Fiscal Forecast: How To Identify a Recession
There was a lot of media attention recently to Germany being in a recession. The only problem is that those who said so, were wrong. Here is why.
There was a lot of media attention recently to Germany being in a recession. The only problem is that those who said so, were wrong. Here is why.
If neither wages nor energy prices can explain why the ECB is right in being concerned about persistent inflation, then what can explain it? There is a candidate that nobody wants to talk about: taxes.
According to the data and predictions of economists, the worst of the inflation spike may have passed but interest rates will still go up in the coming months and banks will be hawkish, imposing the tightest requirements for lending since 2011.
While the stars are lining up for another fiscal crisis in Europe, the ECB’s chief economist fails to even mention the threat. Is the ECB ignorant on what is coming down the pike?
New data suggests an elevated risk for stagflation in Europe. Policymakers beware!
The strikes brought Germany’s entire rail network to a standstill and resulted in more than 90,000 passengers being affected by flight cancellations.
With a welfare state that dominates their budgets, European governments are exceedingly vulnerable to a recession. When tax revenue declines and entitlements force governments to spend more, the inevitable result is larger budget deficits. What will the ECB do in response to that?
If government size and employment rate had been the same in 2022 as they were in 2000, the cost of today’s government would have been $47,000 per employed person. That is a lot of money—until we do the same arithmetic with today’s government size and employment rate. Then the cost comes out to $59,700.
German’s national train operator has announced that all long-distance trains will be cancelled, and the Frankfurt airport has cancelled all regular flights.
Several news sources have raised the volume about a possible systemwide banking crisis. I am not going to contribute to that. In fact, we should all be careful about determining whether or not such a crisis is at hand.
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