Economics

The ECB's (in our view intelligently designed) LTRO transaction still did not bring the satisfactory results as December saw a large contraction in the provision of credit to non-financial corporates. The LTRO can only be judged positively once a sustainable rebound of the provision of credit can be observed in the coming months. However, this will also depend a lot on the next steps of EU politicians and whether they are finally able to implement steps which are credible for the real economy and bring back trust into the political institutions. Read more about the LTRO subject in the Telegraph:

Telegraph: The perils of Mario Draghi's €1.5 trillion blitz, by Ambrose Evans-Pritchard, Jan. 31, 2012

Keywords: LTRO Program, Monetary Policy, ECB, European Crisis

Cato on taxes:

Cato Institute: New Academic Study Confirms Previous IMF Analysis, Shows that Lower Tax Rates Are the Best Way to Reduce Tax Evasion, Jan. 30, 2012

Related:

"tax competition is a powerful mechanism to restrain the greed of the political class"

FT Alphaville: Banking off the FOMC, Jan. 27, 2012

Keywords: Interest Rates, Fed

will we see a "next Paul Volcker"?

Keywords: Government, Economic Liberty

Interesting insights on the "state of debt" in the UK and elsewhere! Particularly interesting is the analyses which also takes the financial debt of banks into account:

Telegraph: America overcomes the debt crisis as Britain sinks deeper into the swamp, Jan. 22, 2012

Britain has sunk deeper into debt. Three years after bubble burst, the UK has barely begun to tackle the crushing burden left by Gordon Brown. The contrast with the United States is frankly shocking. read more in The Telegraph

Keywords: United Kingdom, British Economy, Debt Crisis

Keywords: US Presidential Elections, Mitt Romney

A book about the divergence of the American society which might put the American success model at risk.

BusinessWeek: Book Review: Coming Apart by Charles Murray, Jan. 19, 2012

The conservative sociologist looks at the disintegration of America's white middle class. Is the welfare state to blame? read more in BusinessWeek

Keywords: US Economy, US Society, US Wealth

Great interactive chart of The Economist, showing the overall debt level as percentage of GDP. Click on the picture to get to the interactive graph.

Related:

MarketObservation: EU country's debt: not only official financial debt matters for a comprehensive picture! Jan. 15, 2012

Good article of BofA's chief economist Mickey Levy on European competitiveness. Unit labour costs seem to be a key element:

Source: Voxeu.org: Diverging competitiveness among EU nations: Constraining wages is the key, by Mickey Levy, Bank of America, Jan. 19, 2012

Keywords: Europe, European Competitiveness, Unit Labour Costs

The Economist: iPadded The trade gap between America and China is much exaggerated, Jan. 21, 2012

Pascal Lamy, the head of the World Trade Organisation, has suggested that if trade statistics reflected true domestic content, America’s deficit with China might be more than halved.

Keywords: China, America, Trade Gap

..."Total government spending now exceeds 40% of GDP. Federal regulations now cost the private sector an astounding $1.7 trillion per year, or 12% of total output. That means that the governing elite now control more than 50% of the income produced by the American people to spend and distribute as they and lobbyists for powerful political and economic interests see fit." Source: Forbes

Forbes: To Restore Prosperity, We Must Increase Economic Freedom, Jan. 16, 2012

Keywords: Economic Freedom, Growth, US Economy

Econbrowser: China: Inflation and Exchange Rate Watch, by Menzie Chinn, Jan. 12, 2012

Keywords: China, Chinese Inflation, Yuan

NZZ am Sonntag had an article about a study of the German think tank "Stiftung für Marktwirtschaft". A study showing the effective obligations of countries towards debtors and citizens (mainly official debt, pension obligations and health care obligations). This study provides a different picture than the official debt statistics (which are the basis for the ratings of S&P and alike):

Source: Stiftung Marktwirtschaft: Ehrbare Staaten: Tatsächliche Staatsverschuldung im Vergleich, Dec. 2011

Looking at the long-term, would you rather invest your money in Italy or Luxembourg? In making such a decision, private sector strengths would be another important criteria. The north of Italy does not look so bad. Further research is needed. We will get back to this. For the moment, avoid doing long-term investments by just looking at the S&P ratings!

Find here the book which is a basis to understand a politician such as Ron Paul. He was an ardent reader of the Mises lectures, captured by the intellectual brilliance of this independent scholar:

Ludwig von Mises, The Theory of Money and Credit, 1980 Edition

Excerpts from the Preface to the English edition of the book, written in 1934(!), pages 19 and 20:

"Like all human creations, the gold standard is not free from shortcomings; but in the existing circumstances there is no other way of emancipating the monetary system from the changing influences of party politics and government interference, either in the present or, so far as can be foreseen, in the future. And no monetary system that is not free from these influences will be able to form the basis of credit transactions."

Excerpts from the Preface to the English edition of the book, written in 1934, page 21:

"All proposals that aim to do away with the consequences of perverse economic and financial policy, merely by reforming the monetary and banking system, are fundamentally misconceived. Money is nothing but a medium of exchange and it completely fulfils its function when the exchange of goods and services is carried on more easily with its help than would be possible by means of barter. Attempts to carry out economic reforms from the monetary side can never amount to anything but an artificial stimulation of economic activity by an expansion of the circulation, and this, as must constantly be emphasized, must necessarily lead to crisis and depression. Recurring economic crises are nothing but the consequence of attempts, despite all the teachings of experience and all the warnings of the economists, to stimulate economic activity by means of additional credit."

Mises: Gold Standard, Government Spending

Keywords: Eurozone, US Fiscal Federalism

"As reported by the San Francisco Federal Reserve, for every dollar spent by a product made in China, 55 cents goes to pay for American jobs, contributing more to American jobs than products made anywhere else, including those made in the U.S. The U.S. added higher paying service jobs as a result of China. Without China, U.S. unemployment would be much higher than today." Source: Huffington Post

Read the article here.

Huffington Post: A World Without China, Jan 9, 2012

Keywords: China, US Economy, Outsourcing of Jobs

Tyler Cowen points to liberal labour markets, modest unemployment benefits, independent monetary policy and flexibel immigration policy when looking at the low Swiss unemployment rate:

Marginal Revolution: Why is Swiss unemployment so low? by Tyler Cowen, Jan. 12, 2012

Keywords: Swiss Economy, Swiss Unemployment Rate

MarketWatch: Fed handed $76.9 billion to Treasury in 2011, Jan. 10, 2011

The Federal Reserve transferred $76.9 billion in earnings to the U.S. Treasury during 2011, the central bank announced Tuesday. The transfer is slightly less than the record $79.3 billion transferred in 2010. The Fed said it earned $83.6 billion in interest income from its massive portfolio of securities, which includes Treasury debt and mortgage securities. read more

Keywords: US Fed, US Treasury

good educational video on gold standard, supply of money, fiat money and government spending:

Keywords: Monetary Policy, Gold Standard