Global Economy & Globalization 2017

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Global Economy & Globalization 2016
Eurasia Group: Welcome to the geopolitical recession 2017
A Swedish Billionaire Will Award $5 Million For Reimagining Global Governance

17 October
The secret Swiss mountain bunker where millionaires stash their bitcoins
(Quartz) A bitcoin vault doesn’t store actual bitcoin units. Technically, what’s being stored are private, cryptographic keys. These keys form a pair with particular, public-facing, keys and provide access to the balance of coins stored on the bitcoin network. Gaining unauthorized access to someone’s private keys is akin to making off with a gold bar.
Stories of hackers finding their way through even the best secured accounts are legion, and it’s ironic that bank-like methods have to be used to keep cryptocurrencies safe. If someone gets hold of your private key, there’s no way to claw the funds back or demand a refund. That’s why a firm like Xapo that stores bitcoin is a juicy target for hackers—and why it requires paranoiac levels of security. The lives of bitcoin miners digging for digital gold in Inner Mongolia

World Bank & IMF Annual meetings
The Annual Meetings of the Boards of Governors of the World Bank Group (WBG) and the International Monetary Fund (IMF) bring together central bankers, ministers of finance and development, private sector executives, representatives from civil society organizations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness. Also featured are seminars, regional briefings, press conferences, and many other events focused on the global economy, international development, and the world’s financial system. This year’s events will take place in Washington, DC, October 9-15, 2017.

15 October
Politicians rally round globalist standard as US shuns multilateral legacy
Policymakers from across the globe have striven to present a consensus in favour of multilateralism this week while they fret about the impact on the world’s economic order if America’s withdrawal from the global stage
Countries must feel ‘ownership’ when using European Monetary Fund
With the idea of a European Monetary Fund back on the table at this week’s IMF annual meetings, one Eurozone minister insisted any financing must give a state “ownership” rather than being seen as a directive from Brussels to carry out reforms

10 October
Nouriel Roubini: Three Scenarios for the Global Economy
The International Monetary Fund, which in recent years had characterized global growth as the “new mediocre,” recently upgraded its World Economic Outlook. But is the IMF right to think that the recent growth spurt will continue over the next few years, or is a temporary cyclical upswing about to be subdued by new tail risks?
In the bullish scenario, the world’s four largest, systemically important economies – China, the eurozone, Japan, and the United States – implement structural reforms that boost potential growth and address financial vulnerabilities. By ensuring that the cyclical upswing is associated with stronger potential and actual growth, such efforts would produce robust GDP growth, low but moderately rising inflation, and relative financial stability for many more years. US and global equity markets would reach new heights, justified by stronger fundamentals.
In the bearish scenario, the opposite happens: the world’s major economies fail to implement structural reforms that boost potential growth.
The third – and, in my view, most likely – scenario lies somewhere between the first two. The cyclical upswing, in both growth and equity markets, continues for a while, driven by the remaining tailwinds. Yet, while major economies pursue some structural reforms to improve potential growth, the pace of change is much slower, and its scope more modest, than is needed to maximize potential.

9 October
Richard Thaler Wins the Nobel in Economics For Killing Homo Economicus
(The Atlantic) Thaler’s work shows that assuming human beings are predictably irrational is the most rational approach to studying their behavior.
Renowned for his use of data to observe and predict how people behave in the real world, Thaler’s career has been a lifelong war on Homo economicus, that mythical species of purely rational hominids who dwell exclusively in the models of classical economic theory. In studies that borrowed from psychology, sociology, and plain-old curiosity, Thaler demonstrated that mankind was afflicted by emotion and irrationality, which influences their decision making on everything from retirement savings, to health-care policy, to professional sports.
If irrational human behavior can be predicted, then it can be incited, or nudged. Thaler coined the term “nudging” to describe cheap and easy interventions that change people’s decision-making. The term can apply to both weighty and trivial causes, from encouraging savings by auto-enrolling employees in retirement plans to putting a housefly sticker in a men’s urinal to “improve aim.”
In 2013, Robert Shiller won the Nobel in Economics for his work showing that markets are not rational and that their short-term gyrations are often driven by “animal spirits” that are more emotional than logical. Thaler did more than perhaps any other economists to devise a vocabulary for these animal spirits. While he is famous for exploding the myth of rational decision-making, the irony is that insisting that human beings are not rational is by far the more rational approach to studying their behavior.
Vox explains Professor Thaler’s theories with useful illustrations:
This headline is a nudge to get you to read about Nobel economist Richard Thaler
Okay, it’s not a very good nudge, but his work is really important!
Kenneth Rogoff: Crypto-Fool’s Gold?
(Project Syndicate) The price of Bitcoin is up 600% over the past 12 months, and 1,600% in the past 24 months. But the long history of currency tells us that what the private sector innovates, the state eventually regulates and appropriates – and there is no reason to expect virtual currency to avoid a similar fate.
Is the cryptocurrency Bitcoin the biggest bubble in the world today, or a great investment bet on the cutting edge of new-age financial technology? My best guess is that in the long run, the technology will thrive, but that the price of Bitcoin will collapse.
In Silicon Valley, drooling executives are both investing in Bitcoin and pouring money into competitors. After Bitcoin, the most important is Ethereum. The sweeping, Amazon-like ambition of Ethereum is to allow its users to employ the same general technology to negotiate and write “smart contracts” for just about anything.
Most experts agree that the ingenious technology behind virtual currencies may have broad applications for cyber security, which currently poses one of the biggest challenges to the stability of the global financial system. For many developers, the goal of achieving a cheaper, more secure payments mechanism has supplanted Bitcoin’s ambition of replacing dollars.

