(Roughly) Daily

“We hear all this talk about integrating the world economically, but there is an argument to be made for not integrating the world economically”*…

… and indeed, those arguments seem to be holding increasing sway. Tyler Cowan ponders the possible economic implications of a future in which global economic interdependence recedes– a future in which globe’s economies, freer of each other, don’t rise and fall with each other (as they largely have for decades) to the same extent…

Will we see less co-movement in global economic growth?

That is the question behind my latest Bloomberg column (soft pay wall).  China is now, and looking forward, less of a common growth driver around the world.  Oil price shocks may not be less important for humanitarian outcomes, but they matter less for many of the largest economies.  America is now an oil exporter, and the EU just made some major adjustments in response to the Russia shock.  More renewable energy is coming on-line, most of all solar.

The column closes with this:

In this new world, with these major common shocks neutered, a country’s prosperity will be more dependent on national policies than on global trends. Culture and social trust will matter more too, as will openness to innovation — and, as fertility rates remain low or decline, so will a country’s ability to handle immigration. A country that cannot repopulate itself with peaceful and productive immigrants is going to see its economy shrink in relative terms, and probably experience a lot of bumps on the way down.

At the same time, excuses for a lack of prosperity will be harder to come by. The world will not be deglobalized, but it will be somewhat de-risked.

Dare we hope that these new arrangements will produce better results than the old?

Or perhaps a more general rising tide was the only way many countries were going to make progress?

Marginal Revolution

Byrne Hobart reflects further…

When economies were tightly linked, growth in the US led to more demand for manufactured goods from China, which created more demand for raw materials from other parts of the developing world. But if that link is weaker, it’s entirely possible for there to be a boom in some places and a bust elsewhere. That probably increases the personal returns from global macro investing while decreasing its social return: when the world is closely-linked, there are massive positive externalities in predicting recessions, because there are so few places to hide. It’s comparatively less essential for the world to know that German is slowing down but growth in Indonesia is picking up, but it also means that macro questions are more tractable.

The Diff

* Arundhati Roy


As we think tectonically, we might recall that it was on this date in 1865 that the U.S. first issued Gold Certificates.

Americans began to move out west in the first half of the 19th century. Banks started printing their own money to fund land purchases, and that quickly led to two problems: loose money-printing had a volatile effect on prices, and it became increasingly hard to tell what was counterfeit from what wasn’t.

To tackle these problems, the government decreed in the 1830s that it would only accept transactions in gold and silver. But of course, lugging metals around is nobody’s idea of fun. So in 1863, Congress paved the way for the first “gold certificates” to be printed two years later, in November 1865.

A gold certificate was, in effect, a form of paper currency backed by gold – although not entirely. The Treasury was allowed to issue $120 in gold certificates for every $100-worth of gold it held in its vaults…

$5,000 Gold Certificate, Series 1865 (source)
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