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Chartbook #198 Globalization: The shifting patchwork [Adam Tooze, Chartbook]

By William McClain
In Adam Tooze [Chartbook]
February 27, 2023
543 views
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  • Globalization is shifting – Ian Bremmer, Ngair Woods, Niall Ferguson and I debated this at Davos and continued the train of thought in the FT and in Chartbook #192.
  • Hyun Song Shin of the BIS gave a new outing and an update to his fundamental paper on how to envision globalization – as an island model or a network of balance sheets and how to connect financial and real economic globalization.
  • Globalization has regressed since 2008 – World goods exports in relation to GDP are now back to where they were in 2000.
  • Real and financial globalization are not separate processes but tightly interlinked – Credit finances transactions between a series of sub-contractors.
  • European banks were the main drivers of financial globalization from the 1990s onwards – This went into reverse in 2008.
  • Finance is fungible – A contraction in European lending shrinks funding across the entire system.
  • The world economy has always consisted of a patchwork – Sectors differ from each other in their logics and large parts of the world are not included.
  • Data from S&P’s Capital IQ (CIQ) database provides a snapshot of inter-firm linkages – This allows us to form an impression of the extent of corporate interconnections by country and by sector.
  • Different modes of globalization prevail in the textiles, automotive and information technology sectors – Textiles globalization takes the form of relatively simple China-Asia networks, the automobile industry is multi-polar, and IT involves a mesh of interconnections between Japanese, Chinese, Korean and US firms.
  • Comparing the network of firms in February 2020 with that in December 2021 – The automotive industry network remained largely stable whereas that for Information Technology was subject to significant contraction.
  • Tools of this kind, covering both real and financial interconnections, will enable us to trace future trends in globalization.

Published February 27, 2023
Visit Chartbook to read Adam Tooze’s original post Chartbook #198 Globalization: The shifting patchwork

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The Build-Nothing Country [Noah Smith, Noahpinion]

By William McClain
In Noah Smith [Noahpinion]
February 27, 2023
419 views
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  • Money is not physical stuff: Just because you earmark money for a project doesn’t mean it will get built. Permitting, land use, and development regulations can hold up the process for years, and cost overruns can lead to inadequate physical projects.
  • NIMBYism: NIMBYs are holding up solar and wind projects, transmission lines, and housing construction due to their intrusions on scenic views and taking up a lot of space.
  • Supply-chain snags: The Biden administration’s crackdown on sourcing from China has caused supply-chain snags and long waits to connect to the grid.
  • Cost overruns: The Second Avenue Subway line is an order of magnitude more costly per mile than similar projects in Europe due to overuse of expensive consultants, overly large train stations, and poor coordination and pork-barrel spending by other city agencies.
  • Environmental review laws: California’s extra-strict environmental review law (CEQA) is being abused by local supporters of physical stasis to prevent housing construction.
  • TSMC: The Taiwanese company that recently agreed to build a big plant in Arizona is running into major cost issues due to construction costs being 4 to 5x greater for US fabs versus a fab in Taiwan.

Published February 27, 2023
Visit Noahpinion to read Noah Smith’s original post The Build-Nothing Country

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AI Techies! [Noah Smith, Noahpinion]

