18/1/2014: WLASze: Mathematics of Birds, Internet of Robots, Architecture on the edge, & Hannah Höch Retrospective

This is WLASze: Weekend Links on Arts, Sciences and zero economics.


A very well-written essay on natural optimisation, the case of migrating birds:
http://arstechnica.com/science/2014/01/doing-math-on-the-fly-birds-form-the-flying-v-for-efficiency/

Favourite quote: "It may be that birds have sensory abilities we weren’t previously aware of. It might also be that ibises, and possibly other birds, have an innate ability to do the required mathematics, quite literally, on the fly: judging the distance to the next bird and counting wingbeat cycles as they go." Good luck solving that optimisation problem in your head, folks…

And while on the topic of mathematics for birds, here's another bit, on distribution of territorial rights amongst sea birds: http://www.futurity.org/sea-birds-do-math-to-divvy-up-turf/

What's the PISA score for birds mathematical abilities, anyone?


Mathematics is language, and language is about communications. Pair together cold logic of simple dynamic systems (linear learning) and complex mechanics (robotics) and you have an untapped demand pool for communications between robots… Which begs a question: why not create an 'internet for things'?.. Why not, indeed, when one can easily be conceived as a cloud-based system...
http://scinewsblog.blogspot.ie/2014/01/robots-can-now-communicate-over-world.html
Skynet it is not. At least it is not yet. But as more humanity decamps for Mars in the future, who knows, may be the planet of Earth will succumb to an apocalyptic vision of robots-dominated machines-led Skynet?.. I personally prefer mathematics for birds to internet for robots… kind-of less menacing and more beautiful at the same time...


Earlier this month, AIA, American Institute of Architects named best projects of the year its Honor Awards: http://www.dezeen.com/2014/01/13/2014-aia-institute-honor-awards-winners-announced/
My favourite is, as usual, residential project (I love the challenge of site/scale/space/aesthetic that residential and small-scale public buildings provide):

Here's more on that project: http://www.archdaily.com/255187/the-pierre-olson-kundig-architects-2/


It seems I can't escape birds themed posts today, so here's the one that flips fly fishing upside-down… or at the very least adds some serious challenge to it:
http://scinewsblog.blogspot.ie/2014/01/fish-catches-bird-in-flight-video.html
Those of you who know about fly fishing would appreciate the sheer challenge of replicating this with a fly rod… weight 18 won't cast out a fly to simulate a bird… no way… we need some more serious gear for that…


St Petersburg in the news - the city got a Faberge museum, courtesy of Viktor Vekselberg: http://www.iskusstvo-info.ru/event/item/id/67

Meanwhile, Sundance Festival gets Russian treats… http://rbth.co.uk/arts/2014/01/17/russia_standouts_at_sundance_33331.html


A new retrospective in London that is beyond 'worth visiting' - it is a must-see… "In the 1910s, German artist and feminist Hannah Höch was the lone woman among Berlin’s avant-garde Dada movement, the raucous group responsible for naming a men’s urinal Fountain and turning it into one of the most influential artworks of the last century. Though she hung out with art stars like Piet Mondrian, they never quite saw her as an equal--artist Hans Richter once smugly dismissed her as “the girl who procured sandwiches, beer, and coffee, on a limited budget.”"

Time lapsing to today, Höch is now recognised as one of the most important Dadists in the history of art, and yet rarely profiled in solo shows. This makes a major new exhibition at London’s Whitechapel Gallery that showcases over 100 works by Höch from the 1910s until her death at age 88 in the 1970s. Run to http://www.whitechapelgallery.org/exhibitions/hannah-hch

Enjoy!

18/1/2014: Portugal 'doin Dublin' or going for broke?

A very interesting interview with David Slanic, CEO of Tortus Capital Management LLC on Portugal's sovereign debt sustainability and the need for further debt restructuring.

http://janelanaweb.com/trends/portugal-needs-a-national-salvation-pact-with-a-short-mandate-to-restructure-the-sovereign-debt-david-salanic-tortus-capital/

Is Portugal really that close to restructuring as to pre-borrow reserves forward? Or is it pre-borrowing to do what Dublin did and exit in H2 2014 with no precautionary line of credit?..

Signals from the CDS markets? No evidence of serious markets concerns so far...

18/1/2014: Ireland's Credit Upgrade: Some Background

Moody's upgraded Irish sovereign debt ratings last night. My analysis is here: http://trueeconomics.blogspot.ie/2014/01/1812014-moodys-upgrade-for-ireland.html

Couple additional of points in relation to the upgrade.

Here's the current Western Europe league table in the Euromoney Country Risk Survey, placing Ireland at the top of the peripherals:

This is a consensus view across ECR group of economists and analysts and the core downward risk source for the ratings is Economic Assessment. Ratings upgrade will most likely translate into a higher score on Credit Rating, pushing us closer to France into the 2nd tier.

The upgrade was predictable and overdue. Two weeks ago I run the analysis of CDS spreads over 2012-2013 period (here: http://trueeconomics.blogspot.ie/2014/01/512013-euro-periphery-in-cds-markets.html) and the core conclusion relevant to today's news is in the last bullet point of the post.

• Irish CDS since the beginning of 2012 are carrying heavier weighting on probability of default estimates: in the last two charts, our CPD is priced along the mid envelope of (CDS, CPD) quotes, while Greece implies underpricing of the probability of default (along the lower envelope). Our probability of default is slightly over-estimated compared to Portugal and Spain, but is in line with Italy. This potentially relates to the point raised above in relation to speed of our CPD declines over 2013: we might be experiencing an over-due repricing (very slight) in the relationship between the CDS levels and implied estimates of the probability of default.

In other words, the CDS pricing was signalling lower probability of default for Ireland. And it was predictable on the basis of core fundamentals as well. Here's from the post back in March 2013:
http://trueeconomics.blogspot.ie/2013/03/1532013-irish-banks-still-second.html "my view is that we are due an upgrade, but a single notch one, to reflect economic decoupling from the peripherals".

So to reiterate: the upgrade was

1. Overdue
2. Expected
3. About right on the side of the change in the rating
4. A good net positive on expected markets impact, and
5. Enhancing stability of our debt, with medium-term expectation for lower borrowing costs (this will not play out right away, as Ireland's debt maturity profile is long-dated).

