Historically, meetings of the largest economies in the world have been essential to reach essential agreements that would incentivise prosperity and growth. This was not the case this time. The G7 meeting agreements were light on detailed economic decisions, except on the most damaging of them all. A minimum global corporate tax. Why not an agreement on a maximum global public spending?
Imposing a minimum global corporate tax of 15% without addressing all other taxes that governments impose before a business reaches a net profit is dangerous. Why would there be a minimum global corporate tax when subsidies are…
The first thing any economist should do wen reading a budget proposal is to analyse the basic macro assumptions and the results presented by the administration. When both are poor, the budget should be criticised. This is the case of the Biden Budget Plan.
Same growth, a lot more debt and less employment.
According to the administration, the impact on growth of this budget will be negligible, as their own -and optimistic- estimates see no change in the slowdown of the U.S. economic growth trend.
The CBO (Congressional Budget Office, The Budget and Economic Outlook: 2021 to 2031) estimates a…
“The constant refinancing of debt from companies of doubtful viability also leads to the perpetuation of overcapacity because a key process for economic progress, such as creative destruction, is eliminated or limited”.
One of the arguments most used by central banks regarding the increase in inflation is that it is because of bottlenecks and that the recovery in demand has created tensions in the supply chain. However, the evidence shows us that most commodities have risen in tandem in an environment of a wide level of spare capacity and even overcapacity.
If we analyse the utilization ratio of industrial and…
The University of Michigan consumer confidence index fell to 82.8 in May, from 88.3 in April. More importantly, the current conditions index slumped to 90.8, from 97.2 and the expectations index declined to 77.6, from 82.7.
Hard data also questions the strength of the recovery. April retail sales were flat, with clothing down 5.1%, general merchandise store sales fell 4.9%, leisure & sporting goods down 3.6% with food & drink services up just by 3%.
United States industrial production was also almost flat in April, rising just 0.4% month-on-month in April pushed by a 4% slump in motor vehicle…
The Federal Reserve and European Central Bank repeat that the recent inflationary spike is “transitory”. The problem is that investors do not buy it.
Inflation is always a monetary phenomenon, and this time is not different. What central banks call transitory effects, and the impact of supply chains are not the real drivers of inflationary pressures. No one can deny certain supply shock impacts, but the correlation and extent of the increase in prices of agricultural and industrial commodities to five-year highs as well as the abrupt rise of non-replicable goods and services to decade-highs have monetary policy to blame…
Anyone who believes the “rich” and large corporations will pay for $28 trillion in debt or the $2 trillion in new deficit has a real problem with maths.
Biden’s announcement of a massive tax increase on businesses and wealthier segments of the population simply makes no sense. The tax hikes will have a significant impact on economic growth, investment and job creation and do not even scratch the surface of the structural deficit. Even if we believe the Gross Domestic Product growth and revenue estimates announced by the Biden administration, the impact on debt and deficit is negligible. So, what…
The International Monetary Fund has published its April outlook for the global economy. It has been hailed by most commentators due to the strong upgrade in GDP recovery. The report states that “global growth is projected at 6% in 2021, moderating to 4.4% in 2022. The upward revision reflects additional fiscal support in a few large economies, the anticipated vaccine-powered recovery in the second half of 2021, and continued adaptation of economic activity to subdued mobility”.
However, there are important warning signs that should be considered because headlines have been predominantly euphoric about this optical upgrade.
Two factors that…
For more than ten years, ECB monetary policy has been ultra-expansionary, whether there was crisis, a recovery, economic growth or stabilization. The worst excuse of all that was used to justify endless quantitative easing has been the often-repeated mantra that “there is no inflation.”
Defenders of aggressive monetary policy have always used the same arguments really.
First, they say there is no inflation — as if an average 2% increase in prices during a crisis whereby many salaries fell up to 20% does not constitute “inflation”.
After, they say it is temporary, so to justify maintaining aggressive easing policies.
Next…
The United States: Hardly A Recovery
There is an overly optimistic consensus view about the speed and strength of the United States’ recovery that is contradicted by facts. It is true that the United States recovery is stronger than the European or Japanese one, but the macro data shows that the euphoric messages about aggregate GDP growth are wildly exaggerated.
Of course, Gross Domestic Product is going to rise fast, with estimates of 6% for 2021. It would be alarming if it did not after a massive chain of stimuli of more than 12% of GDP in fiscal spending and…
If we looked at most investment bank outlook reports for 2021, one of the main consensus themes was a strong conviction on a rapid and robust eurozone recovery. They were wrong.
This week, Capital Economics joined other analysts and downgraded the eurozone growth, highlighting “We now think that the euro-zone economy will recover more slowly than we previously anticipated, growing by about 3% this year and 4.5% in 2022. …
Works of Daniel Lacalle
Sharing the writing of Daniel Lacalle with his permission.
