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EconVue Spotlight

Dear R. Hunter,

This morning's US GDP number was a bit below consensus and another
example of hard data trailing soft data and overall sentiment. EconVue
contributor Mike Lewis

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

had forecast .7%, but he says that growth will rebound to more than 4%
in Q2

https://econvue.com/reports/michael-lewis/data-round-weak-17q1-gdp-old-news-solid-rebound-coming-17q2

( subscriber content ). Consumption was only up .3% however.

Today's newsletter is focused on my impressions of the IMF/World Bank
meetings in Washington last week. Here is a quote that is sometimes
attributed to Harry Dexter White, considered the father of these
institutions, actually made by US Treasury Secretary Henry Morgenthau at
Bretton Woods, in his inaugural address in July 1944. His words
encapsulate the tone of the 2017 meetings.

Prosperity, like peace, is indivisible. We cannot afford to have it
scattered here or there among the fortunate or to enjoy it at the
expense of others. If poverty exists, it is menacing to us all and
undermines the well-being of each of us. It can no more be localized
than war, but spreads and saps the economic strength of all the
more-favored areas of the earth.

- Inaugural address, US Treasury Secretary Henry Morgenthau Bretton
Woods, July 1944

My takeaways:

Due to political events since the last meeting in October 2016,
globalization and its discontents were the focus of discussions. IMF MD
Christine Lagarde called for targeted policies to ameliorate income
inequality. Trade is no longer seen as the guarantor of peace or
broader-based prosperity; we have arrived at Globalization 2.0.

The benefits of the first stage of globalization were distributed
unevenly within countries and regions. Why this divergence? "Local
strategies matter" and furthermore labor mobility has been impaired.
This goes beyond automation.

The IMF GDP growth outlook was revised upwards, reversing the recent
downward trend. Productivity losses are a puzzle however. There are
doubts that technology will increase productivity and if it does, fears
that it will increase unemployment.

The TPP could be revived in another form. Many of the speakers warned
against a fragmented approach to trade policy. EconVue contributor Dr
Karim Pakravan discusses these dangers in his article below and on our
website

http://www.econvue.com/

" The IMF Strikes Back

https://econvue.com/pulse/imf-strikes-back

".

In response to my question, German Finance Minister Wolfgang Schäuble
agreed that Germany has been the biggest beneficiary of the EMU, but
said that was not by design, and that the solution was for structural
reforms to make the weaker economies more competitive, rather than
looser monetary policy or devaluation. Here is a link to my question
which is starts at about 56 minutes:
https://www.youtube.com/watch?v=Ay6xv4hBCN0&t=808s

https://www.youtube.com/watch?v=Ay6xv4hBCN0&t=808s

Raghuram Rajan, former central bank governor of India now back at
University of Chicago, delivered a sobering lecture for the Group of 30
in which he said that although economics is global, politics is local
and many feel that they gave away too much political authority upstream.
Here is the entire video of his speech:
https://www.youtube.com/watch?v=nHQn3CmczEQ

https://www.youtube.com/watch?v=nHQn3CmczEQ

Finally, Paul Volker, the eminence gris of the US financial system,
communicated a sense of urgency in terms of regulatory reforms. You can
access his speech

http://www.brettonwoods.org/publication/remarks-by-paul-a-volcker-at-the-bretton-woods-committee-2017-annual-meeting

online but here is a quote:

Given the nature of this occasion – "Bretton Woods" and all those two
words evoke in terms of a grand vision of international cooperation and
stable monetary systems – matters of domestic financial regulation may
seem prosaic. But I hope we have learned the lesson that financial
distress cannot be localized, that markets are inextricably interlinked.
Those interested in this subject will enjoy Marsha Vande Berg

https://econvue.com/experts/marsha-vande-berg

's article fo r EconVue below, " Taking the Lo

https://econvue.com/pulse/taking-long-view-financial-sector-regulatory-overhaul-and-trump-administration

ng View

https://econvue.com/pulse/taking-long-view-financial-sector-regulatory-overhaul-and-trump-administration

" on regulatory reform in the Trump Administration.

STORIES IN OUR SPOTLIGHT Ex-Treasury Secretary Larry Summers just
completely trashed the Trump tax plan

http://www.cnbc.com/2017/04/27/ex-treasury-sec-larry-summers-just-completely-trashed-the-trump-tax-plan.html

Jeff Cox, 4/27/2017 CNBC

Ex-Treasury Secretary Larry Summers on the Trump tax plan. The amount of
detail in the plan is underwhelming, no modeling.

The five markets charts that matter for investors

https://www.ft.com/content/c4de73e2-17a1-11e7-9c35-0dd2cb31823a

Financial Times 4/27/2017

Perhaps President Clinton should have allowed local sales taxes for
Internet purchases. By the time they were imposed buying habits had
changed.

