26/04/20: #COVID19 Update: Charts and Rates

Updating some COVID19 charts and stats:

U.S. vs EU27 cases and deaths:

Death and Infection Rates for G7+Spain:

Death and Infection Rates for BRIICS:

Russia:

13/7/19: BRICS and G7

As a side note: the BRICS now have a bigger share of the world economy than the Euro area and the U.S. combined:

In 2019, BRICS combined GDP will surpass (using PPP-adjusted GDP) that of G7 economies, and in 2020, based on IMF forecasts, it will exceed the combined share of the world GDP for the US + EU27 economies.

Not a single BRICS economy is currently represented in G7. Dire...

5/4/2014: World Market Power Index: G7 and G20

A side-note to my earlier post on G7 and G20 memberships: here is a chart showing market power index for top global economies. Note two sets of countries: the G7 and G20 as ranked by the index of their power in global markets:

Three out of current G7 states should not be anywhere near G7. You might argue about Saudi Arabia's place in the world's 'power by exports' rankings, but China and Russia certainly are diversified enough and have a strong enough sway to be in G7.

On a side note: this should settle the argument who can win from a Russia-Ukraine trade war...

23/3/2014: About that 'kicking' Russia out of G8?..

Much talk about sanctions, punishment and pain for Russia... and one of the cornerstones of these is the idea of 'isolating' the Kremlin. Step one in this direction was the 'suspension' or 'temporary suspension' of Russia's membership in G7+1=G8 group of countries that represent, allegedly, the largest and most powerful states/economies in the world.

Except they do not do such a thing. Today. And they will not do so in the near future either.

Here are two charts, plotting, in current US dollars, GDP of the top 20 nations. Black bars represent countries that are 'permanent' members of G7.

First, 2014 projections:

So as of now (well, end of 2014) Canada and Italy are not in G7 nor in G8, and indeed both make it into G10 by a whisker.

Now to 2018 projections by the IMF:

And so in very near (in economic and geopolitical terms) future, 3 of the current G7 members will not be qualifying for G7 membership based on economy size, and Canada won't make it into G10.

Instead, of course, the G10 (no, we do not need G7) should include today India, Brazil, Russia and China. If you are to make a club that stands for anything other than being the economic Gerontology Central, you do need to extend it to those countries that matter.

Alternatively, we can look at top 20 as a set of several distinct groupings:

• The Giants: US and China
• The Biggies: Japan and Germany
• The Toughies: Brazil, Russia, France, UK and India
• The Pull-Ups: Italy and Canada
• The Push-Ups: Australia, Korea, Mexico and Spain
• The Weaklings: bottom five

Though all of this is still pretty arbitrary and subject to adverse shocks and more glacial trends... 

One way or the other, kicking Russia out of G8 makes about as much sense as keeping Canada and Italy in G7. G8 is not a club where they drink fancy aperitifs and discuss latest Sotheby's sale. It is a club where the largest nations deal with real issues (allegedly), so China, Russia, Brazil should be in, and Canada and Italy should be out.

28/4/2013: That German Miracle...

Germany... the miracle economy of Europe:

Let's do some growth facts. recall that G7 includes such powerhouses of negative growth as Japan and Italy, and the flagship of anemia France.

1) Germany vs G7 in real GDP growth:

From data illustrated above:

• In the G7 group, Germany ranked 6th in growth terms over the 1980s, rising to 5th in the 1990s and 2000s, and, based on the IMF forecasts, can be expected to rank 4th in the period 2010-2018. In simple terms - Germany ranked below average in every decade since 1980 through 2009 and exact average in 2010-2018 period.
• On a cumulated basis, starting from 100=1980, by the end of this year, judging by latests IMF forecast for 2013, Germany would end up with second slowest growth in G7, second only to Italy. 
• On a cumulated basis, starting from 100=1990, by the end of this year, judging by latests IMF forecast for 2013, Germany would end up with fourth fastest growth in G7. Ditto for the basis starting from 100=2000.

2) Germany vs G7 in annual growth rates in GDP based on Purchasing-power-parity adjustment (PPP) per capita to account for exchange rates and prices differentials:

From data illustrated above:

• In the G7 group, Germany ranked 5th - or below average - in PPP-adjusted per capita growth terms over the 1980s and the 1990s, rising to 4th - group average - in the 2000s, and, based on the IMF forecasts, can be expected to rank 3rd - slightly above average - in the period 2010-2018. In simple terms - Germany ranked below or at the average in every decade since 1980 through 2009 and one place ahead of the average in 2010-2018 period.
• Note: Germany is the only G7 country with shrinking overall population, that peaked in 2003 and has been declining since, thus helping its GDP (PPP) per capita performance.

Here's the chart summarising Germany's rankings in G7 in terms of two growth criteria discussed:

Germany might have been performing well in 2006 and 2011 (when it ranked 1st in real GDP growth terms) and really well in 2007-2008 and 2010 when it ranked 2nd, but other than that, it has been a lousy example for any sort of a miracle.

16/2/2013: Minister Noonan Talks International Finance, briefly

This week, Calgary Herald reported some fascinating remarks made by Irish Minister for Finance, Michael Noonan at the EU Finance Ministers meeting. Quoting from the paper (full link here), with mine emphasis added:

"Arriving Tuesday for a meeting of the 27 EU finance ministers, Irish Finance Minister Michael Noonan said: "I think all this debate about the relative value of currencies is going to be an issue at the G-20 but we're coming through a period where the concern was the volatility of the euro". "It's a bit soon to argue that it's too strong." Noonan said he wouldn't support any proposals that the ECB should intervene in the markets to get the value of the euro down."

