My new book:

“The testament of a disabused economist”

le testament d'un economiste désabusé

Our duty is to rebuild society on a solid basis, as well as making deep reforms to financial markets and getting rid once and for all of their intrinsic ability to cause harm. We haven’t learned anything from 2008 and have even worsened our exposure, and exacerbated our risks, so much so that this extreme vulnerability is now infecting even the most well-off. I dare to be the spokesman of an overwhelming majority of “ordinary” citizens by affirming that we will accept suffering this acute and unprecedented crisis (once again!) on the sole condition that our system’s structural and substantive vices are immediately put right.  May the statesmen and women who have enough moral fibre to reject the economy and finance continuing to reign as supreme leaders, while society is bound to follow them with servility, come out of the shadows. The economic catastrophe that is lying in unavoidable wait for us is asking the right questions, and is making its demands for a deep cleansing. May this virus be thanked for it, and win the Nobel prize for economics, if it causes us all to mobilise.

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English Articles
American Sanctions: A Double-Edged Sword
American Sanctions: A Double-Edged SwordSeptember 24, 2023Sanctions are a lever frequently employed, certainly because it allows the rulers who use and abuse them to avoid costly armed conflicts. Sanctions represent a kind of “low-cost” warfare. Not quite, in reality, because these retaliatory measures against a state – far from harming its officials – primarily punish the most vulnerable under the yoke of repressive systems. While it is effortless for a country like the USA to impose them through its dozens of federal agencies, each with its specialty, no one is held accountable within these administrations if these same sanctions harm the innocent civilian populations of nations under embargo, American foreign policy, or even US companies and banks obliged to adhere to them. Furthermore, it is extraordinarily complicated to lift sanctions in a country like the United States – responsible for about half of them since the 1950s – due to bureaucracy, even if they no longer serve national interests. Let’s focus on the case of the USA, whose number of sanctions imposed by the Treasury has skyrocketed from around 1,000 in the year 2000 to nearly 10,000 today. While the Trump administration added an average of 3 names per day to a list of individuals banned from banking, Biden did so with gusto during the Russian invasion of Ukraine. The use of this weapon has thus become systematic over the past twenty years to prevent access to nuclear weapons, punish dictators, dismantle terrorist networks, despite the burdens imposed even on American citizens who, in reality, have no effective means to challenge these measures often unilaterally adopted by their leaders. Decreed and implemented with disconcerting ease, these sanctions are a kind of bludgeon that destroys everything in its path when they should be activated with finesse to avoid harming the innocent, numerous American companies and citizens, and incidentally, allies. In short, most of the current US sanctions undermine the rhetoric that the United States of America are fervent defenders of human rights and the best promoters of peace in the world. Therefore, they must be much better targeted, calibrated, and not put in place almost automatically. Finally, these sanctions must be able to be canceled with the same ease. Otherwise, they lose their effectiveness, or even turn against American interests. Some voices are heard within the US leadership circles, such as that of a former member of Biden’s National Security Council, Peter Harrell, who proposes that sanctions imposed on a country or individual automatically expire unless expressly renewed by Congress. An obvious point: sanctions aimed at regime change in the targeted nation do not work! In this regard, the failure of those imposed in 1962 by Kennedy against Cuba is evident, lifted in 2014 by Obama before being reinstated by Trump. Even worse when these sanctions serve the current dictator, as in the case of Maduro, who blames the Americans for the economic decline of his country. And he is not entirely wrong, as the embargo on Venezuelan oil – which accounts for 90% of the country’s exports – has had disastrous consequences on an increasingly impoverished population, allowing their head of state to consolidate his power while getting closer to Russia and China. However, sanctions can be constructive if they are accompanied by a concrete and realistic goal to achieve, as was the case in 1986 when those imposed on South Africa promised to be lifted upon the abolition of apartheid and the release of Nelson Mandela. To be effective, to avoid harming innocents at all costs, to preserve their own vital interests, sanctions by a country like the United States – which are undoubtedly a devastating weapon – must, therefore, be implemented with discernment. Like this:Like Loading... [...] Read more...
China: Revolt of the Party’s Elderly Leaders ?
