Welcome to Econ Weekly (Trial Week of April 26, 2021)

Inside this Issue:

  • Demand Versus Costs: A Race to the Top
  • Learnings from Earnings: Revelations from Q1 Company Calls
  • The Foundry Quandary: More from Intel on the Semicon Shortage  
  • Inflation Nation? The Arguments For. The Arguments Against
  • Crypto Crackup: Bitcoin Takes a Tumble
  • Americans Psyched About Cycles: Harleys Are Hot
  • Shining from the Shadows: The Rise of Non-Bank Banking
  • No More LIBOR: A Benchmark for Lending is Ending
  • Comfortably Lumb: Lumber Prices Soaring
  • Crispy Gene: Nobel Winner Doudna on the Meaning of CRISPR
  • Ill-Cotton Gains: The Global Cotton Trade, Then and Now
  • Debate: America’s Economic Power: Destined for Decline?
  • And This Week’s Featured Place: Atlanta, Atilla the Hub

Quote of the Week

“The combination of swift vaccine rollout and generous government stimulus programs have certainly led to a more rapid economic recovery than many of us could have imagined 12 months ago. I believe we all acknowledge and understand how fortunate we are to have escaped the longer and more severe economic downturn than we experienced.”

-Daryl Moore, chief credit officer of Indiana-based Old National Bancorp

Market QuickLook

The Latest

Reports for the first quarter are rolling in, and two things are clear: Demand is rising rapidly. That’s good. But so is the cost of doing business. That’s not good. It’s now a race between these twin forces—will sales rise faster than input prices? Or vice versa? The profits of corporate America are on the line.

Rising demand for what exactly? There’s some hint of a shift away from pandemic-era buying habits. Netflix subscriber numbers, for example, suggest people aren’t staying home watching movies as much. But they clearly are traveling and eating in restaurants more. That said, the housing-centric demand boom of the past several quarters remains mostly intact—Americans are still buying homes, furnishing them, repairing them and filling them with stuff. D.R. Horton, a big Texas-based homebuilder, said as much in its earnings call last week. AutoNation sounded no less bullish about demand for cars. Ditto for Intel regarding personal computers. Health care demand is a bit fuzzier. Tenet Health, for one, is seeing a return of procedures deferred during the pandemic but also an ongoing dearth of trauma and sports injuries with fewer people driving and attending school.

And costs? What exactly are companies paying more for? Labor for sure—the trucking company Old Dominion talked about that in its earnings call. Raw materials from lumber to copper. Energy. Shipping. All up.

The hope is that these cost spikes are temporary, and that they don’t lead to spiraling run-ups in prices for consumer goods. That would potentially alter expectations of inflation, causing all sorts of 1970s-style misfortunes. It’s a real concern among many economists, wary of an economy on government amphetamines. Others are more chill (we present the arguments for both sides below).

On Thursday, the Commerce Department will publish its first read of Q1 GDP growth, providing more insight on the impact of federal stimulus measures. Looking beyond the current quarter and current year, the great hope is that federal investments, along with accelerated adoption of new technologies, prove effective in raising productivity, the true path to a wealthier country.

It wasn’t a wealthier week for stock investors, with major indices trading lower. The closely-watched U.S. government bond market didn’t move much—the Q1 spike in yields seems to have calmed. Oil prices dropped despite the return of more cars to the road and planes to the sky. Cryptoassets led by Bitcoin, meanwhile, took a major tumble, underscoring the young sector’s volatility. Maybe buying those coins with that picture of the dog on the front wasn’t such a good idea.

What else were people talking about last week? There’s a railroad bidding war underway, with two Canadian predators battling for Kansas City Southern. It comes as antitrust concerns are growing, both in a general sense and with respect to specific deals, including Nvidia’s proposed purchase of ARM. That has big implications for semiconductors, which some are now calling the new oil—a precious input the U.S. economy can’t do without.

The auto industry knows all about that, frustratingly forced to curtail production due to semicon shortages. As former PIMCO chief Mohamed El-Erian said during a Bloomberg event last week: “There’s something about the shortage of chips at present which is at least faintly reminiscent of the oil shocks of the 1970s.”