World leaders meeting in Washington are pretending they can't see the
bogeyman right in front of them

http://www.businessinsider.com/imf-meetings-in-washington-bring-downplaying-of-trump-agenda-2017-4

Pedro Nicolaci da Costa 4/22/2017 Business Insider

What is the future of globalism and multilateralism in a world fueled by
populism? Mainstream Economics Has Become a Celebration of the Wealthy
Rentier Class

http://evonomics.com/mainstream-economics-become-celebration-wealthy-rentier-class/

Michael Hudson 4/9/2017 Evonomics Ouch! The 1% as the Extractive Class
and economists serve their interests. America is Regressing into a
Developing Nation for Most People

https://www.ineteconomics.org/perspectives/blog/america-is-regressing-into-a-developing-nation-for-most-people

Lynn Parramore 4/20/2017 I n stitute for New Economic Thinking

Should 80% of the US be considered an emerging market? ASIA

Tencent Cloud Servers Float Into Five New Global Locations

http://www.caixinglobal.com/2017-04-26/101083290.html

https://foreignpolicy.com/2017/04/26/kim-jong-un-is-a-survivor-not-a-madman/

Yang Ge 4/26/2017 Caixin Global

In a sea of misconceptions here Is a real China trade issue, but US
negotiators focused on goods, not services Kim Jong Un Is a Survivor,
Not a Madman

https://foreignpolicy.com/2017/04/26/kim-jong-un-is-a-survivor-not-a-madman/

https://foreignpolicy.com/2017/04/26/kim-jong-un-is-a-survivor-not-a-madman/

Andrei Lankov , 4/26/2017, Foreign Policy

North Korea in the news again: A time to reflect

http://thebulletin.org/north-korea-news-again-time-reflect10691#.WPJdbEeVhwc.twitter

Dan Drollette Jr 4/15/2017 Bulletin of the Atomic Scientists

North Korea has the fourth largest military force in the world and soon
its destructive capacity will be enormous. My comments: although the
threat of immediate military conflict with the US has receded, and China
appears to have cut fuel supplies to the DPRK, the Trump Administration
continues to send a series of mixed signals. How can diplomacy win if
the US still has no ambassadors in place in Japan, China, or South
Korea? China's Trillion-Dollar Yuan Defense Puts Growth at Risk

https://www.wsj.com/articles/chinas-crusade-to-prop-up-yuan-neglects-other-pressing-needs-1492107144?mod=e2tw

Lingling Wei 4/13/2017 Wall Street Journal

A liquidity shortfall of almost $2 trillion. In spite of Nick Lardy's
recent remarks at the Boao Forum, corporate debt in China also poses a
systemic risk.

RESOURCES

American energy use, in one diagram

http://www.vox.com/energy-and-environment/2017/4/13/15268604/american-energy-one-diagram

David Roberts 4/13/2017 Vox

2/3rds of our energy is simply wasted.

Investment Environment Reforms Target Tide of Trash

http://www.apec.org/Press/News-Releases/2017/0406_Oceans.aspx#.WOkPkpZx3cs.twitter

APEC press release 4/6/2017

Absent infrastructure investment, Asia will be buried in a mound of
trash.

How Serious is Water Crisis in Iran?

https://themediaexpress.com/2017/04/15/how-serious-is-water-crisis-in-iran/

Khalil Khani April 16/2017 The Media Express

Absolute scarcity by 2025, 50% per capita availability by 2050. Quality
low now.

ECONVUE RESEARCH AND INSIGHTS Trump's Tax Plan is Aimed at the 2018 and
2020 Elections, Not U.S. Competitiveness

https://econvue.com/pulse/trump%E2%80%99s-tax-plan-aimed-2018-and-2020-elections-not-us-competitiveness

Robert Shapiro

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

There is no doubt that the President's tax plan would provide enormous
windfalls for the richest people in the country. Beyond that, it may or
may not sustain growth through the next two elections, since even the
best conservative economists commonly overstate the benefits of cutting
tax rates. But the truth is, there aren't many other options that a
Republican Congress would accept

The IMF Strikes Back

https://econvue.com/pulse/imf-strikes-back

Karim Pakravan

https://econvue.com/experts/karim-pakravan

The IMF argues that the net impact of protectionism on the world economy
is negative, leading to the disruption of international economic
linkages. In good time, the disruption in trade and investment flows and
the fragmentation of global logistic chains would lead to
below-potential growth and productivity. In crisis times, the lack of
global coordination and cooperation would weaken the resilience of the
global economy and magnify the negative impact of shocks to the system.

Taking the Long View: Financial Sector Regulatory Overhaul and the Trump
Administration

https://econvue.com/pulse/taking-long-view-financial-sector-regulatory-overhaul-and-trump-administration

Marsha Vande Berg

https://econvue.com/experts/marsha-vande-berg

The very complexity of US financial services regulatory regimes itself
leaves implementation and enforcement wide open as to specifics of
interpretation about what is consistent with White House edicts. It is
clear, however, that the Trump White House intends to tie rule
promulgation and implementation to costs versus the benefits.

"Peak Globalization" and the Future of Democracy

https://econvue.com/pulse/%E2%80%9Cpeak-globalization%E2%80%9D-and-future-democracy

Banning Garrett

https://econvue.com/experts/banning-garrett

The world may be headed toward "peak globalization". This shift could
empower individuals and communities to strengthen democracy, while
easing some of the most troublesome aspects of globalization.

Infrastructure Stimulus Has Poor Track Record

https://econvue.com/reports/michael-lewis/infrastructure-stimulus-has-poor-track-record

(subscriber only)

Michael Lewis

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

The researchers focused on the $28B sent to states designated for
highway spending. That was enough to boost that category by a whopping
+44% over states' 2008 outlays. Instead, states took the federal money
and reduced their own highway spending accordingly. "The amount of
actual highway infrastructure investment… was likely very similar to
that under a no-stimulus counterfactual," the authors found.

China Update: Reflecting on the Trump-Xi Summit

https://econvue.com/reports/nikolai-tagarov/china-update-anticipating-trump-xi-summit

(paid content)

Nikolai Tagarov

https://econvue.com/experts/nikolai-tagarov

Since Trump attaches great importance to "striking a good deal" in
general, we suspect that in time he will attempt to attain a grand
bargain with China so as to reduce the US trade deficit, which has
continued to grow and reached $347 billion in 2016.

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With all best wishes,


Lyric Hughes Hale

Editor-in-Chief

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