.@KarstenMueIIer and @EmilVerner find that credit growth to non-tradable industries like real estate is predictive of a boom-bust output pattern and financial fragility, while credit to the tradable sector is associated with productivity growth.
Credit expansions lead to disproportionate credit growth toward non-tradable sector firms and households. This pattern is in line with theories in which these sectors are more sensitive to relaxations in financing conditions and to feedbacks through collateral values and domestic demand. The sectoral allocation of credit, in turn, has considerable predictive power for the future path of GDP and the likelihood of systemic banking crises. Credit growth to non-tradable industries predicts a boom-bust pattern in output and elevated financial fragility. Credit to the tradable sector, on the other hand, is less prone to large booms and is associated with higher future productivity growth. Our evidence suggests that previous work, which could not differentiate between different types of corporate credit, has missed an important margin of heterogeneity. Figure 7 plots the average yearly change in sectoral credit-to- GDP for five years before and after a systemic banking crisis, relative to non-crisis times. The sample includes 59 crises. Non-tradable sector credit expands more than twice as rapidly relative to GDP as tradable sector credit, surpassing the growth of household debt in the three years immediately before crises.
.@JoanMonrasEcon argues that immigrants cluster in cities with higher wages to support remittances to family members in their native countries, and are deterred less by higher living costs than US-born workers.
A large share of immigrants keeps ties with their origin countries. Many send money, known as remittances, to family members in those countries, while others plan to eventually return to their birthplace. In either case, this means that a substantial part of immigrants’ spending, now or in the future, takes place in their origin country rather than in the city where they currently work. Hence, for immigrants, the local prices in the city where they work only matter for the fraction of their total budget spent there. This means, that, relative to native-born workers, immigrants are equally attracted to high wages in select cities but less deterred by high local prices—particularly housing. This simple mechanism can explain why immigrants concentrate so much in a small number of select cities, and why these cities tend to have the highest costs of living.
Net emigration from China in 2022 was 300,000 up from a low of 125,000 in 2012 during China’s post-crisis period of growth.
Net emigration from China, which had fallen as low as 125,000 in 2012 according to U.N. data, had rebounded to nearly 300,000 by 2018. The latest U.N. forecast puts net emigration in 2022 at over 300,000 again, after a net drain of about 200,000 in 2021. Strikingly, the U.N. data actually lines up surprisingly well with data from private sources looking at a more specific demographic—the wealthy. Data collated by South Africa-based New World Wealth and Henley & Partners, a London-based investment migration consulting firm, show a similar pattern. Net outflows of high net-worth individuals (with more than $1 million in assets) from China were steady at around 9,000 a year for most of the early 2010s. But in the late 2010s, that number started rocketing up: In 2017, net emigration by the wealthy was over 11,000 individuals, and by 2019 it was more than 15,000. Henley estimate 13,500 wealthy individuals will, on net, leave China this year, following a 10,800 person net drain in 2022. Related: Singapore Asks Banks to Keep Quiet on Wealth Inflows During China Boom and U.S. Bound Migrants Surge at Darien Jungle Crossing in Panama
Gregory Clark @PNASNews finds that social status in England was strongly correlated across generations between 1600 and 2022, consistent with a theory of genetic transmission of characteristics influencing status.
Using a large genealogical database of 422,374 people with rarer surnames in England the paper examines patterns of inheritance of social status in England. These correlations reveal four things. First status persists strongly across even very distant relatives, across all measures of status. Second the decline in status correlations with each step outward in the lineage is a constant 0.79, for different measures of status, and epochs from 1600 to 2022. Third of the correlations conform closely to those predicted by Ronald Fisher in 1918, for familial correlations in the presence of strong assortment in mating. In particular, the correlation in mating in the genetics underlying social outcomes [must] be 0.57 to generate the persistence rate of 0.79. Since these are observational data, there is no proof that additive genetic transmission causes social status. [Only] that whatever social processes are producing the observed outcomes have a form of transmission which mimics that of additive genetic effects, in the presence of the important social institution of strong assortative mating. [Fourth,] the constancy of status persistence across the interval 1600 to 2022 does suggest social interventions have surprisingly modest effects.”