El-Erian separately worries about difficulties the Fed will face when the time comes to disconnect the ventilator. Can the economy get by without so much monetary support? The withdrawal symptoms could be unpleasant, as they were when the Fed tried retreating from stimulus measures after the last crisis. Global markets, remember, threw a “taper tantrum.”

Markets got a little frenzied last week, after reports of plans to raise capital gains taxes for millionaire households. These are taxes paid when you sell a short-term investment and make a gain. President Biden will likely have something formal to propose soon, maybe during his State of the Union address this week. Last week, his chief focus was climate change, hosting a virtual meeting of world leaders. The difficult challenge: Transitioning to net-zero carbon emissions by 2050.

Let’s not forget about the virus. It’s still holding back economic activity in some parts of the U.S. And in some parts of the world—India most tragically—the Covid plague is now worse than ever. Globally, physical goods, capital and ideas continue to flow across borders. But people are still largely confined to their home countries.

Buckle up for more Q1 earnings calls this week. Big Tech takes center stage, with reports from Silicon Valley all-stars like Apple, Google, Facebook and Tesla. Seattle’s stars Amazon and Microsoft report this week as well.


  • Intel: “Technology is increasingly central to every aspect of human existence, and semiconductors are the foundation.” So said Intel’s Pat Gelsinger in his first earnings call since returning to the company, this time as chief executive. Few companies are as important to America’s economic and even geopolitical fortunes, given the indispensability of its products—they’re crucial to computers, autos and even the U.S. military. This importance will only grow with adoption of technologies like cloud computing, 5G connectivity and artificial intelligence. The problem right now: The world doesn’t have enough foundry capacity to meet demand. That’s forced automakers, most notably, to cut production. In response, Intel recently announced a $20b investment in new foundry capacity to produce chips for others. In the meantime, Intel’s recent manufacturing setbacks and shortcoming in the growing mobile market feel less foreboding thanks to extremely strong demand for personal computers. And there’s no sign, Intel says, of that letting up.
  • Coca-Cola, the iconic soft drink maker, said it was closely monitoring upward price pressures for inputs like high-fructose corn syrup, recycled plastic, metals and other packaging material. A sign of sustained inflation? Or just a temporary phenomenon? It’s the question everyone is asking, none more intently than the Federal Reserve. In Coca-Cola’s case, many of these price hikes also affect its bottling partners. Which raises another question: Will rising input prices for companies lead to rising retail prices for consumers? Or will competitive pressures make that impossible, resulting in lower corporate profits? The Atlanta-based company continues to see strong demand for people consuming its products at home. Away-from-home channels (i.e., restaurants and theme parks) are improving but not yet back to pre-pandemic levels.
  • Old National Bancorp, one of many mid-sized regional banks across the U.S., spotlighted another big trend in the U.S. economy right now: “Our clients and prospects we’re talking to, certainly in the manufacturing space… very, very optimistic.” But likewise reminiscent of what’s heard loud and clear economy-wide, the bank said its corporate clients are having trouble finding skilled labor. “That’s the big thing that’s holding people back.” It mentioned “the supply chain challenges” as well. Again, these are major themes of Q1 company earnings calls: rapidly strengthening demand, a tight market for skilled workers and bumps in the supply chain.
  • BOK Financial: In oil-rich Oklahoma—Tulsa to be exact—commentary from the regional bank BOK Financial captured some other big Q1 trends. It’s seeing, for example, soft demand for new loans, especially from commercial real estate customers. But well beyond just this sector, companies in general are busier paying down old debt than taking out new debt. The bank’s deposits are way up (nearly 30% y/y). But “we believe we’re poised for [loan] growth opportunities in the latter half of 2021, as the economy continues to rebound.”
  • Harley-Davidson: Demand is picking up for the iconic U.S. motorcycle maker. Q1 sales in North America jumped 30% y/y, offsetting big declines in Europe and Latin America. Growth was slightly positive in Asia, helped by strong demand in China. Overall, sales rose 9%, leading to a $346m Q1 operating profit on $1.4b in sales. This follows a difficult 2020 in which Harley lost money on its motorcycle sales, avoiding company-wide red ink only thanks to profits from its financing arm. The Milwaukee-based manufacturer, which also has factories in Pennsylvania, Brazil and Thailand, is one of America’s most storied brands—a “lifestyle” brand as some call it. That’s just as true today as it was in decades past. But it’s also had a history of financial and strategic emergencies, from the challenge posed by Japanese imports in the 1980s to the global financial crisis in 2008. It announced another round of layoffs last year, part of a five-year restructuring effort that also features plans to simplify operations, invest in electric motorcycles and diversify revenues by selling more parts and servicing. It wants to increase merchandising revenues as well (think riding gear and apparel). New products include the Pan America, its first bike in the adventure touring segment. One major concern: “Huge” import tariffs in Europe, which if not removed, could lower Harley’s profit margins by an estimated two percentage points this year. In the U.S. though, where the pandemic is waning and the economy reviving, sales of both new and used motorcycles are up. So are average prices. But like other U.S. companies, Harley is experiencing supply chain pressures stemming from global shipping bottlenecks, weather disruptions and significant raw material and component shortages. Said CEO Jochen Zeitz: “Getting the bikes out was a bit of a challenge.”

