Attention Economy


Thursday, August 31, 2023

The Politics of Public Debt


My take:
Fitch’s downgrade of US debt wasn’t a mistake — it was long overdue 
https://thehill.com/opinion/finance/4138215-fitchs-downgrade-wasnt-a-mistake-it-was-long-overdue/ 
America’s long-term fiscal sustainability challenge

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Interest Rates and the Housing Market

How can American house prices still be rising?
https://www.economist.com/finance-and-economics/2023/08/30/how-can-american-house-prices-still-be-rising
Mortgage payments are at their highest since the mid-1980s
 
To fix broken mortgage markets, look to Denmark
https://www.economist.com/leaders/2023/08/31/to-fix-broken-mortgage-markets-look-to-denmark 

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India's Growth Rebounds Even as China Struggles

India GDP growth hit 7.8% in April-June, fastest in a year
https://asia.nikkei.com/Economy/India-GDP-growth-hit-7.8-in-April-June-fastest-in-a-year
Economy accelerates on services, capex but coming months may bring headwinds
 
China’s Economy Shows Fresh Weakness in Factories, Housing and Consumer Spending
https://www.wsj.com/world/china/chinas-economy-shows-fresh-signs-of-weakness-in-factories-consumer-spending-ad46fa8a 

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Rise of the Global South

The Return of the Global South
https://www.foreignaffairs.com/world/return-global-south
Realism, Not Moralism, Drives a New Critique of Western Power 



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Canada Revises its Immigration Program

Canada has changed its permanent residence selection process. Here’s what to know
https://www.theglobeandmail.com/canada/article-permanent-residence-categories-international-students/ 

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India's Impressive Space Program

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State of the US Labor Market

Companies Are Using Fewer Temp Workers, but That Doesn’t Portend a Downturn
https://www.wsj.com/economy/jobs/companies-are-using-fewer-temp-workers-but-that-doesnt-portend-a-downturn-c40d3f5c
Related:

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Xi's Outdated Ideology

Xi’s Live-to-Work Ideology Is So 1960s
https://www.bloomberg.com/opinion/articles/2023-08-30/china-xi-jinping-s-live-to-work-ideology-alienates-youth
The generation gap between the president and China’s youth is vast. Does he even care?  

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Russians Drive Latest Dubai Real Estate Boom

Russians Are the Top Home Buyers from Dubai’s Biggest Developer
https://www.bloomberg.com/news/articles/2023-08-31/russians-are-top-emaar-property-buyers-as-demand-for-dubai-homes-stays-strong
 
Russian influx drives up rental prices in Dubai
https://www.bbc.com/news/business-65037061 

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Empire of Dust

Empire of dust: what the tiniest specks reveal about the world
https://www.theguardian.com/news/2023/aug/31/empire-of-dust-what-the-tiniest-specks-reveal-about-the-world
Nobody normally gives a second thought to dust, but it is inescapable. And if we pay close attention, we can see the biggest things – time, death and life itself – within these tiny floating particles 

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Wednesday, August 30, 2023

Are Canadian Stocks Worth Considering?

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Too Much Pessimism About China's Economy?


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Lessons From 2023 US Banking Crisis

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Hurricane Names Starting with an ‘I’

Hurricanes beginning with ‘I’ are the most retired storm names and Idalia could be next
https://www.cnn.com/2023/08/29/us/hurricane-names-i-idalia/index.html 

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UK Policy Debate – Wealth versus Income Taxation

The UK’s tax system entrenches inequality, stymies growth, and rewards a few at the expense of the many.
https://www.newstatesman.com/politics/economy/2023/08/britains-great-tax-con
One part of the country has lived through an asset boom. The other is living on wages that have not risen in real terms for 15 years, since before the 2008 financial crash. For those with assets, the crash is a distant memory. London house prices have risen inexorably since 2010, by 31 per cent after inflation. The FTSE 100 is 58 per cent higher after dividends. Real average weekly pay is, meanwhile, no higher today than in July 2006. Those who live in Asset Britain have no idea what Austerity Britain is like. 

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Seeking Math Geniuses - High-Paying Internships

Citadel Vets 69,000 Intern Applicants to Find Next Math Geniuses
https://www.bloomberg.com/news/articles/2023-08-28/how-much-can-hedge-fund-interns-earn-citadel-pays-19-000-a-month
Griffin’s financial empire is going all out in the battle for “truly exceptional” new hires.
 