China: Revolt of the Party’s Elderly Leaders ?September 7, 2023In Beijing, it’s the revolt of the elderly! Those who have led the Communist Party, these former leaders who presided over and orchestrated China’s rise to power until Xi’s accession, are now demanding accountability. It has recently come to light that they gathered in late August in the Hebei Province, specifically in the coastal city of Beidaihe, and formalized and clarified their grievances to the current leaders in power. These summits of past and present Party leaders – and therefore of the country – are regular and held strictly in secret. However, this is the first time that dissent has leaked to the public, as this conclave of former leaders who were either deposed or forced into retirement seems deeply concerned about the situation in China. In unison, criticisms were directed at Xi, who until now was not accustomed to being questioned and appears to have been caught off guard or at least destabilized. A few days after Beidaihe, an important forum is missed on the sidelines of the BRICS, where Xi’s speech is read on his behalf by his Minister of Commerce, Wang Wentao. Furthermore, for the first time since coming to power in 2012, he is absent from a G20 summit, an organization he considers crucial. Indirectly related to the meetings of the elderly in Beidaihe, which do not involve taking stock of the country, Xi’s absences can be explained first by his reluctance to answer the inevitable questions from foreign leaders and journalists about China’s economic underperformance. Xi cannot afford to lose face and justify a stagnation not experienced on this scale since the 1970s, nor can he publicly admit the collapse of foreign investments in his country. He cannot acknowledge the debacle of a massive real estate market that was the backbone of citizens’ prosperity, nor the mass unemployment affecting young Chinese, which led to the outright suspension of this statistic’s publication last summer. It is also impossible for the undisputed Chinese leader not to be questioned about the disappearance of Qin Gang, the short-lived Minister of Foreign Affairs who vanished one moonless night, or about the purge in early August of two crucial generals in the People’s Liberation Army (PLA) Rocket Force. The sharp criticisms and probing questions were abundant at this meeting of the elderly in Beidaihe, pushing Xi to his limits, even questioning the leadership of his three predecessors: Deng Xiaoping, Jiang, and Hu. One thing is certain: his absence from the Asia-Pacific Economic Cooperation (APEC) Council meeting in San Francisco in November would be clear evidence of the very complicated position he finds himself in today. How can we not draw a connection between the discontent expressed by the former Party cadres and the public reappearance of Li Keqiang just days after Beidaihe? Li Keqiang, who served as the Premier and number 2 for 10 years until his fall from grace last March, is now leading the official Chinese delegation to the G20, and he appeared with a smile on social media sites that were promptly censored by the authorities. It’s worth noting that Xi himself recently pushed Li out. Can the flutter of a butterfly’s wings in Beidaihe provoke a tornado in Beijing? Like this:Like Loading... [...] Read more...
China: a shadow of itself
China: a shadow of itselfAugust 27, 2023China has become one of the most expensive countries in the world to raise and support a family. The collapse of consumption and overall living standards is wreaking havoc among young Chinese couples, who now have little motivation to start a family. Chinese fertility is declining rapidly despite the pro-natalist policy adopted by the government in 2021, which encourages families to have three children. However, this policy has had little effect, as fertility (or the desire for children) remains one of the few aspects that the Chinese authorities struggle to control. As a result, the demographic decline is expected to persist and may even accelerate over time. The Chinese population is projected to dramatically decrease to 800 million individuals by the end of the century, compared to the current 1.4 billion, according to the United Nations. Bleaker predictions by statisticians, suggesting that the population would cease to replenish itself by 2029, were contradicted by an even more grim reality, as this tipping point of birth and death equality occurred as early as last year, in 2022. The situation is so severe that one must look back to medieval times of famines and epidemics to find population losses of this magnitude. So, have analysts, experts, and policymakers been engaging in fearmongering by overestimating China’s economic power, similar to how their predecessors did with Sputnik-era Russia in the 1960s and Japan’s electronic prowess in the 1990s? It seems certain that China will need at least a generation to reach the American level, given how it continues to interfere politically with its industrial and technological leaders. The Communist Party and national security are far ahead of any other concerns for Chinese leaders. In accordance with these priorities, economic growth is asked to step aside if it means preserving or strengthening political control, maintaining the social status quo, and increasing influence abroad. The recent charm offensive aimed at encouraging Western businessmen and companies has not gained much traction, especially in a context where foreigner arrests and intrusions into established companies within the country are effectively freezing foreign investment and strongly discouraging visits. By imposing the Party’s absolute control over education, technology, entertainment, and more, Xi has succeeded in stifling Chinese innovation. This approach has also alienated countries like Australia, South Korea, and Italy, which have been dismayed and disgusted by the iron-fisted approach and coercive measures. As the Party places much higher value on power than on the economy, it’s easy to understand that China’s current (economic) troubles and forthcoming (demographic) challenges are political and ideological in nature. None of the plans aimed at stimulating its economy will succeed in the face of the now evident disconnect between officials and the private sector. How can one invest, innovate, and succeed when this regime exhibits one of the traditional shortcomings of authoritarian regimes, namely unpredictability? Like this:Like Loading... [...] Read more...
