Some links for today
1. The most telling macro statistic of last weeks (source: ECB): The Euro area balance of payments (including the current account) in March. The Euro area current account surplus is increasing at an unsustainable 0,1% of GDP per month. Once the surplus surpasses 2,5% (October?) and continues to increase, big trouble with the UK and the USA lies ahead. Anyway – together with 12,1% unemployment this information shows that we are living below our means. Yes, there is a massive balance sheet recession connected output gap in the Eurozone, due to lack of demand, even when the DSGE models used by the ECB rule this possibility out by design (DSGE models: Diederik Stapel General Equilibrium models). It’s ironic that these new ECB statistics are compelling evidence for the existence of this gap.
2. Careful reading of this report, by Cosimo Pancaro (source: ECB) ECB shows that such rapid increases are invariably caused by restraining domestic demand. The report also shows that such increases do not have to hamper subsequent (!) growth, unless they are accompanied by banking crises and the like. Oops. When we compare the data in the report (current account deficits of a number of developed countries between 1970 and 2007) with recent data it also shows how ridiculously large the Greek/Spanish/Irish/Portuguese/Latvian/Estonian/Lithuanian current account deficits were, around 2007/2008. Only Ireland around 1980 comes close, other historical deficits were only about half the size of the recent Eurozone country deficits (max!)… .
3. Interesting blog from JP Hochbaum, still a small government libertarian but also a former hard-core Austrian economist, about his discovery of, among other things the ‘sectoral balances’ approach and MMT and how this influenced his thinking about money and macro.
4. An Voxeu article about reckless lending by European banks.
5. Smart ideas from the European Commission about smart grids: invest, invest, invest. Yes, twenty-five years late, but solar is taking off, at the moment, in Europe: “Our price index for solar panels (incl. VAT and installation) is currently (i.e. February 2013, M.K.) 65% lower than early 2011.” Mind that, despite the f..cking hype, average production costs for new oil are increasing.
6. For those speaking German: some interesting German quality blogs (not many of you might speak German but too much of the discussion is focused on USA and english language blogs, I want to show that interesting things are going on outside the Anglosaxon world, too):
Querschusse (everything about the latest statistics, a kind of German ‘Calculated Risk’ but with more focus on Europe and the rest of the world)
Nachdenkseiten. A kind of German ‘Naked capitalism’(this time also proverbial German, i.e. more thorough and focused).
Georg T’s blog ‘Sapere Aude’. A ‘lone wolf’ blog about complexity and economics.