8 October
Wolfgang Schäuble: World economy at risk of new financial crisis
‘Economists all over the world are concerned,’ says outgoing German finance minister.
(Politico eu) Global debt and unstable loans could throw the world into another financial crisis, outgoing German Finance Minister Wolfgang Schäuble said in an interview with the Financial Times published Sunday.
“Economists all over the world are concerned about the increased risks arising from the accumulation of more and more liquidity and the growth of public and private debt,” Schäuble said. “I myself am concerned about this, too.”
Schäuble, who is slated to become speaker of the Bundestag in Germany’s new government, warned of new market bubbles forming, fueled by money pumped into the economy from central banks.

5 October
World Bank launches the new Human Capital Project, Funding Job Skills Training for Young People
The World Bank Thursday launched a spending program to assess young people’s skills in developing countries before they enter the job market and to help them by providing funds for health, care, education, and job skills training, President Jim Yong Kim said.
“Human capital is the key to reducing poverty and to reducing inequality,” said Kim, adding that “far too many” leaders of World Bank member countries have underestimated the long-term benefits of investing in people.
Globally, developed countries do invest in their citizens but low-income countries are focused on funding infrastructure and providing goods and services.
At next week’s annual meeting of the World Bank and the International Monetary Fund, Kim will outline the Human Capital project with member countries’ heads of central banks and finance ministers, focusing on increasing jobs, reducing poverty and strengthening their global competitiveness.

19 September
Mohamed A. El-Erian: The Risk of a New Economic Non-Order
The upcoming IMF and World Bank annual meetings offer a critical opportunity to start a serious discussion on how to arrest the lose-lose dynamics that have been gaining traction in the global economy. The longer it takes for the seeds of reform to be sown, the less likely they will be to take root.
(Project Syndicate) Next month, when finance ministers and central bank governors from more than 180 countries gather in Washington, DC, for the annual meetings of the International Monetary Fund and the World Bank, they will confront a global economic order under increasing strain. Having failed to deliver the inclusive economic prosperity of which it is capable, that order is subject to growing doubts – and mounting challenges. Barring a course correction, the risks that today’s order will yield to a world economic non-order will only intensify.
… the evolution of the global order had long been outpaced by structural economic changes on the ground, with multilateral governance institutions taking too long to recognize fully the significance of financial-sector developments and their impact on the real economy, or to make adequate room for emerging economies. … governance structures, including voting power, correspond better to the economic realities of yesterday than to those of today and tomorrow. And nationality, rather than merit, still is the dominant guide for the appointment of these institutions’ leaders, with top positions still reserved for European and US citizens.
America’s inward turn, already underway for several years, has been particularly consequential, because it leaves the world order without a main conductor. With no other country or group of countries anywhere close to being in a position to carry the baton, the emergence of what the political scientist Ian Bremmer has called a “G-Zero era” becomes a lot more probable.
China is responding to the global system’s weakening core by accelerating its efforts to build small networks, including around the traditional Western-dominated power structures. This has included the establishment of the Asian Infrastructure Investment Bank, the proliferation of bilateral payments agreements, and the pursuit of the “Belt and Road Initiative” to build infrastructure linking China with western Asia, Europe, and Africa.

30 September
Martin Feldstein: The International Consequences of US Tax Reform
(Project Syndicate) The proposed shift to a territorial tax system is likely to have far-reaching effects on US corporations’ behavior. But that change, together with a reduction in the 35% corporate-tax rate, could trigger another round of tax reform among developed countries seeking to improve their attractiveness to internationally mobile capital.
The most important changes will apply to US corporations rather than to individual taxpayers. Of these reforms, the one with the most obvious and direct international impact will be the change in the taxation of US corporations’ foreign subsidiaries.
The current US rule is unique among all major advanced economies. Consider the example of a subsidiary of a US corporation that earns profits in Ireland. That subsidiary pays the Irish corporate tax at Ireland’s low 12% rate. It is then free to reinvest the after-tax profits in Ireland, in financial securities, or in operating businesses anywhere in the world – except the US.

29 September
How Stable Is the Global Financial System?
Is the world economically safer now than when the financial crisis erupted a decade ago? Benjamin J. Cohen of the University of California, Santa Barbara, examines arguments by Mohamed El-Erian, Robert J. Shiller, Howard J. Davies, and other Project Syndicate commentators to determine where the global response to the 2008 crisis succeeded – and to highlight where more work needs to be done.
(Project Syndicate) The 2008 crisis was immediately followed by a wave of public support for reform, which crested in 2010-2011 with the Dodd-Frank Act and the Basel III agreement. But as memories of the near-death experience have faded, so has enthusiasm for reform. The danger now is that badly needed follow-up measures will not be enacted.  … One such action would be to strengthen the FSB, which, as of Oxford University points out, “has no legal mandate or enforcement powers, nor formal processes for including all countries.” But proposals to expand the FSB’s mandate have met with indifference. For the time being, Woods concludes, the FSB will remain “a ‘standard setter’ in a world with strong incentives to evade standards and negligible sanctions for doing so.” Worse, there is now mounting political pressure to reverse key post-crisis reforms. US President Donald Trump has not hidden his distaste for both Dodd-Frank and Basel III. “Making America great again,” Davies , “is not likely to involve new enthusiasm for more intrusive rules.”

