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

The divergent nowcast and one model’s forecast at Seeking Alpha

by New Deal democrat

The divergent nowcast and one model’s forecast at Seeking Alpha

Over 10 years ago I found a good, quick-and-dirty way of looking at the Index of Leading Indicators. It only matters at turning points, which means, for the first time since the 2015-16 “shallow industrial recession,” it’s worth looking at now.

That, plus a concise look at the bifurcation in the producer vs. consumer economy as it stands now, is a post I’ve put up over at Seeking Alpha.

As usual, clicking over and reading should hit you with a little dose of knowledge, and me with a little dose of coin to reward me for my efforts. After all, those books I’m reading on the historical antecedants to the American Republic aren’t boing to pay for themselves!

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Service disruption

We have had little disruption with service over the last few years, so the disruption Monday came as a surprise.  I apologize for any inconvenience.  A server malfunction was the cause.  It is a reminder that internet infrastructure has weak points other than my laptop.

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Weekly Indicators for October 7 – 11 at Seeking Alpha

by New Deal democrat

Weekly Indicators for October 7 – 11 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

The stars are aligning for the recovery from the present slowdown in the longer term. But in the meantime, the present and short term data is still soft.

As usual, clicking over and reading helps reward me a little bit for my efforts.

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The road to dictatorship is depressingly predictable. 

Interesting stuff from the One Handed Economist

“The road to dictatorship is depressingly predictable. Once power is stolen, the problem is to keep it. Anyone who might develop a separate power base must be struck down. Eradicate rivals, rule through force and fear. Trust no one, particularly family, friends and the army. Keep everyone on their toes with random executions, unpredictable policy changes and imaginative public tortures. So far, so historic. It could be a Shakespeare play. What distinguishes modern tyranny, Dikötter argues, is the cult of personality. Total control of the information space keeps the modern dictator in power.” Via New Statesman.

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From Intellectual to influencer

Interesting stuff from the One Handed Economist

From Intellectual to influencer: “In the case of the public intellectual, the institution was the academy and the role was thinking. In the case of the public influencer, the institution is the corporation and the role is marketing. The shift makes sense. Marketing, after all, has displaced thinking as our primary culture-shaping activity, the source of what we perceive ourselves to be.”

How true does this seem?

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Does France Have an “Exorbitant Privilege”?

by Joseph Joyce

Does France Have an “Exorbitant Privilege”?

The U.S. has long been accused of using the international role of the dollar to exercise an “exorbitant privilege.” The term, first used by French finance minister Valéry Giscard d’Estaing, refers to the ability of the U.S. to finance its current account deficits and acquire foreign assets by issuing dollars as a reserve currency. While flexible exchange rates have lowered the need for reserve currencies, the use of the dollar in international trade and finance ensures that there is a continuing need for dollar-denominated assets. The status of the dollar contributes to the surplus in U.S. international investment income despite its negative net international investment position (NIIP). But France also has a surplus in international investment income and a negative NIIP. Does it possess its own privilege?

The U.S. surplus reflects the composition of its external balance sheet as well as the return on its assets and liabilities. The U.S. has a positive balance on equity, and in particular, FDI, which is offset by the negative balance on portfolio securities, such as bonds. U.S. Treasury bonds are the universal “safe asset,” held by private foreign investors as well as central banks. The return on the equity assets exceeds that paid on the debt liabilities, thus yielding a positive investment income balance. This is the return that the U.S. receives for playing the role of the “world’s venture capitalist,” according to Pierre-Olivier Gourinchas of UC-Berkeley and Hélène Rey of the London Business School. In addition, the U.S. receives a higher return on its FDI assets than it pays out on its FDI liabilities.

France also has a negative NIIP but a positive net international investment income balance. In 2018, for example, it received $35.6 billion in investment income. Moreover, the Banque de France pointed out in the 2015 Annual Report on the French Balance of Payments and International Investment Position that while the ratio of outward direct investment stocks to liabilities was 2 to 1, the ratio of FDI receipts to payments was 3 to 1. The French surplus, like that of the U.S., therefore can be attributed to both a “composition” effect reflecting the difference in the types of assets and liabilities it possesses, but also a “returns” effect due to the relatively higher return on its direct investment assets vis-à-vis its liabilities.

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