rethinking international adjustments [Speech by Benoît Cœuré, Member of the Executive Board of the ECB]

https://www.ecb.europa.eu/press/key/date/2015/html/sp151121.en.html

Assortative Mating and Rising Inequality

Tyler Cowen on Assortative Mating and Rising Inequality

http://www.nytimes.com/2015/12/27/upshot/marriages-of-power-couples-reinforce-income-inequality.html

Assortative Mating and the US Marriage Market

The Economist notes –

http://www.economist.com/news/united-states/21679220-most-americans-would-get-married-if-only-they-could-find-someone-suitable-demand-meet

“While fewer women are marching to the altar—the proportion of those married before the age of 30 has fallen from 50% in 1960 to around 20% today—the ones that do increasingly look like Leah. Highly educated, financially independent women were once among the least likely to get hitched. Now they are getting married at a faster rate than their lesser-educated peers, and often to highly educated men. These unions are not only the most common, but also the most harmonious. New data show that America’s divorce rate has continued its plunge from its 1981 peak—from 5.3 to 3.2 divorces per 1,000 people in 2014—but this decline is largely concentrated among the better-educated. Among college graduates who married in the early 2000s, only around 11% divorced within seven years, according to data from Justin Wolfers of the University of Michigan.”

Related:

Interesting results from a Spanish study:

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/12/18/in-love-opposites-dont-attract-and-thats-a-big-problem-for-inequality/
People selecting spouses primary from their their own 'class' (determined by income/education level) has significant effect on future generations. The above post notes:

“The tendency of people to marry someone similar, which economists call "assortative mating," is one of the most important factors in determining how wealth is distributed throughout a society and whether children are born with genuinely equal opportunities to succeed.”

A Cash-Free Society?

Sweden gets closer to achieving a cash-free society:

http://www.nytimes.com/2015/12/27/business/international/in-sweden-a-cash-free-future-nears.html

A Clever Business Idea

A fantastic case study of marketing: How Daniel Wellington Made a $200 Million Business Out of Cheap Watches

http://www.bloomberg.com/news/articles/2015-07-14/how-daniel-wellington-made-a-200-million-business-out-of-cheap-watches

Bloomberg piece: “Relying almost entirely on sly social media promotion, founder Filip Tysander is making a killing selling inexpensive, Chinese-built timepieces (that look fancy)”

Foldscope and Frugal Science

A fascinating piece in the New Yorker – Through the Looking Glass: Can a cheap, portable microscope revolutionize global health?

http://www.newyorker.com/magazine/2015/12/21/through-the-looking-glass-annals-of-science-carolyn-kormann

International Affairs – Interesting Items

Middle East Mess

The Syrian Debacle - Seymour Hersh’s extraordinary piece [Easily, the most insightful and original piece of reporting on the Syrian mess]

http://www.lrb.co.uk/v38/n01/seymour-m-hersh/military-to-military

Columbia economist and world-renowned development expert Jeffrey Sachs on the fundamental drivers of political and economic chaos in the Middle East:

http://www.project-syndicate.org/commentary/middle-east-sustaining-development-by-jeffrey-d-sachs-2015-12

Saudi Arabia and Islamic Terrorism

http://www.project-syndicate.org/commentary/saudi-arabia-war-on-terrorism-by-brahma-chellaney-2015-12

John Kerry – Profile

http://www.newyorker.com/magazine/2015/12/21/negotiating-the-whirlwind

Economic Impact of International Migration

An interesting WSJ piece:

http://www.wsj.com/articles/some-countries-see-migrants-as-an-economic-boon-not-a-burden-1450881706

Institutional Development in China

Recently deceased Nobel Laureate Douglas North’s work on institutions continues to be relevant:

http://www.project-syndicate.org/commentary/china-institutional-change-douglass-north-by-andrew-sheng-and-xiao-geng-2015-12

Battery Technology and Renewable Energy

US Higher Education - Interesting Items

Harvard economist Greg Mankiw's op-ed on the factors affecting college tuition rates:

http://www.nytimes.com/2015/12/20/upshot/three-reasons-for-those-hefty-college-tuition-bills.html

