Economics and International Affairs Blog: July 2018

“As income and wealth shift from the West to the East, China will increasingly be able to challenge the US as the world’s leading geopolitical, economic, and technological power.

This transition will not happen smoothly. For Europe, the stakes could not be higher. The rebalancing of power that is already underway could determine the fate of Europe’s democracies, welfare states, independence, and way of life. If Europe does not prepare itself, it will be left with no other choice than to become a dependent of either America or China – Atlanticism or Eurasianism.

Europeans should not count on existing alliances and rules to offer much protection during this period.”

Global Japan

https://www.bloomberg.com/view/articles/2018-07-30/japan-goes-global-as-the-u-s-looks-inward

Bloomberg’s Noah Smith notes:

“Between increased openness, corporate and social reform, and a recognition of its hidden strengths, Japan isn’t laying down and succumbing to graceful decline. At a moment when many advanced democracies are stumbling, Japan is yet again finding its own path forward.”

Monday, July 30, 2018

US Trade Policy - Economic Reality versus Politics

Europe’s Trade Victory in Washington

https://www.project-syndicate.org/commentary/juncker-outmaneuvers-trump-in-trade-deal-by-simon-johnson-2018-07

https://www.independent.co.uk/news/world/americas/us-politics/trump-juncker-trade-us-eu-trade-tariffs-white-house-meeting-flashcards-a8467051.html

The US is at Risk of Losing a Trade War with China

https://www.project-syndicate.org/commentary/trump-loses-trade-war-with-china-by-joseph-e--stiglitz-2018-07

Nobel Prize winning economist Joseph Stiglitz notes:

“Beyond the true, but by now platitudinous, assertion that everyone will lose, what can we say about the possible outcomes of Trump’s trade war? First, macroeconomics always prevails: if the United States’ domestic investment continues to exceed its savings, it will have to import capital and have a large trade deficit. Worse, because of the tax cuts enacted at the end of last year, the US fiscal deficit is reaching new records – recently projected to exceed $1 trillion by 2020 – which means that the trade deficit almost surely will increase, whatever the outcome of the trade war. The only way that won’t happen is if Trump leads the US into a recession, with incomes declining so much that investment and imports plummet.”

Trump’s Tech Tariffs Are Awesome, for Southeast Asia
https://www.bloomberg.com/view/articles/2018-07-30/trump-s-tech-tariffs-are-awesome-for-southeast-asia

Saturday, July 28, 2018

Long Reads for the Weekend

How to teach happiness

https://www.newstatesman.com/politics/education/2018/07/how-teach-happiness

Obama Presidency – Cautious to a Fault

https://www.lrb.co.uk/v40/n15/david-runciman/the-impermanence-of-importance

Ivanka Trump, Jared Kushner and the Trump Presidency

https://www.nytimes.com/2018/07/28/us/politics/jared-ivanka-trump.html

Global Dominance of the English Language

https://www.theguardian.com/news/2018/jul/27/english-language-global-dominance

Jacob Mikanowski notes:

“From inauspicious beginnings on the edge of a minor European archipelago, it has grown to vast size and astonishing influence. Almost 400m people speak it as their first language; a billion more know it as a secondary tongue. It is an official language in at least 59 countries, the unofficial lingua franca of dozens more. No language in history has been used by so many people or spanned a greater portion of the globe. It is aspirational: the golden ticket to the worlds of education and international commerce, a parent’s dream and a student’s misery, winnower of the haves from the have-nots. It is inescapable: the language of global business, the internet, science, diplomacy, stellar navigation, avian pathology. And everywhere it goes, it leaves behind a trail of dead: dialects crushed, languages forgotten, literatures mangled.”

GDP Data Revisions and Recent Economic History [MUST READ]

Excited About GDP Number? Wait for the Revisions

https://www.bloomberg.com/view/articles/2018-07-27/revisions-in-2015-gdp-change-the-bigger-picture

Friday, July 27, 2018

US GDP Data

A note of caution regarding the advance estimate for 2018Q2 GDP:

www.washingtonpost.com/opinions/the-economys-great-that-doesnt-mean-trumponomics-is/2018/07/26/2327dd6e-910c-11e8-bcd5-9d911c784c38_story.html

Catherine Rampell correctly notes:

“There are a lot of idiosyncratic factors that juiced growth last quarter. One is that growth was relatively disappointing at the beginning of the year and was due for a rebound. Again, the numbers are noisy.

But another major factor is that businesses freaking out about Trump’s trade war likely pulled forward some of their activity. That is, as Morgan Stanley chief U.S. economist Ellen Zentner puts it, they “doomsday prepped” by stockpiling raw materials, intermediate goods and finished products before tariffs raised costs on all those things.

Soybean exports surged, for example, as companies raced to beat retaliatory tariffs that went into effect this month. The jump in soybean exports alone probably added 0.6 percentage points to GDP growth in the second quarter, estimates Ian Shepherdson, chief economist at Pantheon Macroeconomics.”

UPDATES:

Long-Term GDP Revisions:

https://www.nytimes.com/2018/07/27/business/economy/revised-gdp-report.html

GDP Isn’t Growing Fast Enough for Markets

https://www.bloomberg.com/view/articles/2018-07-27/gdp-isn-t-growing-fast-enough-for-markets

U.S. GDP Report Clears Path for Two More Fed Rate Hikes
https://www.bloomberg.com/view/articles/2018-07-27/u-s-gdp-report-clears-path-for-two-more-fed-rate-hikes

Thursday, July 26, 2018

Scientific Perspective on Climate Change

Climate change is supercharging a hot and dangerous summer

https://www.washingtonpost.com/national/health-science/climate-change-is-supercharging-a-hot-and-dangerous-summer/2018/07/26/cf960ba8-905c-11e8-bcd5-9d911c784c38_story.html

Record-breaking summer marches on to the beat of climate change

https://www.cnn.com/2018/07/23/world/global-heatwaves-climate-change-wxc/index.html

NASA: Climate change: How do we know?

https://climate.nasa.gov/evidence/

Trade Tariffs – History Lesson

A timely read:

https://www.theatlantic.com/politics/archive/2018/07/when-trump-country-turns-against-tariffs/566084/

Related:
Economist Walter E. Block makes an important point:

https://www.nytimes.com/2018/07/26/opinion/trump-tariffs-farmers-iowa-libertarian.html

“In reality, however, creating jobs alone does not make for a strong economy. What we really want is to increase production. And to achieve that, we need to allocate labor as efficiently as possible. One way to do that is to ensure that if other countries can make certain goods more efficiently than we can, we trade with them for these items, rather than manufacture them ourselves. The result is cheaper goods, which is to our advantage.

But tariffs do nothing to improve this efficient allocation of labor. They also do not increase or decrease employment. They just shift jobs around, and almost always in a manner that hurts the economy.”