Related:
https://nypost.com/2023/06/06/interns-at-ken-griffins-hedge-fund-earn-5k-a-week-free-housing/

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A Bifurcated Economy

Higher Interest Rates Are Splitting the Economy in Two
https://www.bloomberg.com/opinion/articles/2023-08-24/jackson-hole-higher-interest-rates-divide-the-us-economy-housing-market
Big corporations and existing homeowners reap the benefits as smaller companies and prospective homebuyers are on the outside looking in. 

Delinquencies rise for credit cards and auto loans, and it could get worse
https://www.washingtonpost.com/business/2023/08/30/delinquencies-credit-auto-loans/
More Americans are falling behind on their car loan and credit card payments than at any time in more than a decade, a troubling signal of consumer stress as higher prices and rising borrowing costs are squeezing household budgets.

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North American Higher Education Sector

Colleges hide the truth about tuition
https://www.washingtonpost.com/opinions/2023/08/30/high-college-tuition-marketing-tool/
Academia loves to play the moral tutor, especially by deploring unsavory capitalism. How to account, then, for its own practices regarding college costs? 

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Indian Startups


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Challenges Facing German Policymakers


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Tuesday, August 29, 2023

Evaluating Evidence

How the Possibility Grid Can Help You Evaluate Evidence Better
https://behavioralscientist.org/how-the-possibility-grid-can-help-you-evaluate-evidence-better/ 

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The Psychology Underlying the Crypto Phenomenon

The Paranoid Style in American Plutocrats
https://www.nytimes.com/2023/08/28/opinion/columnists/covid-climate-cryptocurrency-plutocrats.html
Paul Krugman:
Success all too easily feeds the belief that you’re smarter than anyone else, so you can master any subject without working hard to understand the issues or consulting people who have; this kind of arrogance may be especially rife among tech types who got rich by defying conventional wisdom…
Underlying the whole crypto phenomenon is the belief by some tech types that they can invent a better monetary system than the one we currently have, all without talking to any monetary experts or learning any monetary history. Indeed, there’s a widespread belief that the generations-old system of fiat money issued by governments is a Ponzi scheme that will collapse into hyperinflation any day now.
 
My take from May 2021:
https://thehill.com/opinion/finance/554998-is-bitcoin-the-future-of-money/
The problem with fictional scenarios, like the one painted in Shriver’s novel, as well as with the widespread belief that modern fiat money is purely based on a shared illusion, is that they ignore a key aspect of reality involving key fiat currencies. Major fiat currencies, in fact, have some derived “intrinsic value” due to their status as legal tenders — they are backed by the full faith and power of stable national governments and supported by an elaborate and sophisticated regulatory and financial system.
In her congressional testimony, legal scholar Katharina Pistor noted: “States that have their own currency, issue most of their debt in their own currency and under their own laws, and oversee financial intermediaries that also issue most of their debt in the currency of their home regulator. States ensure asset safety by putting the future productivity of their economies and taxpaying citizens on the line. They insure bank deposits (up to a ceiling) and they stand in for the sovereign debt they have issued.”
It would therefore require a state to utterly fail in some fiscal fashion (as was the case in Venezuela and Zimbabwe in recent years) for citizens to abandon faith in their currency. 

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Monday, August 28, 2023

Decline in College Wage Premium

Falling College Wage Premiums by Race and Ethnicity
https://www.frbsf.org/wp-content/uploads/sites/4/el2023-22.pdf
Workers with a college degree typically earn substantially more than workers with less education. This so-called college wage premium increased for several decades, but it has been flat to down in recent years and declined notably since the pandemic. Analysis indicates that this reflects an acceleration of wage gains for high school graduates rather than a slowdown for college graduates. This pattern is most evident for workers in racial and ethnic groups other than White, possibly reflecting an unusually tight labor market that may have altered their college attendance decisions.
 
Related:
https://thehill.com/opinion/education/590971-will-the-us-higher-education-bubble-finally-burst/ 

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The Case for Intelligent Failures

The big idea: why we need to learn to fail better
https://www.theguardian.com/books/2023/aug/28/the-big-idea-why-we-need-to-learn-to-fail-better
Amy Edmondson notes:
Intelligent failures are to be welcomed, because they point us forward towards eventual success. They shut down one path and force us to seek another. The category encompasses wildly different phenomena, ranging from, say, a tedious blind date to the failed clinical trial of a promising new treatment. People who design clinical trials minimise the risks as much as possible. But there is no way to ensure it all works out before the trial is launched. The same can be said of that blind date.
Many of today’s medical miracles – such as open-heart surgery to repair diseased vessels and valves – were once the impossible dreams of pioneers. Without their willingness to tolerate and learn from intelligent failures along the way, most of the life-saving advances we now take for granted would not exist.