Meanwhile, this week's Euromoney ECR note on FY2013 credit risks shows continued drag on ratings in the euro area:

The full analysis (restricted access) is here. My quote on the above is about the general sense of complacency at the euro area 'leadership' level:

My full comment given to ECR on the 2013 results is here:

Euro area:

Euro area remained the weakest economic region globally, over the entire 2013, with a number of countries struggling with high unemployment, recessionary macroeconomic conditions, extremely low and near-deflationary price pressures and operating in the monetary environment still characterised by anaemic growth in money supply and tight credit markets. Based on the latest data, euro area is the only region world wide that is expected to post negative real GDP growth in 2013. 

The fact that this abysmal performance comes alongside relatively benign output gap, compared to other regions, and amidst overall improved global economic outlook, signals structural nature of the Great Recession in the euro area. In addition to the weak macroeconomic performance, euro area continued to suffer from acute leadership deficit - a fact that did not go unnoticed by the analysts. 

In 2013, eurozone's leadership effectively shifted from the risk-management mode that underpinned relatively rapid and robust rhetorical responses to the crisis in 2012, to a navel-gazing mode. Few of the policy proposals tabled over 2012 in response to the sovereign debt and banking sector crises were implemented or fully structured in 2013. The monetary policy, while remaining  relatively accommodative, continued to deploy the very same measures used in previous years, with little improvement in the credit supply conditions on the ground, at the level of the real economy. Thus, monetary growth was subdued and retail interest rates margins over the policy rate continued to rise, making credit to euro area enterprises and households both less available and more expensive.

Sub-regional:

The focal point of the euro area adverse news flow over 2013 has shifted from the so-called PIIGS to the relative newcomers to the crisis-stricken periphery: Cyprus and Slovenia. With Cyprus' depositors bail-ins setting a new benchmark for private sector burden sharing that will serve as a template for the euro area future crisis resolution measures, Slovenia has been desperately attempting to avoid a formal Troika bailout of its weak banking system. As the result, the country saw significant deterioration in macroeconomic environment over 2013. 

In the second half of 2013, with growth starting to return to core euro area economies, the centre of gravity in the Great Recession moved to economically weak Italy and France and away from the recovery-bound Ireland and Spain. In fact, 2013 macroeconomic and fiscal performance by the former warrants significant improvements in its credit scores, while the latter is starting to gain ground in terms of stabilising external trading conditions, while lagging on fiscal side. The expectation, therefore, is for continued decoupling of Ireland from the weaker peripherals sub-group as signalled by the CDS spreads and bond yields to-date.

Overall, Italy remains the weakest large euro area economy, member of the Big 4 countries of the eurozone, with virtually no growth and no reforms compounded by the risk of renewed political instability. Current expectation is for the real GDP contraction of 1.8% in 2013 following a 2.37% decline in 2012. Italy is also the only large euro area economy that is expected to post a fall in overall exports of goods and services in 2013 and, along side Spain, reduction in levels of employment across the economy. As the result of its poor growth performance, Italy is likely to post the only increase in the net government deficit for 2013 of all big euro area states, leading to an increase in the country debt/GDP ratio to 132.3%. The key to the country deteriorating credit risk scores, however, rests with the general markets perception that Italian political leadership remains incapable to deliver any meaningful structural reforms. 

Meanwhile, France is showing all the signs of deepening deterioration in manufacturing and core services activity since the onset of Q4 2013. French economy is currently once again on the edge of another recessionary dip and unemployment is poised to post further increases in Q4 2013-Q1 2014. At the same time, like Italy, French leadership appears to be stuck in 'neutral' when it comes to fiscal and structural reforms - a situation that is likely to spillover into a twin crisis of anaemic growth conditions and renewed industrial unrest in early 2014 (in 2013, French unemployment rate exceeded that recorded in Italy in 2012). With nearly zero structural adjustment underway, France's current account remains in deficit (-1.6% of GDP in 2013), while general government gross debt is now at around 93.5% of GDP, up on 90.2% in 2012, and heading higher in 2014. France also has second largest primary deficit of all larger euro area economies, as well as overall Government deficit that is in excess of that recorded in Italy. With public and household finances in tatters, France is likely to finish 2013 with lowest end-of-year inflation of all big euro area economies, pushing the country closer to deflation.

18/1/2014: Moody's Upgrade for Ireland

Moody's Investor Services upgraded Irish sovereign ratings tonight in a move that was expected by the analysts (http://trueeconomics.blogspot.ie/2013/09/2092013-irelands-credit-risk-scores.html) and was overdue.

Moody's release on this is here: https://www.moodys.com/research/Moodys-upgrades-Irelands-sovereign-ratings-to-Baa3P-3-outlook-changed--PR_290559?WT.mc_id=%40moodysratings

Key takeaways from the release:

1. Rationale for the upgrade: "The two main drivers for the upgrade are: (1) The growth potential of the Irish economy, which together with ongoing fiscal consolidation is expected to bring government debt ratios down from their recent peak; (2) The Irish government's exit from its EU/IMF support programme on schedule, with improved solvency and restored market access.
2. On growth potential: "Moody's expects a stronger expansion of net exports in the next few years as the negative impact lessens from the expiry of key pharmaceutical patents and as Ireland's major trading partners register more robust growth. Improved competitiveness ...since the 2009 recession, contributing to the shift from large current account deficits before the crisis to the current surpluses. Moreover, there are signs of a revival in domestic demand as household savings rates come down from historic highs. Foreign direct investment also remains extremely strong, attracted by Ireland's innovative and flexible labour force, and the housing sector appears to have stabilized."
3. On fiscal side: "The second driver of the upgrade is the Irish government's exit from its three-year economic adjustment programme in mid-December 2013. Its ability to do so without a precautionary credit line reflects that the government's reform agenda stayed largely on track throughout the programme, despite weaker than expected domestic and external economic conditions. The government regularly outperformed quantitative fiscal goals, which helped it regain and retain market confidence. Similarly, Moody's expects that Ireland will be able to address its excessive deficit (i.e. bringing it sustainably below 3% of GDP) by 2015."

Readers of this blog would know my views as to the risks associated with some aspects of the above assessments. However, the risks are unlikely to play out over the next 12 months horizon and are not carrying significant probability to derail overall low-growth recovery trend. So, in my view, Moody's is justified in shifting ratings up to Baa3 from Ba1.

On risks side, moody's cite: "That said, the clean-up of the banking system's non-performing loans is still in the early stages. In 2013, the Central Bank of Ireland (CBI) used its increased powers to establish a schedule requiring banks to resolve mortgage and SME loan arrears on a sustainable basis. The CBI is also demanding that banks strengthen collection efforts from customers who are able to pay. In the meantime, however, these mortgage resolutions are likely to increase foreclosures, impairing profitability and potentially dampening the housing market recovery."

