I wrote this essay for CFA Institute and first published it on the Enterprising Investor. It includes one of the few mixtapes on earth that qualifies for continuing education credits.
By troll economy, I mean that of the United States of America, of course.
Anybody who doesn’t think the United States is a special place has never tried real barbecue (BBQ). But BBQ’s just the beginning. Let’s start with geopolitics. As the excellent book The Accidental Superpower notes, most Americans have no grasp of the bounty they are blessed with. Author Peter Zeihan, who will be speaking at the 69th CFA Institute Annual Conference in May, points out that the United States just happens to have the world’s best piece of arable land — the American Midwest — located conveniently amid the world’s largest navigable network of waterways.
If you forget every other nice thing you know about the United States but remember that, you still walk away thinking the country is disproportionately blessed by good fortune. Add to that some simple observations about US ports — the Chesapeake Bay alone “boasts longer stretches of prime port property than the entire continental coast of Asia from Vladivostok to Lahore” — and you can’t help but feel pretty positive about the country’s long-term competitiveness.
The Unemployment-to-Population Ratio Fell Two-Tenths of a Percent on Strong Household Survey Hiring: pic.twitter.com/GyKHrQ6yEJ— Michael McDonough (@M_McDonough) March 4, 2016
Take a look at the last big piece I did — 34 Charts: This Time is Different — to get some more color there.
But let’s all close our eyes for a minute and think about what it might mean to live in a world where Americans who want jobs have them and their wages start growing.
Why might it do that? Perhaps it will focus on the still-tepid global economy. Vice chair Stanley Fischer insists the Fed must look beyond its borders but also remember that it is not the world’s central bank.
In either circumstance, America could frustrate the rest of the globe. A Fed that’s forced towards hawkishness as domestic job gains and inflation continue to materialize would be a headwind to the rest of the world unless it follows suit.
In any case, an imminent recession does not seem to be in the cards for the United States. No reason not to stay vigilant — these things revert quickly — but the immediate risks are elsewhere. What if the troll economy forces rates upward unexpectedly and well before the rest of the world is ready? That’s the risk I’d ponder as you head off for the weekend.
Check Out These Papers
- “What Makes US Government Bonds Safe Assets?” They’re the only game in town. (National Bureau of Economic Research)
- And what happens when there aren’t enough safe assets? A “safety trap” recession. (National Bureau of Economic Research)
- Unusual news is predictive of market volatility. (Social Science Research Network)
- What’s the difference between a good boom and a bad boom? (National Bureau of Economic Research)
- Turns out some financial firms “specialize” in misconduct. (Social Science Research Network)
Discussions Worth a Look
- My colleague, Svi Rosov, CFA, speaks with Horace Dedieu about disruption. (Market Integrity Insights)
- Jamie Dimon on the future of finance. (Bloomberg)
- The world: not terrible! So says a number of C-suite executives. (Enterprising Investor)
- Yours truly in conversation with long-time Enterprising Investor contributor David Schawel, CFA. (CFA Institute)
- Stephen Wolfram on Artificial Intelligence (AI) and the future of civilization. (Edge)
- The Iditarod has a problem this year: no snow! (Huffington Post)
- A Twitter bull on Twitter: It’s irreplaceable. (AVC)
- The barter economy: just a myth that keeps getting repeated? (The Atlantic)
- Thankfully, dog ownership is optional. (Mr. Money Mustache)
- A novelist applies for a job in the CIA. (Lapham’s Quarterly)
- The excellent Damon Beres on how machine learning in elections could bring about the death of free will. (Huffington Post)
- Does the free market reward fraud? (Evonomics)
- Refugees in Germany are buying one-way plane tickets home. (Los Angeles Times)
- A contemporary neoconservative manifesto. (New Republic)
- A look inside the “The Clinton System” (The New York Review of Books)
Many thanks for reading! For fun this week, I also made you a playlist. I hope you enjoy the first (and maybe only) edition of Weekend Beats.