Popularity of American Grad Schools Amongst International Students - Council of Graduate Schools Report
http://cgsnet.org/ckfinder/userfiles/files/2015_International_Graduate_Admissions%20Survey_FINAL.pdf

Entrepreneurship and Liberal Arts

The Limits of Scientific Inquiry

An extraordinary piece – A Fight for the Soul of Science

https://www.quantamagazine.org/20151216-physicists-and-philosophers-debate-the-boundaries-of-science/

“As we approach the practical limits of our ability to probe nature’s underlying principles, the minds of theorists have wandered far beyond the tiniest observable distances and highest possible energies. Strong clues indicate that the truly fundamental constituents of the universe lie at a distance scale 10 million billion times smaller than the resolving power of the LHC. This is the domain of nature that string theory, a candidate “theory of everything,” attempts to describe. But it’s a domain that no one has the faintest idea how to access.

The problem also hampers physicists’ quest to understand the universe on a cosmic scale: No telescope will ever manage to peer past our universe’s cosmic horizon and glimpse the other universes posited by the multiverse hypothesis. Yet modern theories of cosmology lead logically to the possibility that our universe is just one of many.”

International Finance – Recent Developments

Goldman Sachs predicts oil hitting $20 a barrel

http://www.cnbc.com/2015/12/17/goldman-sachs-expects-oil-prices-to-fall-further-as-opec-stands-pat.html

Ukraine defaults on some of its debt obligations

http://www.bloomberg.com/news/articles/2015-12-18/ukraine-defaults-on-3-billion-russia-bond-as-court-battle-looms

Brazil – Finance minister is replaced

http://www.bloomberg.com/news/articles/2015-12-18/brazil-finance-minister-levy-said-to-be-replaced-by-barbosa

South Africa – Three finance ministers in one week

http://www.economist.com/news/middle-east-and-africa/21684043-investors-are-hoping-south-africas-latest-finance-minister-can-steady-ship-south

BOJ fine tunes its on-going QE program

http://www.economist.com/news/finance-economics/21684516-central-bank-joins-effort-get-japanese-companies-spend-their-cash

The Rising Global Impact of China’s Consumer Class

China’s insatiable appetite for pork shakes Spanish industry:

http://www.nytimes.com/2015/12/02/world/europe/spains-prized-iberico-hams-cant-cure-fast-enough-for-china.html

“In fact, the Chinese appetite for Spanish pork stretches all the way down its production chain, including innards that Spanish companies struggle to export to many Western countries. Fresh pork exports to China from Spain — including heads, ears and other parts — rose 35 percent last year, making it the second-largest market in volume after neighboring France, according to figures from the Spanish Meat Export Office.”

Argentina's Economic Reboot

Argentina's new government liberalizes the currency regime and Peso drops sharply:
http://www.bloomberg.com/news/articles/2015-12-17/argentine-peso-plunges-29-as-macri-fulfills-free-float-promise

The Anti-Climactic Fed Rate Hike

As expected, the Fed hiked interest rates:

http://www.bloomberg.com/news/articles/2015-12-16/fed-ends-zero-rate-era-signals-4-quarter-point-2016-increases

Was Germany Responsible for the Eurozone Crisis?

Oxford economist Simon Wren-Lewis argues that Germany bears significant responsibility for the Eurozone crisis:

http://www.independent.co.uk/voices/who-is-responsible-for-the-eurozone-crisis-the-simple-answer-germany-a6771536.html

My own 2012 piece on the Eurozone crisis can be found here:
https://www.ut.edu/uploadedFiles/Academics/Business/Economics/Tampa%20Bay%20Economy%20Summer%20Fall%202012_web.pdf

China - The Long View

FT columnist David Pilling offers a big picture perspective on China – “The doomsayers have it wrong about China”. [gated version]

http://www.ft.com/cms/s/0/e228304a-a345-11e5-bc70-7ff6d4fd203a.html

Pilling wisely notes:

“It is easy to imagine China’s economic freight train going off the rails. When I came to Asia 14 years ago, many people in Japan, where the economy was then three times the size of China’s in nominal terms, were predicting precisely that. Surely, they reasoned, the system must crumble under its own contradictions. …

The conclusion, however, that the inherent stresses would lead to social chaos and bring the system crashing down was born of wishful thinking. It underestimated the Communist party’s achievements in bringing tangible improvements to the lives of hundreds of millions of people. It underestimated, too, the strength of its patriotic message: that, after more than 100 years of humiliation, China had, finally, in the words of Mao Zedong, “stood up”. Instead of collapsing, by some measures China has gone from strength to strength. Its output is more than twice the size of Japan’s. In purchasing-power parity terms, it overtook the US last year, making it the world’s biggest economy. In just 15 years, its gross domestic product per capita has jumped from 8 per cent of the US level to 25 per cent.”

