Weekend reading links

1. The WSJ has an article which points to the work of Nicholas Eberstadt which highlights the growing idleness among the male workforce. The US labour force participation rate has fallen precipitously from 67% in 2000 to 61.9% in 2020, lower than even Europe. This has taken out nearly 13 million workers out of the labour force. 

Mr. Eberstadt’s research reveals the dreary lifestyles of a rising number of nonworking Americans. “By and large, nonworking men don’t ‘do’ civil society,” Mr. Eberstadt says. “Their time spent helping in the home, their time spent in worship—a whole range of activities, they just aren’t doing.” His source is the Bureau of Labor Statistics’ American Time Use Survey, which compiles respondents’ self-reported habits. 

What is filling idle men’s time? “There’s a lot of staying at home, it seems. And what they report doing is ‘watching.’ They report being in front of screens 2,000 hours a year, like that’s their job.” Women again trail the men, but not by much. In 2019 childless women without jobs said they spent seven hours a day in “leisure,” a category dominated by entertainment. The pandemic probably sped up the trend by shutting people inside and making idleness easier. An abundance of streaming movies, videogames and social-media sites consume ever more of most people’s time. “This is not what Marx would have called the ‘higher pursuits’ of leisure,” Mr. Eberstadt says. “There’s something fundamentally degrading about this.”

2. China is the largest lender to emerging countries.

And this status complicates debt restructuring of low income countries since the terms of Chinese loans are opaque and not known, and the Chinese generally refuse to come together with other lenders for collective restructuring. 

3. Henry Mance points to an adulterated Turkish proverb to describe the shambles that's the British government under Boris Johnson,

“When a clown moves into a palace, he doesn’t become a king. The palace becomes a circus.”

4. As natural gas shortages grip Europe, it has provided a boost to LNG trade,

The ships can carry enormous amounts because, when chilled to minus 260 degrees Fahrenheit, natural gas reduces into a liquid that takes up only one six-hundredth of its volume as a gas. Liquefied natural gas, known as LNG, is loaded on ships and transported to any location with facilities to receive the chilled fuel and warm it back to a gaseous state. A large tanker, around the length of three football fields, can pack a powerful transfusion of energy — enough to light up to 70,000 homes for a year, according to an industry estimate... Taking advantage of abundant gas from shale drilling, the United States has over the last six years grown from almost nothing to one of the world’s largest exporters of liquefied gas, along with Qatar and Australia... so far this winter, liquefied natural gas suppliers from along the Gulf of Mexico and elsewhere have bailed Europe out of what could have been a dire situation even without the standoff with Russia over Ukraine... Liquefied natural gas was something of an afterthought in Europe, with cargoes mostly going to Asian countries like Japan, South Korea and China.

5. FT has a report on a damning investigation on work place culture in Rio Tinto.

The report by former Australian sex discrimination commissioner Elizabeth Broderick was thorough and damning: it found systemic bullying, experienced by almost half the 10,000 survey respondents, widespread sexism and racism, high rates of sexual harassment, multiple instances of sexual assault including rape, a “culture of silence” and lack of consequences when abuse of women, minorities and LGBTIQ+ employees was reported... Rio’s findings demonstrate the potential gulf for any company between warm words in the boardroom and grubby reality on the ground — and the emptiness of ESG investing that relies on assessing paper pledges rather than operational implementation... the risk factors highlighted by Broderick should resonate elsewhere: a hierarchical, male-dominated workplace; a culture of sexual bravado or posturing; low appreciation of the challenges of balancing work and family life; a highly performance-driven culture. Others point to a technically minded approach prone to focusing on processes rather than people.

Kudos to Rio Tinto for having published the report in full. 

6. The Big Mac Index of the Economist shows that the rupee is 56% undervalued against the US dollar.

Interesting that the Russian Rouble is the most undervalued currency as per this index.

7. Good briefing in The Economist on the savings glut in the world economy and its impact on interest rates. It points to three drivers - rising government foreign exchange reserves, corporate and household savings, and demographic shifts. 

Forex reserves have risen from 5.2% of global GDP in 1998 to 15% in 2020. Household savings have risen on the back of rising share of incomes accusing to the richest, who end up saving more. 

