Category Archives: Opinions

Italy’s Grim Outlook

There are many reasons to be depressed about Italy.

Bad policy is part of the problem, of course, but the following chart shows that the country is also facing a demographic crisis. The blue lines show that there are now more deaths than births.

Figure 1 – Demographics Italy

The chart comes from a Bloomberg column by Flavia Rotondi and Giovanni Salzano, and they explain some of the adverse consequences of this demographic change.

Italy isn’t just in an economic slump, its population is also sagging, pushing the country into its biggest demographic crisis in more than a century. The number of people in the country fell for a fifth year in 2019, and deaths exceeded births by almost 212,000, the biggest gap since 1918. …Italy already has huge long-term economic challenges, and the population trends, if they continue, are going to make surmounting them even harder. Italy won’t have enough young workers, and funding a rapidly aging population will strain an already stretched fiscal situation. Pension costs now amount to almost 17% off the economy. …“With an aging population and a consistent decrease of workers who pay taxes, our retirement system may go haywire” said Pietro Reichlin, a professor of economics.

Politicians naturally will want to compensate for these changes by raising the tax burden.

But Italy already is at a breaking point because of punitive taxation. Writing for the Foundation for Economic Education, Daniel Di Martino discusses his nation’s dirigible system.

Italy’s problem, similar to many of its southern European neighbors, is an oppressively high tax burden, irresponsible welfare programs that encourage high measured unemployment and increase the debt, and high levels of regulation. …the share of average wages collected by the Italian government via income and social security taxes is 48 percent, among the highest in the Organization for Economic Co-operation and Development (OECD). In addition, Italy imposes a value-added tax of 22 percent on most goods and services, one of the highest in Europe. Plus, Italy’s corporate, capital gains, gift, and myriad other taxes are passed on to individuals and borne directly by workers. …At the same time, Italy’s complex regulations are a barrier to starting or continuing productive activities. A study by economist Raffaela Giordano of the Bank of Italy concluded that the main reason behind Italy’s underperformance was burdensome regulations and corrupt and inefficient government structure.

Adam O’Neal makes similar points about bad policy in a column for the Wall Street Journal.

Even before the pandemic, Italy hadn’t recovered fully from the 2008-09 financial crisis. Unemployment hovered around 10% in 2019. Adjusting for inflation, the average Italian worker earned the same as he did 20 years ago. Italian banks were Europe’s weakest. …What ails Italy? …Italy’s greatest challenge is a gargantuan government that destroys wealth as efficiently as the private economy creates it. …In 2018 government revenue was 42% of GDP, nearly 8 points above the Organization for Economic Cooperation and Development average. Yet profligate outlays—Rome spent 16.2% of GDP on public pensions in 2015—brought debt to about 135% of GDP last year.

The net effect of all this misguided policy is that Italy’s economy is moribund.

In his column for Bloomberg, Professor Tyler Cowen summarizes the problem.

One striking fact about Italy is that, over the last 20 years, growth in per capita income has been close to zero. …a zero-growth environment cannot be stable forever. …If the pie doesn’t grow, eventually it becomes harder to sustain productive activity… Aging is another reason economic growth is necessary. …many countries (including Italy) have expensive pension systems. Someone has to pay the bill, and without innovation and economic growth, taxes will have to rise. That in turn discourages work, pushing people into untaxed black-market activity, necessitating higher tax rates, and the vicious cycle starts again.

And when you combine bad demographics and bad policy, that not only means stagnation in the short run, it also could mean fiscal crisis in the long run. Except “long run” may be just around the corner.

Desmond Lachman of the American Enterprise Institute warns that an Italian fiscal crisis will make the mess in Greece seem trivial by comparison.

…markets are displaying remarkable complacency toward a rapidly deteriorating Italian political and economic situation. They are doing so in a manner that is painfully reminiscent of how complacent they were in 2009 on the eve of the Greek sovereign debt crisis. This could have major consequences for global financial markets considering that the Italian economy…has around 10 times as much public debt as Greece had at the time of its crisis. …One has to hope that while markets might be turning a blind eye to Italy’s deteriorating economic and political fundamentals, global economic policymakers are not. As experience with the Greek sovereign debt crisis reaffirmed, crises often take a lot longer than one would have thought to occur, but when they do occur they do so at a very much faster rate than one would have expected.

Some people argue that a fiscal crisis can be avoided if the European Central Bank buys up Italy’s government debt. That certainly can avert a panic, at least for a while, but this approach can cause a different set of problems.

Joseph Sternberg opines for the Wall Street Journal that the European Central Bank’s easy-money policy has backfired by giving politicians in Rome the leeway to postpone desperately needed reforms.

If the ECB had not stepped in as a buyer of government debt, Rome long since would have faced fiscal catastrophe. Only a miracle—or €365 billion in ECB purchases of Italian sovereign debt since 2015—can explain how in recent years a country whose debt has ballooned to 130% of gross domestic product paid nearly the same interest rate as Germany… Even after selling so many sovereign bonds to the central bank, Italy’s banks continue to be large holders of their government’s debt. Such bonds constitute around 10% of Italian bank assets, nearly three times the eurozone average. …Mr. Draghi hoped his interventions would give wayward governments such as in Rome breathing room to overhaul the supply side of their economies—deregulating markets, privatizing state assets, trimming welfare programs and the like. But Rome has mainly slid backward.

Figure 2 – Size of Government Italy

While intervention by the European Central Bank isn’t the solution to Italy’s problems (and may actually make problems worse), this is also a good opportunity to make the related point that the euro currency also shouldn’t be blamed for the nation’s stagnation.

I’m not a big fan of the European Union and the crowd in Brussels, but Italy’s challenges overwhelmingly are the fault of policies adopted by Italian politicians.

Indeed, if you look at the data from the most recent edition of the Fraser Institute’s Economic Freedom of the World, you can see monetary policy isn’t a problem. Instead, the nation’s big impediment to prosperity (highlighted in red) is terrible fiscal policy.

To put this data in perspective, Italy has the next-to-lowest ranked in Western Europe, with only Greece having less economic liberty.

The numbers from the Heritage Foundation’s Index of Economic Freedom tell a very similar story.

