16/8/2013: US Mint gold sales: July 2013

It has been some time since I updated the data on sales of US Mint Gold Coins, so let's take a quick run through the data for July 2013.

• US Mint gold coins sales in July 2013 stood at 50,500 oz, dow 11.4% m/m (though there is little point looking at monthly figures which can be volatile) and up 65.6% y/y. The sales were close to historical average at 57,239 oz and below the crisis period average (since January 2008) of 88,694 oz.
• US mint sales of coins in July 2013 stood at 90,000 coins, down 20.4% m/m and up 97.8% y/y. This compares agains 100,286 coins sold on average per month over historical period and 124,731 coins sold on average per month over the crisis period.
• Average volume of gold sold per coin in July 2013 stood at 0.561 oz/coin, which is 11.2% ahead of June 2013 and 16.3% behind July 2012. In historical comparatives, July sales were behind 0.59 oz/coin monthly average over the historical period and well behind 0.77 oz/coin average for the crisis period.
• 24mo rolling correlation between volume sold (oz) and gold price (end of month spot price) stood at 0.009 in July 2013, up on -0.045 in June 2013 and ahead of -0.09 average rolling correlation for the historical period covered by data, but virtually identical to the 0.01 average rolling correlation for the crisis period. In basic terms, the zero correlation between gold coins sales and gold spot price remained intact in July 2013.

Charts to illustrate:

Overall, analysis above confirms a short-term trend toward increased demand for gold coins, driven by changes in prices. This trend is more directly evident in 6mo sales data (next post). In total coins sales, there is a nice reversion to the up-sloping trend (first chart above), while oz/coin sold remains below the longer-term up-sloping trend line, potentially reflective of speculative purchasing running at more subdued volumes (second chart). Per third chart, there is a clear negative correlation between demand for coinage gold and the price of gold, suggesting some 'buying-on-the-dips', although this correlation is weak (last chart above) and is getting weaker (in absolute terms). There is a long-term trend toward positive (or at least much less-negative) correlation between the price of gold and coins sales.

Tune in for the H1 2013 cumulative data analysis next.

16/8/2013: H1 2013 Trade in Goods & Balance Dynamics for Ireland

On foot of my post detailing Irish cumulated figures for trade in goods for H1 2013, some asked me to post on the relationship between exports and trade balance. Here are few charts, taking snapshot from H12000 through H1 2013:

First, two charts showing levels of exports and trade balance for trade in goods:

Note that in the first chart, there is barely any difference between the 2000-2013 average level of exports (at EUR44.145bn) and 2009-2013 period average (at EUR45.077bn). The gap is only 2.1% of EUR932mln. At the same time, the second chart shows that there is a massive gap between the average trade balance over the period of 2000-2013 (EUR17.184bn) and for the period of 2009-2013 (EUR20.728bn) -  a gap of 20.6% or EUR3,544 mln. The core reason for this is that much of the 2009-2013 'stellar' performance in our trade surplus was driven by collapse in imports, rather than a rise in exports. 

To see this, let us plot exports against trade balance:

The last chart clearly shows that in 2009-2013, on average, exports were tracking changes in trade balance, but they were not doing so 1:1.

More interestingly, the chart shows that trade in goods in Ireland is in trouble. In 2009-2013 period, Irish Government policy has been to rely solely on exports (of goods and services) in driving the economy toward recovery and debt sustainability. This hope rests on growth in exports and simultaneously positive trade balance and growing trade balance as the key parameters for consideration when it comes to both economic growth and debt sustainability.

Alas, in years 2010, 2012 and 2013 (in other words in 3 out of 5 years), measured by H1 figures alone, Irish goods traded operated in the 'pain spot' region - the region of shrinking exports and shrinking trade surpluses.

In other words, in terms of levels our merchandise trade is performing well. But in terms of growth it is performing poorly. And this is despite a huge drop-off in imports, something that is not likely to last when the economy goes back to capital investment (imports of capital goods will rise) and/or consumption recovery (imports of consumption goods will rise).

15/8/2013: H1 2013 Trade in Goods data for Ireland

Latest data for Merchandise trade for June 2013 allows us to make some comparatives for the first half of the year. Here are some stats, all covering only merchandise trade:

• Total Imports rose in H1 2013 by 3.12% on H2 2012 and were down 2.39% on H1 2012. Imports were up 3.11% in H1 2013 compared to the 6 months cumulative averages over the three years from H1 2010 through H2 2012. H1 2013 levels of imports were 23.2 below their peak for any 6 months period since H1 2000.
• Total Exports fell in H1 2013 by 4.35% on H2 2012 and were down 6.55% on H1 2012. Exports declined, in absolute terms by EUR3.045 billion year-on-year. This marked the largest 6-mo cumulative drop in exports since H1 2003, marking the H1 2013 the worst year-on-year 6 months period since then.
• Exports were down 4.48% in H1 2013 compared to the 6 months cumulative averages over the three years from H1 2010 through H2 2012. H1 2013 levels of exports were 12.43% below their peak for any 6 months period since H1 2000.
• Trade Surplus fell 12.62% on H2 2012 and was down 11.47% in H1 2013 compared to H1 2012. In level terms, trade surplus was down EUR2.442 billion in H1 2013 compared to H1 2012, marking the worst 6 months period since H1 2005.

