7/2/20: Someone, page Paul Krugman on this one: Irish Gross Value Added Data 3Q 2020

Remember that somewhat offensive, but also somewhat apt description of the Irish 2015 growth figures that Paul Krugman came up with? Well, le's call it the 'L-economics'. Now, the CSO recently published the latest figures (through 3Q 2019) on the gross value added in the Irish economy, as decomposed into 'Foreign-owned multinational enterprise dominated' sector and 'Other sectors excluding the foreign-owned multinational enterprise dominated sector'.  So here is a chart you do want to see, plotting the share of the 'Foreign-owned multinational enterprise dominated' sector of the total gross value added across all of the Irish economy:

Now, see that massive spike in 1Q 2014? Aha, that was Krugman's 'L-economics'. Back then, the share of the MNCs' [dominated sectors] in the Irish economy jumped from 2014 annual average of 26.4 percent to 2015 annual average of 38.36 percent. And then we thought, surely, things are going to calm down a bit at the Silicon Docks, right? Not quite. In 2018, the share averaged 42.4%. Boom! And in the first three quarters of 2019 it jumped to 44.1 percent. Double Boom!

Comically, or sarcastically, or may be... ah, neah... never mind. At the last 7 quarters growth rates, folks, by 2035, three quarters of the Irish economy will be... err... Krugmanited. So, OECD, G20 and the rest of the global tax justice worriers, there's nothing to see on the shores of the Liffey.

7/2/20: Mapping Real Economic Debt: BRICS

Some great charts on real economic debt, via IIF, with my highlighting of the BRICS economies:

First off, mapping corporate debt and government debt as a share of GDP:

 China is an outlier within the BRICS group when it comes to corporate debt.

 Chart above shows how dramatic has been deleveraging out of FX-denominated debt in Russia over the last decade. Much of this came from the reduction in US Dollar-denominated exposures.

Lastly, the chart above showing changes in the US Dollar-denominated debt quality (by corporate ratings). Again, Russia is a positive stand-alone in this, with more positive outlook than negative outlook corporates - a trend strikingly different from both the Emerging Markets overall, and for other BRIC economies.

7/2/20: Mapping Real Economic Debt 2019

A neat summary map of the real economic debt as a share of the national economies, via IIF, with my addition of Ireland's benchmark relative to its more accurate measure of the national income than GDP:

Yep, it is unflattering... albeit imperfect (there is some over-estimate here on the corporate debt side).

3/2/2020: Demographics and Support for the EU: Populism Base

Rising populism in politics, demographics and the financial crisis aftershocks are linked. Intuitively and empirically. And thus says a new study, published in the Journal of European Public Policy. The study by Fabian Lauterbach and Catherine e. De Vries, titled "Europe belongs to the young? Generational differences in public opinion towards the European Union during the Eurozone crisis" tackles the "...notion that younger people hold more favourable attitudes towards the European Union (EU) is prevalent in both academic and popular discourse." The authors shows that "Younger cohorts in debtor countries have become significantly more sceptical of the EU than their peers in creditor states" after the crisis. At the same time, "Older generations are more supportive of the EU in debtor countries compared to creditor states."

Marginal means by cohort, Euro-debtor, Euro-creditor and other EU member states

Full paper: https://www.tandfonline.com/doi/full/10.1080/13501763.2019.1701533. 

28/1/20: The Precariat of America's Workampers

Precariat is defined as "a social class formed by people suffering from precarity, which is a condition of existence without predictability or security, affecting material or psychological welfare. The term is a portmanteau obtained by merging precarious with proletariat." [Source]

Here is a very interesting article chronicling journalist's experience with the "Workampers", or a large number of Americans living in the world of campers, RVs and seasonal jobs: https://www.marketwatch.com/story/many-older-americans-are-living-a-desperate-nomadic-life-2017-11-06. Many are undoubtedly victims to the age discrimination that adversely impacts Americans after the age of 50, despite the pro forma legal bans against discrimination on the grounds of age.

28/1/2020: Federal Tax Revenues Over Time

Via the @SoberLook, WSJ's data / charts newsletter, a neat summary of changes in the U.S. federal taxation base over the years:

What does it tell us? In the 1940s-1960s, the share of excise, inheritance and other taxes, plus the share of corporation taxes in total federal tax revenues ranged above 30 percent, declining from around 45 percent in the 1940s to roughly 35-36 percent in the 1960s. Over the last decade, that share was around 14-15 percent. The burden of taxation, instead, has dramatically shifted onto labor income and personal income. This trend is forecast to worsen over the 2020s decade, with non-income taxes expecting to decline in their importance to around 12-13 percent of the total tax revenues.

It is worth noting that the benefits distribution has been also trending against current income earners, with a rising share of Government spending accruing to old-age support programs, social security payments and, of course, as usual - Pentagon.

Given these trends, it is hard to see how the politics of the younger electorate (growing role of the Millennials, GenXers and GenZers in voting) is going to be compatible with this situation. Likewise, given the likelihood for future shift in electoral politics against low corporation tax revenues share in total tax take in the U.S., it is hard to see how continued prosperity of the well-known corporate tax havens, including Ireland, Luxembourg, the Netherlands et al, can be sustained either.

