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GIC Meeting Gleanings

L: The GIC is the Global Interdependence Center, which is a non-profit based in Philadelphia that encourages the expansion of global dialogue and free trade in order to improve cooperation and understanding among nations. They hold meetings all over the world. The event we attended was in Fayetteville, AR on Monday. The theme was "Location Matters in a Global Economy" and it featured six speakers from the nearest Federal Reserve Bank districts, three more globally-focused speakers and three others who are based in Fayetteville, working for national companies. Here are some of my favorite fact-bites or reactions:

Inflation Rate

The Federal Reserve Act in November 1977 explicitly identifies “the goals of maximum employment, stable prices, and moderate long-term interest rates” for the Federal Reserve System's Federal Open Market Committee (FOMC). In January of 2012, the FOMC announced that it thought a policy which targets a 2 percent rate of inflation "is most consistent over the longer run with the Federal Reserve's statutory mandate". Dr. George A. Kahn, Vice President and Economist of the Federal Reserve Bank of Kansas City, offered some ideas of why the inflation rate has been running under 2 percent for some time now, despite a variety of economic indicators that would normally result in increasing inflation. My question: why does 2 percent inflation sound good? What's wrong with 0 inflation? I realize that's perilously close to deflation, but running a bit under 2 seems perfectly fine to me.

Hurricane Effects

There don't seem to be many. Dr. Mine Kuban Yücel, Sr Vice President and Senior Research Advisor at the Federal Reserve Bank of Dallas and Lesley McClure, Regional Executive and Senior Officer of the Birmingham Branch of the Federal Reserve Bank of Atlanta, (both women!) reported that Hurricane's Irma and Harvey had obvious negative impacts on their respective regional economies, but that GDP forecasts were not expected to change as a result of them. Temporary (and sometimes permanent) job losses were most prevalent in professional and business services (Dallas) and agriculture (Florida) along with losses in leisure and hospitality. About 300,000 cars were totaled by Hurricane Harvey. And in case you notice that orange juice prices are way out of whack later this year, you probably ought to know that more than 1/2 of the orange crop of Florida was destroyed by Hurricane Irma. Yikes!


Michael Drury, Chief Economist of McVean Trading and Investments and current chair of the GIC, gave a terrific presentation about China. Notable quote (paraphrased), "Chinese leaders always make decisions based on whether the outcome will keep the Communist Party in power or not." So that's THAT!

Global warming and pollution are tied together in the minds of the Chinese, and they are very concerned about this because the center of their economic output is located on low-lying land that will revert to its swampy nature as sea levels rise.

Not that I knew a thing about this before his talk, but Michael made a very scary case for being nervous about the (probable) introduction of a Chinese government-backed crypto-currency (like bitcoin). For a hint of the scariness, imagine the possibilities of funding untold number of nefarious activities with untraceable money.

European Union/Euro Zone

Dr. Manuel Balmaseda, Chief Economist for CEMEX, is Spanish. His take on the Catalonian referendum is that the Catalonian bid for independence will ultimately fail, not just because it is an illegal act (secession is never appreciated) but because there will be great pressure from surrounding countries to not allow it since they, too, have separatist groups that they would like to, um, discourage.

The EU is not particularly concerned with Brexit. They see it is a problem for the UK. They are likely right.


We DID meet in the land of Walmart, so it makes sense that a portion of the day's presentations addressed retail issues, such as the disruption of the brick-and-mortar model of selling to consumers and the enormous challenges of distribution.

Department stores haven't figured out how to give consumers what they want yet, as evidenced by the 28 percent drop in the number of employees who worked in department stores since May of 2001 according to Ann Bordelon, Chief Financial Officer of Mitchell Communications Group and a former CFO of two units of Walmart. She also noted that in 2017, more than 7,000 retail stores of all kinds have been closed, including those of Radio Shack, Teavana, Abercrombie & Fitch, The Gap and Staples to name just a few.

Colby Beland, Vice President of Sales and Marketing of CaseStack (a logistics company serving retailers), gave a rather sobering forecast for the trucking industry. Barring an immediate transition to self-driving trucks or an improvement in US immigration policies, there will be a trucking crisis in the near future. Truck drivers are very hard to find, and here is one place where the hurricanes will have a major, if unexpected, negative impact. Many truck drivers can also work as construction workers, and since construction workers can go home from work every night while truck drivers cannot, many current truck drivers are expected to fill re-construction jobs in hurricane rebuilding areas.

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