Chaos and hackers stalk investors on cryptocurrency exchanges
(Reuters) Cryptocurrencies were supposed to offer a secure, digital way to conduct financial transactions, but they have been dogged by doubts. Concerns have largely focused on their astronomical gains in value and the likelihood of painful price crashes. Equally perilous, though, are the exchanges where virtual currencies are bought, sold and stored. These exchanges, which match buyers and sellers and sometimes hold traders’ funds, have become magnets for fraud and mires of technological dysfunction, a Reuters examination shows, posing an underappreciated risk to anyone who trades digital coins.

18 September
Reading the tea leaves
(The Hindu) The emerging India-Japan alignment sets the stage for the reordering of the Asian strategic landscape
In history, defining moments like 9/11 that can be identified as markers of change are rare. More often, there are trend lines of slow-moving geopolitical changes which come together at a particular moment in time resulting in an inflexion point. Reading the tea leaves indicates that 2017 may well be the year which marked the reordering of the Asian strategic landscape.
Two trend lines
The two slow moving trend lines clearly discernible since the Cold War ended a quarter century ago are the shift of the geopolitical centre of gravity from the Euro-Atlantic to the Indo-Pacific region and the rise of China.
Even though China has been a beneficiary of the U.S.-led global order, it is impatient that it does not enjoy a position that it feels it deserves, especially in the Bretton Woods institutions. During the last five years, it has set about creating a new set of institutions (the Asian Infrastructure Investment Bank and the New Development Bank) and launched the Belt and Road Initiative (BRI) to create a new trading infrastructure that reflects China’s centrality as the largest trading nation.

13 September
Saving the international economic order: major overhaul needed as balance shifts
(Shanghai Daily) It has been apparent since before the turn of the century that the post-World War II governance structures were untenable, because the assumptions that formed their foundation were beginning to crumble. In particular, with emerging economies, especially China, on the rise, the division between the West and the “rest” was narrowing fast.
Yet the global economy’s institutional underpinnings — the IMF and the World Bank — have remained largely unchanged. Indeed, the multilateral institutions on which global governance rests do not look all that different today than they did in 1944, when Britain’s John Maynard Keynes and America’s Harry Dexter White convened representatives from 44 countries in Bretton Woods, New Hampshire, to design the post-WWII international financial order.
There has been no shortage of signals that the global economy’s institutional architecture needs to be updated. If the Asian financial crisis of 1997 pointed to the potential for contagion in an increasingly interconnected financial system, the global crisis of 2008 directed a neon-lit flashing arrow at it.

6 September
Daniel Gros: Central Bankers’ Shifting Goalposts
The themes of the world’s foremost gathering of central bankers in Jackson Hole, Wyoming, and of the ECB’s annual meeting this year, had little to do with monetary policy. Instead, they focused on economic growth, an issue that they can do little to influence.

Seth Miller: This Is How Big Oil Will Die
Big Oil is perhaps the most feared and respected industry in history. Oil is warming the planet — cars and trucks contribute about 15% of global fossil fuels emissions — yet this fact barely dents its use. Oil fuels the most politically volatile regions in the world, yet we’ve decided to send military aid to unstable and untrustworthy dictators, because their oil is critical to our own security. For the last century, oil has dominated our economics and our politics. Oil is power.
Yet I argue here that technology is about to undo a century of political and economic dominance by oil. Big Oil will be cut down in the next decade by a combination of smartphone apps, long-life batteries, and simpler gearing. And as is always the case with new technology, the undoing will occur far faster than anyone thought possible.(24 May 2017)

The World’s 8 Richest Men Are Now as Wealthy as Half the World’s Population
Just eight individuals, all men, own as much wealth as the poorest half of the world’s population, Oxfam said on Monday in a report calling for action to curtail rewards for those at the top.
While [Bill] Gates exemplifies how outsized wealth can be recycled to help the poor, Oxfam believes such “big philanthropy” does not address the fundamental problem.
“If billionaires choose to give their money away then that is a good thing. But inequality matters and you cannot have a system where billionaires are systematically paying lower rates of tax than their secretary or cleaner,” [Max Lawson, Oxfam’s head of policy] said. (Fortune) 15 January 2017

30 August
Andrew Sheng and Xiao Geng: Barbarians at the Monetary Gate
(Project Syndicate) After the US Federal Reserved revealed its decision last month to leave interest rates unchanged, the Dow Jones industrial average set intraday and closing records; the Nasdaq, too, reached all-time highs. Now, financial markets are waiting for signals from this year’s meeting of the world’s major central bankers in Jackson Hole, Wyoming.
But there is another factor that could further destabilize an already-tenuous leverage- and liquidity-based system: digital currencies. And, on this front, policymakers and regulators have far less control.
The concept of private cryptocurrencies was born of mistrust of official money. In 2008, Satoshi Nakamoto – the mysterious creator of bitcoin, the first decentralized digital currency – described it as a “purely peer-to-peer version of electronic cash,” which “would allow online payments to be sent directly from one party to another without going through a financial institution.”
A 2016 working paper by the International Monetary Fund distinguished digital currency (legal tender that could be digitized) from virtual currency (non-legal tender). Bitcoin is a cryptocurrency, or a kind of virtual currency that uses cryptography and distributed ledgers (the blockchain) to keep transactions both public and fully anonymous.
However you slice it, the fact is that, nine years after Nakamoto introduced bitcoin, the concept of private electronic money is poised to transform the financial-market landscape. This month, the value of bitcoin reached $4,483, with a market cap of $74.5 billion, more than five times larger than at the beginning of 2017. Whether this is a bubble, destined to collapse, or a sign of a more radical shift in the concept of money, the implications for central banking and financial stability will be profound.