France is angry, France is hungry
France is angry, France is hungryJuly 5, 2023The flour war in 1775 sparked around 300 riots throughout France and was caused by the state’s abolition of price controls on bread, driven by Turgot’s influence. Turgot, who had elevated “laissez-faire” as an economic principle almost akin to divine law or inherent in natural laws, had not at all concerned himself with the rising cost of this ingredient, which at the time constituted over two-thirds of the common people’s food in the Kingdom of France. It was a sad era where the most impoverished were forced to spend half of their meager income solely on bread. Today, our wallets are theoretically less sensitive to fluctuations in food prices, and most of us first sacrifice other expenses during lean times. However, it is difficult not to draw parallels with recent riots in France, where food prices have skyrocketed by 22% since 2021, according to a recently published article by Philip Pilkington citing data from INSEE. After the COVID-19 pandemic, we have been saddened by articles and photos of students lining up at food banks. How can one not be struck by scenes of supermarkets being looted by housewives in early July 2023, or by that proud teenager who managed to steal bottles of olive oil? No, it is an insignificant minority that rushed for brand-name products, and it is hardly possible, paraphrasing Marie Antoinette, to shout at them, “Let them eat Nike.” Fortunately, we are no longer in an era where a substantial increase in food prices leads to famine in our Western nations. However, it is now quiet common to skip a meal in modern-day France, where the least fortunate citizens have not experienced such an erosion of their standard of living for decades. Did you know that one out of eight French people is now reduced to not having enough food to eat, and these deprivations have resulted in a 17% decrease in food consumption in a little over a year? This information comes from the same aforementioned article, which states that it is the most substantial decline since this statistic was established in 1980. It goes without saying that the lower classes are the most severely affected because they are forced to allocate nearly 30% of their budget to food, whereas the figure is around 7% for the more affluent. The sudden surge in the cost of living, particularly for essential food items, poses a danger to public order because it is not difficult to put oneself in the shoes of those who can no longer manage to eat enough in 21st-century France, whose people resigned themselves to consuming nearly 60% less meat due to its high prices. It is unthinkable in our supposedly civilized era, in a country like France that never misses an opportunity to extol its social model, that rising food prices and declining consumption of basic necessities continue to be precursors to riots. Today, we are learning at our own expense that our developed nations are not a cocoon and are far from immune to global turbulence. A colossal catastrophe looms on Europe’s doorstep, and it is urgent to realize that the troubles do not stop at the borders of the Schengen area. Europe—and in this tragic example that concerns us, France—will not always be able to consistently satisfy the needs of its citizens, as these are the mechanical consequences of wars, climate change, and hypercapitalism. In 1775, the uprisings linked to the soaring price of bread were the infallible signs of the approaching storm, which continued in October 1789 with the march of women to Versailles in response to the food shortage. Supposedly the first baker of France, the King had established, over the centuries, a modus vivendi with the population that recognized the inalienable right to bread. Today, it seems that France is hungry once again. Like this:Like Loading... [...] Read more...
