20/6/20: COVID19 Impact on Learning & Education

McKinsey's handy graphic summarizing expected and actual outcomes of the racial inequality in terms of access to learning and education during the lockdowns phase of the pandemic:

Pretty self-explanatory.

20/06/20: COVID19 Update: Sweden v Other Nordics

Sweden is a now a verifiable basket case amongst the Nordic countries when it comes to the country management of the COVID19 pandemic:

The two charts above show that Sweden performance in both daily cases and deaths has been truly shockingly poor, compared to all other Nordic countries combined. The same is true in country-by-country comparatives.

In fact, based on ECDC data, were Sweden to perform as all other Nordics (including Estonia), its total number of cases of COVID19 registered would currently stand at 22,890, against its actual count of 54,443, and its death toll would have been 2,113 against its actual death toll of 4,877.

20/6/20: Russia COVID19 Update: Too Early For Going Back To Normal

Russia is taking a page from the U.S. book on 'How Not to Do Pandemics' entering a major restrictions relaxation stage too early:

New cases numbers are running slightly (statistically not significantly) below the trend, but are still trending at an alarming rate (chart above). In the week through 20/06/2020, Russia averaged 8,234 new cases per day which is only slightly below 8,798 average for the week through 13/06/2020. 7 day average for deaths at 179.6 in the week through 20/06/2020 is above the same for the 7 days through 13/06/2020 that stands at 169.6.

Both, actual and adjusted death rates per official case are still moving up:

In simple terms, Russia is not ready to go to a more relaxed restrictions regime, yet.

20/6/20: EU vs USA Covid19 Update

Currently, compared to the pre-lockdown dynamics, daily cases and deaths in the U.S. warrant continued, if not accelerated severity of lockdowns, as opposed to relaxation of restrictions:

In Europe, in contrast, new cases are relatively benign and currently running (on a sustained medium term basis) below the levels at which the wide-spread lockdowns have been introduced.

On a per-capita basis, the U.S. now performing consistently worse than the EU27 in terms of new cases, daily deaths counts and dynamics in both:

In summary, the U.S. is currently the worst global basket case in managing the COVID19 pandemic. My take on the underlying causes: https://twitter.com/GTCost/status/1273999784089497606?s=20

20/6/20: World COVID Data Update: The Theory of Back to Normal

Relaxation of the Covid19 pandemic restrictions is gaining momentum worldwide, with clusters of renewed concerns over the 'second peak' or 'second wave' dynamics. The problem is that global pandemic numbers remain extremely worrying:

Total new cases are hitting all-time highs:

The orange box represents, roughly, the range of earlier data that triggered the lockdowns. It is clear that worldwide numbers are sustainably above that range. The 7-day running average is horrific and trending up at an accelerating rate. The slope of the current 7-day moving average is now similar to what we observed in the peak period of contagion in Europe.

Total daily deaths are also on the rise, once again:

Once again, the orange box related current deaths to the European lockdowns initiation deaths. The 7-day moving average is on the rise, once again.

Yes, on per-capita basis, the pandemic has moderated, primarily due to different geographies of concentration of new cases and new deaths. However, European lockdowns periods coincided with more robust testing in Europe and in advanced economies in Asia, while current period of globally spiking cases and rising deaths is coincident with less robust public health systems in less developed countries, implying that current numbers are most likely coming from much larger underestimates of actual cases and deaths.

19/6/20: Fox News, COVID19 Social Distancing and COVIDIOTS?

How influential is the U.S. mainstream media in defining public attitudes toward pandemic risk, decision-making under severe uncertainty and risks to their own health? It turns out - hugely influential.