29 August
The Global Economy’s New Rule-Maker
By (Project Syndicate) In a recent commentary for the South China Morning Post, Helen Wong, HSBC’s chief executive for Greater China, shows that China’s rising generation of 400 million young consumers will soon account for more than half of the country’s domestic consumption. This generation, Wong notes, is largely transacting online, through innovative, integrated mobile platforms, indicating that it has already “leapt from the pre­-web era straight to the mobile Internet, skipping the personal computer altogether.”
Of course, China’s rising middle class is not news. But the extent to which digitally oriented younger consumers are driving rapid growth in China’s service industries has not yet received ample attention. Services, after all, will help drive China’s structural transition from a middle- to a high-income economy.
…  China’s economic power is rapidly rising. Its domestic market is growing fast, and could soon be the largest in the world. And because the Chinese government can control access to that market, it can increasingly exert its influence in Asia and beyond. At the same time, China’s declining dependence on export-led growth is reducing its vulnerability to the whims of those who control access to global markets.

25 August
(Quartz) The annual Fed conference gets underway in Jackson Hole, Wyoming. Federal Reserve chair Janet Yellen and European Central Bank president Mario Draghi will both deliver high-profile speeches, but the elephant in the room is whether Yellen will continue for a second term (WSJ paywall). Donald Trump said he is considering nominating her for another term, but White House economic policy director Gary Cohn is also a contender.
(WE Forum) Central bankers converge on Wyoming. Tonight marks the opening reception for the 39th Economic Policy Symposium in Jackson Hole, Wyoming, a gathering of the world’s most powerful monetary policymakers. This year’s theme is “Fostering a Dynamic Global Economy.”

3 July
Refugees, trade and climate are top issues at upcoming G20 summit
(PBS Newshour) The G20 summit on July 7-8 comes amid tensions over trade, climate, and refugee policy and increased uncertainty over the U.S. commitment to multilateral institutions.
The annual summit of the Group of Twenty (G20), a gathering of the world’s largest economies [Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States, plus the European Union], has evolved into a major forum for discussing the most pressing global issues. One of the group’s most impressive achievements was its robust response to the 2008 global financial crisis, but some analysts say its cohesion has since frayed.
The July 2017 summit in Hamburg, Germany, is the first for U.S. President Donald Trump, who has already clashed with many of the group’s members over trade, climate, and refugee policy. While the group’s meetings will be closely watched, bilateral meetings taking place on the summit’s sidelines are of particular interest this year, especially because Trump and Russian President Vladimir Putin are scheduled to meet for the first time.
Every year the heads of G20 members meet to discuss a wide range of issues, with a focus on economic and financial matters, and coordinate policy when possible.

27 June
(CNBC) “Davos in Dalian” begins. The World Economic Forum’s annual summer meeting in China kicks off, with discussions focused on innovation and technology.
The world’s second-largest economy has made waves recently with its fast-growing tech sector, marking what experts say is a noticeable shift away from the old image of a copycat China. And it’s a move that China needs — looking toward the new economy driven by the private sector and entrepreneurship.
China has timed its move just as the U.S. has appeared to retreat from the international stage, giving Xi an opportunity to fill the gap. For example, China’s “One Belt, One Road” giant trade and diplomatic initiative serves to boost its global influence.
But critics say China, in reality, is far from achieving the image of the global leader that it’s painted for itself because of economic woes, murky markets and human rights abuses at home.

2 June
After three decades, globalization may be on its way out. As protectionist politics and policies are on the rise, the integrity of global value chains is at risk. Explore research insights into the possibilities, promise, and perils of this new era and examine what may be in store.
The end of globalisation as we know it?
(Barclay’s) The period of hyperglobalisation that began in the early 1990s may be drawing to a close. Should deglobalisation come to pass, it could have far-reaching consequences for countries, corporations, and investors.Loosely defined as the free flow of trade, capital, people, technology and ideas across national borders and regions, globalisation has long been associated with economic development, increased opportunity, and progress. Now, however, it is increasingly viewed as a threat. Indeed, anti-globalisation sentiment was a significant contributor to the two major ballot box surprises of 2016: the UK’s vote to leave the European Union, and the election of Donald Trump as President of the US.
Factors driving hyperglobalisation
Modern globalisation has gone well beyond the trade of goods, as technology allowed for transfer of know-how and skills.

1 June
HENRY BLODGET: This chart explains everything that’s wrong with the economy today (short video)
Henry Blodget explains the most important chart in the world right now based on economist Pavlina Tcherneva’s analysis of income gains during recoveries. Which have gone entirely to the top 10%. Blodget points out the growth in profit as a percent of GDP compared to the decline in wages as a percent of the economy.

The world is sitting on a $400 trillion financial time bomb
(Quartz) Financial disaster is looming, and not because of the stock market or subprime loans. The coming crisis is more insidious, structural, and almost certain to blow up eventually.
The World Economic Forum (WEF) predicts that by 2050 the world will face a $400 trillion shortfall (pdf) in retirement savings. (Yes, that’s trillion, with a “T”.) The WEF defines a shortfall as anything less than what’s required to provide 70% of a person’s pre-retirement income via public pensions and private savings.
The US will find itself in the biggest hole, falling $137 trillion short of what’s necessary to fund adequate retirements in 2050. It is followed by China’s $119 trillion shortfall.