Tweet of the Week

“Goldman Sachs: ‘While semiconductors account for only 0.13% of U.S. output, they are an important production input to 12% of GDP.’”

-James Pethokoukis


  • Finance: Stanford University’s Amit Seru chronicles the “Rise of Fintech Intermediaries” in a presentation to Princeton University’s Bendheim Center for Finance. It’s a development that JPMorgan’s Jamie Dimon, for one, constantly laments. Banks face “disruption from every direction,” Seru says. Non-bank entities armed with new technology and less burdened by regulations are increasingly involved in lending and credit allocation (i.e., Quicken Loans and Credit Karma), in payments (PayPal and Apple), in wealth management (Robinhood and Betterment) and so on. Non-bank entities, according to Seru, account for 40% of all lending in the U.S. today, with Quicken Loans for its part leading the nation in mortgage lending. Why now? Two triggers are 1) post-2008 regulations on banks and 2) new technologies like artificial intelligence, which startups can often use to their advantage.
  • Health Care: Investors are clearly interested in the giant health care sector, which accounts for about 17% of the entire U.S. economy. CB Insights says globally, health care companies raised nearly $32b in equity funding last quarter, a new quarterly record. The number of investment deals rose 9%, with a record 96 of them worth at least $100m.

Inflation Nation?

Ring the Alarm: Inflation is Coming

Chill Out: The Inflation Risk is Minimal

·    Massive government stimulus, both fiscal and monetary, is greatly increasing the supply of money

·    This is not the 1970s. Labor unions have much less influence today, and the U.S. is much less dependent on foreign oil. So don’t expect wage-price spirals and oil shocks.

·    Not only is the supply of money rising, but much of the stimulus is going directly into people’s pockets; no need for higher demand to come via greater borrowing

·    Global competition remains a powerful force pushing down prices. This includes competition among companies and competition among labor

·    The economy is reopening with vaccinations up and the Covid threat waning. This is driving stronger aggregate demand

·    The U.S. consumer retail economy is dominated by companies who are masters at driving down prices and costs—think Walmart and Amazon, America’s two largest companies; some like Google even offer key products for free, earning money through adverting

·    Prices are already spiking for all sorts of things: homes, financial assets, used cars, food, airline tickets, energy, other commodities; this partly reflects supply shocks similar to the oil supply shocks that preceded the 1970s inflation crisis

·    Though hard to measure, productivity gains through new technologies seems to be increasing, all the more so with accelerated adoption during the pandemic—think telehealth and Zoom meetings

·    The price of money began spiking last quarter too, reflected in higher Treasury yields

·    Look at the labor market; large numbers of Americans are still without a job or out of the job market. This implies lots of labor slack, which in turn mitigates labor cost inflation

·    Just as the demand for goods and services jumps due to stimulus and economic reopening, supplies of many goods and services are constrained; think housing, semiconductors, lumber, metals

·    Now that Americans are traveling and eating at restaurants again, the boom in goods demand should ease, meaning demand won’t grow all that much in aggregate

·    Labor is in short supply too; especially skilled labor but even unskilled labor due to lingering Covid concerns and childcare responsibilities (labor participation rates are down)