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A Fundamental Shift in US Trade Policies

Biden’s course for U.S. on trade breaks with Clinton and Obama
https://www.washingtonpost.com/business/2023/08/27/biden-trade-trump/
President Biden is reshaping the U.S. approach to trade policy to focus on the needs of Americans as workers rather than consumers, breaking with 30 years of trade policy. 

Factories May Be Leaving China, but Trade Ties Are Stronger Than They Seem
https://www.nytimes.com/2023/08/29/business/economy/china-us-trade-supply-chain.html
The United States is trying to lessen its dependence on Chinese goods, but research is showing how tough it is to truly alter global supply chains.

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White-Collar versus Blue-Collar Jobs

In Reversal Because of A.I., Office Jobs Are Now More at Risk
https://www.nytimes.com/2023/08/24/upshot/artificial-intelligence-jobs.html
Technology disruption typically affected blue-collar occupations. Now white-collar workers may feel the brunt of changes.

Blue-Collar vs. White-Collar Pay: Why a Decadeslong Trend Is Flipping
https://www.wsj.com/video/series/wsj-explains/blue-collar-vs-white-collar-pay-why-a-decades-long-trend-is-flipping/8348F0FB-906A-44D1-8897-3CE3A885B206
Wages are outpacing inflation, driven largely by pay gains for low-income workers. Those gains have helped close the gap between blue- and white-collar workers. WSJ explains what’s driving the higher wages, and whether they will stick around. 


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AI and Future Wars

A.I. Brings the Robot Wingman to Aerial Combat
https://www.nytimes.com/2023/08/27/us/politics/ai-air-force.html
An Air Force program shows how the Pentagon is starting to embrace the potential of a rapidly emerging technology, with far-reaching implications for war-fighting tactics, military culture and the defense industry.
 
We Need AI Arms Control to Keep the New Cold War from Turning Hot
https://www.bloomberg.com/opinion/articles/2023-08-27/ai-arms-control-can-keep-the-new-cold-war-from-turning-hot 

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Quiet Cutting

You’ve Heard of Quiet Quitting. Now Companies Are Quiet Cutting.
https://www.wsj.com/lifestyle/careers/youve-heard-of-quiet-quitting-now-companies-are-quiet-cutting-ba2c326d
Layoffs are down, but employers are still finding ways to cut jobs 

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Sunday, August 27, 2023

Uncertainty Surrounds Rate Outlook

Why Central Bankers Are Unsure Whether They’ve Raised Rates Enough
https://www.wsj.com/economy/central-banking/why-central-bankers-are-unsure-whether-theyve-raised-rates-enough-aa57c648
 
‘No playbook’: policymakers face up to changing global economy at Jackson Hole
https://www.ft.com/content/9c60014d-2934-459f-af56-f71412ae8d7b 

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Demographics and Economic Development - The Case of Africa

Demography Is Destiny in Africa
https://foreignpolicy.com/2023/08/26/demographics-africa-sub-sahara-population-boom-growth-aging-gender-inequality-climate-change/
Rapid population growth is about to hit the countries whose economies and climates are least equipped to handle it.

Talking More About Condoms Is Good for Africa’s Economy
https://www.bloomberg.com/news/articles/2022-11-01/condoms-family-planning-are-key-to-nigeria-economic-growth    
Lowering birthrates is key to cutting poverty in the world’s most fertile population.
 
Africa's population will double by 2050 | The Economist
https://www.economist.com/special-report/2020/03/26/africas-population-will-double-by-2050
 
Africa’s Prospects for Enjoying a Demographic Dividend
https://www.nber.org/papers/w22560
 
Be Fruitful or Multiply: On the Interplay between Fertility and Economic Development
https://www.jstor.org/stable/20007749 

Related:
The Competition for Believers in Africa’s Religion Market
https://www.wsj.com/articles/the-competition-for-believers-in-africas-religion-market-66e5255d
On a continent whose growing population presents enormous opportunities for Christianity and Islam, both faiths are adapting to charismatic modes of worship and indigenous traditions. 
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Saturday, August 26, 2023

Supply, Demand, and Surplus Wine

France has too much wine. It’s paying millions to destroy the leftovers.
https://www.washingtonpost.com/world/2023/08/26/france-wine-surplus-drinking-less/
Ruining so much wine may sound ludicrous, but there’s a straightforward economic reason this is happening: Making wine is getting more expensive, and people are drinking less of it. 

