Macro roundup: More on inflation
Price increases continue to accelerate as the issue assumes political urgency
Inflation is moving to the centre of the political as well as the economic agenda, with the prime minister announcing that to mitigate its effects Greece will raise the minimum wage by more than 2 percent in May.
The EU-harmonised index of consumer prices rose 4.4 percent from a year earlier in December, up from 4 percent the month before, according to Elstat data released yesterday. The national consumer price index increased 5.1 percent in December.
A deeper dive into the inflation numbers is due here soon. But in the meantime, after November’s release, a reader pointed out that Greece’s deflation in 2020 was much deeper than anywhere else in the eurozone, so last year’s price rises need to be seen in that context. That’s a fair point, so rather than the usual inflation chart, here’s a chart for two-year inflation instead.
From two years earlier, Greek consumer prices were still falling as recently as September. However, the two-year inflation rate has shot up in just three months to 1.9 percent.
To the reader’s point, the gap between two-year inflation for the euro area as a whole and for Greece was 2.8 percentage points in December. That’s a substantially wider margin than one-year inflation, where the euro area’s 5 percent inflation rate is just 0.6 percentage points higher than Greece’s.
In other data, industrial production climbed 8 percent in November from a year earlier, with manufacturing rising 9.1 percent.
And earlier this week I took a look a the country’s bond issuance plans for this year. Greece isn’t the only country potentially looking to front load purchases before yields rise further, but it does face tensions of its own that are likely to bubble up this year.
NOTE: If you read the piece by email without clicking through (or if you clicked through soon after it was sent) you may have noticed that the chart for the government’s cash buffers was repeated. I made a last-minute tweak to it before sending, then accidentally replaced the wrong chart with tweaked version. That’s fixed now on the site, but here’s the chart that got left out of the email version:
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Next week’s key releases
Monday, Jan. 17:
2021 central government budget execution (Finance Ministry)
Wednesday, Jan. 19:
November unemployment (Elstat)
Thursday, Jan. 20:
November balance of payments (Bank of Greece)
Friday, Jan. 21:
Third-quarter non-financial accounts of general government (Elstat)
An elsewhere on the web special
This week’s elsewhere on the web section isn’t about Greece, but there were a few things that I read recently that were connected along a theme that I found interesting. That theme is crypto, or “web3” as its latest iteration is often dubbed, which may make some eyes glaze over. I get that, but since it’s everywhere right now, we might as well separate the wheat from the chaff.
Kicking it off, this piece by Moxie Marlinspike, a cryptographer dipping his toes in the web3 waters, has been widely praised — I think deservedly so as it’s probably the most insightful thing I’ve read on the underlying technology. The way I’d summarise the points made here is essentially that “web3” looks an awfully lot like a handful of “web2” platforms for accessing blockchains (if you don’t want to read the whole thing, but are interested in other parts of this theme, then the first few paragraphs provide some useful definitions of web1, web2 etc).
If you’re into finance and humour (hey, who isn’t?) then you’re probably already subscribed to Matt Levine’s newsletter. If you’re not, you really should be. In his take on Marlinspike’s piece he compares blockchain technology with his own ExcelCoin, which is an Excel file on his computer. I better warn you that it’s behind Bloomberg’s metered paywall and will count as your free Bloomberg article for the month if you open it (“Web3 Takes Trust Too”). But for his future output, you can subscribe here to the emails for free.
Soon Parted, by Daniel Neilson, is an excellent Substack newsletter that applies Perry Mehrling’s Money View approach to a range of issues. He regularly writes about platform finance and cryptocurrencies, and a couple of his posts fit the theme in today’s section:
Back in April, he wrote about Coinbase, describing it as “a bank in crypto clothing”. Going back to Marlinspike’s piece at the start of this sequence, this is a good example of a web2 platform for accessing blockchain technology.
His latest post looks at JPM Coin through the lens of T accounts. This is JP Morgan’s blockchain platform for intraday repo transactions. It feels a bit like the beginning of the realisation of something that got in motion around 2015 or 2016, when “blockchain” became a buzzword after people in finance realised it had applications that were separate from Bitcoin (in particular they got excited about using it to handle backend settlement, while the syndicated loans market was another use case that I remember often getting cited). This is the point that Neilson alludes to at the end of his post, when he says that he sees the future of Blockchain ultimately being about providing the infrastructure background for core money banks.
This brings me back to Levine’s take above, and one of the articles that he links to there, which is this absolutely fascinating look at COBOL, the (very old) programming language that much of the world’s current infrastructure background is built upon. The piece itself has nothing to do with web3, blockchains or crypto, but it fits today’s theme since this is the technology that is supposedly about to be disrupted.Normal money is actually a bunch of ancient mainframes running cobol in batch mode, where govt can edit money database whenever they want
The article is packed full of fascinating nuggets (mark down 2045 in your diaries!), but the overriding theme of it is that the much-maligned COBOL doesn’t deserve its reputation as this creaking piece of architecture that’s under the strain of the modern world. On the contrary, it’s working just fine, and when public officials blame “ancient systems” for high-profile IT failures, its usually recent bolt-ons in modern languages that have caused the problems. But there is a real issue in the shortage of COBOL programmers — and it’s a big problem given how critical COBOL is to the world’s functioning.
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