Money, Media, & The Middle East: EconVue Spotlight January 12 2020

Welcome back after the holidays! As one of my New Year's resolutions, I began posting some of the older and more provocative books in my library on Instagram. I came across a couple of volumes written by Walter Lippmann almost a hundred years ago. In Public Opinion Lippmann says that it is impossible for the media to inform the public adequately. Although he himself was a journalist, he was pessimistic about the role of the press in a democracy. This resonated with my frustration over media coverage of last week's events in the Middle East.

During the high-stakes US-Iran-Iraq kabuki performance, it was obvious (at least to this Persian studies graduate) that most reporting was influenced by previously held political beliefs, rather than knowledge of any kind. This is not new of course. All media is biased. Technology has changed media distribution channels, but this in itself did not destroy objectivity which was always a myth. However during the first week of January bias and misinformation reached a new high. More on Iran below, but if you are looking for a great long-form article to read this Sunday, I recommend Elizabeth Braw's superb piece on the real-life consequences of deterioration in public discourse, Victor Klemperer and the Decay of Political Language.

If you are looking for a good new book, EconVue contributor Robert Pringle, eminent editor and commentator on banking and finance, has written a page-turner. The Power of Money (Palgrave) is both a history of money and an iconoclastic view of its future. Pringle says money draws its power from ideas and innovation, is a constant work in progress, and only has value within a mutable social framework. It represents much more than its function as a medium of exchange. Pringle calls for a reset of our thinking about finance. A link to a summary of his book is included in the EconVue research links below.

"In the end, the market, the people will decide what forms of money have value and which do not." 

Pringle has a historian's view of cryptocurrencies, illuminating criticism by saying "The modern state is a jealous god". It always amuses me when people tell me nothing "real" backs cryptocurrencies. The same is true for any currency. As Pringle explains, money is real because a certain group of people believe it is. Today 11% of Americans own some amount of bitcoin, but among millennials, the number is higher, 35%. It's a generational issue. Over time, beliefs about money evolve, just as when the dollar eclipsed the pound in a changing world. If not Bitcoin, there will certainly be another innovation that changes the landscape once again. 
So bookending the lessons of these two volumes, how do we ascertain both economic value and the accuracy of our information? These questions are fundamental to both economics and decision making. At the American Economic Association annual meeting in San Diego last weekend, there was much soul-searching about the ability of economics to accomplish these goals. The webcast moderated by Dani Rodrik is worth your time: Can Economics Rise to the Challenge?  With leading lights Suresh Naidu, Gabriel Zucman, Samuel Bowles, Wendy Carlin, and Luigi Zingales.

You will find a plethora of links to new research by EconVue experts and others below.

ECONVUE PANEL DISCUSSION

Spotlight on Japanese Corporate Governance
With EconVue experts Marsha Vande Berg and Nicholas Benes. On the heels of criticism of the Japanese legal system and business culture by former Tokyoite Carlos Ghosn. Feel free to join the discussion.

RESEARCH BY ECONVUE EXPERTS

The Power of Money: How Ideas about Money Shaped the Modern World
Robert Pringle 

At one level, money is simply the asset in which goods and services are priced and with which they can be bought. Money is more than that, however. It is at the heart of the way we look at almost every aspect of our lives.

Private Payroll Trend Remains Solid in December, Wages Poised to Accelerate in 2020
Michael Lewis

2019 ended on a mostly consensus note. The private payroll jobs trend remained clearly healthy. The jobless rate set a new cycle low (marginally). Aggregate hours worked came in below expectations but, with productivity gains and a surge in net exports, FMI is still looking for +2.5% or so real GDP growth for 19Q4.

Unrelenting Margin Pressures: Overcoming Healthcare’s Softening Revenues and Rising Expenses
David W. Johnson

Despite favorable rating agency outlooks, the 2020s promise to be healthcare’s most turbulent decade since the 1990s. It’s been a great 20-year run for the healthcare industry, but business as usual for hospitals and health systems is no longer a viable option. Five key pressure points are driving down margins.

The US Tax System Cannot Finance Medicare for All  
Robert Shapiro

Medicare for All remains the most contentious and consequential issue for 2020 Democrats. It’s easy to see why.  A large majority of Democrats—and a slimmer majority of Independents—have said they approve of it. But an even larger majorities of Democrats and Independents also want to keep their private coverage or enroll in a public program.  And we simply cannot levy enough taxes to pay for it all. 

Iran & The Middle East

The Middle Eastern Problem Soleimani Figured Out
Hassan Hassan 1/12/2020 Politico

Militias have made much of the region ungovernable, and one general managed to exploit the chaos in Iran’s interests. Now the U.S. has an opportunity—maybe.

The Coming Accidental War with Iran
Lyric Hughes Hale 12/6/2011 Huffpost

My article from 2011 on the prospects for war with Iran. The crash of Ukrainian Flight 752 demonstrates that accidents are far from unlikely in this conflict.

After the Assassination – The Possibility of An End to the Violence
Marvin Zonis 1/7/2020 Marvin Zonis Blog

US-Iran stalemate? In its immediate aftermath, University of Chicago professor emeritus Marvin Zonis was one of the few who wrote that it was entirely possible that the assassination of General Suleimani would not result in any major escalation of violence. (See accidents above.)