21 May
The ‘gig economy’ has broken a fundamental link in capitalism that was good for workers
(Buusiness Insider UK) Everyone knows capitalism is based on supply and demand. If the supply of something goes down, then the price of it rises. The concept applies to labour, too. In boom times, when there is low unemployment, wages go up as employers compete for workers and the available labour pool dwindles.
But today, average wage growth is only 1.9%.
Pay rates no longer move upward as unemployment moves downward, because companies like Uber, Just Eat, and Deliveroo can switch their demand for labour on and off on a minute-by-minute basis. Self-employed folks making a living on Etsy, Amazon, Airbnb or eBay know their clients instantly go elsewhere if they raise their prices by even a few pennies.
16 May

Christopher Ketcham: The Fallacy of Endless Economic Growth
What economists around the world get wrong about the future.
(Pacific Standard) The idea that economic growth can continue forever on a finite planet is the unifying faith of industrial civilization. That it is nonsensical in the extreme, a deluded fantasy, doesn’t appear to bother us.
The Limits to Growth, issued as a slim paperback by a little-known publisher in March of 1972 …  exploded onto the scene, becoming the best-selling environmental title in history. More than three million copies have been sold to date in at least 30 languages.
Its message was commonsensical: If humans propagate, spread, build, consume, and pollute beyond the limits of our tiny spinning orb, we will have problems. This was not what Americans indoctrinated in growthism had been accustomed to hearing—and never had they heard it from Ph.D.’s marshaling data at one of the world’s citadels of learning. …
In March of 2016, the All-Party Parliamentary Group on Limits to Growth in the United Kingdom issued a report declaring that the 1972 projections were worrisomely spot-on. …
Even in the midst of substantial innovation, today’s global economy has become more profligate and more wasteful, using more materials per unit of GDP than it did 20 years ago. According to a 2016 report from the International Resource Panel at the United Nations Environment Programme, the amount of virgin natural resource needed for a given amount of product has gone up 17 percent over a single decade. In 2000, it took an average 1.2 kilograms of materials to generate one dollar of global GDP. By 2010, it took 1.4 kilograms. The amount of primary materials extracted from the Earth globally rose from 22 billion tonnes in 1970 to 70 billion tonnes in 2010, with per capita global material use going from seven tonnes in 1970 to 10 tonnes over the same 40-year period. According to the report, there is “growing environmental pressure per unit of economic activity,” not less.

14 May
Capitalists are destroying capitalism. They must be stopped
(Quartz) Although markets reign today, Paul de Grauwe says that the forces of government control are strengthening. De Grauwe is one of Europe’s leading economists, now at the London School of Economics, and his book The Limits of the Markets (Oxford University Press) was recently translated into English from Dutch. In the book, de Grauwe warns that the nature of swings in “the pendulum between government and market” can be dangerously disruptive.
“When markets grow they don’t take care of two things, both of which are external costs. One is the environment. Without government control, the markets will lead to so much destruction of the environment that people will reject it—that’s when the market hits its limit. We can already see it today in the extreme levels of pollution in China and India.
“The other external cost has to do with inequality. What do you do with a market system that creates great benefits for many people but also hardship for those in society that lose? We can’t let this happen because it will lead to political instability. We have to be willing to tell the rich, “you will have to contribute more and we will have to tax you more.” Unfortunately, we don’t do that.”

13 May
China-led AIIB approves seven new members ahead of new Silk Road summit
The China-backed Asian Infrastructure Investment Bank (AIIB) said on Saturday it had approved seven new members to join the bank, a day before China’s biggest diplomatic event of the year kicks off.
Leaders from 29 countries will attend China’s new Silk Road forum in Beijing on Sunday and Monday, an event orchestrated to promote President Xi Jinping’s vision of expanding links between Asia, Africa and Europe underpinned by billions of dollars in infrastructure investment.
Delegations from around the world will attend including the United States and North Korea.
The new members are Bahrain, Bolivia, Chile, Cyprus, Greece, Romania and Samoa, bringing the bank’s total membership to 77 countries.
The bank’s president Jin Liqun held a joint press conference with Chilean President Michelle Bachelet to announce the new members.
“Better infrastructure across Asia will allow Chilean goods to access new markets, more investment in Chilean infrastructure in turn will further bind together the two great continents of Asia and Latin America,” said Jin.

5 May
The New York Times Magazine: Tracing the Strange Connections of a Global Economy
Our hyperglobalized economy may not have made the world “small,” or “flat,” but it has certainly made the world strange, as the interconnections of capital have brought about other, unforeseen types of connection. This week’s Money Issue tries to capture some of those connections, gathering stories in which global trade — for good and ill — has forged surprising links among nations. In Namibia an extraordinary influx of investment from China, now unquestionably the world’s expansionist superpower, has utterly transformed local economies and communities. In Chile, Korea’s infectious pop music has found an unusual foothold. The harvesters of the once-obscure açaí berry in Brazil have had their livelihoods improved but also complicated by a surge of demand in the United States.
If a common theme emerges from these pages, it is that politicians, in trying to enrich their citizens or themselves, can steer the flows — but only to a point. Alabama’s tax breaks have helped import hundreds of airplane-industry jobs from Europe, even as similar tax breaks by Britain and Canada have exploded Hollywood’s visual-effects industry. Tens of thousands of Filipino caregivers have gone to Israel to tend to its aging population, but the contortions of ideology have kept them from being entirely welcomed.
Bellow all you like about America First, or la France pour les Français, or anyplace else über alles. As of 2017, at least, capital and its incessant planetary movements still reliably make a mockery of such slogans.

