EconVue Spotlight IMF/World Bank Spring Meetings

Last week I attended the IMF/World Bank Spring Meetings in Washington.  Although the weather was cold, the mood was better than it has been for some time, buoyed by the unexpected US decision to contribute additional capital to the World Bank.  The most amazing thing however was how many people were turned away from the Fintech panels.  The organizers completely underestimated interest in blockchain and cryptocurrencies. It was fascinating to hear regulators, central bankers, and practitioners discuss cutting edge financial innovations, and what these might mean for emerging markets. EconVue expert Karim Pakravan reviews the two major reports issued at the meeting below.

At the Bretton Woods Committee meeting, World Bank President Jim Yong Kim described how he worked with private insurance companies to create catastrophe bonds to fund global disasters such as pandemics and famine. I first heard about this at the G7 meetings in Sendai in 2016 - the Japanese have been strong backers. Now this innovative approach has become reality and $450M has been raised. You can watch Kim’s speech here. The pandemic bonds are paying 8.7% and were twice oversubscribed.  This is a terrific example of a public-private partnership which can provide readily available resources in times of need.

My overall impressions over the three days I spent in DC:  although inflation is on the horizon, risks are moderate. No one really can forecast the effects of new technologies on finance, jobs, and markets efficiencies. The US is more of a rational global player than is being portrayed in the media. Concerns are rising about the US-China relationship, potential channels of contagion, and the collapse of private investment in China over the past two years.  For more on this, I’ve included a link below to the Peterson Institute’s China seminar, co-sponsored by Caixin. I especially recommend the second panel on reforms, and Nicholas Lardy’s remarks. 

Lastly, for those of you who are in the LA area, I will be speaking at a breakfast sponsored by City National Bank on May 24th.  

RESEARCH BY ECONVUE EXPERTS

The IMF Report: Short-Term Resilience, Rising Medium-Term Risks
Karim Pakravan 

The just concluded IMF Spring Meeting issued the semi-annual updates of its two major reports-the World Economic Outlook (WEO) and Global Financial Stability Report (GSFR).  In these reports, the IMF remained upbeat about the short-term outlook for the global economy, but warned about rising downside risks, especially in the medium- to long-term.

Payments Potential
Collin Canright

From realtime to person-to-person and crypto, digital payments continue to change the payments landscape in the United States. Even so, cash is back, to the detriment of one growing business, as covered in this issue's links.

How the 2018 Summit of the Americas can still make a difference
R. Evan Ellis 

Although this article article on the Summit of the Americas in Peru was written before the missile strike in Syria, and doesn't capture the impact of the action on the summit agenda, I believe that the basic analysis of the conservative trend in the region is consistent with what happened at the summit, and the article's arguments about the agenda for the Americas may continue to be of use to you as a point of reference.  

 
STORIES IN OUR SPOTLIGHT

Global Financial Landscape

Animation: Global population by region from 1950 to 2100
Jeff Desjardins 4/25/2018 Visual Capitalist

Stunning animation that highlights imminent huge population growth in Africa as it catches up with Asia. What it doesn't show is the age of people in those two regions over that same period. Asia will be old, and Africa will be young. 

Truculent view on Target-2: Greenspan points to 'destabilising' euro
David Marsh 4/27/2018 OMIFF

Is Europe at risk? At the meeting of the World Gold Council, Alan Greenspan restates his views on the Euro, which he says is an unsustainable currency.

OPIC: Corporate welfare and foreign policy
Tad DeHaven 4/23/2018 George Mason Unversity 

OPIC stays. The new head of OPIC, Ray Washburne was quite impressive- you can see his remarks  here at the Bretton Woods meeting.2 I asked him how China’s One Belt One Road project compares in terms of investment: OPIC is only $40B compared to OBOR’s $2T.

FinTech

IMF Quiz: How Much Do You Know About Fintech?
13This is fun.  10 questions and you will get a perfect score no matter what. But no more spoilers!

What has driven the expansion of the peer-to-peer lending?
Olena Havrylchyk 2/23/2018 SSRN

The rapid growth of peer-to-peer lending is another example of decentralization of financial services enabled by technology and spurred on by the effects of the Global Financial Crisis. 

The case for central bank electronic money and the non-case for central bank cryptocurrencies
3Aleksander Berentsen and Fabian Schar 4/16/2018 Federal Reserve Bank of St. Louis

Blockchain without an incentive-based payment system such as bitcoin is just a slow private distributed ledger database someone has to pay to maintain. 

Why an investor is predicting Bitcoin could hit $700,000
5Jen Wieczner 4/25/2018 Fortune

Will bitcoin replace gold? There are seven ways to Sunday in terms of calculating its true value.

China

China and the world: Recalibration and realignment
4/20/2018 Webcast Peterson Institute/Caixin Media

In Washington, timely discussion between old & new friends, theorists, practitioners & policymakers. Perspectives on recent changes in China and future trends in the global economy.

China’s currency internationalization is failing; Oil futures won’t rescue it
Benn Steil and Benjamin Della Rocca 4/18/2018 Council on Foreign Relations

In spite of the fact that China is the world's #2 economy, only 1.6% of the world's trade transactions are settled using the renminbi.

'Boiled frog syndrome': Germany's China problem
14Noah Barkin 4/15/2018 Reuters

This is a paradigm shift.

EU ambassadors band together against Silk Road
Dana Heide, Till Hoppe, Stephan Scheuer & Klaus Stratmann 4/17/2018 Handelsblatt Global 

EU report says China’s Silk Road Project “runs counter to the EU agenda for liberalizing trade and pushes the balance of power in favor of subsidized Chinese companies.” Tensions are rising not just between the US & China, but between the US & Europe.

Others

History and geography is not destiny: Poland’s lesson for Africa’
43/2018 The Brenthurst Foundation

Fascinating paper-how Poland overcame both bad geography and a devastating history of rule by other powers. Lessons for Africa.