The Economics Hub Newsletter: Week 2
A quick weekly recap and other article recommendations.
Happy Saturday!
I hope you are having a great weekend. A lot has happened in the last week, especially in the United States regarding the Roe v. Wade case. Nevertheless, let’s dive in and explore this week’s news and article recommendations! If you have already subscribed, thank you! If you are here for the first time, then please consider subscribing for free educational content!
Could you please do me a favour and kindly share my blog with your dearest friends as well? It would genuinely encourage me to continue this week with utmost passion and dedication :)
1. Goldman Sachs Asset Management’s Weekly Report
Goldman Sachs’ weekly report succinctly sums up the current state of monetary policies of major central banks and what is the possible inflation outlook in the imminent future. The report evaluates lots of economic and financial indicators to predict a policy response from central banks in 2023, although that depends upon the inflation figures in the second part of 2022. If you prefer the shorter version, check out my Instagram post on the same topic!
2. Explained: Russia has cut gas supplies to Europe; what happens now?
This is a good piece by the Indian express, that briefly explains the ongoing turmoil between Russia and the European countries over the natural gas supplies. Russia last week reduced gas supplies to five European Union (EU) countries, including Germany, the biggest economy of the bloc that is heavily dependent (around 35%) on Moscow’s gas to generate electricity and power industry. Natural gas is used by many industries and the cut in supplies would result in higher production costs and difficulties in filling storage capacities. Now, European governments have decided to phase out Russian gas entirely by 2027 and as a result of which, they have been buying more expensive and cumbersome to transport - Liquefied Natural Gas, or LNG. Read this article to understand why some European nations are now compelled to start coal-fired power plants and the plans moving ahead.
3. The EU’s global scramble for gas
This is a very important article and if anything, I want you to read this piece this week. It covers some important points:
How the War in Ukraine has confronted the EU’s previously held views on energy security, and how they underestimated their heavy dependence on Russian gas for their industrial and public needs.
Now that the EU has turned to Liquified Natural Gas (LNG) for their needs, it has been exacerbating an energy crisis in developing countries in Asia and Latin America, which have been increasingly dependent on LNG in recent years to offset their fuel oil and coal needs.
The EU has become a direct competitor for LNG with other markets in Asia and Latin America, as it is willing to snatch LNG cargoes on the spot market at almost any price. The consequences of such would be higher imported inflation, food shortages, economic slowdown, etc. which could then easily spill over into political turmoil.
Why the burden of transitioning to clean energy economies for combating climate change shouldn’t be on developing countries, which are already cash-strapped and lack political will.
4. Roe vs Wade: Period Tracking, Abortions, and Privacy
In a historic and far-reaching decision, the U.S. Supreme Court officially reversed Roe v. Wade on Friday, declaring that the constitutional right to abortion upheld for nearly a half-century, no longer exists. The decision, most of which was leaked in early May, means that abortion rights will be rolled back in nearly half of the states immediately, with more restrictions likely to follow. For all practical purposes, abortion will not be available in large swaths of the country.
What makes this worse is the era of unprecedented state surveillance we are living in. The massive scale of data and metadata collection through various search engines, messaging, period-tracking and other applications make it easier for law enforcement and anti-abortion lobbies to trace the identities of people seeking abortion - with an unfortunate objective to "punish them". Privacy activists have been proactively vocal about the grave implications of this for a while now. Here are some useful links to articles/essays that will educate you on this topic in-depth:
Reproductive Healthcare Service Provider, Seeker, or Advocate? by EFF
Security and Privacy Tips for People Seeking Abortion by EFF
What Companies Can Do Now to Protect Digital Rights In A Post-Roe World by EFF
11 Online Privacy Tips for Getting an Abortion by Shoshana Wodinsky
How to Get an Abortion in the Age of Surveillance by Shoshana Wodinsky
Keep Your Abortion Private & Secure by Digital Defense Fund
How to Protect Your Digital Privacy if Roe v. Wade Falls by Wired
5. RBI nukes multiple Indian fintech through guidelines on prepaid instruments
Considering the meteoric rise of the Buy Now Pay Later (BNPL) industry in the last two years (569% in 2020, and 637% in 2021), this is pretty upsetting news for the Indian fintech industry. On Monday, the Reserve Bank of India said prepaid payment instruments (PPIs) must not be loaded through credit lines from non-bank lenders, sending the wallet and buy-now-pay-later industry into chaotic confusion. I encourage you to read the article itself for a better understanding, but the TL;DR is that the Indian fintech start-ups have been partnering up with banks to issue prepaid cards. At the same time, they were also partnering up with NBFC to offer a credit line, which is loaded to the same prepaid card. RBI’s circular said that under its master directions, PPIs can’t be loaded using credit lines issued by NBFCs. The central bank said any such practice if followed, should be stopped immediately, and non-compliance may attract penal action under the Payment and Settlement Systems Act, 2007.
6. India's inflation fight will not be painless, says RBI deputy governor Michael Patra
Speaking at an industry meet in New Delhi, Deputy Governor in charge of monetary policy, Michael Patra, said inflation based on the consumer price index, would stay above the RBI’s target range of 2%-6% for the next three quarters. India’s retail inflation is showing signs of peaking and the policy needed to contain prices won’t be as harsh as elsewhere, he continued. He added that even though containing food and fuel prices was outside the remit of the central bank, it was important to tame the second-round impact of elevated prices. Read the article for more details!
