One *super basic* thing that has been missing from the 🇷🇺 oil & gas embargo econ debate is some PERSPECTIVE.
We have seen terms like "poverty", "huge impact", particularly in 🇩🇪 (a pivotal country, so I will focus on it).
To help with perspective, some v basic charts: 1/n
We have seen terms like "poverty", "huge impact", particularly in 🇩🇪 (a pivotal country, so I will focus on it).
To help with perspective, some v basic charts: 1/n
First, 🇩🇪 annual GDP growth.
The red diamond is IMF fcast for '22, adjusted lower for the recent rise in energy prices.
The grey swathe is a range of embargo impact e.g. from @GoldmanSachs & @ben_moll @kuhnmo @MSchularick @BachmannRudi and others econtribute.de/RePEc/ajk/ajkp… 2/n
The red diamond is IMF fcast for '22, adjusted lower for the recent rise in energy prices.
The grey swathe is a range of embargo impact e.g. from @GoldmanSachs & @ben_moll @kuhnmo @MSchularick @BachmannRudi and others econtribute.de/RePEc/ajk/ajkp… 2/n
Some people have a gut feeling the impact would be more severe.
It is difficult to draw a gut feeling on the chart.
But OK, let's take 5% hit to GDP in 2022, the yellow square.
Look at this chart again. Does it look like return to poverty is likely in 🇩🇪? 3/n
It is difficult to draw a gut feeling on the chart.
But OK, let's take 5% hit to GDP in 2022, the yellow square.
Look at this chart again. Does it look like return to poverty is likely in 🇩🇪? 3/n
Next up, the level of GDP. How far back wld the embargo take us?
Check the next chart.
The income in the short term might drop to 2017 levels or so.
"Huge"? "return of poverty"? Mmmm I don't think so 4/n
Check the next chart.
The income in the short term might drop to 2017 levels or so.
"Huge"? "return of poverty"? Mmmm I don't think so 4/n
Ahh maybe GDP is not everything, and it's all about unemployment.
OK let's check: the red line is the German UR (right axis)
I do not need any fanciful econometrics to argue that the increase in unemployment can be
contained.
we know how to - look at 08/corona! 5/n
OK let's check: the red line is the German UR (right axis)
I do not need any fanciful econometrics to argue that the increase in unemployment can be
contained.
we know how to - look at 08/corona! 5/n
The truth is we don't exactly know what an embargo would do to GDP.
The point is to label this uncertain impact as 'huge', 'disastrous', 'return of poverty' does not square w longer-run perspective, even if you are v pessimistic.
[It is also insensitive, btw]
6/n
The point is to label this uncertain impact as 'huge', 'disastrous', 'return of poverty' does not square w longer-run perspective, even if you are v pessimistic.
[It is also insensitive, btw]
6/n
Looking at these charts I am embarrassed we are even having this short-term econ debate.
It ignores where we must get to in the long-term anyway.
+ ignores large econ risks (eg Putin closes the taps in Nov)
+ ignores the LT costs of this lack of 🇩🇪 leadership in 🇪🇺
7/n
It ignores where we must get to in the long-term anyway.
+ ignores large econ risks (eg Putin closes the taps in Nov)
+ ignores the LT costs of this lack of 🇩🇪 leadership in 🇪🇺
7/n
Economists must ofc help to assess impact + devise ways to cushion against it.
But the decision should have been taken already on strategic, political & moral grounds, which surely completely swamp these considerations. n/n
But the decision should have been taken already on strategic, political & moral grounds, which surely completely swamp these considerations. n/n
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