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Wednesday, October 18, 2006

Playing with my Bio

Afoe is about to launch a new format site, so I thought I'd do a new version of my bio. Playing around I came across the 'Catalan question'. I mean who am I? Part of me is British, and always will be. But that country plays little part in my life as it is now, and I don't even follow the economy there. If I had gone to live in the United States I guess by now I would be saying: I am American. So I thought, what the hell, I am Catalan, that is what (or who) I am. Somewhere along the line I think there is a lesson for the whole of Europe here.

Edward 'the bonobo' is a Catalan economist of British extraction based in Barcelona. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

He is currently working on a book with the provisional working title "Ageing, Fertility and Global Imbalances".

Apart from his participation in A Fistful of Euros, Edward also writes regularly for the demography blog Demography Matters. He also contributes to the Indian Economy Blog . His personal weblog is Bonobo Land . Edward's website can be found at EdwardHugh.net.

After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption", since this is now his main culture of reference. Catalans, it should be noted, are not a race, but a culture, and Catalanism is not a nationalism but simply a polite request for a culture to have the right to go its own way and be left in peace. The Catalan culture, like all European cultures, is in reality a culture of mongrels. According to one popular conception of citizenship, whoever lives and works in Catalonia and takes the trouble to learn Catalan has every right to feel themselves a part of this culture. Edward has simply availed himself of this right. He has done so since he feels the Catalan idea of citizenship is in fact one of the most modern and to the point in a Europe which currently finds itself in the throes of a rapid and ongoing change in cultural values, one which poses a constant and inevitable challenge to the our basic feelings of belonging and identity.

Tuesday, October 17, 2006

German ZEW Index Drops Significantly

Investor sentiment in Germany - as recorded in the ZEW index fell for the ninth straight month in October, dipping to its lowest level in over 13 years. I have really nothging more to say at this stage, this was all soooo predictable. For a good example of someone who saw it coming try Claus Vistesen (and here , and here).

Well, here we go:

The Mannheim-based economic think tank said its economic expectations indicator for Germany, based on a survey of 298 analysts and institutional investors, fell to -27.4 from -22.2 in September.

That was lower than the -20 reading expected by economists in a Reuters poll and the weakest level since March 1993. The euro slipped briefly against the U.S. dollar in response to the figures.

ZEW President Wolfgang Franz said rising orders and lower oil prices should have helped the indicator in October.

“Economic expectations were, however, overshadowed by a possible cooling of the U.S. economy, by a likely further rise in ECB interest rates and above all by the decreased consumer buying power through the VAT increase and other tax measures n 2007,” Franz noted.

The poor sentiment reading came amid growing optimism about 2006 growth in Europe’s largest economy.

Monday, October 16, 2006

India and Italy

These days I am following two countries more or less systematically: India and Italy.

A strange choice some may say, perhaps I am simply interested in making a collection of countries whose first letter is 'I'.

Well no. I take India and Italy as different examples and test cases of one and the same phenomenon: the ongoing demographic transition. The interesting point is that Italy is at one end of the process and India at another. In both cases I am making counter-consensus calls (which we will soon see to be either right or wrong) and I am able to use this by deploying a theoretical structure which I am developing (for my research go here, and for some blog material try Demography Matters).

A good summary of my views on the current prospects for the Indian economy can be found in this post (which also contains comments by some very talented Indian economists, my feeling is that this post is something special) around the core issue of whither trend growth in India. A lot about the future course of the global economy may depend on the answer to this question.

At the same time I am following the Italian economy over at Italian Economy Watch. This situation here is rather different, since while trend growth in India is almost certainly accelerating as India begins to get hold of the demographic dividend which is available through the age structure changes she is experiencing, trend growth in Italy continues to drop steadily towards zero (and possibly beyond) as she increasingly enters the period where the elderly population 'demographic penalty' may come into play.

To make explicit what should be implicitly obvious: I am quite happy to treat these two examples as test cases for the theory. If these economies perform as I am expecting them to I will take this as some sort of support for the structure I am developing, if they don't then I will accept that I am getting something wrong somewhere. As Popper pointed out, you can never *prove* a theory, but you can certainly *disprove* one.

Productivity In Europe

As was to be expected the rate of productivity increase in the US now seems to be slowing somewhat. Maintaining the rate of increase means maintaning the pace of a technological and organisational revolution, and it isn't immediately obvious that this is always possible (hence all those arguments about whether the cruising speed of the US economy had been raised in the long term or not).

On the other hand Europe is now catching up somewhat in the productivity game:

``Labor productivity, the holy grail of economic welfare and stock-market performance, has significantly accelerated,'' says Eric Chaney, Morgan Stanley's chief European economist in London and a former forecaster at the French Ministry of Finance.

Morgan Stanley economists calculate that productivity increased in the dozen euro nations at an annual rate of 2.6 percent in the first half of 2006, double the pace of the prior six years.

So while tyhere is obviously a first mover advantage with new technology, there is also a second mover 'catch-up' advantage if the pioneer doesn't keep moving forward. This is what we may now be seeing. Over a longer period of time there is absolutely no reason whatsoever that the EU economies cannot find ways to leverage ICT just like in the US, who have, at the end of the day, shown the others the way.

What the macro economic implications of this will be is another matter altogether. Here I don't go with the Bloomberg reading at all, but this is for another post.