4 May
OBOR 2.0: China prepares for May summit with global ambitions
(Global Capital) The One Belt, One Road summit in mid-May will see 28 global leaders converge on Beijing and learn that the Chinese government now sees OBOR as a manifestation of its international ambitions — and of its long-term hopes of redrawing global trade flows and rules in its own image

29 April
The Changing of the Global Economic Guard
China has profited immensely from the open global trading system. But whether it remains open depends on the actions of the West’s increasingly reactive democracies.
(The Atlantic) In January 2017 the global economy changed guard. The venue was Davos, the annual gathering of the world’s wealthiest recyclers of conventional wisdom—and consistently one of the last places to anticipate what is going to happen next. This time was different. The assembled hedge-fund tycoons, Silicon Valley data executives, management gurus, and government officials were treated to a preview of how rapidly the world is about to change. Xi Jinping, the president of China, had come to the Swiss Alpine resort to defend the global trade system against the attacks of the U.S. president-elect, Donald Trump. With minimal fanfare, the leader of the world’s largest developing economy took over the role of defending the global trading system in the teeth of protectionist war cries from the world’s most developed nation. It portended a new era in which China would apparently play the role of the responsible global citizen. The bad guys were swapping places with the good. “Some people blame economic globalization for the chaos in our world,” Xi told Davos. “We should not retreat into the harbor whenever we encounter a storm or we will never reach the other shore. … No one will emerge as a winner from a trade war.” …
The return of China, and the 15 other fast-growing non-Western economies, including Indonesia, Thailand, and India, which together account for half the world’s population, is dramatically reconfiguring the global power structure. Within my lifetime, the emerging middle class has gone from virtually nowhere to supplant the established Western middle class as the engine of global growth. Since 1970, Asia’s per capita incomes have increased fivefold. Even in Africa, the world’s worst performing continent, incomes have almost doubled. The West’s median income, meanwhile, has barely shifted in the last half-century. In some parts of Asia, such as Singapore and South Korea, incomes have either overtaken or are level with those in the West. In others, notably India, they still languish at less than a 10th of the Western average. But the direction is clear. If you chart a global economic map, the center of gravity in the 20th century could be found somewhere in the mid-Atlantic, according to the Singaporean economist Danny Quah. That point has now shifted eastwards to Iran. Over the coming decades it will settle at a point somewhere between China and India, in the Himalayas. From the middle of the Atlantic to the roof of the world in 50 years—our generation is present at the re-creation.

10 March
SEC rejects application to list Bitcoin ETF
The U.S. Securities and Exchange Commission on Friday denied a request to list what would have been the first U.S. exchange-traded fund built to track bitcoin, the digital currency.
Bitcoin had scaled to a record of nearly $1,300 this month, higher than the price of an ounce of gold, as investors speculated that an ETF holding the digital currency could woo more people into buying the asset.
Bitcoin can be used to move money around the world quickly and with relative anonymity, without the need for a central authority, such as a bank or government.
Yet bitcoin presents a new set of risks to investors given its limited adoption, a number of massive cybersecurity breaches affecting bitcoin owners and the lack of consistent treatment of the assets by governments.
“Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated,” the SEC said in a statement posted online. “The Commission notes that bitcoin is still in the relatively early stages of its development and that, over time, regulated bitcoin-related markets of significant size may develop.”

17 February
‘Complexity’ of exports is a good predictor of income inequality
The mix of products that countries export is a good predictor of income distribution, study finds
(EurekAlert) In a series of papers over the past 10 years, MIT Professor César Hidalgo and his collaborators have argued that the complexity of a country’s exports — not just their diversity but the expertise and technological infrastructure required to produce them — is a better predictor of future economic growth than factors economists have historically focused on, such as capital and education.
Now, a new paper by Hidalgo and his colleagues, appearing in the journal World Development, argues that everything else being equal, the complexity of a country’s exports also correlates with its degree of economic equality: The more complex a country’s products, the greater equality it enjoys relative to similar-sized countries with similar-sized economies.
“So if you’re a country like Venezuela, no matter how much money Chavez or Maduro gives out, you’re not going to be able to reduce inequality, because, well, all the money is coming in from one industry, and the 30,000 people involved in that industry of course are going to have an advantage in the economy. While if you’re in a country like Germany or Switzerland, where the economy is very diversified, and there are many people who are generating money in many different industries, firms are going to be under much more pressure to be more inclusive and redistributive.” MIT news
Mark Zuckerberg: Building Global Community
Our greatest opportunities are now global — like spreading prosperity and freedom, promoting peace and understanding, lifting people out of poverty, and accelerating science. Our greatest challenges also need global responses — like ending terrorism, fighting climate change, and preventing pandemics. Progress now requires humanity coming together not just as cities or nations, but also as a global community. …
For the past decade, Facebook has focused on connecting friends and families. With that foundation, our next focus will be developing the social infrastructure for community — for supporting us, for keeping us safe, for informing us, for civic engagement, and for inclusion of all.

