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Economic Analysis

On the Verge of Chaos

Thoughts from the Frontline

November 23, 2014

“Great powers and empires are, I would suggest, complex systems, made up of a very large number of interacting components that are asymmetrically organized, which means their construction more resembles a termite hill than an Egyptian pyramid. They operate somewhere between order and disorder – on “the edge of chaos,” in the phrase of the computer scientist Christopher Langton. Such systems can appear to operate quite stably for some time; they seem to be in equilibrium but are, in fact,...

Notes on Russia

Outside the Box

November 19, 2014

Russia and its redoubtable president, Vladimir Putin, have been much in the news lately. The latest flurry came when Putin was taken out behind the woodshed at the G20 conference in Australia last weekend over his recent moves to inject more Russian troops and arms into Ukraine.

For today’s Outside the Box we have two pieces that deliver deeper insights into the situation with Russia and Putin. The first is from my good friend Ian Bremmer, President of the Eurasia Group and author of Every...

The Return of the Dollar

Outside the Box

November 13, 2014

Two years ago, my friend Mohamed El-Erian and I were on the stage at my Strategic Investment Conference. Naturally we were discussing currencies in the global economy, and I asked him about currency wars. He smiled and said to me, “John, we don’t talk about currency wars in polite circles. More like currency disagreements” (or some word to that effect).

This week I note that he actually uses the words currency war in an essay he wrote for Project Syndicate:

Yet the benefits of the...

Hato No Naka No Neko (ハトの中の猫)

Things That Make You Go Hmmm...

November 11, 2014

Last week, appropriately enough on Halloween, the Bank of Japan did something truly scary.

As shocks go, this one — though it had been fairly well-telegraphed to the markets that something wicked this way might be coming — was in a league of its own.

The Last Argument of Central Banks

Thoughts from the Frontline

November 10, 2014

For a central banker, deflation is one of the Four Horsemen of the Apocalypse: Death, Famine, Disease, and Deflation. (We will address later in this letter why War, in the form of a currency war, is not in a central banker’s Apocalypse mix.) It is helpful to understand that, before a person is allowed to join the staff or board of a central bank, he or she is taken into a back room and given DNA replacement therapy, inserting a gene that is viscerally opposed to deflation. Of course, in...

The Biggest Threat to U.S. Jobs: The “Contestability” Nightmare

Outside the Box

November 7, 2014

Today’s Outside the Box comes from Sam Rines of Chilton Capital Management in Houston, TX – a promising young economics contributor to The National Interest and a rising star who I met at Worth Wray’s wedding a few weeks ago.

Worth and Sam have developed quite the friendship over the past several months, but it didn’t take much convincing from Worth to get me to share Sam’s latest article with you. Sam’s work speaks for itself and I am VERY impressed by his insights on a wide range of...

Rhyme and Reason

Thoughts from the Frontline

November 4, 2014

“The significant problems that we have created cannot be solved at the level of thinking we were at when we created them.”
– Albert Einstein

“Generals are notorious for their tendency to ‘fight the last war’ – by using the strategies and tactics of the past to achieve victory in the present. Indeed, we all do this to some extent. Life's lessons are hard won, and we like to apply them – even when they don't apply. Sadly enough, fighting the last war is often a losing proposition. Conditions...

The Colder War

Outside the Box

October 29, 2014

The story of energy is the story of human expansion. From the days when we roamed the African savanna, we tamed first fire and then other forms of energy, using them as tools to control our environment and improve our lives. The control of energy has always been at the heart of the human story.

This week our Outside the Box essay is from my friend Marin Katusa, who has written a fascinating book about a part of that story, a subplot of intrigue and conspiracy. Under Putin, Russia has...

This Little Piggy Bent The Market

Things That Make You Go Hmmm...

October 27, 2014

About 18 months ago, I had a very pleasant chat with a gentleman by the name of Luzi Stamm.

You may detect some measure of surprise in my words, and the reason for that is quite simple: Luzi Stamm is a politician; and, as regular readers will know, I am no fan of that particular class.

But Herr Stamm was different.
 

A Scary Story for Emerging Markets

Thoughts from the Frontline

October 25, 2014

The consequences of the coming bull market in the US dollar, which I’ve been predicting for a number of years, go far beyond suppression of commodity prices (which in general is a good thing for consumers – but could at some point threaten the US shale-oil boom). The all-too-predictable effects of a rising dollar on emerging markets that have been propped up by hot inflows and the dollar carry trade will spread far beyond the emerging markets themselves. This is another key aspect of the...