Category Archives: EU

17/4/20: COVID19 Updated Charts and Outliers


Updating two charts for #COVID19 pandemic today:

First: US vs EU chart:

Second: Russia chart:

Since I included no commentary on Russian data in the chart itself, it is worth noting that data so far indicates no data suppression or mis-reporting. This is confirmed by analysis of 'outliers' in the data. I have looked at all countries with > 1,000 cases reported and considered observations on cases reported that fall out of trend line from the time when the country cumulated cases counts reached > 50 cases. For example, if a country reported 127 cases in day T, followed by 139 cases in day T+1, and suddenly showed 0 cases in T+2, followed by 99 cases in T+3, the date of T+2 was marked as an 'outlier'. I ignored all cases where 'outlier' suspect dates were above 20 cases, even if the number was still outside the range of the trend-defined 'norm'.

Note: these outliers can be a function of tests arrivals dates, availability of tests, hospitals reporting dates and other differences that have nothing to do with 'Government manipulation'. All in, 43 countries out of 77 with more than 1,000 cases have reported at least one outlier.

Russia had 3.45% of days reporting appearing as extreme outliers. 30 out of the total 77 countries on the list had higher percentage of outliers days than Russia. Median for 77 countries was 2.9%, mean was 5.9% and STDEV was 8.6%.

Only two of these countries, namely Russia (3.45% of observations countable as outliers) and China (13.3% of observations being outliers), has been accused in the Western media of releasing politically manipulated data. China, of course, has a very high percentage of observations that can be identified as outliers, while Russia is, basically, middle-of-the-road.

8/4/20: Ifo Institute Germany Forecast for 2020


A surprisingly 'positive' forecast for Germany from ifo Institute this morning:



While GDP contraction for 2020 looks sharp at -4.2 percent y/y, unemployment figures appear rather robust and employment levels seem to be only weakly impacted. Forecast for current account implies subdued global demand shocks. The swing in the fiscal position is roughly 6.5 percent of GDP, reflecting emergency supports measures. This is significant, and underpins shallower expected effects on employment and unemployment, as well as no deflationary dynamics in labour costs.

My view: Germany entered the pandemic crisis with already weak economy. 2019 growth at 0.6 percent was shockingly weak, with the economy skirting recession. Massive strength in the current account was reflective of weak domestic demand and the economy dependent on growth momentum globally. This momentum is now severely disrupted, and I do not expect robust global recovery outside domestic demand. In other words, my view is that worldwide exports are unlikely to rebound robustly in H2 2020, putting severe pressure on net exporting economies, like Germany and Italy.

So, whilst 4+ percent drop in full year GDP might be fine, I would expect closer to 5-5.5 percent decline (reflective of weaker prices), and much more pronounced impact on unemployment and employment levels.

15/1/20: What Trade Deal Phase 1/N Says About the Four Horsemen of Apocalypse


Phase 1 of N of the "Greatest Trade Deal" that is "easiest to achieve' by the 'stablest Genius' is hitting the newsflows today. Which brings us to two posts worth reading on the subject:

Post 1 via Global Macro Monitor: https://global-macro-monitor.com/2020/01/15/phase-1-of-potemkin-trade-deal-signed-sealed-and-yet-to-deliver/ is as always (from that source) excellent. Key takeaways are:

  • "We never believed for one moment that China would cave on any of the big issues, such as restructuring its economy and any deal would be just some token political salad dressing for the 2020 election."
  • "Moreover, much of the deal depends on whether the Chinese will abide by Soviet-style import quotas," or in more common parlance: limits on imports of goods into the country, which is is 'command and control' economics of central planning.
  • "We are thankful, however,  the economic hostilities have momentarily ratcheted down but the game is hardly over," with tariffs and trade restrictions/suppression being the "new paranormal".
  • "Seriously, after more than two years of negotiations, they couldn’t even agree on dog and cat food imports?"
  • "The [trade] environment remains very much in flux and a source of concern and challenge for investors".

My takeaways from Phase 1/N thingy: we are in a VUCA world. The current U.S. Presidential Administration is an automated plant for production of uncertainty and ambiguity, while the world economy is mired in unresolvable (see WTO's Appellate Body trials & tribulations) complexity. Beyond the White House, political cycle in the U.S. is driving even more uncertainty and more ambiguity into the system. The Four Horse(wo)men of the Apocalypse in charge today are, in order of their power to shift the geopolitical and macroeconomic risk balance, Xi, DNC leadership, Putin and Trump. None of them are, by definition, benign. 