Agree with their view, though other risks also exist, beyond the mortgages resolution process and banking sector performance.

Nice bit about the upgrade - it comes after Moody's delayed any changes to Portugal's ratings last week, a move that was interpreted by some analysts as a signal that the agency could have left Ireland's debt ratings unchanged as well.

My view on the ratings is that Ireland is moving into the same category of debt as Belgium (aptly, along with Belgium's longer term growth trajectory of ca 1.5% pa and Belgium's long-term struggle of shifting out of the 100% debt/GDP ratio for sovereign debt). It is a net gain for us, given the scale of the crisis we are starting to recover from.

Note: a H/T & thanks to Conrad Bryan @conradbryan and Dave Ryan @MailPidgeon for alerting me to Moody's action this late at night.

17/1/2014: BlackRock Institute Survey: N. America & W. Europe, January

BlackRock Investment Institute released its latest Economic Cycle Survey for EMEA region was covered here: http://trueeconomics.blogspot.ie/2014/01/1712014-blackrock-institute-survey-emea.html.

Now, on to survey results for North America and Western Europe region. emphasis is always, mine.

"This month’s North America and Western Europe Economic Cycle Survey presented a positive outlook on global growth, with a net of 83% of 109 economists expecting the world economy will get stronger over the next year, marginally higher than 81% reported in December. The consensus of economists project mid-cycle expansion over the next 6 months for the global economy."

"At the 12 month horizon, the positive theme continued with the consensus expecting all economies spanned by the survey to strengthen except Portugal, which is expected to remain the same."

Of note:

• Ireland is now moved into the middle of 'growth distribution' from previous position firmly ahead of the entire region. Italy and Spain are now posting stronger expectations than Ireland.
• Eurozone expansion expectations are still lagging those of the UK and the US.
• Germany continues to lead the Eurozone expectations.

Out to 6 months horizon: "Eurozone is described to be in an expansionary phase of the cycle and expected to remain so over the next 2 quarters. Within the bloc, most respondents expect only Greece to remain in a recessionary phase at the 6 month horizon."

"Over the Atlantic, the consensus view is firmly that North America as a whole is in mid-cycle expansion and is to remain so over the next 6 months."

Red dot denotes Austria, Germany, Norway and Switzerland



Note: these views reflect opinions of survey respondents, not that of the BlackRock Investment Institute. Also note: cover of countries is relatively uneven, with some countries being assessed by a relatively small number of experts.

17/1/2014: BlackRock Institute Survey: EMEA, January

BlackRock Investment Institute released its latest Economic Cycle Survey for EMEA region. Emphasis is mine.

"With caveat on the depth of country-level responses, which can differ widely, this month’s EMEA Economic Cycle Survey presented a bullish outlook for the region."

The consensus of respondents describe Slovenia, Croatia, Egypt and, the Ukraine to be in a recessionary state and expected to remain so over the next 6 months except for Croatia, where there is an even split between expansion and contraction.

Note: Red dot represents Czech Republic, Kazakhstan, Hungary, Romania, Israel, Poland and Slovakia

At the 12 month horizon, the positive theme continues with the consensus expecting all EMEA countries to strengthen with the exception of Turkey. So Russia is improving 6mo forward improvement in outlook on current phase (see above chart), but Ukraine is expected to remain in a late cycle recession. Out at 12mo horizon, Ukraine is still expected to underperform Russia.

Note Slovenia's performance expectations. It is worth noting that the IMF is releasing Slovenia's economy's assessment, so it would be interesting to take a comparative look at the Fund expectations.


Globally, respondents to the EMEA survey "remain positive on the global growth cycle with a net 82% of 61 respondents expecting a strengthening world economy over the next 12 months – an 8% increase from the net 75% figure last month. The consensus of economists project mid-cycle expansion over the next 6 months for the global economy."

Note: these views reflect opinions of survey respondents, not that of the BlackRock Investment Institute. Also note: cover of countries is relatively uneven, with some countries being assessed by a relatively small number of experts.

17/1/2014: Goods Exports: A Story of Irish Tax Arbitrage Mode of Growth?

I covered monthly and annual trends in Irish Trade in Goods statistics yesterday (http://trueeconomics.blogspot.ie/2014/01/1612014-trade-in-goods-november-2013.html), noting that

1. Irish exports of goods are continuing to shrink - not grow at a slower rate, but grow at a negative rate - over 2013
2. Irish trade surplus in goods is now in negative growth territory for the third year in a row.
3. Past resilience of Irish trade in goods statistics was predominantly down to the collapse in imports.

In the past, I have argued that we are likely to witness further deterioration in external balance for Ireland once the domestic economy moves back into growth cycle (imports of consumer goods and capital goods will all rise). Given the overall problematic situation with domestic disposable after-tax income, this implies that we can lose the only pillar supporting our debt sustainability (external balance) if capex ramps up, while employment creation and wages growth is lagging. In other words, a jobless recovery on foot of capex expansion can end up being a pyrrhic victory for Ireland.

To see this, consider imports/exports ratio in the economy (to remove monthly volatility, we use half-yearly aggregates):

Following a large jump in the ratio of exports to imports on foot a significant decline in imports, we are now running below the historical trend. This suggests that our exports of goods are becoming less, rather than more, tax-efficient (which, of course, is consistent with pharma sector decline in our exports of goods). Good news is that this means our exports are also potentially becoming better anchored to real value added carried out in this economy, and less tax arbitrage-driven. But the bad news is that at the same time, exports growth rates are collapsing:

And the decade-averages, shown in the chart above are telling this story.

This is worrying... doubly so because what is taking place of our good exports is the 'success' story of our ICT services sector, which is growing on foot of tax arbitrage. We are replaying the same 'advantage' as before - instead of developing successful, value-added based exporting model we are just switching from one tax arbitrage play to another. ICT manufacturing tax arbitrage of the 1990s gave way to Pharma tax arbitrage play of the 2000s, which is now giving way to ICT services tax arbitrage play of the 2010s... 

16/1/2014: Trade in Goods: November 2013

Ireland's seasonally adjusted trade surplus for trade in goods only (excluding services) was down 15% in November compared to October.

Per CSO, there was "a decrease in seasonally adjusted exports of €327 million (-5%) to €7,009 million" in November 2013 compared to October. Seasonally
adjusted imports rose by €132 million (+3%) to €4,472 million. Thus, seasonally adjusted trade surplus fell to €2,538 million - "the lowest seasonally adjusted trade surplus since August 2008."

