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Noteworthy 2017

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Five economists, three correspondents, three politicians and two global investment strategists made noteworthy comments in 2017.

CreditPulse recaps the fascinating year of 2017 with our year-end montage of insightful comments from noteworthy people around the world. "Capitalism has become a 'safe space' for firms that want to shield themselves against market disruption."

"Reducing a trade deficit through tough, smart negotiations is a way to increase net exports--and boost the rate of economic growth," said economist Peter Navarro in a speech before a group of business economists in Washington that helped set the tone for dramatic changes in U.S. trade relations with the rest of the world.

The election of Donald Trump and his decision to withdraw the United States from the 12-nation Trans Pacific Partnership (TPP) and revamp American trade policy made trade one the biggest issues in 2017.  Navarro (top row second from the right), one of the president's chief economic advisors, and Commerce Secretary Wilbur Ross (highlighted below) are strong advocates for the U.S. taking a more forceful stance in bilateral trade relations with other countries particularly China, while avoiding multilateral arrangements.

The Navarro and Ross quotes on trade were just two of many noteworthy comments from individuals around the world who formed a cadre of intellectual insight into the dynamics of free market economics, credit markets and credit risk. These insightful comments, which are given front page coverage throughout the year by CreditPulse, form a knowledge base that increases our conceptional understanding of markets and business.

Early in the year, Navarro and Ross were joined by former Stanford economist Judy Shelton who gave us a lesson on currency manipulation in a February op-ed in the Wall Street Journal.  "When governments manipulate exchange rates to affect currency markets, they undermine the honest efforts of countries that wish to compete farily in the global marketplace," wrote Shelton. "China has long been intervening directly in the foreign-exchange market to manipulate the value of its currency."

Shelton then went on to explain how the Chinese yuan gets its value: "The People's Bank of China announces a daily midpoint for the acceptable exchange rate between the yuan and the dollar, and then does not allow its currency to move more than 2% from the target price," according to Sheldon. "When the value of the yuan starts to edge higher, China's government buys dollars to push it back down. When the yuan starts to drift lower than the desired rate it sells off dollar reserves to buy back its own currency."

With a political longshot winning the U.S. election, Britain voting to leave the E.U. and an anti-establishment wave sweeping across Europe, it was becoming all to clear that people everywhere were becoming fed up with their economic situation.  Some were starting to blame capitalism.  But Fredrik Erixon and Bjorn Weigel, two Swedish economists, said hold on.  It can't be the fault of capitalism because what we have today really isn't capitalism.

"Firms are increasingly focused on safe, 'risk-free' forms of profitmaking. Neither investors nor competitive markets have forced them to spend more capital and energy on long-term investment and innovation," wrote both Erixon and Weigel in a fascinating essay entitled "Capitalism without Capitalists" that appeared in the August 16th edition of American Affairs. "Capitalism has become a 'safe space' for firms that want to shield themselves against market disruption..."

Echoing the sentiments of many American economists, the Swedish duo point the blame for slow growth at easy monetary policy.  "With all that circulation of credit and cash, large nonfinancial enterprises have increasingly come to operate as savings institutions that make money by simply lending their capital at rates that are higher than the cost of capital they borrow."  They pointed to the ever-increasing number of stock buybacks as more evidence of what they termed "money-manager capitalism."

One area of the world where real capitalism is taking hold is in the former communist country of Poland, which was the topic of an incredibly insightful op-ed by Ruchir Sharma (far left, middle row) that appeared in the July 5th edition of the New York Times on the eve of President Trump's visit to Warsaw.

"If getting rich is hard for individuals, it is harder still for nations. Of more than 190 countries tracked by the International Monetary Fund, fewer than 40 count as wealthy or advanced economies," wrote Sharma of Morgan Stanley. "The rest are known as emerging nations, and many of them have been emerging forever. The next major nation likely to join that club could be Poland."

In 2017, digital currencies such as bitcoin seemed to be coming of age not only as a currency but as an investment, however, not all investors were sold. "I don't use value and bitcoin in the same sentence, but I think anonymity is its source of greatest interest," said Robert Sinche, global strategist at Amherst Pierpont Securities on Bloomberg Tech on November 15th. "I think bitcoin has a very concentrated area of interest and I think it's going to be a very, very small percentage of total money in the global economy."