If you peruse the data from the most recent edition of that publication, you’ll see that Italy gets weak scores for its approach to labor issues, the judiciary, and taxes.

But it gets an utterly dismal score (highlighted in red) for government spending.

Figure 3 – Government Spending Ranking Italy

Sadly, there’s no political party in Italy that wants to solve the problem of excessive spending – even though I explained how it could be done while I was in Milan many years ago. And without spending restraint, that means it’s almost impossible to adopt pro-growth tax reform.

No wonder some people in Sardinia want to secede from Italy and instead become part of Switzerland.

Disclaimer: This is a republishing of Dan Mitchell’s personal work.

Holiday Special: Italian Trouble Up Ahead

While The Golden Investor is taking a time-out after a long year of hard work, the world continues to turn. In the last two weeks gold has risen to new highs, today breaking the 1800 dollar level of resistance. Once again global GDP growth rates have been adjusted downwards. As predicted, the corona crisis is far from over while full vaccine implementation is still months away more misery can be expected. Today The Golden Investor will focus on the country which is hit the hardest by the corona crisis, the same country where The Golden Investor has landed to be able to report and understand the corona aftermath better. This somewhat informal overview will show that the Italian economy is far from recovering.

On landing the 28th of June, one thing was immediately clear, the airport was deserted. As native speaking Italian it is not very hard to hear the agony of many Italians, already in the cab to the city it became clear that Rome was empty. One of the busiest tourist places on earth is abandoned by tourists and it is very clear when visiting the normally crowded Trevi Fountain, Colosseum and Vatican City. No lines, a handful of tourists and desperate sales persons are what is left. An African immigrant throws his bracelets at my head after I refused to listen to him. As the only tourists in Rome are Italians, who have created natural resistance to the very pervasive sales persons, many entrepreneurs, immigrants and everything in between are desperate for some revenue.

“They give one hand and they take two”

Italian business owner in Rome

Arriving an hour early to an appointment with my new landlord in Rome I sit down around the block to grab an Italian coffee. I sit down next to two eighty year old pensioners. But I was wrong, these were not pensioners, they were the restaurantholders. They immediately start talking to me, explaining to me the normal dynamics of Rome. Around April Italians all start to go out and enjoy the nice but not too warm Italian weather. Two weeks into June the inhabitants start leaving the city to flee the heat and make place for the foreign tourists. Now, restaurants were closed for three months and only recently have started to open up. The aged couple emphasize: they have seen everything, but this is worse than war, protests, corruption and anything they have seen before. They had to fire their chef which had been working there for 35 years and they still barely survive. They received 25.000 euros governmental support and do not have to pay their yearly license of 15.000 to the city of Rome to have a terrace on the street. Being stunned by the size of the relief, I was quickly made clear that it is not enough. They had to fire 4/5 people in their staff, to be able to pay their bills. Symptom for this misery is the lack of assistance and corruption in Italian institutions. While being closed for three months their electricity bills are as high as before the outbreak. They had to go to court to settle the dispute, while having to pay the overpriced bills after the initial dispute in April. After I generously pay for my coffee, they give me back my money saying: “Rome will take every coin you have, this one is on Rome”.

While reading a book in the Parco Villa Borghese a young woman asks me if I want to take a picture of her. After having taken the picture I ask her where she is from. She says she is a university student here in Rome, but that she comes from the South of Italy. As she is almost done with her study she is ready to find a job. One thing everyone should know is that the North and South of Italy are very much separated and divided. The difference in economic welfare between the North and the South of Italy is one of the biggest within country welfare gaps of Europe. When I suggest that she should go work in the North she is quick to respond with a firm no. She explains that while the rest of the world is discussing the BLM-movement, in Italy people are done with defending misbehaving immigrants. But after immigrants come Southern people, she would be next in line to be discriminated by Northern Italians. Just look at the Five Star Movement, basically a political party that literally only represents the North, she says. But it doesn’t matter, she does not even want to live in the completely different North.

All these stories are clear stories of Italian misery. Italians keep focusing on European solidarity with the Corriere starring the Dutch prime minister Mark Rutte on their cover with the heading: “The Severe Doctor”, after having said that Italy should take care of itself for once. As Italians point to European solidarity, their very own country is divided even more. How can European integration work if countries themselves lack internal integration? The answer to this question is simple: it can not. If Italians had as much solidarity to their own fellow inhabitants as they have with their family many discontent could be prevented. The rising individualism in the North has created a huge disparity with the close South, where quote “nieces and nephews are like brothers and sisters, and my aunt is your aunt”. Is individualism a result of economic progress or is individualism necessary for a thriving economy? It is not an easy question to answer, but an essential one as it is one of the most important drivers between the division of regions within Europe with Italy as the best example. It is very important to stop major changes from happening as a result of the corona crisis, to prevent a European Union that will break down even further. If the European Union will lack solidarity to Italy we are soon going to see a Union without Italy. And a European Union without Italy is like a pizza without cheese: not a pizza.

The Importance of Institutionalism And Economic Behaviour

Economic as a science is more than rather using mathematical models trying to explain how theoretical ideas are related to each other. Mathematical models could be useful for the visualization of theoretical concepts, but most of these models assume that people are rational. According to these models, people maximize their utility by doing what satisfies their preferences the most. With institutionalism as upcoming mainstream view in economics, the way people behave and their decision making seem to gather more attention through the last years. Institutionalism emphasizes the importance of economic institutions on certain economic outcomes. This article will discuss the importance of institutions and how they could affect economic outcomes.

What is institutionalism?

Institutionalism is an approach which emphasizes the importance of institutions. The study of institutions is based upon multiple disciplines, like economics, sociology, political science and psychology. Institutions are especially important in the provision of a sustainable environment for economic transactions to occur. Transactions are more likely to occur in a safe environment where property rights are well-protected. Property rights are the theoretical and legal ownership of resources, which prevent other people from using the resources you own. Johnson et al. (2002) claim that property rights are very important especially for investments. Entrepreneurs will not invest if they expect to be unable to keep the fruits of their investment. This lack of well-defined property rights could lead to less efficient economic outcomes, which seem to be very undesirable. Acemoglu et al. (2005) argue that differences in economic institutions are the fundamental cause of differences in economic development. Economic institutions provide a safe environment for transactions to occur and make markets more efficient. However, old literature proposes that factor accumulation is the cause for economic growth, however, Acemoglu et al. claim that factor accumulation is economic growth. These factor accumulations are the outcomes of an institutional system designed by economic institutions in a specific country.