The Strange Defeat
The Strange DefeatJune 26, 2023Clearly, for Russia, it was a chronicle of an announced debacle. They invaded the largest country in Europe with barely 150,000 soldiers, while the USSR mobilized nearly a million men in 1968 to occupy a country (Czechoslovakia) that represented only one-fifth of Ukraine’s territory and a quarter of its population at that time. Stalin would have acted differently. He didn’t hesitate to dismiss and even execute his favorite Marshal, Kulik, when the Red Army was crushed in Ukraine in 1941 by the Germans, who could then leisurely march towards Moscow. Understanding that it was not wise, at least from a military perspective, to surround oneself with sycophants, Stalin did not hesitate to entrust significant responsibilities to disgraced generals, some of whom were imprisoned in concentration camps but were competent and ultimately secured victory for him. In our days, the lamentable failure of the Russian army and its pitiful retreat from Kyiv and Kharkiv has not been followed by the typical reaction of autocrats who have ruled Russia since the distant era of the Tsars, where incapable generals ended up facing a firing squad. This time, Putin did not use his (theoretical) absolute power to remove the incompetent individuals lacking military and strategic talent, unworthy of commanding troops. It is inexplicable! Especially coming from someone who was believed to have a zero-tolerance policy towards failure, a character he had cultivated over the decades without any qualms. The reaction against the high-ranking officials who had captured power in Moscow came from an incredulous Prigozhin in the face of his master’s passivity. Sergei Shoigu, promoted to Defense Minister -even though he had never served in the military – because he was an unconditional servant of Putin? Valery Gerasimov, chief of staff and theorist of cyber warfare, who believed that it had supplanted the good old infantry? Prigozhin incessantly sent all kinds of messages, direct and subliminal, urging his Tsar to promptly replace the eminent members of his court with these young individuals who, against their will, distinguished themselves on the front lines. For our friend Prigozhin, the choice is simple: either execute Shoigu, Gerasimov, and the like—traitors due to incompetence or laziness, who have never bloodied their tunics like him—or abandon his Ukrainian territorial ambitions. Does Putin have control over his shop? The distant and indifferent observer, somewhat knowledgeable about history, understands that the Kremlin owes its mythical eternity only to the war of clans. This particular Tsar has lost some of his splendor and his monopoly on the use of force. Indeed, Putin is not Stalin. Putin is, after all, just a bureaucrat. This internal struggle—pancreatic struggle—between Prigozhin and Putin is reminiscent of a remark by the unforgettable Kissinger regarding the war between Iran and Iraq: “What a pity that both cannot lose.” Like this:Like Loading... [...] Read more...
Russia at war with OPEC
Russia at war with OPECJune 11, 2023It is necessary to conjugate the striking force of OPEC in the past. This group of countries that used to meet in Vienna, deciding unanimously to reduce their production and using their monopoly to drive up oil prices to the detriment of nations and continents eager to consume it, no longer impresses much. How distant that era seems, starting in 1973, when OPEC, followed by a few non-member countries, caused the first oil shock. Today, its members realize an obvious fact: maintaining a cartel regime is quite complicated. The temptation is too great for each member to break the solidarity that is the essence of a cartel when there is an opportunity to earn more by selling more. Defections are simply human when profits can be increased by offering a slight discount to buyers, and in the absence of a mechanism that prevents and punishes such misconduct. Thanks to its vast reserves, making it the largest producer in the Organization, and especially thanks to its extraction costs being significantly lower than those of other members, traditionally, Saudi Arabia was the variable adjustment. It had the power to exert intense downward pressure on prices by opening its taps wide, thus delivering a harsh lesson by compressing the revenues of countries that did not respect their quotas. These potential retaliatory measures by Saudi Arabia gave it real power within OPEC because it was the nation that could flood the market overnight while preserving its own interests, but with a significant capacity to harm those who did not play by the rules. However, the power dynamics of this cartel have shifted with the integration of Russia into what became OPEC+ in 2016. It was meant to cement the absolute dominance of the oil market by this cartel and serve as an effective bulwark against any indiscipline from members who would then face retaliatory measures from this all-powerful group. The capping of oil prices by the G7, the European Union, and Australia, combined with an alliance comprising China and India, have disrupted the very structure of this market. Now, it is the buyers – not the sellers – who dictate their conditions! Indeed, Russia, which needs immediate and vital liquidity to finance its war machine in the face of unprecedented sanctions, can no longer perceive the market through the same lens as other OPEC members. Unable to afford the luxury of long-term thinking or playing the game of reducing its production to reap future benefits, Russia has managed to increase its production levels to those before the war in Ukraine and even before the COVID-19 pandemic, reaching 600,000 barrels per day. The substantial price reductions it is forced to grant to China and India (its only buyers as the West boycotts it), who now account for 90% of its exports, allow Russia to keep its head above water to some extent. This explains why its oil revenues have plummeted by around 30% despite a significant increase in production. In an almost desperate attempt to counter the effects of this Russian defection (and other oil-exporting countries in Africa following suit), which is causing widespread downward pressure on oil prices, Saudi Arabia is reducing its own production to stabilize, or even reverse, the market. However, it will not succeed because the former cooperation within OPEC is a thing of the past, and the reduction in its production will only result in decreasing its own revenues. Who could have predicted that the war in Ukraine would lead to a new era of significantly lower oil prices? Like this:Like Loading... [...] Read more...
