Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
An FBI investigation has led to the arrest of at least nine prominent officials from FIFA, the governing body of international soccer. This represents one of my favourite news events of all time.
FIFA has long been regarded as one of the most corrupt institutions in human history, as the statement from the U.S. Justice Department underscores:
" 'The indictment alleges corruption that is rampant, systemic, and deep-rooted both abroad and here in the United States," said Attorney General [Loretta] Lynch. "It spans at least two generations of soccer officials who, as alleged, have abused their positions of trust to acquire millions of dollars in bribes and kickbacks.' "
On the surface this seems a story for the sports section, not the Report on Business, but there is a larger economic point with reference to the work of M.I.T. economist Daren Acemoglu. Mr. Acemoglu's thesis is that the multi-century economic dominance of the west resulted from the creation of institutions – political, financial and religious among others – that were trusted by the people. (Corruption allegations in China and Brazil highlight the developing world's ongoing struggles in this regard.)
FIFA is only one example, however, of the west's increasing tolerance of corruption. The dismal approval ratings for U.S. Congress, in large part the result of legislative capture by lobby groups that is so widespread it's barely news, is proof of deteriorating institutional trust that threatens future economic growth. Widespread and entirely reasonable disgust with the banking industry after the financial crisis is another poignant example.
"Nine FIFA Officials and Five Corporate Executives Indicted for Racketeering Conspiracy and Corruption" – U.S. Department of Justice
"FIFA Officials Held Over Alleged Corruption; World Cups Also Probed" – (video) NBC News
"Why Nations Fail" (summary) – Acemoglu and Robinson
Bloomberg reports that Iraq is about to flood global markets with oil in what would be another blow to investors in the energy sector:
"The additional Iraqi oil is equal to about 800,000 barrels a day, or more than comes from OPEC member Qatar. The rest of the Organization of Petroleum Exporting Countries is expected to rubber stamp its policy to maintain output levels at a meeting on June 5."
"Iraq About to Flood Oil Market in New Front of OPEC Price War" – Bloomberg
The Wall Street Journal reports that the glut in North American oil supply has resulted in a corresponding glut in Calgary commercial real estate. This is not good news for holders of real estate investment trusts with high exposure to the province:
"Today, slumping oil prices have pushed a record amount of unleased space downtown back onto the market even as construction of nine major office buildings is under way. Along with Brookfield Canada Office Properties, which plans to open the first tower of Brookfield Place in 2018, some of Canada's other biggest real-estate developers are investing here… Calgary's vacancy rate climbed to nearly 11 per cent during the first quarter from 8.5 per cent at the end of 2014."
"Oil Slump Has Calgary Awash in Vacant Office Space" – Wall Street Journal
Economist Noah Smith wrote a terrific eulogy for mathematician John Nash who tragically died along with his highly accomplished wife Alicia in an auto accident last weekend. Noah Smith notes the extraordinary debt the field of economics owes Mr. Nash:
"The game theory concepts that Nash's math brought to the field were a true paradigm shift in economics… in the end, economics will be John Nash's field. We owe him as much as we owe Adam Smith. Not bad for a guy who probably wouldn't even have called himself an economist!"
"Death of John Nash and His Beautiful Ideas" – Noah Smith, Bloomberg
"John F. Nash Jr., Math Genius Defined by a 'Beautiful Mind,' Dies at 86" – New York Times
Tweet of the day: "@Berlaymonster I hear that one #FIFA official, when approached by police, leapt to the floor and rolled around clutching his ankle." – Twitter
Diversion: "How To Kick A Bad Habit" – Gizmodo
Scott Barlow