As we know institutions protect property rights and provide a sustainable environment for transactions to occur, so we could argue that economic behaviour is closely related to the quality of these institutions. People act upon the rules of the games provided by economic institutions, and thereby affect the economic outcomes of that specific country. So economic development depends on the quality of institutions, but there seem to be more fundamental causes for the creation economic development. The two most interesting fundamental causes of economic growth, for me, are geography and culture. Geography, climate and ecology are all important determinants for the preferences and opportunities of individuals. Infrastructure, distance to capital and population density are for instance very interesting geographical variables, which could affect the economic behaviour of people. During my own research on the effects of ERDF on economic growth, I took a closer look at the importance of the distance to capital. The capital of a country is most likely to be one of the places with a high concentration of economic activities, and therefore you expect that countries with economic activities more spread over the country to face lower economic outcomes. Literature shows that density has a positive influence on total factor productivity. Being co-located provides benefits like knowledge spillovers, thick labour markets and you could attract more customers (Jennen et al., 2010). Therefore, to measure this geographical aspect, distance to capital could be a relevant factor in explaining economic growth.

Secondly, culture can explain choices and economic behaviour through cultural beliefs. Cultural beliefs shape the moral framework through which people make their decisions and decide whether something is good or bad. These beliefs are embedded in society, changes of these informal institutions are nil (Williamson, 2000). Norms and other cultural beliefs affect trust, which seem to be an important part of culture in explaining economic growth. Trust goes with property rights and the quality of institutions, because more trust leads to more efficient transactions contributing to more economic growth. People like people of their own social group, which leads to more ethnic fractionalization. As people act within their own social group, you could argue that trust affects multiple social aspects that influence economic growth.  The relationship between trust and economic outcomes seems to be quite endogenous. However, I argue that trust could be a channel through which culture affects economic outcomes, which is quite interesting.

So, geography and culture are two possible channels through which institutions could affect economic growth. It might be clear that institutions matter, especially in shaping the economic environment. In times of COVID-19, we observe differences in the way countries act upon this pandemic. We see that countries use different ways to prevent an outbreak in their country. I am convinced that the role of institutionalism is essential during this COVID-19 crisis, because this crisis shows that (economic) behaviour is one of the most important elements in the process to certain outcomes. Such a crisis shows the behaviour of people under different and strange circumstances, which is quite interesting for the upcoming years. What will be the economic consequences of this COVID-19 crisis? No one knows and, unfortunately, there is no mathematical model which could predict these outcomes.


Acemoglu, D., Johnson, S., & Robinson, J. A. (2005). Institutions as a fundamental cause of long-run growth. Handbook of economic growth, 1, 385-472. Up to and including section 6.

Williamson, O. (2000). The New Institutional Economics: Taking Stock, Looking Ahead. Journal of Economic Literature, 595-613.

Johnson, Simon, John McMillan, and Christopher Woodruff. 2002. “Property Rights and Finance .” American Economic Review, 92 (5): 1335-1356.

Jennen, M., & Verwijmeren, P. (2010). Agglomeration effects and firm performance. Urban Studies, 47, 2683-2703.

The ESG Hypocrisy In The Western Investment Management Industry

As per economics 101, there is only one thing that firms are after: Maximizing Profit. The ESG investing (investing to influence better environmental, social, and governance practices) has recently emerged as a marketing tool of the global investment industry, which seems to have been profitable. However, it’s the ESG hypocrisy and not ESG investing that yielded such profits.

We all know that Western investment management firms have been rushing after high yields and high profits rates in the so-called emerging markets, and most of their “investments” have been in government bonds (local and hard currency), some in equities, and less in corporate bonds. Even though the ESG-indicators have been deteriorating for many of these “emerging markets”, the Western investment firms have kept speculating on their assets with disregard to ESG underperformance in these countries. And in many cases, the Western investment firms are by undertaking these transactions incentivizing financial schemes that, through excessive money printing inflation and exchange rate deterioration of the target country, expropriate wealth from the masses of these countries.

Let me illustrate this ESG hypocrisy with a salient example I am familiar with. The Western investment industry has rushed to investments in Egypt’s government bonds since the interest rate rose substantially in late 2016, while the Egyptian government, which is a product of a military coup that took place in 2013, is on one of the ruthless ruling regimes of our time, evidenced by several standard quantitative indicators like those presented by World Governance Index, Corruption Index, and World Justice Project, where Egypt’s ranks in all these indices have been deteriorating in the past years. Yet, Western investment management firms, who claim that ESG is a priority of their business model, have been lusting after the high interest rates of Egypt’s government bonds. This clearly disregards the deterioration of the human experience as an outcome of supporting Egypt’s dictatorship through these “fixed income investments”.

I support my claim by reporting a personal experience back in 2016 when I worked in the asset management industry in the Netherlands. I met with several senior portfolio managers who always spoke highly of the potential of “Egypt fixed income investments”, and one senior portfolio manager of a major Dutch asset manager located in Rotterdam, told me that “My longest position is currently in Egypt local currency bonds”. Another senior portfolio manager from one of the largest asset management firms in The Hague confirmed that they are heavily invested in the same asset class in Egypt. Nevertheless, these firms, and many others who followed suit, have large ESG-related logos whenever you see their names. Other notable countries whose governance has been deteriorating, nevertheless, have been “emerging markets hot spots” of fixed income”investments” are Brazil, Peru, Russia, Turkey, Columbia, and Saudi Arabia among several others in Africa, the Middle East, and Asia.

ESG hypocrisy has been the fashion trend of the day in the global investment industry in recent years and they have been used by investment management firms as a marketing tool to enhance their public image and attract the stray money of institutional and individual investors.

They lend dictatorship and corrupt governments around the world, and they deliberately dismiss that they are financing political repression, resource expropriation, human rights violation, corruption, and overall political and economic degeneration.

