GDP and the decline of the euro (lebasi)
Of course, unfortunately the form of the blog, which has its advantages in terms of dialogue and involvement (which has allowed us to become a more unique than rare community , even if, as you know, we don't exist…), also has a disadvantage from an educational point of view that was clear to me right from the start: the contents get lost in the magmatic flow of the narration, and recovering the most relevant ones to assimilate them is an objectively impossible undertaking, above all considering that almost nobody clicks on the links with which reference to the "key" posts (yet, you know what these posts are ).
This limitation of the "blog form" is unfortunately aggravated by my worst defect: perspicuity.
Translated: unfortunately if you often don't understand anything (I meant something else, of course) it's my fault, it's the fact that I write in understandable Italian. This gives you the feeling of having it all figured out, a feeling as comforting as it is often illusory. It is a bit part of the teacher's job to give the student the feeling that he has understood: a student who is perpetually frustrated in his desire to know, and above all to show that he knows, would abandon his studies! But this is a talent that must be dosed carefully, otherwise monsters like the one I am about to liquidate are created. We invoke Saint George:
and let's proceed…
Meet a new friend
( here ).
I was hoping to have closed it here, but today I find this indefinable stuff in the queue:
Ihavenodream left a new comment on your post "The situation is serious, but it's not serious":
I know: it's a pity that the bogus data in Italy (and in truth throughout Europe) speak of growth of 3-4% for 2022, failing to say that growth is … and it is not real, we are not not grown by 4% in real terms in 2022. For example here: https://finance.yahoo.com/quote/EURUSD=X?p=EURUSD=X&.tsrc=fin-srch says that the Italian nominal GDP is down 5% in dollars compared to 2021 (-5% YoY). In Euros we will have grown by 4% which is the data circulating mainstream…but it is precisely nominal growth, in real terms we are below zero and by quite a lot!
Published by Ihavenodream on Goofynomics on Jan 6, 2023, 8:18 pm
The site mentioned refers to the euro/dollar exchange rate, which in the last year has done this stuff here:
last piece of the downward trajectory whose motivations (competitive devaluation by the North to attack markets outside the Eurozone and to keep the weaker member states inside the Eurozone) have been extensively discussed in the previous post. The chart starts at 1.13 and ends at 1.05 (but as you know I think it will drop a little more…), which corresponds to a decrease of 7%, relative of 5% of our friend (as you know, the exchange rates are a very volatile variable and the devaluation/revaluation compared to the previous year changes every day, even significantly). On the page referred to there is no trace of GDP, neither measured in euros nor measured in dollars. Our friend's "reasoning" therefore appears to be exactly what we were dealing with six years ago :
and which we already refuted six years ago. It was the famous story of the 30% drop in GDP in the event of an exit, authoritatively taken up by experts of the Democratic Party , where it was precisely omitted to say that this assessment referred to GDP measured in dollars. The scenario was therefore extremely bleak because it was based on a meaningless unit of measurement: none of us go shopping in Manhattan every morning! In other words, since the euro/dollar exchange does not have a direct impact on the quantity of goods that we can buy in Italy with our income in euro, i.e. it does not impact on our real income, on real GDP, the only sensible measure of real GDP, when we use it to evaluate the level of well-being or malaise of Italian citizens, it remains the currency used by Italian citizens to purchase goods in Italy, i.e. the euro.
In short, what makes us smile a little is that in his somewhat paranoid attempt to emancipate himself from the mainstream narrative, our new friend, who perhaps wasn't there six years ago, or has a fleeting memory, proposes exactly the same paralogisms again of mainstream storytelling!
Yes, all right, the extremes touch, but, as I add, then they lose sight…
However, I come to the merits of the question, to fix the orders of magnitude in our texts.
The 4% growth for 2022 is a data that has not yet been consolidated (as you know, it takes a while for the statistical surveys of GDP to be processed), and it is obviously in real terms, i.e. measured on the GDP valued at (constant) prices of 2015. Last November's estimates give an annual "acquired" at 3.9% ( here ), which means that if the GDP of autumn 2022 will be equal to that of summer 2022, the GDP of the year 2022 will be higher by 3.9% to that of the year 2021 (but it could also be better). This according to ISTAT. I recall that in October the IMF gave 3.1% for 2022 and -0.2% for 2023, while the OECD now gives +0.2% for 2023 and the ECB gives +0.3% (the situation is rapidly evolving. ..). We will have the preliminary estimate of GDP for autumn 2022 (and therefore for the entire year 2022) on Tuesday 31 January, the consolidated estimate on Friday 3 March ( here the calendar ) and only then will we be able to know what will have happened.
