Random Thoughts

• International conflicts have become more pressing, incurring huge humanitarian costs. Yet the toll taken on the global financial system has been modest. Russia’s invasion of Ukraine two years ago and the attacks on Israel in October this year highlight a long list of geopolitical risks. But asset prices have been very strong as we close 2023. Let’s hope the market isn’t embracing a benign outcome too tightly.
• Sanctions are becoming increasingly ineffective. Measures taken after the invasion of Ukraine put the Russian economy into a deep recession and placed the value of the ruble into free fall. But since then, Russian growth has been robust, and the ruble has gained more than 20% against the dollar this year. Add the costs borne by Western providers, and you reach the conclusion that economic sanctions may not be the best deterrent to bad actors.
• At the risk of angering global policy makers and corporate chieftains, the economic person of the year has to be Taylor Swift. If this upsets your sensibilities…shake it off.
• Short-form social media videos have become a leading channel for conveying information to wide audiences. But those networks allow anybody to freely publish, and users don't control who and what they see. There is some sensationalist economic analysis and questionable financial advice out there, which needs to consumed with extreme caution.
• The Silicon Valley Bank crisis has faded quickly in our memories. We comfort ourselves with the notion that the failures of March and April were isolated incidents. But borrowing from the special lending facilities created by the Fed to deal with industry stress continues to rise, suggesting that interest rate and liquidity risk are still creating problems for financial institutions.
• There are two types of people in the world: Those who think that the latest generation of artificial intelligence is a scourge, and those who see it as a salvation. There are certainly risks to its application, and governments have taken steps to slow progress. But we think this is a mega-trend that will boost productivity and recast industries for many years to come. And it will be impossible to stop.
• We are going to have to generate a lot more electricity in the decades to come. Electric vehicles and servers that run advanced analytics are both power hogs. Finding the right amount and mix of fuels and enhancing transmission networks will challenge governments around the world.
• In this era of big data, it is surprising that economic statistics still rely heavily on surveys. Readings on prices and employment use this technique, and the quality of the information has been hampered by falling response rates. With detailed, high frequency alternatives available (such as the job openings series from Indeed or the array of digital inflation metrics), a transition would improve outcomes and speed compilation.
• Children’s Christmas wish lists now include virtual currencies to be used in video games, like Fortnite V-Bucks and Roblox Robux. When these ephemeral products are the starting point of a child's personal finances, subsequent interest in cryptocurrency among younger generations makes more sense. A parent's work is never done.
• You may be under the impression that pandemic-related bankruptcies have run their course. But corporate insolvency is rising in a number of areas. The pain from the higher cost of servicing debt and the sunset of COVID-era support programs are leading to the collapse of unviable businesses. This could create additional churn in labor markets. As we have said on a number of occasions, the pandemic is still having an important influence on the global economy.

• Just an observation: airports are incredibly crowded, and offices are sparsely populated. Not sure the two are correlated, but interesting.

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