7. What is Wrong with ESG?
This week, Finshots have a good explainer of the ambiguity of the Corporate Environmental, Social, and Governance (ESG) movement and how it has led to corporate greenwashing and virtue signalling with tangibly adding a significant value to the environmental cause. It also talks about how fund managers are using the ESG tags to drive their ESG fund’s profits. In fact, US Securities and Exchange Commission (SEC) revealed that it was investigating Goldman Sachs for lying about its ESG credentials — specifically related to some of its mutual funds. A month ago, the SEC fined BNY Mellon for fraudulently stating that all investments in their funds had undergone an ESG quality review. And a couple of weeks ago, over in Germany, authorities launched a raid on the asset management arm of Deutsche Bank and accused the firm of lying about their ESG practices as well.
8. Explaining Inflation to your Boyfriend
Economist Vivek Kaul concisely explains the current state of inflation from an Indian perspective. He describes multiple factors that are currently driving Consumer Price Index (CPI) up in India such as higher food prices, energy crisis, supply-chain bottlenecks, a weaker Indian rupee that adds up to the import inflation, etc. More importantly, he emphasizes the fact that the CPI inflation figures do not apply equally to all. It differs from person to person and region to region as the share of expenditure on different items (food, fuel, consumer goods) is subjective.
9. Mapping the Migration of the World’s Millionaires
A super interesting Henley Global Citizens Report projects that 88,000 millionaires will move countries this year. Read this report to understand country-wise data, past-year trends, and why they are leaving the countries behind?
10. ‘It’s death either way’: desperate Tigrayans flee starvation and forced conscription
Ethiopia’s Tigray region has been in the middle of a major humanitarian disaster for the past 19 months, led by tensions between the Ethiopian government and the Tigray People’s Liberation Front (TPLF), the political party that represents the Tigray region. The conflict erupted into violence after the TPLF attacked a federal military facility in Tigray in what it said was “preemptive self-defence.” In response, the Ethiopian government launched what it called a “law enforcement operation,” a justification for a full-scale invasion. The situation has since turned into a protracted conflict with disturbing humanitarian implications. A joint report by Human Rights Watch and Amnesty International emphasizes how it has led to the ethnic cleansing of Tigrayans by Ethiopian paramilitaries, forcing hundreds of thousands of people from their homes using threats, killings and sexual violence. The region has been cut off from the world, with the Ethiopian authorities preventing access and closing down internet communications. The above article describes how Tigrayans are taking dangerous smuggling routes out of the area to escape forced military service under one side and the starvation and repression imposed by the other.
Here is more material to get you started on this topic:
11. Morgan Stanley, Goldman Strategists See More Stock Market Losses
Equities have yet to fully price in the risk of a recession and may have further fall, according to Morgan Stanley and Goldman Sachs Group Inc. strategists. Although this year’s slump in US stocks has left them more fairly priced, the S&P 500 Index needs to drop another 15 per cent to 20 per cent to about 3,000 points for the market to fully reflect the scale of economic contraction, Morgan Stanley strategists led by Michael Wilson wrote in a note. Their views were echoed by counterparts at Goldman Sachs, who said stocks were only pricing in a mild recession, “leaving them exposed to a further deterioration in expectations.” Berenberg strategists also said on Tuesday it was too early to call a bottom for equities with earnings downgrades just beginning amid expectations of a recession.
12. Are Crypto Assets the Great Scam?
Recently Nobel-Prize-winning economist Paul Krugman wrote an op-ed for the New York Times on why cryptocurrencies are a “Big Scam.” Gerald P. Dwyer writes in response to AIER on why we should not completely reject the crypto-assets and the bunch of emerging technologies such as Distributed Ledger Technology, Smart Contracts, Elliptic Curve Cryptography, Zero-Knowledge Proof, Stealth Addresses, etc. that underpin their respective ecosystems. He illustrates the example of the personal computer and how in the 1970s, critics did not see any reason for its advancement and household usage, but here we are. He extrapolates the same reasoning to crypto-assets and makes a compelling case for the supporting technologies that are currently in their nascency.
13. The BIS presents a vision for the future monetary system
The Bank for International Settlements (BIS), an association of the world’s major central banks last week released a report laying out the foundations for a future digital monetary system. It dedicates a 42-page chapter in its "2022 Annual Economic Report" for this purpose. In that vision, there is room for only some of crypto’s underlying technical features, like programmability and tokenization, not for cryptocurrencies themselves. The report rules out cryptocurrencies as the “future money” because their “structural flaws make the crypto universe unsuitable as the basis for a monetary system: it lacks a stable nominal anchor, while limits to its scalability result in fragmentation.” BIS favours a monetary system that is centred around central bank money as it “offers a sounder basis for innovation, ensuring that
services are stable and interoperable, domestically and across borders. Such a system can sustain a virtuous circle of trust and adaptability through network effects.” Furthermore, they make strong arguments for a vibrant monetary ecosystem driven by Central Bank Digital Currencies (CBDCs) and (retail Fast Payment Systems) FPS. If interested, please read this report – it has got some amazing graphs and information!
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 :)