For investment professionals only. Not for onward distribution. Issued by M&G Securities Limited and M&G International Investments Ltd. Both are authorised and regulated by the Financial Conduct Authority in the UK. Please see Bondvigilantes.com for further information.

 

Earlier this year we interviewed both Robert Gordon and Martin Ford about their books examining the impact of technology on the modern economy.  In the latest of our author interviews I talked to the Economist’s senior editor and economics columnist Ryan Avent about his new book, “The Wealth of Humans”, that develops this same theme.  In particular he looks at how we will be able to cope with an absence of work for large portions of society.  With less work, and stagnant incomes, do we need a massive, and ongoing, redistribution of wealth to avoid unrest?

For investment professionals only. Not for onward distribution. Issued by M&G Securities Limited and M&G International Investments Ltd. Both are authorised and regulated by the Financial Conduct Authority in the UK. Please see Bondvigilantes.com for further information.

 

Here’s the latest in our series of interviews with the authors of interesting and important new books on economics, politics and investing.  In it, Pippa Malmgren – a global strategist and former economics advisor to President George W. Bush – talks about “Signals”, her book about the challenges facing the global economy today both on a state level (China, Russia, the US) and for households.  In both cases the tensions that are emerging might be blamed on central banks for allowing consumer prices to rise but wages to stagnate.  The “signals” she refers to can help us to spot global trends way ahead of the official statistical data:  “shrinkflation”, when companies keep prices steady but reduce the size of the goods, being just one example.  This is a topic we’ve thought about a lot, and as always I’d like to provide a link here to our seminal academic paper on the number of “feet” in a packet of Monster Munch.

You can watch Pippa’s video below.  This, and all of our other author interviews (including Adair Turner, TV’s Ed Conway, and Martin Ford) can also be found on our YouTube channel.

For investment professionals only. Not for onward distribution. Issued by M&G Securities Limited and M&G International Investments Ltd. Both are authorised and regulated by the Financial Conduct Authority in the UK. Please see Bondvigilantes.com for further information.

 

Professor Robert Gordon of North-Western University was in town this week to give speeches at Prospect Magazine (which is ace by the way) and the LSE.  His latest book, “The Rise and Fall of American Growth” was released earlier this year, and is a tremendously powerful antidote to the wave of techno-optimism we might feel when we see shiny electric cars and gadgets coming out of Silicon Valley.  Professor Gordon points out that mankind’s greatest period of technological innovation came between 1920 and 1970, and that since then it’s been a story of disappointment.  As Peter Thiel put it, “we wanted flying cars, instead we got 140 characters”.  Here’s my interview with him – after this and our previous interview with Martin Ford, pessimistic about technology for a different reason, we need cheering up.

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My book of the year in 2015 was The Rise of the Robots by Martin Ford.  I wasn’t alone in liking it; it was the FT McKinsey Business Book of the Year, and set the debate for a year of robotisation stories in financial markets.  Last week we held a Bond Vigilantes x Technology conference here at M&G, with great speeches from Diane Coyle on Digitally Disruptive GDP (are we measuring growth or inflation “properly” in today’s online world?), our own Dr Wolfgang Bauer on advances in battery technology, solar and fission energy, and Martin on the robots.  Tesla also brought along a couple of cars for us to play with – I mean examine the battery technology in.

If you haven’t read The Rise of the Robots yet, you must.  In it Martin Ford shows how AI and advances in robotics are putting at threat huge numbers of jobs in both developed and developing markets.  And whereas previous advances in machinery replaced mainly manual jobs, this next phase will also cause massive disruption to higher skilled workers, threatening both jobs and wages.  The knock on impact will be a huge demand deficit – who will be able to afford to buy the goods that the robots make?   In the book Martin suggests that the governments may have to expand the state safety net significantly to prevent societal disaster.

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How did the UK go from a manufacturing powerhouse in the 1950s, to economic destitution in the 1970s?  Is the history of post-war UK economics one of policy mistake after policy mistake?  And are Britain’s political and financial institutions better placed today to make good, long term decisions than they were in the past?  In the latest of our series of interviews with authors of new economic books. I spoke to David Smith, economics editor of the Sunday Times, about “Something Will Turn Up – Britain’s Economy, Past, Present and Future”.  I loved this book, and it should be required reading for all students of the UK economy.  Here’s the video interview.

