Report Card on the Health of the World Economy: EconVue Spotlight October 1 2019

Our subject is health - both the health of the global economy, and the health of its global citizens. Each is dependent on the other, especially in a world where healthcare expenditures continue to rise. According to the World Bank, they average ten percent of GDP and are nearly double that in the US. 

The Annual Meetings of the World Bank and the IMF are wrapping up this weekend in Washington. The centerpiece of the meetings is the release of the IMF's annual World Economic Outlook and the IMF Data Mapper. Highly-regarded IMF chief economist Gita Gopinath has added a new phrase to the vernacular, "synchronized slowdown" which Larry Summers calls a euphemism for secular stagnation. The report says that due to trade spats, global GDP will fall by .8%. by 2020.

There are a few surprises: Mexico's GDP is expected to rise by 1.3% instead of .5%. Even in a no-win trade war, there are always winners. But reports are that Mexico's security situation is deteriorating, and like Brexit and the US-China trade negotiations, events could continue to take a series of hairpin turns. The IMF's forecasts have in fact been correct just six percent of the time over the past twenty tumultuous years. 

New ideas in economics sometimes surface at the IMF/World Bank meetings. Back in November of 2016 a young economist named Esther Duflo delivered an intriguing lecture "The Economist as Plumber, Laying the Pipes, Fixing the Leaks". Last week she became the youngest person to ever win the Nobel Prize in Economics. It is worth watching this lecture which is even more pertinent today. She says that the success of fiscal stimulation depends on efficient and impactful transmission of that stimulus from central authorities to local governments.  Which is a perfect description of the issues faced by China's slowing economy today. Social infrastructure such as healthcare that must be delivered locally is just as critical as building roads. 

This week's guest on the Hale Report is both a friend and expert contributor to EconVue, David Johnson. He is CEO of Chicago-based  4sight Health and is the author of a new book, The Customer Revolution in Healthcare, just published by McGraw Hill.  He discusses how aligning economic incentives with patient needs will deliver better outcomes at lower costs. Johnson believes that the market will be won by disruptive, bottom-up, and customer-centric, tech-savvy competitors who will deliver kinder, smarter, and cheaper healthcare. This is a subject absolutely everyone has a stake in, and Johnson explains in our podcast not just what is broken, but how it can be fixed. HIs positive prescriptions apply not only to the US, but universally. 

HALE PODCAST: The Coming Customer Revolution in Health Care with David Johnson and Lyric Hale

Some additional links you might find useful:

World

Annual Meeting of the IMF 2019: VIDEOS
If you can't make it to Washington you'll find a treasure trove video presentations on key topics in global economics here. Also live through Saturday. 

Economic Forecasting Is Really Difficult. Just Ask the IMF
Alex McIntyre and Cedric Sam 4/9/2019 Bloomberg

Johnson's Withdrawal Agreement: What Happens Next?  BREAKING
Steve Peers 10/19/2019 Prospect Magazine

Prime Minister Boris Johnson is now legally obliged to apply for an extension. But his deal could still squeak through in the coming days.

Why Global Trade Imbalances Could Get Worse Before They Get Better…
Brad W. Setser 9/20/2019 Council on Foreign Relations

Bad policy choices seem set in stone in both Europe and Asia.

Japan to exempt asset managers from stricter investment rules
10/17/2019 Nikkei Asian Review

This is good news for investors in Japan. New regulations on foreign investment meant to limit Chinese influence could hurt Japanese equities.  Drew Edwards of Usonian Investments:  "The revision, as currently proposed, is a very bad idea that would be the regulatory equivalent of an 'own-goal' relative to the otherwise constructive corporate governance policy reforms under Prime Minister Abe".

Richard Koo Explains Why Governments Still Haven't Learned The Lessons Of Japan  PODCAST
Joe Weisenthal and Tracy Alloway 10/14/2019 Bloomberg

Koo is great on Japan & macroeconomics in general, but I do not agree that Chinese SOE's are lending to private firms, so there is no cause for concern over debt. The opposite situation is true. SOE's are slow-paying vendors, so private firms are in fact financing the SOE's.

How fortunes reversed for Germany and Greece
Tommy Stubbington 9/29/2019 Financial Times

The very definition of Schadenfreude. While German manufacturing has taken a dive “the same sector in Greece is growing faster than anywhere else in the currency bloc.”