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Insurance and Natural Disasters

Insurance companies are struggling to keep up with economic growth, population shifts, inflation trends and the most unpredictable variable of all: the rising prevalence of natural disasters—big and small
https://www.wsj.com/finance/insurance-catastrophe-reinsurance-hurricane-77a69eab 

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Consumer Spending Pattern Shifts Again

Consumers Are Spending Like It’s 2019
https://www.wsj.com/business/retail/consumers-are-spending-like-its-2019-dff7b8bc
Pandemic-driven binges recede as expenses mount and customers value experiences over goods 

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The R-star Debate

Hitch Your Wagon to R-Star
https://www.nytimes.com/2023/08/25/opinion/natural-interest-rate-r-star.html
 
Investors see a high-spending new normal keeping interest rates and inflation elevated.
https://www.bloomberg.com/news/articles/2023-08-24/bond-market-flashes-warning-as-us-budget-deficit-surges
 
My take from May 25, 2022:
Where are interest rates headed?
https://thehill.com/opinion/finance/3500474-where-are-interest-rates-headed/
The Fed’s consensus estimate for the neutral rate (of around 2.5 percent) may turn out to be incorrect if de-globalization, demographic and labor supply shifts and other structural changes fundamentally alter the U.S. economy. The long-run neutral rate is determined by the supply and demand for savings, and they in turn are dependent on factors such as productivity growth, international capital flows and demographics. 

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BLS Data Revisions

Revised figures for the year that ended in March show 300,000 fewer jobs at the close of the period than previously reported.
https://www.nytimes.com/2023/08/23/business/economy/us-job-growth.html
 
Preliminary Benchmark Revisions:
https://www.bls.gov/web/empsit/cesprelbmk.htm 

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Liberalism's Future - Hope versus Fear

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Mortgage Rates - The Basics

Why Are Mortgage Rates So High, and How Long Will They Stay Up?
https://www.nytimes.com/2023/08/26/business/mortgage-rates-housing-market.html 

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China's Crisis of Confidence

China in charts: Missing economic boom points to slowing post-COVID growth
https://asia.nikkei.com/Spotlight/The-Big-Story/China-in-charts-Missing-economic-boom-points-to-slowing-post-COVID-growth
Economists say industrial model based on infrastructure and real estate is grinding to a halt

The Problems with China’s Economy Start at the Top
https://www.nytimes.com/2023/08/26/opinion/china-economy-xi-jinping.html
Related: https://www.economist.com/leaders/2023/08/24/why-chinas-economy-wont-be-fixed
 
A Crisis of Confidence Is Gripping China’s Economy
https://www.nytimes.com/2023/08/25/business/china-economy-confidence.html
 
Beijing is no longer the hyper-growth role model it once was for the developing world
https://www.telegraph.co.uk/business/2023/08/26/zero-covid-disaster-ends-china-triumphalism/
 
China’s economy is in desperate need of rescue
https://www.economist.com/finance-and-economics/2023/08/24/chinas-economy-is-in-desperate-need-of-rescue
 
To Early to Declare China’s Demise
The US is revelling in China’s economic troubles at its own peril
https://www.scmp.com/comment/opinion/article/3232271/us-revelling-chinas-economic-troubles-its-own-peril
How China became a car-exporting juggernaut
https://www.economist.com/graphic-detail/2023/08/10/how-china-became-a-car-exporting-juggernaut
China is leading the challenge to incumbent carmakers
https://www.economist.com/special-report/2023/04/14/cars-with-chinese-characteristics
China's BYD breaks into world's top 10 automakers with EV push
https://asia.nikkei.com/Business/Automobiles/China-s-BYD-breaks-into-world-s-top-10-automakers-with-EV-push 

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Friday, August 25, 2023

Diminished Europe

Deluded Europe can’t see that it’s finished
https://www.telegraph.co.uk/business/2023/08/25/deluded-europe-cant-see-that-its-finished/
Gerard Araud, former French ambassador to the United States, notes:
Yes, Europeans dominated the world between 1815 and 1945, and from then until today we have stood just behind the US. But that was only two centuries: a comma in the history of the world. Until 1650, the GDP of India and, until 1750, the GDP of China were probably larger than any country in Europe.
So, in New Delhi and Beijing, we were seen as the upstarts during our period of dominance, and the economic rebalancing underway over the past few decades between Europe and Asia is viewed as merely a return to the long-term historical norm. The upstarts are being put back in their place. 

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US Stocks Take a Breather

Why the Stock Market’s Summer Doldrums Are Not a Problem
https://www.nytimes.com/2023/08/25/business/why-the-stock-markets-summer-doldrums-are-not-a-problem.html
After a fierce rally largely propelled by a handful of tech stocks, the market’s rapid climb stalled in August. 

