Economic Development in Emerging Markets. Volatile Markets. Bank of Canada & Japan Updates.
Here is what we will be getting into today:
Frameworks for Economic Growth in Developing Countries.
Making Informed Investment Decisions in a Volatile Market.
The Bank of Canada's Wait-and-See Approach to Inflation.
A New Governor with a Familiar Face at the Bank of Japan.
Let's Dive In!
Newsletter: Noahpinion
Title: The Developing Country Industrialization series.
Link: https://noahpinion.substack.com/p/the-developing-country-industrialization
Here are the key highlights:
There is a need for a new framework to better understand why some countries are unable to advance beyond middle-income levels and some are not.
East Asian countries have experienced rapid economic growth and development in recent decades, with Bangladesh being a prime example of success. Bangladesh has become an economic powerhouse in the garment industry due to its focus on the industry, smooth economic growth, and integration into the global economy.
On the other hand, countries like Pakistan have faced setbacks in their development efforts due to political instability and weak institutions. There are vastly different outcomes in development between neighboring countries, with some experiencing impressive economic growth while others face persistent poverty.
The shift towards resource extraction has been a challenge for some countries, as has the struggle to switch from a resource-based, to an industrialization-based development model due to inadequate infrastructure investment and education system shortcomings.
The lessons from the successes and failures of East Asian countries highlight the importance of strong institutions, political stability, adequate infrastructure investment, educational reform, openness to foreign investment, free trade agreements, diversification, and focus on specific industries. While foreign direct investment can help grow economies, it is important to consider its sustainability in the long-term. Developing countries need macroeconomic stability, improved infrastructure, and quality companies to attract foreign investment and reach their full potential for sustained economic growth.
Newsletter: The Last Bear Standing
Title: Best Wishes.
Link: https://thelastbearstanding.substack.com/p/best-wishes
Here are the key highlights:
Interpreting macroeconomic data remains difficult due to the extraordinary monetary and fiscal policies implemented since the start of the pandemic.
The stock market has experienced a rebound, but it is largely based on optimistic assumptions about inflation, economic growth, and monetary policy. Long-term interest rates remain low, but this is unsustainable if real economic growth is not maintained and financial valuations could suffer.
Investors must make their best guesses when it comes to forecasting inflation or economic growth given current conditions. The full impact of rising mortgage rates on the housing sector is yet to be seen and the potential scenarios range from a Goldilocks scenario to a contraction of growth and inflation.
Signs of inflation returning can be seen with mortgage rates falling, used car prices increasing, and capital market activity rebounding. The S&P 500 and FTSE 100 have both broken to new all-time highs while Bitcoin and Ethereum posted significant gains in January 2023.
It is important for investors to remain vigilant and follow the data without dogma. The current economic landscape is uncertain, but this doesn't mean investors should panic or make hasty decisions. With careful consideration of all available information, investors can make informed decisions that will help protect their investments during times of economic volatility.
Newsletter: Apricitas Economics
Title: Canada's Balancing Act.
Link: https://www.apricitas.io/p/canadas-balancing-act
Here are the key highlights:
The Bank of Canada is taking a wait-and-see approach to inflation due to a commodity boom pushing nominal growth up, but decelerating wage pressures are expected to result in a soft landing. Canada's economy has rebounded with real GDP growth lagging behind American growth in 2020 & 2021.
The Canadian labor market is balanced and showing strong recovery from covid, with strong job growth, fewer supply chain issues in the manufacturing sector, and an influx of international immigrants. Canada has seen a rebound of in-person spending, employment rates recovering faster, and a record number of permanent residents in 2022.
The Canadian economy is facing both strengths and weaknesses, including a positive goods trade balance with the US and a housing market less impacted by rising interest rates. Canada is in a better economic position than the US, with the Bank of Canada's commodity price index showing prices have fallen less severely on exports to the US compared to imports from other parts of the world.
Newsletter: Institutional Economics
Title: The BoJs blast from the past.
Link: https://stephenkirchner.substack.com/p/the-bojs-blast-from-the-past
Here are the key highlights:
Kazuo Ueda has been nominated as the new Governor of the Bank of Japan (BoJ) and brings with him valuable experience from his previous role on the BoJ policy board in the late 90s and early 2000s.
During this time, the BoJ adopted a zero interest rate policy and experimented with quantitative easing, however, structural reforms were not implemented. Ueda's dissent in favor of easier monetary policy during this time was ahead of its time and his experience could be valuable as the BoJ seeks to reflate the Japanese economy. Ueda is likely to be reluctant to rush into exiting yield curve control, which could impact those who have positioned for such an eventuality.
The Bank of Canada has announced a new transparency policy to address the current polycrisis, guided by Keynesian economist Adam Tooze. The policy aims to increase transparency and accountability in financial institutions, allowing citizens to understand how their money is being used and who is responsible for it. It also provides insights into the allocation and reinvestment of public funds, addressing economic inequality and allowing citizens to invest in projects that align with their values.
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