·    Lots of households are using their stimulus money to repay debt, which is deflationary not inflationary; in addition, lots of the money is winding up in the stock market, pushing up stock prices but not consumer prices

·    Many businesses went away or shrank during the pandemic, adding downward pressure to supply; American Airlines for one permanently cut its fleet by more than 100 planes

·    Energy prices, though way up from extremely depressed levels last spring, are still relatively cheap with oil at around $60 per barrel; besides, energy just isn’t that impactful anymore when it comes to overall consumer inflation—in the first half of the 2010s, oil averaged closed to $100 a barrel without any inflation worries

·    Elevated household savings is another reason to expect demand growth; also, as house and stock prices go up, people feel wealthier

·    The Fed is ready to act if it does see any signs of inflation; indeed, it would have a tougher time dealing with deflation with interest rates at the zero lower bound

·    The Fed’s heightened tolerance for inflation makes it more likely to occur

·    Aging U.S. and global population will mean less future production meaning less demand, meaning downward pressure on prices

·    Huge federal debt makes raising interest rates to fight inflation increasingly dangerous; it won’t be easy to hike rates without repercussions

·    Health care costs in the aggregate are not particularly inflationary now and might see helpful productivity gains from technologies like telehealth; the growth of health care costs, incidentally, slowed in the 2010s

·    Consolidation in areas like technology, health care, railroads and aircraft leasing means more opportunity for firms to raise prices

·    Loan demand, banks say, is low throughout the economy, meaning all that new Fed money in the banking system isn’t getting used; borrowing and lending, keep in mind, is the economy’s biggest driver of money creation

·    After the last crisis in 2008-09, inflation fears never came to pass. But this time is very different for many reasons including fiscal stimulus rather than contraction

·    The Fed’s quantitative easing (QE) lowers interest costs for businesses which can then pass the savings on through lower prices; lower interest rates also hurt the spending power of savers

·    Another difference this crisis is that banking system is healthy and ready to lend

·    Yes, prices for lots of things are rising right now, but it’s only a temporary phenomenon coming out of the pandemic, not systemic inflation that will profoundly change people’s price expectations

·    The global labor surplus that held prices down in the 2000s and 2010s is disappearing; countries like China now have shrinking and aging working-age populations

·    Some economists point to a global dollar shortage, or a shortage of dollar-like safe assets; this is deflationary for the world economy

·    For most middle-class Americans, official inflation statistics don’t capture the escalating costs of “The H’s”: housing, health care and higher education; this is especially true in major metro areas

·    Japan and Italy are overseas examples of countries with deflation despite big debts; demographics surely play a role, and the U.S. too has a shrinking birth rate, a shrinking workforce and an aging population. Demographically, people tend to spend most during middle age, but it’s currently seniors—with their higher propensity to save—accounting for a growing portion of the U.S. population

·    The Alabama Amazon vote notwithstanding, unions are gaining clout politically

·    More vigorous antitrust enforcement appears to be coming

·    With so much debt, the U.S. dollar will inevitably lose value at some point, leading to much higher prices for imported goods

·    The sharing economy, repurposing economy, is another check on rising prices; think Uber and AirB&B; people are now repurposing their homes as offices, sinking the price of corporate real estate

·    International trade, a deflationary force, is now in retreat in the wake of trade wars and the Covid crisis

·    Similarly, the asset-light “intangible economy” is less inherently inflationary; for many of America’s top companies, ideas and intellectual property are the chief raw materials, not assembly line workers or steel; again, this is not the 1970s

·    Higher corporate taxes, without higher personal taxes, could drive companies to hike prices so not to weaken profit margins

·    Easy money leads to zombie companies that would otherwise go under, resulting in overproduction across the economy; government bailouts (consider the airline sector) have the same effect

·    Q1 earnings season has thus far seen many companies, from Coca-Cola to Procter & Gamble, talk about price rises

·    Growing income inequality is a demand suppressant because wealthier households allocate more of their income to savings, buying stocks rather than stuff.


