Sunday Thoughts XII (July 9-15)

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A selection of links and thoughts that I stumble upon throughout the week – everything from economics to politics to philosophy to the occasional music video. 

I. Another Great Week in Trump World

Calling Germany controlled by Russia because of energy dependency? Check. Insinuating NATO is obsolete and at the same time urging its members to more than double their military spending? Also check. Undermining the prime minister of the UK on a visit there, calling her handling of Brexit “unfortunate” and suggesting that her foe (who has an awesome haircut, by the way) would be a great replacement? Hell yeah. All the while driving the world ever deeper into a global trade war? You betcha. Meeting the Russian president in private tomorrow, who is so lucky because he doesn’t have to deal with pestering courts or disrespectful journalists? Very much looking forward to hit. Constant contradictions and bullshit overload to keep the failing media on their toes? No one does it better. So. Much. Winning. (see e.g. Financial Times) Continue reading “Sunday Thoughts XII (July 9-15)”

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Sunday Thoughts VIII (June 11-17)

A selection of links and thoughts that I stumble upon throughout the week – everything from economics to politics to philosophy to the occasional music video.

I. The Great Fiscal Escape

In a new paper, the researchers Tørsløv, Wier, and Zucman find that close to 40% of multinational profits are shifted to tax havens each year. They also argue that it’s profits and not productive capital that is moved across borders, and thus a tax cut will most likely fail to substantially create new jobs. You can read about it in The New York Times and the Washington Post, and Paul Krugman also wrote about the topic in his New York Times column – he also discusses the relatively minor effect corporate tax rates have on business investment decisions in general.

The researchers also note that, throughout the world, for one $ 1.00 in wages paid, US multinationals say they make around $ 0.50 cents in (pre-tax) profits – except in Ireland, Bermuda, Luxembourg and the like, where they say they make $ 3.50. These tax havens surely have some crazy-productive workers. Continue reading “Sunday Thoughts VIII (June 11-17)”

The Financial Cycle Around the World in 2016

As the year is coming to a close, the financial economy in large parts of the world is characterised by high levels of uncertainty and central banks navigating through widely unknown territory. In this article, I want to take a brief look at the state of affairs in a few different economic areas and analyse potential implications for monetary policy decisions. For this purpose, a proxy for the financial cycle as developed by Drehmann et al. (2012) from the Bank for International Settlements (BIS) is presented as a visualisation tool. This concept captures cyclical fluctuations in both private credit and house prices. A high point represents above-trend volume of credit to the private non-financial sector and elevated asset prices. A low point on the other hand indicates a contracted credit and housing market (You can find a very brief description how the financial cycle is derived at the end of this article). Additionally, I consider some other important developments throughout the global financial economy. Continue reading “The Financial Cycle Around the World in 2016”

Aurora – A Short History of Gold and a Brief Look at Its Investment Opportunities

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Thank you for more than 1000 views in the first five months of this blog. I appreciate everyone who takes some of their precious time to read one of my articles and am especially grateful for all the comments and suggestions that I have received so far.

When uncertainty about the economic future and the perceived probability of market downturns rise, investors often turn to so-called “safe havens” to protect their savings. Especially when these factors are combined with concerns about increasing inflation, gold often gains centre stage in safe haven consideration. In the aftermath of the Financial Crisis and during the Euro Crisis, the gold price surged to levels not seen since the beginning of the 80s (in real terms). However, although uncertainty arguably has not decreased after the Brexit referendum in June and the election of Trump in November and with the referendum on constitutional reform in Italy this Sunday (December 4) looming, gold prices have been falling since July of this year. What is driving these developments? What are the reasons for and against investing in gold? Does it make sense to invest in gold at the moment? Before I investigate these questions, let us take a brief look at the history of gold as a financial tool. Continue reading “Aurora – A Short History of Gold and a Brief Look at Its Investment Opportunities”