By William McClain
In Noah Smith [Noahpinion]
February 27, 2023
358 views
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  • The AI techie subculture is a relatively small subculture of youngish people in San Francisco and the peninsula to the south, who often live in group houses and who are loosely clustered around the AI industry.
  • Money enables the AI techie subculture, but fundamentally it’s about dreams – feeling like you’re part of something new and special and amazing that no one else is a part of.
  • Beliefs that stem from and help to intensify this romantic feeling of momentum and importance include the belief that the AI boom is just getting started and will supercharge the economy, the conviction that AI will replace most human endeavors, worries about malign artificial general intelligence (AGI), and a believe in the crucial importance of AI alignment (designing AI to be human-friendly).
  • The bohemian/yuppie optimal control problem is a balance between the desire for romantic bohemianism and the desire for upward economic mobility.
  • The new AI techie culture is a bit different than the culture that built the internet – it feels more conservative, drugs and alcohol are frowned on more than they used to be, there’s more rhetorical support for things like monogamy and childbearing, and there’s much less passion for social justice.
  • Monogamy and Childbearing – AI techies are less likely to go to local Burner events and more likely to go to Vibecamp, which is described as “Burning Man for autistic people”. There is less passion for social justice and more disgust with SF’s homelessness situation.
  • Immigrants from Conservative Regions – Techies nowadays are more likely to be children of immigrants from more conservative regions of the globe, such as East and South Asia, East Europe, the Middle East, and West Africa.
  • Nature of Technology – The internet was inherently a utopian, humanistic project, while AI is generally framed as a way for companies to replace human beings.
  • Money – As the startup world has become a big, institutionalized business, money has become more and more available to a younger and younger set of people.
  • Yuppies – Young urban professionals who dedicate their time to climbing the economic ladder.
  • Multi-Armed Bandit Problem – Finding a balance between yuppie social climbing and bohemian youth.
  • Constrained Optimization Problem – Without living two full lifetimes, you don’t get to be both entirely bohemian and entirely yuppie.
  • Network – People used to working in AI need to network to meet VCs, engineers, founders, and people who might give them ideas about how to solve technical problems.
  • Echo Chamber – AI techies’ need to network can cut them off from the wider community around them.

Published February 26, 2023
Visit Noahpinion to read Noah Smith’s original post AI Techies!

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Ukraine’s War Economy, 1 Year In [Joseph Politano, Apricitas Economics]

By William McClain
In Joseph Politano [Apricitas Economics]
February 27, 2023
380 views
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  • One year ago, Vladimir Putin announced that Russia was launching a full-scale invasion of Ukraine – This has resulted in hundreds of thousands of casualties, tens of millions of refugees, and a 30-40% reduction in Ukraine’s GDP.
  • Ukraine and the Global Food Crisis – Ukrainian crop production and food exports have been severely harmed, but the absolute worst-case scenario was avoided. The Black Sea Grain Initiative has been instrumental in allowing food exports to resume.
  • Ukraine’s Battered Industry – Ukrainian industrial output has fallen more than 35%, and manufacturing output has fallen a staggering 40%. Companies still see the situation as getting worse before it gets better, and the war is the biggest impediment to Ukrainian economic growth.
  • Conclusions – Ukraine will likely remain dependent on foreign aid for much of its economic needs, and many nations are already failing to meet their stated military and financial commitments. Subscribe now to receive new posts on economic data analysis.

Published February 25, 2023
Visit Apricitas Economics to read Joseph Politano’s original post Ukraine’s War Economy, 1 Year In

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Chartbook #197: The Ukraine-Aid Reality Gap [Adam Tooze, Chartbook]

By William McClain
In Adam Tooze [Chartbook]
February 27, 2023
295 views
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  • There is a gap between collective awareness of major social, environmental, political and economic problems and the resources mobilized to meet them. This gap can be interpreted as a problem of hypocrisy, policy, or perception (a “reality gap”).
  • The Kiel Institute has tracked €143.6 billion of financial, humanitarian, and military aid committed to Ukraine between January 24, 2022 and January 15, 2023. Poland is contributing the most in proportional terms (2.1% of GDP), followed by the US and Germany (0.375% of GDP).
  • The US and Germany are not contributing as much as they have in past military-economic efforts. Furthermore, their contributions to Ukraine are less than their contributions to other emergencies.
  • Ukraine is in need of $3.5 billion per month. The US and Europe have committed to providing enough to cover that, but payments do not arrive in a steady or reliable fashion.
  • The gap between declared intentions and actual delivery of aid to Ukraine is vast. This raises questions of cynicism, incompetence, and a “reality gap”.
  • The course of the war in 2023 is highly uncertain. If Russia does not crumble, the “reality gap” may close in the direction of greater financial and military aid.
  • Chartbook Newsletter is free to readers around the world. It is sustained by voluntary subscriptions from paying supporters. Subscribe now to join the group of supporters.