  • Debt: Mark Van Der Weide, General Counsel of the Fed’s Board of Governors, gave Congress an update on LIBOR last week. What’s that? It’s the London Interbank Offered Rate, which is the average interest rate large banks pay when borrowing in wholesale money markets—without any collateral—for their everyday needs. Why is it so important? Because it’s the benchmark used for setting rates on $200 trillion (yes, trillion) worth of commercial loans, mortgages, derivatives and other financial contracts worldwide. Take an example from some recent loans announced by American Airlines: “The loans bear interest at a variable rate equal to LIBOR, plus a margin of 4.75% per annum.” The financial world, however, is moving away from LIBOR. The rate, Van Der Weide told Congress, became vulnerable to “collusion and manipulation,” all the more so after the 2008 financial crisis, when banks reduced their reliance on wholesale non-collateralized funding markets. Sure enough, the rate was scandalously manipulated. Here’s a line from a David Enrich book: “In 2006, an oddball group of bankers, traders and brokers from some of the world’s largest financial institutions made a startling realization: LIBOR—the London interbank offered rate, which determines the interest rates on trillions in loans worldwide—was set daily by a small group of easily manipulated functionaries, and that they could reap huge profits by nudging it to suit their trading portfolios.” Thereafter, most of the banks involved said they’d stop participating in the process. And last month, LIBOR’s U.K. regulator announced that the one-week and two-month U.S. dollar LIBOR term rates will cease to be published at the end of 2021, while overnight and other LIBOR term rates will cease to be published in June 2023. What will replace it? A committee established by the Fed recommends the Secured Overnight Financing Rate, or SOFR, which measures the cost of borrowing cash overnight using U.S. Treasuries as collateral. Because that’s such a giant market, it should reflect the true equilibrium price of money based on actual supply and demand.
  • Labor: From LIBOR to labor… The Wall Street Journal examines mixed signals in the U.S. labor market, which in some respects appear bullish. The official unemployment rate is down to 6%. Certain measures of wage earnings are on the rise. Job openings are more numerous now than they were pre-pandemic. Businesses cite shortages of drivers, childcare staff, IT workers, nurses and so on. Yet there are still more than 8m fewer people working now than before the crisis, which is on par with the worst point after the recession of 2008/09. One explanation is that there are still many Americans purposely avoiding the job market for reasons pertaining to Covid—for example, fears of catching the disease, caring for someone affected by it or caring for virtually-schooled children. Another theory, according to the WSJ: There’s a mismatch, with sectors and regions unscathed by the pandemic eager to hire, “but the available workers are in the wrong place or have the wrong skills.”
  • Labor: One thing that’s clear: It’s a lot better to be graduating from college this spring than it was last spring. The job market for college grads is vastly healthier now. On a side note, podcaster and NYU professor Scott Galloway notes a big spike in college students majoring in epidemiology.
  • Lumber: It’s not the only reason why house prices are soaring. But it’s certainly one reason. The Wall Street Journal looks at the soaring cost of lumber, futures of which have tripled in the past year. Lumber mills are benefitting greatly. But oddly enough, tree growers aren’t. Put another way, the price of processed lumber is spiking but the wood used to make the lumber is not. Why the divergence? The WSJ report recounts a 1980s policy in which Washington paid landowners—many of them located in southeastern states like Georgia—to plant trees instead of corn and soybeans. The goal was to lift prices of such food commodities to help farmers. But now the south has a great surplus of trees. Right now, despite the demand, lumber mills can pretty much name their price for the logs they buy. And experts warn it could be another decade or two before enough trees are cut down to get supply and demand back in balance.
  • Food: In a corollary to the great inflation debate, have a look at this, from a Bloomberg report last week: “Overall, global food costs have surged for 10 straight months, the longest rally in more than a decade, according to a UN gauge. The surge is stirring memories of 2008 and 2011, when spikes led to food riots in more than 30 nations across Africa, Asia and the Middle East, and contributed to political strife and uprisings in the Arab Spring.” Sobering.

Debate: U.S. Economic Power: Is it Fading?