All hostages to the imminent US default
All hostages to the imminent US defaultMay 21, 2023Is it time to doubt the American economy, known for its dynamism? Is its financial system still as resilient in the face of challenges? Is its democratic architecture characterized by the famous “checks and balances” still functional? Not a day goes by without a nation outside its bloc announcing a measure, at the very least a step, in what it hopes will be a process of de-dollarization in an attempt to establish its own hegemony, like China or India. This serious and openly expressed desire to dethrone the dollar is also a safeguard against potential US sanctions that this country imposes through the transmission belt of its currency. These challengers to the greenback have been widely aided in recent weeks by American politicians themselves, who get entangled in battles over raising the debt ceiling of their country. This tragicomedy of the Washington microcosm has periodically polluted the debates for nearly 30 years. However, intentionally fueled and maintained by the country’s political parties, it is now taking on a relatively dramatic turn as it undermines confidence in the US Treasury. Considered the safest and most liquid investment in the world, the T-Bond has allowed this nation throughout the ages, wars, pandemics, and bank failures to finance itself with ease and at rates lower than the rest of the world. These “US Treasury bonds” are nothing less than the keystone of the global financial system. Its $25 trillion market is the indispensable foundation of any transaction across the globe. This absurd and utterly unnecessary political turmoil from US officials could indeed result, in the event of a failure to raise the debt ceiling, in soaring financing rates, an economic crisis, and a surge in unemployment. The actual effects will be far more devastating because no one can predict how states and institutional investors holding a significant amount of obligations that the US will stop honoring will react to the gigantic shock of the American default. No one can estimate the damage of an event that is all the more inconceivable because it will not be caused by the US’s inability to pay its debts. A potential, but entirely possible in the very near future, default will be attributable to a technical clause in place since World War I, which requires the Department of the Treasury – which financed that conflict through borrowing – to seek Congress’s authorization to raise more funds when the allotted debt limit is reached. The country – and the entire world – find themselves in 2023 as captives of a practice dating back more than a century, which aimed at simplifying the war financing process because the US government had to pass a new law every time it wanted to issue a loan. Originally intended to streamline the legislative calendar, this debt ceiling was not a notable instrument of US economic policy or a weapon of mass destruction… until it became a political calculation. Indeed, this is the third time in less than ten years that these quarrels and political tactics threaten to explode the system. While disastrous default has been avoided twice in recent history, the current debates are of a completely different nature and resemble a grotesque game of poker played by the most important political figures in the country in an atmosphere of hatred between the Democratic and Republican parties. Some of their members indulge in radical postures and smile, whispering that the United States has always narrowly avoided default. The “Treasury bonds” – the supreme measuring instrument in all private and public lending, borrowing, guaranteeing, and investment operations – should not be held hostage to the dysfunctions of American politics. Neither should the US Treasury, which, with daily inflows and outflows of $185 billion, is undeniably the world’s largest enterprise. US lawmakers have a universal responsibility not to destabilize the world for base partisan motives. That is why journalists’ only question to American politicians should not be to inquire whether they are approaching an agreement to raise the debt ceiling, but rather whether their intention is truly to provoke an international turmoil over so little. Like this:Like Loading... [...] Read more...
