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EconVue Spotlight

Dear R. Hunter,

I agree with a Twitter commentator today: US-China trade relations is
also giving me whiplash. As treatment, I recommend two new books with a
longer view on the changes taking place in China. The first, " The End
of an Era " by Carl Minzer is truly a must-read for any China watcher.
Devin Stewart at the Carnegie Council conducted a wonderful interview
with Prof Minzer, which I've included below.

Monday night, Elizabeth Economy will be in Chicago to discuss her new
book, " The Third Revolution ". As she says "One of the great paradoxes
of China today is Xi Jinping's effort to position himself as a champion
of globalization, while at the same time restricting the free flow of
capital, information, and goods between China and the rest of the
world." If you cannot make her lecture, The Chicago Council on Global
Affairs will be streaming it live tomorrow night here.

https://www.thechicagocouncil.org/event/xi-and-his-china-third-revolution

My conclusion from reading both books is that despite the twitter
theatrics, changes in the US-China relationship are being driven more by
fundamental changes in China's system of governance than they are by US
politics.

In addition to some really excellent reports by our EconVue experts on
corporate tax cuts, Japanese corporate governance, China in Latin
America, and reform of the US Post Office, my favorite link is about the
persistence of the Roman system of roads across Europe today and its
role in economic development. It is worth clicking on the first graphic,
which shows the Roman network of roads in 117 CE compared with nighttime
light intensity in this decade.

Happy Mother's Day to all!

RESEARCH BY ECONVUE EXPERTS

Corporate Tax Cut to Yield More Investment & Wages, Gradually

https://econvue.com/pulse/corporate-tax-cut-yield-more-investment-wages-gradually

Michael Lewis

https://econvue.com/experts/michael-lewis

How long do we have to wait for this fiscal stimulus? Or should we heed
Nancy Pelosi as she channels her inner Gerschwins, and "let's call the
whole thing off?"

The short answer, FMI believes, is that stimulus is already occurring,
but it will take a while to garner all the economic benefits. That it
would happen instantly is wildly optimistic. Yes, Trump and Co.
over-promised -- they are politicians -- but the end results will be
significant.

Public Comment to the Proposed Revisions to Japan's Corporate Governance
Code

https://econvue.com/pulse/public-comment-proposed-revisions-japan%E2%80%99s-corporate-governance-code

Nicholas Benes

https://econvue.com/experts/nicholas-benes

As the one who proposed this governance code in the first place...an
English translation of my public comments. I hear the Keidanren would
not let FSA use the word "Code" after "stewardship", even though both
codes are the FSA's. (!!) And in the age of AI, the JPX/TSE still have
not made the disclosure items in CG Reports machine-readable. They
remain machine-UN-readable.

China Recognizes Dominican Republic — We Should Worry

https://econvue.com/pulse/china-recognizes-dominican-republic-%E2%80%94-we-should-worry

R. Evan Ellis

https://econvue.com/experts/r-evan-ellis

Dr. Ellis' work on the Dominican Republic's recent establishment of
diplomatic relations with the PRC. He examines the activities which are
likely to follow, based on other countries which have changed their
diplomatic posture toward China in recent years.

Venezuela's Election, the Day after: A Handover of the Nation's Oil
Riches to Russia and China?

https://econvue.com/pulse/venezuela%E2%80%99s-election-day-after-handover-nation%E2%80%99s-oil-riches-russia-and-china

R. Evan Ellis

https://econvue.com/experts/r-evan-ellis

Dr. Ellis argues that the deepening political and economic crisis of the
Venezuelan regime, and its associated need for resources from Russia and
the PRC to maintain itself in power, make it likely that after its
almost inevitable victory in this month's "elections," it will use its
"honeymoon period" to modify laws (and possibly the constitution) to
give Chinese and Russian companies the expanded presence, control and
safeguards they require before providing a significant new inflow of
capital. Such a move would change Russia and China's position just
across the Caribbean from the US in important ways, and present the US
government with important questions regarding how to respond.

The Case for Reforming the United States Postal Service

https://econvue.com/pulse/case-reforming-united-states-postal-service

Robert Shapiro

https://econvue.com/experts/robert-shapiro

Economist Robert Shapiro presents the results of his new study
evaluating the subsidies the USPS receives to provide universal
first-class and bulk mail deliveries, and how much of those subsidies
are used by the USPS to support its business division that competes with
FedEx, UPS, and others. Amazon uses the USPS to deliver packages,
especially over the "last mile" from a local depository to its
customers' homes and offices, because those "cross subsidies" lower the
rates the USPS charges Amazon and others. The source of the problem that
spurred Trump's tweets lies with the USPS, not with Amazon.

STORIES IN OUR SPOTLIGHT World

On Roman roads and the sources of persistence and non-persistence in
development

https://voxeu.org/article/roman-roads-and-persistence-development#.Wu8FMLqAT0A.facebook

Carl-Johan Dalgaard, Nicolai Kaarsen, Ola Olsson, Pablo Selaya 4/10/2018
Vox

Although spatial differences in economic development tend to be highly
persistent over time, this is not always the case. This column combines
novel data on Roman Empire road networks with data on night-time light
intensity to explore the persistence and non-persistence of a key
proximate source of growth – public goods provision. Several empirical
strategies all point to the Roman road network as playing an important
role in the persistence of subsequent development.