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Thursday, August 24, 2023

College Graduates Face a Tough Job Market

In Reversal Because of A.I., Office Jobs Are Now More at Risk
https://www.nytimes.com/2023/08/24/upshot/artificial-intelligence-jobs.html
Technology disruption typically affected blue-collar occupations. Now white-collar workers may feel the brunt of changes.
 
US graduates struggle to find work despite tight labor market
https://www.ft.com/content/1b2d2134-613c-4a5b-8d03-821ee80fe0e8 

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Profile of Elon Musk

Elon Musk’s Shadow Rule
https://www.newyorker.com/magazine/2023/08/28/elon-musks-shadow-rule
Sam Altman, the C.E.O. of OpenAI, with whom Musk has both worked and sparred, told me, “Elon desperately wants the world to be saved. But only if he can be the one to save it.” 

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Social Security Payouts

Baby Boomers Are Overestimating Future Social Security Income
https://www.bloomberg.com/news/articles/2023-08-24/how-much-do-i-need-to-retire-baby-boomers-overestimate-social-security
The amount of pre-retirement earnings replaced by the government program will be less than many surveyed workers expect. 

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Demise of the Treasury Bull Market

Goodbye to the Bull Market for US Treasury Bonds
https://www.bloomberg.com/opinion/articles/2023-08-22/goodbye-to-the-bull-market-for-us-treasury-bonds
The paradigm has shifted. Higher yields are back.
 
My take from July 1, 2022:
New era of inflation will bedevil central banks and bond markets
https://thehill.com/opinion/finance/3543857-new-era-of-inflation-will-bedevil-central-banks-and-bond-markets/ 

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India's Scientific Ambitions

India’s Frugal Path to Global Clout: Breakthroughs in Space and Beyond
https://www.nytimes.com/2023/08/24/world/asia/india-chandrayaan-3-moon-landing-space.html
Resources have increased in recent years, and India’s opening up of its space sector for private investment is seen as a new era. But ISRO still operates on an annual budget of only about $1.5 billion. NASA’s budget, for a much larger space program, is nearly $25 billion. India’s is so cost-effective that its spending of about $75 million on a Mars orbiter was less than the $100 million budget of the Hollywood space film “Gravity,” as Mr. Modi proudly has said.
What draws broad support for ISRO’s missions — with Wednesday’s landing welcomed with prayers, music and special screenings in schools across the country — is a culture of humility, teamwork and efficiency. Analysts said that a key to ISRO’s success had been freeing itself more than other institutions from bureaucratic constraints and bloated staffing that comes with state funding.
 
Related:
https://vivekjayakumar.blogspot.com/2023/08/indias-burgeoning-space-industry.html

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Interest Rates and the US Housing Market



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Profile of Anne Krueger

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China's Policy Dilemmas

How China Made Its Housing Crisis Worse
https://www.nytimes.com/2023/08/24/business/china-economy-safety-net.html
Years of inattention to building an adequate safety net for seniors, the jobless and others in financial stress have left Chinese consumers afraid to spend.
 
As China’s property crisis plagues its economy and financial system, is a ‘Lehman Moment’ looming?
https://www.scmp.com/economy/china-economy/article/3231900/chinas-property-crisis-plagues-its-economy-and-financial-system-lehman-moment-looming
 
China debt: Beijing warned opportunity costs are rising as it seeks comprehensive solution to local government crisis
https://www.scmp.com/economy/economic-indicators/article/3232066/china-debt-beijing-warned-opportunity-costs-are-rising-it-seeks-comprehensive-solution-local 

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BRICS Expansion

With six countries set to join BRICS group, China labels expansion ‘historic’
https://www.washingtonpost.com/world/2023/08/24/brics-china-russia-expansion/


Related:

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Searching for a Climate Haven

Looking for a US ‘climate haven’ away from heat and disaster risks? Good luck finding one
https://theconversation.com/looking-for-a-us-climate-haven-away-from-heat-and-disaster-risks-good-luck-finding-one-211990 

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Wednesday, August 23, 2023

CR Rao - Legendary Statistician Has Passed Away

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1973 – A Turning Point for the West?

In the West, five decades of economic stagnation have scrambled politics.
https://www.newstatesman.com/ideas/2023/08/world-ended-1973 

Related:

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Sweden Faces Serious Problems

How Sweden lost the plot
https://www.newstatesman.com/international-content/2023/08/how-sweden-lost-the-plot
The country is no longer a model for the world. 

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The Oxbridge Tutorial System in the Age of ChatGPT

Can Oxford and Cambridge Save Harvard from ChatGPT?
https://www.bloomberg.com/opinion/articles/2023-08-23/can-oxford-and-cambridge-save-harvard-from-chatgpt
Their time-tested tutorial system offers top US universities a way to blunt AI cheating and revive real learning. 