9 February
Kenneth Rogoff: Why Trump Can’t Bully China
(Project Syndicate) some would argue that beneath the chaos and bluster, there is an economic rationale to the Trump administration’s disorderly retreat from globalization. According to this view, the US has been duped into enabling China’s ascendency, and one day Americans will come to regret it. We economists tend to view abdication of US world leadership as a historic mistake
It is important to acknowledge that the roots of the anti-globalization movement in the United States run much deeper than disenfranchised blue-collar workers. For example, some economists opposed the Trans-Pacific Partnership (a 12-country trade deal that would have covered 40% of the global economy) on the questionable grounds that it would have harmed American workers. It fact, the TPP would have opened Japan far more than it would have affected the US. Rejecting it only opens the door to Chinese economic dominance across the Pacific.
China has financial weapons, including trillions of dollars of US debt. A disruption of trade with China could lead to massive price increases in the low-cost stores – for example, Wal-Mart and Target – on which many Americans rely.
Moreover, huge swaths of Asia, from Taiwan to India, are vulnerable to Chinese aggression. For the moment, China’s military is relatively weak and would likely lose a conventional war with the US; but this situation is rapidly evolving, and China may soon have its own aircraft carriers and other more advanced military capabilities.
The US cannot “win” a trade war with China, and any victory will be Pyrrhic. The US needs to negotiate hard with China to protect its friends in Asia and deal with the rogue state of North Korea. And the best way to get the good deals Trump says he seeks is to pursue a more open trade policy with China, not a destructive trade war.

24 January
A very long analytical piece focused on William Doll and the plans he and his club of billionaires, Syneidesis, are formulating. Well worth devoting time to.
Meet the leader of a billionaires’ club determined to stop Trump from destroying the world
(Quartz) Already, Doll was talking of “pivoting”—of somehow resisting the centrifugal forces pulling apart the post-war world. He spoke of telling his members, “You need to stand up and show the good you can do. Show you can invest in projects that produce good jobs.” “We need to show the fallacy that the elites are only in it for themselves,” he said.
In conversations over the subsequent weeks, Doll said Syneidesis’ multi-national families would reject the current mantra of distrust of experts, elites, science and institutions. They would invest together in “solid infrastructure and social projects. We will do economic diplomacy, in investments, to being keeping our countries’ interests aligned.”
… economists are now in a panic, along with politicians, professionals and workers of all types. They are worried about the new and expanding age of robots, and the possibility that they will wipe out whole classes of professions—lawyers, Wall Street brokers and analysts, accountants, journalists and more. Because of the scale of the impact of machine learning and artificial intelligence, this time, it is feared, [Milton] Friedman will meet his Waterloo; the Luddites will be found to have been correct after all, and the ostensible law that Friedman explained will no longer apply. We do not know the degree to which the alarm is valid—if we are at the onset of an age of job-killing robotization, leaving us all in soup kitchens, and exacerbating our social and political chaos, or whether technological history will follow its usual course. But this is precisely what Doll’s globalization metrics are designed to gauge—how much an investment can be deliberately tailored to combat the inadvertent destruction of technological progress.

18 January
US vice-president Joe Biden, 48 hours from the end of his term, verbally strafed president-elect Donald Trump with an array of rhetorical weaponry. Visibly emotional, Biden urged Europe and the US to preserve the seven-decade-old liberal world order, which he said had delivered a middle-class income to hundreds of millions and bolstered people’s “basic sense of dignity.”

16 January
Although the president-elect is the dominant subject of conversation this week, representatives from his team are thin on the ground. Today, though, we get a double dose of Anthony Scaramucci—hedge-fund founder, Davos fixture, and soon-to-be White House advisor. He is speaking on a panel about monetary policy and also appearing on his own to detail the priorities for the incoming US government
davos_wef_2017(Quartz) Xi Jinping sang the praises of globalization. There was standing room only for the first Chinese president to speak at the World Economic Forum. Xi defended globalization, which fueled China’s explosive growth and is now under growing attack in the West. But he said it had to be more inclusive, and blamed the woes of the world on conflict and the excessive pursuit of profits. (Asia Times) Globalization not the cause of the world’s woes: Xi Jinping — Chinese President tells the World Economic Forum in Davos there will be no winners in a trade war.

15 January
Here’s What World Leaders Think Is the Greatest Risk for 2017
(Fortune) Some of the world’s most powerful leaders are growing more concerned, it seems, about the world’s most powerful leaders. More so, in fact, than climate change and financial panics, like a collapse of the euro.
Weapons of mass destruction now ranks as the No. 1 concern of global leaders, according to a new survey from the World Economic Forum.
It’s the 12th year that the World Economic Forum has published the survey, which polls 750 of the group’s members, including CEOs and leaders and experts in various fields. The organization publishes the survey on the eve of its annual confab in Davos, which kicks off next week.
The survey was conducted in September and early October.
In a report that accompanied the survey results, the World Economic Forum wrote that a rise of nationalism and less cooperation among world powers was raising the risks of global conflicts.
Of the top five worries of global leaders, the other four are related to climate change. Among those, extreme weather conditions was the No. 1 concern, followed by water crisis, major natural disasters, and the failure of climate change efforts to make a difference. … Not a single economic issue made it in to either the top 5 concerns of world leaders for 2017 in either the potential biggest impact category or likeliest to happen. It was the first year in the survey’s existence that an economic issue didn’t show up in either list.
(Quartz) Globalization and its discontents. An impassioned defense of globalization by economist Dambisa Moyo—it “has to be all or nothing”—will serve as the rallying cry for delegates keen to double-down on a defense of the liberal world order. “It is not the idea of globalization itself that is problematic,” she writes, “it is that its implementation has not gone far enough.” Strong stuff.