An alternative future for the sell-side analyst: eco-warrior
Alex Money 10/15/2019 Financial Times

The United States asked Iran to meet diplomacy with diplomacy (Video)
Christiane Amanpour interviews Brian Hook 9/23/2019 CNN

Sanctions are not exactly diplomacy. However, the Iranian government has refused to meet with President Trump until they are lifted. So we have now arrived at a Mexican standoff with no way out for either side, despite efforts by French President Emmanuel Macron on the sidelines of the UN meetings in New York.

Macroeconomic and Microeconomic Impacts of Improving Physical and Social Infrastructure
9/2019 Levy Economics Institute

Social infrastructure matters--not just roads and bridges--for macroeconomic development. Tanzania and Ghana case studies.

U.S.

2019 Employer Health Benefits Survey
KFF 9/25/2019

Annual premiums for employer sponsored family health coverage reached $20,576 this year, up 5% from last year, with workers on average paying $6,015 toward the cost of their coverage.  

Small employers and new businesses are all that matters for the labor market
Samuel Rines October 2019 Avalon Investment & Advisory

Large businesses don’t hire many people. Small ones do. The source of dynamism in the U.S.

Treasury and Tax and Loan Program
Federal Reserve Bank of New York

Best explanation of a solution to the repo ruckus I've read--the Treasury Tax and Loan Program. But still wondering about the underlying reasons some banks aren't lending to other banks so that either the Fed or Treasury has to intervene.

Technology

Frequently Asked Questions on Virtual Currency Transactions
Internal Revenue Service 2019 Revised Ruling:  https://www.irs.gov/pub/irs-drop/rr-19-24.pdf

Everything you ever wanted to know but were afraid to ask about crypto taxation in the US.

Europe Overly Dependent on Outside Technology, EU Memo Warns
Ryan Gallagher and Natalia Drozdiak 9/30/2019 Bloomberg

Unlike the US and China, because of “core values” the EU has lagged behind, ever since the dawn of Facebook, Twitter, Amazon, Alibaba, Tencent, etc. It’s about risk and penalties for failure.

Disintermediation, Disintegration, and Innovation: The Future of Finance Controlled by Big Tech and Giant Central Banks
Karen Petrou Federal Financial Analysis 10/3/2019

Google researchers have reportedly achieved “quantum supremacy" over supercomputers
MIT Technology Review 9/20/2019

Will Oliver, an MIT professor and quantum specialist, likened the computing milestone to the first flight of the Wright brothers at Kitty Hawk in aviation.

Your Navigation App Is Making Traffic Unmanageable
Jane Macfarlane 9/19/2019 IEEE Spectrum

Existing infrastructure cannot manage the volume of traffic that is being rerouted. 

Scientists and Politics?
Ian L. Boyd Science 10/18/2019

Governments have tended to put scientists in a metaphorical box and to only open the lid when they are needed, thus reducing science to a technical service function, supplying support, advice, and economic goods.

China: How science made a superpower
Shellen Wu 10/1/2019 Nature Magazine

This is why in today’s China, science and technology trump economics.

China

Chinese censorship is no longer just a China problem
Quartz 10/17/2019 VIDEO

After the NBA's Houston Rockets general manager Daryl Morey voiced his support for Hong Kong protesters on Twitter, China’s state-run TV channel CCTV canceled its agreement to show preseason games. What academics, commentators, filmmakers, musicians, celebrities, and even institutions say outside of China is increasingly modified by the gravitational pull of the Chinese government and Chinese consumers.

PayPal is first foreign company to win Chinese payments licence
Yuan Yang 9/30/2019 Financial Times

Financial institutions are the biggest potential beneficiaries of the US-China trade fracas. 

Close Up: Chinese Investments in America
Macro Polo 9/23/2019 

China has 51 investments in Ohio that have created 2200 jobs, an average of only 40 employees per company. After watching "American Factory" I'm not sure how many are Americans and how many are Chinese. As a comparison, there are 500 Japanese companies in Ohio, employing about 80,000 Americans. China is just not as good at greenfield investments which ended the US-Japan trade disputes.

22% of urban Chinese consumers would permanently leave China if they had the means to do so
Tom Hancock 9/30/2019 Twitter threads

What winning looks like. I would be interested in a global study of this question - Russia, Iran, Brazil, South Africa...how many of their citizens would leave if they could? Sadly, I don't think we need a survey to answer this question for Venezuela and Syria.

I hope you enjoy the lively conversation about health care in our podcast