Charts below illustrate the trends:

Good news, per chart above, Trade Surplus is still running above 2000-present average, although Exports are now running below their 2000-present average. Bad news, the above chart does not adjust for inflation.

Not-too-good news is, exports are now in the negative territory in terms of y/y changes. Remember, we need positive growth in total (merchandise and services) exports of ca 5% per annum to maintain any semblance of sustainability. Here's the tricky bit:

As chart above shows, we really need rapid, very rapid growth in services exports to return our total exports and trade balance to where we need them to be to maintain economic activity at the levels that will be consistent with long-term gradual reduction of public debt.  Over the last 5 years, merchandise exports in Ireland grew on average at 0.59% y/y and over the last 10 years this growth was 0.94%. Owing to the recent collapse in our imports, our trade balance grew on average at 11.73% in the last 5 years. However, over the last 10 years the growth in our trade balance was much less dramatic 3.18%.

8/13/2013: Sunday Times, August 11: Wither Middle Ireland

This is an unedited version of my Sunday Times article from August 11, 2013.


Recent data from Irish retailers, aggregate services indices as well as household surveys paints a picture of an economy divided in misery and fortunes. Following an already unprecedented five years of straight declines, domestic demand, stripping out one-off effects, such as weather, continues to shrink. This is the paralysed core of our economy. At the opposite side of the spectrum, pockets of strength remain within some demographic groups – namely the young and mobile professionals and debt-free older households. These form a de facto sub-economy only marginally attached to Ireland’s long-term future. With personal consumption still accounting for over half of the total annual GDP, a society torn between these two divergent drivers of domestic demand, savings and investment, is an economy at risk.


On the surface, CSO data through H1 2013 shows that Irish retail sales (excluding cars) grew modestly in June 2013 when compared to the same period a year ago. Much of this growth was due to weather effects and these are likely to strengthen even further in the third quarter. However, removing food, fuel and bars sales, core retail sales were down 1.7 percent in value and were up 0.8% percent in volume in April-June 2013, year-on-year. In other words, core sales are still being driven primarily by price declines rather than by organic growth in demand.

Meanwhile, aggregate data released this week, covering services (as opposed to sales of goods alone) showed annual declines in June 2013 in accommodation, and food and beverage services activities.

The bad news is that five years into the process of reducing household expenditures, Irish consumers are still tightening their belts. Not only discretionary spending is dropping, but demand for staples is contracting as well. At the end of H1 2013, retail sales were down on 2007 levels for both durable and non-durable household consumption items, as well as food.

This data is largely consistent with the analysis of the household budget surveys released earlier this month.  These surveys showed that compared to 2009, Irish households have cut deeper into their bills in twelve months through Q3 2012. Demand for groceries, clothing and footware, recreation, health Insurance and education saw continued cutbacks. For example, in the 24 months prior to June 2011, 56 percent of Irish households cut down on food purchases. Further 51 percent cut spending in the 12 months through September 2012. Despite these already severe cutbacks, industry surveys show that Irish households are still concerned with high cost of basic consumables.

Households’ propensity to cut costs has risen in the twelve months through September 2012 compared to the 24 months period to June 2011 as those still holding onto their jobs are now shifting into deeper cost savings mode. This busts the myth that the only people forced to severely cut their spending are the unemployed and the poor. The largest proportion of severe cuts in the earlier part of the recession fell onto the shoulders of the households where at least one person was jobless, followed by students. Back then households in employment were the category second least impacted by household budgets cuts. Last year, households still in employment were the second most likely to reduce spending. Significantly - households with some members on home duties, retired or not at work due to illness or disability posted the shallowest average cuts of all demographic groups.

The above explains why the data from multiples retailers in Ireland has been showing a V-shaped pattern of changes in consumer demand, with higher demand witnessed in lower-priced categories of own-brand goods supplied by discount retailers, such as Aldi and Lidl, and the premium own-brands of traditional multiples, such as Tesco. Demand for mid-range priced goods usually purchased by the middle class continued to fall.

Ditto for the luxury end of the market, with exception of Dublin, as sales of food and drink in specialist stores have fallen almost 20 percent on pre-crisis peak. Exactly the same pattern of shift away from the middle of price range sales emerged in the demand for electrical goods.


The drivers for the above trends are crystal clear. Middle Ireland is under severe pressures financially, while Happily-Retired and Yappy Irelands are having a relatively easy recession or living through the good times. The main force working through the Irish domestic demand is that of polarization of households not along the lines of employed v unemployed, but along the more complex and fragmented demographic lines.

The average number of spending cutbacks in 12 months through September 2012 for households with no person at work stood at 2.6 categories of spending. The same numbers for households with one and two persons working were 3.3 and 3.2 categories, respectively.

This pattern of cutbacks and income distribution changes across the households is also strengthening over time. In effect, due to Government policies, Ireland is becoming a country with severely polarised distribution of financial well-being. This polarisation is contrary to the one witnessed in normal economies and is different from the one that majority of out policymakers and analysts have been decrying to-date.

The Great Recession has finally exhausted ordinary savings of both working and unemployed households, while lack of income growth has meant that even those in employment are now sinking under the weight of debt and tax and cost inflation driven by the State budgetary policies to-date.

