Relevant and even prescient commentary on news, politics and the economy.

Weekly Indicators for June 10 – 14 at Seeking Alpha

by New Deal democrat

Weekly Indicators for June 10 – 14 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

The divergence between the near term vs. longer term forecast is increasing, and the risk that the forecast is too optimistic is asymmetrical, because for the economy, Trump’s chaotic tariff behavior cannot improve the situation, but can definitely cause harm.

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The slowdown cometh

by New Deal democrat

The slowdown cometh

I submitted a long post on the above to Seeking Alpha. They haven’t put it up yet. When they do, I’ll link to it here.   UPDATE: Here’s the link.

Long story short: you all know that a year ago I forecast a slowdown by about mid-year this year. Everything except for portions of GDP and jobs has acted in accordance with that forecast.

And, judging by this morning’s ADP jobs report for May:


the official jobs report may finally follow suit this Friday

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The Rise and Fall of FDI

by Joseph Joyce

The Rise and Fall of FDI

After the global financial crisis,  international capital flows contracted, especially bank lending in Europe. Foreign direct investment (FDI) by multinational firms, however, provided a steady source of external finance, particularly for emerging market economies. The McKinsey Global Institute has calculated that the global stock of FDI increased from 46% of world GDP in 2007 to 57% in 2016 ($25 trillion to $41 trillion). But FDI flows fell by 27% in 2018 according to the Organization of Economic Cooperation and Development (OECD), and this drop followed a decline of 16% in the previous year. We have entered a new period of contraction by multinational firms, and in particular, U.S.-based multinationals.

A significant amount of the decline is due to firms based in the U.S. responding to changes in U.S. tax law. The U.S.-based firms repatriated earnings that had been kept abroad to avoid U.S. taxes. As a result, the U.S. recorded a negative FDI outflow of $50 trillion in 2018, down from a positive outflow of $379 billion in the previous year. By the latter half 2018, the acquisition of foreign assets had returned to positive levels, but the long-run changes of the tax code revision on the foreign operations of U.S. firms will only become clear over time.

Ireland and Switzerland were particularly hard-hit by the disinvestments, since these countries had often attracted FDI because of generous tax provisions. There were also reversals of investment in Special Purpose Entities (SPE), which allow the multinationals to channel funds through countries with favorable regulatory and tax practices to their ultimate destination. The OECD reported that FDI flows to SPEs in Luxembourg and the Netherlands fell to negative levels last year.

 

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Kenneth Thomas in WSJ

Kenneth Thomas (an AB contributor) was quoted April 7  in the Journal a second time on the general question of how to solve the problem of subsidy bidding wars.  Unfortunately it is behind a paywall…but worth pointing to…

 WSJ.COM
Opinion | Pass a Law to Combat Rent-Seeking

Congress could invoke the Commerce Clause to limit destructive competition over corporate subsidies.

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Weekly Indicators for May 27 – 31 at Seeking Alpha

by New Deal democrat

Weekly Indicators for May 27 – 31 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

There was a touch of weakening across several timeframes. The economy is just weak enough that continuing trade and tariff tantrums could take a slowdown and do enough damage to make it a downturn.

As usual, clicking over and reading should be informative for you, and helps me just a little bit for the effort I put into the work.

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