The Economics Hub Newsletter: Week 1
A quick weekly recap and other article recommendations.
Happy Sunday!
I am very excited to start my weekly newsletter, the details of which will be posted in a separate blog. The objective of this newsletter is to provide you with a brief recap of the important news of the week from a broad range of topics including finance, economics, privacy, geopolitics, human rights, policy and decision making. Furthermore, you will also find a list of notable essays, podcasts, videos, Twitter threads etc. that I believe would add value to your wisdom. The benefits of this newsletter are many, but mainly having exposure to the noteworthy events in the world, even in your busy weekly schedules.
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Okay, a lot has happened in the past week let’s dive in!
Notable Readings
1. The European Central Bank is Trapped. Here’s Why
Lyn Alden compellingly explains why European Central Bank has the hardest task among all central banks in this stagflationary economic environment, as it has found itself in a serious policy dilemma. The dilemma is the inability to tighten monetary policy much unless it is willing to blow up most of Southern Europe.
2. How Inflation Erodes Financial Privacy
Interesting article that explains the ever-increasing financial surveillance of Americans through the Bank Secrecy Act 1970 and what inflation/debasement of the dollar has to do with it!
3. How the Ruble’s Recent Strength Has Defied Western Sanctions
The Russian ruble is the best-performing currency in the world this year. Two months after the ruble's value fell to less than a U.S. penny amid the swiftest, toughest economic sanctions in modern history, Russia's currency has mounted a stunning turnaround. The ruble has jumped 40% against the dollar since January. Much of this bullishness has been fuelled by European companies having to comply with President Vladimir Putin’s demand that they pay in rubles to import Russian natural gas, despite the imposition of sanctions.
4. The Third-World Debt Crisis Reveals the Rot at the Heart of the Global Economy
A very informative and insightful article on why developing nations in the dollar-dominated world are enslaved to the short-term capital flows in the financial markets and to boom-bust cycles driven by macroeconomic policies of the Western countries. Dominik Leusder presents thought-provoking arguments for a stable system of global economic governance.
5. How Should Developing Countries Deal With Inflation? A Q&A With Raghuram Rajan
Former central banker Raghuram Rajan speaks to ProMarket about how sources and remedies for inflation differ from the US in developing countries such as India and Brazil. He also suggests governmental reforms for business growth, unemployment, and international sanctions.
6. The Bank of Japan Ramps Up Yield Control Defense Against Global Debt Rout
The Bank of Japan ramped up the defence of its policy framework on Tuesday after yields came under renewed upward pressure, unveiling a further set of unscheduled buying operations, including purchases of much longer maturities. The jacked-up moves reflect the BOJ’s commitment to protecting its yield-curve control policy even if it prompts further slides in the yen as the Federal Reserve accelerates its rate hike pace. Worse-than-expected inflation data from the US has been a catalyst behind the global market rout this week.
7. Bitcoin Falls Below $18,000, Ethereum Under $900 as Selloff Intensifies
There was no weekend respite for cryptocurrency markets that continued to slide, with the largest digital currency bitcoin (BTC) breaking $18,000 and ethereum (ETH) plummeting below $900. The current Crypto Winter is different from 2018 in that crypto is tanking along with tech stocks as the broader economy looks shaky, inflation is ballooning, and a full-on recession looks imminent.
8. The Fed hikes the interest rate by 0.75%
The world’s biggest economy is fighting four-decade high inflation. In an aggressive drive to tame the surge, the U.S. federal reserve had raised its key interest rates by 75 basis points. It is the most significant hike in nearly three decades, with a 0.75 per cent hike. The short-term benchmark rate is now in a range of 1.5 to 1.75 per cent. The super-size move was the first 75 basis point increase since November 1994. The move comes after May’s hotter expected inflation report and Wall Street’s growing call for stricter action from the Fed to keep prices under control.
9. Mortgage rates hit 5.78%, the biggest weekly jump since 1987
Mortgage rates surged by more than half a percentage point this week amid rising inflation and an interest rate hike by the Federal Reserve, according to Freddie Mac. The jump is the largest one-week increase since 1987. The 30-year fixed-rate mortgage averaged 5.78% in the week ending June 16, up from 5.23% the week before. Rates have risen more than two-and-a-half percentage points this year. They were at an average of 2.93% this time last year. "Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market," said Sam Khater, Freddie Mac's chief economist.
10. Flows into government bond ETFs surge to record high in May
Net flows into government bond exchange-traded funds hit a record high in May as deteriorating economic sentiment led investors to batten down the hatches. Nate Geraci, president of The ETF Store, an investment adviser, said “there are some meaningful risks on the equity side, particularly concerns that the Fed may throw the US into recession. If that happens fixed income and government bonds start to look more attractive.”
11. Apple and Google are Coming for your Car
If you’re buying a new car these days, most will offer support for Android Auto, Apple CarPlay, or Amazon Alexa — if not all three. Antitrust advocates and some lawmakers see this as another way these massive companies can draw more people into their ecosystems and make it harder for them to leave. That’ll give those companies that much more data, and make it that much harder for new or smaller companies to compete. But antitrust advocates aren’t just concerned about Big Tech and infotainment systems. They also see these moves as the beginning of a possible future where Big Tech has a much bigger role in vehicles as those vehicles become more dependent on sophisticated technology to run. These companies are making big investments in more than just infotainment systems and dashboards.
12. What VPN Server Closures in India Mean for Users
Recently, VPN providers operating in India were directed to store validated customer names, their physical addresses, email IDs, phone numbers, and the reason a customer is using the VPN as part of CERT-In directives. They were also asked to log the user’s “ownership pattern" and the dates when they use the VPN, along with a record of the time-stamp for when a user registered, and every IP address that the VPN assigns to the user. As a result of which many VPN providers are withdrawing their servers from India. This article explains the possible implications of such a move.
13. People are What Matters, Actually
Kyla Scanlon’s newsletter dives deeper into various aspects of inflation and the need for quick, effective, and targeted fiscal policy decisions. Amid inflation driven by the energy crisis and supply chain issues, the Biden administration has more tools at its disposal to improve consumer sentiment, expand refining capacity, etc. There are other interesting things in the newsletter as well, and I would highly recommend you to check it out!
Thank you so much for making it this far! I hope you had lots of takeaways from my article recommendations. Looking forward to the next weekly issues, I would try my best to include podcasts, videos, and research paper recommendations as well! Please subscribe if you haven’t yet and let your nerdy friends know about my newsletter :)
Have a great week ahead,
Shreyas