Last week, CSO reported distribution of the households by their ability to manage bills and debts over 12 months prior to July-September 2012. Of households with at least one adult aged 65 and over, up to 28 percent were experiencing difficulties in managing their debts and bills. For households with all adults under the age of 65 the corresponding number was up to 46 percent. Up to 69 percent of the families with children were in the same boat. The older the respondent was, the less pressure on paying their bills their reported.

In normal economies it is the older families that face tighter budget constraints. In today's Ireland it is the younger and the middle-age families with children that are being pressured the hardest by the crisis. This bedrock of financial health in the normal times has been pulled from underneath the economy by the Great Recession.

At the same time, the crisis has generated a new class of the relatively well-off. Based on employment levels and quality, earnings, as well as regular and irregular bonuses data, three sectors in the Irish economy stand out as the winners during the crisis: the ICT services, specialist exports-focused services and international financial services. All three sectors are dominated by younger workers with high percentage of employees coming from abroad and working on a temporary assignment basis here. The demographic they represent is primarily from mid-20s through mid-30s, with smaller size families. These groups of employees are also heavily concentrated geographically, with exporting services sectors workers primarily living in Dublin, followed by a handful of other core urban areas.

Even as early as 2006-2007, market research has shown that these types of households favour premium consumption of convenience food, spend more of their income on going out and travel abroad, and less on purchases of durable goods, household goods, education and health insurance. They do not invest in this economy and hold off-shore most of their long-term savings. Their financial investments are also held and managed abroad and often include mostly shares and options in their own employers. Their children are not going to continue growing up in Ireland and will not be a part of our future workforce. The skills they accumulate while working here are transitory to the overall stock of Irish human capital. On a social level, their demand for entertainment is currently best exemplified by the booming restaurants and bars across the D2-D4-D6 areas of Dublin and stands in stark contrast to Middle Ireland’s hollowed out town centres and neighborhoods with empty storefronts and vacant building sites.


Today’s Ireland is a society where the middle class and large swaths of the upper-middle class have been dragged under water by the combination of the unprecedented crisis, compounded by rampant state-sanctioned cost inflation and legacy debt.

The data on domestic demand suggests that we might be entering a classic ‘Bull trap’. Here, tight rental markets in the leafy South Dublin neighborhoods fuels sales of rentable properties to service the needs of the Yappy Ireland. These pockets of activity are at a risk of generating inflated expectations of incoming prosperity. Don’t be fooled by this – the risks to the real Irish economy are still there, in plain view, in the streets of real Ireland.

Recognising this reality requires the Government to reconsider the tax increases that are impacting adversely the middle and the upper-middle classes. It also means that the State must reform, rapidly and thoroughly the semi-state sector to reduce the cost drag exerted by the Irish utilities, transportation, health and education services providers on Middle Ireland families’ balancesheets.  Lastly, prudent risk management requires for us to manage very carefully the process of mortgages arrears restructuring and debt work-outs. While many economy have survived sovereign and banking sectors busts, no economy can emerge from a crisis having destroyed its middle classes.

Box-out:

In Ptolemaic cosmology, astronomers believed that the Earth was the centre of the Universe. To balance this Universe, Ptolemists used to draw complex sets of larger and smaller circles - known as epicycles - to describes their orbits around the Earth. The problem with epicycles spelled the demise of the Ptolemaic cosmology in the end: as the known number of planets and stars increased, the system of superficial orbits rapidly collapsed under its own complexity. The Ptolemaic absurdity, however, is still alive today in Irish economic policies. A year ago, the Government had a clear choice of policy options: a site-value tax (SVT) that can be levied on all forms of properties, including land, or a residential property tax that can be levied only on structures. In a study covering all known forms of policy mechanisms used to fund public infrastructure around the world,  submitted to the Department of Environment, I have argued that one of the major advantage of the SVT over a property tax was that it would have incentivised more efficient use land, reducing land hoarding and speculation. There were multiple other advantages of SVT over the property tax as well. Alas, the Government opted for a property tax favouring under-use of land over all other properties. This tax suits the major lobbies influencing the State: farmers and well-off rural landed families. Fast-forward eight months from last December: this week, Dublin City Council called for a levy on unused vacant sites. Hundreds of sites lay vacant across the city - blotching the cityscape and posing a threat to personal safety to many workers, as well as an unpleasant reminder of the property bust and economy's dysfunctionality to the would-be foreign investors. Dublin City has been trying to force this land back into development since 2009, although no one in the city has a slightest idea where the demand for such development might come from. Thus, our Ptolemaic system of economic policies is about to draw yet another contrived, complex and inefficient balancing circle on the map of our tax policies to compensate for the Government's rejection of the site value tax. After all, managing the superficial complexity of a political economy that attempts to appease the landed classes, while satisfying the needs and demands of foreign investors and urban authorities is an arduous task

13/8/2013: UK Great Recession

An interesting chart comparing the historical recessions in the UK to the current one:

Source: http://www.bbc.co.uk/news/10613201

The longest it took before the current recession for the output to return to pre-crisis peak was 47 months (1930-34 recession and 1979-1983 recession). In the current one, the UK is at 62 months and counting. I don't need to remind you that the UK has both fiscal and monetary policy at its disposal and was aggressive in deploying both during the current crisis. Ireland has neither fiscal nor monetary policy at its disposal. 

