Recommended Weekend Reads
April 7 - 9, 2023
Happy Easter! Here are our recommended reads from stories we saw in the last week. Let us know your thoughts and if you or a colleague want to be added to our distribution list. Have a great Easter and a week ahead!
· “The electric grid is about to be transformed” The Economist
At present, 62% of the energy delivered as electricity comes from fossil fuels; that has to come down to more or less zero. A lot of its replacement will be in the form of cheap wind and solar, and that presents a serious challenge to grid operators. It means a lot of new connections – a lot of new relationships. And a lot of state regulations need to be changed, too.
· “China as an International Lender of Last Resort” AIDDATA, A Research Lab at William & Mary College
This paper shows that China has created a new global system for cross-border rescue lending to countries in distress. AIDDATA built a comprehensive new dataset on China’s overseas bailouts between 2000 and 2021 and concluded the People’s Bank of China’s (PBOC) global swap line network had been heavily used as a financial rescue mechanism, with more than USD 170 billion in emergency liquidity support to crisis countries. In addition, the research documents that Chinese state-owned banks and enterprises have extended an additional USD 70 billion in rescue loans for balance of payments support. In total, China’s overseas bailouts correspond to more than 20% of total IMF lending over the past decade, and bailout amounts are growing fast.
However, China’s rescue loans differ from those of established international lenders of last resort in that they (i) are opaque, (ii) have relatively high-interest rates, and (iii) are almost exclusively targeted to debtors of China’s Belt and Road Initiative. Our results have implications for the international financial and monetary system, which is becoming more multipolar, less institutionalized, and less transparent.
· “Geopolitics and Fragmentation Emerge as Serious Financial Stability Threats” International Monetary Fund Blog (This blog is significantly expanded upon accessible data and charts in Chapter 3 of the forthcoming IMF Global Financial Stability Report 2023)
The blog and forthcoming report raise concerns about global economic and financial fragmentation, having intensified in recent years amid rising geopolitical tensions, strained ties between the United States and China, and Russia’s invasion of Ukraine. Ultimately, the authors argue policymakers should be aware that imposing financial restrictions for national security reasons could have unintended consequences for global macro-financial stability. Given the significant risks to global macro-financial stability, multilateral efforts should be strengthened to reduce geopolitical tensions and economic and financial fragmentation.
· “The U.S. Semiconductor Ecosystem Map” – Semiconductor Industry Association
As the impact of the CHIPS Act, passed by the U.S. Congress last year, begins to take hold, the Semiconductor Industry Association has published its first U.S. Semiconductor Ecosystem Map. The map, which is interactive, provides a comprehensive guide to various locations where research and development, I.P. and chip design software providers, semiconductor fabrication, and suppliers of semiconductor manufacturing equipment and suppliers are located – showing the significant breadth of the sector geographically across the U.S.
Chart of the Week
Russian President Putin’s Drain on the Civilian Employment Sector
As Russian President Vladimir Putin desperately seeks to expand the size of Russian armed forces, it is causing significant labor shortages in the economy. It is reported Putin is looking for another 400,000 contract recruits to throw into battle in Ukraine. Bloomberg, citing data from the Russian Statistical Service, shows which sectors are suffering the most from lost labor.
