It suppresses the context, eliminates the causes, corners the explanations and a table of macroeconomic forecasts becomes a bet on the lottery and the economic situation in a random and apparently erratic up/down of variables. Then, given the human need to understand what is happening, the way is clear to blame/thank the current government for the situation: criticize it if it goes wrong, applaud it if it goes well, polarizing public opinion according to previous mental schemes. The simple, even erroneous, ends up imposing itself.
Unfortunately or fortunately, governments today are not so important as to become the sole determining agents of economic evolution in a world as globalized as ours, where the interrelationships between countries mean that (almost) everything is connected with (almost) everything, regardless of national borders.
All Western countries are experiencing a sharp slowdown in their recovery and a sudden rise in inflation. Everyone, not just Spain. The eurozone has grown this first quarter by 0.2%, with Italy in negative (like the United States) and supports in April, an inflation of 7.5%. This speaks of a global problem, an external ‘shock’, which has a negative impact on everyone, although with asymmetric nuances depending on the economic structure of each country.
And there is little doubt that several negative and unforeseen events have been concatenated a few months ago: omicron, supply shortages, new confinements in China (zero contagion policy that has blocked the world’s main commercial port, Shanghai), war of Putin in Ukraine and subsequent blockades. This is what all international organizations and common sense point out, this being an explanation more adjusted to the complex and dynamic reality in which we live. The up/down in forecasts thus finds a rational explanation, away from the useless pointing out false culprits to channel, in partisan terms, the logical citizen discomfort.
The most outstanding thing in Spain is the fall in household consumption, which indicates two facts: the loss of purchasing power and the so-called precautionary factor in the face of news such as the war in Ukraine. The evidence accumulated subsequently, at Easter and on the May bank holiday, plus the employment generated in April, would indicate that the second quarter will be more positive in terms of spending by that half of the families that make ends meet and have accumulated savings during the pandemic. If prices continue to fall (the change in the electricity market will help this a lot) and the ‘Next Generation’ funds are spent and not just committed, things will tend to normalize and we will end the year with robust growth, although insufficient , 4.5%.
More worrying seems to me to be the medium-term forecast of the new Government forecast table that growth will decline to a meager 1.8% in 2025, where we will continue to show an unemployment rate of almost 10% and without a change in productive model. But, who knows, with how far away it is and the amount of things that can happen until then.
Cryptocurrencies / crypto assets
Almost four million Spaniards own crypto assets and, at least 233,000, have received a letter from the Treasury reminding them that operating with them pays taxes while the rest try to attract us to those digital values through television ads. It is estimated that there are more than 15,000 different cryptoactives, with bitcoin, which emerged in 2009, being the majority among those that do not have any type of backup, and tether among those that have some kind of backup mechanism.
As a whole, it is estimated that they represent 1% of world financial assets, highlighting the speed of their growth because just four years ago they were at 0.02%. According to calculations by the Bank of Spain, cryptocurrencies moved 60,000 million euros last year in our country.
Crypto assets are used as an investment since their revaluations can be very pronounced (bitcoin had a 1000% in twenty-four hours), as well as sometimes their falls (dogecoin fell 80% in a year). But they are also used as a means of payment, that is, as digital money for transactions, although in none of their functions do they have any type of regulation, control, guarantees or claims. It is a pure and simple market, where supply and demand, coordinated by technological platforms, determine the price. A liberal’s dream Hayek: denationalized money. At least, in theory, since the whole process is highly risky, the most prominent being: misleading information, market manipulation (burning or unilateral withdrawal of assets), large fluctuations without control or guarantees of transparency, money laundering.
While El Salvador and the Central African Republic have made bitcoin legal tender, China has banned crypto, even punishing any transaction with them with 10 years in prison. Although he presents it as a way to control the flow of capital, in reality he avoids competition to the determined bet he has made for his own cryptocurrency: the digital yuan, which they premiered during the Olympic Games in Beijing.
The European Union has been debating, since September 2020, a Commission Regulation on the cryptocurrency market and, recently, given the shift towards these currencies caused by the resurgence of inflation, all European surveillance and supervision authorities have just release a statement warning people of its use, presenting them, almost, as the scam of the holy card.
However, the phenomenon is unstoppable. The ‘blockchain’ technology of cryptocurrencies is creating new financial assets and promoting new ways of financial intermediation, promoting the so-called ‘fintech’, or digital banking. Its widespread acceptance questions the role of Central Banks, the need for a monetary policy and even that of traditional banking itself. Let’s get ready for the digital euro.
the price of freedom
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Beyond the estimated setback in growth and the increase in prices, the war in Ukraine is leading to a new world scenario defined by a sharp deglobalization and a leap forward in a more sustainable energy model, less dependent on fossil materials. Unlike what happened during the Russian occupation of Crimea in 2014, the West has decided to fight for Ukraine and stop the dictator Putin. As President Zelensky said before the European Parliament, the Ukrainians are fighting for the freedom that we enjoy in Europe.
Let us not lose sight of this important dimension of ethics and values, in the current post-pandemic world moment. In the midst of the rise of autocratic powers and populism, defending our democracies has become a requirement. Because freedom has a price. Let’s take care of her.