We can (and should) reference Government failures in dealing with the crisis, but we have to keep the simple fact in perspective: by joining the euro area, we have removed virtually all and any power from the hands of our politicians to even attempt to manage the economy. Instead of Dublin, Irish Great Recession can be almost solely blamed on Frankfurt & Brussels (Strasbourg et al can be included too, for completeness). Its causes are rooted in the systemic mispricing of economic and investment risks facilitated, incentivised and even directly driven by the euro and the underlying monetary policy of the ECB. Its regulatory and institutional frameworks were shaped and influenced and informed by the European (Brussels) ethos which put political considerations over political economy, and political economy over economy. Its inability to deal effectively and economically efficiently with the crisis is due to the lack of monetary policy tools, while its fiscal collapse is 50% driven by the social partnership model of the European social democracy, and 50% driven by the severe mismanagement of the banking crisis resolution by the EU/ECB/IMF. This is not to say that Irish society and Governments were not culpable in creating the conditions for the crisis or in failures of managing the crisis. Instead, it is to point to the joint liability that befalls not only us, but also the European systems and leadership.

This should be a reminder to European politicians, especially those claiming to have learned something from the crisis (e.g. http://trueeconomics.blogspot.it/2013/08/982013-political-waffle-passing-for.html)

12/8/2013: Sunday Times August 4, 2013: Troika Programme Exit vs Fiscal Reforms

This is an unedited version of my article for Sunday Times August 4, 2013.


Irish political leaders are not exactly known for making logically consistent policy pronouncements. The current budgetary debates are case-in-point. On the one hand, minister after minister from both sides of the coalition benches are repeating ad nausea the tired cliches about their successes in managing the economy. On the other hand, the very same ministers are talking tough about the need for more pain, more adjustments, and more 'reforms' to secure the said recovery and deliver us from the clutches of the Troika. Only to turn around and start praising Troika support as the source of our recovery.

In reality, there are good, if only rarely voiced, reasons for these exhortations: seven hard budgets down, we are not really close to shaking off past legacy of wasteful fiscal practices. The state is still insolvent. The structure of the state policies formation is still dysfunctional. The legacy of pork barrel party politics continues unreformed.

Nothing exemplifies this better than the stalled structural reforms of social welfare and the resulting temporary, risk-loaded nature of much of our fiscal adjustments to-date.


Take a look at the top-line data coming from the Merrion Street.

In the first six months of 2013 tax revenues collected by the Government were EUR3.17 billion ahead of the same period three years ago, while the total voted current expenditure by the Exchequer was up EUR391 million. In other words, the only difference between the current budgetary approach and that practiced by Bertie Ahearn is that today's tax collections are starting from the low levels. Aside from that, current spending continues to ride well ahead of our economy’s capacity to fund it. The 'boom is not getting “boomier”, but the two main current spending lines: social protection and health, are still running at 65.2 percent of the total voted current expenditure, up more than 4 percentage points on 2010.

Things have changed, over the years, to be fair. There have been reductions in current expenditure during the crisis, overshadowed by tax hikes and dramatic cuts to capital spending. Thanks to tax hikes, in H1 2013, Ireland marked the first half-year period when the current spending by the Super-3 Departments: Education and Skills, Health and Social Protection, combined, was below the total tax revenue collected by the State. A significant milestone, but hardly a salvation, as three departments' current expenditure in January-June 2013 still counted for 95 percent of total tax receipts. Thus, even with all the cuts to-date, shutting down all current voted expenditure, excluding the Super-3, will only half our Exchequer deficit from EUR6.59 billion to EUR3.31 billion.

Which exposes once again the five-years-old policy dilemma: to balance the books, Ireland will require at least a EUR2.7 billion worth of further cuts on the spending side on top of what is being planned for 2014-2015. Most, if not all of these will have to come from the Social Protection and Health

Sustainability of savings achieved to-date presents a further risk. So far, cuts to the Exchequer spending that dominated the last five years were heavily concentrated on the sides of capital expenditure and public payrolls. Both are at a risk of reversal in the future.

Any return to growth will require heavier capital investment in public infrastructure, schools, medical equipment and facilities and so on. In other words, capital savings are an illusion on the longer time scale.

Meanwhile, much of the current spending cuts fell onto the shoulders of temporary and contract staff, leaving permanent and more expensive staff protected. This protection came at a cost of increased demands on their productivity. With staff feeling the bite of higher taxes and pensions contributions, while being forced to work more and outside their comfort zone of life-long assignments, public sector unions are already itching to get a new wave of wages increases going.

Back in December 2012, the Troika has pointed out that the savings delivered in public sector pay bills under the Croke Park Agreement cannot be deemed sustainable in the long run. The Haddington Road Agreement for 2013-2016 further confirms this assessment. The insolvent state is now fully committed to more rounds of increments payments, no matter what happens to the economy or exchequer finances. Virtually all ‘savings’ to be delivered under the Haddington Road Agreement are to be automatically reversed at the end of the agreement term or earlier.

