Pre-Xmas Reads (Dec. 21, 2014)

I have arrived on vacation and may finally get around to writing some posts (assuming internet access stabilizes). To start off, here are some things I’ve read on the plane and intend to read over the break.

Year in Review. Grantland

A brief history of pregnancy workplace rights. JSTOR Daily

Governing through unhappiness. Potlatch [on austerity]

The War Nerd: more proof the US defense industry has nothing to do with defending America. Pando [there are also a couple of articles in the January edition of Harper’s that have terrific insights on the defense industry’s posture towards Russia and Ukraine]

Also: Could the US even launch a nuclear missile if it wanted to? Daily Mail. [Answer: probably not; serious longstanding morale problems in the USAF nuclear command]

Reporters fail to capture implications of pension provisions. Columbia Journalism Review [on the recent budget deal in Congress]

Adair Turner understands better than Paul Krugman. Angry Bear [understands “the economic situation”; follow video link]

Overselling America’s infrastructure crisis. New Geography

My reading of the FT on China’s “turning away from the dollar”. Michael Pettis at Credit Writedowns

Foucault’s responsibility. Jacobin

$100,000 says my portfolio will beat Tony Robbins’. Barry Ritholtz, The Big Picture

Weekend long reads (Dec. 5, 2014)

Readers will notice that there hasn’t been much activity here since Thanksgiving. My absence is partly due to traveling I’ve had to do, being engrossed in my new book (The Power Broker by Robert Caro), and other academic obligations, which will continue next week. Nonetheless, I have provided some long reads here as they seem to one of the more popular types of posts. I hope to have the third part of the series on sectoral investment patterns up by the end of next week.

Fracking tantrums

Banking

Research and academics

Thanksgiving long reads (Nov. 27, 2014)

Happy Thanksgiving! Here are some articles I have lined up to read over the long weekend. Not all are recent; I’m trying to clear out the reading list.

1. The tech worker shortage doesn’t really exist. Bloomberg Businessweek

2. State unemployment map goes monochrome for October 2014. The Economic Populist. [Not actually monochrome, but close: no state observes an unemployment rate greater than 7.9% (US average is 5.9%), although underemployment is a separate problem. Also contains maps for employment-population ratio by state!]

3. Kuroda turns up the heat on Japan Inc.: turn profits into higher wages. WSJ

4. How the world’s most leveraged hedge fund got away with insider trading. Zerohedge

5. Oil at $75 means patches of Texas Shale turn unprofitable. Bloomberg [Good run-down of the economic-geography of fracking profitability]

6. Public relations and the obfuscation of management errors–Texas Health Resources dodges its Ebola questions. Health Care Renewal

7. Boomers, millennials and interest rates: a muni investor’s perspective. BlackRock blog

8. For middle-skill occupations, where have all the workers gone? Federal Reserve of Atlanta

9. Over at Project Syndicate: economic growth and the Information Age: Daily Focus. Washington Center for Equitable Growth

10. Jeff Henry, Verruckt, and the Men Who Built the Great American Water Park. Grantland.com [Schlitterbahn!]

On the book front, I’ve reading The Power Broker: Robert Moses and the Fall of New York by Robert Caro. I’ve been meaning to read it for a while and then found it at the bookstore, so here I go!

Link share: geography of a decade of job growth and decline

Check out this very well done interactive graphic from the blog of Austin-based consulting firm TIP Strategies!

I’ve filed this under “Terrible Cartography” (I have no category for the opposite), but rest assured this is the work of professionals.

Reading list (Nov. 19, 2014)

Here is another batch of items I am currently reading. Some of these are from last week or before, and that’s because I add things to my Pocket reading list and then leave them there.

1. Why are dystopian films on the rise again, JSTOR Daily

2. Why is anyone surprised that Abenomics failed? Naked Capitalism

3. Why do financial types hate Fed intervention? Pragmatic Capitalism

(Another option is that financial types pretend to hate intervention to mask the benefits that accrue to them from intervention; perhaps a recognition of the diversity of financial types could go some way to resolving this, ie. pension funds, hedges funds, too-big-to-fail banks, community banks, etc, as well as recognition that they don’t always love or hate it).

4. Potential output and recessions: are we fooling ourselves? Board of Governors of the Federal Reserve System

5. Credit to noncorporate businesses remains tight, St Louis Federal Reserve

6. Retirement planning: millennials vs boomers, Research Affiliates

On the book front, I have finished reading Robert Caro’s Master of the Senate (third in his LBJ series), which I recommend (specifically the chapters starting after pg 200). I am now reading the Kindle sample of Daniel Galvin’s Presidential Party Building: Dwight D. Eisenhower to George W. Bush and deciding whether or not to buy. I’m leaning towards buy.

A brief comment on petro-states

I read this Op-Ed piece at Al-Jazeera the other day, entitled ‘The perils of petro-states: The case of Alberta’ (link: http://aje.me/1fjPONb). It goes on to compare the Canadian province of Alberta with Norway, contrasting the former’s success in managing its oil wealth with the failed promises of economic salvation in the latter.

This topic appeals to me for a number of reasons. I grew up in Norway and my father worked for an oil major my whole life, so arguments about Norway’s success have been quite personal for me, as I consider myself a fortunate beneficiary of it. Similarly, a number of my colleagues at graduate school were specialists in sovereign wealth funds and natural resources generally; one of my dissertation examiners, in fact, wrote a book on such funds. These conversations have been floating around my head for the last few years, and they are rather interesting.

