„Prediction is very difficult, especially if it’s about the future.“

Whoever this bon mot is attributed to, it makes one smile and takes the heat out of a debate that should be about the matter at hand and not about dogmatism. Predicting economic development in times as turbulent as the present is indeed a delicate business for anyone who dares to do it. But since assessments of the future development of a country’s or continent’s economy are important for forward-looking economic policy, it is precisely then that the quality of forecasts on which decision-makers rely must be closely scrutinised.

„Prediction is very difficult, especially if it’s about the future.“ weiterlesen

The ECB gambles away its credibility

In contrast to the nine previous hikes, the European Central Bank’s (ECB) decision to raise key interest rates by 0.25 percentage points on 14 September 2023 was no longer unanimous in the ECB’s Governing Council but, according to ECB President Christine Lagarde, only approved by a „solid“ majority. The public response is also no longer as unanimous as before. Some experts, such as the President of the German Institute for Economic Research (DIW) Marcel Fratzscher, emphasise the risk that the ECB is taking with this step regarding the economic development in the Eurozone. Markus Demary, an expert at the Institute of the German Economy (IW), which is close to employers, criticises the decision more or less directly: „The ECB has chosen to take inflationary pressure out of the economy and is accepting a recession for the sake of price level stability“.

The ECB gambles away its credibility weiterlesen

The recession deepens

The downward slide of the German economy continues. Production and incoming orders in German industry are still on course for recession in the first month of the third quarter. The latest sentiment indicators, such as the ifo index and the PMI markit, which were surveyed in August, point clearly downwards. So it can no longer be ruled out that the recession will continue even at a pace much faster than now.

The recession deepens weiterlesen

Still on a knife’s edge? The federal government fails to recognise the economic situation

Anyone in the civilised world who wants to drive a car must prove that he can correctly assess the direction of movement and speed of his vehicle, master the aids of stabilisation and gain a certain overview of the traffic situation. The obligation to pass a driving test meets with general approval among the population, because the person willing to drive a car can put not only himself but also others in danger if he does not have the required skills and knowledge. Those who steer a national economy do not have to prove anything of the sort, although the general danger to the life and welfare of the population posed by their errors of judgement and misconduct is enormous.

Still on a knife’s edge? The federal government fails to recognise the economic situation weiterlesen

Falling energy prices at the producer and consumer level – what should feed continued inflation?

The President of the Deutsche Bundesbank, Joachim Nagel, said in a speech in Frankfurt on 5 July 2023 that it was too early to sound the all-clear with regard to the price development in Germany, „Inflation has broadened overall.“ And he adds: „According to our June projection, the inflation rate in Germany will remain high for the time being. The ECB’s June projection for the euro area gives a similar result.“

Falling energy prices at the producer and consumer level – what should feed continued inflation? weiterlesen

“Inflation” will soon be over – when will the ECB react?

A simple series of figures made available recently by the Federal Statistical Office of Germany brings it to light: what has been called “inflation” in public in recent months will, according to all we know, only exist for a few more months at most.

“Inflation” will soon be over – when will the ECB react? weiterlesen

Reform of the European fiscal rules? The German finance minister is blocking a reasonable reform

An english version of our comment on an article by Christian Lindner, German finance minister, is available.

Globalisation à la carte?

(first published in German in “Freitag”, 20 January)

Globalisation has become the talk of the town. People no longer want to be so dependent, many say. In future, one cannot simply rely on the efficiency gains of globalisation, say others. It must be possible to produce all important products at home, most believe. Only in the case of raw materials that we do not have, politicians in industrialized countries argue, we would like to keep the markets open at all costs.

Globalisation à la carte, so to speak, is what people and politics in the industrialised countries want. After the total globalisation that the global North offered the global South in the 1990s, now selective globalisation, in which everyone is careful not to become too dependent.

Continue reading on flassbeck-economics.com

Terra and Luna – or how the moon destroyed the earth

Can there be a better business in this world? One claims to be a computer genius and to have understood that the currencies of this world issued by the states are unstable, inflation-prone and in general threatened with extinction because they are far too inflexible with their national limitations on the one hand and too centralistic on the other. Consequently, they would create a currency themselves that would be available to everyone and could be used globally at any time. Because something like this already exists in the form of Bitcoin, whose wild fluctuations do not exactly distinguish it as a “currency,” they claim to have created a cryptocurrency that has a fixed exchange rate to the U.S. dollar.

Continue reading this article.