The risks of policies reversals on capital and public sector pay, relating to the above measures, are non-trivial. IMF forecasts through 2021 showed the current path of fiscal adjustments taking us to a debt to GDP ratio of just over 95 percent in 2021 from the peak of 2013. Using IMF assumptions, my own estimates suggests that reversing budgetary policies to 2013 levels after 2015 can result in our Government debt to GDP ratio stuck at 108 percent in 2021.


All of which points to a simple but uncomfortable fact: to achieve long-term sustainability of our fiscal policies, Ireland requires a longer term reduction in public spending well in excess of what can be delivered without significantly cutting into current health and social welfare expenditures. Given the fact that health spending is already stretched, the above cuts will have to happen on welfare side.

The reforms, to be undertaken across a period of, say 2015-2016 will have to be sweeping and permanent, building in part on some of the piecemeal changes already in place.

To reduce the risk of replay of the devastating 2008-2010 effects of unemployment shocks on exchequer and economy at large, we need to separate unemployment benefits from other welfare supports.

Unemployment Insurance (UI) should provide a temporary, but generous safety net, sufficient to sustain reasonable family commitments to mortgages and children- and health-related expenditures. Thus, UI should be paid as a percentage of the end-of-employment salary, starting with 2/3rds of the salary up to a maximum of the median wage, with payments declining with duration of unemployment. Payments should terminate after 9 months.

Social welfare payments (SWP) to able-bodied adults can kick in following the expiration of the UI scheme on a means-tested basis. A low monthly personal SWP rate should be supplemented with access to childcare and healthcare, as well as educational grants for children, but only in the cases where recipients engage in training and/or active job searching. A recipient cannot turn down a reasonable offer of a job without facing a financial penalty. All benefits should be subject to a life-time cap of 6-7 years to prevent formation of permanent welfare dependency, while providing a broadly sufficient safety net..

All benefits payments above the monthly personal SWP rate, benchmarked for provision under the scheme, such as health, public services and transport allowance, should be cashless to reduce potential misuse of funds. To encourage better health attitudes and more careful utilisation of public services, a share of unused allowances, say 10-20 percent, accumulated in the account at the end of each year can be paid out as an annual bonus.

We also need to reform our state pensions. Given the fallout from the property bust, large numbers of Irish families are facing the prospect of pension-less retirement. They will require significant state supports - something we cannot afford while carrying the burden of unfunded state pensions.

All statutory state pensions should be means-tested to generate immediate savings and remove absurd subsidisation of the better-off at the expense of those in genuine need. Ditto for age-linked medical cards.

Automatic benchmarking of legacy public sector pensions should end and all current public employees’ pensions should be converted into defined contribution schemes. This will require a legislative decision to alter employment contracts. It will also require recapitalization of the public pensions fund, which can be done gradually over the period of, say, 10 years.

Savings to be targeted in the above measures should apply gradually, over 2014-2017, to generate new substitutes for temporary measures adopted in previous budgets.

However, even with gradual improvements in the labour markets and economy from 2014 on, implementing the above reforms will be nearly impossible. Current political system, with policy decisions based on consensus of the interest groups, is subject to stalling on big reforms and the risk of future reversals by governments seeking popular mandates. This means that we need to take a National Unity approach to structuring and enacting the new legislation dealing with reforms of the social welfare and pensions. Such a consensus is feasible, once all political parties in the Dail realise that Ireland will continue to face subdued economic recovery, elevated unemployment and anemic asset markets well into 2020-2021. With these headwinds, the pressure to carry on with prudent fiscal policies will remain. Thus, the only way of avoiding the contagion from the current long-term economic crisis to the political and state balance of power is to enact irreversible, legislatively protected structural reforms of the social welfare on the basis of bi-partisan legislative engagement.

Box-out:

A note from Davy Research on Mortgages Arrears, published this week, represents a good summary of the current crisis and draws some sensible and well-argued policy conclusions on the subject. Alas, the report commits one common, unnecessary and unfortunate error. Strategic non-payment of mortgages debt is cited in the report eighteen times. Yet, there is no direct evidence presented in the report, or in any study cited in the report, as to the true extent of the problem in Ireland. Instead, like all other analysts, Davy team references unsubstantiated statements by the banks and banking authorities, and simplistic extrapolations of other countries’ studies to the case of Ireland as evidence that "mortgage delinquency has continued to grow despite better-than-expected labour market  conditions” and that “strategic default is now a problem." Like other researchers, Davy team cites increases in employment in Q1 2013 as the evidence of a 'growing problem' with strategic non-payments.  Alas, in Q1 2013, seasonally-adjusted full-time employment (jobs that can sustain payment of mortgages) dropped 4,500 year on year. Broader measures of unemployment reported by CSO also posted increases. This hardly constitutes a material improvement on households' ability to fund mortgages repayments and it certainly does not support the thesis of significant and growing strategic defaults. Of course, absence of evidence is not evidence of absence; the employment data cited above does not prove that there are no strategic defaults in Ireland. It simply shows that absent real, direct evidence, one should take care not to fall into the trap of convincing oneself that an oft-repeated conjecture must invariably be true.

11/8/2013: WLASze Part 2: Weekend Links on Arts, Sciences and Zero Economics

Due to travels, I will be posting shorter versions of WLASze: Weekend Links on Arts, Sciences and zero economics this week and next. Here is the second post of the series for this weekend (the first post is linked here: http://trueeconomics.blogspot.it/2013/08/1082013-wlasze-part-1-weekend-links-on.html.

