Former McKinsey consultant and now History Professor Louis Hyman describes the history of temp workers and the current wave of strikes demanding greater worker rights in our first featured podcast. On markets, Juliette Declercq, one of Macro Hive’s featured contributors, discusses her pessimistic 2020 outlook which includes another Fed cut.
Next, we have Ash Carter, Former US Secretary of Defence, who sheds light on the key issues within US foreign policy and how the Pentagon is engaging in a tech cold war with China. We also can’t ignore Trump’s impeachment and we feature Noah Feldman, Professor of Law at Harvard Law School, who presents insights on the case.
Finally, we tune in to Planet Money’s most “Underrated Trends Of the 2010s”.
Enjoy!
Bilal
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Former McKinsey consultant and now History Professor Louis Hyman describes the history of temp workers and the current wave of strikes demanding greater worker rights in our first featured podcast. On markets, Juliette Declercq, one of Macro Hive’s featured contributors, discusses her pessimistic 2020 outlook which includes another Fed cut.
Next, we have Ash Carter, Former US Secretary of Defence, who sheds light on the key issues within US foreign policy and how the Pentagon is engaging in a tech cold war with China. We also can’t ignore Trump’s impeachment and we feature Noah Feldman, Professor of Law at Harvard Law School, who presents insights on the case.
Finally, we tune in to Planet Money’s most “Underrated Trends Of the 2010s”.
Enjoy!
Bilal
Louis Hyman, “Temp: How American Work, American Business, And The American Dream Became Temporary” (New Books in Economics, 1 hr 14 min listen) Louis Hyman, Professor of History at Cornell University and formerly of McKinsey unravels the decline of steady work in his latest book, Temp.
• Hyman has sifted through thousands of archives from McKinsey, Apple, and HP, etc., and examines three worlds of labour: consultancy, temporary labour, and migrant labour.
• In the modern-day structure, the management consultant’s role is paramount in optimising inefficiencies in the corporate structure and to bring focus to core activity.
• Amid this changing corporate backdrop, temporary work (initially tailored to married white women) has gradually been incorporated into all sections of the workforce.
• The rise of temporary workers began with the technological innovations of the computer (eg in data entry for IBM) but more recently, there has been a new wave in industries such as package delivery, taxi services, and food delivery services. These have drawn wide criticism due to perceived infringements of worker rights and benefits.
Why does this matter? This is the first decade in which every year unemployment rate has fallen in the US. However, whilst a large percentage of the population is employed, more and more are struggling to obtain full time, permanent work. Long gone are the days of the union’s power; entire assembly lines can be replaced at click of a button. Temporary work is a major factor behind the increased the number of strikes witnessed in the USA this year and the global trend of increasing temp work that is outsourced poses a significant risk for economic activity.
Juliette Declercq: Inflations Is Not In The Cards (Macro Voices, 1 hr 26 min listen) Juliette Declercq decodes the macro outlook and translates that view into actionable trading strategies:
• Declercq believes the QT and hikes of 2018 were clearly policy mistakes and that the Fed will cut in 2020.
• Signals to look out for include the US curve re-inverting, global equities struggling to make new highs, and renewed dollar strength against EM and commodities.
• She expects inflation expectations to be non-reactive to easing policy.
• Goods inflation has become a zero-sum game and any central bank able to gain inflation will be the one that manages to weaken its currency. The 2017 dollar fall is the main source of reflation in the US over past 2 years; the 2018 hawkish policy mistake strengthened the dollar; and we will enter deflation in 2020.
• Declercq highlights a reason for central bank policy divergence. One key thing that global central banks have is equivalent mandates about the inflation target, but the targets are measured in completely different ways. For example, the Fed includes hefty weight on cost of home ownership, a major chunk of spending by household, yet the ECB does not because there is no independent source for it.
Why does this matter?
• Peoples’ QE taking over financial QE by wisely distributing funds to institutional mandates (rather than by MMT) is the future. Of course, more politically acceptable plans will be tried and fail first.
• Declercq’s recommended trade strategies: US rates are too high. There will be further rate cuts into the election irrespective of the trade war situation. 1) Long 2 years treasuries, play the theme of Fed dragging their feet via lower inflation and break evens. 2) Short USD/YEN, given DM rates convergence. 3) Given strong carry of 2.25% on EUR/USD, calls for neutral stance, however with the euro becoming the funding currency of choice, a sharp move higher is on the cards on any bouts of risk aversion
Ash Carter (Talks at GS, 30 min listen) Former US Secretary of Defence Ash Carter sheds light on key issues in US foreign policy and the role of technology and innovation in addressing America’s greatest national security challenges.