Published February 25, 2023
Visit Chartbook to read Adam Tooze’s original post Chartbook #197: The Ukraine-Aid Reality Gap

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Chartbook #197: The Ukraine-Aid Reality Gap [Adam Tooze, Chartbook]

By William McClain
In Adam Tooze [Chartbook]
February 27, 2023
173 views
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  • The Main Criticism – The main criticism I have heard is that I’m just another old man (I’m 59) shaking his fist and complaining about “kids these days,” when in fact “the kids are alright.”
  • Self-Reported Depression and Anxiety – Section 1 of the Collaborative Review summarizes self-report surveys that have been conducted at regular time intervals since 2010 or earlier. Do members of Gen Z *say* that their mental health is declining? Yes, in every study we can find.
  • Self-Harm – If Phillips and Friedman were correct that “the kids are alright” and the appearance of an epidemic is an illusion based on Gen Z’s “more honest relationship with their mental health,” then we would not see any change in objective measures of mental health, such as hospitalizations for self-harm, or deaths by suicide. But in fact, we do see such changes.
  • Suicide – Section 3 of the Collaborative Review doc presents the most tragic data of all: a large increase in the number of completed suicides. For suicide, the rates are always higher for boys and men. Girls and women make more suicide attempts, but they are more likely to use reversible means.
  • Conclusion – The evidence that this time is different is very strong. In 2010 there was little sign of any problem, in any of the long-running nationally representative datasets (with the possible exception of suicide for young teen boys). By 2015 the teen mental health was a 5 alarm fire, according to all the datasets that Jean Twenge and I can find. The kids are not alright.

Published February 24, 2023
Visit Chartbook to read Adam Tooze’s original post Chartbook #197: The Ukraine-Aid Reality Gap

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Don’t be a doomer [Noah Smith, Noahpinion]

By William McClain
In Noah Smith [Noahpinion]
February 22, 2023
263 views
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  • The media has been debating the cause of teenage unhappiness in the U.S. Taylor Lorenz argued that the main reason teens are unhappy is that they realize the world around them is a “hellscape”.
  • There is an entire “doomer” subculture that focuses on Covid, climate change, environmental destruction, and capitalism.
  • Capitalism is not failing; humans are richer now than ever before and poverty, child mortality, illiteracy, and hunger are all decreasing.
  • The U.S. does have a social safety net including Social Security, SSDI, Medicare, Medicaid, unemployment insurance, Section 8 housing vouchers, SNAP, the EITC, and the child tax credit.
  • Job security has stayed the same since the 1990s and the layoff rate has fallen slowly but steadily since the turn of the century.
  • Covid is not an HIV-like disease and has fallen far behind other issues in terms of Americans’ priorities. Vaccines developed in record time have saved millions of lives in the U.S. and worldwide.
  • Climate change is a real threat but recent climate models have all but ruled out most of the worst-case scenarios for warming and estimates of emissions during the 2010s have been revised downward.
  • Doomerism is a demotivating DDoS because it reduces motivation to solve problems, distracts people from the actual priorities, and can have negative effects on mental health in the long run.
  • We should actively combat doomer ideas in the world at large to save people from entering the doom loop in the first place.

Published February 22, 2023
Visit Noahpinion to read Noah Smith’s original post Don’t be a doomer

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Repost: Much of what you’ve heard about Carter and Reagan is wrong [Noah Smith, Noahpinion]