A new paper from a group of U.S. economists, titled "The Persuasive Effect of Fox News: Non-Compliance with Social Distancing During the Covid-19 Pandemic" (authored by Andrey Simonov, Szymon Sacher, Jean-Pierre Dube, and Shirsho Biswas, May 17, 2020 https://bfi.uchicago.edu/wp-content/uploads/BFI_WP_202067.pdf) finds that:

• "The average partial effect of Fox News viewership in a zipcode implies that 1 percentage point increase in cable viewership reduces the propensity to stay at home by 8.9 percentage points compared to the pre-pandemic average." 
• "A persuasion rate of Fox News on noncompliance with stay-at-home behavior during the crisis of about 33.5% − 50% across our various social distancing metrics."
• Simple regression (OLS) analysis o"generate a positive and statistically significant effect of Fox News viewership from early March onwards."
• More robust, IV estimates. "are considerably larger and indicate a take-off in the Fox News effect in early March and a stabilization in mid March, almost immediately after the declaration of a national emergency."
• "Since the supply-side measures, such as business closures, start to happen only two weeks later after the take-off of Fox News effects, the magnitudes of the viewership effects reflect the persuasive effect of Fox News on viewers and not a feedback effect from the equilibrium response of firms, at least early on."
• "Our findings for CNN are inconclusive, with imprecise point estimates centered near zero."

18/6/20: Cheap Institutional Money: It's Supply Thingy

In a recent post, I covered the difference between M1 and MZM money supply, which effectively links money available to households and institutional investors for investment purposes, including households deposits that are available for investment by the banks (https://trueeconomics.blogspot.com/2020/06/what-do-money-supply-changes-tell-us.html). Here, consider money instruments issuance to institutional investors alone:

Effectively, over the last 12 years, U.S. Federal reserve has pumped in some USD 2.6 trillion of cash into the financial asset markets in the U.S. These are institutional investors' money over and above direct asset price supports via Fed assets purchasing programs, indirect asset price supports via Fed's interest rates policies and QE measures aimed at suppression of government bond yields (https://trueeconomics.blogspot.com/2020/05/21520-how-pitchforks-see-greatest.html). 

Any wonder we are in a market that is no longer making any sense, set against the economic fundamentals, where free money is available for speculative trading risk-free (https://trueeconomics.blogspot.com/2020/06/8620-30-years-of-financial-markets.html)?

18/6/20: America's Scariest Charts Updated

Weekly data for initial unemployment claims for the week ending June 13, 2020 is out, so here are the updated 'America's Scariest Charts':

Index of employment, benchmarked to the pre-recession peak employment:

Estimated total non-farm payrolls:

And initial unemployment claims, half-year running sum:

Today's initial unemployment claims came in at 1,561,267 for the week ending June 6, 2020 (final estimate), slightly up on previous preliminary estimate. For the week ending June 13, 2020, non-seasonally adjusted initial unemployment claims came in at a preliminary estimate of 1,433,027.

A summary table to put these numbers into historical comparative:

Some recent context on the latest official employment numbers from earlier this month is provided here: https://trueeconomics.blogspot.com/2020/06/11620-americas-scariest-charts-updated.html.

13/6/20: Gold Coins Sales are Up, and the Markets are Screaming Something New

Some interesting movements in demand for gold coins in recent months, worth watching:

Price is up, and volume of sales is quite volatile. Still, sales are hitting highs.

• Following weaker y/y January and February, March 2020 sales rose almost x10 y/y in volume and average coin sold size rose from 0.5 oz in March 2019 to 0.674 oz in March 2020. 
• April 2020 sales were x3.25 times sales in April 2019 by volume, with average coin size rising to 1.0 oz. May saw a major fall-off in demand m/m but still posted sales x2.26 time those of May 2019, with average coin sold size down to 0.538 oz per coin. 
• Through June 13, June monthly sales are already x2.75 times higher than sales for the entire month of June 2019, with average coin size sold so far this June running at 0.985 oz per coin, against 0.625 oz per coin in June 2019. 

It seems investors still showing little signs of moderating safe haven demand for gold, despite robust performance in the financial markets until this week profit-taking blowout. 

