Japan recorded the highest core-core inflation* since 1982: will the Bank of Japan finally raise the interest rate?
#Econgram_Asia
Facts:
1) In February, the Japanese economy recorded a year-on-year increase of 3.5% in the core-core CPI*. That is the fastest rate since January 1982.
2) Nonetheless, inflation in Japan’s services sector has been slow, at roughly 1.3%.
3) Japan’s major companies agreed to an average pay rise of 3.8% for the financial year beginning in April.
Analysis:
1) Even though the inflation in the services sector remains low relative to the West, the core-core CPI is growing rapidly. Besides, the more-than-expected pay rise will boost prices: higher salaries lead to more consumption.
2) Consequently, the increase in inflation is stickier than expected. In fact, some economists forecast Japan to abandon its longstanding loose monetary policy* to fight the rise in prices.
3) Nonetheless, the Bank of Japan still argues that there are reasons to continue the monetary easing*. For instance, low interest rates would help the country soften the effect of the Western banking crisis. That is because banks have access to cheap money when rates are low.
#Econgram_Asia
Facts:
1) In February, the Japanese economy recorded a year-on-year increase of 3.5% in the core-core CPI*. That is the fastest rate since January 1982.
2) Nonetheless, inflation in Japan’s services sector has been slow, at roughly 1.3%.
3) Japan’s major companies agreed to an average pay rise of 3.8% for the financial year beginning in April.
Analysis:
1) Even though the inflation in the services sector remains low relative to the West, the core-core CPI is growing rapidly. Besides, the more-than-expected pay rise will boost prices: higher salaries lead to more consumption.
2) Consequently, the increase in inflation is stickier than expected. In fact, some economists forecast Japan to abandon its longstanding loose monetary policy* to fight the rise in prices.
3) Nonetheless, the Bank of Japan still argues that there are reasons to continue the monetary easing*. For instance, low interest rates would help the country soften the effect of the Western banking crisis. That is because banks have access to cheap money when rates are low.
How are China - U.S. tensions affecting Chinese exports?
#Econgram_China
Facts:
1) Kunshan is known as China’s richest county due to its numerous contract manufacturers*. Many of them are Taiwanese. They chose to assemble components of their supply chains* in Kunshan because of the cheap inputs.
2) Since last October, the county has been cutting back on production, labour force and wages.
Analysis:
1) The main driver of the Chinese economy has always been its exports. However, the recent rise in inflation and economic uncertainty caused a decline in demand for Chinese products. Hence, Kunshan has decreased production.
2) Besides, Taiwanese companies started outsourcing their operations to other countries, such as Vietnam and India. That is because these firms want to limit their exposure to the U.S. - China tensions.
3) In response, Kunshan has been looking for new clients. The region is attempting to sign contracts with those companies that want to both outsource operations and sell their products in China. That strategy works thanks to Kunshan’s proximity to Shanghai, the largest Chinese consumer market.
#Econgram_China
Facts:
1) Kunshan is known as China’s richest county due to its numerous contract manufacturers*. Many of them are Taiwanese. They chose to assemble components of their supply chains* in Kunshan because of the cheap inputs.
2) Since last October, the county has been cutting back on production, labour force and wages.
Analysis:
1) The main driver of the Chinese economy has always been its exports. However, the recent rise in inflation and economic uncertainty caused a decline in demand for Chinese products. Hence, Kunshan has decreased production.
2) Besides, Taiwanese companies started outsourcing their operations to other countries, such as Vietnam and India. That is because these firms want to limit their exposure to the U.S. - China tensions.
3) In response, Kunshan has been looking for new clients. The region is attempting to sign contracts with those companies that want to both outsource operations and sell their products in China. That strategy works thanks to Kunshan’s proximity to Shanghai, the largest Chinese consumer market.
The World Bank predicts 2022-2030 to be a “lost decade” for the world economy
#Econgram_World
Facts:
1) The World Bank predicts that between 2022 and 2030, the world economy will grow by only 2.2%/year.
2) Between 2011 and 2021, the global GDP grew by 2.6%/year. In contrast, from 2000 to 2010, the growth rate was even higher, at 3.5%.
Analysis:
1) The main reason for the slowdown of global economic growth is elevated uncertainty. It was caused by the COVID pandemic and the war in Ukraine. As a result, investors are reluctant to direct their money into new projects, thus hindering economic growth. The current banking crisis will increase uncertainty even more, further deteriorating growth prospects.
2) The World Bank proposes several policies that could increase the global growth rate to 2.9%/year. They include:
- Government investment into environmentally friendly infrastructure projects. That could increase economic resilience to natural disasters.
- Decreasing tariffs* for green goods, thus facilitating global trade.
- Investing in training courses to foster labour-force* participation of women and older workers. That could solve the problem of the shrinking working class as societies age.
#Econgram_World
Facts:
1) The World Bank predicts that between 2022 and 2030, the world economy will grow by only 2.2%/year.
2) Between 2011 and 2021, the global GDP grew by 2.6%/year. In contrast, from 2000 to 2010, the growth rate was even higher, at 3.5%.
Analysis:
1) The main reason for the slowdown of global economic growth is elevated uncertainty. It was caused by the COVID pandemic and the war in Ukraine. As a result, investors are reluctant to direct their money into new projects, thus hindering economic growth. The current banking crisis will increase uncertainty even more, further deteriorating growth prospects.
2) The World Bank proposes several policies that could increase the global growth rate to 2.9%/year. They include:
- Government investment into environmentally friendly infrastructure projects. That could increase economic resilience to natural disasters.