This statement bound to raise eyebrows of anyone even remotely familiar with economics and / or international finance.

Minister Noonan - in charge of the Finance portfolio in a Euro area country - seemingly has trouble formulating exactly what the Euro crisis is / was about. Volatility of the euro he cites was never a problem during the crisis. In fact, in major exchange pairs, Euro has not been the driver of the volatility, but the subject to periodically, short-term elevated volatility induced by the changes in policies and fundamentals in non-Euro area countries. And volatility of the EUR relative to any other major currency was actually lower than for exchange rates ex-EUR.

The confusion in his mind seems to arise from the lack of basic grasp of the currency markets.

1. Minister Noonan seems to have no idea that "volatility of the Euro" as a phrase is fundamentally imprecise. Euro (and any other currency) can be volatile only in terms of a bilateral (or in more complicated setting - triangular) exchange rate. He mentions no such pairs. We can talk about EUR/USD exchange rate volatility, or EUR/JPY volatility, etc, but not about 'Euro volatility' in pure terms, unless we want to say that EUR is the driver of volatility in the bilateral exchange rates vis-a-vis all major currencies.
2. Minister Noonan seems to be confusing 'volatility' (definable by a number of statistically objective metrics) and 'uncertainty' (definable only imperfectly by a risk transform approximation). This is more than an innocent failure to understand philosophical differences between risk and uncertainty. By confusing 'volatility' for 'uncertainty', Minister Noonan anchors his analysis of potential and preferred solutions to the crisis solely to policies that can reduce volatility of the exchange rate. By this metric, the crisis was not even worth a footnote in a newspaper.

But then comes a logical step that defies any comprehension. Having stated that the crisis was 'volatility of the Euro', Minister Noonan goes on to say that he opposes ECB intervention to alter the value of the euro. Surely, intervention would be consistent with policy management to reduce the exchange rate volatility that Minister Noonan is so concerned about?

Let's set aside the apparent lack of logic in the statements above. And let's focus on Minister Noonan's longer-term position vis-a-vis the Euro. 

Minister Noonan and his Government have actively pursued policies of extending Irish Government debt maturity. The latest instalment of this strategy was the 'deal' on the IBRC Promissory Notes. In other words, Irish Government entire economic policy (with exception of 'exports-led recovery') can be summed up as a hope for future inflation wiping out real value of Irish Government debt. Forget the fact that such an outcome will destroy the other side of our economy where debt overhang is also present: the households (higher inflation = higher interest rates = higher burden of debt). But what on earth is Minister Noonan doing talking against his own Government policy?

This bizarre combination of 'swinging' focus in policy goes deeper. Irish Government second (and last) pillar for economic policy - other than inflation - is 'exports-led recovery'. 2010-2012 data on Irish exports shows rapidly contracting rate of growth in exports. Monthly and quarterly data show even more reasons for concern. Foreign demand weaknesses and structural issues in the Irish exporting sectors are clearly major drivers. But higher valuation of the Euro are not helping. Yet, Minister Noonan is concerned with preventing devaluation!

Should Enda, perhaps have a chat with Minister Noonan, rather than send troops out after his party backbenchers whenever they are slightly critical about the Government position? Afterall, in the above few words, Minister Noonan has managed to mis-state the source of the Euro problem, derive an implicit but deeply flawed policy conclusion out of this mis-statement, and contradict his Government's two cornerstone policies. 

29/8/2012: Spot that 'engine for growth'

We keep hearing, usually from the European officials, and at times of referenda - from domestic politicians - that the EU and the euro are the drivers for growth and prosperity. Even today, in his op-ed, ECB chief Mario Draghi referenced euro as a driver of prosperity.

So let's do a simple exercise, take pre-crisis peak and history of growth in nominal euro area GDP and see where would the region have been if it were an 'engine for growth' comparable to relatively weak G7 states (A2), other advanced economies ex-G7 and the euro area (A1), and 1990-2009 world growth average (A3).

Chart below illustrates:

Here's an interesting fact: the advanced economies ex-G7 and euro area path, even after the crisis is factored in is almost identical to the world growth path. But the euro area path is underperforming the G7 path by 2 years in terms of regaining the pre-crisis peak.

Note: all data is taken from and/or computed on the absis of the IMF WEO database.

Caveats are many - this is hardly a deep analysis, so be warned. But by any comparatives, this does not support the proposition of the euro area as an engine for growth.

Let's do another mental exercise. Suppose we ignore the fact that euro area actually expanded since 2004 in terms of membership 9adding very insignificant overall boost to the region GDP of 1.5-1.7%). Assume that post 2004 there are two possible growth rates that apply:

• Average growth rate between 1993 and 2004 to reflect pre-euro area era and
• Average growth rate for 2004-2012 to reflect euro area era

Here's where the two assumptions lead us:

Again, where's that engine for growth?

Please note: the argument that 'absent euro things would/could have been much worse' is vacuous. We don't say Mercedes AMG is an 'engine for speed' by implying that it delivers non-zero speed. We claim this by comparatives to other functioning vehicles.

Lastly, let's compare like-for like. Here's actual (including IMF forecasts for 2012-2017) GDP data for G7 countries (excluding Germany, France and Italy), and EA3 members of G7 (Germany, France and Italy), with an added line for G7 countries ex-EA3 and Japan:

Obviously, an engine for growth should have at very least achieved some comparable performance for EA3 to that of its peers? Err... not really. And worse, taking 1999 as a base date (the year of EA3 adopting the euro officially) yields very similar qualitative results.