If you have doubts about my claims, please visit the following websites and check the trajectory of the different governance indicators’ scores of the “emerging” countries I mentioned, and then check the data on foreign portfolio investment flows and origins in them.

Disclaimer: These comments on latest gold miners are of Omar AbouZeid personally. The comments are his personal opinion and thus does not necessarily reflect his employers opinion on the topic.

Why The Euro Is Not Likely To Last

The 21st century has brought many groundbreaking developments, as we became increasingly dependent of the internet, the euro got adopted by a majority of European countries. This has had several positive effects, like less exchange rate risk and inflation risk, but the euro is increasingly becoming a liability rather than a uniting link between countries. The euro is product of European enthusiasts, but as the world experiences a rise in globalization this European monetary integration is becoming more and more under pressure due to several societal aspects which have to change in order for the euro to last. The euro can only function well in a fully unified Europe, but as European support drops in almost all European nations, this currency will go through some though times. The corona debt burden will be the last nail to the coffin of the euro.

What Will Prevail: The European Bureaucracy or The American Liberality?

When adopting the European currency a country gives up on his own monetary autonomy, national interest rate and exchange rate. The latter is the most notable, when used correctly, exchange rate management can increase competitiveness and makes it easier to overcome exogenous economic shocks. In order to stimulate exports a country can depreciate their currency to become cheaper for importers of other countries. In one European currency area, countries that experience different shocks due to differences in economic structures and characteristics are dependent of the same exchange rate. In order to be able to make up for different effects of the shock countries have to change prices, but as prices are sticky on the short run due to labour market policies European recovery of exogenous shocks is relatively slower. Interesting will be to see if the corona shock is a temporary one or if the negative economic effects will last. The European system is more likely to overcome a temporary shock as employment is guarded more than in the USA. However, if the economic pain will last longer the European structures will suffer more.

Labour Market Mobility And Fiscal Transfers Are Essential To An Optimal Euro Area

As European countries all have different economic structures not only the exchange rate unity poses a problem. For a currency area to work there has to be labour market mobility between countries. If a certain sector is hit relatively harder by a certain development, people have to be able to move to better performing industries. Labour mobility was already relatively low due to cultural and linguistic limitations of migration between regions. But as low skilled labour is valued less and less due to globalization, the inequality gap has significantly increased over the last fifty years. This inequality has resulted in the rise of populist parties across countries in Europe, of which most condemn free mobility, even between European countries. This has a negative impact on the functioning of the euro currency area.

Another important feature which is necessary for the euro to survive is the use of fiscal transfers to support less developed and under-performing regions. This is essential for the euro area to function, but as countries like Austria and the Netherlands tend to criticize these kind of fiscal transfers, the European strength weakens. Fiscal transfers to lesser developed regions also tend to lead to moral hazards. These regions become dependent of these funds and do not have a natural economic incentive to increase productivity within the region, but tend to twist policies in way which leads them to receive more of the European Structural funds. However, it is widely known that the more developed regions tend to benefit more of European integration than the outskirts of Europe. Fiscal transfers are made to make sure that regions which suffer under European integration also receive some of the benefits. But as this system is shaking and the board of the ECB diverges more and more, the euro is under high pressure.

Having One Monetary Union Reduces Exchange Rate Risks For All Member States

The richest European countries are dependent on the income of the poorer countries in regions. Each year there are capital flows out of the south of Europe to the north due to differences in economic structures. In order for this to be sustainable fiscal transfers are necessary to keep this flow going. It feels counter-intuitive to support less productive regions, but it is vital to European economic engine. Rich exporting countries are dependent on poorer typically import countries, so in a system with one currency fiscal transfers are necessary to sustain the European economy. Having different currencies across Europe creates a more flexible and seemingly fairer economic system. However, weaker countries will face exchange rate speculation attacks like we saw at the end of the last decade. Traders will speculate against the one with weakest pockets, which creates a self fulfilling prophecy, damaging to economic stability and thus spurring economic growth. And when weaker countries face lower growth, exporting countries with bigger pockets also lose economic prosperity.

As the most vulnerable countries in Europe also are the countries heavily dependent on tourism, where in Italy tourism is responsible for 15 percent of GDP, in Greece this number is 24 percent. As the corona outbreak is a killer to this industry, these countries will face huge debt burdens. European solidarity has to be higher than ever in order for the euro area to survive in the way we know it. It will be harder than ever, countries will face their own problems and under pressure of European skeptics the corona aftermath will prove to be the start of the end of the euro as we know it.

Decreasing Political Support Poses An Existentional Threat To The Euro Area

It would be great if we could coordinate as humans instead of nationalistic entities. This would lead to more equality, sustainability and overall prosperity, however such a world is far away in a world where there are minorities, oil tycoons and a wealthy minority with the majority of the power. Having a group of intellects with a majority of the power is not necessarily bad. Such a system would work as long as these people do not have personal interests, are absolutely rational and do not hold preferences in any way. Stepping back in reality, if even the European Union does not function optimally, we are not likely to see this kind of governing board anytime soon.

Keeping or abolishing the euro is a trade-off between solidarity and integration versus individualism and autonomy. Economically speaking it is best to function as one big European country, but as cultures differ greatly and people don’t feel as connected with fellow European inhabitants, the euro area is not likely to survive. The best would be to take away all the borders and function as one world, with one nationality: Earth. But as people tend to value and hold onto cultures and old habits, which isn’t necessarily a bad thing, an economic system is more likely to work within identical cultural regions. This is the same reason why The Golden Investor thinks that on the short run the euro is not likely to survive.

Disclaimer: The Golden Investor is not a fortune-teller, be sure to make the right decisions in accordance to your own financial situation, this is not investment advise or anything like that.

To Understand The Market And Governmental Policy, One Must Understand Neoliberalism

We are living in turbulent times. COVID-19 is leading to what is likely to be one of the greatest economic recessions we have ever seen. Governmental policies, in the forms of the slashing of interest-rates and unprecedented quantitative easing. For any investor, but especially an investor in a commodity as gold that rises in price during a time of crisis, it is vital to understand the fundamental framework which determines such economic policy. This framework determines the mode of thought and thus action of both government officials and investors. To grasp this framework is to understand what determines the unspoken assumptions of economic reasoning, what is seen as valid economic reasoning and the legitimacy of economic ideas and how they are implemented. This article therefore discusses the dominant framework of today, that of neoliberalism.