- Decreasing tariffs* for green goods, thus facilitating global trade.
- Investing in training courses to foster labour-force* participation of women and older workers. That could solve the problem of the shrinking working class as societies age.
How is the banking crisis destroying emerging economies?
#Econgram_World
Facts:
1) Following the start of the banking crisis, over 25% of emerging countries have lost access to international bond* markets.
2) Roughly 27% of emerging economies’ sovereign bonds* have a yield spread* of over nine percentage points relative to the U.S. Treasuries*.
3) Some counties, including Nigeria and Kenya, planned to issue bonds. However, they eventually decided not to do that due to an enormous cost of borrowing.
Analysis:
1) The banking crisis caused investors to sell risky securities and buy safer ones due to increased uncertainty. That hit the emerging economies, as their sovereign bonds have a high default risk*.
2) Consequently, the yields on bonds of emerging countries rose, compensating investors for the increase in risk. However, the yield became so high that debt is now unsustainable for many economies. Therefore, these countries lost access to bond markets. They might have to ask the IMF for help or to devalue* the currency, avoiding the depletion of the foreign reserves.
3) Emerging economies are already facing high inflation and negligible growth. It is unclear when they will get access to bond markets again.
#Econgram_World
Facts:
1) Following the start of the banking crisis, over 25% of emerging countries have lost access to international bond* markets.
2) Roughly 27% of emerging economies’ sovereign bonds* have a yield spread* of over nine percentage points relative to the U.S. Treasuries*.
3) Some counties, including Nigeria and Kenya, planned to issue bonds. However, they eventually decided not to do that due to an enormous cost of borrowing.
Analysis:
1) The banking crisis caused investors to sell risky securities and buy safer ones due to increased uncertainty. That hit the emerging economies, as their sovereign bonds have a high default risk*.
2) Consequently, the yields on bonds of emerging countries rose, compensating investors for the increase in risk. However, the yield became so high that debt is now unsustainable for many economies. Therefore, these countries lost access to bond markets. They might have to ask the IMF for help or to devalue* the currency, avoiding the depletion of the foreign reserves.
3) Emerging economies are already facing high inflation and negligible growth. It is unclear when they will get access to bond markets again.
The Economic Perspective on the Barbenheimer Phenomenon
#Econgram_Business
The Barbenheimer* phenomenon, a summer 2023 sensation, sparked online trends. However, it is also noteworthy for its economic impact.
Data on Barbie:
1) Barbie’s Warner Bros. is the highest-grossing* global release in the studio’s 100-year history, beating out 2011’s “Harry Potter and the Deathly Hallows: Part 2.”
2) “Barbie” made $155 million domestically in its opening weekend, marking the largest opening weekend of the year and the biggest-ever debut for a female director.
3) “Barbie” hit the $1bn global box office mark barely three weeks into its run. This is remarkable considering that the highest-grossing movie of all time is Avatar (2009), with a lifetime gross of $2,846,089,541 ($2.85bn).
4) Gerwig became the first solo female director with a billion-dollar movie.
5) Warner Bros. had a marketing budget of $150mn. It is higher than the $145mn budget to produce the movie.
Data on Oppenheimer:
1) "Oppenheimer" has generated around $300mn at the domestic box office and topped $925.9 million worldwide, making it the highest-grossing biopic in history.
2) Outside of the U.S., the movie’s top markets include the UK, Germany, and France. They accounted for more than $121mn in ticket sales.
3) "Oppenheimer" is Nolan’s third highest-grossing* domestic release, behind Batman movies “The Dark Knight” and “The Dark Knight Rises.”
4) “Oppenheimer” is also the second-biggest R-rated* film in history, behind 2019’s Joker.
Inspired by CNN, Forbes, CNBC, Insider, The Economist
Lockdowns and streaming services contributed to cinema’s recent decline. However, data shows that people are still attracted to the big screen, as the Barbenheimer phenomenon suggests. Is there still hope for the cinema industry?
#Econgram_Business
The Barbenheimer* phenomenon, a summer 2023 sensation, sparked online trends. However, it is also noteworthy for its economic impact.
Data on Barbie:
1) Barbie’s Warner Bros. is the highest-grossing* global release in the studio’s 100-year history, beating out 2011’s “Harry Potter and the Deathly Hallows: Part 2.”
2) “Barbie” made $155 million domestically in its opening weekend, marking the largest opening weekend of the year and the biggest-ever debut for a female director.
3) “Barbie” hit the $1bn global box office mark barely three weeks into its run. This is remarkable considering that the highest-grossing movie of all time is Avatar (2009), with a lifetime gross of $2,846,089,541 ($2.85bn).
4) Gerwig became the first solo female director with a billion-dollar movie.
5) Warner Bros. had a marketing budget of $150mn. It is higher than the $145mn budget to produce the movie.
Data on Oppenheimer:
1) "Oppenheimer" has generated around $300mn at the domestic box office and topped $925.9 million worldwide, making it the highest-grossing biopic in history.
2) Outside of the U.S., the movie’s top markets include the UK, Germany, and France. They accounted for more than $121mn in ticket sales.
3) "Oppenheimer" is Nolan’s third highest-grossing* domestic release, behind Batman movies “The Dark Knight” and “The Dark Knight Rises.”
4) “Oppenheimer” is also the second-biggest R-rated* film in history, behind 2019’s Joker.