Year on year, "the value of exports decreased by €607 million (-7%) to €7,710 million. The main drivers were decreases of €572 million (-25%) in the exports of Medical and pharmaceutical products and €158 million (-8%) in the exports of Organic chemicals. … Comparing November 2013 with November 2012, the value of imports rose by €335 million (+8%) to €4,377 million. Imports of Machinery specialised for particular industries increased by €121 million (+175%)."

With 11 months of data in, we can provide a reasonable approximation for H2 2013 data and full year outlook. Caveat - these are simple extrapolations from 11 months data.

The first chart shows annual data for exports. Based on January-November data:

- Annual imports are set to rise by ca 0.4% y/y, after having posted a 1.76% rise in 2012 and 5.55% rise in 2011. On a cumulative basis, imports rose by EUR3.582bn over 2011-2013 period.
- Annual exports of goods are set to post a contraction of approximately 4.3% y/y against 2012 annual growth of 0.5% and 2011 annual expansion of 1.70%. Cumulatively from January 2011 through the end of 2013, exports of goods are set to shrink by EUR1.975bn.
- Note that in all three years: 2011, 2012 and 2013 exports growth under performed imports growth and this is before any significant uptick in domestic consumption demand for imports or domestic capes demand for imported capital goods.
- Trade surplus for 2013 is expected to decline by around 9.8% on 2012 levels, after having posted a decline o 0.9% in 2012 and a decline of 2.3% in 2011. Cumulatively over the last 3 years, the decline in trade surplus amounted to EUR5.557bn.

The next chart plots annual rates of growth and 10-year growth rates averages. This shows that the current decade is the worst in the history of the state with exception of the 1930s, with the decade of 2000-2009 being the third worst.

This puts into perspective the problem with the assumed debt sustainability framework based on growth in exports. The chart above shows exports of goods only, omitting exports of services. Two points, however:
1) In the 1990s, recovery was led by exports which were predominantly on the goods side, so the average rates in the chart for the decade of the 1990s are closely correlated with total exports growth rates. Today, growth in services exports outpacing growth in goods services has much lower impact on the economy overall, since exports of services are less anchored to the domestic economy and are more reflective of the aggressive tax optimisation strategies of the MNCs operating in the ICT and IFS services areas.
2)Services exports growth is slowing so far as well. This was covered here: http://trueeconomics.blogspot.ie/2013/12/20122013-how-real-is-that-gdp-and-gnp.html

Finally, the last chart plots exports of goods adjusted for prices changes and exchange rates using Trade Price Index for Exports, expressed in 2006 euros.

The upward correction in 2009 and 2010 period now is almost fully erased by declines since 2010. And the decline seems to be accelerating.

Most of the above declines in exports in the last two-three years has been driven by the pharmaceuticals sector. I will be covering this topic when dealing with more detailed composition of exports once we have data for December 2013. In the mean time, you can see CSO data for January-November 2013 y/y comparatives in Table 3 here: http://www.cso.ie/en/media/csoie/releasespublications/documents/externaltrade/2013/gei_nov2013.pdf

16/1/2014: Some thoughts on Ireland's Rankings in the Index of Economic Freedom

Here are my thoughts on the Heritage 2014 Index of Economic Freedom scoring for Ireland (covered here: http://trueeconomics.blogspot.ie/2014/01/1612014-2014-index-of-economic-freedom.html) :

First off: the positive is that Ireland's score is rising (the ranking improvement is a major positive, but I have some reservations about that, voiced below). Another positive is that the improvements are occasionally structural although predominantly they risk being cyclical:

• Government spending gains are, in my view, largely cyclical (driven by tax extraction measures and capital spending cuts, plus banks measures tapering of) with some structural changes (some of tax systems put in place are sustainability enhancing, such as property tax).
• Fiscal policy gains are largely symbolic and driven by the EU-wide changes (6-pack, 2-pack and Fiscal Compact, etc).
• Labour markets improvements, especially some activation measures deployed are structurally sustainable and often positive. Unfortunately, their impact today runs against high unemployment and low jobs creation. In other words, we are pursuing right reforms at the wrong time. Aside from these, there is preciously little change in the structure of the labour markets. Competitiveness gains, stripping out the effects of sectoral composition, are flattening out, albeit these are still significant compared to pre-crisis.
• Trade freedom improvement is puzzling. There has been no major improvement in the EU treaties or bilateral trade agreements. Aside from this, there has been little change to the regulatory systems and costs involved in exporting from and importing into Ireland. On financial services side, there has been an increase in regulatory barriers to transactions, including compliance tightening, enhanced reporting requirements and higher costs.

Now on to unpleasant bits. The report on Ireland is raising some questions:

1) Debt restructuring is cited in relation to the February 2013 swap of the IBRC Promissory notes for senior sovereign bonds. It is alleged that this resulted in a significant reduction in debt levels. In my opinion, the swap did not deliver significant material alteration to the total debt. Instead it achieved markedly improved maturity profile of debt, and reduced front-end cash flow requirements relating to the original promissory notes. The swap was a net positive, but of modest impact when it comes to debt levels.

2) On property rights: since May 2011 the Irish Government is engaged in expropriation of private pension funds via a levy on capital component of the funds and this levy was increased in the Budget 2014. Further, Irish Government forced (since 2010 and ongoing under the IBRC shutdown proceedings) sales of distressed assets to the State agency, NAMA. This can be treated as a de facto (de jury bit remains to be tested in the courts) expropriation of a large number of private assets, especially where such assets included at-the-time fully performing loans.

4) Top income tax rate is 41%, but it applies to earnings above a very low threshold. Heritage analysis also excludes the USC and PRSI both of which are taxes on individual income. The analysis ignores the differences in taxation of the self-employed and PAYE incomes. Counting all income tax measures, upper marginal tax rate on income in Ireland stands at above 50%. In the case of businesses, the report does not cite rates - a major component of tax costs. The report quotes tax receipts as a share of Gross Domestic Income, which really means GDP. However, stripping out transfer pricing and tax transfers by the multinationals (which are not fully captured by the tax base) Irish Government tax burden is significantly above 27.6% of our economy.

5) The report cites prices as being 'generally set by market forces'. However, many goods and services traded in Ireland's domestic economy are either directly priced by the state regulators, disproportionately impacted by state taxes, levies and duties and/or are set by state oligopolies. These include energy prices, prices relating to all forms of public transport and even some private transport, majority of health services, pharmaceuticals, education, alcohol, tobacco, fuel, social protection, etc. They also include many professional services costs set under the power of professional bodies that are granted market power by the state. Whilst private sectors are in a deflationary environment, state-controlled prices are up double digits over the course of the crisis.