As for nominal GDP, the picture currently available, which obviously (and two) is provisional, is this:
In September, the NADEF gave real growth of 3.7%, with a deflator of 3.0%, which added together (with rounding) to a nominal 6.8%. The nominal value of the IMF in October was lower, at 6.4%, due to distrust in real growth (which was estimated at 3.2%). In November, as regards real growth, the OECD confirmed the picture of the NADEF and ISTAT proposed a higher acquisition, at 3.9% (as we said above). As far as nominal growth is concerned, the OECD gave a higher growth deflator (3.3%), which brought nominal growth to 7.0%.
The point on which I would like you to reflect, returning for a moment to the previous post, is that the OECD always gives for 2022 in Germany real growth of 1.8% (half of ours) and a growth of the GDP deflator of 5 .8% (inflation almost double ours). Understand what it means to saw the branch?
The sunset of the euro
I will make a brief remark, to which I am naturally drawn by fond memories of the days when Squinzi or my esteemed colleague De Micheli confused the variation of nominal GDP expressed in dollars with that of real GDP expressed in euros (it goes a little further than confusing the apples with pears, but mum made us indulgent, so we'll stop here…).
From 9 May 2013, the day on which the then president of Confindustria Squinzi feared devaluations of 30%, to today, the euro has lost 20.1% (falling from 1.3142 to 1.0500). If we had done this calculation on 28 September last, it would have returned a devaluation of 27.2% (from 1.3142 to 0.9565): very close to the 30% feared by then President Squinzi. There has been a certain recovery since September, but American monetary policy, aimed at preserving the supremacy of the dollar with interest rate hikes, suggests that either we suffocate our economy with equal rate hikes, or the exchange rate will have to give back (we'll see what happens).
To the idiots who occasionally appear on Twitter commenting "and even today the euro will set tomorrow" I would like to point out that in fact even today the euro has set yesterday . The continued loss of ground you see here (with daily Eurostat data):
it supports our thesis that ten years ago the single currency's exchange rate was unsustainable. I don't want to sound presumptuous, because the credit isn't mine (it belongs to the facts), but everything we've been talking about here for so many years has gradually come to fruition.
Remember when we asked for expansionary policies but were told they couldn't be done? Fatte (the tale of good debt)!
Do you remember when it was said that the ECB could not intervene to support public debts? Done ("we are not here to close spreads", correction made in record time in March 2020)!
Remember when we criticized wage deflation policies? Now the central bankers are criticizing them (see previous post).
Yet I told you that mainstream positions were rapidly evolving !
So to the many who "siccerano them" at this time we would be no one knows where I suggest to stay steers. A Germany that has half the growth and double the inflation of us (measured with the GDP deflator: with consumer prices the figures are different) will certainly help us to do another little bit on the path of things that in theory they could have been done up to the moment in which they will have to be done, also because the change that is sustainable for us is not sustainable for you, as we have always said and repeated here .
It goes without saying that it would make no rational sense to create useless controversy around a problem that not only cannot we solve on our own, but afflicts others more than us. Let those who wanted a certain world enjoy it, and keep calm! The growth of our country at 4% in real terms is not a conspiracy of strong powers, dear Ihavenodream: it is a success of our productive fabric, of the much vilified SMEs, which, however throttled by absurd fiscal and credit policies, remain the way of organization of production more suited to the "challenges of globalization", challenges that from the Triassic onwards require agility, not gigantism, as zoologists well know :
even if an external shock is often necessary to acknowledge this profound truth.
Let the giants of the North manage the disadvantage of their greater food needs for gas and their inability to adapt to a changing environment, and we keep the bar of this community that does not exist (and therefore enjoys the main advantage of not existing, that is to be able to say what you want)!
And that's all for today.
(… I think you understand that it's not always possible for me to spend so much time on it, but I don't want to neglect you for this. Finding a new balance will be among the tasks for 2023, which starts on January 9 for me. Meanwhile, let's enjoy the weekend . ..)
(… and the asteroid? The asteroid is the financial crisis, of course. Everyone says it won't happen, that now there's a complasensi, that doesn't suit anyone – and this is true!, but I'm not then so convinced that things only happen if it is "convenient" for someone. Shit happens, say our allies, and they are right. The important thing is that the responsibility is not placed on those who cleaned up their banks and their debts always honored, that is, we …)
This is a machine translation of a post (in Italian) written by Alberto Bagnai and published on Goofynomics at the URL https://goofynomics.blogspot.com/2023/01/il-pil-e-il-tramonto-delleuro-lebbasi.html on Sat, 07 Jan 2023 15:44:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.