Inspired by CNN, Forbes, CNBC, Insider, The Economist
Lockdowns and streaming services contributed to cinema’s recent decline. However, data shows that people are still attracted to the big screen, as the Barbenheimer phenomenon suggests. Is there still hope for the cinema industry?
Chile wants to nationalize* its lithium industry
#Econgram_LA
Facts:
1) Chile has the third-largest lithium reserves of roughly 11mn tonnes.
2) Recently, Chile’s president announced plans to nationalize the lithium industry. The aim is to let government participate in the lithium production cycle and impose stricter environmental rules. The president said that it is a chance to conduct a transition to a sustainable and developed economy.
3) The plan will not have any effect on current mining contracts. However, future contracts will be issued as private-public partnerships. The government will take majority control.
4) As a result, the shares of Chilean lithium firms Albermarle and SQM dropped.
Analysis:
1) Lithium is used in batteries for electric vehicles. Since November, battery prices have dropped by roughly 70% due to the decrease in Chinese demand. However, the Chilean government believes in the long-term prospects of the lithium industry.
2) Albemarle and SQM are publicly traded*. Hence, by announcing a nationalization, Chile risks repelling investors and losing the competition to other lithium-mining countries. That is because the state-owned South American companies have a poor record in managing natural resources.
#Econgram_LA
Facts:
1) Chile has the third-largest lithium reserves of roughly 11mn tonnes.
2) Recently, Chile’s president announced plans to nationalize the lithium industry. The aim is to let government participate in the lithium production cycle and impose stricter environmental rules. The president said that it is a chance to conduct a transition to a sustainable and developed economy.
3) The plan will not have any effect on current mining contracts. However, future contracts will be issued as private-public partnerships. The government will take majority control.
4) As a result, the shares of Chilean lithium firms Albermarle and SQM dropped.
Analysis:
1) Lithium is used in batteries for electric vehicles. Since November, battery prices have dropped by roughly 70% due to the decrease in Chinese demand. However, the Chilean government believes in the long-term prospects of the lithium industry.
2) Albemarle and SQM are publicly traded*. Hence, by announcing a nationalization, Chile risks repelling investors and losing the competition to other lithium-mining countries. That is because the state-owned South American companies have a poor record in managing natural resources.
The U.S. will default* in June unless Democrats and Republicans reach a consensus
#Econgram_US
Facts:
1) Recently, the U.S. hit a $31.4trn debt ceiling*. Economists predict that America could default on its debt in June.
2) In response, Democrats* asked to lift the debt limit to repay creditors. However, Republicans* demanded a spending cut in exchange.
Analysis:
1) Republicans proposed several measures that would reduce billions in public spending. That will undermine Biden’s government policy priorities but would make the American debt sustainable. However, the President is reluctant to accept any compromise.
2) Republicans proposed to annul roughly $50-$60bn of the pandemic relief funds that have not yet been used. Besides, they suggested reducing spending on climate measures and other Biden initiatives.
3) House Republicans set the ambitious plan of balancing* the budget in ten years. Given the increase in the cost of borrowing due to inflation, they need to cut $3.6trn in spending over a decade.
4) Overall, if parties do not reach a consensus, then the U.S. will default. That would lead to a global financial crisis and a recession.
Inspired by NYT
#Econgram_US
Facts:
1) Recently, the U.S. hit a $31.4trn debt ceiling*. Economists predict that America could default on its debt in June.
2) In response, Democrats* asked to lift the debt limit to repay creditors. However, Republicans* demanded a spending cut in exchange.
Analysis:
1) Republicans proposed several measures that would reduce billions in public spending. That will undermine Biden’s government policy priorities but would make the American debt sustainable. However, the President is reluctant to accept any compromise.
2) Republicans proposed to annul roughly $50-$60bn of the pandemic relief funds that have not yet been used. Besides, they suggested reducing spending on climate measures and other Biden initiatives.
3) House Republicans set the ambitious plan of balancing* the budget in ten years. Given the increase in the cost of borrowing due to inflation, they need to cut $3.6trn in spending over a decade.
4) Overall, if parties do not reach a consensus, then the U.S. will default. That would lead to a global financial crisis and a recession.
Inspired by NYT
Why are central banks buying so much gold?
#Econgram_World
Facts:
1) In 2022, central banks bought 1136 tons of gold, the highest number since 1967. Central banks’ gold purchases grew by 152% compared to 2021.
2) According to a poll among 83 central banks, two-thirds of the respondents believe that other central banks will increase the share of gold reserves in 2023.
Analysis:
1) According to the poll, 70% of central bankers see gold purchases as an effective hedge* against rising inflation. With high inflation, investors feel more uncertain about the future. Therefore, they tend to invest more in gold because it is believed to have stable “fundamental value” due to its scarcity. Consequently, the gold demand increases, driving its price up. Indeed, the gold price is currently close to its historical maximum.
2) Another reason why central banks currently prefer gold to foreign currency is the growing counterparty risk*. It is associated with the unpredictable monetary policies of foreign central banks. For instance, the U.S. and EU's freezing of the Russian Central Bank’s reserves worth $300bn made many states buy more gold. That is because it cannot be frozen.
Inspired by FT
#Econgram_World
Facts:
1) In 2022, central banks bought 1136 tons of gold, the highest number since 1967. Central banks’ gold purchases grew by 152% compared to 2021.
2) According to a poll among 83 central banks, two-thirds of the respondents believe that other central banks will increase the share of gold reserves in 2023.
