Recommended Weekend Reads

August 11 - 13, 2023

Here are our recommended reads from reports and articles we read in the last week. We hope you find these useful,  and have a great, relaxing weekend.   And let us know if you or someone you know wants to be added to our distribution list or sign up via the website.

Global Political Economy 

• “Vassals vs. Rivals: The Geopolitical Future of AI Competition”   Lawfare

  The U.S. should use an AI-competitive world as an opportunity to lead in developing an open, rule-bound, and balanced global AI ecosystem. For its part, it is in the U.S.’s national interest to encourage global AI competition and use it as a catalyst for creating a global AI ecosystem that is more open, rule-bound, and balanced than it would be in an AI vassal future.

Indo Pacific 

• “Support Provided by the People’s Republic of China to Russia”  Report from Office of the U.S. Director of National Intelligence

  The US DNI issued this report in late July, detailing how China “is pursuing a variety of economic mechanisms for Russia that mitigate both the impact of Western sanctions and export controls.  The PRC has increased its importation of Russian energy exports, including oil and gas supplies rerouted from Europe.”  The report goes on to detail Beijing’s increased use of its current and its financial infrastructure with Russia.

• “The End of China’s Economic Miracle”  Adam Posen/Foreign Affairs Magazine

  Posen, the President of the Peterson Institute for International Economics and a former voting member of the Bank of England’s rate-setting Monetary Policy Committee (MPC), points out that the first quarter of 2020, which saw the onset of COVID, was a point of no return for Chinese economic behavior, which began shifting in 2015, when the state extended its control: since then, bank deposits as a share of GDP have risen by an enormous 50 percent and are staying at that high level. Private-sector consumption of durable goods is down by around a third versus early 2015, continuing to decline since reopening rather than reflecting pent-up demand. Private investment is even weaker, down by a historic two-thirds since the first quarter of 2015, including a decrease of 25 percent since the pandemic started. And both these key forms of private-sector investment continue to trend still further downward.  

Russia

• “A War of Attrition: Assessing the Impact of Equipment Shortages on Russian Military Operations in Ukraine”   Center for Strategic and International Studies

• This report examines the impact of Russia’s growing military equipment and ammunition shortages on the Kremlin’s ability to prosecute the war in Ukraine and to carry out operations in other areas. In doing so, it focuses on the availability of artillery ammunition, as well as five weapons categories of central importance for Russia’s ability to sustain operations: tanks, artillery, uncrewed aerial vehicles, electronic warfare systems, and long-range precision strike weapons. 

Americas 

• “Meet the Candidates: Argentina”   Americas Quarterly

  Argentines head the polls on Sunday, August 13th, to vote in presidential primaries.  With inflation raging at historic rates, the stakes are high as the ruling Peronist Unión por la Patria coalition is struggling to retain power and right the nation’s abysmal economic conditions.

• “Latin America could become this century’s commodity superpower”   The Economist

  Latin America is no stranger to supplying the world with raw materials, but it could be on the verge of a boom. Three forces are pushing the region to become this century’s commodity superpower. The green transition is increasing the demand for metals and minerals that Latin America has in large supply, as well as the renewable energy to process them. The region already supplies more than a third of the world’s copper, used in wiring and wind turbines, and half of its silver, a component of solar panels.

• “What Should College Athletes Be Paid?  Market Structure and the NCAA”  Federal Reserve Bank of St. Louis

  This interesting Teachers Guide written by the St. Louis Fed asks: What should college athletes be paid? The debate over the compensation for student-athletes in the US is not new, but recent policy changes and court cases have once again brought the issue to the forefront. This issue looks at how the market structure underlying college athletics has taken this debate all the way to the Supreme Court. 

Charts of the Week 

The U.S. Pandemic Geographic Income Shift  

There has been a lot of talk about the great migration of 2020-2021 because of the Pandemic.  But how did that break down in terms of income shifts?  Axios, looking at a new analysis of tax data from the Economic Innovation Group, shows a surge in incoming that arrived in many rural and exurban cities as well as popular vacation spots.  Big cities were, as we all know, the big losers.  And of those who left, disproportionately, it was those with higher incomes. 

Axios reports that San Francisco’s outbound migration caused a 20 percent drop in adjusted gross income from 2020 to 2021.  In Manhattan, it dropped 13 percent, and in Boston, 11 percent – and overwhelmingly, it was high earners who left.  San Francisco’s leavers had an average taxable income of $240,000. 

The biggest winners in terms of wealth moving in?  Walton County, Florida, in the Florida panhandle, saw a 51.6 percent increase in income per person.  Other places that were big winners; Naples, Florida; Collier County, Florida; and Pitkin County (Aspen), Colorado – all up by 31 percent or more.

Recession or Not? Where Do the Banks Stand? 

As markets debate whether we are headed for a soft economic landing or a recession of some sort is already built in, it is always interesting to see where the major Wall Street investment banks stand.  While it seems to us that overall sentiment is leaning toward no recession, Bloomberg this week offered a scorecard, and surprisingly, most of the big banks are still in the camp a recession is coming.