Yes, the U.S. will lose much of its economic power

No, the U.S. will remain the world’s premier economic power

·   China, if it’s not already a larger economy than the U.S., will be soon by relevant measures of GDP. China of course has many more people than the U.S. Its new digital central bank currency makes it more likely that the yuan will replace the dollar in more and more international transactions. With fewer protections for individual rights and liberties, China can advance much farther with artificial intelligence—no need to worry about bothersome privacy laws. China is already far ahead in areas like mobile payments. Other big powers like Russia, meanwhile, are keen on destabilizing the U.S. through information warfare

·   China is hardly ten feet tall. Its problems are far more severe than those the U.S. faces, including shortages of food, water and energy. It also faces massive debts, extreme dependence on U.S. technology, hostile neighbors on all sides and an economy that seems to be “growing” only thanks to increasingly wasteful infrastructure spending

·   America’s massive debts will eventually erode people’s confidence in the dollar. A sharp rise in interest rates, meanwhile, would be extremely costly for the U.S. given all of its debts

·   Peter Zeihan, author of the Accidental Superpower, makes it clear that U.S. wealth and power rests upon extremely strong foundations. They include the world’s richest farmland and best deep-water ports (Puget Sound, San Francisco Bay and Chesapeake Bay, he writes, are bar none the earth’s three largest and best natural harbors)

·   The U.S. military advantage is waning in an era of cyberattacks and asymmetric warfare.

·   The U.S. has abundance of energy now too, having broken its dependence on imports thanks to the shale revolution of the 2010s

·   As JPMorgan’s CEO enumerated in his annual shareholder letter, the U.S. faces problems ranging from political gridlock to racial tensions to growing income inequality to crumbling infrastructure

·   The U.S. has strong allies, younger demographics than other industrialized countries and the world’s top universities and technology companies; it also drains brains from other parts of the world through immigration

·   America’s inability to avoid a huge death toll from the Covid pandemic shows its vulnerabilities

·   America’s lead in producing and distributing vaccines to end the Covid pandemic shows its enduring strengths


  • Poverty: Long before Lyndon Johnson’s war on poverty, governments have contemplated how to address substandard living conditions. But how to define poverty? That’s the subject of “Poorly Understood,” a new book co-authored by sociologist Mark Rank. The U.S. government currently sets the poverty line at around $20,000 for a family of three, $27,000 for a family of four, $32,000 for a family of five, and so on. This doesn’t tell the whole story though, as Rank explains in a discussion with EconTalk’s Russ Roberts. Roughly 10% of Americans fall below the poverty line. But almost half of that population are in “extreme” poverty, defined as less than half the official line. The 10% figure rises to 35% for single-parent households. But most Americans aren’t affected. Or are they? Rank’s research shows that the majority experience poverty at some point in their lives, for a limited period. He and his colleagues pin the lifetime risk of experiencing poverty for at least one year (between ages 20 and 75) at somewhere around 60%. There’s a separate question about the poverty line itself and how useful it is in measuring low living standards. The cost of living obviously varies a lot across states. Some question the methodology used to set the number, which involves estimating what people need for a minimally adequate diet and then multiplying by three. That formula was devised in the 1960s, when Americans really did spend about a third of their incomes on food. Today the cost of other necessities like health care and childcare are much more expensive. For the record, the current U.S. poverty rate, according to March figures, is 11.7%. The figures are closer to 20% for poorer states like Mississippi and New Mexico.
  • The right to fix your own stuff: Doesn’t sound like a federal court case. But it is. NPR’s Marketplace Tech looks at “right to repair” laws proposed in about half of all state legislatures. Massachusetts actually did pass a right for people to fix their own cars. But manufacturers sued to delay its implementation, and the case is going to federal court. To be more specific, there’s a movement to force manufacturers to publish manuals to enable anyone to repair their products, be they iPhones, tractors or medical ventilators. Companies are resistant because they often earn a lot of money by servicing their products. Apple is notorious for making their gadgets very difficult to work on without special equipment. Some say this leads to waste as people wind up throwing out products they might have repaired on their own.