Analysis:
1) According to the poll, 70% of central bankers see gold purchases as an effective hedge* against rising inflation. With high inflation, investors feel more uncertain about the future. Therefore, they tend to invest more in gold because it is believed to have stable “fundamental value” due to its scarcity. Consequently, the gold demand increases, driving its price up. Indeed, the gold price is currently close to its historical maximum.
2) Another reason why central banks currently prefer gold to foreign currency is the growing counterparty risk*. It is associated with the unpredictable monetary policies of foreign central banks. For instance, the U.S. and EU's freezing of the Russian Central Bank’s reserves worth $300bn made many states buy more gold. That is because it cannot be frozen.
Inspired by FT
What is India missing to become a superpower?
#Econgram_India
Facts:
1) In India, in 2021, online payments have reached $66bn. In contrast, they were only $1.2bn in 2014.
2) However, only 15% of rural and 42% of urban households have internet access. Moreover, fewer than half of India’s population can use the Internet properly.
Analysis:
1) After becoming the most populous country, India is ready to overcome China economically. The further development of the digital infrastructure could make India become a superpower. In fact, Prime Minister aims to make India an alternative investment destination.
2) Hence, the majority of public services are now processed online. However, no proper regulation to manage such a massive amount of personal data has been approved yet. That causes opportunities for abuse and surveillance.
3) India’s digital transition seems to be a success. In fact, Morocco and the Philippines use made-in-India digital identity schemes. Nonetheless, the digital transition programme might worsen the social disparity within the country since only a minority has direct access to the Internet and can use it.
Inspired by FT
#Econgram_India
Facts:
1) In India, in 2021, online payments have reached $66bn. In contrast, they were only $1.2bn in 2014.
2) However, only 15% of rural and 42% of urban households have internet access. Moreover, fewer than half of India’s population can use the Internet properly.
Analysis:
1) After becoming the most populous country, India is ready to overcome China economically. The further development of the digital infrastructure could make India become a superpower. In fact, Prime Minister aims to make India an alternative investment destination.
2) Hence, the majority of public services are now processed online. However, no proper regulation to manage such a massive amount of personal data has been approved yet. That causes opportunities for abuse and surveillance.
3) India’s digital transition seems to be a success. In fact, Morocco and the Philippines use made-in-India digital identity schemes. Nonetheless, the digital transition programme might worsen the social disparity within the country since only a minority has direct access to the Internet and can use it.
Inspired by FT
Why has Greece become a safer borrower?
#Econgram_EU
Facts:
1) Last Friday, S&P Global Ratings* revised the credit rating outlook for Greek sovereign debt* from Stable to Positive. However, it kept the Italian rating outlook at the same level.
2) Nevertheless, Greece’s rating of BB+/B is still below "investment grade". The scale goes from D to AAA*. When an entity has BBB or better, it is classified as "investment grade", otherwise as "speculative".
Analysis:
1) The decision is based on the S&P expectations of how the country will perform in future. The budget deficit* is financed by government debt. Hence, the bigger the deficit, the more debt the government has to pay. That is why a larger deficit goes with a lower credit rating.
2) Greece is expected to reduce its large budget deficit. That signal comes from an increase in investments and planned governmental structural reforms.
3) In turn, Italy is projected to be in a worse fiscal position than currently. Since rating agencies are always careful before downgrading ratings compared to upgrading, they decided to keep Italy’s rating outlook and await other signals.
Inspired by FT
#Econgram_EU
Facts:
1) Last Friday, S&P Global Ratings* revised the credit rating outlook for Greek sovereign debt* from Stable to Positive. However, it kept the Italian rating outlook at the same level.
2) Nevertheless, Greece’s rating of BB+/B is still below "investment grade". The scale goes from D to AAA*. When an entity has BBB or better, it is classified as "investment grade", otherwise as "speculative".
Analysis:
1) The decision is based on the S&P expectations of how the country will perform in future. The budget deficit* is financed by government debt. Hence, the bigger the deficit, the more debt the government has to pay. That is why a larger deficit goes with a lower credit rating.
2) Greece is expected to reduce its large budget deficit. That signal comes from an increase in investments and planned governmental structural reforms.
3) In turn, Italy is projected to be in a worse fiscal position than currently. Since rating agencies are always careful before downgrading ratings compared to upgrading, they decided to keep Italy’s rating outlook and await other signals.
Inspired by FT
Why might the U.S. Inflation Reduction Act accelerate inflation?
#Econgram_US
Facts:
1) In August 2022, the U.S. Government enacted the Inflation Reduction Act (IRA). It Includes $369bn in subsidies aimed to incentivize environmentally friendly manufacturing and lower the prices for prescription drugs.
2) Besides, the U.S. passed the Chips and Science Act (CSA). It offers $50bn in subsidies to encourage domestic semiconductor production.
Analysis:
1) Paradoxically, many analysts think the Inflation Reduction Act may increase inflation. The IRA and CSA aim to incentivize firms to shift their production from China to the U.S. To move manufacturing to America, companies will need to hire new workers. By 2030, the U.S. will need an additional 546 thousand construction workers, 300 thousand engineers, and 90 thousand technicians to satisfy the elevated demand for labour.
2) Considering the tight labour market*, companies will have to raise their wages to hire enough workers. Analysts forecast that higher salaries and more resources spent on finding suppliers will add 10% to production costs.
3) The higher production costs will not be offset by the subsidies. They will eventually be passed on to consumers in the form of growing prices.