By William McClain
In Noah Smith [Noahpinion]
February 22, 2023
297 views
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  • Carter was the one who beat inflation. He inherited a modest deficit from his predecessor and kept it at about the same level throughout his presidency, and appointed Paul Volcker as the Fed Chair, who raised interest rates to 17.61%, causing the first Volcker Recession in 1980.
  • Carter was the Great Deregulator, not Reagan. Despite Reagan’s fiery rhetoric, he passed only two pieces of deregulation during his two terms in office, while Carter passed seven major pieces of deregulatory legislation.
  • Reagan didn’t increase defense spending by much. In dollar terms, Reagan increased military budgets, but when adjusted for GDP, it looks much less impressive and was much lower than the military outlays of earlier decades.
  • The fall of the USSR is more complicated. The most convincing economic explanation for the Soviet collapse in the late 80s comes from Yegor Gaidar, a Soviet official who later became Prime Minister of Russia, who suggested that the Soviet economy collapsed due to the oil glut that began around 1985.
  • Lessons to take away. Successful policy takes a long time to work, American policy is driven less by ideology and presidential personality than we think, and presidential elections are not always as cataclysmic as we may think.

Published February 21, 2023
Visit Noahpinion to read Noah Smith’s original post Repost: Much of what you’ve heard about Carter and Reagan is wrong

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The U.S. cannot afford to turn against immigration [Noah Smith, Noahpinion]

By William McClain
In Noah Smith [Noahpinion]
February 20, 2023
254 views
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  • Immigration is a necessity – We need continued robust immigration flows, especially of high-skilled immigrants, in order to keep our nation both prosperous and secure.
  • Fertility rate is declining – Despite a very small post-pandemic uptick, the country’s total fertility rate has fallen well below the replacement level over the past decade and a half.
  • Immigration is beneficial to innovation and technical leadership – Immigrants are responsible for 30% of U.S. patents and 38% of U.S. Nobel Prizes in science, and nearly three quarters of all U.S. innovation since 1976 can be attributed to high-skilled immigration.
  • AI research is especially important – AI systems will be crucial to precision weaponry in the not-too-distant future, and the U.S. is in danger of falling behind if we don’t retain our ability to welcome China’s best and brightest.
  • Border chaos is not worth it – Making it easier to apply for asylum by crossing the border illegally rather than presenting yourself at a point of entry naturally creates a ton of disorder at the border and fuels an anti-immigration sentiment.
  • Compromise is necessary – A long-term bargain between increased border security and increased legal pathways to immigration must be struck in order to increase immigration.

Published February 18, 2023
Visit Noahpinion to read Noah Smith’s original post The U.S. cannot afford to turn against immigration

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Russia’s New Friends [Joseph Politano, Apricitas Economics]

By William McClain
In Joseph Politano [Apricitas Economics]
February 20, 2023
301 views
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  • The bulk of the military response to the Russian Invasion of Ukraine came in the form of arms, equipment and training for Ukrainian troops. This was to help them better resist the Russian invasion and largely prevent the direct involvement of armed forces in open combat with Russia to avoid escalating the conflict.
  • The economic sanctions had to hit Russia’s economy hard to deter further aggression but preserve Russian oil and gas exports essential for global energy consumption. The Allies leveraged their economic strength of high-tech manufactured goods and international finance to cut Russia off from critical imports and sources of credit/liquidity.
  • The strategy worked: Russian businesses and markets were roiled by the initial round of financial sanctions and Russian industrial output suffered. This year the Russian economy entered a significant recession with GDP dropping 3.7%.
  • The squeeze on Russia’s industrial base is easing. Cut off from trade with high-income democracies, Russia has been making new friends and new trading partners which has resulted in an increase in total Russian imports.
  • The rising Russia-China Trade Relationship was always the obvious first choice for Russia to turn to when the Allies began implementing sanctions. China can supply Russia with cars, phones, computers and machinery and Russia can supply China with oil and natural gas.
  • Turkey is another source of Russian imports. Exports to Russia are up 120% in the last year, imports from Russia remain elevated and there is a surge in nonmonetary gold imports.
  • To achieve a just peace, further sanctions may be necessary. This could include pressure on Turkey, a NATO member, and China, already a frequent target of sanctions, to limit their trade with Russia.
  • Subscribe now! To receive new posts on economic data analysis, consider subscribing.

Published February 18, 2023
Visit Apricitas Economics to read Joseph Politano’s original post Russia’s New Friends

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