  • Atlanta: And you thought Florida was a hotly contested political battleground? These days, the hinge of national political power is just to the north, in Georgia. Voters there helped put President Biden into office. Voters there even more dramatically put Democrats in control of the Senate. With the stakes so high, no wonder why Georgia and its elections are again at the center of national attention. This time, it’s a new state voting law that critics see as a manifestation of reawakening demons—demons of racial injustice. Caught in the vortex of the dispute is the economy of Atlanta, Georgia’s capital and—some like to say—the capital of the American South. Make that the “New South,” as promoters call it, distinct from the old south and its troubled past. Atlanta, said one its mayors famously, was too busy to hate. To be sure, Atlanta has had its share of racial tensions, as Frederick Allen makes clear in his 1996 book “Atlanta Rising.” And in 2021, the city lost its chance to host this year’s baseball All-Star Game, after the sport deemed Georgia’s new voting law unacceptable. Will the economy suffer? Probably not much. Atlanta’s economic fortunes rest on firm ground in 21st century America, in one respect for the same reason it was so important to the South in the 19th. The city started life as a national transportation hub, for railroads. Now, it’s a global transportation hub, for airlines. Covid-skewed trends in 2020 aside, Atlanta airport handles more passengers than any other worldwide, thanks in part to the strength and reach of Delta, one of several corporate giants based in “A-Town.” Another is UPS, a cargo giant. The most famous is Coca-Cola, an Atlanta institution since the late 1800s. There’s Home Depot, currently thriving amid the home-centric spending boom. There’s the cable company Cox Communications. You can include CNN too, though it’s technically now part of AT&T, a Dallas-Fort Worth-based company. Atlanta’s aviation prominence is nothing new. As early as 1930, it was the third busiest airport in the nation behind only New York and Chicago (these cities remain larger aviation markets today, but traffic is split across multiple airports). World War II was a major moment for the economy, becoming a big production site for aerial bombers and the military supply center for the entire southeast. After the war, manufacturers like Ford and Lockheed established assembly plants, often employing a racially mixed workforce. Atlanta would gain national prominence over subsequent decades, with the rise of national figures from Martin Luther King Jr. to Jimmy Carter to Ted Turner. The 1980s was a breakout decade, ushering in the great sunbelt migration that continues today. Atlanta entered the global spotlight by hosting the Olympics in 1996. During the 2010s, its population grew 14%, boosted by many African American decedents of the great northern migration now returning south. It’s still the city with the largest percentage of African American business owners, millionaires and middle-class households. Today, Atlanta is the country’s ninth largest metro area with about 6m people, just behind Philadelphia. The area’s second largest employer after Delta is Emory University and its health center. With air travel coming back and the economy more generally reopening, metro Atlanta’s unemployment rate fell to 4.1% in March; that’s well below the 6% national average. One thing Atlanta is not, which proved a blessing in disguise during the pandemic, is a big tourist attraction. In fact, much of Atlanta’s abundant airport traffic is merely connecting there, en route to Florida or some other destination. Fewer than ten foreign airlines flew to Atlanta from overseas in 2019, and most of those only because of close business ties to Delta. Atlanta by the way, also lost some of its banking clout to nearby Charlotte (the latest loss was SunTrust, now called Truist). Looking ahead, Korea’s SK Innovation is building a $2.6b battery plant just outside the metro area. It won’t be Atlanta’s only connection to the auto industry—several foreign car builders have their U.S. bases there, including Germany’s Mercedes and Porsche. There are plenty of technology firms too, many on the front lines of wireless communication developments like the internet of things.

Prosperity and Poverty

America’s Wealthiest and Poorest Counties

Ranked by per capita personal income in 2019

source: Bureau of Economic Analysis (BEA)

  • Teton County, home to Jackson Hole, a wealthy resort area near Yellowstone Park
  • Wheeler County, Georgia a statistical anmoly: average incomes depressed by large prison population (same is true of Crowley County, Colorado











  • Pakistan: Sticking with the cotton theme of the Looking back section below, Pakistan finds itself in a difficult situation. As Bloomberg News describes, the country is one the world’s largest cotton producers—some 1.5m of its farmers depend on it for a living. The problem is that harvests have been damaged by years of bad weather, pest outbreaks and high opportunity costs—farmers find other crops often generate higher profits. Production this year is set to be the lowest in about three decades. Pakistan’s critical textile industry, to be clear, is flourishing right now, operating at full capacity and ramping up exports as economies around the world recover. But with homegrown cotton in short supply, the country is forced to spend billions on imports. Cotton, remember, is the textile industry’s raw material. And the textile industry is Pakistan’s number one employer, providing jobs to a shocking 40% of the country’s workforce. Textile exports, meanwhile, generate more than half of the country’s U.S. dollars and other foreign currencies, which are necessary to buy other stuff the economy needs like oil, medicines and everyday goods from telephones to cars. The U.S., by the way, is Pakistan’s top export market. As for imports, it buys more from China than anywhere else.