Islamic Finance: Protects Humanity and Preserves its Morals
Islamic Finance: Protects Humanity and Preserves its MoralsMay 11, 2023The first “Sharia-compliant” obligation dates back to the Ottoman Empire in 1775. In 2004, Germans were the first Europeans to issue a “sukuk,” an Islamic bond that attracted investors from the Gulf, Saudi Arabia, Malaysia, the United States, Japan, and Hong Kong. This instrument was specifically an “ijarah,” a vehicle that aimed to collect rents and income from assets, mainly of an immovable nature. As interest payments are prohibited according to Sharia, sukuk holders receive a return proportional to the rents, knowing that the entire contract is resold at maturity to return investors’ initial investment. The great specificity of a sukuk is that it must be imperatively correlated to an underlying income-generating asset. These have been used to finance numerous projects related to real estate, infrastructure, and renewable energy. For example, in 2014, Saudi company ACWA Power issued a $814 million sukuk to finance the construction of a solar thermal power plant in Morocco. In 2018, the Islamic Development Bank launched a program to finance projects related to the United Nations’ Sustainable Development Goals (SDGs). This program aims to encourage investment in sectors such as renewable energy, health, education, and infrastructure to contribute to the SDGs and promote sustainable and responsible development. Another concrete application of Islamic finance is musharakah, a partnership contract that allows for project financing by sharing profits and losses. Thus, investors share the risk with the company, thereby encouraging prudent and responsible management of funded projects. This financing method is often used for SMEs that need funds to grow but cannot bear the high financial risks of traditional loans. In Malaysia, a pioneer country in the development of Islamic finance, the concept of takaful was put in place, which is a Sharia-compliant insurance system based on the principle of cooperation and solidarity among members. Unlike traditional insurance, where premiums are considered payment for a service, members pay contributions within the framework of takaful to contribute to a common fund to help those affiliated who suffer financial losses. This system allows for risk-sharing and encourages responsibility and solidarity among members. Therefore, Islamic bonds are essential to financial stability. In the presence of such rules, it is impossible to contract debts that are not linked, amortized, or at least partially balanced by future income. Would respecting this principle alone not have prevented the excessive indebtedness of many of our Western nations? Additionally, would not morality have been saved with products like “musharakah” or “mudarabah,” which allow for the collection of profits while at the same time requiring participants to share any potential losses? We immediately think of Western banks and their shareholders who were rescued by taxpayers’ money without suffering any adverse consequences. This socialization of losses that we experience daily does not exist in Islamic finance, where the only potential losers are always those who have accepted the risk. We also think of our peripheral European states – such as Spain and Ireland – who, having spent without counting to save their financial institutions, subjected their youth to a unemployment rate exceeding 50% at the height of the sovereign debt crisis, thanks to austerity imposed by financial markets, too happy to regularly call on taxpayers to absorb their losses. Finally, to countries like Greece, which had to sell off its strategic assets for having succumbed to predators like Goldman Sachs, which cleverly manipulated its public accounts. In this world of Islamic finance, as money is considered for what it really is – a simple means of payment – the degree of risk that investors are willing to assume is significantly reduced. Assets and goods that do not exist at the time of contract initiation simply cannot be sold in anticipation! Money is therefore always and in all circumstances linked to the real economy. This simple principle fundamentally discourages speculation, ruling out any derivative product whose very essence is to deal with phantom assets. It is the subprime crisis and the European sovereign debt crisis that could have been spared, and the exacerbated volatility of financial markets, commodities, and foodstuffs that would have been significantly reduced if our West had drawn some inspiration from the spirit of Islamic finance. Although it currently accounts for only about 5% of assets traded globally, Islamic finance is nonetheless developing at a pace 50% faster than other traditional banking products. Sharia-compliant instruments – currently worth $3 trillion – are beginning to attract non-Muslim investors attracted by the security and low volatility provided by these investments. Non-Muslim investors even hold 85% of Islamic bonds in a country like Malaysia! Finance accessible to all and products whose understanding is within everyone’s reach: that is what Islamic finance can bring today to a decadent and self-important Western finance. Because money and finance are just a means, not the ultimate goal. Like this:Like Loading... [...] Read more...