Gold can be seen as both a hedge and safe haven against a range of key financial and political risks, but it can also be viewed as a long-run wealth storage tool, and, given its liquid nature, as a precautionary savings instrument for tail risks. If the current demand remains robust in the face of rising gold prices, we are likely witnessing a risk-return relationship/expectations shift amongst the savers and investors, away from considering trend-driven investment strategy of thee recent years and in favour of investing against a major concern for significant tail risks driving the markets in months and years ahead.

13/6/2020: What Do Money Supply Numbers Tell Us About Social Economics?

What do money supply changes tell us about social economics? A lot. Take two key measures of U.S. money supply:

• M1, which includes funds that are readily accessible for spending, primarily by households and non-financial companies, such as currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; traveler's checks; demand deposits; and other checkable deposits. 

• MZM, which is M2 less small-denomination time deposits plus institutional money funds, or in more simple terms, institutional money and funds available for investment and financial trading.

Here we go, folks:

Does this help explain why Trumpism is not an idiosyncratic phenomena? It does. But it also helps explain why the waves of social unrest and protests are also not idiosyncratic phenomena. More interesting is that this helps to explain why both of these phenomena are tightly linked to each other: one and the other are both co-caused by the same drivers. If you spend a good part of 20 years pumping money into the Wall Street while largely ignoring the Main Street, pitchforks will come out. 

The *will* bit in the sentence above is now here.

12/6/20: American Love Affair with Debt: Part 2: Leverage Risk

I have earlier updated the data on the total real private economic debt in the U.S. as of the end of 1Q 2020 here: https://trueeconomics.blogspot.com/2020/06/12620-american-love-affair-with-debt.html

So, just how much is the U.S. economic growth dependent on debt? And have this dependency ben rising or falling prior to COVID19 pandemic onset? Well, here is your answer:

Using data through 1Q 2020, U.S. dependency on debt to generate economic growth in the private sector shot through the roof (see dotted red line above). In other words, U.S. corporate sector is leveraged to historical highs when the corporate debt levels are set against corporate value added.

All we need next is to see how 2Q 2020 COVID19 pandemic figures stack against this. A junkie hasn't been to a rehab, and the methadone clinic is closed...

12/6/20: American Love Affair With Debt: Pre-COVID Saga

Latest data for debt levels at the U.S. non-financial businesses and households (including non-profits) is out this week. So here are the charts and some stats:

There has been a bit of rush back in 1Q 2020 (the latest data available) to load up on loans by both private households and private businesses. 

• Non-financial business debt rose 7.86% y/y in that quarter, before COVID19 pandemic fully hit the U.S. economy. For comparison, previous quarter, debt rose *just* 4.81% y/y and 8 quarters annual growth rates average through 4Q 2019 was *only* 6.21%. Not only the U.S. businesses levered up over the last two years at a pace faster than nominal GDP growth, but their reckless abandon went into an overdrive in 1Q 2020.
• U.S. households and non-profit organizations serving them were not far behind the U.S. businesses. Debt levels in the U.S. households & NPOs rose 3.75% y/y in 1Q 2020, up on 3.26% y/y growth rate in 4Q 2019 and on 3.32% average growth rate over the two years through 4Q 2020. Which, in part, probably helps explain how on Earth financially-stretched American households managed to buy up a year worth of toilet paper supplies in one week in April.

Thus, overall, real private economic debt in the U.S. has ballooned in 1Q 2020, rising to USD 33.092 trillion. This marked y/y growth rate of 5.80% in 1Q 2020, up on 4.03% growth in 4Q 2019 and on 4.73% average growth over two years through 4Q 2019:

 

And yes, leverage risks in the private sector have increased as the result of these figures. At the end of 1Q 2020:

• U.S. non-financial businesses debts stood at 78.07% of GDP, an all-time high since the post-WW2 data started;
• U.S. households and NPOs debts stood at 75.6% of GDP, marking an official end to the post-Global Financial Crisis 'deleveraging' period that saw debt/GDP ratio declining to the low of 74.2% in 4Q 2019.
• Total non-financial private real economic debt stood at 153.67%, the highest level since 1Q 2011.