Hit or Miss? The Effect of Assassinations on Institutions and War 
Benjamin F. Jones, Benjamin A. Olken 5/2007 the National Bureau of Economic Research (h/t Peter Carre)

Assassinations are a persistent feature of the political landscape. Using a new data set of assassination attempts on all world leaders from 1875 to 2004, we find that, on average, successful assassinations of autocrats produce sustained moves toward democracy. We also find that assassinations affect the intensity of small-scale conflicts and that small sources of randomness can have a pronounced effect on history. 

To QE or not to QE

There is no QE!
Brian McCarthy 1/6/2020 Macrolens

Let’s quickly dismiss the disconcertingly widespread argument that the Fed is “pumping up asset prices” with QE, and make sure we get off on the proper analytical footing in 2020.

Danielle DiMartino Booth of Quill Intelligence on Fed Reserve consideration in purchasing treasuries
Fox Business TV 1/3/2020

DiMartino Booth explains why QE is bullish for markets.

Jim Bianco Says This Is QE, Like Y2K
Tyler Durden 1/1/2020 Zero Hedge

Is Fed repo funding just another form of QE? Bianco compares this to the extraordinary precautions the Fed took 20 years ago prior to Y2K.

Markets

In Disappointing Year, Bridgewater’s Flagship Fund Returns 0.5%
Stephen Taub 1/7/2020 Institutional Investor

In a year where markets boomed, Ray Dalio’s Pure Alpha did anything but. Citadel and others did better but all underperformed even a basic S&P 500 index fund. Bitcoin is up 123% YOY. 

Inflation is Even More Inflated Than We Thought
David Henderson 10/31/2017 EconLog FinTech

Catching up with CME Group's crypto executive Tim McCourt - The Block
Frank Chaparro and Yilun Cheng 12/24/2019 the Block

The Block recent spoke with Tim McCourt, managing director at CME Group.

U.S. Research

More than a third of millennials polled approve of communism
Shawn Langlois 11/2/2019  The Margin

A new survey released by the Washington, D.C., nonprofit Victims of Communism Memorial Foundation reflects that if the younger generation gets out and votes in 2020, those running for office on the far left have reason to be hopeful.

A helpful list of U.S. military research papers, masters theses, and doctoral dissertations
Micah Zenko 1/5/2020 Twitter

Browse to see how the military is thinking about emerging national security trends

Most Popular RAND Research of 2019
Rand Corporation 12/24/2019

The ten research projects that rand.org readers engaged with the most in 2019. 

China

What Went Wrong? US-China Relations from Tiananmen to Trump
James Steinberg 1/2020 Texas National Security Journal

The article China watchers are talking about this month. What different decisions might the US and China have made over the past 30 years? Counterfactual history--always fun.

History and propaganda clash in China's war museums
Barak Kushner 12/13/2019 Nikkei Asian Review

A wave of war-related exhibitions sets out to bolster the CCP view of the past.

How Propaganda Manipulates Emotion to Fuel Nationalism: Experimental Evidence from China
Daniel Mattingly & Elaine Yao 1/6/2020 SSRN

Influential studies depict propaganda as a heavy-handed tool with limited persuasive power. By contrast, we argue that propaganda can effectively manipulate emotions and cause durable changes in nationalist attitudes.

Why Did One-Quarter of the World’s Pigs Die in a Year?
Yanzhong Huang 1/1/2020 New York Times

This should have been a manageable outbreak. What lessons does this hold for the next SARS epidemic in China?

Did Xi surrender to Trump? China struggles to silence chatter
Katsuji Nakazawa 12/19/2019 Nikkei Asian Review

The view from Japan-structural reform issues make Phase 2 of the US-China trade deal much harder to achieve than Phase 1. My timeframe is just after the Democratic Convention in Milwaukee.

Europe

Don’t glaze over. This statistic holds the key to UK prosperity
Hetan Shah 1/6/2020 the Guardian

The most important boring statistic that most people have never heard of is 0.3% - UK's low annual productivity growth over the last decade. My piece before Christmas sets out one of the biggest policy challenges for the Johnson government.

While Italy’s debt-to-GDP ratio is the highest in more than 40 years, its net interest payments as a % of GDP are the lowest since 1980!
Jeroen Blokland 1/6/2020 Twitter

Therein lies the tale of the 2020 global economy, built on a foundation of historically low interest rates and no inflation.  What if that changes?

Greek Economy: Will Reality Collide Fresh Optimism in Athens?
Benn Hall and Kerin Hope 1/7/20 Financial Times

Bond yields have tumbled — the yield on Greek 10-year debt, which spiked to nearly 15 per cent in 2015, fell to 1.1 per cent in November, below Italy’s.  

Driving the Silk Road: Halfway Across the World in a Bentley S1
Douglas McWilliams 12/2019 Whitefox Publishing

An intrepid British economist and his brother decide to enter an endurance rally to drive from Beijing to Paris in 2019. Along the way, they see unexpected changes in Russia, China and Eurasia. This is the kind of thing more economists should do.  

Happy 2020!  

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