Europe: a sleeping beauty
Europe: a sleeping beautyApril 24, 2023How not to be shocked by the near-economic disappearance of Europe? The “acceleration of the European economy” mentioned by Emmanuel Macron in China this April is a tale that no longer comforts or deceives anyone. Readers: your first electric car will most likely be Chinese, as China has now surpassed Germany as the world’s second-largest exporter of vehicles. This continent, which invented the car, is reduced to importing its electric vehicles, of which it has become a major consumer, as it does not produce them. What a sudden decline for Europe, which exported so many cars to China and boasted of outdoing others in terms of equipment industries: it did not see the end of the combustion engine coming. We will soon be downgraded even in a field where we were champions, namely that of heavy transport, as the French President has accepted, still as part of this trip to China, to double the local production of Airbus, thus offering the Chinese ample opportunity to appropriate the technology in order to outperform the Europeans. Exactly as was the case when Siemens made available to them its high-speed train technology. Like Kuka Robotics, the world-renowned German industrial robotics flagship, slowly eaten away by Chinese shareholders who started at 5.4% in 2016 and are now at 95%. Why would the Chinese refrain from doing so when Europeans systematically opt for immediate profit to the detriment of their own technological sustainability in the long term? For those who took the trouble to be interested and who incidentally know how to read, the objectives were clearly defined as early as 2018 in the roadmap entitled “Made in China 2025,” which are: “an initiative aimed at securing China’s position as a global power in high-tech industries. The goal is to reduce China’s dependence on imported foreign technology and to invest massively in its own innovations in order to create Chinese companies capable of competing both in the national and global markets.” This is why our German industrial engine is now doubled by China, and this while our neighbor is pitifully closing all its nuclear power plants in the midst of a global energy crisis. This is why Germany’s trade deficit with China in 2022, at 85 billion euros, was the highest ever recorded by statistics – I remind you – in a context of sanctions against Russia paralyzing the first European economy, and which also makes it increasingly dependent on the Chinese market for its survival. Europe – whose GDP was roughly equivalent to that of the United States in the early 1980s – has since fallen far behind. It was also overtaken by China in 2020. It is as if this continent unilaterally chose to deny the technologies of the future when it could have become the equal of Americans in a field where it nevertheless shines with the quality of its brains. From the outset, Europe did not so much see these rapid advances as economic opportunities as threats that had to be regulated over and over again. For the vision that Europe has of progress is primarily problematic. It is simple: it legislates, it issues directives and regulations, while others invent and produce. How then can we be surprised by Europe’s near invisibility in Artificial Intelligence? Is it not both anecdotal – but oh so revealing – that Italy and perhaps soon France are banning ChatGPT? How can we move forward, how can we be competitive on a universal scale, in areas that we consider to be threats? When will Europe understand that it is useless to regulate – or to want to be the champion of morality – without mastering its own economic power? This continent – which is now lagging behind in almost every industrial and technological sector – is not actually seeking to become a superpower. Its ambition is to maintain its high quality of life and not to meddle in crises that are not its own. Like this:Like Loading... [...] Read more...
Is there a way towards economic serenity?
Is there a way towards economic serenity?March 29, 2023All the economic parishes agree on the fact that too high debts are harmful. However, they diverge when the profile of the debtor is considered because, while the Austrian school is primarily concerned with public debts, the neo-Keynesians attach much more importance to private sector debts. The classics are indeed indifferent to the debts of private individuals, because they assume that the aggravation of the level of their debts is only a transfer of purchasing power from an individual (or a company) to the another, thus having an overall zero macro-economic consequence. These Orthodox, on the other hand, stigmatize the public debt accused, according to them, of preventing the private sector from investing because the available money is monopolized by the State, while increasing the burden of future generations in the process. The Keynesian school, for its part, is more or less indifferent to the level of public debt because this – after all – is denominated in a currency that its central bank can print indefinitely. They are therefore in favor of monetary creation capable of encouraging consumption and meeting the needs of the economy in terms of financing. Their thesis was royally confirmed by the various and massive interventions of the central banks since 2007. But also by the venerable Bank of England which arbitrated in 2014 in their favor, affirming that the loans granted by banks indeed constitute a monetary creation, that this new arrival of money in the economy benefits GDP and assets in general. In other words, private debt stimulates aggregate demand. Hence the example of the economic liquefaction of Spain during the European crisis of the 2010s, attributing the depression that hit this country to a plunge in its private debts from 35% of GDP in 2008 to 19% in 2014, and therefore attributing the recession to a net halt in consumption due to a plunge in access to credit. It was the economist Irving Fisher who was the first to theorize the pointlessness – on a macroeconomic level of course – of repaying debts because each dollar returned is a dollar destroyed. Under this logic, any new loan obviously benefits the money supply. As early as 1932, he wrote in his “Theory of the Great Depressions” that (my translation from french) “when a debt to a bank is paid by debiting another account, it is the whole sum which is therefore erased”. The fall in the quantity of money in circulation thus causes a fall in GDP, a phenomenon which in turn leads to an increase in the overall ratio of debt to GDP, solely due to the repayment of the debt. “It is really the attempt on the part of private individuals to repay their debt that increases it. We are faced with a great paradox that explains the great depressions: The more debtors owe, the more their indebtedness increases”. Almost a century later, I understand that this thesis can still shock. The fact remains that our nations today desperately need to find a way to reduce their debts (relative to their GDP) without sinking their economy, without harming creditors, without encouraging excessive risk taking , without encouraging speculative bubble hunters, without causing a new Great Depression or a new world war. Like this:Like Loading... [...] Read more...