The Long & Winding Road - February 17 2019 EconVue Spotlight

The US government shutdown is over, but the question of how a wall between the US and Mexico will be funded is unresolved. The threat, or lack of a threat posed by immigrants at the southern border, is a litmus test for US politicians. AMLO, Mexico’s new leader, could achieve what no one has before in terms of eliminating violence and corruption, or he could make things much, much worse and turn his country into the next Venezuela.

US-China negotiations ramble on with no reportable progress. President Xi and President Trump are reportedly meeting in mid-March, but the issues are so complex that it is highly doubtful that they can be resolved by then.  The same applies to President Trump’s meeting with Kim Jong-un at the end of this month.

In Europe, Brexit is still being negotiated and it is really anyone’s guess what will happen March 29th. Italy continues to confound, and Germany has slipped into recession. Everyone is muddling along, but the momentum of the European Project has been lost.  As Adam Tooze’s book relates, the last financial crisis was caused by both European and US actors. The next financial crisis will most likely be rooted in Europe.

In Asia, the most important story is India, where BJP Prime Minister Narendra Modi is facing an election in the next few months. India must now decide how to react to the February 14th Pulwama attack. They have already imposed a 200% tariff on Pakistani goods entering the country. Modi’s opponent, Rahul Gandhi, has a father, grandmother, and great-grandfather who were prime ministers. Tensions in the region are bound to rise.

Another consequential election, in Nigeria, was delayed at the last minute by government officials this weekend. It seems that the pause button has been pushed around the globe. I think Nouriel Roubini has it right-- there are mixed signals everywhere. 2019 will be a long and winding road, heading to a clearer vision in 2020.

RESEARCH BY ECONVUE EXPERTS

'Data Dependent’ Fed Will Change Policy Course If --and Only If -- Needed
Michael Lewis 

Powell & Co. will not continue tightening if the economy falters. This should be self-evident. Fed officials repeat this utterly indisputable position at most every opportunity.

Beginning The Endgame In Venezuela
R. Evan Ellis

As the crisis in Venezuela has deepened over the past week, a mysterious transformation has occurred. What started out as U.S. diplomatic support for the new, constitutionally legitimate government of Juan Guaidó has come to be treated in the international media as a possible U.S. military intervention. 

An Unbearable Burden: Paying for Commercial Health Insurance
David W. Johnson

The Healthcare Affordability Index shows how the rising costs of healthcare insurance, both for companies and employees, stagnate wages.

STORIES IN OUR SPOTLIGHT

World 

A Mixed Economic Bag in 2019
Nouriel Roubini 2/8/2019 Project Syndicate

Known for his pessimistic views, Nouriel Roubini’s forecast for 2019 drives right down the middle of the road of global economic expectations. No recession, but no acceleration either. At the speed limit. I agree the world economy will stay within a trading range in 2019.

Universal Basic Income In The US and Advanced Countries
Hilary W. Hoynes, Jesse Rothstein Feb 2019 NBER

This is counterintuitive. Current Universal Basic Income (UBI) pilot programs will not resolve the most pertinent questions about UBI in advanced countries.

Ethiopia Gets Its Teff Back
Jerry Chifamba 2/6/2019 AllAfrica 

Fascinating story of the legal rights to Ethiopia’s national grain products.

IMF Staff Floats Dual Money to Allow Much Deeper Negative Rates
Amanda Billner 2/6/2019 Bloomberg

A special place in hell…reserved for these economists.

Europe 

Incredible Shrinking Europe
Walter Russell Mead 2/11/2019 WSJ

The inexorable decline of the European project is not good news for the US. Surely this is where the next financial crisis will begin.

How EU Leaders Can Prevent a No-Deal Brexit
Anatole Kaletsky 2/5/2019 Project Syndicate

Might EU leaders prove as inflexible as May on the March 29th Brexit deadline, to her advantage?

'Italy headed for 'vicious' debt crisis' 
Desmond Lachman 2/14/2019 OMFIF

Italy's economy is ten times larger than Greece.

U.S.

Why Schumer and Sanders Are Wrong On Buybacks
Benn Steil, Benjamin Della Roca 2/15/2019 CFR

Common sense about share buybacks. Logically, there is no basis for believing that a firm prevented from buying back its stock will, in consequence, increase investment or compensation.

The Real Reason America Is Scared Of Huawei: Internet-Connected Everything
Will Knight 2/8/2019 MIT Technology Review

What exactly is 5G? Not "a protocol or device, 5G refers to an array of networking technologies meant to work in concert to connect everything from self-driving cars to home appliances over the air." Utilizing two different frequencies.

Asia

What is GDP in China?
Michael Pettis 1/16/2019 Carnegie Endowment

China’s GDP-the good, the bad and the ugly. Must read for China watchers.

Millions Are On The Move In China, And Big Data Is Watching
Kirsty Needham 2/6/2019 Sydney Morning Herald

Unintended consequences of the social credit system: millions in China are banned from travel on high speed trains and planes.

U.S.-China Trade War Boosts City’s Economy
Rob Schmitz 2/12/2019 NPR

Hai Phong: Chinese property buyers are eclipsing local buyers and many of the firms operating in Vietnam have Chinese owners. Shell game.

Hong Kong: When Rich Dreams Interrupt Fortunate Life
Vivienne Chow 2/11/2019 Lowy Institute

The Cantonese New Year's greeting Kung Hei Fat Choi "originated in the Guangdong region during the Self-Strengthening Movement (1861­–1895) in the late Qing period, with Chinese workers wishing their foreign bosses prosperity during the New Year."

India Will Rise, Regardless of Its Politics
Martin Wolf 2/5/2019 FT

The triumph of hope over experience.

Innovation

The Future of Global Health Is Urban Health
Thomas J. Bollyky 1/31/2019 CFR

Before 1900, urban residents lived shorter lives that their rural counterparts. Then sanitation and other infrastructure increased urban lifespans. Now treatment rather than prevention is the primary driver.

Just another database format? On blockchains, governance, enterprise systems, and economics
Oliver Beige 2/2/2019 Medium

The problem is that much of what drove the relevant shifts in economic organization over the last twenty-plus years has happened off the radar of economists, hidden inside firms.