13 January
Harnessing automation for a future that works
Automation is happening, and it will bring substantial benefits to businesses and economies worldwide, but it won’t arrive overnight. A new McKinsey Global Institute report finds realizing automation’s full potential requires people and technology to work hand in hand.
Recent developments in robotics, artificial intelligence, and machine learning have put us on the cusp of a new automation age. Robots and computers can not only perform a range of routine physical work activities better and more cheaply than humans, but they are also increasingly capable of accomplishing activities that include cognitive capabilities once considered too difficult to automate successfully, such as making tacit judgments, sensing emotion, or even driving. Automation will change the daily work activities of everyone, from miners and landscapers to commercial bankers, fashion designers, welders, and CEOs. But how quickly will these automation technologies become a reality in the workplace? And what will their impact be on employment and productivity in the global economy?

11 January
Capitalism needs urgent reform: World Economic Forum
(CBC) Reforming the very nature of capitalism will be needed to combat the growing appeal of populist political movements around the world, the World Economic Forum said Wednesday.
Getting higher economic growth, it added, is necessary but insufficient to heal the fractures in society that were evident in the election of Donald Trump as U.S. president and Britain’s vote to leave the European Union.
In a wide-ranging report from the organizer of the annual gathering of political and business leaders in the Swiss resort of Davos, the WEF identified “rising income and wealth disparity” as potentially the biggest driver in global affairs over the next ten years.
As an example of this growing inequality, the WEF highlighted the massive increases in CEO pay at a time when many people in advanced economies have struggled to make ends meet following the global financial crisis.
“This points to the need for reviving economic growth, but the growing mood of anti-establishment populism suggests we may have passed the stage where this alone would remedy fractures in society: reforming market capitalism must also be added to the agenda,” it said in its latest Global Risks Report.
“The combination of economic inequality and political polarization threatens to amplify global risks, fraying the social solidarity on which the legitimacy of our economic and political systems rests.”

10 January
A call for responsive and responsible leadership
Leaders have to be responsive and responsible; they must understand that we are living in a world marked by uncertainty, volatility and deep transformational changes. Many people are living in precarious situations and searching for identity and meaning in a fast-changing world. They want to regain their sense of purpose. More than ever, leadership means taking responsibility. It requires courage and commitment to listen and honestly explain the breadth and complexity of issues, to proactively generate solutions and to take action based on core values.

7 January
bitcoin-106808_1280(Quartz) Disparate collections of people around the world may find an unlikely common cause in 2017. They include Indians struggling with the effects of demonetization; Chinese currency speculators; Swedish pensioners; and desperate Venezuelans.
These groups are all enemy combatants in the war on cash being waged by governments around the world. Cash has the advantages of being accessible, inclusive, and largely surveillance-free. It also has a tendency to leak into unexpected places, which makes governments uncomfortable. They say killing off cash plugs the leaks, and besides, it’s technological progress.
But that means outsourcing the mechanics of money to banks, payments companies, and the growing coterie of fintech firms. And killing cash hurts not only black-marketeers but also ordinary people whose livelihoods depend on its flexibility and simplicity. If simple cashless alternatives, such as Kenya’s M-Pesa mobile money, were more widely available, those people would probably embrace them. But they aren’t.
Hence these groups of unlikely allies may also share an interest in an unlikely solution: cryptocurrencies, which enable secure, anonymous payments uncontrolled by any government or bank. Bitcoin, the oldest and most widely used cryptocurrency, has been rising steadily in value (even if it’s not entirely clear why). This week it almost hit an all-time high, only to suddenly crash; but overall its bull run looks way more solid than in past years.
Yes, the total value of bitcoins is still miniscule compared to a country’s money supply, and its wild volatility and arcane mechanics have led naysayers to predict its death many times over. But whether they’re Indian smugglers or Swedish pensioners, the people on the sharp end of the war on cash might be starting to find the idea of a stateless cryptocurrency controlled by no-one a little more attractive.—Joon Ian Wong and Akshat Rathi

3 January
Ian Bremmer introduces the Eurasia Group’s new report, “Top Risks 2017: The Geopolitical Recession”
(Charlie Rose) … “But it’s not just the United States, of course. We talk about geopolitical recession, we recognize that America’s allies in Europe are weak and fragmented, facing enormous internal challenges. We recognize that the Middle East is in disarray, that Asia has stronger leaders. China, of course, is much more willing to provide leadership economically that challenges U.S. architecture and norms and values, but in no other way. The Russians are willing to do that in terms of security, but in no other way. And you put all of those things together, and then you elect president Trump, come January 20th, I think we can say Pax Americana is over. We enter this geopolitical recession. And what’s interesting about it is it’s not going to be an enormous challenge for the United States at home, right? I mean, the global economic recession in 2008 affected everyone, there was enormous coupling of the global economies. Geopolitically, while Europe bleeds and while there’s an arms race going on in Asia, and while we have territorial disputes in lots of parts of the world, the failed states, here in the United States we don’t have a problem.”

2 January
Nouriel Rubini: “America First” and Global Conflict Next
(Project Syndicate) As in the 1930s, when protectionist and isolationist US policies hampered global economic growth and trade, and created the conditions for rising revisionist powers to start a world war, similar policy impulses could set the stage for new powers to challenge and undermine the American-led international order. An isolationist Trump administration may see the wide oceans to its east and west, and think that increasingly ambitious powers such as Russia, China, and Iran pose no direct threat to the homeland.
But the US is still a global economic and financial power in a deeply interconnected world. If left unchecked, these countries will eventually be able to threaten core US economic and security interests – at home and abroad – especially if they expand their nuclear and cyberwarfare capacities. The historical record is clear: protectionism, isolationism, and “America first” policies are a recipe for economic and military disaster.

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