Inspired by FT
#Econgram_US
Facts:
1) In August 2022, the U.S. Government enacted the Inflation Reduction Act (IRA). It Includes $369bn in subsidies aimed to incentivize environmentally friendly manufacturing and lower the prices for prescription drugs.
2) Besides, the U.S. passed the Chips and Science Act (CSA). It offers $50bn in subsidies to encourage domestic semiconductor production.
Analysis:
1) Paradoxically, many analysts think the Inflation Reduction Act may increase inflation. The IRA and CSA aim to incentivize firms to shift their production from China to the U.S. To move manufacturing to America, companies will need to hire new workers. By 2030, the U.S. will need an additional 546 thousand construction workers, 300 thousand engineers, and 90 thousand technicians to satisfy the elevated demand for labour.
2) Considering the tight labour market*, companies will have to raise their wages to hire enough workers. Analysts forecast that higher salaries and more resources spent on finding suppliers will add 10% to production costs.
3) The higher production costs will not be offset by the subsidies. They will eventually be passed on to consumers in the form of growing prices.
Inspired by FT
The risk that banks did not know about before the Silicon Valley Bank failure
#Econgram_US
Facts:
1) On March 10, following Silicon Valley Bank's announcement that it needed additional funds, SVB was taken under control by regulators.
2) Dr Cookson* researched to figure out whether the bank run* was accelerated by social media. Eventually, he found evidence that Twitter indeed exacerbated the SVB’s situation.
Analysis:
1) It is known that coordination between depositors is the main element of any bank run. If one depositor tells the other that he wishes to withdraw money from the bank, then the other has more incentives to do so too.
2) Technology made communication much easier than before. Hence, Dr Cookson decided to test whether social media can accelerate the bank run. Indeed, negative tweets about SVB were followed by negative stock returns. Besides, stock market losses tend to be greater for banks with a bigger audience on social media.
3) To sum up, SVB faced a risk that appeared just recently with the expansion of social media. It significantly accelerated the bank run because depositors from all over the world could share their pessimistic expectations about the future of SVB.
Inspired by WSJ
#Econgram_US
Facts:
1) On March 10, following Silicon Valley Bank's announcement that it needed additional funds, SVB was taken under control by regulators.
2) Dr Cookson* researched to figure out whether the bank run* was accelerated by social media. Eventually, he found evidence that Twitter indeed exacerbated the SVB’s situation.
Analysis:
1) It is known that coordination between depositors is the main element of any bank run. If one depositor tells the other that he wishes to withdraw money from the bank, then the other has more incentives to do so too.
2) Technology made communication much easier than before. Hence, Dr Cookson decided to test whether social media can accelerate the bank run. Indeed, negative tweets about SVB were followed by negative stock returns. Besides, stock market losses tend to be greater for banks with a bigger audience on social media.
3) To sum up, SVB faced a risk that appeared just recently with the expansion of social media. It significantly accelerated the bank run because depositors from all over the world could share their pessimistic expectations about the future of SVB.
Inspired by WSJ
The historical causes of Africa’s huge income inequality
#Econgram_Africa
Facts:
1) The pre-tax income of the wealthiest 10% of Africans constitutes 54% of national income. In contrast, the income of the poorest 50% is only 9%. The resulting ratio is the highest among all the world’s regions.
2) However, not all African countries are so unequal. The income earned by the wealthiest 10% is 65% of the national in South Africa. That number is 45% for most countries in the North and West of the continent.
Analysis:
1) Let us derive the source of African income inequality and the differences across countries through history:
- In the 17th century, inequality was due to slavery*. The warrior class was gaining by selling their fellow Africans.
- In the 19th century, inequality rose due to colonization. The most unequal countries were those with the biggest number of colonizers. Besides, inequality was higher in regions that required more capital. For instance, South Africa’s gold mines demanded investment.
- The African socialism of the 1960s had catastrophic effects on economic growth. Later, the collapse of commodity* prices in the 1980s and corruption hurt Africa’s ability to adopt redistributive* policies.
Inspired by The Economist
#Econgram_Africa
Facts:
1) The pre-tax income of the wealthiest 10% of Africans constitutes 54% of national income. In contrast, the income of the poorest 50% is only 9%. The resulting ratio is the highest among all the world’s regions.
2) However, not all African countries are so unequal. The income earned by the wealthiest 10% is 65% of the national in South Africa. That number is 45% for most countries in the North and West of the continent.
Analysis:
1) Let us derive the source of African income inequality and the differences across countries through history:
- In the 17th century, inequality was due to slavery*. The warrior class was gaining by selling their fellow Africans.
- In the 19th century, inequality rose due to colonization. The most unequal countries were those with the biggest number of colonizers. Besides, inequality was higher in regions that required more capital. For instance, South Africa’s gold mines demanded investment.
- The African socialism of the 1960s had catastrophic effects on economic growth. Later, the collapse of commodity* prices in the 1980s and corruption hurt Africa’s ability to adopt redistributive* policies.
Inspired by The Economist
Oil-rich Gulf states claim that Egypt attempts to fool them
#Econgram_Africa
Facts:
1) Egypt is currently lacking foreign currency. Besides, it will be facing a drastic financing gap* of roughly $17bn over the next four years.
2) Egypt’s allies (oil-rich Gulf states) have traditionally bailed out* the country. However, they are now seeking good commercial deals instead.
Analysis:
1) To reduce the financing gap and foreign currency shortage, the government wants to sell 32 state-owned companies. However, there is a mismatch in the prices targeted by Egypt and the ones offered by the Gulf states.