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India’s Burgeoning Space Industry


India becomes first nation to land spacecraft near the moon’s south pole
https://www.washingtonpost.com/technology/2023/08/23/chandrayaan-3-india-moon-landing/
Related:

India’s rover takes walk on the moon after frenzied celebrations
https://www.theguardian.com/world/2023/aug/24/india-rover-takes-walk-on-moon-frenzied-celebrations

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History Lesson: East India Company

The Merchant’s Leviathan
https://www.foreignaffairs.com/reviews/merchants-leviathan-east-india-company-empire-incorporated
How the East India Company Made the Modern World 

The East India Company, a trading firm with its own army, was masterful at manipulating governments for its own profit.
https://www.nytimes.com/2019/09/04/opinion/east-india-company.html

The Anarchy: The East India Company, Corporate Violence, and the Pillage of an Empire by William Dalrymple
https://www.amazon.com/Anarchy-Relentless-Rise-India-Company/dp/1635573955/

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Tuesday, August 22, 2023

Why Real Yields Matter

What Are Real Yields, and Why Do They Matter?
https://www.wsj.com/finance/investing/what-are-real-yields-stocks-treasury-bonds-13a419c2
Inflation-adjusted interest rates are the highest since 2009, which helps to explain stocks’ unhappy August. 

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Sri Lanka Update

Sri Lanka enters a new era of post-pandemic austerity
https://asia.nikkei.com/Spotlight/The-Big-Story/Sri-Lanka-enters-a-new-era-of-post-pandemic-austerity
Encouraged to borrow during lockdowns, many poor countries face harsh consequences as priorities change 

Sri Lanka is back in business
https://asia.nikkei.com/Opinion/Sri-Lanka-is-back-in-business
Stocks and rupee are top performers as economic rebound takes hold

Sri Lanka hit by record brain drain, but some stay to rebuild
https://asia.nikkei.com/Spotlight/Sri-Lanka-crisis/Sri-Lanka-hit-by-record-brain-drain-but-some-stay-to-rebuild
Many doctors and entrepreneurs remain faithful to country despite economic crisis 

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Cryptos - Financial Stability Risks and Energy Consumption

Financial stability risks from cryptoassets in emerging market economies
https://www.bis.org/publ/bppdf/bispap138.pdf
In emerging market economies (EMEs), cryptoasset adoption has been on a steady rise. For some users, cryptoassets provide an alternative to limited investment and savings instruments. For others they offer a seemingly safe haven against volatile domestic currencies. For EME financial authorities, there are serious concerns about their ability to monitor cryptoasset markets and to assess the financial stability risks from cryptoassets. This report studies how vulnerabilities in the nature, structure, composition and function of cryptoasset markets translate into financial stability risks in traditional financial markets. This includes market, liquidity, credit and operational risks, bank disintermediation and capital flow risks. It then outlines the transmission channels through which these risks can affect financial stability. Risk catalysts in EMEs can strengthen these transmission channels, increasing a country's vulnerability to financial stability risks.  

When cryptomining comes to town: High electricity use spillovers to the local economy
https://cepr.org/voxeu/columns/when-cryptomining-comes-town-high-electricity-use-spillovers-local-economy
In recent years, data centres have consumed 0.9% of global electricity, and bitcoin mining alone 0.5%. This column looks at the real effects of technology processing on local economies. The authors find that households and small businesses paid an extra $204 million and $92 million annually, respectively, in Upstate New York due to increased electricity consumption by cryptominers. In China, where electricity prices are fixed, rationing of electricity in cities with cryptomining deteriorates wages and investments.

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Minimum Wage During Inflationary Episodes

The minimum wage has passed the high inflation test
https://www.ft.com/content/563779a3-a16d-468b-bbae-c0a6edff9ce3
It reduces pay inequality while employment doesn’t suffer — even if productivity is not boosted
 
Minimum wages in times of high inflation
https://cepr.org/voxeu/columns/minimum-wages-times-high-inflation
High inflation, rising prices, and stagnant nominal wages have caused a decline in real wages for several quarters in many OECD countries. This column describes how almost all OECD countries increased their minimum wages between December 2020 and May 2023, which allowed them to keep pace with inflation. However, such increases raise concerns about wage distribution compression and potential price wage spirals. While regular adjustments of minimum wages appear necessary, careful assessment of their impact is required to avoid adverse consequences. 

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Sign of a Cooling Labor Market?