What exactly is neoliberalism? Michel Foucault, arguably the most influential philosopher of the 20th century, explains how it entails a complete overhaul of what we consider to be legitimate forms of intervention by the government. During the middle-ages, governments extensively regulated and actively intervened and in the market to create more just outcomes. An example of this is the introduction of a “just price”, which set such as to give a livable wage to the workers, a fair profit to the merchant but was still affordable to the buyer. If you are an economist and you read the last sentence, you likely considered it to be sounding awfully inefficient. However, how do you determine what is efficient and what is not? When assessing efficiency, you are using a framework introduced in the middle of the 18th century by the Physiocrats and the Classical Political Economists. In their perspective, the economy was in a state of efficiency when it left alone by the government; this proposition is commonly known under the term of “laizzes-faire” or the night-watchmen state.

During the period 1930s-1980s, a new mode of economic thought rose to dominance known as Keynesianism. In this mode of economic thought, active government-intervention and stimulus were actually validated on grounds of achieving efficiency; for an economy to recover from a state of a slump, governmental stimulus is required to lift the expectations or “animal spirits” of investors. However, the Keynesian was invalidated in the economic thought-collective by the stagflation in the 1980s. From its ashes emerged neoliberalism, and it has been the dominating political and economic thought ever since.  To borrow a computer-analogy by the economist Mark Blyth, if the physical capital is the “hardware” of the economy, this shift was an update of its “software”. In this mode of economic thought, all governmental practices and interventions as assessed in market-terms. It entails speaking of citizens as “customers” of governmental services by civil servants and the introduction of “competition” and “the laws of the market” not only in the economy, but also in society and government. In other words, the fundamental goal of the government becomes to increase efficiency by increasing the extending the competitive working of the market-mechanism in the economy, society and the government.

However, and this is fundamental to understand for investors, neoliberalism in practice and theory are almost two opposite forces; neoliberalism in practice entails not a reduction but an extension of governmental intervention. The closest analogy to it is that of doublethink from Orwell’s dystopian novel 1984, where it entails the acceptance of truth that clearly contradicts reality.  To ensure the workings of the market (approach) the way markets work as explained in economic textbooks, extensive intervention is required. Conditions must be set to ensure the competitiveness of the market. This means that in practice, size and intervention of government will actually increase under neoliberalism.

Furthermore, the deregulation of the financial market, for the market must regulate investors, not the government, and the focus on “shareholder-value” means markets will increasingly be ruled by “short-terminism”. Inevitably, this will cause financial markets to blow-up, as shown by the Great Recession in 2007-2009. Even within a neoliberal framework, the government cannot allow the complete annihilation of the economy, even if, from a neoliberal perspective, eventually a stronger economy will arise from its ashes. This is because the latter is especially contradicted by the experience in the 1930s, a memory that even neoliberal doublethink cannot disregard or erase. We can therefore expect the quantitative easing to continue, while it is being justified in neoliberal doublespeak.

Lastly, the extension of the market meant the slashing of social spending as unemployment-benefits, labour market institutions as trade-unions and in the name of efficiency. This has led to sky-rocketing wealth and income inequality, leading to increased tensions worldwide. Both left-wing and right-wing parties, arguing from a political neoliberal framework, cannot solve (perhaps not even halt) this process. This has been an important contributor to the rise of the alt-right, who blame results of neoliberalism combined with technological change (of which the unequalizing effects cannot be countered in a neoliberal framework) as stagnant wages for the bottom quartile on immigrants. They too cannot solve these issues, which will most likely only be amplified by their decrease in government-intervention. COVID-19 and the death of George Floyd are the tipping-point, the tinder which hive lightened the fires of the riots that are currently engulfing the world.

Are there alternatives to neoliberalism? The answer to that is a resounding yes. Changing neoliberalism requires us to change the fundamentals of economic thought. The ideas of the basic models of economic thought, that minimal government is required for economic efficiency, is often proven to be false by more complex economic models. Furthermore, there are numerous lesser-known schools of economic thought that advocate profoundly different ideas on the role of government and the meaning of efficiency. To change the fundamentals of our economic thought, we must start at its root; the education system. We need to inform and let students engage with different fundamentals.

Disclaimer: These comments on neoliberalism are of Koen Smeets personally. This piece represents his personal opinion and thus does not necessarily reflect Rethinking Economics’ opinion on the topic.

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The Tipping Point For Gold Miners

Through the many financial crises suffered in the modern era, the yellow metal has been a haven and, many times, a great inversion outperforming the financial market returns. At the beginning of 2020, no one could guess such an event as the global pandemic. A few bearish investors, like Michael Burry, saw the indexes and especially the S&P500 trading well above its fair price and created a short position in the main indexes; the famous doctor nailed his short bet yet again.

The humanity and specially developed countries are facing its biggest challenge since War Word Two; the S&P500 was trading at 3.300 points in February 2020, but hit by the COVID-19 outbreak fell sharply to 2.200 points in March 2020, a loss of 1.100 points (or 33%) in less than one month. Now, at the end of May, the S&P500 has reached the 2.900 points. It looks like financial markets think the pandemic is over, but unfortunately it is not. What has changed? To put it in a nutshell: the FED and central bank behaviour.

During the great recession the FED started printing money, reaching a balance sheet which is as high as 15% of U.S. GDP. At this moment May 2020, this percentage reached 30%. This huge amount of money has been used to maintain liquidity in the bond system and to keep the current financial system going. This is the main reason why stock markets have raised sharply again. However, this massive monetary expansion across the globe could create very soon inflation and dilute the value of the currencies. Although in 2008 many believed this unconventional monetary expansion would lead to inflation, after a decade we haven’t seen such a scenario. Nevertheless, this time the amount of printed money is higher, the unemployment rate at its highest in a century and the epidemic risks are still unknown. The chances of more unlimited quantitative easing are high, and eventually this will lead to inflation. Even without extraordinary inflation, during the 2008 financial crisis gold prices rose by 20 percent while the global stock markets lost 20 percent during the same period. As tension and fears grow over the economy also the price of gold will rise.

