Subject: EconVue Spotlight July 2, 2017
From: "Lyric Hughes Hale" <[email-masked]>
To: "R. Hunter Biden" <[email-masked]>
Date: Sat, 1 Jul 2017 22:36:32 -0700 (PDT)

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EconVue Spotlight

Dear R. Hunter,

This holiday weekend I will be brief, in hopes that you will have time 
to read the outstanding and consequential longer reports below. The BIS 
Annual Report on the global economy, and BP's Energy Outlook have just 
been released. The BP report has a chapter on China's energy 
consumption, which last year increased only 1.3%. A new study by the 
Chinese Academy of Social Sciences says that China has almost reached 
peak demand. For a big picture, iconoclastic view, San Francisco-based 
RethinkX's report on the future of transportation and the disruptions it 
will cause is breathtaking --oil at $10-$20 a barrel? On Saturday, India 
begun an ambitious new tax regime. The new GST eliminates a plethora of 
local taxes. If Modi is able to accomplish this successfully in tandem 
with the 2016 demonitization, he will become India's greatest economic 
reformer. Geopolitics could intrude. Border "skirmishes" between 
Pakistan and India, India and China -all three nuclear powers- are 
becoming more serious every day. As President Trump prepares to speak 
with President Xi on Sunday night, fears are rising that trade issues 
will be surfacing once again. Just as Trump's travel ban ignited legal 
responses, steel tariffs will unleash a similar battle. Great item in 
Axios about a meeting on trade last week at the White House, also cited 
below. Finally, EconVue expert Michael Lewis has written about the 
barriers to financial deregulation, and Karen Petrou of Federal 
Financial Analytics agrees that at least some of Trump's agenda will be 
realized. Next week we will have a special report on cryptocurrencies 
and the technological limits to their scalability.

STORIES IN OUR SPOTLIGHT

World

BIS 87th Annual Report

http://www.bis.org/publ/arpdf/ar2017e.htm

Bank for International Settlements 6/25/2017

The BIS cites forthcoming research on the interrelationship of 
consumption and debt which is important to understanding the resilience 
of US and Chinese consumers. Specifically, a 1% point increase in the 
household debt-to-GDP ratio is associated with growth that is 0.1% point 
lower in the long run... Cash flows from lenders to borrowers reach 
their maximum before new borrowing peaks. They turn negative before the 
end of a credit boom, since the positive cash flow from new borrowing is 
increasingly offset by the negative cash flow from rising debt service.

BP Energy Outlook

http://www.bp.com/en/global/corporate/energy-economics/energy-outlook.html

Spencer Dale, BP Chief Economist 2017

Essential reading, as is its companion publication, The BP Energy 
Economics Statistical Review

http://www.bp.com/content/dam/bp/en/corporate/pdf/energy-economics/statistical-review-2017/bp-statistical-review-of-world-energy-2017-full-report.pdf

. The Energy Outlook sets out a base case which outlines the 'most 
likely' path for global energy markets until 2035, based on assumptions 
and judgments about future changes in policy, technology and the 
economy. The Outlook also develops alternative cases to explore key 
uncertainties.

Rethinking Transportation

https://www.rethinkx.com/executive-summary

RethinkX 2017

The TaaS (Transportation as a Service) disruption will have enormous 
implications across the transportation and oil industries, decimating 
entire portions of t heir value chains, causing oil demand and prices to 
plummet, and destroying trillions of dollars in investor value — but 
also creating trillions of dollars in new business opportunities, 
consumer surplus and GDP growth.

Russia GDP Up 3.1% in May. Strong Result as Recovery Gather Pace

https://twitter.com/bneeditor/status/877780785671090176

BenAris 6/21/2017 Twitter

Russian GDP up more than 8% in less than 2 years, in spite of falling/ 
stagnant oil prices. How was this stunning reversal achieved?

A Quick Guide to Indian GST Rates in 2017

http://economictimes.indiatimes.com/news/economy/policy/a-quick-guide-to-india-gst-rates-in-2017/articleshow/58743715.cms

The Economics Times 6/29/2017

Gold taxed at 3%, ketchup at 12%, shampoo at 28%.

Working for Indo-Pak dialogue to resolve Kashmir: UN chief

http://www.kashmirmonitor.in/Details/126628/working-for-indo-pak-dialogue-to-resolve-kashmir-un-chief/

Press Trust of India 6/22/2017 Kashmir Monitor

An underreported conflict between two nuclear nations is escalating, and 
China is in the mix.

Work, Wages, and Monetary Policy

http://www.bis.org/review/r170630f.htm

Bank for International Settlements 6/20/2017

Ba nk of England economist Andrew Haldane's recent speech is pointing 
the way to a more hawkish monetary policy for the UK, which given the 
atmosphere of uncertainty there makes one wonder about the possibility 
of policy error, especially now that the BOE governor Mark Carney seems 
to be following along. The UK is currently the developed world's worst 
performing economy.

U.S.

Two opposing views on markets by two esteemed economists:

In Long Run, There's No Such Thing As An Einstein Investor

https://www.nytimes.com/2017/06/23/business/in-long-run-theres-no-such-thing-as-an-einstein-investor.html?smid=tw-share

Robert J. Shiller 6/23/2017 NY Times

Robert Schiller says no way to predict a casino.