Pay for New Hires Is Shriveling
https://www.wsj.com/lifestyle/careers/the-worker-bidding-war-is-over-companies-are-cutting-pay-for-new-hires-1cab0fe
After years of salary increases, business across the economy say they’re reducing starting salaries for recruits. 

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Monday, August 21, 2023

AI Development

ChatGPT and other language AIs are nothing without humans – a sociologist explains how countless hidden people make the magic
https://theconversation.com/chatgpt-and-other-language-ais-are-nothing-without-humans-a-sociologist-explains-how-countless-hidden-people-make-the-magic-211658
 
How Nvidia Built a Competitive Moat Around A.I. Chips
https://www.nytimes.com/2023/08/21/technology/nvidia-ai-chips-gpu.html
The most visible winner of the artificial intelligence boom achieved its dominance by becoming a one-stop shop for A.I. development, from chips to software to other services. 

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Growth and Convergence - The Case of Dominican Republic

Dominican Republic's Income Convergence Signals Path to Advanced Economy Status in Coming Decades
https://www.imf.org/en/News/Articles/2023/07/26/cf-dominican-republics-income-convergence-signals-path-to-advanced-economy-status-in-coming-decades 

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Evolution of Women’s Soccer

Rise of European superclubs raised the bar to undreamed level with Spain’s devastating show of strength and the US in decline
https://www.theguardian.com/football/blog/2023/aug/21/england-spain-lucy-bronze-ona-batllle-football-womens-world-cup 

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Populism and Economics

The Populist Advantage by Raghuram G. Rajan
https://www.project-syndicate.org/commentary/populist-economic-policies-easier-sell-than-liberal-orthodoxy-by-raghuram-rajan-2023-08
Since the 2008 global financial crisis discredited the old liberal orthodoxy, the door has been open for simplistic policies, in part because most people tend to focus only on a policy’s first-order effects. Unfortunately, everyone will have to learn the hard way why such policies fell out of favor in the first place. 

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Dreaming of an Early Retirement

An early retiree who travels the country in his RV built wealth the old-fashioned way to join the FIRE movement: ‘I saved my pennies and invested wisely’
https://fortune.com/2023/08/20/early-retiree-tips-advice-building-wealth-join-fire-movement/
https://finance.yahoo.com/news/early-retiree-travels-country-rv-130000576.html

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US Finance Sector - Geographic Shifts

New York and California Each Lost $1 Trillion When Financial Firms Moved South
https://www.bloomberg.com/graphics/2023-asset-management-relocation-wall-street-south/ 

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US Household Finances

Realted:
Do the Rich Save More? [2004 JPE paper]
https://www.journals.uchicago.edu/doi/10.1086/381475
Abstract
The question of whether higher–lifetime income households save a larger fraction of their income was the subject of much debate in the 1950s and 1960s, and while not resolved, it remains central to the evaluation of tax and macroeconomic policies. We resolve this long‐standing question using new empirical methods applied to the Panel Study of Income Dynamics, the Survey of Consumer Finances, and the Consumer Expenditure Survey. We find a strong positive relationship between saving rates and lifetime income and a weaker but still positive relationship between the marginal propensity to save and lifetime income. There is little support for theories that seek to explain these positive correlations by relying solely on time preference rates, nonhomothetic preferences, or variations in Social Security benefits. There is more support for models emphasizing uncertainty with respect to income and health expenses, bequest motives, and asset‐based means testing or behavioral factors causing minimal saving rates among low‐income households. 

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Heat and Productivity

Summer Heat Is Becoming a Big Drag on Productivity
https://www.bloomberg.com/opinion/articles/2023-08-21/summer-heat-is-already-a-big-drag-on-productivity
 
Heat Singes the Mind, Not Just the Body
https://www.nytimes.com/2023/08/10/health/heat-mental-health.html
Hot weather can destabilize mood, exacerbate mental health disorders and complicate drug treatment. Climate change itself is a stressor, scientists say.  

Related:
Rising Temperatures Are Wreaking Havoc Year-Round
https://www.bloomberg.com/graphics/2023-global-warming-impacts-data/
Even small changes in global average temperature are driving environmental and economic consequences.

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US-China De-Risking - Unintended Consequences

U.S.-China De-Risking Will Inevitably Escalate
https://foreignpolicy.com/2023/08/20/derisking-decoupling-us-china-biden-economy-trade-technology-semiconductors-chips-supply-chains-ai-geopolitics-escalation/
The logic of reducing dependence always ends in a downward spiral. 