Another factor to consider are the real interest rates (interest rates adjusted by inflation). Currently, the real interest rates are negative, and since it has an inverse relationship which the cost of holding gold it could be confirmed, the current costs of holding gold are relatively low. The yellow metal has seen its value rise in the last months almost reaching the 1800 dollars per troy ounce. However, I believe there is room for even higher gold prices. And there is one way of investing indirectly in gold with higher returns than physical gold: Gold miners.

During the outbreak of COVID-19, the gold price almost reached its historical maximums prices which allows gold miners to sell at higher prices, increasing its top line. Furthermore, the fear of the pandemic and the current financial markets conditions have provoked a skyrocketing demand for physical gold. On the other hand, the drop in the oil prices will reduce the AISC of the miners significantly, since it is one of its main cost. Both factors would have a great effect on the bottom line on the gold miners. Furthermore, gold miners are often located in isolated places, where social distancing can be respected more easily, so the lockdown of businesses would have a lower impact on the mining sector when compared to other sectors.

The Gold Miners ETF (GDX), which replicates the performance of the biggest gold miners worldwide has seen its price increased by 75% year to date. Although this is an impressive performance, I firmly believe that with the conditions expressed above miners are going to see its value increased even more. It is worth mentioning that the index is currently trading 80 percent below its peak it reached in 2010, but the amount of quantitative easing is twice as high. This creates the perfect opportunity for investors to hedge their portfolios or speculate against more monetary expansions.

Disclaimer: These comments on latest gold miners are of Alfonso Hernández de Castro personally. The comments are his personal opinion and thus does not necessarily reflect his employers opinion on the topic.

Panic Buying, An Economic Perspective

At first glance it seems rather selfish to start buying in bulk; in this way people who are in greater need find empty shelves at the end of a hard day of work. Inventories of supermarkets tend to be used as efficiently as possible and there supermarket stores aren’t capable to withstand a sudden endogenous shock as was the case at the start of the corona outbreak. It seems as if this unknown phenomenon of lockdowns scared people in such a way that this fear switched on survival mode which resulted in supermarket shopping sprees. At least, this was the narrative in mainstream media, here at The Golden Investor we like to look at it from a different perspective. We like to use the prisoners dilemma in this occasion and from there we will show that bulk buying is actually a great investment.

Non-Negotiable Prisoners Dilemma Leads To Detrimental Behaviour

The prisoners dilemma basically describes a situation where two prisoners face the option to betray each other (2 years of prison) or remain silent (1 year of prison). For the prisoners both remaining silent is the best option. However there’s a “perverse” incentive for both of the prisoners to betray each other if they think the other remains silent. The silent one will get all the blame and a higher sentence (3 years of prison) and the snitch will go free. Because they don’t know each other’s choice, the dominant strategy is to betray each other.

“A prisoner’s dilemma is a situation where individual decision makers always have an incentive to choose in a way that creates a less than optimal outcome for the individuals as a group.” – Investopedia¹

The same theory can be applied to the panic bulk buying, the socially optimal outcome would be that no one would buy in bulk and the supermarkets would be able to maintain healthy levels of stock in store. However the corona outbreak is slightly different than the normal prisoners dilemma game, first of all it involves an almost infinite number of people, second of all the game is different for every individual. Two prisoners can make a deal with each other and try to enforce non-snitching behaviour, with panic buying this is almost impossible because people aren’t able to negotiate with every competitor in this game. This leads straight away to a non-socially optimal outcome of bulk buying; e.g. if you know you can’t compete against the mass, you have to beat the mass in order to obtain the most economically efficient outcome. It’s a non-negotiable prisoners dilemma.

Ethics Diverges The Game Into Wealth Varying Subgroups

However in the prisoners dilemma, there’s no room for ethics. If you would involve ethics in the prisoners dilemma, this would mean that prisoners wouldn’t snitch on each other either way, simply because they obey the non-written rules of the gang. The same applies to the corona virus bulk buying. For some people, being a good person or having the feeling of being better than others gives a much more satisfactory feeling than having an extra big supply of food and toilet paper at home. If you lack this feeling of empathy with unknown fellow human beings, which is the case for many people in many decisions, it is rational to buy in bulk.

Toilet paper is a better investment than money on bank accounts at the moment.

If you can afford to stockpile, than it is completely rational to do this. Currently money on savings accounts doesn’t increase over time, interest rates are zero, however inflation keeps on going. Next year, the same toilet paper is two percent more expensive using the target inflation of central banks. In other words, pre-corona people were just not as efficient in allocating there assets, toilet paper is a better investment than money on bank accounts at the moment. Many people just started to make better financial decisions.

Using this inflation targeted argument, we also can argue that shortages can lead to increased prices in certain types of supermarket products. At the moment stores around the world face supply chain disruptions, from leek to meat, many stores now face empty shelves due to a logistical supply shock. This issue was previously discussed in the Golden Investor March Stock Market Outlook and is now visible in supermarkets all around the globe. If consumers adapt their behaviour to future supply shocks, they may also have been “pricing-in” possible future shocks in prices of these products. Therefore the game doesn’t only diverge into ethical and non-ethical games, it is further split into games for different classes of wealth. Poor people who can afford toilet paper now, are afraid of price increases due to demand and supply shocks, so they make the rational choice to buy now and own later. In this way they create an investment in an asset with an even higher yield than the two percent inflation. Whereas rich people tend to have less incentive to buy toilet paper, because they can afford future prices and are able to overcome temporary spikes in prices and thus can afford to be ethical.

People prefer certainty over everything, especially in uncertain times, this is very much visible in the panic buying shopping sprees. Even if the chances are low that supply of supermarkets will see long-lasting disruptions, for many people it is absolutely rational to buy in bulk: they use the asset, it has some yield and provides absolute supply certainty. Therefore bulk buying is always a perfect investment, but during corona times it is an even better one.