An Index-Fund Evangelist is Straying From His Gospel

https://www.nytimes.com/2017/06/22/business/burton-malkiel-investment-stock-index-funds.html?smid=tw-share

James B. Stewart 6/22/2017 NY Times

Princeton Economist Burton Malkiel would disagree with Schiller

1 Big Thing…Exclusive: Trump Plots Trade War

https://www.axios.com/axios-am-2450643147.html

Mike Allen 6/30/2017 Axios.com

With the political world distracted by President Trump's media wars, one 
of the most consequential and contentious internal debates of his 
presidency unfolded during a tense meeting Monday in the Roosevelt Room 
of the White House.

China

Little Chinese Autoparts Maker is Behind the Huge Takata Takeover

http://asia.nikkei.com/magazine/20170629/Business/Little-Chinese-autoparts-maker-is-behind-the-huge-Takata-takeover?n_cid=NARAN11&utm_source=NAR%20Newsletter&utm_campaign=RN%20Subscriber%20newsletter&utm_medium=weekly%20newsletter&utm_content=article%20link

Yu Nakamura 6/29/2017 Nikkei Asian Review

Richard McGregor (via Twitter): amazing and telling - tiny Ningbo 
company barely a decade old snaps up auto parts giant .

Peak of China's Energy Consumption Has Arrived

http://xinhua-rss.zhongguowangshi.com/13701/-2369365658050701942/1983788.html

(Chinese)

Xinhua News Agency 6/27/2017

The Chinese Academy of Social Sciences says that China has reached peak 
energy consumption. Enormous consequences . Large scale urbanization 
related housing and infrastructure construction will be completed and 
demand for steel, non-ferrous metal, construction material and 
transportation related energy will decrease as well.

China Asks Banks to Assess Credit Risks Linked to Firms Active in 
Overseas Deals

http://www.caixinglobal.com/2017-06-22/101104621.html

Wu Hongyuran, Guo Nan and Leng Cheng 6/22/2017 Caixin Global

Be careful what you wish fo r.

Game Changer: MSCI to Add Chinese A-shares to EM Index

http://www.institutionalinvestor.com/article/3726849/asset-management-indexing-and-etfs/game-changer-msci-to-add-chinese-a-shares-to-em-index.html?ArticleId=3726849#/.WU0j0GjyuUl

Allen Cheng 6/21/2017 Institutional Investor

Mostly symbolic, $19B annual increase versus China's total $11T market 
cap. This equals just one month's forex outflow and should not affect 
the RMB exchange rate.

The Power of Ideas: The Rising Influence of Thinkers and Think Tanks in 
China

https://www.brookings.edu/books/the-power-of-ideas-the-rising-influence-of-thinkers-and-think-tanks-in-china/

Cheng Li 6/5/2017 The Brookings Institute

China invented think tanks, so this is not surprising.

ECONVUE RESEARCH

New Regulations to Slow Sharply, Some Rollback Likely

https://econvue.com/reports/michael-lewis/new-regulations-slow-sharply-some-rollback-likely

Michael Lewis

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

Unfortunately, economic benefits from these initial actions will be 
modest. To date, Trump has only cancelled regulations that had not yet 
gone into effect. While their future costs will not materialize, there 
will be no cost reductions. In fact, regulated firms had already spent 
money and/or changed procedures to comply with the new rules. Reversing 
those steps may add some costs.

Karen Petrou of Federal Financial Analytics responds to Michael Lewis ' 
s report: I agree with its overall conclusions about the nuanced 
approach that should be taken to the "Trump bump" for financial 
regulation…In part, this is because I think Trump appointees will make 
substantive changes to key structural, capital, liquidity, and 
resolution rules over time … In general, I think there will be 
legislative change going beyond community banks once the Senate gets 
into this quagmire. Although a final bill will be hard to craft, it's 
more than possible absent another big-bank scandal, crisis, or 
Congressional preoccupation.

FMI July 2017 Economic &amp; Investment Outlook

https://econvue.com/reports/michael-lewis/fmi-july-2017-economic-investment-outlook

Michael Lewis

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

FMI bottom line: Real GDP picking up: +2.5% trend thru 2018; lulls in 
inflation & long bonds to be short-lived.

China's "Belt and Road Initiative" and Its Implications for Australia

https://econvue.com/pulse/chinas-belt-and-road-initiative-and-its-implications-australia

Saul Eslake

https://econvue.com/experts/saul-eslake

The ‘Belt and Road Initiative' is of considerable potential interest to 
Australia, from a number of perspectives, including opportunities for 
Australian businesses arising from infrastructure and other projects in 
countries which are formally on the ‘Belt' or the ‘Road', and Chinese 
involvement in infrastructure projects in Australia which may complement 
various aspects of the ‘Belt and Road' initiative.

Truth and Payments

https://econvue.com/pulse/truth-and-payments

Collin Canright

https://econvue.com/experts/collin-canright

The FinTech revolution is not lost. Its outlines may be obscured by the 
fog of events, but, as this week's links show, it's still moving 
forward.

With all best wishes,

Lyric Hughes Hale

Editor-in-Chief

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