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Daniel Lacalle

Daniel Lacalle

Articles by Daniel Lacalle

An L-Shaped Recovery Is Not an Anomaly, It Is the Norm.

1 day ago

The massive bailout of indebted sectors that already had overcapacity and were in process of obsolescence may also drive the largest wave of malinvestment in decades. If the previous recoveries came with poor wage and capital expenditure growth and high debt, the next one will likely be even worse. This Audio Mises Wire is generously …

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An L-Shaped Recovery Is Not an Anomaly, It Is the Norm.

5 days ago

Many analysts and economists are trying to predict the shape of the economic recovery post-COVID-19. To understand how the recovery may look, we need to look at past recoveries and at the history of pandemics. Starting with the pandemic, we know a few things. First, there has never been a vaccine for any of the …

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The ECB Has Been Hiding Risk. They Won’t Be Able to Do It Much Longer.

17 days ago

Despite the unprecedented increase in the European Central Bank’s asset purchase program, the spread of southern European sovereign bonds versus German ones is rising.   White: Italy 10-Year vs. German 10-Year | Orange: Spain 10-Year vs. German 10-Year | Yellow: Portugal 10-Year vs. German 10-Year The ECB balance sheet has soared to more than 42 percent of …

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Three Reasons Why the Eurozone Recovery Will Be Poor

24 days ago

The eurozone economy is expected to collapse in 2020. In countries such as Spain and Italy, the decline, more than 9 percent, will likely be much larger than in emerging market economies. However, the key is to understand how and when the eurozone economies will recover. There are three reasons why we should be concerned: The …

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How Governments Broke the Oil Market

May 5, 2020

The Organization of the Petroleum Exporting Countries (OPEC) and its partners have been cutting production since September 2016. Between September and November 2016 they cut production by more than 1.7 million barrels a day, a historical cut that was wrongly prolonged throughout the expansionary phase of the global economy. In December 2018 they cut production …

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Central Banks and the Next Crisis: From Deflation to Stagflation

April 23, 2020

When governments and central banks announce massive stimulus packages at the very beginning of a crisis, they bet on a speedy recovery and a return to normal as if nothing had happened. This is far from the case. This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros. Original Article: “Central …

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Central Banks and the Next Crisis: From Deflation to Stagflation

April 22, 2020

All over the world, governments and central banks are addressing the pandemic crisis with three main sets of measures: Massive liquidity injections and rate cuts to support markets and credit.Unprecedented fiscal programs aimed at providing loans and grants for the real economy.Large public spending programs, fundamentally in current spending and relief measures.However, they may cause deeper …

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The US Labor Market Will Heal Faster Than the European One

April 16, 2020

The jobless claims figures of the past two weeks have been unprecedented and alarming. However, knowing that the data will continue to be concerning, we need to analyze how quickly the economy can can heal and go back to the previous path of record job creation. The United States economy starts from a comparatively stronger base. …

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Why the World Has a Dollar Shortage, Despite Massive Fed Action

March 31, 2020

How can the Fed launch an “unlimited” monetary stimulus with congress approving a $2 trillion package and the dollar index remain strong? The answer lies in the rising global dollar shortage, and should be a lesson for monetary alchemists around the world. The $2 trillion stimulus package agreed by Congress is around 10% of GDP …

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Governments Can’t Fix This Economic Crisis They Caused

March 27, 2020

Before analyzing the emergency plans that the global economy needs, we must remember that, as in the past, the prudence and responsibility of the civil society and businesses will help us to get out of this crisis . In the face of an unprecedented crisis, we have to be realistic, responsible and cautious. This is …

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The Global Economy Won’t Bounce Back Soon

March 19, 2020

In February, the general consensus between large investment banks and supranational entities was that there would be a one-time hit to GDP in the first quarter due to the impact of the coronavirus, followed by a stronger, V-shaped recovery. The IMF expected a modest correction of global GDP of 0.1 percent, and the largest cut …

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The Fed Panicked, and Its Rate Cut Is Making the Economy Worse

March 9, 2020

The Federal Reserve’s monumental mistake of cutting rates this past week can only be understood in the context of the rising God complex among central planners: an overwhelming combination of ignorance and arrogance. Less than a week ago, several members of the Federal Reserve board reiterated—rightly so—that cutting rates would not have a significant impact in …

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Governments Are Using the Coronavirus to Distract From Their Own Failures

March 4, 2020

The Johns Hopkins University Coronavirus Global Cases Monitor shows that the mortality rate of the epidemic is very low. At the writing of this article,1 there have been 92,818 cases, 3,195 deaths, and 48,201 recoveries. It is normal for the media to focus on the first two figures, but I think that it is important to remember the …