2) The government strives to sell the companies at a large premium* to market values. It claims that market prices do not take into consideration the long-term potential. However, investors do not raise the price they offer because they do not believe in the willingness of Egypt’s military-led regime to start reforms that would favour businesses.
3) Moreover, these public firms mainly depend on state funding in the form of government contracts and subsidies. If an investor buys one of these companies, he needs to be sure that these privileges continue. Otherwise, he will face a high degree of uncertainty.
Inspired by FT
#Econgram_Africa
Facts:
1) Egypt is currently lacking foreign currency. Besides, it will be facing a drastic financing gap* of roughly $17bn over the next four years.
2) Egypt’s allies (oil-rich Gulf states) have traditionally bailed out* the country. However, they are now seeking good commercial deals instead.
Analysis:
1) To reduce the financing gap and foreign currency shortage, the government wants to sell 32 state-owned companies. However, there is a mismatch in the prices targeted by Egypt and the ones offered by the Gulf states.
2) The government strives to sell the companies at a large premium* to market values. It claims that market prices do not take into consideration the long-term potential. However, investors do not raise the price they offer because they do not believe in the willingness of Egypt’s military-led regime to start reforms that would favour businesses.
3) Moreover, these public firms mainly depend on state funding in the form of government contracts and subsidies. If an investor buys one of these companies, he needs to be sure that these privileges continue. Otherwise, he will face a high degree of uncertainty.
Inspired by FT
Why stock prices of the U.S. tech companies have risen by 44% in 2023?
#Econgram_US
Facts:
1) Since the beginning of 2023, the S&P 500 index* has grown by 8%.
2) 80% of the increase is driven by seven tech companies: Apple, Microsoft, Alphabet, Meta, Nvidia, Amazon, and Tesla. The stock prices of these companies have risen by 44% in 2023, while the shares of other firms in the S&P 500 have increased by 2%.
Analysis:
1) The main reason for the rise in stock prices of tech companies is the recent AI boom. The success of Generative Artificial Intelligence* improved investors’ expectations about the growth prospects of tech companies that heavily invest in AI.
2) Another reason for the impressive performance of tech stocks is the low base effect*. In 2022, most tech companies showed poor financial results. Hence, investment funds sold tech firms’ shares. However, nowadays, the enthusiasm for AI and the expectations that the FED will stop increasing interest rates make investment funds buy tech firms’ shares back.
3) Nevertheless, today shares of many tech firms, such as Alphabet and Amazon, are still valued less than they were one year ago.
Inspired by FT
#Econgram_US
Facts:
1) Since the beginning of 2023, the S&P 500 index* has grown by 8%.
2) 80% of the increase is driven by seven tech companies: Apple, Microsoft, Alphabet, Meta, Nvidia, Amazon, and Tesla. The stock prices of these companies have risen by 44% in 2023, while the shares of other firms in the S&P 500 have increased by 2%.
Analysis:
1) The main reason for the rise in stock prices of tech companies is the recent AI boom. The success of Generative Artificial Intelligence* improved investors’ expectations about the growth prospects of tech companies that heavily invest in AI.
2) Another reason for the impressive performance of tech stocks is the low base effect*. In 2022, most tech companies showed poor financial results. Hence, investment funds sold tech firms’ shares. However, nowadays, the enthusiasm for AI and the expectations that the FED will stop increasing interest rates make investment funds buy tech firms’ shares back.
3) Nevertheless, today shares of many tech firms, such as Alphabet and Amazon, are still valued less than they were one year ago.
Inspired by FT
The Economic Perspective on the Barbenheimer Phenomenon
#Econgram_Business
The Barbenheimer* phenomenon, a summer 2023 sensation, sparked online trends. However, it is also noteworthy for its economic impact.
Data on Barbie:
1) Barbie’s Warner Bros. is the highest-grossing* global release in the studio’s 100-year history, beating out 2011’s “Harry Potter and the Deathly Hallows: Part 2.”
2) “Barbie” made $155 million domestically in its opening weekend, marking the largest opening weekend of the year and the biggest-ever debut for a female director.
3) “Barbie” hit the $1bn global box office mark barely three weeks into its run. This is remarkable considering that the highest-grossing movie of all time is Avatar (2009), with a lifetime gross of $2,846,089,541 ($2.85bn).
4) Gerwig became the first solo female director with a billion-dollar movie.
5) Warner Bros. had a marketing budget of $150mn. It is higher than the $145mn budget to produce the movie.
Data on Oppenheimer:
1) "Oppenheimer" has generated around $300mn at the domestic box office and topped $925.9 million worldwide, making it the highest-grossing biopic in history.
2) Outside of the U.S., the movie’s top markets include the UK, Germany, and France. They accounted for more than $121mn in ticket sales.
3) "Oppenheimer" is Nolan’s third highest-grossing* domestic release, behind Batman movies “The Dark Knight” and “The Dark Knight Rises.”
4) “Oppenheimer” is also the second-biggest R-rated* film in history, behind 2019’s Joker.
Inspired by CNN, Forbes, CNBC, Insider, The Economist
Lockdowns and streaming services contributed to cinema’s recent decline. However, data shows that people are still attracted to the big screen, as the Barbenheimer phenomenon suggests. Is there still hope for the cinema industry?
#Econgram_Business
The Barbenheimer* phenomenon, a summer 2023 sensation, sparked online trends. However, it is also noteworthy for its economic impact.
Data on Barbie:
1) Barbie’s Warner Bros. is the highest-grossing* global release in the studio’s 100-year history, beating out 2011’s “Harry Potter and the Deathly Hallows: Part 2.”