I think the author makes a couple important points in the piece, and I would like to take it up in a little more depth. Suffice to say in the meantime I do not think the comparison between Alberta and Norway is at all justified. Norway is a sovereign nation (it isn’t even a part of the European Union), it controls its currency, and the geography is completely different (its oil reserves are in the North Sea). A more apt comparison would be between Alberta and Texas. Both are provinces, subject to a national currency, much of their oil wealth is pulled out of the ground. Both the US and Canada are members of NAFTA, so when the author of this piece tries to relate the losses in manufacturing jobs starting in the 1990s to the mismanagement of oil wealth, it doesn’t quite make sense. There needs to be a sharper attention to geography and economic history here.

In a future post, I’m going to riff on “petro-state” and try to formulate a regional alternative to it. I think, as a start, the definition of petro-state (“dependent on petroleum for 50 percent or more of export revenues, 25 percent or more of GDP, and 25 percent or more of government revenues”) is a little too dry. There is, as noted above, the scale issue: does this apply only to countries, or at sub-national scales? What sort of petroleum products are included in this, for instance (raw material exports or refined products)? Using employment, output, and tax revenue data (assuming I can locate it), I’m going to try to work backwards and see what kind of alternative definitions can emerge that take geography more seriously.

The contemporary context of investment in the United States, part 1: introduction

The Great Recession (2007-2009) changed the context for investment in the United States in several ways. First, it created imbalances in the economy, in terms of losses and gains between economic (businesses, households, government) as well as industrial (agriculture, manufacturing, services) sectors. These losses and gains can be measured in terms of lost output, including employment. These are imbalances to the extent that contractions in output were unevenly shared across sectors.

Second, the political environment changed as new constituencies and alliances were formed, while others were made more obvious. An example of such a long-standing alliance that became stronger was the relationship between the Federal Reserve and large, globally-competitive financial companies. This relationship was codified in the emergency recapitalization (the TARP) and in the Dodd-Frank law. New constituencies emerged or became more pronounced, for instance as unemployment and homelessness rose, and they reflected a regional character (for the reason that the financial crisis and recession were, in fact, regional crises). These new constituencies and alliances generated pressures for different kinds of policy intervention, with varying success.

And finally, the macroeconomic context changed, given changes or stickiness in the informal rules of investment (such as tax rates, interest rates, the supply of credit). Similarly, economic development through the application of new technologies, discovery and extraction of fossil fuels, and global capital flows also have shaped the macroeconomic context.

Over the next several posts, I’m going to outline the context of investment in the US immediately before and since the financial crash in 2008. I will describe the nature of investment since the crash, with a focus on the distribution of investment activity between sectors (economic and industrial) as well as the nature of investment (private fixed assets: structures, equipment, intellectual property). Finally, I’ll briefly describe the kinds of companies and regions that were poised to reap the benefits of this changing context, and contrast them against those entities that have borne the greatest burden.

The next posts will frame investment in the US with the following specific questions. First, what do I mean when I talk about investment in the United States? I will outline that question by referencing JK Galbraith’s new book (The End of Normal) as well as borrowing some insights from Hyman Minsky. Let me add that I do not mean to advance any kind of coherent theory; that is way beyond my remit at the moment. Rather, I find it useful to identify useful metrics and relationships in the data that can eventually be situated within a wider theory, or can be used to advance or refute other ones.

Second, what are the current obstacles at the geopolitical and national levels to growth in investment within the United States? Off the top of my head, I can think of several important “obstacles”: the process of domestic credit allocation (including interest rates, integrity of too-big-to-fail banks, property development); the cost of raw materials (especially oil and gas); and, military commitments and the general financing of national security. Readers of Galbraith’s book will notice these topics are quite prominent in his account, while I have spent most of my very short academic career focused on the first.

Third, what is the current progress or state of the economic recovery since 2009? There are some subsidiary descriptive questions that point to my thinking here. Which economic sectors have returned to pre-crisis trends in output growth (contribution to GDP) and which remain stalled? Which industrial sectors? How did investment in private fixed assets respond to the crisis and aftermath? What about for investment in structures, equipment, and intellectual property? (If readers want to see what I’m getting at with these questions, take a look at this article from the NYT back in April: http://nyti.ms/1zZEVct; I am essentially expanding this kind of inquiry, which has been, incidentally, the empirical base upon which most of research has been conducted).

My doctoral dissertation advisor liked to say that a solid way to organize an argument follows the formula: what; why; and, so what. The what component here is really, where is investment happening in the USA (both in sector and locational terms). The why seeks to explain the relevant processes that propel the investment we see or hinder the investment we hope for (particularly, why it should be the case that despite there being a real recovery in material terms, there should be such a slow expansion in quality employment opportunities). The so what for me really comes down to distributional fairness. In other words, something that has been on my mind the last few years is whether the parties responsible for the financial crisis and disappointing recovery were the same parties that amortized its costs, or whether there has been a systemic and successful effort to push those costs onto other parts of society. Additionally, I want to explore the durability/sustainability of the investment that is happening. At the end of the day, we all want to be a part of a successful collective endeavor–the US economy. Hopefully I’ll find much to be proud and excited about as I dig through the data. Alternatively, hopefully I can provide some insight into how to rectify the processes that point to the contrary.