6) Irish lending and investment climate is assessed as unchanged year on year. Credit supply in Ireland is continuing to contract, especially to indigenous firms, while domestic investment in new enterprises is now nearly fully state-captured via state-controlled or regulated funding schemes. Meanwhile, the banking sector saw no meaningful reforms other than continued shift toward a duopoly model. Competition in banking sector is collapsing and this is an ongoing development. Irish banks are becoming  more domestic, cross-border financing is becoming less available.

7) The report cites 'public debt' at 117% of GDP. Assuming this covers General Government Debt the actual figure is at 124.1% of GDP per latest official estimate for 2013. Public debt traditionally includes liabilities of the local authorities and state bodies, which pushes the above figure well ahead of the reported percentage. Once again, given that a meaningful comparative for Irish economy is not GDP, but some metric closer to GNP, even 124.1% figure is a massive underestimate of the true extent of the 'public' debt overhang.

Conclusion: In my opinion, the above caveats do not necessarily imply that Ireland's position in the IEF deteriorated significantly year on year in 2013. However, they do pose some questions about the improvement recorded in the overall ranking for Ireland compared to 2013.

16/1/2014: 2014 Index of Economic Freedom: Ireland Up 2 Rankings

Heritage Institute's 2014 Index of Economic Freedom was out on Tuesday and here are some details of Ireland's performance:

1) We are ranked number 9 in the world, up from 11th in 2013. Which is good news. We are second best in Europe and 1st in the EU28.

2) We posted a small improvement in our score (+0.5 to 76.2), the first time we recorded an improvement in the score since 2010.

So key improvements are on Government spending and fiscal performance (say thanks to the Troika?), improved labour markets score (say thanks to the Troika?) and improved trade freedom.

More on these:

The above, in effect, highlights the shortcomings of the Heritage Index (as compared to http://www.freetheworld.com/) as Heritage inputs into analysis can be relatively narrow and excessively qualitative in some areas.

Note, on property rights, the Heritage seemingly ignores the issues related to expropriation of pension funds that continued in 2013.

3) Comparative:

You can visualise more comparatives here: http://www.heritage.org/index/visualize

16/1/2014: Fresh Signs of Euro Area Banks Deleveraging Out of Global Growth

For some time now I have been pointing at the ongoing exits by the European banks from the rest of the world (obviously there are some exceptions)... Here's a reminder http://trueeconomics.blogspot.ie/2012/10/13102012-europes-banks-are-now-global.html

Now, more evidence trickling in:

And the process ain't over yet...

15/1/2014: BusinessInsider's Investment Ideas For The Next Decade

BusinessInsider is running a 10-year investment suggestions from some analysts...
http://www.businessinsider.com/best-investment-ideas-for-the-next-decade-2014-1#ixzz2qUatCHZj

Warning: my suggestion is at number 17.

I should put some disclaimers around this - in my view, one should aim to hold a diversified portfolio of investments, structured to match your life-cycle objectives and risk preferences, as well as reflecting income and wealth specifics, etc. Hence, my contribution should be looked at in this context, as food for thought...

The idea of 10 years-out outlook gave me a bit of a thought... and although I am not known for providing trading ideas, here are my 5 cents on 15 and 30 year horizons:

For the next 15 years: A basket of precious metals: Both monetary conditions and physical demand dynamics suggest that a non-speculative (cost-averaging-based) accumulation of these within a balanced portfolio will provide a reasonable long term hedge against upcoming risks and demand pressures. This is not a speculative bet, but a view that long-term, small fixed share of a balanced portfolio should be maintained in the gradually accumulated precious metals positions.

For the next 30 years: arable land with substantial water rights in Northern US and Central Canada. A combination of rising global temperatures, declining fresh water reserves and rising pressures on food production make it a compelling investment case. Opening up of the Northern Sea Route and generally increased accessibility of Northern Territories, coupled with stable institutional and legal environments are making it a good risk hedge for potential geopolitical risks that logically likely to accompany the aforementioned pressures.

15/1/2014: Things are fine... things are working...

On foot of disastrous (for euro area) long range forecasts from DG ECFIN (covered here: http://trueeconomics.blogspot.ie/2014/01/1412014-dg-ecfin-latest-long-range.html), Morgan Stanley latest forecast for the global economy is here:

H/T Fabrizio Goria @FGoria

2012 outrun: euro area = lowest growth
2013 estimated outrun: euro area = lowest growth
2014 forecast: euro area = lowest growth
2015 forecast: euro area = lowest growth on par with Japan

Unpleasant, to put it mildly... Meanwhile, here's some bragging about the great euro area achievements... obviously not to be confused with those stated above... via ESM Press Office:

@ESM_Press:
#ESM MD Klaus #Regling in hearing with EU Parliament Members, Strasbourg: lv/stream at 15:00 http://www.europarl.europa.eu/ep-live/en/schedule …
#Regling: I welcome this debate because I think transparency & discussion are essential ingredients for lively democracies
#Regling: not my role to defend troika, support overall eco. approach. €area faced existential crisis with no tools, so troika was set up
#Regling: I worked for #IMF & know well #IMF program design which was model for program of €countries under assistance
#Regling: our critics miss the point. GR, IR, POR, CY faced choice: buying time with #EFSF/#ESM program or collaps w/ adjustment overnight
#Regling: no #EFSF/#ESM program would have meant risk of leaving €area; polls show citizens of concerned countries want to stay in €area
#Regling: disagree that there is no democratic control for programs; troika advises, political decision is taken by elected governments
#Regling: In POR & IR even opposition parties at the time, which are today in government, committed to assistance programme
#Regling: decisions on #EFSF/#ESM financial assistance is for national gov/parl because risk is on national budgets
#Regling: am not minimizing the difficulties that the countries are facing, especially unemployment
#Regling: there are clear signs that our strategy is working, in Dec IRL & ES had successfully exited their programs.

Happy times... and -0.6-0.5+0.6+1.1 is just a fine, fine, fine arithmetic... cause you know... 'things are working'...

15/1/2014: Simple, but entertaining... a democratic elites 'score card'

Recently, I cam across the following highly simplified, but rather amusing graphic highlighting some differences between the US and Italy

It is, as I noted, a highly stylised and simplified sort of information. Nonetheless, it does make a valid point: why are European democracies top-heavier than other democracies?