Modern slavery

https://www.cfr.org/interactives/modern-slavery/?utm_medium=social_share&utm_source=tw&utm_campaign=modern-slavery#!/section1/item-1

https://www.carnegiecouncil.org/studio/multimedia/20180504-end-of-an-era-in-china-carl-minzner

5/9/2018 Council on Foreign Relations Infoguide

A sober read. Slavery, long banned and universally condemned, persists
in many corners of the world, victimizing tens of millions of people.
Much of it is debt bondage.

"End of an Era" in China

https://www.carnegiecouncil.org/studio/multimedia/20180504-end-of-an-era-in-china-carl-minzner

Podcast with Carl Minzner 5/4/2018 Carnegie Council

Best podcast of the past week. I nterviews with Carl Minzner about his
new book " End of an Era ". Minzer's thesis is that China's recent
prosperity and 40-year ascent was due to its open reform policies and
political stability - and that this era has come to an end with
unpredictable consequences for China's future.

A record 22% surge in international debt securities issuance pushed
up annual growth in US Dollar credit to emerging
economies to 10% in 2017, hitting $3.7 trillion

https://twitter.com/hashtag/DebtSecurities?src=hash

http://A record 22% surge in international #DebtSecurities issuance
pushed up annual growth in #USDollar credit to #EmergingEconomies to 10%
in 2017, hitting $3.7 trillion

4/30/2018 Bank for International Settlement

What could possibly go wrong? Much of this emerging market dollar debt
is not related to financing trade, but is unhedged speculative
investment. If the dollar really strengthens, we could be heading
towards a 1998 moment.

U.S.

Fed unwinding the Bernanke experiments: Progress report

http://www.cmegroup.com/education/featured-reports/fed-unwinding-bernanke-experiments-progress-report.html#.WvXYmMW6SR0.twitter

Bluford Putnam & Erik Norland 4/30/2018 CME Group

This is intriguing from the CME - is it time for a change in the Fed
policy that goes back to 1951 and the Truman Accord? Will the Fed target
the Secured Overnight Funding Rate (SOFR) instead of the Federal Funds
Rate?

The US employment rate has returned to its pre-recession level adjusted
for aging

https://piie.com/blogs/realtime-economic-issues-watch/us-employment-rate-has-returned-its-pre-recession-level

Harris Eppsteiner , Jason Furman and Wilson Powell III

People are both living and working longer. Are wages depressed because
older workers have savings, pensions, and social security benefits which
enable them to take lower paying jobs? Looking for answers to low wage
growth.

FinTech

World's second most valuable cryptocurrency under regulatory scrutiny

https://www.wsj.com/articles/worlds-second-most-valuable-cryptocurrency-under-regulatory-scrutiny-1525167000

Dave Michaels & Paul Vigna 5/1/2018 Wall Street Journal

The SEC could decide that Ethereum is a security and Bitcoin is not. But
would Bitcoin be insulated from the shock to cryptomarkets? Or could
regulatory certainty help Ethereum?

The State of Cryptocurrency Mining

https://blog.sia.tech/the-state-of-cryptocurrency-mining-538004a37f9b

David Vorick 5/13/2018 Sia

Absolute tour de force from David Vorick. Your understanding of ASICs
and mining is incomplete if you don't read this. "At the end of the day,
cryptocurrency miner manufacturers are selling money printing
machines...The buyer needs to understand why the manufacturer is selling
the units instead of keeping them for themselves."

Coinbase is allowing customers to make big trades in the shadows in
attempt to lure big Wall Street traders to its exchange

http://content.davidhaleweb.com/acton/ct/3037/s-01f2-1805/Bct/l-sf-cl-701C0000000UEmJIAW-0024/l-sf-cl-701C0000000UEmJIAW-0024:15c/ct20_1/1?sid=TV2%3A55f6nPt5B

Frank Chaparro 5/1/2018 Business Insider

Coinbase said to be opening a Chicago trading office.

Illinois

How to mislead Illinoisans into accepting higher tax cuts

https://www.illinoispolicy.org/how-to-mislead-illinoisans-into-accepting-higher-taxes/

Orphe Divounguy, Bryce Hill & Joe Tabor 5/3/2018 Illinois Policy

A new report would have Illinoisans believe that a progressive income
tax means tax cuts and economic growth. Illinois lawmakers'
tax-and-spend tendencies and evidence from all 50 states say otherwise.

Historical Lincoln items could go on auction block amid presidential
museum foundation money woes

http://www.chicagotribune.com/news/local/politics/ct-met-abraham-lincoln-artifacts-sale-20180510-story.html

Ray Long 5/13/2018 Chicago Tribume

Oh Illinois, Land of Lincoln. Selling the family jewels.

With all best wishes,


Lyric Hughes Hale

Editor-in-Chief

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