Foreign direct investment in the US fell by 27% in 2022 to $285 billion, but the United States remains the largest destination of foreign direct investment.
The U.S. was the top destination for businesses looking to expand internationally last year but the inflow of capital fell as companies around the world cut foreign investment amid rising uncertainty and borrowing costs. Foreign investment in the U.S. fell to $285 billion in 2022 from $388 billion in 2021, mainly due to a sharp fall in foreign purchases of American companies, according to United Nations data. While still behind the U.S., China registered its highest-ever inflow at $189 billion, an increase of 5%. Much of that increase came from European businesses. Related: Financial Fragmentation
The number VC funded startup deals in Q2 2023 was down a third vs. Q2 2022, with total deal value down nearly half. @markets
In the US, investors financed 3,011 startup funding deals last quarter, about a third fewer than a year ago. And they spent less cash: $39.8 billion, down by nearly half from the same period last year. Take out the more than $6.5 billion investors spent on payments company Stripe, and the total looks even worse, said PitchBook analyst Kyle Stanford. The biggest drop came in angel or seed deals. In that category, there were half as many funding deals as there were a year earlier. Those early funding rounds — when young companies are either nurtured or starved — are generally considered to be critical to the health of the venture ecosystem.
.@JosephPolitano notes a surge in US capital investment in chip-making equipment: in Q1 2023, special industry machinery investment (mostly semiconductor equipment) was 50% higher in real terms than the 2019 peak.
The boom in domestic US chipmaking construction has been coupled with rising demand for semiconductor equipment that can’t be met domestically. The pace of US semiconductor equipment imports over the last few months has been near an all-time high, with Japan, the EU, and Singapore being the major sources. This is part of the reason why the market for semiconductor equipment hasn’t contracted alongside the market for chips themselves. Supercharged domestic investment is perhaps the US’s greatest asset in the current trade war—buying up scarce chipmaking equipment gives America leverage to encourage compliance among its would-be customers and trade partners. Related: Making Manufacturing Great Again and TSMC To Send Hundreds More Workers To Speed U.S. Plant Construction
Ruy Teixeira notes that Democrats’ margin with Latino voters dropped by 18pp in ‘20 vs. ‘16, with Latino men giving President Trump 44% of their 2020 two-party vote.
Catalist data confirm a nationwide shift among Latinos in 2020. The Democrats’ overall margin among this group dropped by 18 points relative to 2016. Cubans had the largest shift of 26 points, but Puerto Ricans moved by 18 points to Trump, Dominicans by 16 points and Mexicans by 12 points. An overall weak spot for Democrats was among Latino men who gave Trump a shocking 44 percent of their two-party vote in 2020. And in a recent Washington Post-ABC poll, Hispanics preferred the way Trump handled the economy when he was in office to Biden’s performance so far by 55 to 36 percent. What Happened In 2022 and Republicans Really Are the Party of the Working Class
.@Edsall notes that former President Trump’s core constituency of whites without college degrees fell by 2.1M from 2016-22. During that same period, the number of white college graduates increased by 13.2M.
One of the most significant developments in the run-up to the 2024 presidential election has emerged largely under the radar. From 2016 to 2022, the number of white people without college degrees — the core of Donald Trump’s support — has fallen by 2.1 million. Over the same period, the number of white people who have graduated from college — an increasingly Democratic constituency — has grown by 13.3 million. These trends do not bode well for the prospects of Republican candidates, especially Trump. President Biden won white people with college degrees in 2020, 51 to 48 percent, but Trump won by a landslide, 67 to 32 percent, among white people without degrees, according to network exit polls. Related: The Road To A Political Realignment In American Politics and What Happened In 2022
Torsten Sløk @apolloglobal notes the Fed has been increasing its estimate of the long-run Federal Funds rate. However, their estimate is only back at its 2019 level.
The Fed has started to increase its estimate of the long-run Fed funds rate. The implication is that the Fed is beginning to see the costs of capital as permanently higher. A permanent increase in the risk-free rate has important implications for investors. Related: What Have We Learned About the Neutral Rate