The Future of Money: The New Digital Payments Race, and Libra’s revised whitepaper – what I have been reading this week

Libra published a revised whitepaper. In particular, single-currency stablecoins are included in order to comply better with the requirements of regulators and central banks:

https://libra.org/en-US/white-paper/#cover-letter

Also, Huw van Steenis on the new digital payments race: https://www.project-syndicate.org/onpoint/central-banks-digital-payments-by-huw-van-steenis-2020-04

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The U.S. Economy this week: Another 4.4 million Americans registered to claim for jobless benefits in the week after Easter

For the fifth consecutive week, a very high number (4.4 millions) of Americans filed for first-time unemployment. Two weeks before, initial jobless claims had jumped to 6.6 millions, and one week before, the number was at 5.2 millions. Since the middle of March, a total of around 26 million persons registered for jobless benefits. Although the numbers can be expected to further decrease in the next weeks, they will probably remain high and one can expect that the total since the middle of March will probably exceed 30 millions by the beginning of May.

A so-called V-shaped recovery (so high economic growth after some of the measures to slow the spread of the coronavirus are lifted) is increasingly unlikely, but not completely unrealistic. I expect a subdued recovery. As I mentioned earlier, serious economic forecasts are not possible at the moment. I hope that in early May, I might be in a position to attempt a preliminary assessment of the macroeconomic situation.

Here is the report by the U.S. Department of Labor:

Oil prices remain extremely low. West Texas Intermediate, the US benchmark, even crashed into negative territory on April 20. Strong reductions in demand and limited storage capacities seem to be the main reasons for this pattern. At the moment, there is much reason to believe that oil demand will only recover somewhat and remain low this year.

https://www.ft.com/content/a5292644-958d-4065-92e8-ace55d766654

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Coronavirus: how many workers are employed in sectors directly affected by COVID-19 shutdowns, an international perspective on COVID-19 and the world of work, and estimating the COVID-19 infection rate – what I have been reading today

Since I started to carefully study the coronavirus and its associated health and economic consequences in January 2020, I have been reading many news, research articles, and blog posts. I got more and more concerned and I hope that the situation will improve as soon as possible. Let me now regularly share with you some interesting background articles:

How many workers in the United States are employed in sectors that are most affected by COVID-19 shutdowns? A useful and good overview by the Bureau of Labor Statistics:

https://www.bls.gov/opub/mlr/2020/article/covid-19-shutdowns.htm

According to the International Labour Organisation “Full or partial lockdown measures are now affecting almost 2.7 billion workers, representing around 81 per cent of the world’s workforce.” An important international perspective:

https://www.ilo.org/global/about-the-ilo/WCMS_740877/lang–en/index.htm

How many people are infected by COVID-19? We do not know because not everyone has been tested. Charles F. Manski and Francesca Molinari try to provide credible and informative bounds on infection rates:

https://arxiv.org/abs/2004.06178

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Coronavirus: Mass Testing, Real Time Labor Market Estimates, Economics in the Age of COVID-19, Fiscal Policies to Contain the Damage from COVID-19 – what I have been reading today

Since I started to carefully study the coronavirus and its associated health and economic consequences in January 2020, I have been reading many news, research articles, and blog posts. I got more and more concerned and I hope that the situation will improve as soon as possible. Let me now regularly share with you some interesting background articles:

The Nobel Prize winner Paul Romer strongly advocates mass testing (there are various articles, here is an example on his homepage):

https://paulromer.net/covid-sim-part3

In the United States, labor market statistics are collected once a month and published with a three week delay. In normal times, this is entirely sufficient. But currently, it is difficult to assess what is going on in the labor market (of course, one knows that the situation is very difficult).

Joshua Gans has a book manuscript for a book on “Economics in the Age of COVID-19”:

https://economics-in-the-age-of-covid-19.pubpub.org

The International Monetary Fund has good overviews on fiscal policies in the time of COVID-19:

https://blogs.imf.org/2020/04/15/fiscal-policies-to-contain-the-damage-from-covid-19/

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The U.S. Economy this week: Another 5.2 million Americans registered to claim for jobless benefits in the week before Easter – Industrial Production and Retail Sales drop in the United States

For the fourth consecutive week, a very high number (5.2 millions) of Americans filed for first-time unemployment. The week before, even 6.6 million persons registered for jobless benefits. Although the numbers can be expected to further decrease in the next weeks, they will remain high. A range of other data this week showed how deep the recession is. Industrial production and retail sales dropped in March and will further decrease in April. Also the so-called Beige Book published by the Federal Reserve System showed a sharp decline in economic activity.

A so-called V-shaped recovery (so high economic growth after some of the measures to slow the spread of the coronavirus are lifted) is increasingly unlikely. As I mentioned earlier, serious economic forecasts are not possible at the moment. I hope that in early May, we might be in a position to attempt an assessment of the macroeconomic situation.

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The Future of Money: Libra’s scope seems to be downgraded – what I have been reading this week

It appears that Facebook’ Libra project is downgraded and more aligned with the requirements of regulators all over the world.