2) “Barbie” made $155 million domestically in its opening weekend, marking the largest opening weekend of the year and the biggest-ever debut for a female director.
3) “Barbie” hit the $1bn global box office mark barely three weeks into its run. This is remarkable considering that the highest-grossing movie of all time is Avatar (2009), with a lifetime gross of $2,846,089,541 ($2.85bn).
4) Gerwig became the first solo female director with a billion-dollar movie.
5) Warner Bros. had a marketing budget of $150mn. It is higher than the $145mn budget to produce the movie.
Data on Oppenheimer:
1) "Oppenheimer" has generated around $300mn at the domestic box office and topped $925.9 million worldwide, making it the highest-grossing biopic in history.
2) Outside of the U.S., the movie’s top markets include the UK, Germany, and France. They accounted for more than $121mn in ticket sales.
3) "Oppenheimer" is Nolan’s third highest-grossing* domestic release, behind Batman movies “The Dark Knight” and “The Dark Knight Rises.”
4) “Oppenheimer” is also the second-biggest R-rated* film in history, behind 2019’s Joker.
Inspired by CNN, Forbes, CNBC, Insider, The Economist
Lockdowns and streaming services contributed to cinema’s recent decline. However, data shows that people are still attracted to the big screen, as the Barbenheimer phenomenon suggests. Is there still hope for the cinema industry?
A new way to connect East and West
#Econgram_World
Facts:
1) During the G20 summit, the project for a new ship and rail corridor connecting India, the Middle East, and the Mediterranean area was proposed. That would make trade between India and Europe 40% faster.
2) “This is nothing less than historic. It will be the most direct connection to date between India, the Arabian Gulf and Europe,” stated Ursula von der Leyen, president of the European Commission.
Analysis:
1) Despite no binding financial commitment being made yet, the parties agreed to come up with a plan over the next 2 months. The proposal includes a new undersea cable and energy transport infrastructure. Indeed, both Saudi Arabia, the world’s top oil exporter, and the UAE, the Middle East’s dominant finance centre, are willing to become a key logistic hub between East and West.
2) Both the EU and the U.S. have backed the development of this project. The EU negotiated its commitment during a visit by von der Leyen to Abu Dhabi. The collaboration is fundamental to deepening trade and investment ties with the Gulf region. Therefore, the EU has planned to invest €300bn into overseas infrastructure up to 2027.
Inspired by FT
What could be the main difficulties involved in the project?
#Econgram_World
Facts:
1) During the G20 summit, the project for a new ship and rail corridor connecting India, the Middle East, and the Mediterranean area was proposed. That would make trade between India and Europe 40% faster.
2) “This is nothing less than historic. It will be the most direct connection to date between India, the Arabian Gulf and Europe,” stated Ursula von der Leyen, president of the European Commission.
Analysis:
1) Despite no binding financial commitment being made yet, the parties agreed to come up with a plan over the next 2 months. The proposal includes a new undersea cable and energy transport infrastructure. Indeed, both Saudi Arabia, the world’s top oil exporter, and the UAE, the Middle East’s dominant finance centre, are willing to become a key logistic hub between East and West.
2) Both the EU and the U.S. have backed the development of this project. The EU negotiated its commitment during a visit by von der Leyen to Abu Dhabi. The collaboration is fundamental to deepening trade and investment ties with the Gulf region. Therefore, the EU has planned to invest €300bn into overseas infrastructure up to 2027.
Inspired by FT
What could be the main difficulties involved in the project?
Is it the end for Erdoganomics?
#Econgram_Turkey
Facts:
1) After years of unorthodox economic policies*, Erdogan is finally fighting inflation.
Analysis:
1) Erdogan is a proponent of unorthodox economic policies. They suggest that the lower the cost of borrowing*, the lower the prices: "low rates, low inflation". That theory made it impossible for the Turkish Central Bank to tackle the country’s rising inflation. In 2022, it skyrocketed to 86% (now 44%).
2) Turkish investors do not believe the central bank will successfully fight inflation. That caused mass investments in foreign currencies and real assets. In turn, that led to an even higher inflation rate: people prefer buying an overpriced good to storing a fast-debasing Turkish lira.
3) Erdogan is retracing his steps. Now, the new central bank governor and the finance minister are voices of economic orthodoxy. Short-term interest rates are as high as 25%, and the new treasury minister is targeting policies that would shield Turkish Public Finances from the lira's fluctuations.
Inspired by The Economist, FT
#Econgram_Turkey
Facts:
1) After years of unorthodox economic policies*, Erdogan is finally fighting inflation.
Analysis:
1) Erdogan is a proponent of unorthodox economic policies. They suggest that the lower the cost of borrowing*, the lower the prices: "low rates, low inflation". That theory made it impossible for the Turkish Central Bank to tackle the country’s rising inflation. In 2022, it skyrocketed to 86% (now 44%).
2) Turkish investors do not believe the central bank will successfully fight inflation. That caused mass investments in foreign currencies and real assets. In turn, that led to an even higher inflation rate: people prefer buying an overpriced good to storing a fast-debasing Turkish lira.
3) Erdogan is retracing his steps. Now, the new central bank governor and the finance minister are voices of economic orthodoxy. Short-term interest rates are as high as 25%, and the new treasury minister is targeting policies that would shield Turkish Public Finances from the lira's fluctuations.