Predicting Financial Crises - A Tricky Endeavor

Is a financial crisis on the horizon?
http://www.telegraph.co.uk/finance/economics/12052433/Third-Avenue-could-be-the-event-that-will-finally-explode-the-post-crisis-asset-bubble.html

2016 - Annus horribilis?
http://www.bloomberg.com/graphics/pessimists-guide-to-2016/
(Frankly, 2015 was a horrible year ... not sure how 2016 could be worse?

Djibouti – Africa’s Dubai?

An interesting BBC report:

http://www.bbc.com/travel/story/20151118-is-africa-getting-a-dubai

[Includes stunning photographs]

Monetary Economics - Important Issues

Low Inflation or Deflation Fears Overstated?

Greg Ip of the WSJ notes:

http://www.wsj.com/articles/greg-ip-beware-an-inflation-scare-1450127231

"…But fear of superlow inflation or even deflation may be getting out of hand. Goldman Sachs calculates that the fixed-income markets are projecting 32% odds that inflation remains below 1% for the next five years—which seems far too pessimistic. “We’re not inflation hawks,” says Charles Himmelberg, chief credit strategist at Goldman. “Inflation pressures are very well contained. That is distinct from saying deflation is a big risk now.””

Related:

Persistence of Low Inflation Rates

http://www.wsj.com/articles/the-mystery-of-missing-inflation-weighs-on-fed-rate-move-1450056838

Asset Prices and the Fed:

http://www.wsj.com/articles/as-commercial-real-estate-prices-soar-fed-weighs-consequences-1449885225

---

MONETARY HISTORY

Neil Irwin takes the long view on interest rates in the US:

http://www.nytimes.com/2015/12/15/upshot/why-very-low-interest-rates-may-stick-around.html

“… But the lessons of history do offer this guidance: Whether rates will be high or low a few years from now has very little to do with what the Fed does this week. It has quite a lot to do with what happens to forces deep inside the economy that are poorly understood and extremely hard to forecast. And just because many people are old enough to remember the high inflation and high rates of the 1970s and 1980s doesn’t mean that is the normal to which the economy will inevitably revert”.

US Inflation Rates Since 1775:

http://blogs.wsj.com/economics/2015/12/14/a-brief-history-of-u-s-inflation-since-1775/

Big Week for the Fed and the Oil Market

Fed expected to finally raise rates on Dec 16:

http://www.telegraph.co.uk/finance/economics/12048511/Why-the-coming-US-interest-rate-hike-is-like-none-ever-witnessed-before.html

http://www.wsj.com/articles/the-mystery-of-missing-inflation-weighs-on-fed-rate-move-1450056838

(Despite all the hoopla surrounding the rate liftoff, the critical issue is the projected rate path for 2016)

How low will crude oil prices go?

http://www.bloomberg.com/news/articles/2015-12-14/oil-falls-below-35-in-new-york-for-first-time-since-2009

Weekend Readings - 12/12

Finland’s Universal Basic Income Plan – an interesting economic experiment:

http://www.theguardian.com/commentisfree/2015/dec/10/finland-universal-basic-income-ubi-social-security

Turkey’s Increasingly Wobbly Democracy - Der Spiegel interviews Turkish author Elif Shafak:

http://www.spiegel.de/international/world/turkish-author-elif-shafak-on-society-under-erdogan-a-1066223.html

Shopping in Venezuela – Apparently, a very unpleasant experience:

https://www.washingtonpost.com/news/worldviews/wp/2015/12/11/the-special-weird-misery-of-being-a-shopper-in-venezuela/