• He shares insights on the true dimensions of the Pentagon’s activity: it has more employees, a bigger budget, and more R&D activity than FAANG companies combined.
• He draws a parallel between and how the US dealt with the Soviet Union during the Cold War and the current threat from China’s regime. Now is worse due to China being a trading partner and technology/IP being freely transferred, compared with the trade membrane in place against Russia.
• Even if the US still holds the dominant position in the world, Carter says the current trade deal will not solve the structural problem of an uneven playing field. An international environment that shifts from multilateral to bilateral agreements actually empowers China by allowing it to leverage the state’s might against US companies and have a coercive influence on its business environment.
Why does this matter? Risk markets have rallied across sectors on phase one of the US-China trade deal. However, Carter sheds light on structural problems with the current dynamic and how further US dealings will affect the global order, especially in Asia. China is only half of Asia and the US only needs to manage to get the other half on board to redress this coercive influence.
It is worth paying attention to these developments because the Chinese model will most probably disturb the way American firms interact with their own government by shifting international arrangements.
America’s Impeachment Struggle | Noah Feldman (Opinion Has It, 29 min listen) Noah Feldman, an American professor at Harvard Law School, presents insights on the case for the impeachment of President Trump:
• The case rests on two grounds: 1) High crime and misdemeanour through abusing the power of the presidential office for personal gain, i.e. soliciting aid from a foreign government (Ukraine) for his 2020 presidential run.
2) Obstruction of congress, i.e. defying the subpoena issued by the House of Representatives. Trump instructed associates and executive branch not to testify and that no documents be released, a clear violation of constitutional principle.
• Feldman states that despite there being no clear definition of treason from the framers’ of the constitution, the best way to derive the definition and an understanding is either from its use in impeachments in England (its origination) or from looking at the constitutional conventions.
• In either case, we find that ‘abuse of power’ is understood to be an abuse of office to serve personal gain and that not co-operating towards supervision is essentially dictatorship and a threat to democracy.
• When examining the charges placed against Trump to previously impeached presidents, the professor stipulates that on both counts the severity of Trump’s actions outweigh those of President Clinton, from lying under oath to having an affair with an intern, and those of President Nixon with the Watergate scandal (obstruction of congress).
Why does this matter? The ability to impeach a president for foul play or any other form of misdemeanour provides discipline to the house committee, ensuring it does not neglect its duties. It also sets a precedent for future leaders. If the president loses the next election, history will say that whether the impeachment process (successful or not) had a hand in the defeat; if the president wins again in 2020 despite being impeached, it will still remain a stain on his record and provide confidence that this kind of behaviour will not stand and that opposition parties will react.
Underrated Trends Of The 2010s (The Indicator from Planet Money, 9 min listen) Cardiff Garcia and Stacey Vanek Smith, hosts of Planet Money, reflect on the last decade and presents three critical trends possibly underrated despite their importance within the USA (in ascending order of importance):
• ‘People have become more cautious about borrowing and spending money’. Until the mid-2000’s, mortgaged debts were much higher relative to the 2010s and so was borrowing against homes. However, since the housing bubble people have the tendency to save more, reaching about 7.8% of income after taxes, which is twice as much as before the recession.
• ‘Life expectancy’. Ever since the 1950s, life expectancy has been increasing until it peaked in 2010. From 2014, it has declined from 78.9 to 78.6. The fall is only marginal, hence the lack of attention, but the US is the only advanced economy experiencing it. Scholars attribute it to the ‘death of despair’ (suicide, drug overdose, and medical conditions from chronic alcohol and tobacco abuse).
• Why include this trend? Economics plays some role here. For example, people with college degrees are less likely to die from death of despair, probably due to a reduced impact from changing economic conditions via the labour market. However, rural areas, partly due to greater income and geographic inequalities, are more prone to death of despair.
•‘Consistency of US Economic Growth’. The economy has been following a steady growth path, growing for an unprecedented 126 months straight. But the current growth rate of 2.3% is also the slowest pace since the 1940’s. Since 2010, unemployment has fallen every year but the decline has been gradual.
Why does this matter? Many economic trends such as the trade wars and Brexit grabbed the headlines. The 3 trends highlighted above are rarely discussed but provide an insight into the overall performance of the economy across the decade, putting matters into perspective.
Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)