Eco+Nomics

So, Mario Draghi said that an inflation much lower than 2% is against his mandate. And it is! If you ask me, early 2015 is the right time, if not too late, to buy sovereign bonds. Let me, please, tell you what I think. First of all, given that Eurozone economy is below its potential, inflation risk will remain low, and the zero lower bound will prevent monetary policy to be "hazardously" inflationary. But, this is an argument why we should not fear of inflation, if the ECB decides to take bold action. True! For now... Moreover, given that we remain below our potential output, member states have begun to deviate from austerity and call for more expansionary budgets. Sooner or later, they will start creating budget deficits as a mean of expansion. And this has two implications. The first one, which relates to my previous argument is that budget deficits will boost expansion, and, hence, the return to the potential output. Therefore, the later the ECB decides to act, the mo...

While French Hollande is ready to negotiate for pro-austerity, "fiscal consolidation" if you will, others take serious steps for the best of the entire Eurozone's interest. Mario Draghi is (claims to be) ready to take bold action against deflation threat  ( Reuters ),  and Matteo Renzi publicly denouncing budget cuts in a recessionary environment ( Le H uffington Post ). Both are in the trenches with Berlin. At the same time, the rest of the leaders are conspicuous by their absence. I do not know anything about politics, but while the "fiscally sound" Eurozone failed to ram unemployment, an actual human index, the US did far more better job. The "cost" of fully recovering from recession was an approximately 9% of GDP additional debt burden for the US. Hopefully, Euro leaders will realize that unemployment is far more important than fiscal soundness, before it's too late!

Reading " Euro zone trade surplus rises more than expected in June " in  uk.reuters.com , we may feel either happy or concerned or indifferent. Since the trade surplus has, per definitionem, two branches; the imports and the exports, one has to check both of them in order to make and assessment. For that purpose, the latest relevant  Eurostat News Release (ENR) can  be found  here . In this ENR we observe that the  growth of exports (non seasonally adjusted)  was really sluggish as compared to the more vigorous rise of imports,  for the 18-membered Euro Area  over the first semester of 2014. This might be a result of the weakening Euro of the second quarter, following the deflation concerns. By checking the seasonally adjusted data we see that imports have shown some month-to-month growth signs lately ( feel free to compare it with 2013 ). If we take under consideration the dwindling Euro-zone inflation compared to the more vivid evolution of p...

European Union's "Food and Live Animals" (SITC01) exports to Russia in 2013 accounted for some more than 7.3% of the block's flows towards this trade partner (see European Commission Trade Statistics with Russia ), and were of approximately 8.6bn Euros gross value. Not outstanding in aggregate, but in industry level whose total exports had a value of approximately 75.3 bn Euros (see European Commission Trade Statistics with the World ), gross, it is something. Image Source: http://www.tradeandexportme.com/2013/12/eurozone-inflation-rises-in-november/ What does this mean for the inflation? It is simple! SITC01 firms of the Eurozone will have to cut their prices to boost the demand of their undisposed goods in the interior and in other trade partners. Should this scenario be realized, it will add further downward price pressure in the already fragile price and product developments of the Monetary Union. On the other hand, the SITC01 firms might seek to li...

This week I feel like the entire world is waiting for Ben Bernanke's announcement of the monetary policy decisions. So, is a tapering likely this month? No! I do not think so. Three reasons: [1] Inflation expectation are well anchored (see Cleveland Fed ) [2] Inflation is low [3] Although unemployment declines, it still can get better. [4] Real investment growth rate is not that remarkable. Overall,  inflation , i.e.  half of the FED's d ouble mandate , is low (perhaps, dangerously low) while  unemployment , i.e.  the other half , remains high and declines dully. That is to say there is no reason for tapering now

"Populist" parties, such as the euro-sceptics, euro-critiques and euro-implacable-foes, are likely to form a coalition for the EU Parliamentary elections of May 2013. You can guess why, I presume. They are rallying their troops in order to hinder - if not to demolish - the European integration. And the oxymoron: the "populists" unite to halt European Union. I was casually browsing news websites when the "Europe: United by hostility" , by Joshua Chaffin of FT, drew my attention. It  that was a bolt from the blue!  In Greece, media have not yet covered this issue at all, at least to my attention.   I had earlier read a less dismal essay, "Watch out for the rise of a European Tea Party" , by Gideon Rachman, again of FT; but I was not that concerned.  Joshua Chaffin initially unveiled the oxymoron: " While the group [the European Alliance for Freedom, a "populist" alliance]  opposes the EU, its principled stance has not prevented it f...

Just messing around...

It is a real shock if you live in a parallel universe of your own... (News initially read at Naftemporiki )

Many times, the private debates in which I have participated have been fueled by the debt and the banking crisis and the imminent recession. What went so uglily wrong? What should have been done? Is it too late? Can things take a turn for worse?  Firstly, it is essential to unfold the exact chain of events the way I apprehend it based on my knowledge of economic theory. Everything began in 2007-2008 when the financial sector of the US devastating losses following the collapse of both the sub prime lending and its securitization and gradually the rest of the world was infected. After Lehman Brothers everyone realized that there was nothing to end painlessly. In their effort to prevent a broader contamination, governments borrowed large sums in other to strengthen the balance sheet of the banking and financial sector and safeguard their economies. Put differently, tax payers are asked to pay for a risk they never undertake and for which they never compensated. Nations with we...

It has been a while, since  I posted " It's the animal spirits " trying to identify some reasons why the US economy is underachieving in terms of employment and growth. Unfortunately, I was unable to substantiate some of my claims one of which was: In addition, households curb their optimism for their future income and are intimidated to spend; either they cannot be confident that they will maintain their current job or the unemployed household members cannot be sure that they will be hired in the near future. David Beckworth on  Macro and Other Market Musings: The Ongoing Dereliction of Duty  fortunately provides evidence that actually expected household income plays a vital role in the future course of the US economy. Enjoy his post!

After DeLong's " L ESS THAN 100,000 PAYROLL JOBS, A 58.5% EMPLOYMENT-TO-ADULT-POPULATION RATIO EXACTLY WHERE IT WAS A YEAR AGO, AND LABOR FORCE PARTICIPATION DOWN BY 0.5 PERCENTAGE POINTS IN THE PAST YEAR " I once more started thinking of the Keynesian animal spirits . Keynes attributed the so called "Great 1929 Depression", back in 1933, to the low profit expectations of the business coordinators and other economic agents. As a result, investment was being gravely hindered by the adverse economic environment and by the blunted consumption (demand) resulted by the unemployment.  Bradford DeLong  is anxiously concerning for what he could reply to future "whippersnapper economic historians who will come to interview him" for the currently sluggish economic activity of the US. I do not blame him! He does not overreact, either! I have something in mind that could serve as an answer to future historical quests. It has been a while since I first started ...