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Argentina’s “Emergency Law” Just Means More of the Same

January 25, 2020

The so-called Economic Emergency Law announced by the new government in Argentina is simply another massive set of tariffs and burdens on the private sector to finance the bloated public expenditure in a country where confiscatory monetary and fiscal policy is the norm. What is the major problem with the recent Economic Emergency Law? That …

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Why Sweden Ended Its Negative Interest Rate Experiment

January 7, 2020

Negative rates are the destruction of money, an economic aberration based on the mistakes of many central banks and some of their economists, who start with a wrong diagnosis: the idea that economic agents do not take more credit or invest more because they choose to save too much and that therefore saving must be …

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Is China a Better Trading Partner for Latin America Than the US?

December 30, 2019

Part of the economic debate in Latin America, particularly in Argentina after the elections, focuses on what type of financial and trade relationship is most convenient for the region, and several discussions consider the merit of strengthening relations with China instead of the United States The first thing we should understand is that it is …

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Europe’s Spending Binge Is Slowing Its Economy

October 21, 2019

The idea that governments can’t lower taxes because there is a deficit, but are free to raise all expenses even if there is a deficit can be found in many political manifestos these days. Central planners always see the economic challenges as a problem of demand, and as such cringe at the idea of prudent …

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The ECB Continues to Incentivize Reckless Behavior

June 19, 2019

The European Central Bank continues to disproportionately inflate the debt bubble of the Eurozone, while the economic slowdown of the main European economies worsens. What was designed as a tool for governments to buy time in order to carry out structural reforms and reduce imbalances, has become a dangerous incentive to perpetuate the excessive spending and increase …

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Five Reasons for the Weakness of the Argentine Economy

May 2, 2019

Argentina has been “printing money for the people” MMT-style for many years. Its wrongly-called “inclusive monetary policy” of the past-print money to finance massive government spending- has driven the country to massive inflation and depression. This is the main reason why a country with an excellent education, human capital, and high economic potential has third-world …

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Central Banks Are Heading Toward a Stagnant Global Zombie Economy

April 10, 2019

Liquidity injections and zero interest rate policies disguise risk and may give a false sense of security. This risk could not be more evident today.  Not only have we seen large downgrades to consensus growth estimates and central banks’ expectations of GDP and inflation, leading indicators also point to a much weaker economy ahead. There are …

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Europe Tried It’s Own “Green New Deal” — It Was a Disaster

February 13, 2019

What happens when politicians see that their monster stimuli have not delivered? They bring the next rabbit out of a hat. They need a new name and a new magic solution to make citizens believe in the magic of demand-side policies despite the constant failure of those same plans. The Eurozone Example A huge stimulus in …

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Will Policy Makers Turn a Global Economic Slowdown Into a Crisis?

January 25, 2019

The recent macroeconomic data of the leading economies point to a widespread slowdown. What is more concerning is not just a logical moderation in the path of growth, but the acceleration in the weakening of economies that were supposed to be stronger and healthier. It is even more concerning that this aggressive worsening of key …

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The Crisis of Argentina and How to Reduce Country Risk

January 17, 2019

Argentina maintains a high country risk. In fact,  it is currently the second highest in Latin America and the third of the emerging countries if we include Turkey. What is the country risk? It is the spread between the yield of the sovereign bond of a nation compared with the United States Treasury bonds, the …

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The Eurozone Banks’ Trillion-Euro Timebomb

December 7, 2018

Eurozone banks have fallen dramatically in the stock market despite the results of the stress tests carried out by the ECB, and the EU Banks Index is down 25% on the year despite year-long bullish recommendations from almost every broker. This should not surprise anyone because we have seen in the past that these tests …

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China Was Desperate for a Trade Deal, but the G-20 Agreement is a Mirage

December 5, 2018

The G20 meeting in Buenos Aires had a primary objective. To reach an agreement between the United States and China. However, the announced agreement is more a “diplomatic truce” than a real agreement. The United States commits to delaying tariffs against China that would start on January 1st, 2019 and China commits to purchase more …

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The Next Financial Crisis

November 11, 2018

We have been reading numerous comments recently about a forthcoming recession and the next crisis, particularly on the tenth anniversary of the collapse of Lehman Brothers. The question is not whether there will be a crisis, but when. In the past fifty years, we have seen more than eight global crises and many more local …

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The US Ten-Year Shows The Extent Of The Bond Bubble

October 31, 2018

“Only when the tide goes out do you discover who’s been swimming naked.” – Warren Buffett Earlier this month, the US 10-year bond reached a yield of 3.2%, the highest since 2011. As inflation in the United States picks up, the economy grows well above consensus estimates and unemployment falls to the lowest level of …

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