Disclaimer: This article was written to shed a different light on an economic phenomenon. The Golden Investor does not judge the ethical behaviour of others individuals. It is for each individual to make its own decisions.



QE Infinity Is Here To Stay – Does It Lead To Inflation or Deflation?

When the Federal Reserve officially started their first „Quantitative Easing Program“ in 2009, they assured that these would be „temporary measures“ and that they would return back to normal when the financial conditions would allow it. Although markets believed that narrative back then, we are still waiting for a “normalization” as the FED was not able to fulfill its promise. On the contrary, due to the Coronavirus Pandemic the FED brought another QE-program on its way ending up buying more bonds than ever before and as a result have been demolishing the last pieces of a free-market in bonds. Looking back in history this path should have been obvious since the implementation of the FED’s very first QE-program.

In 2008 the Federal Reserve started to buy mortgage backed securities to support the struggling mortgage market, 1.35 trillion in total. Additionally Ben Bernanke stated that the FED would also buy US-Treasuries worth 300 billion dollars. In November ’10 the FED started QE2 where it bought another 600 billion of US-treasuries at a pace of 75 million per week. However, even that was not enough: QE3 started on September 13th of 2012 with additional purchases of mortgage backed securities at a pace of 40 billion per month. On October 2014 those buying programs have accumulated 4.5 trillion dollars in total assets on the central banks balance sheet. Surprisingly to many critical voices of these programs, they did not cause a rise in inflation according to the CPI. Proponents of the programs therefore saw that as proof that – if executed correctly – these asset purchases do not necessarily result in inflation.

I have a different opinion on that. It is true that all those massive waves of liquidity did not find its way into consumer prices but honestly such a scenario was not impossible as we know since Richard Cantillon has formulated his “Cantillon-Effect” back in 1755. According to Cantillon newly created money does not affect all parts of an economy simultaneously but rather spreads in steps. This observation definitely is true when it comes to QE1-3. The additionally created money flowed directly into the stock market, bond markets and the mortgage market where it caused prices to rise. While in a true capitalistic system the 2008 financial crisis would have caused price-deflation in those markets and would have caused bankruptcies for over-leveraged companies who misallocated capital, the programs put them on a life-line. That is why a reduction of the FED’s balance sheet never really happened since then because it would have caused interest rates to rise and would have hazarded those companies again.

On the contrary, the QE-programs and the low-interest rate environment encouraged more risk-taking behavior of investors and companies. Overleveraged companies started to buy-back their own stocks instead of restructuring their businesses and investors started to buy riskier bonds to receive a some yield at least. Another reason why there has been no inflation is that lots of dollar-denominated debt has been accumulated by foreign central banks and investors. However, in fall of 2019 tensions in the US-Repo market and the danger of rising swap-rates forced the FED to intervene further. Even though it was not called QE it fulfilled all characteristics, months before the coronavirus crisis was on the radar. Latest at that point investors should have been warned but the financial mania led to another bull-market run where the Dow-Jones Industrial Average reached new all time highs around 25,500 points.

In February this year the coronavirus started to become a major threat for the world-economy which finally pricked the asset price bubble. The reckless investors were in trouble again as the stock market crashed and investment grade and junk bond yields rose dramatically. As governments all around the world put the economy on halt, lots of businesses have been put under pressure as they were forced to shut down which intensified the problems. Unemployment claims rose dramatically with more than 26 million unemployed workers within 5 weeks. The FED’s and other central banks response to the crisis was obvious: more of the same, slashing in interest rates and more bond buying programs although at a much higher volume.

Not only did the Federal Reserve restart the buying mortgage backed securities and US-Treasuries, but also continued to intervene heavily in the US-Repo market, they went all-in. Chairman Powell announced that it will continue buying all kind of bonds, for example municipal bonds and even junk bonds. Furthermore, the Federal Reserve will make direct loans to struggling business and additional cash-payments to unemployed workers. As a result workers in the majority of the states will now earn more than their normal salaries according to Wall Street Journal.

The consequences of those policies will be disastrous for several reasons: First of all a lot of workers will quit their job to get unemployment benefits, especially in low-paid jobs. Secondly, businesses, which may have got out of business anyway, will receive those benefits which will only delay their bankruptcies. Thirdly, with economies all around the world coming to standstill, there will be a shortage in supply. While the FED’s and other Central Banks’ policies can stimulate demand they are ineffective when it comes to the supply side of the economy. By keeping demand steady, the result of a shortage in the supply of goods and services may be a rapid increase in prices, this time with a high probability of not only inflating stocks and bonds but also consumer prices. And fourth, the coronavirus crisis will cause a change in economic activity, especially in the service-sector economy. Even if one is optimistic, he must admit that the demand for restaurants, traveling and other leisure activities is likely to decrease sharply after the world will overcome the coronavirus pandemic.

Does this mean that we are on the edge of dollar hyperinflation? Not necessarily, as investor Raoul Pal recently pointed out in a Twitter-thread: The crisis also led to a huge dollar-shortage all around the world as the dollar is the worlds-reserve currency and safe haven. The expansion of the FED’s balance sheet is also correlated with the latest rise in the dollar-index and on the other hand led to a free-fall in emerging market currencies. Another interesting fact is that the velocity of the newly created money is decreasing rapidly and as a result crowds out emerging market currencies. Given those arguments a debt-deflation scenario is also likely, even though I have a different opinion on that.

As the FED has floated the markets with money created out of thin air directly into the real economy this time I think that the chance of a rise in inflation is of a higher probability. Not only in the United States and in the dollar but also in the euro and other currencies. However, the leveraging of US-companies, households and the government is extra-ordinary if we compare it to European standards. If one assumes a rise in inflation due to the recent supply chain disruption there may be a point where the German Bundesbank and other Central Banks of Northern Europe will refuse to continue with negative interest rates and quantitative easing. Nevertheless, the damage will be done already regardless whether we will experience deflation or inflation next.

Disclaimer: These comments on latest QE-policies are of Fabian Wintersberger personally. The comment is his personal opinion and thus does not necessarily reflect his employers opinion on the topic.

European Fiscal Crisis, Round 2?