For investment professionals only. Not for onward distribution. Issued by M&G Securities Limited and M&G International Investments Ltd. Both are authorised and regulated by the Financial Conduct Authority in the UK. Please see Bondvigilantes.com for further information.

 

For years the Western world mocked Japan’s attempts to recover from its spectacular debt-fuelled boom and bust, blaming the Bank of Japan for doing far too little and far too late, and lamenting Japanese fiscal stimulus as extreme recklessness, where the only achievement has been to propel Japan’s debt levels into the stratosphere.

Now, seven years after much of the developed world’s own debt fuelled bubbles went pop, some people (us included) are starting to wonder if Japan’s post bubble experience was actually a good outcome, relative to today’s exceptionally dark prognosis for not just the Eurozone but other economic blocs too.

Richard Koo is developing a cult following as someone who has long seen the parallels between the Japan of the 1990s and where we are today. With theories rooted in Keynesianism, he has consistently argued that Japan’s lost decade and the 1930s Great Depression came about because of ‘balance sheet recessions’, where the private sector’s determination to delever in the aftermath of a debt-fuelled bubble means households and/or companies can’t be encouraged to borrow and spend at any level of interest rate. Instead, the private sector’s desperation to save means that it is up to the government to step in to prevent the downward spiral of debt deflation.

Richard’s very accessible recent book, Escape from Balance Sheet Recession and the QE Trap, provides a broad update on his previous work, applying his theories to the problems faced today in Japan, the US, Europe and China. We discuss aspects of this in the brief interview.

For investment professionals only. Not for onward distribution. Issued by M&G Securities Limited and M&G International Investments Ltd. Both are authorised and regulated by the Financial Conduct Authority in the UK. Please see Bondvigilantes.com for further information.

 

One of my favourite economic reads of 2014 was Diane Coyle’s book about an economic statistic – GDP. Whilst monarchs had been trying to take inventories of the national wealth since the Doomsday Book and earlier (so they could tax it!), the idea that you should rigorously measure economic activity is under one hundred years old. But the concept of Gross Domestic Product has now become central to the management of all economies (remember the Maastricht Criteria which based participation in the Euro area on debt and deficit ratios related to GDP? Diane’s book tells how Greece’s dubious GDP number was generated in one room above a parade of shops and without the aid of a computer). Even with banks of computers GDP is challenging to measure, subject to big revisions, and in a world of rapid technological change, arguably measuring the wrong stuff. But for us bond market participants watching Bloomberg screens, or Prime Ministers announcing triumph, it’s the big one.

In this 10 minute video Diane Coyle (@diane1859), Professor at the University of Manchester and responsible for Enlightenment Economics discusses the history of our most used economic statistic, and asks whether it’s the best we can do.

For investment professionals only. Not for onward distribution. Issued by M&G Securities Limited and M&G International Investments Ltd. Both are authorised and regulated by the Financial Conduct Authority in the UK. Please see Bondvigilantes.com for further information.

 

Last week, Sky’s Ed Conway came in to talk about his brilliant book “The Summit”, the story behind the Bretton Woods conference that tried to organise the structure of the global economy in the aftermath of the Second World War, and enshrined the dominance of the US dollar as the world’s currency.

The conference took place as the war was still raging, both in Europe in the weeks after D-Day, and also in the Pacific. Whilst the Russians were invited to the run down hotel in New Hampshire, and were still very much an ally of the western powers, tensions were mounting and the Cold War was about to begin. Incredibly it appears that the US’s chief negotiator, Harry Dexter White, may himself have been a Soviet spy. “The Summit” is a fascinating account of what was a fairly surreal and incredibly drunken retreat. It also covers the genius and eccentricities of John Maynard Keynes’s final months before his death – for all his greatness and reputation he couldn’t prevent bankrupt Britain’s economic side-lining by the US. As well as being a great piece of economic history, the debate about how the great powers can manage the value of global currencies, and the role of gold in that, is as relevant today as then. The book is also full of interesting colour – for example did you know that the world only ended up with a gold standard because Sir Isaac Newton miscalculated the value of silver when he was Master of the Mint?