And then I checked Ireland:

• Population 4.589 million (2012)
• Senators: 60 (76,483 persons per senator)
• Dail Eireann: 166 TDs (27,645 persons per TD)
• Ministers: 14 Ministers and 15 Ministers of State (158,241 persons per Minister)

Just for your bemusement, not for some scientific or even economic argument sake...

Note: Auto Blu references state cars and Carburante references cost of petrol per litre.

15/1/2014: Are Irish Family Benefits Really the Highest in the OECD?..

An interesting chart on public spending relating to families across the OECD states:

Ireland is a clear leader in terms of family supports. But the bulk of our lead comes from cash payments (second only to Lux). Which suggests that Irish families do not need another tax break or lower tax burden.

There is a problem, however, with this assessment. Here's why.

Per methodological note behind the chart (see here: http://www.oecd.org/els/family/PF1_1_Public_spending_on_family_benefits_Dec2013.pdf)

"Child-related cash transfers to families with children [include] …child allowances, with payment levels that …sometimes are income-tested (PF1.3); public income support payments during periods of parental leave (PF2.1) and income support for sole parents families." Which, obviously, means the chart is distorted by non-working parents allowances and payments.

Furthermore, "Public spending on services for families with children includes, direct financing and subsidising of providers of childcare and early education facilities, public childcare support through earmarked payments to parents (PF3.4), public spending on assistance for young people and residential facilities, public spending on family services, including centre-based facilities and home help services for families in need." Which largely does not apply to the majority of Irish families outside income-tested cases.

Finally, "Financial support for families provided through the tax system. Tax expenditures towards families include tax exemptions (e.g. income from child benefits that is not included in the tax base); child tax allowances (amounts for children that are deducted from gross income and are not included in taxable income), child tax credits, amounts that are deducted from the tax liability…" Some of these do apply to working families with children in Ireland.

Worse: "…tax advantages for married people as exists in, for example, Belgium, France, Germany and Japan are not considered to serve a ‘social purpose’, and are not included here (regardless of whether or not such measures are part of the basic tax structure). Only the value of support for children through such measures is included."

Lastly, it appears that data above is not adjusted for the size of families.

In other words, we have no idea as to where Ireland really stands in comparison to other countries in terms of subsidies/supports for working families...

15/1/2014: 2008 Guarantee was "fully justifiable": J-C. Trichet

Yesterday, the former head of the ECB, Jean-Claude Trichet, told the EU Parliament's Committee on Economic and Monetary Affairs that the Irish government had been correct to guarantee the banks in September 2008.

The guarantee, which ended up imposing onto the Irish taxpayers costs of EUR64bn or more (depending on how one calculates the full extent of banking measures applied, and excluding the payments on the Guarantee by the banks) was a "fully justifiable position given the very difficult circumstances [the Irish government] faced".

However, per Mr Trichet, Ireland has issued the Guarantee all on its own, based on the same advice as given to other countries. "The message from the (European) Central Bank to Dublin was the same as the message from the Central Bank to Germany, to Belgium, to France, and we were at the heat of the crisis saying clearly, beware. We know what happens after we had Lehman Brothers."

In fairness to Trichet, as he claimed yesterday, the ECB did warn on numerous occasions that prior to the crisis, there was a growing cost competitiveness gap across the euro area and that fiscal performance was insufficient for a number of countries in the region.

More on the story is here: http://www.irishtimes.com/business/economy/europe/ireland-s-bank-guarantee-was-justifiable-claims-trichet-1.1655216

One way or the other, the Trichet's testimony now opens up room for the Government to put into public domain the content of the controversial letters that Trichet wrote to Minister Lenihan back in 2010 as well as full correspondence between ECB and Irish authorities back in 2008. Let's see what advice was exactly given to Ireland by the ECB on the Guarantee and subsequently.


Update: H/T to Seamus Coffey's: the letters that are yet to be released relate to 2010 exchanges between Mr Trichet and Brian Lenihan.

However, we still do not know as to what exact advice was given to Mr Lenihan by Mr Trichet and the ECB before the Guarantee of 2008. As far as I am aware, back in September 2008 there was no official ECB position on any government issuing guarantees to cover the liabilities in their banking sector. Even after Ireland issued its guarantee, there was no such position publicly formulated. In fact, Irish Government notified the ECB, the Ecofin and the Eurogroup of its decision to guarantee the banks liabilities ex-post issuing the guarantee. It did so at the same time as making the Guarantee public. The closest we know of that the Government came to potentially receiving any wisdom from the ECB of the Guarantee could have been during a phone call between Mr Trichet and Minister Lenihan that took place a week before the Guarantee issuance. As far as I am aware, we do not know the exact contents of this conversation.

14/1/2014: Irish M&A activity in 2013

Irish M&A values rose strongly in 2013, according to the Experian data.

• "Total number of Irish Mergers and Acquisitions and Equity Captial Market deals in 2013 was 254 - a decline of 15.1% from the 299 deals announced in 2012". 
• "The total value of deals for the year, however, increased significantly led by a spike in the number of mega (€1bn plus) deals. Transactions worth €38.590bn were announced in 2013, up by 39.1% from 2012’s €27.734bn worth of deals."
• Core mega-deals were split between pharma manufacturing and financial services
• "The Republic of Ireland represented approximately 2.4% of the total volume of all European transactions in 2013, and accounted for 4.9% of their total value. In 2012, the Republic of Ireland featured in 2.9% of European deals and contributed 3.6% to their total value."
• There were 37 large deals (over €120mln) announced in 2013, up by 32.1% on 2012’s total of 28 transactions; the twelve large deals announced in Q4 represented the busiest quarter in the large deals value segment since Q4 2006. Large deal values were up from €24.687bn in 2012 to €35.846bn in YTD 2013, a rise of 45.2%. The largest announced deal in 2013 was Perrigo Corp’s acquisition of Elan Corporation Plc for US$8.6bn.
• Mid-market (€12-€120mln) deal activity declined; 43 transactions were announced, down by 35.8% from the 67 deals announced in 2012. The aggregate value of mid-market deals fell by 34.4%, from €2.803bn to €1.840bn. Notable mid-market deals in 2013 included Dublin electronic payments business Payzone sell Cardpoint Ltd, to Houston-based Cardtronics Inc. for €119mln.
• The number of small deals (under €12mln fell by 11.1% on 2012’s figures; down from 54 to 48 transactions. The aggregate value of small transactions also fell - by 26.3%, from €243mln to €179mln.
• Largest by sector was - manufacturing. In 2013 accounted for 43.3% of deals; however, deal volumes here were down by 27.1% (from 150 in 2012 to 110 in 2013). 
• Second most active sector: wholesale, retail & repair, activity declined by 41.6%.
• Post and telecommunications sector saw 114% upturn in activity. 
• Social and personal services sector activity rose 76.5%. 
• Research and development sector activity was up 53.3%.  

