The European Central Bank announced a tapering of the repurchase program on September the 9th. One would imagine that this is a sensible idea given the recent rise in inflation in the eurozone to the highest level in a decade and the allegedly strong recovery of the economy. However, there is a big problem. The announcement is not really tapering, but simply adjusting to a lower net supply of bonds from sovereign issuers. In fact, considering the pace announced by the central bank, the ECB will continue to purchase 100% of all net issuances from sovereigns.

There are several…


A lie is still a lie even if it is often repeated. And claiming the Nordic countries are socialist economies with high taxes for wealth and businesses is a big lie.

Nordic countries are not socialist. They rank at the top in the Heritage Foundation’s Economic Freedom Index 2020 (Denmark,10, Finland, 17, Sweden, 21, Norway, 28). They also rank at the top in the World Bank’s Ease of Doing Business Index 2020 (Denmark, 4, Norway, 9, Sweden, 10, Finland, 20), with simple and limited business regulation and strong support for entrepreneurship.

They also rank at the highest levels in labor…


Recent macroeconomic data from the United States should worry us. Amid the reopening and the biggest fiscal and monetary stimulus in recent history, and with all the possible tailwinds from policy decisions, consumer confidence has plummeted to the lowest level since 2016.
Retail sales have fallen sharply again in July, and the employment or industrial production data are far more than disappointing considering the level of stimulus and that GDP has returned to pre-pandemic level.

The use of industrial capacity, at 76%, is 4% below the average for the 1972–2020 period, and the labor participation rate, at 61.6%, has been…


This year marks the 50th anniversary since Nixon suspended the convertibility of the USD into Gold. This began the era of a global fiat money debt-fueled economy. Since then, crises are more frequent but also shorter and always “solved” by adding more debt and more money printing.

The suspension of the gold standard was a catalyst to trigger massive global credit expansion and cement the position of the US dollar as the world’s reserve currency as it de-facto substituted gold as the reserve for the main central banks.


Despite high domestic economic growth and solid global recovery, the Chinese market is down on the year. At the close of this article, the Shanghai CSI 300 is down 5% vs the S&P 500’s +18%, and in the past five years, it has risen 51%, a decent but modest figure compared to the S&P 500’s +103%.

Additionally, the Chinese stock market looks optically cheap. At 12.7x estimated Price to Earnings 2021, according to Bloomberg, it is significantly cheaper than most developed economies and many emerging ones. So why do I say “optically”? Because the Chinese stock market valuation includes…


The United States economy recovered at a 6.5% annualized rate in the second quarter of 2021, and gross domestic product (GDP) is now above the pre-pandemic level. This should be viewed as good news until we put it in the context of the largest fiscal and monetary stimulus in recent history.

With the Federal Reserve purchasing $40 billion of mortgage-backed securities (MBS) and $80 billion in Treasuries every month, and the deficit expected to run above $2 trillion, one thing is clear: The diminishing effect of the stimulus is not just staggering, the increasingly short impact of these programs is…


Cuba is a dictatorship that uses terror and propaganda to repress its people. It locks citizens, strips them of the most basic human rights, silences them, and confronts families using extortion and threats. The regime’s constant practices of illegal detention, the personal ruin of political dissidents, and limitation of fundamental rights have nothing to do with any blockade or embargo but everything to do with the totalitarian communist dictatorship.

All the propaganda that whitewashes the Cuban dictatorship is based on two lies: the inexistent “blockade” and the allegedly excellent “public health”.

Cuba only suffers from one blockade: that of the…


Central Banks should know by now that you cannot have negative interest rates with low bond yields and strong growth. One or the other.

Central banks have chosen low bond yields at any cost, despite all the evidence of stagnation ahead. This creates enormous problems and perverse incentives.

It is not a surprise that markets have bounced aggressively, driven by the tech sector, after a slump based on concerns about the pace of economic growth. Stimulus package effects are increasingly short, and it was pretty evident in the poor figures of industrial production and the ZEW survey gauge of…


The United States’ jobs recovery is extremely poor, especially if we consider the size of the monetary and fiscal stimulus and the spectacular upgrade to GDP estimates. After a massive consensus increase in GDP recovery estimates to 6.5% in 2021, no one should be cheering a 5.9% unemployment rate, 58% employment to population ratio, and, even worse, a 61.6% labor force participation rate that has remained stagnant for ten months. Furthermore, Bloomberg Economics shows that the United States unemployment rate would be 8.4% excluding the participation decline.

In the European Union, the employment situation is also a cause of…


Despite an endless chain of monetary and fiscal stimuli, the Eurozone consistently disappoints in growth and job creation. One of the reasons is demographics. No monetary and public spending stimulus can offset the impact on consumption and economic growth of an ageing population, as Japan can also confirm.

However, there is an especially important factor that tends to be overlooked. The lack of competitiveness of the Eurozone industry due to rising and non-competitive power prices.

Residential electricity prices in the European Union between 2010 and 2014 averaged near $240/MWh, whereas the U.S. averaged nearly $120/MWh, or less than half…

Works of Daniel Lacalle

Sharing the writing of Daniel Lacalle with his permission.

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