Miguel Navascués | Although there seems to be no awareness of it, the current problem in the world economy is of cosmic proportions, a problem for which we have no close antecedents. We have huge pockets of liquidity, originated to alleviate the contraction of the pandemic, now that inflation is rebounding with great vigour, and a recession that is already being announced in some indicators; what some translate as an…
Articles by Miguel Navascués
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Miguel Navascués | According to Ambrose Evans-Pritchard, the Daily Telegraph’s editorialist, the recent global meeting on climate change in Glasgow was full of optimism, especially on the part of business. However, the cost of transforming from “dirty” to “clean” production has not been discussed. That is to say, there has been enthusiastic talk of quantities of CO2 easily eliminated thanks to incipient discoveries, without any details of how this would…
Miguel Navascués | After reaching 22,169 euros at the end of 2019, Spanish per capita income had fallen to 19,429 euros by end-2020, a level very similar to that of 2015 (19,348 euros). Per capita income, or GDP per capita, depends on GDP growth and population growth, obviously. GDP growth depends, as we know, on the productivity growth of all factors, i.e. investment, technology, and the number of employees. Which…
Miguel Navascués | To build a public housing stock to house those who are now forbidden to be evicted? Or to undertake a plan such as the one proposed by the chief economist of Arcano, supported at the time by the president of Santander? The traction effect of the construction sector is proven, and is indisputable. However, according to Julián Núñez, president of the construction employers’ association, SEOPAN, the data and forecasts are not encouraging.
Miguel Navascués | In a paper entitled Recent Developments in the Spanish Economy, Policy & Funding, the Spanish government explains how the €140 Bn from the European Recovery Fund will be allocated to obtain the best result: a solid rebound of the economy with permanent fundamentals. According to the government, it is expected these €140 Bn to have a multiplier effect of about €500 Bn, i.e. a not inconsiderable multiplier of 3.6 euros for each spent. Is it reasonable to expect such an amount?
Miguel Navascués | The depression and the drop in inflation -or even deflation- have led the central banks to try a disastrous experiment: negative interest rates. Even Christine Lagarde speaks of putting the reference interest rate at -2%. This has been a mistake for several reasons. It discourages the holding of liquid deposits (which logically yield zero or negative), but it does not make people anticipate consumption, if prices stagnate or fall.
Miguel Navacués | In the 2’Q20 Spaniard’s savings rate on disposable income reached a record high of 31.1%. Investment depends on companies’ expectations, sales and profitability, which increase their value. And it in turn depends on the effective demand, which determines the volume of sales. If there is no sales volume in sight, there is no demand and GDP shrinks. Demand in Spain -except from abroad- is still digesting the collapse due to the pandemic, and the resurgence in cases, amid a climate of permanent mistrust which is prolonging the crisis.
Miguel Navascués | The Fed is continuing to buy assets and issue money to chosen subjects (for the first time not just the banks). The purchases made so far are more than double those made in 2008. However, the speed of money circulation (i.e., GDP/M2), shows a decline to levels never seen before: each unit of money in circulation moves just $1.4 of GDP. Or, in other words, more and more money is needed to move the same amount of GDP.
Miguel Navascués | The slope of the interest rate curve has become negative in several countries, among them the most important. As we know, whenever this happens there is a high probability that it is anticipating a recession, in this case global. Some countries will come out of this better than others, but the recession is highly likely.
Miguel Navascués | There are many signs that the public think the crisis is over. One is the bankruptcy of Podemos, but there are many more. But has it ended? I doubt it.