Sunday Thoughts IX (June 18-24)

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.

This week’s edition is brought to you from a Cambodian dormitory in Paris with no internet connection; thank god for the new European Union roaming regulations. 

I. Western Immigration Woes

On Wednesday, The Guardian ran an article on a list that tries to document all immigration-related deaths in Europe: “The major significance of the List is in its signals. It shows that this has been ongoing for 25 years and the people who pretend to be shocked now should have been shocked a long time ago.” I have spent quite some time scrolling through the list and for a moment, I might have got a fleeting idea of the tragedies behind the too many, brief entries.

In the New York Times, you can find some additional facts (and, of course, opinions – it’s still the New York Times) about global migration.

Lastly, I have found this Economist article to be a lucid analysis of the immigration dilemma that the West faces. Continue reading “Sunday Thoughts IX (June 18-24)”

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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)”

Sunday Thoughts IV (May 14-20)

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. Besieged and Desperate

On Monday, while Israeli Prime Minister Netanyahu declared with a smile, “What a glorious day”, merely 100 km away,  58 Palestinians were killed by Israeli gunfire, and more than 1,200 wounded. The incident speaks volumes about the despair that the people in Gaza must be feeling and the lack of a peaceful perspective. On Friday, the Guardian published a long article by Sarah Helm about the suicide of a young Palestinian writer that offers a measured look at another lost generation and the misery in Gaza at large. Continue reading “Sunday Thoughts IV (May 14-20)”

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”

Unemployment in the Eurozone: A Tale of Two Countries

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unemployment as share of active population (%); data source: Eurostat

On Friday, Eurostat, the statistical office of the European Union, announced that the unemployment rate in the euro area continued to fall in May, from 10.2 to 10.1 percent. While this constitutes a considerable recovery from its high of 12.1 percent in the second quarter of 2013, there is still a long way to go back to the pre-crisis level of 7.3 percent. Moreover, this number shrouds the highly diverse situation within the euro area, with Germany and Greece sitting at the two ends of the spectrum. Both countries entered the crisis with an unemployment rate of 7.5 percent in the second quarter of 2008. After a minor bump in 2009, the German labour market consistently strengthened and now stands at an unemployment rate of 4.3 percent in the first quarter of 2016. This development is mainly attributed to increased wage flexibility due to the so-called Agenda 2010 and the extended use of short-time labour subsidies during the crisis (e.g. Rinne & Zimmermann, 2012 and Krause & Uhlig, 2012). Once been labeled Europe’s “sick man”, Germany now has had the lowest unemployment rate in the euro area for more than two years. Greece, on the other hand, has fallen into a deep depression, intensified by the Greek government-debt crisis and, as argued by many, darkened by austerity policies (just whether budget cuts or tax hikes have been more devastating depends on whom you ask, for example Paul Krugman or John Cochrane). The unemployment rate mirrors this crisis, rising to a shocking peak of 27.9 percent in the third quarter of 2013 and recovering at a slower pace than the Eurozone average, considering pre-crisis levels, decreasing to 24.3 percent in the first quarter of this year. The youth unemployment rates (capturing the unemployment share of the active population younger than 25) present a similar picture. Continue reading “Unemployment in the Eurozone: A Tale of Two Countries”

The Times They Are A-Changin’

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This article reflects my personal opinion.

On Friday, supporters of the Remain campaign in the United Kingdom European Union membership referendum were faced with the ruins of their beliefs. In contrast with most of the latest polls, a majority of the voters had decided for an exit of the UK out of the EU. Although the demographic analysis of the referendum has not yet been finalised, it is already rather clear where the lines between the two camps ran. Besides the obvious separation between London, Northern Ireland and Scotland as net supporters of the Remain campaign and most of the rest of England and Wales as Leave strongholds, voters divided alongside age-demographic and educational lines. Areas with many young and well-educated residents were more likely to vote “Remain” while areas with a high concentration of low-skilled workers and old residents tended to vote “Leave” (see this guardian article for a colourful demographic breakdown of Thursday’s referendum). A lot of young voters feel that their future has been sabotaged by a generation who will not be around long enough to suffer the consequences of their vote. Congruently, many academics and other high-skilled workers perceive the referendum as a blow to their economic opportunities by ill-informed protest voters. And together, Remain supporters all around the world ask themselves “How did this happen?” Continue reading “The Times They Are A-Changin’”