Internationally:
"Europe saw a slight reduction in transaction volume in 2013 (from 10,500 to 10,476 deals), but an upturn in deal value, from €754.7bn in 2012 to €786bn, an increase of 4.1%."

"North American deal volumes were down by 28.7% (from 8,283 deals in 2012 to 5,908 in 2013), but the aggregate value of transactions was up by 1.3% year-on-year, to €939.7bn. North America returned strong activity in its manufacturing and information technology sectors in 2013."

"Asia-Pacific region ...volume was down 25.2% (from 8,822 deals in 2012 to 6,602 in 2013), without the associated increase in value recorded in the US and Europe (total deal value slumped from €616.9bn in 2012 to €385.6bn in 2013)."

See more on the subject here: http://www.experian.co.uk/assets/consumer-information/white-papers/corpfin/cf-monthly-review-dec-2013.pdf

A chart to illustrate:

14/1/2014: DG ECFIN latest long-range forecasts for euro area, 2014-2023

Some interesting, although abysmal, forecasts from DG ECFIN on euro area's growth prospects out through 2023. Original paper is linked here.

Few charts of note with my comments:

Total factor productivity growth in Euro area... three regimes: decline in 1970s, gradual and shallow recovery in 1980s-1990s, collapse in 2000s and early 2010s, and now expected shallow recovery to below 1% trend in 2015-2023... In brief - abysmal...

Subsequently, steady decline in TFP relative to the US, from levels already below those in the US in 1995 (ca 85% of the US levels back then) to some 25% lower than the US into 2023... Meanwhile, physical capital share is declining less dramatically and is remaining close to that found in the US... which implies that we are witnessing in the case of the euro area increasing relative physical capital intensity of production compared to tech and human capital intensity?..

Notice how the crisis effects on output growth are 'permanent' - through 2023 forecasts, the euro area is not expected to regain the rate of growth in output, let alone the levels of output consistent with pre-crisis trends. That is ca 15 years of 'lost decade' (obviously subject to forecast uncertainty) and a gap of ca 20% of GDP... and this gap will remain beyond 2023 (unless one to dream up a scenario of a discrete jump in GDP of ca 20% comes 2024...)

 Now onto US-euro area comparatives. These speak for themselves.

Ugly prospects for the euro area, to put it mildly.

And a summary of that conclusion:

13/1/2014: Seeking MEPs support for legacy debt resolution?

Today, Irish Times is covering the intention of the Minister Noonan to seek support for a retrospective debt deal for Ireland from the EU MEPs. Here's the full article: http://www.irishtimes.com/news/politics/noonan-to-seek-meps-support-for-debt-relief-over-banks-1.1652911

Couple of thoughts in relation to this intention:

1. This is the 7th year since the ill-fated banks guarantee that started the process of transfer of banking sector losses away from (some) investors in the banks (majority of unsecured and all secured and senior bondholders)  to the taxpayers. This, it appears, is the first instance in which the Irish Government is officially attempting to enlist support for the retroactive resolution of these transfers from the EU MEPs. Why? The Ireland Says No campaign of ordinary citizens and residents of the state have requested such assistance in a number of meetings with the MEPs. People like myself, whenever asked to brief the MEPs on the issues relating to the banking crisis have done so on a number of occasions. Irish Government, it seems, is only now coming around to a realisation that having MEPs support can be of value in addressing the problem? Why? I spoke to the ECON committee members some 6-8 months ago and asked them to support Ireland's efforts. Why is the Irish Government only now officially attempting to do the same?
2. Per article: "The argument that Ireland’s significantly high debt to GDP ratio of almost 120 per cent means that it needs further debt relief has emerged in recent months as a key strand of the Government’s campaign to secure support on legacy bank debt." Why? Sustainability of our debt has been , allegedly, tested by the Department of Finance, by the Central Bank, the Troika etc, and yet none of these entities and organisations ever once voiced any serious concern with sustainability of debt. How can the same Government that continues to claim that everything is sustainable, that Ireland is in a recovery, that we will repay every red cent of our debts etc etc etc now turn around and credibly claim that "it needs further debt relief"? What has changed "in recent months" to alter Government position? Did Government alter its position?
3. In June 2012, Irish Government announced that it has reached - claiming its own effort to credit - a 'seismic deal'. There were no qualifiers used, no caution given, no room for 'may be it won't happen' doubts allowed. The deal was the deal and that was it: Ireland was to get retroactive debt relief. Since June 2012, this 'seismic' deal was thrown like a proverbial banana peel into every gathering of voices doubting the Government achievement or debt sustainability dogma. And now, is Minister Noonan finally admitting there is no deal? Because if the deal is just a matter of time - an 'when' not an 'if' - and has only to wait until the SSM comes into force, then why does Minister Noonan need the MEPs support?

Lastly, as the readers know, this blog position has been that Ireland's total economic debt levels (household, Government and non-financial corporate, combined) are not sustainable. Non-sustainability  of debt in the context of my arguments always involved the view that Ireland is facing a choice: either fund current levels of debt and face long term structural collapse of growth in this economy, or we will need to restructure our debts. In terms of restructuring our debts, I have consistently suggested that the best target would be banks liabilities. The opposing side in the argument always put forward the planned/projected declines in debt/GDP ratio starting with 2014 as a sign of debt sustainability. the cost of such 'reductions' in debt liabilities on the economy (growth and investment effects) and society (health, psychological costs, social costs etc) never phased those who argued that the debt is sustainable. The Government has expended significant effort attempting to argue against the view that our debt is not sustainable. Is the same Government now directly agreeing with the positions they disputed? Are they really saying that we are facing a risk to our debt sustainability?

Setting aside the above issues, if Minister Noonan is indeed committed to seeking MEPs support for a retroactive debt relief for Ireland in relation to the debts related to our banking crisis, I am happy to help in any way I can. it's been long (too long) overdue.

12/1/2014: Icelandic Banks Crisis: Failure to Enforce?