According to the Financial Times:

“the association outlined plans to offer a set of digital versions of single currencies, such as a Libra dollar or a Libra euro, that would be fully backed one to one by cash or cash equivalents, plus support from a capital buffer….The shift follows a backlash from US watchdogs over its initial proposals to create a synthetic coin backed by a basket of currencies, which prompted concerns about foreign exchange risks and raised questions as to how such a basket would be weighted. Libra said it was still aiming to create a “multi-coin currency”, though this would be a “digital composite” of some of its existing single-currency coins.” 

https://www.ft.com/content/23a33fcb-1342-4a18-be39-504e8507f752

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Coronavirus: how are small businesses adjusting to COVID-19, targeting super-spreaders, and the CEPR “journal” on COVID economics – what I have been reading today (and yesterday)

Since I started to carefully study the coronavirus and its associated health and economic consequences in January 2020, I have been reading many news, research articles, and blog posts. I got more and more concerned and I hope that the situation will improve as soon as possible. Let me now regularly share with you some interesting background articles:

An interesting article on “How Are Small Businesses Adjusting to COVID-19? Early Evidence from a Survey” One of the main findings of the paper:

“Several main themes emerge from the results. First, mass layoffs and closures have already occurred. In our sample, 43 percent of businesses are temporarily closed, and businesses have – on average – reduced their employee counts by 40 percent relative to January.”

https://www.nber.org/papers/w26989#fromrss

An interesting link showing that controlling an epidemic means that one should target those in the population that generate most infections. Intuitive and I would say obvious, but it is sometimes forgotten in current discussions.

“This stupidly simple model makes the stark point that if we want to control an epidemic in a heterogeneous population, we should target the segment of the population that generates the most infections. This will often be the same segment of the population that is least at-risk for the most severe consequences of infection. This model provides the logic underlying what may seem like draconian social-distancing interventions (e.g., closing schools, canceling public gatherings).”

https://eehh-stanford.github.io/gceid/struct.html

The Centre for Economic Policy Research (CEPR) started the publication of a special “COVID Economics” journal containing papers with preliminary results. The journal contains many interesting articles. Here is the third issue. Highly recommended!

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Another 6.6 million Americans registered to claim for jobless benefits in the beginning of April – Consumer Sentiment drops in the United States

For the third consecutive week, a record number (6.6 millions) of Americans filed for first-time unemployment. In addition, the consumer sentiment index provided by the University of Michigan plunged by 18.1 in the beginning of April. These developments are worrying. Although there is hope that the situation will not get much worser and might start to improve in early May, recovery could be slow. A so-called V-shaped recovery (so high economic growth after some of the measures to slow the spread of the coronavirus are lifted) is still possible, but increasingly unlikely. As I mentioned earlier, serious economic forecasts are not possible at the moment. I hope that in early May, we might be in a position to attempt an assessment of the macroeconomic situation.

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Why are there so many researchers but low productivity growth?

In a recently published article, Bloom et al. find that “ideas are harder to find”. They find that “aggregate growth rates are relatively stable over time, while the number of researchers has risen enormously”.

And: “Perhaps the best example of this finding comes from Moore’s Law, one of the key drivers of economic growth in recent decades…. the number of researchers required to double chip density today is more than 18 times larger than the number required in the early 1970s… In addition to Moore’s Law, our case studies include agricultural productivity (corn, soybeans, cotton, and wheat) and medical innovations. Research productivity for seed yields declines at about 5 percent per year. We find a similar rate of decline when studying the mortality improvements associated with cancer and heart disease. Finally, we examine two sources of firm- level panel data, Compustat and the US Census of Manufacturing. While the data quality from these samples is coarser than our case studies, the case studies suffer from possibly not being representative. We find substantial heterogeneity across firms, but research productivity declines at a rate of around percent per year in Compustat and 8 percent per year in the Census.

Highly recommended!

Here is the working paper version:

And the published version (Bloom, Nicholas, Charles I. Jones, John Van Reenen, and Michael Webb. 2020. “Are Ideas Getting Harder to Find?” American Economic Review, 110 (4): 1104-44):

https://www.aeaweb.org/articles?id=10.1257/aer.20180338

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Coronavirus: Effects of COVID-19 on international relations; emerging market economy exchange rates; and the life of status seekers under isolation – what I have been reading today

Since I started to carefully study the coronavirus and its associated health and economic consequences in January 2020, I have been reading many news, research articles, and blog posts. I got more and more concerned and I hope that the situation will improve as soon as possible. Let me now regularly share with you some interesting background articles:

Thomas Wright from Brookings on the long-term effects of COVID-19 on international relations (It is too early to make any serious statements, but it is an interesting article):

Boris Hofmann, Ilhyock Shim and Hyun Song Shin from the Bank of International Settlement (BIS) on “Emerging market economy exchange rates and local currency bond markets amid the Covid-19 pandemic”

Here is the full article:

Tyler Cowen has a good article on “Isolation Changes Everything for Status Seekers: Covid-19 is upending all the usual ways for people to win the approval of their peers.” He argues that:

“The desire for status and approval is one of the most powerful human motives. It induces us to work hard, dress well and engage in conspicuous consumption, such as Instagramming our fancy vacations. But with the rapid advent of Covid-19, most of those options have been whisked away from us.”

“More generally and in the longer run, expect the technology sector and the nerds to rise in status. It is their products and services that are commanding our attention and filling our status vacuums. The “nerdy look” is even less of a social handicap than it used to be. To paraphrase that famous saying: On a Zoom call, nobody knows you’re wearing mismatched socks.”

https://www.bloomberg.com/opinion/articles/2020-04-06/isolation-changes-everything-for-status-seekers

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