The tendency toward restriction that runs through the tone of the presentation seems to me to be quite problematic. It seems to me to support a wide variety of misguided policy impulses. –Larry Summers, Jackson Hole 2005 You might think Summers had changed his mind in the eleven years since he called Raghuram Rajan a “Luddite” for daring to suggest the financial system had gotten riskier since the 1970s thanks to competition and the rise of performance-based pay. After all, in a new paper, Summers and graduate student Natasha Sarin not only cited Rajan’s work approvingly, they concluded lenders are still too vulnerable to panics. You would, however, be wrong.
Financial hype cycles are predictable mostly because they mimic fashion fads and music fads. For example, there was a time in this reporter’s life when she aspired to be cutting edge and cool. Joyfully, no longer. This involved dying her hair pink (as much as she could get away with without being expelled), reading NME and Melody Maker, and listening to the most obscure bands available in the acceptable genre, which was Indy rock. If and when the bands went “mainstream”, however — something assessed by whether the year below was listening to them — it was time to move on and find something more obscure. “Are you seriously listening to Blur? What seriously? Jeez. I much prefer Radiohead. What!? You’ve never heard of Radiohead? I can’t believe it. I’ve been a fan for like ‘forever’. You’re not cool.“
Maybe you’re aware that productivity growth has been abysmal in recent years. Maybe you’ve even read Robert Gordon’s new book — or just one of the many summaries and critical reviews — and you worry gravely about what this means for future living standards.
The first batch of reviews for Robert Gordon’s new book The rise and fall of American Growth: the US standard of living since the civil war, are feeding through the blogosphere. Here, for example is Diane Coyle’s take. She’s mostly appreciative of the work but not entirely convinced Gordon’s central thesis that innovation today is slower and less important than it was in the 20th century has been entirely proven. She is more sympathetic, however, about the issue of headwinds slowing down whatever innovation-driven growth there might otherwise be. We haven’t read the book ourselves yet, but reading Coyle’s review it’s clear Gordon uses the book to expand in more detail on some of the ideas presented in his October 2015 paper Secular Stagnation on the Supply Side: U.S. Productivity Growth in the Long Run. That paper, itself, expands on his core thesis that the days of miracle growth are long gone and that slower growth lies ahead.
ESG stands for Environment, Social, Governance. And it’s an increasingly big thing in the asset management world. The basic premise is that if you can get the biggest investment managers to collectively commit to ESG-focused principles in their strategies — whether that be through active engagement as shareholders or divestment strategies — capital will eventually be pulled from the type of corporations that routinely undermine or undercut the standards society judges to be important — from pollution and environment, to labour rights and fraud — forcing them to adapt their behaviour. The idea is to send bad corporates to capital-unavailable Coventry.
About a month ago, Citi’s Disruptive Innovations report revived the debate over the cause of slowing productivity in Western economies. One insight related to how modern technology encourages smarter distribution rather than outright production growth. You don’t need to produce as many spoons because, well, in the digital age less is more and everyone drinks Soylent. You probably don’t need a big house either, because, hey virtual reality. But if true, why does it not feel like quality of life is improving in many corners of the developed world? Perhaps there is something more to it.
We’ve rushed straight from Camp Alphaville’s big data, AI and debt sustainability conversations to Paris to take part in a United Nations Environment Program-hosted symposium entitled New Rules for New Horizons: Reshaping Finance Sustainability. [As an aside - we were delivered to the venue by a particularly overjoyed Parisien taxi driver celebrating news that local protests against Uber's UberPop service, which allows non-professionals to offer rides, had successfully persuaded the Silicon Valley Taxi-Unicorn-App-Monopoly-Disruptor to suspend the service as of this weekend.] This is a very brief summary of the session we moderated on financial technology and sustainability — yes there is a connection — before a more thoughtful take on everything we’ve just downloaded sometime next week.
Back in November we meandered through the possible implications of there being no more petrodollars in the system (on account of US shale oil energy liberation). Since then, we’ve also been thinking about the possible implications of there being no more sweatdollars in the system (on account of US re-shoring and digital manufacturing trends). So what happens if key dollar recycling pathways were to be significantly closed off or contracted? Privately, we’ve speculated the situation could over time lead to the rise of a new international funding currency front runner. (Though, certainly not because the US is losing influence. More because, shale oil and a labour surplus means it may not be in America’s interest to defend reserve-currency status at all.)