Chinese Renminbi and the Global Monetary System

A well-written piece by economist Paola Subacchi:

http://www.project-syndicate.org/commentary/renminbi-international-currency-in-the-making-by-paola-subacchi-2015-12

“It is important to note, however, that China’s leaders do not seem to be angling for the renminbi to replace the dollar as the dominant international currency. Their approach – based on the belief that a more diversified, and thus more liquid, international monetary system would contribute to a more balanced and less volatile global economy – is more pragmatic. Anticipating a shift from a dollar-based (and, more broadly, US-dominated) system toward a multi-currency, multipolar system, China’s leaders are laying the groundwork for their country (and its currency) to grasp one of the positions at the top, alongside other great powers.”

PBOC to calculate daily reference rates based on a basket of currencies rather than just the US dollar:

http://www.wsj.com/articles/chinas-central-bank-signals-intention-to-loosen-yuans-peg-to-dollar-1449843879

Related:

Chinese currency to be added to the IMF SDR basket -

http://www.bloomberg.com/news/articles/2015-11-30/imf-backs-yuan-in-reserve-currency-club-after-rejection-in-2010

Implications of Renminbi's addition to the IMF's SDR basket

http://www.cnbc.com/2015/11/28/imf-expected-to-include-yuan-in-sdr-currency-basket.html

Japan’s Big Bet on India

Growing economic and strategic relationship between India and Japan:

http://www.livemint.com/Politics/euHzlv8NTeObxqfip7FYYJ/India-Japan-sign-MoU-on-civil-nuclear-energy-defence-techn.html

“On the economic front, Japan said it will provide $12 billion of soft funding to build India’s first bullet train besides another $12 billion as an incentive package for Japanese companies investing in India. As part of its overseas assistance package, Japan would lend India $400 billion yen, or $3 billion, for various projects. It will also participate in big ticket infrastructure projects in India, including the $5.5 billion Chennai-Bengaluru corridor project.”

Related:

http://www.bloomberg.com/news/articles/2015-12-10/abe-looks-to-cash-in-on-modi-friendship-as-china-dominates-trade

http://www.economist.com/news/asia/21679756-leaders-india-and-japan-admire-each-other-and-fear-china-their-friendship-will-affect

http://www.livemint.com/Opinion/yoDbATculxoLxfwhlzSL8N/The-AbeModi-connect.html

Economic Mobility in the US

Interesting charts:
http://www.bloomberg.com/news/articles/2015-12-10/here-s-how-much-the-u-s-middle-class-has-changed-in-45-years

Science and Society

Technology, Computer Science and Modern Society:

http://www.theatlantic.com/technology/archive/2015/12/the-moral-failure-of-computer-science/420012/

http://www.wsj.com/articles/in-belgium-an-encryption-powerhouse-rises-1449791014

An Interesting Piece on Cancer Treatment by Malcolm Gladwell:

http://www.newyorker.com/magazine/2015/12/14/tough-medicine

Urbanization and Economic Development

A neat WSJ piece:

http://www.wsj.com/articles/as-world-crowds-in-cities-become-digital-laboratories-1449850244

Institutions, Corruption, Growth and Development

Corruption Is Just a Symptom, Not the Disease by DARON ACEMOGLU and  JAMES A. ROBINSON

http://www.wsj.com/articles/corruption-is-just-a-symptom-not-the-disease-1449174010

Related:

Why is Democracy Performing so Poorly? By Francis Fukuyama

https://fukuyama.stanford.edu/sites/default/files/basic-page/jod_article_jan_15_0.pdf

Is There a Proper Sequence in Democratic Transitions? By Francis Fukuyama

https://fukuyama.stanford.edu/sites/default/files/basic-page/current_history_sequencing.pdf

Corruption and (Lack of) Economic Growth in Southern Italy

http://www.nytimes.com/2012/10/08/world/europe/in-italy-calabria-is-drained-by-corruption.html

Democracy, Autocracy and Economic Development
https://www.washingtonpost.com/blogs/monkey-cage/wp/2014/12/29/economic-development-promotes-democracy-but-theres-a-catch/