28/1/20: What Doesn't Work in NYC Probably Won't Work in Dublin

As Irish politicians talk rent controls, here is some interesting evidence from NYC's recently passed rent control rules (since June 2019): https://reason.com/2020/01/27/totally-predictable-consequences-of-new-yorks-rent-regulations/.

Summary:

• Sales of apartment buildings in NYC fell by 36 percent in 2019, and that the total spend on purchases fell by 40 percent. Not all of this is down to rent controls changes - NYC is grossly over-supplied in the premium segment of the market and traditionally large-ticket buyers are staying out of the market (Russian and Middle Eastern money) or selling (Russian and Chinese) due to geopolitical and legal ownership threats.
• "The prices investors were paying for rent-stabilized units—where allowable rent increases are set by the government and usually capped at around 1 or 2 percent per year—fell by 7 percent." More direct evidence for less than 6 months of new rules being in force.
• "... landlords are reportedly cutting back on the money that they're putting into the buildings that they do own... [as] 69 percent of building owners have cut their spending on apartment upgrades by more than 75 percent since the passage of the state's rent regulations. Another 11 percent of the landlords in the survey decreased investments in their properties by more than 50 percent." More direct evidence things are not going in the desired direction.
• "The new law's limits on recouping the costs of renovating apartments mean it is often more  financially feasible to leave old apartments vacant."
• The lower end of the market is probably most hit: "The Commercial Observer reports that the new rent laws are encouraging small- and mid-sized landlords to exit the market entirely, writing that "many property owners have woken up to a world where their buildings are worth 30 to 50 percent less than they were a year ago."" 
• And another quote: "Middle-class and working-class neighborhoods, ... would be at particular risk."

Thoughts on why this should work any differently for Ireland are welcomed in the Irish mainstream-populist media.

27/1/20: The Value of History and the Shifting Winds of Public Policy

My latest contribution to the Manning Financial for January 2020 is out: https://issuu.com/publicationire/docs/mf_january_2020?fr=sZTk2MDI2MTg4NA.

21/1/20: Inflation and Growth: BRIC 2020

Via Danske Bank Research, an interesting chart showing 6-12 months forward expectations for inflation (CPI) and economic growth (GDP) for a number of countries, most notably, the BRIC economies:

Clearly suggests continued growth suppression in Russia and, at last, moderating inflationary pressures, returning the economy back toward a longer-term trend of ~2% growth and sub-3% inflation. Also shows continued problems is Brazil persisting into 2020 and only a moderate uptick in economic activity in India, where Modi 'reforms' have been largely washed out into slower growth over the recent quarters.

21/1/20: US Deficits, Growth and Money Markets Woes

My article for The Currency on the effects of the U.S. fiscal profligacy on global debt and money markets is out: https://www.thecurrency.news/articles/7371/the-us-deficit-has-topped-1-trillion-and-investors-should-be-worried.

Key takeaways:

"As the Trump administration continues along the path of deficits-financed economic expansion, the question that investors must start asking is at what point will debt supply start exceeding debt demand, even with the Fed continuing to throw more cash on the fiscal policies bonfire?"

"In the seven years prior to the crisis of 2008-2012, US economic growth outpaced US budget deficits by a cumulative of $1.56 trillion. This period of time covers two major wars and associated war time spending increases, as well as the beginnings of the property markets and banking crises in 2007.

"Over the last seven years since the end of the crisis, US economic growth lagged, on a cumulated basis, fiscal deficits by $928 billion, despite much smaller overseas military commitments and a substantially improved employment outlook.

"These comparatives are even more stark if we are to look at the last three years of the Obama Administration set against the first three years of the Trump Presidency. During the 2014-2016 period, under President Barack Obama, US deficits exceeded increases in the country’s GDP by a cumulative amount of $226 billion. Over the 2017-2019 period, under  Trump’s tenure in the White House, the same gap more than doubled to $525 billion.

"No matter how one spins the numbers, two things are now painfully clear for investors. One: irrespective of the stock market valuations metrics one chooses to consider, the most recent bull cycle in US equities has nothing to do with the US corporate sector being the main engine of the economic growth. Two: the official economic figures mask a dramatic shift in the US economy’s reliance on public sector deficits since the end of the crisis, and the corresponding decline in the importance of the private sector activity."

21/1/20: Investor Fear and Uncertainty in Cryptocurrencies

Our paper on behavioral biases in cryptocurrencies trading is now published by the Journal of Behavioral and Experimental Finance volume 25, 2020:

We cover investor sentiment effects on pricing processes of 10 largest (by market capitalization) crypto-currencies, showing direct but non-linear impact of herding and anchoring biases in investor behavior. We also show that these biases are themselves anchored to the specific trends/direction of price movements. Our results provide direct links between investors' sentiment toward:

1. Overall risky assets investment markets,
2. Cryptocurrencies investment markets, and
3. Macroeconomic conditions,

and market price dynamics for crypto-assets. We also show direct evidence that both markets uncertainty and investor fear sentiment drive price processes for crypto-assets.

16/1/20: Irish GE2020: Kommersant

My musings on the Irish election 2020 via Russia's Kommersant.ru: https://www.kommersant.ru/doc/4220157.