Brussels now messing up with financial derivatives

The Financial Times reports that the European Commission intends to launch a new type of Government bond, packaging the bonds of various countries into a single security. I think this is an extremely bad and dangerous idea. First, it is a distortion of the market that would cause large amounts of capital to flow into the bonds of the weaker economies, just as it happened when the Euro was created and interest rates started to converge. Second, The pooling of bonds carrying various risks into a single security, was at the core of the global financial crisis.

Do migrants bring economic benifts to the host country?

Today, in a short commentary written for Radiocor/IlSole24Ore, I discuss the issue of migrant flow into Europ and its impact on the economy of the host country. Everyone asks the question “Do migrants bring positive or negative benefits to the receiving country?”. The short answer is it depends on a number of variables and generalisation across the globe would be mis-leading. However, narrowing the focus on the Mediterrenan migrant flow into Italy, one can almost certainly affirm that in the short term, the impact is negative and that in the long term it is, at best unclear. The impact may potentially be positive only under a strict set of assumptions, that need to be carefully analysied before making irreversible decisions.

Moody’s alignment with reality

In one of my Op-Eds written for Radiocor- IlSole24Ore, Moody’s fa i conti e si allinea alla realtà dei fatti, I talked about Moody’s choice to align itself with the reality when China’s sovereign debt was downgraded from A1 to Aa3. China’s state bonds market is, currently, a non-market: the trading volume is low and the main players are state banks that buy bonds issued by the government and, almost always, they keep them in the portfolio until they expire.

Geraci speaks at GAAF 2017

Michele Geraci was a guest speaker at GAAF 2017, yesterday in Shanghai. In his speech, he shared following three viewpoints: First, RMB will never be international currency. Second, Interest rate in China needs to be brought up to the same level of GDP growth rate in order to create stable economy. Third, There will be more difficulties for China trade with the U.S. but it will be easier for China outbound investment to the U.S.

Bagnai reiterates the failure of the euro

Prof Bagnai makes some important points in his article written for IlSole24Ore. The one that I find most interesting is that many economists and politicians, today, when discussing about the future of the Euro, hold the view that There Is No Alternative and that history is linear and we can only go forward. Those who maintain this view are probably not well informed or, worse, say so to hide what they really think. I would just add that Dornbursch, my economic Professor at MIT, used to tell me that disaster takes longer to materialize than we expect, but then it happens suddenly.

Prodi in Beijing to talk OBOR

Last Friday, the Pangoal Institution and TWAI organized the conference “The Belt and Road Initiative and China-EU Economic and Trade Ties.” Guests included Former Prime Minister of Italy, Former President of the European Commission Romano Prodi, President of the Pangoal Institution Yi Peng, Professor from Peking University Enrico Fardella, Former Deputy Administrator of State Administration of Taxation Xu Shanda, Professor of Applied Economics, University of Ferrara Giorgio Prodi and Head of China Economic Policy Program Michele Geraci. We discussed future cooperation between China and EU under One Belt and one Road.

Manufacturing 2025 works on

China’s economy is likely to grow by 6.8% year on year in the first quarter of 2017, driven by increasing production activities and investments, according to a report by National Academy of Economic Strategy (NAES). The positive trend seen in 4Q 2016 has continued into the first quarter of 2017. Industrial production, fixed assets investment, real estate and infrastructure development have all gone up. It will be very unusual for China to beat its own 6.5% as estimate. However, if the first quarter of the 2017 really were to post 6.5% GDP growth, that would be a very good result for the economy. And, more importantly, for the confidence that world economy may have on futures perspectives of China.

Manufacturing in China: already showing signs of success

Chinese industrial companies are experiencing robust profit growth in the first two months of 2017. In January and February, industrial enterprises reported a 31.5% increase in profit from the same period last year, reaching a total value of 1.02 trillion Yuan ($148.5 billion). I strongly believe that, this time, China is serious about it. China Manufacturing 2025 is a real thing and not the usual initiative aimed at pleasing the desire to enhance soft power and find objective to dissuade attention.