Emerging Markets Update

China’s Economic Growth – Past and Future Drivers

An interesting short article by Linda Yueh in the Harvard Business Review:

https://hbr.org/2015/12/chinas-growth-a-brief-history

Ethiopia – Africa’s Manufacturing Hub
http://www.dw.com/en/low-wages-draw-international-textile-companies-to-ethiopia/a-18877027

Science Update

The Chinese Math Quartet - Rising Chinese stars in the Higher Mathematics

https://www.quantamagazine.org/20151208-four-mathematicians/

Harvard Physicist Lisa Randall

Commodity Crash and the Global Economy

An interesting piece from AEP:
http://www.telegraph.co.uk/finance/economics/12040314/Fear-grips-market-as-oil-leads-commodity-crash.html

Energy and Mining Companies Struggle
http://www.nytimes.com/2015/12/09/business/anglo-american-to-cut-85000-jobs-amid-commodity-slump.html

SEZs and Economic Development

Special Economic Zones (and Free Trade Zones) may reenergize Asian economies:

http://www.cnbc.com/2015/12/07/asia-needs-more-special-economic-zones-to-beat-trade-slowdown-adb.html

Report from the Asian Development Bank - ASIAN ECONOMIC INTEGRATION REPORT 2015

http://www.adb.org/sites/default/files/publication/177205/asian-economic-integration-report-2015.pdf

Fed Actions - Global Spillover Effects

Hélène Rey on the spillover effects of Fed actions:

http://www.nytimes.com/2015/12/08/business/dealbook/economists-criticism-of-federal-reserve-policies-gains-ground.html

Profile of Hélène Rey:

http://www.imf.org/external/pubs/ft/fandd/2015/06/pdf/people.pdf

100 Greatest British Novels

A BBC ranking that is bound to generate controversy - the greatest British novels of all time:
http://www.bbc.com/culture/story/20151204-the-100-greatest-british-novels

OECD Tax Comparison Tool

Voter Susceptibility and Politics

A great piece - Politicians Talk Nonsense Because It Works by Cass R. Sunstein

http://www.bloombergview.com/articles/2015-12-07/politicians-talk-nonsense-because-it-works

Sunstein notes:

“Pennycook and his colleagues also investigated the individual characteristics that lead people to regard baloney as profound. Not surprisingly, they found that people are more receptive to it if they do less well on measures of analytical thinking, such as numeracy and verbal intelligence. They also found that people are more open to this stuff if they also hold paranormal beliefs, endorse alternative medicine or accept conspiracy theories….

The paper downplays an important reason for the effectiveness of this kind of thing, which is how it makes people feel. Pseudo-profound statements work when they make people feel that they are being given access to a deep secret: They produce a kind of awe, even reverence, and so it’s all the better if the meaning of those statements is unclear. When it is effective, political baloney makes people feel that they are listening to someone firm, confident and strong. The vagueness of the statement isn’t a problem; what matters is the favorable emotion that it produces.”

Social Classes in Britain

A fascinating new survey on social class structure in modern day United Kingdom:

http://www.telegraph.co.uk/news/uknews/12037247/the-seven-social-classes-of-21st-century-britain-where-do-you-fit-in.html

One interesting tidbit:

“The elite are more obsessed with class than anyone else.
Elite - This is the wealthiest and most privileged group in the UK. They went to private school and elite universities and enjoy high cultural activities such as listening to classical music and going to the opera.”

European Business School Rankings - 2015

FT's rankings of European Business Schools:
http://im.ft-static.com/content/images/81b920b4-98ac-11e5-95c7-d47aa298f769.pdf

World’s Economic Future Depends on Emerging Markets

An excellent piece by Liam Halligan in The Telegraph:

http://www.telegraph.co.uk/finance/comment/12035075/Why-emerging-markets-will-rise-from-gloom-to-boom.html

Halligan observes:

“Marketing spiel aside, it is certainly true that EM currencies have tumbled as the dollar has strengthened, which not only makes shares relatively cheap but has also helped various countries to tackle current accounts deficits that had previously made investors nervous. …

As a life-long EM watcher, I care far less about timing the turning of the cycle than I do about the long-term trend….The EMs account not just for 75pc of humanity, but also 70pc of global currency reserves and 55pc of global GDP – up from just 30pc a decade ago.”