The trade deal so far shows that Xi holds momentum over Trump. Putin's shake up of the Russian Cabinet today shows that he is positioning for some change in internal power balances into 2020, and this is likely to have some serious (unknown to-date) implications geopolitically. Putin's meeting with Angela Merkel earlier this week is a harbinger of a policy pivot to come for the EU and Russia and Lavrov's yesterday's statement about weaponization of the U.S. dollar and the need for de-dollarization of the global economy seems to be in line with the Russo-German New Alignment (both countries are interested in shifting more and more trade and investment outside the net of the U.S. sanctions raised against a number of countries, including Iran and Russia).

DNC leadership will hold the cards to 2020 Presidential Election in the U.S. My belief is that it currently has a 75:25 split on Biden vs Warren, with selection of the former yielding a 50:50 chance of a Trump 2.0 Administration, and selection of the latter yielding a 35:65 chance in favour of Warren. The electoral campaigning climate is so toxic right now, we have this take on the latest Presidential debate: https://twitter.com/TheDailyShow/status/1217431488439967744?s=20. Meanwhile, debate is being stifled already by the security agencies 'warnings' about Russian 'interference' via critical analysis of the candidates.

Mr. Trump has his Twitter Machine to rely upon in wrecking havoc, that, plus the pliant Pentagon Hawks, always ready to bomb something anywhere around the world. While that power is awesome in its destructiveness vis-a-vis smaller nations, it is tertiary to the political, geopolitical and economic powers of the other three Horse(wo)men, unless Mr. Trump gets VUCAed into a new war.

BoJo's UK as well as Japan, Canada, Australia et al, can just sit back and watch how the world will roll with the Four punchers. The only player that has a chance to dance closely with at least some of the geopolitical VUCA leaders is the EU (read: France and Germany, really). 

23/4/19: Income per Capita and Middle Class


New research reported by the Deutsche Bank Research shows that, on average, there is a positive (albeit non-linear) relationship between the per capita income and the share of middle class in total population:
Source: https://pbs.twimg.com/media/D42GiWNXkAMpID2.png:large

There is an exception, however, although DB's data does not test formally for it being an outlier, and that exception is the U.S. Note, ignore daft comparative reported in chart, referencing 'levels' in the U.S. compared to Russia, Turkey and China: all three countries are much closer to the regression line than the U.S., which makes them 'normal', once the levels of income per capita are controlled for. In other words, it is the distance to the regression line that matters.

Another interesting aspect of the chart is the cluster of countries that appear to be statistically indistinguishable from Russia, aka Latvia, Estonia and Lithuania. All three are commonly presented as more viable success stories for economic development, contrasting, in popular media coverage, the 'underperforming' Russia. And yet, only Latvia (completely counter-intuitively to its relative standing to Estonia and Lithuania in popular perceptions) appears to be somewhat (weakly) better off than Russia in income per capita terms. None of the Baltic states compare favourably to Russia in size of the middle class (Latvia - statistically indifferent, Lithuania and Estonia - somewhat less favourably than Russia).

23/4/19: Income per Capita and Middle Class


New research reported by the Deutsche Bank Research shows that, on average, there is a positive (albeit non-linear) relationship between the per capita income and the share of middle class in total population:
Source: https://pbs.twimg.com/media/D42GiWNXkAMpID2.png:large

There is an exception, however, although DB's data does not test formally for it being an outlier, and that exception is the U.S. Note, ignore daft comparative reported in chart, referencing 'levels' in the U.S. compared to Russia, Turkey and China: all three countries are much closer to the regression line than the U.S., which makes them 'normal', once the levels of income per capita are controlled for. In other words, it is the distance to the regression line that matters.

Another interesting aspect of the chart is the cluster of countries that appear to be statistically indistinguishable from Russia, aka Latvia, Estonia and Lithuania. All three are commonly presented as more viable success stories for economic development, contrasting, in popular media coverage, the 'underperforming' Russia. And yet, only Latvia (completely counter-intuitively to its relative standing to Estonia and Lithuania in popular perceptions) appears to be somewhat (weakly) better off than Russia in income per capita terms. None of the Baltic states compare favourably to Russia in size of the middle class (Latvia - statistically indifferent, Lithuania and Estonia - somewhat less favourably than Russia).