Enjoy!


Nightvision is a project that involved a 23-year-old videographer, Luke Shepard and his friend plus a 90 day Eurail Pass, and Kickstarter… the group traveled to 36 cities in 21 European countries "with the goal of capturing the greatest European architectural masterpieces around today." Shepard & co have shot more than 20,000 photos and he was able to create 47 image sequences of the trip, 27 of these formed his amazing timelapse called Nightvision. http://www.lshep.com/index.html
Sadly, the group did not get to Dublin… which means someone else will have to do a good time-lapse of our Grand Canal Square…


A brilliant photography/collage artist, Sergey Larenkov (his site here: http://sergey-larenkov.livejournal.com/) combines historical images with current shots of cityscapes to deliver always poignant and occasionally stunningly beautiful collages that merge history across time and physical landscapes. One example: Pushkin 1941-2011...

Yes, at certain point we must stop reviewing or even discussing Zaha Hadid's architecture for it is rapidly becoming formulaic, non-explorative and simply predictable. Here's an example: http://www.dezeen.com/2013/08/07/movie-beko-masterplan-by-zaha-hadid/ And the best bit, as usual - comments by the readers.

My own view: It is rather obvious that over-production and over-design are the two core threats to Zaha Hadid's practice and legacy. She has long became singular in form and missing any progression. Putting a stop to innovation to focus on 'iconic' semiotics is the end of an architect and artist, in my view. Hadid's architecture was recently id'd by one of the commentators on her work as "Kim Kardashian buildings: Rich in curves but no meaningful content or good taste". My sentiment too.


While reading through Taipei's solo run for Design Capital 2016 (lack of any other contestants pretty much assures that the venue will go to Korea, despite the relatively obvious lack of any serious merit in the two projects submitted for it), I came across this post from 2012 on the project called the Scrap Skyscraper http://www.dezeen.com/2012/07/31/scrap-skyscraper-by-projeto-coletivo/ A very interesting concept:

An amazing Chinese photographer, Jialiang Gao
http://www.flickr.com/photos/46999807@N03/sets/72157626997860925/

Via AtlasObscura: "Covering over 16,600 hectares in Southern Yunnan in China, the Honghe Hani Rice Terraces cut over the Ailao Mountain slopes down to the Hong Kong river. There for 1,300 years, the channels of water have supported farming of red rice, involving eel, fish, buffaloes, cattle, and ducks that all move through the landscape dotted by 82 villages."
http://www.atlasobscura.com/articles/2013-new-unesco-sites

The article linked above has some other stunning photography by, for example, Teo Gómez. The poignancy of colour, the fluidity of shapes, the compositional perfection of created landscape - necessity sometimes is not only the mother of all inventions, but also a sister of beauty… In a sense, both sets - by Gao and by Gomez - document the improbability of beauty as well as its transience and ability to return.


For those of my followers who do read Russian, a very interesting debate about the Russian national identity: http://www.snob.ru/selected/entry/63417.  The debate juxtaposes current perceptions of Russian (nationalist) identity and the long-established multicultural and multinational (subsequently federal) identity. Many outside Russia over the decades (and in Russia since the nationalist revival in the 2000s) are being sold the identity of Russian dominance (racial and cultural) over minority groups. However, this view of Russia is hugely at odds with the historical reality. this historical reality is that even in AD 880s Russian identity was organically inclusive of a large number of smaller nationalities, and that cultural, religious, ethnic, genetic and geo-political integration have been an active model for the creation of modern Russia over at least 800-900 years.

One example, striking in its powerful contradiction to the mantra of cultural or ethnic purity or dominance of the standardised 'Russian' identity is the case of Ivan Kalita - Muscovite duke - who in 1327 as a head of the Golden Horde mission burned to the ground orthodox Tver dukedom, as a response to the murder in Tver of the Tatar Ambassador. In a punitive expedition the Tatars alongside the Muscovites "Turned the whole Russian realm to ash." Tver prince fled to Novgorod and then in Pskov. Ivan Kalita demanded his extradition, and the Metropolitan Feognost sitting in Moscow, excommunicated him and all the Pskov from the church, thus revealing one of the top models of the Orthodox collusion between the Muslim Horde, Moscow and the Moscow Church. At the very time of the Muscovite power, that power rose above the notions of kinship, and above the Orthodox faith.

Sadly, I would not recommend using google translation for this article, since its format leads to translation providing exact opposite interpretation to the actual meaning of the complex phrases in a number of cases. It is, thus, to remain the material suited to Russian-language readers.

10/8/2013: WLASze Part 1: Weekend Links on Arts, Sciences and Zero Economics

Due to travels, I will be posting shorter versions of WLASze: Weekend Links on Arts, Sciences and zero economics this week and next.

Here's the first post for this weekend. Enjoy!


Performance art meets actual art: MOCA Grand Ave hosts RETINA: http://www.digitalretna.com/

From http://www.mymodernmet.com/profiles/blogs/berlin-wall-gets-street-art-makeover


On allegorical (and humorous, or rather perhaps sardonic, though not sardonicistic… oh, ok, just elevated sarcastic… ): Chris Berens' "Lady of the Cloth"

His site: http://www.chrisberens.com/home Oh, do smile...