A detailed account of the Icelandic crisis and the failure of regulatory enforcement (not necessarily of regulatory easing) in propelling risky behaviour by the banks: http://www.voxeu.org/article/gambling-resurrection-iceland

11/1/2014: WLASze: Weekend Links on Arts, Sciences & zero economics

This is WLASze: Weekend Links on Arts, Sciences and zero economics… enjoy.


Amazing collection of photographs from Hong Kong by Alex Ogle, AFP. http://blogs.afp.com/correspondent/?post/Hong-Kong-squared%3A-Instagramming-a-region

His Instagram page is here: http://instagram.com/alex_ogleOne

Ogle's photographs document one of the most diverse cities in the world. And diversity is best measured by language differences, the only metric that is relatively free from the problem of identification. Here's an interesting study mapping lexicological distances between European languages:
http://elms.wordpress.com/2008/03/04/lexical-distance-among-languages-of-europe/
Sadly, the mapping is incomplete, including some relatively large (by the visual taxonomy) languages, such as Friulan (300,000+ users).


A promising exhibition coming to Project Arts Centre: http://projectartscentre.ie/event/eva-kotatkova/ February-April 2014 featuring joint collaboration between Eva Kotátková and Dominik Lang. The exhibition is preceded by a solo show at the Cube by Eva Kotátková starting from January 23rd.

Here's an example of Kotátková's conceptualism at work:

And here's an example of Dominik Lang's work: Sleeping City, 2011 installation from Czech and Slovak Republic Pavillion, 54th Venice Biennale

Recent North American Big Freeze storm has generated loads of hoax photographs and mis-labeled and mis-dated reprints of past photographs. But some real images are truly stunning. Here are some examples, from Chicago: http://galleries.apps.chicagotribune.com/chi-140108-otherworldly-cold-weather-chicago-pictures/
Taking us from stunning…

… to ugly…

… to outright frightening…

While on the theme of cold and winter, interesting photography - both techniques used and compositional approaches - from Maroesjka Lavigne
http://www.maroesjkalavigne.be/fotografie/island/

Cold is hardly a descriptor for the series of Picasso's linocuts, representing all plate stages, acquired by by the  British Museum. The set covers both finished prints and artist's proofs for his "Still Life under the Lamp" (image next) and "Jacqueline Reading", with both linocuts created in 1962 when Picasso was 80. The real value of the set is that is shows all stages of linocuts evolution from the first state - an occasion so rare that no other museum in world currently has in its collection a complete set. There are nine progressive sets of states for the "Still Life under the Lamp" alone and four proofs of "Jacqueline Reading".

Both sets are on the show in Room 90 at The British Museum through 6 May 2014. More information here: http://www.britishmuseum.org/about_us/news_and_press/press_releases/2014/picasso_linocuts.aspx

11/1/2014: Individualism v Collectivism: Dynamic Effects of Culture on Innovation & Growth

A few years old, but very good paper: "Culture, Institutions and the Wealth of Nations" by Gorodnichenko, Yuriy and Roland, Gérard (September 2010, NBER Working Paper No. w16368: http://ssrn.com/abstract=1678911)

Based on an endogenous growth model with cultural variable the paper "predicts that more individualism leads to more innovation because of the social rewards associated with innovation in an individualist culture. This cultural effect may offset the negative effects of bad institutions on growth. Collectivism leads to efficiency gains relative to individualism, but these gains are static, unlike the dynamic effect of individualism on growth through innovation."

Empirical findings: "Using genetic data as instruments for culture we provide strong evidence of a causal effect of individualism on income per worker and total factor productivity as well as on innovation. The baseline genetic markers we use are interpreted as proxies for cultural transmission but others have a direct effect on individualism and collectivism, in line with recent advances in biology and neuro-science."

And robustness checks: "The effect of culture on long-run growth remains very robust even after controlling for the effect of institutions and other factors. We also provide evidence of a two-way causal effect between culture and institutions."

11/1/2014: Trueeconomics cited in Expresso

Trueeconomics cited in today's Expresso article on euro area peripheral bonds:
http://expresso.sapo.pt/grecia-e-portugal-lideram-descida-dos-juros-da-divida=f850116.

11/1/2014: Don't mention the 'D' word in the Eurozone, yet...

Bloomberg this week published a note analysing the GDP performance of the euro area countries during the Great Depression and the Great Recession: http://www.bloomberg.com/news/2014-01-06/europe-s-prospects-looked-better-in-1930s.html. The unpleasant assessment largely draws on the voxeu. org note here: http://www.voxeu.org/article/eurozone-if-only-it-were-1930s.

Perhaps the most important (forward-looking) statement is that in the current environment "complying with the EU's debt-sustainability rules will entail severe and indefinite budget stringency, clouding the prospects for growth still further". This references the EU Fiscal Compact and 2+6 Packs legislation.

And on a related note, something I am covering in the forthcoming Sunday Times column tomorrow (italics in the text are mine and bold emphasis added):

"What are the fiscal lessons? First, avoid deflation ... at all costs. ... Beyond that, the options in theory would seem to be financial repression, debt forgiveness, debt restructuring and outright default. Financial repression, the time-honored remedy, would seem to be out of bounds... and EU governments aren't yet ready to contemplate the alternatives [debt forgiveness, restructuring and defaults]. At some point, they will have to. In the 1930s, the situation didn't look so hopeless."

But why would the default word creep into the above equation?

Update: and another economist calling for debt restructuring/default denouement: http://www.voxeu.org/article/why-fiscal-sustainability-matters#.UtJWBR7i-nh.gmail
I know, I know - everything has been fixed now, so no need to panic...

11/1/2014: US Jobs Losses & Some Bad Omens for Europe...

Via @calculatedrisk blog, we have an updated chart comparing jobs destruction in the US for the Great Recession against the previous downturns (post-WWII):

I noted before that in addition to highlighting the severity of the Great Recession, this chart also shows that since 1981, downturns in the US have been marked by ever-extending duration of periods of jobs losses recovery.

Another worthy note is to point out that the US economy is now in 71st month of jobs levels below pre-crisis peak, which means that the US has already clocked almost 6 years of jobs losses. On current trend, it will be around 8-9 more months before the US fully recovers to the pre-crisis jobs levels. Given labour force and demographic changes during the crisis, and given pre-crisis long-term trends in jobs creation now foregone due to the crisis, the US is unlikely to regain the pre-crisis trend levels of employment any time in the next 5 years if not longer. That's the so-called 'lost decade' extending to more like 12 years or beyond.

And the US is in a much better shape than Europe... which is on aggregate is in much better shape than the 'peripherals'...