Looking back

  • Cotton: Sven Beckert’s “Empire of Cotton” (2014) is a history of the cotton trade across centuries and countries. The book makes clear just how important the commodity was to the development of pretty much every major economy in the world. That includes the U.S., which didn’t start becoming a truly industrialized country until northeastern mills started producing textiles for clothing, using cotton picked by slaves on southern plantations. Beckert writes at length about the economics of the U.S. textile industry in the 19th century, including its importance to the British economy at the time. Just as interestingly, the book’s epilogue looks at the cotton and textile trade today, in which the U.S. and Britain play a far less significant role. To be sure, the world today creates and consumes more cotton than ever before, still thanks to a network of growers, weavers, spinners, tailers, and merchants from different parts of the world. But the places have changed. “A century ago,” Beckert writes, “your shirt would’ve likely been sewn in a shop in New York or Chicago, using fabric spun and woven in New England, from bolls grown in the American South. Today it is probably made of cotton grown in China, India, Uzbekistan or Senegal, spun or woven in China, Turkey or Pakistan, and then manufactured in a place like Bangladesh or Vietnam.” Only some 25,000 cotton farmers remain in the U.S., mostly in Arizona and Texas. U.S. cotton is highly uncompetitive on the world market, existing only thanks to generous federal subsidies. The last mill in Fall River, Massachusetts, once an epicenter of textile manufacturing, closed in 1965. Today, a typical pattern might see cotton grown in West Africa sent to a Hong Kong mill, then on to an Indonesian sewing ship, before reaching a shopping mall in Kansas City. That said, U.S. retailers like Walmart and GAP play a major role in the clothing supply chain, essentially scouring the world for the cheapest labor using contractors and subcontractors working with farmers and mills. These days, lots of clothing are made of petroleum-based synthetic fibers instead of cotton. Nevertheless, the cotton trade employs an estimated 3% to 4% of the entire world population today, according to Beckert. As a postscript to his book, note that roughly a fifth of all cotton is currently produced in the Xinjiang region of China, a site of much controversy around alleged human rights violations.
  • Cotton: When discussing cotton, keep in mind that it was the international textile industry that Karl Marx was observing as he formed his critiques on capitalism. For all the suffering his own ideas would cause in later decades, Marx wasn’t wrong when he said in 1846: “Without slavery there would be no cotton, without cotton there would be no modern industry.” In today’s world of course, modern industry means a lot more than just making textiles.
  • Cotton: On a lighter note, history lives on in Lowell, Mass, once the textile capital of America. The city’s minor league baseball is called the Lowell Spinners.

Looking ahead

  • Gene Editing: Jennifer Doudna, co-recipient of the 2020 Nobel Prize for chemistry, spoke about her revolutionary gene editing discovery with Bloomberg’s Emily Chang last week. It’s called CRISPR, and it allows scientists to change the function of genes in a targeted way. She and fellow researcher Emmanuelle Charpentier studied a system in bacteria that detects and cuts virus genetic material. They were able to then harness that system as a tool for genetic manipulation. Scientists can now alter any cell’s DNA sequences in a programable fashion. Or put another way, they can change the function of genes. Already, CRISPR is proving revolutionary as a tool to cure diseases like Sickle Cell Anemia. But Doudna warns of ethical dangers, especially when it comes to editing human genes and embryos. Should parents be able to choose what physical features they want for their babies? She also cautions that a lot still needs to be learned about the new technology. Users don’t yet have precise control over outcomes. A separate concern is the cost—Sickle Cell patient therapy can cost some $2m. Doudna and her discoveries, by the way, are profiled in a much-discussed new book by Steve Jobs biographer Walter Isaacson.
  • Cryptoeconomy: Ari Paul of BlockTower Capital made an important point on a podcast called Modern Finance. In discussing the topic of blockchain-based decentralized finance, or “defi,” he’s unequivocally bullish. But he cautioned investors that the leading companies and technologies in the space today might not be the winners of the future. Some of the early pioneers might get outcompeted by newcomers, much like MySpace was famously outcompeted by Facebook in social media.



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