More whimsical, ironic… plain fun: Gregoire de Lafforest via http://www.itsliquid.com/birdcage-table.html

And another (near-)classic: http://design-milk.com/a-lamp-that-you-pump-up-olab-by-gregoire-de-lafforest/ Artist's site: http://www.gregoiredelafforest.com/#


Lovely retrospective - of secondary in ranking, but not in quality works - on the theme of "Workman and Collective Farm Woman" or "Рабочий и колхозница" - worth a scroll through the slide show from this March 2013 exhibition: http://www.iskusstvo-info.ru/exhibition/item/id/52

And while on the Russian art theme, we are now almost one month away from 17th Art Moskva show: http://www.art-moscow.ru/#

I wrote before (http://trueeconomics.blogspot.ie/2013/06/2162013-weekend-reading-links-part-1.html)about James Turrell's Guggenheim (NYC) show and here are some stunning photographs from it: http://design-milk.com/james-turrell-resculpts-the-guggenheim-with-light/james_turrell_guggenheim_1/

Amasing imagery of the Russian Far-North - destroyed social and environmental landscapes, but also space of raw beauty too by Justin Jim:
http://www.bjp-online.com/british-journal-of-photography/project/2201023/justin-jin-the-zone-of-absolute-discomfort

The full project site is here: http://justinjin.com/reportage/arctic/


Science-meets-art bit: A cool app from Oxford Uni gets you to track - on a mobile - high energy particle collisions directly from the Large Hadron Collider, while lounging in your chair at home or on a date in, say, a restaurant, "making it simple to understand what's going on at a glance." Now, I am not so sure about that "simple to understand" bit, but I bet rolling out a "Higgs Boson in your hand" mobile app from CERN at a bar to a hot-looking brunette will be a great ice-breaker… or an insight in the Titanic's experience… either way - hardly an indifference generator. http://collider.physics.ox.ac.uk/

Now, in case you've missed what Higgs boson thingy is, here's a popular primer: http://www.theguardian.com/theguardian/shortcuts/2012/jul/04/how-explain-higgs-boson-discovery


And for the 'laugh your pants off' bit this week around: El Pais has reported that the 200 metre-tall Intempo tower in Alicante, an apartment block of immense ugliness to start with, "has been built without a working elevator above the 20th floor. Per Dezeen.com: "It was originally designed with 20 storeys, but developers later decided to extend it to 47 storeys - offering 269 homes. However they neglected to allow the extra room required by a lift ascending over twice as far." Gas, man!
http://www.dezeen.com/2013/08/09/benidorm-skyscraper-built-without-an-elevator/

10/8/2013: EMEA Forward Economic Conditions: BlackRock Institute

The BlackRock Investment Institute Economic Cycle Survey : EMEA Aggregate Results were published recently, so here is the update.

Note: the views expressed in the survey are those of the external panel of economics and finance experts and not of the BlackRock Investment Institute.
The results of the survey must be viewed as being subject to the depth of country-level responses considerations, as these can differ widely.

Per the results: "this month’s EMEA Economic Cycle Survey presented a generally bullish outlook for the region. The consensus of respondents describe Slovenia, the Ukraine, Croatia and Czech Republic currently to be in a recessionary state, with an even split of economists gauging Slovakia to be in a expansion or contraction. Over the next 2 quarters, the consensus shifts for all these countries, except the Ukraine and Slovenia, towards expansion.
At the 12 month horizon, the positive theme continues with the consensus expecting all EMEA countries to strengthen, with the exception of Kazakhstan and Turkey."

In comparison, "Globally, respondents remain positive on the global growth cycle, with a net 68% of 62 respondents expecting a strengthening world economy over the next 12 months - this is marginally lower than from a net 70% in last month’s report."

Two charts to map regional economies prospects:

9/8/2013: Political Waffle Passing for Learning?

Mr Schulz - the President of the European Parliament - has penned an op-ed that is available here: http://www.linkedin.com/today/post/article/20130809113308-239623471-did-we-really-learn-the-lessons-of-the-crisis?trk=tod-home-art-large_0


My response is as follows:

This article is a trite rehashing of cliches, some of which have served as pre-conditions to the crisis, by a man who is presiding over the institution complicit in creation of the crisis in the first place, as well as in exacerbating the adverse impact of the crisis on the member states of the EU. 

Let me just deal with the first set of Mr Schulz's core hypotheses: 

"Firstly, the invisible hand of the market does not work and needs a robust regulatory framework." 

Given that the Euro area crisis arose from the disastrous mis-management of the monetary union, the statement is absurd and ideologically dogmatic. Markets require proper regulation and are legally-based structures. Mr Schulz seems to fail to understand this and is confusing anarchy with the 'invisible hand' of the markets. European markets have failed, in part, due to wrong regulation (not the lack of regulation) and in part due to the lack of enforcement of existent regulation. Mr Schulz seems to have no idea as to these facts. Institutions that commonly failed to enforce existent regulations and treaties include, among others, the European Commission (allegedly reporting to the EU Parliament, that Mr Schulz presides over) and the European Parliament itself.