According to work by Atif Mian, of Princeton University, Ludwig Straub, of Harvard University, and Amir Sufi, of the University of Chicago, from 1983 to 2019, the share of American income going to the top 10% of the income distribution rose by 15 percentage points. Because of this “saving glut of the rich”, average annual saving by the top 1% of American earners alone has outstripped annual average net domestic investment since 2000... According to Peter Chen, of the Analysis Group, an economic consultancy, and Brent Neiman, of the University of Chicago, and Loukas Karabarbounis, of the University of Minnesota, annual global corporate saving rose from less than 10% of world GDP to nearly 15% between 1980 and 2015. The corporate sector has been acting as a net lender to the global economy, rather than as a net borrower from it.

The ageing global population means that there are more proportion of people in their prime working years, the highest saving periods. This has important implications for the long-term prognosis for interest rates,

Etienne Gagnon, Benjamin Johannsen and David López-Salido of the Federal Reserve Board suggest that ageing in America may account for about one percentage point of the drop in interest rates since the 1980s. (Other recent work finds still larger effects, of as much as three percentage points.) If past is prologue, rates seem sure to remain low. Barring a surge in procreation, or the embrace of a dystopian “Logan’s Run” approach to the aged, the world’s population will continue to get older. The share of global population over the age of 50 rose from 15% in the 1950s to 25% today, say Adrien Auclert and Frédéric Martenet, of Stanford University, Hannes Malmberg, of the University of Minnesota, and Matthew Rognlie, of Northwestern University. It is expected to rise to 40% by 2100...

economists say there are reasons to expect ageing to continue to depress interest rates. They note, for example, that it is the age profile of a population as a whole which matters. Even as more people retire, the age of the typical working person will continue to rise toward those prime saving years. There are boomers aplenty, but the median age in America is still just 38. Another reason is that, in the emerging world, a larger share of workers have their prime saving years still ahead of them. The median age in India is only 28, for instance. So long as financial markets remain reasonably integrated around the world, higher saving anywhere helps to depress interest rates everywhere.

This may well be another example of Japanification,

The world, in other words, may come to look ever more like Japan. There, the median age is 48, more than a quarter of the population is over 65, and the yield on a 30-year government bond is a cool 0.8%, despite a government debt load of 259% of GDP.

8. Fascinating graphic on the welfare spending by governments to mitigate Covid 19 impacts. As can be seen, almost all the $3 trillion have been in the rich and upper middle-income countries, with the rich countries alone making up 87%.

Whereas rich countries spent $847 per person to provide extra benefits, over the first year or so of the pandemic, the World Bank reckons, 17 of the poorest countries spent a pitiable $4 per person.

Interestingly, despite the dominance of cash transfers in the narratives, they came third in the nature of social stabilisation measures, behind social insurance and labour market programs. But it's likely that they formed the major share of support in low income countries. 

9. The Economist points to signatures of a global investment revival,

One feature of the pandemic, for instance, has been soaring demand for everything digital. As a result, investment in computers in America is 17% above its pre-covid trend. Roughly a year ago the Taiwan Semiconductor Manufacturing Corporation announced that it would spend $100bn over three years to expand its chipmaking output. In mid-January 2022 it upped the stakes, saying it would spend $40bn-44bn this year alone. Days later Intel, another chipmaker, said it would invest more than $20bn in two factories in Ohio. Blockages in the global supply chain for goods have also led to a splurge on new capacity. In 2021 shipping companies ordered the equivalent of 4.2m twenty-foot containers—a record, according to Drewry, a consultancy.

The article feels that the demand may remain strong in the foreseeable future. It sees three reasons. 

The first is that companies are likely to keep spending on their supply chains as they seek to strengthen and diversify them... The second reason to expect more investment is the growing optimism about the potential of new technologies to boost productivity growth... firms are increasingly betting on technological progress. Intellectual property now makes up 41% of America’s private non-residential investment, compared with 36% before the pandemic and 29% in 2005. In 2021 the big five technology firms—Alphabet, Amazon, Apple, Meta and Microsoft—alone spent $149bn on R&D... The third force driving investment higher is decarbonisation. A number of countries, together making up 90% of the world economy, have pledged to reduce carbon emissions to net zero over the coming decades in order to fight climate change. If that goal is to be achieved, the world will need everything from electric-vehicle charging infrastructure to battery storage and energy-efficient housing. Punters are pouring money into green-tinged investment funds, the assets of which amounted to $2.7trn in the fourth quarter of 2021, according to Morningstar, a data provider. Global investment spending on the transition away from fossil fuels reached $755bn last year, about half of which was spent on renewable energy, according to BloombergNEF, a research firm. Spending on electric vehicles has risen particularly quickly, by 77% since 2020 to $273bn.

10. A Bloomberg feature on the 20 richest Asian families, with combined net worth of $450 billion.