Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.
Central Banks' Lesson: Easy Money Alone Isn't a Growth Salve (The Wall Street Journal) Central bankers have injected roughly $8 trillion into the global economy since the financial crisis. In return, the world has remained in a low-growth rut. Increasingly, the global problem isn't just demand, but weaker capacity to supply goods and services with available capital and labor, what economists call "potential growth." This is due to declining growth of labor-force populations and feeble growth in productivity, which is output per worker. Econintersect: Our bottom line is that loose monetary policy has "created" more money for finance but not for the "real economy" of goods and services. The result is more money in financial instruments and institutions and no more (even less?) in the hands of consumers and producers of consumer goods and services. Talking heads may debate whether it is a supply problem or an demand problem. We say it is both - they are intertwined and it is ridiculous to talk about independent supply and demand on a macro scale.
The Story Behind the Emerging-Market Meltdown (Noah Smith, Bloomberg) Smith puts the onus on emerging market woes (see chart below) on the slowdown ih China. He says the lull will pass and new emerging market leaders will take over from a slower growing China. He puts his money on India to be at the forefront here. See article by Raghuram Rajan below (India).
Welcome to the Block Party (The Awl) Ad blockers will change the way advertising is delivered over the internet - it will not stop it. This author argues it will make advertising better, more effective and more efficient for both advertisers and internet users:
People who block ads are right; if this stuff doesn't interest them it's just as well they don't see it. But when the ad is content being shared by people on a platform, it will be increasingly laser-targeted, and it won't be blockable. When content and advertising and user profiles hoarded and traded by marketers are all inextricable, brand affiliations will precede users virtually everywhere they go. Desktop and mobile display ads as we know them (and block them) now will fade out, in the image of Buzzfeed, because they'll be inferior. Blocking ads will lead to "better" ads, for some parties. Publishers that can sustain their own advertising arm can circulate sponsored content through one platform after another, using their internal data to inform their targeting strategies. Other publishers, smaller ones that hand over control of their business to platforms will get better-targeted ads, thanks to even tighter integration with the most comprehensive, all-knowing trackers on the internet; both publisher and advertisers will do better business reassured by the closed nature of apps and platforms that their ads are reaching the optimal audience who cannot escape them. And we can say for certain the pages will load very, very fast. For a while, anyway.
Scottish independence: A yes vote would have plunged Scotland into a deep depression (City A.M.) Since the Scottish independence referendum last year the price of oil has fallen precipitously and at today's price the author estimates an independent Scotland's fiscal deficit would have been around 10% of GDP. With some analysts predicting that the oil price will fall further to $20, this would of course increase the deficit further. The result would have been an independent Scotland in an economic depression, according to the author, an economics professor at the University of Glascow. But not all agree - see next article.
IS has big plans for gold currency (Al Monitor) The U.S. should be afraid, be very afraid. IS has announced that the gold dinar will destroy "the US dollar by excluding it from international financial transactions and replacing it with gold, silver and copper".
The current difficulties of emerging markets stem from a complicated set of reasons, but an important one is impatience to regain growth by overemphasizing old and ineffective methods of stimulus. Brazil may have overspent, China may have overinvested. The world is a difficult place. Let us recognize we are doing quite well in comparison - indeed, many industries in difficulty have a problem because exports are low or imports are very competitive, and not because domestic demand is inordinately weak. We cannot compensate entirely for what is happening across our borders, else we will risk acquiring the problems our fellow emerging markets have. We have to have the discipline to stick to our strategy of building the necessary institutions and creating a new path of sustainable growth where Jugaad is no longer needed. For this, we need the understanding and cooperation of business, not impatience and pressure for quick impossible fixes. Only then can we realize our true potential as a nation.
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