The markets failures were, in the case of the 'peripheral' euro states, exacerbated by the inactions and actions of the European authorities, including those by the European Parliament.

"Secondly, politics should gain primacy over markets and labour over capital." 

Primacy of politics over markets (or rather economics) in Europe is exactly what led us into this crisis. 

Political dominance over economic policies design is behind the creation of the monetary union and the expansion of the union to include countries that are not ready for a single currency regime. It is also responsible for the fraudulent ways in which some member states have acceded to the monetary union (e.g. Italy and Greece, where misreporting and financial instrumentation of deficits and debt were rampant and Mr Schulz's institution was amongst those that were aware of these facts, were required to be aware of these facts, and yet were inactive in the face of these facts). Politicization of the markets for Government bonds, for foreign exchange, for credit, for equity, for risk pricing, etc has been responsible for inducing many deep failures in the markets in Europe. For one, this politicization has led to an unsustainable debt accumulation in the private sector and transfer of private debts onto the shoulders of taxpayers. 

I might agree with Mr Schulz on the point of 'labour' supremacy over 'capital'. Alas these are poorly defined concepts in Mr Schulz's case. Labour can mean labour unions (organised labour movement) or labour as human capital (skills, entrepreneurship, creativity, etc) and everything in-between. All of these definitions will contain internal contradictions in incentives, preferences for policies and responses to policies to each other and to the definitions of capital that can be deployed. Mr Schulz fails to define the categories he references, which suggests that his assertions are once again nothing more than populist sloganeering. Mr Schulz seems to have no idea that capital can be physical, technological, financial, intellectual or human. That 'labour' can be complementary to physical and technological capital in which case primacy of labour over technology can be destructive to the objectives of both. Mr Schulz appears to be inhabiting a simplistic universe more corresponding to that inhabited by Marx and Engels in the late 1840s than the one that exists today.

"Thirdly, and most importantly, the economy and politics should return to the values of solidarity, social justice, decency and respect." 

This is both historically incorrect and, frankly put, too rich coming from someone heading a powerful EU institution. 

It is inherently incorrect because a return implies existence of something in the past. European societies never possessed any real sense of 'solidarity' or 'social justice' but historically (and to-date) relied on preservation of the status quo of distribution of wealth within the set confines of the European elites and independent of merit. Thus, Europe never pursued meritocratic systems of wealth and income allocations. And subsequently never developed such systems. What Mr Schulz might mean (and we are reduced here to guessing) is the return to the status quo of interest groups-driven 'social' allocations of resources - a system commonly known as tax (someone else) and spend (on me or my friends). 

It is a rich statement coming from Mr Schulz because he presides over the EU institution that was at least complicit in forcing member states to transfer private sector losses onto taxpayers and failed to structure properly core institutional frameworks of the EU. Whether this complicity involved errors of omission or commission is irrelevant. The outcomes of these errors are Greece today, Cyprus today, Ireland today, and Italy, Spain, Portugal and so on. From this point of view, the perspective of returning to values by the political and economic institutions of Europe would first and foremost involve (require) restructuring of the European institutions from the top. Mr Schulz's job would be on the line in any such process of renewal and return to accountability. 

That, alas, is the nature of leadership: you fail and you are gone. Writing op-eds full of well-meaning waffle is, frankly, not an excuse for the failures of both action and inaction.

9/8/2013: Euromoney on Russian Economy's Risks

Deteriorating outlook for Russia and CIS is reflected in this Euromoney Country Risk note, citing my views on Russian economy's risks:

http://www.euromoney.com/Article/3230133/SubPage/9449/ChannelPage/0/Region/14091/Russia-and-CIS-satellites-failing-to-impressECR-Q2-2013-results.html

9/8/2013: Irish ICT Services: Geniuses & Jobs Creators?..

The latest annual services inquiry for Ireland, published yesterday by the CSO and available here: http://www.cso.ie/en/releasesandpublications/er/asi/annualservicesinquiry2011/#.UgTpe2QmlF8 offers a fascinating read into the workings in the bizarrely-distorted world of MNCs-led exporting services in the country.

Here is one interesting set of facts, not shown by the CSO.

As chart above shows, in 2008-2011, Gross Value Added in ICT Services sector in Ireland (the sector heavily dominated by the likes of Google and other tax transfer-driven MNCs) has boomed, rising 30%. This growth, as the Government et al love reminding us, is allegedly translating into jobs, jobs and more jobs.

Alas, the facts speak for themselves:

• Over 2008-2011 wages and salaries paid out in the sector rose just 8.2% or a tiny fraction of growth in value added.
• GVA per person engaged in the sector rose 29.9% an
• d GVA per full time employee rose 31.1% - both by far the fastest rates of growth of any sector in the economy.
• The numbers engaged in the sector dropped (not rose) in 2008-2011 by 5.0% while numbers of full-time employees in the sector dropped 5.9%.

Can someone explain these miracles to me, please? By anything other than ongoing substitution of activity away from actual production of services toward more tax optimisation?.. Anyone?..

While at it, here is another illustrative chart to consider:

The above shows that Irish ICT Services workers constitute a truly miraculous breed of employees - so vastly more productive than any other type of human being in Ireland. Next time, walking down the Barrow Street, do marvel at all the geniuses walking about.