April 12 - 15, 2024

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

China

"As China’s Economy Falters, So Does Middle-Class Confidence" NBC News
At a restaurant in the Chinese capital that serves up low-cost meals to seniors, much of the crowd these days is decidedly less than senior. For Wang Ran, a 27-year-old designer, lunch at the restaurant in Beijing costs about half what she would normally pay — which makes a big difference as she downgrades her spending amid an economic slump in China that could have global ramifications.
"No Substitute for Victory: America’s Competition with China Must Be Won, Not Managed" Foreign Affairs
Chairman of the U.S. House Select Committee on the Chinese Communist Party, Representative Mike Gallagher (R-WI), and former U.S. Deputy National Security Advisor Matt Pottinger write that amid a presidency beset by failures of deterrence—in Afghanistan, Ukraine, and the Middle East—the Biden administration’s China policy has stood out as a relative bright spot. The administration has strengthened U.S. alliances in Asia, restricted Chinese access to critical U.S. technologies, and endorsed the bipartisan mood for competition. Yet the administration is squandering these early gains by falling into a familiar trap: prioritizing a short-term thaw with China’s leaders at the expense of a long-term victory over their malevolent strategy. The Biden team’s policy of “managing competition” with Beijing risks emphasizing processes over outcomes, bilateral stability at the expense of global security, and diplomatic initiatives that aim for cooperation but generate only complacency.

Americas

“Should Investors Take a Sheinbaum Victory for Granted in Mexico?” Americas Quarterly
In a year in which about half of the adult population in the world will vote and several national elections are set to be dramatic, Mexico is a puzzle. On June 2, the country will vote for president, 128 federal senators and 500 congresspeople, governors in nine states (including Mexico City), and local congresses and municipalities—all in all, a whopping 20,000 public offices will be up for grabs. Yet, markets would suggest Mexico is an oasis of tranquility, a “boring long,” so to speak. After rallying by 15% against the U.S. dollar in 2023, the Mexican peso has posted an additional 2.1% gain this year, the only major currency still outperforming the mighty greenback. Credit default swaps (CDS), which measure the cost of insuring against a government defaulting on its debts, tell a similar story: at 92 points, they are significantly lower than Brazil’s (144) and Colombia’s (149) and have been hovering below the 100 mark for the last 12 months.

“Canada Stuck In NATO Penalty Box Through 2030” Politico
Canada is not about to meet its NATO defense spending commitments anytime soon, as new spending plans fail to meet the 2 percent target all NATO members are required to spend (and which Prime Minister Justin Trudeau again committed to meeting in 2023). The latest budget suggests Canada will only hit the defense spend-to-GDP ratio requirement of 1.76 through 2030.

International Finance and Technology

"Chapter 2: Expanding Frontiers: Fiscal Policies for Innovation and Technology Diffusion" International Monetary Fund
How can fiscal policies promote innovation and technology diffusion in a fiscally constrained world? Countries are implementing industrial policies to promote innovation in specific sectors amid security concerns. However, the IMF argues industrial policy is only advisable when targeted sectors generate measurable social benefits (such as lower carbon emissions or knowledge spillovers), implementation capacity is strong, and policies do not discriminate against foreign firms. A well-designed fiscal policy mix that supports innovation more broadly across sectors and emphasizes fundamental research can boost long-term growth for advanced economies. For less advanced economies, facilitating technology adoption with strategic investments and tax reforms should be the priority.

"The New Quantum Technology Race" Internationale Politik Quarterly
Throughout history, technological advancements have bestowed states that are innovation leaders with a decisive edge over other states. The development of today’s internet, pioneered by the US Advanced Research Projects Agency, significantly enriched the United States, for example. It currently boasts seven of the world’s top 10 companies, which make their profits from the hardware and software for internet-connected devices.

U.S. 2024 Elections

"The 2024 U.S. Election, Trust, and Technology: Preparing for a Perfect Storm of Threats to Democracy" RAND Corporation
Foreign governments interfered in the 2020 U.S. presidential election, while some domestic leaders alleged election fraud before voting even began. Assertions that the election was “stolen” gained so much traction that, as certification began, a crowd rallied and attacked the U.S. Capitol, causing damage, injury, and death. Messages discrediting the election results and the agencies and officials investigating the riot and election-related offenses have continued unabated, particularly on social media.

Economics

"How the Big Mac Index Relates to Overall Consumer Inflation" Federal Reserve Bank of St. Louis Blog
The Big Mac index was created by The Economist magazine as an informal way of measuring the purchasing power parity between different countries and currencies. The idea is that in every country, the Big Mac sold at McDonald’s is the same. The price of the Big Mac should reflect the local price of ingredients, wages, and other expenses like advertising. Therefore, even though the Big Mac sandwich is the same in every country, its price differs.

Podcast Recommendation of the Week

The “In Good Company” Podcast

Last week, the Wall Street Journal ran a fantastic profile of Nicolai Tangen, the CEO of Norges Bank Investment Management (which has $1.6 trillion under management). Tangen somehow finds time to run a podcast called “In Good Company,” where he interviews the biggest CEOs in the world – and gets them to share fascinating insights about themselves, their companies, and what they think about all sorts of things on their minds. Tangen has interviewed Darren Woods, CEO of Exxon (who loves to grill all kinds of meats), former Morgan Stanley CEO James Gorman (who revealed he would regularly get physically sick from all the stress of work), Elon Musk, Alibaba Founder Jack Ma, and many others. Give it a listen – you won’t be disappointed. It’s available on Apple Podcasts, YouTube, and Spotify.

Recommended Weekend Reads