Inspired by The Economist, FT
U.S. bans investments in China
#Econgram_World
Facts:
1) Earlier in August, Biden signed an executive order to prohibit new investments in sensitive Chinese technology firms. The decision is aimed at stopping the Chinese military from accessing American capital and knowledge. Restrictions will come into force from 2024.
2) According to U.S. Commerce Secretary Raimondo, restrictions on Chinese technology investments are not meant to “decouple” the American economy from China’s. Instead, the bans are necessary to protect national security.
Analysis:
1) Raimondo is the fourth senior Biden administration official to visit China over the last three months. Her goal is to soften the relationship between the two world’s biggest economies following the announcement of new restrictions. Indeed, in her speech, Raimondo stressed the importance of trade relationships between the U.S. and China.
2) Hong Kong's response to the announcement was prompt. The government described the restrictions as “unreasonable measures” because they “damage the economic and commercial interests of American companies themselves”. The restrictions will affect private equity and venture capital firms: they are going to redirect their capital.
Inspired by FT and Reuters
Will these restrictions influence the relationship between the U.S. and China in the long run?
👉
#Econgram_World
Facts:
1) Earlier in August, Biden signed an executive order to prohibit new investments in sensitive Chinese technology firms. The decision is aimed at stopping the Chinese military from accessing American capital and knowledge. Restrictions will come into force from 2024.
2) According to U.S. Commerce Secretary Raimondo, restrictions on Chinese technology investments are not meant to “decouple” the American economy from China’s. Instead, the bans are necessary to protect national security.
Analysis:
1) Raimondo is the fourth senior Biden administration official to visit China over the last three months. Her goal is to soften the relationship between the two world’s biggest economies following the announcement of new restrictions. Indeed, in her speech, Raimondo stressed the importance of trade relationships between the U.S. and China.
2) Hong Kong's response to the announcement was prompt. The government described the restrictions as “unreasonable measures” because they “damage the economic and commercial interests of American companies themselves”. The restrictions will affect private equity and venture capital firms: they are going to redirect their capital.
Inspired by FT and Reuters
Will these restrictions influence the relationship between the U.S. and China in the long run?
👉
The Economic Perspective on the Barbenheimer Phenomenon
#Econgram_Business
The Barbenheimer* phenomenon, a summer 2023 sensation, sparked online trends. However, it is also noteworthy for its economic impact.
Data on Barbie:
1) Barbie’s Warner Bros. is the highest-grossing* global release in the studio’s 100-year history, beating out 2011’s “Harry Potter and the Deathly Hallows: Part 2.”
2) “Barbie” made $155 million domestically in its opening weekend, marking the largest opening weekend of the year and the biggest-ever debut for a female director.
3) “Barbie” hit the $1bn global box office mark barely three weeks into its run. This is remarkable considering that the highest-grossing movie of all time is Avatar (2009), with a lifetime gross of $2,846,089,541 ($2.85bn).
4) Gerwig became the first solo female director with a billion-dollar movie.
5) Warner Bros. had a marketing budget of $150mn. It is higher than the $145mn budget to produce the movie.
Data on Oppenheimer:
1) "Oppenheimer" has generated around $300mn at the domestic box office and topped $925.9 million worldwide, making it the highest-grossing biopic in history.
2) Outside of the U.S., the movie’s top markets include the UK, Germany, and France. They accounted for more than $121mn in ticket sales.
3) "Oppenheimer" is Nolan’s third highest-grossing* domestic release, behind Batman movies “The Dark Knight” and “The Dark Knight Rises.”
4) “Oppenheimer” is also the second-biggest R-rated* film in history, behind 2019’s Joker.
Inspired by CNN, Forbes, CNBC, Insider, The Economist
Lockdowns and streaming services contributed to cinema’s recent decline. However, data shows that people are still attracted to the big screen, as the Barbenheimer phenomenon suggests. Is there still hope for the cinema industry?
👉
#Econgram_Business
The Barbenheimer* phenomenon, a summer 2023 sensation, sparked online trends. However, it is also noteworthy for its economic impact.
Data on Barbie:
1) Barbie’s Warner Bros. is the highest-grossing* global release in the studio’s 100-year history, beating out 2011’s “Harry Potter and the Deathly Hallows: Part 2.”
2) “Barbie” made $155 million domestically in its opening weekend, marking the largest opening weekend of the year and the biggest-ever debut for a female director.
3) “Barbie” hit the $1bn global box office mark barely three weeks into its run. This is remarkable considering that the highest-grossing movie of all time is Avatar (2009), with a lifetime gross of $2,846,089,541 ($2.85bn).
4) Gerwig became the first solo female director with a billion-dollar movie.
5) Warner Bros. had a marketing budget of $150mn. It is higher than the $145mn budget to produce the movie.
Data on Oppenheimer:
1) "Oppenheimer" has generated around $300mn at the domestic box office and topped $925.9 million worldwide, making it the highest-grossing biopic in history.
2) Outside of the U.S., the movie’s top markets include the UK, Germany, and France. They accounted for more than $121mn in ticket sales.
3) "Oppenheimer" is Nolan’s third highest-grossing* domestic release, behind Batman movies “The Dark Knight” and “The Dark Knight Rises.”
4) “Oppenheimer” is also the second-biggest R-rated* film in history, behind 2019’s Joker.
Inspired by CNN, Forbes, CNBC, Insider, The Economist
Lockdowns and streaming services contributed to cinema’s recent decline. However, data shows that people are still attracted to the big screen, as the Barbenheimer phenomenon suggests. Is there still hope for the cinema industry?
👉