Spreading State Restrictions on China Show Depths of Distrust in the U.S.
https://www.nytimes.com/2023/08/21/us/politics/china-restrictions-distrust.html

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China's Real Estate Crisis

Why It’s So Hard for China to Fix Its Real Estate Crisis
https://www.nytimes.com/2023/08/22/business/china-economy-property.html
Beijing has often addressed economic troubles by boosting spending on infrastructure and real estate, but now heavy debt loads make that a hard playbook to follow.

China Is on Edge as Fallout from Its Real Estate Crisis Spreads

China’s property crash is becoming more dangerous by the day
https://www.telegraph.co.uk/business/2023/08/17/china-property-crash-becomes-more-dangerous/

China’s property market is too big to fail, but will Beijing save it?
https://www.washingtonpost.com/world/2023/08/18/china-evergrande-bankruptcy-property-real-estate/

China’s Home Buyers Are Waiting Out the Property Slump
https://www.wsj.com/articles/chinas-home-buyers-are-waiting-out-the-property-slump-bcbf9239

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UAE Benefits from Russian Woes

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Key Monetary Policy Debates

Why the Era of Historically Low Interest Rates Could Be Over
https://www.wsj.com/economy/central-banking/why-the-era-of-historically-low-interest-rates-could-be-over-49bcdc59
Higher productivity and increased deficits could raise the ‘neutral’ rate of interest, limiting Fed cuts
 
The Fed Should Carefully Aim for a Higher Inflation Target
https://www.wsj.com/articles/the-fed-should-carefully-aim-for-a-higher-inflation-target-reserve-powell-greenspan-5fef5051 

My take from Spring 2023:
Will the ‘Great Moderation’ Give Way to the ‘Great Volatility’? By VIVEKANAND JAYAKUMAR
https://www.ut.edu/uploadedFiles/Academics/Business/TBESpring2023_Final.pdf 

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Poor Image of UK Tourists

A Summer Rite in Spain: Coping with the British Tourist Invasion
https://www.nytimes.com/2023/08/20/business/british-tourists-mallorca-drinking-local-economy.html
On the front lines of a low-cost resort, Spanish residents complain that U.K. visitors drink too much and don’t spend enough. 

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Saturday, August 19, 2023

Which Jobs Will Survive the AI Revolution?

In Reversal Because of A.I., Office Jobs Are Now More at Risk
https://www.nytimes.com/2023/08/24/upshot/artificial-intelligence-jobs.html
Technology disruption typically affected blue-collar occupations. Now white-collar workers may feel the brunt of changes.

The internet’s ‘original sin’ means AI will be a nightmare

Robo-Taxis Are Legal Now
https://www.newyorker.com/news/letter-from-silicon-valley/robo-taxis-are-legal-now
In San Francisco, it’s getting easier to hail a ride from no one.


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Employee Stock Options

The Hidden Risk of Getting Paid in Stock Options
https://www.nytimes.com/2023/08/18/opinion/stock-options-start-ups.html
 
Equity illusions
https://doi.org/10.1093/jleo/ewad017
Abstract
Although equity-compensation grants for rank-and-file employees are common in startups and are considered an ingrained part of their business culture, little is known about how employees approach this form of compensation. We begin filling this gap by examining employees’ financial literacy regarding equity compensation and their willingness to forgo cash compensation for startup equity. Using a survey and a combination of natural language processing and machine learning techniques with conventional regression modeling, we find that employees commonly respond to economically irrelevant signals and misinterpret other important signals. The findings suggest that employees harbor a range of “market illusions” regarding startup equity that can lead to inefficiencies in the labor market, which sophisticated employers can legally exploit. The results raise questions about the protection of employees in their investor capacity in a market where highly sophisticated repeat players, such as venture capital investors, interact with unorganized and uninformed retail investors. 

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Friday, August 18, 2023

Britain versus Mississippi

Is Mississippi Really as Poor as Britain?
https://www.theatlantic.com/ideas/archive/2023/08/britain-mississippi-economy-comparison/675039/
The question is usually posed the other way around—which is an insult to the dynamic economy of this southern state that is now my home.
 
Related:
https://www.ft.com/content/e5c741a7-befa-4d49-a819-f1b0510a9802

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Carl Linnaeus and Modern Taxonomy

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US Economic Outlook

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Janet Yellen - A Foodie

Janet Yellen inadvertently ate hallucinogenic mushrooms in China – and started a trend
https://www.theguardian.com/business/2023/aug/16/janet-yellen-inadvertently-ate-hallucinogenic-mushrooms-in-china-and-started-a-trend 

A good biography of Janet Yellen:

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Female Labor Force Participation in India

What’s Holding Back India’s Economic Ambitions?
https://www.wsj.com/world/india/india-economy-women-work-labor-46bfb0f0 

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