I’m not an optimist about Europe’s economic future. Nations have excessive welfare states and punitive taxes, which is hardly good news. You then have to consider demographic trends such as aging populations (i.e., more people relying on government) and falling birthrates (i.e., fewer future taxpayers). That’s a very grim combination. Indeed, this is a big reason why I favored Brexit. Yes, it was largely about escaping an increasingly dirigiste European bureaucracy in Brussels, but it was also about not being chained to a continent with a dismal long-run outlook.

More than one year ago, before there were any concerns about a coronavirus-instigated economic crisis, Vijay Victor, an economist from Szent Istvan University in Hungary, expressed concern about Europe’s fiscal future in a column for the Foundation for Economic Education:

Why the European Debt Crisis Is Likely To Get Worse

The debt crisis in the Eurozone is getting no better, even in the wake of the new year. The five countries in the Eurozone with the highest debt-to-GDP ratio in the third quarter of 2018 were Greece, Italy, Portugal, Belgium, and Spain. The total debt of Greece is around 182.2 percent of its GDP and that of Italy is 133 percent… Dawdling economic growth coupled with low-yield investment options are dragging these indebted economies toward insolvency…Unemployment rates, for example, are still very high in most of these highly indebted European economies. Despite the recurrent monetary assistance and policy support, job creation is weak, which might imply that the debt financing is channelized in a nonproductive direction.

By the way, I can’t resist taking this opportunity to remind people that debt is a problem, but it also should be viewed as a symptom of en even-bigger problem, which is an excessive burden of government spending. A bloated welfare state is a drag on economic performance, whether it’s financed by borrowing or taxes. Though nations that try to finance big government with red ink eventually spend their way into crisis (as defined by potential default). And we may be reaching that point. Desmond Lachman of the American Enterprise has authored a very grim assessment, focusing primarily on Italy, for the National Interest:

The Coronavirus Could Create A Massive European Debt Crisis (Think Italy)

Today, with Italy at the epicenter of the world coronavirus epidemic, it would seem to be only a matter of time before the durability of the Euro is again tested by another full-blown Italian sovereign debt crisis. …even before the coronavirus epidemic struck its economy was weak while its public finances and banking system were in a state of poor health. After having experienced virtually no economic growth over the past decade, the Italian economy again entered into a recession by end-2019. At the same time, at 135 percent its public debt to GDP ratio was higher than it was in 2012 while its banks’ balance sheets remained clogged with non-performing loans and Italian government bonds. …the coronavirus epidemic will seriously damage both Italy’s public finances and its banking system…by throwing the country into its deepest economic recession in the post-war period. That in turn is bound to cause Italy’s budget deficit to balloon and its banking system’s non-performing loans to skyrocket as more of its households and companies file for bankruptcy. …all too likely that the Italian economy will shrink by at least 10 percent in 2020.

All this matters because the people and institutions that purchase government debt may decide that Italy’s outlook is so grim that they will be very reluctant to buy the country’s bonds (i.e., they’ll be very hesitant about lending money to the Italian government because of a concern that they won’t get paid back). This means that the Italian government will have to pay much higher interest rates in order to compensate lenders for the risk of a potential default. So what are the implications? Will Italy default, or will there be some sort of bailout?

If the latter, Lachman predicts it will be huge:

One way to gauge the amount of public money that might be needed to prop up Italy is to consider that over the past decade it took around US$300 billion in official support to keep Greece in the Euro. Given that the Italian economy is around ten times the size of that of Greece, this would suggest that Italy might very well need around $3 trillion in official support to keep Italy in the Euro. …Meanwhile, Italy’s US$4 trillion banking system could very well need at least US$1 trillion in official support to counter the capital flight and the spike in non-performing loans that are all too likely to occur in the event of a deep Italian recession.

For what it’s worth, Lachman thinks a bailout would be desirable. I disagree. Default is a better choice because it will discipline the Italian government (it would mean an overnight balanced budget requirement since nobody will lend money to the government) and also discipline foolish lenders who thought Italian politicians were a good bet. Simply stated, we should minimize moral hazard. I also think it’s worth noting that Italy isn’t the only government at risk of fiscal crisis. Here’s the OECD data for major nations, including a few non-European examples:

Figure 1 – Debt To GDP Percentage

Japan wins the prize for the most red ink, though this doesn’t mean Japan is most vulnerable to a default, at least in the short run. A fiscal crisis is driven by investor sentiment (i.e., when will people and institutions decide they no longer trust a government to pay back loans). And that depends on a range of factors, including trust. The bottom line is that investors trust the Japanese government and they don’t trust the Italian government. That being said, I think all of the PIGS (Portugal, Italy, Greece, and Spain) are very vulnerable. And politicians in Ireland, Belgium, and France should be nervous as well. I’ll close by sharing some calculations, based on the aforementioned OECD data, showing which nations used last decade’s economic recovery to improve their balance sheets. Congratulations to Germany and Switzerland for fiscal responsibility, and mild applause for the Netherlands and Sweden.

Figure 2 – Debt TO GDP Over Time

I’ve highlighted (in red) the nations that were most reckless. Though keep in mind that you want to look at both the trend for debt (far-right column) and the existing level of debt (the next-to-far-right column). So I’m not overly worried about Australia. Debt is still comparatively low, even though it almost doubled last decade. But all of the PIGS are in trouble. So if economic conditions deteriorate in Europe, the fallout could be significant.

P.S. The United Kingdom, like Japan, benefits from a high level of trust – presumably in part because the country paid off enormous debts from the Napoleonic wars and World War II. That being said, the numbers for the U.K. are worrisome, which hopefully will lead to a renewed commitment to spending restraint by Boris Johnson’s government.

Disclaimer: This is a republishing of Dan Mitchell’s personal work.






ZeroHedge Blocked By Twitter After Claims Of Human Engineering Of Corona

Soon after the outbreak many fake news reports and conspiracy theories popped up on social media mostly pointing to possible human engineering on corona viruses at the base of the start of the current 2019-ncov outbreak. ZeroHedge pointed as one of the first to the interesting fact that a high level research lab on viruses is based in Wuhan. According to ZeroHedge one of China’s top virology and immunology experts was and still works at China’s top-rated biohazard lab, the Wuhan Institute of Virology.

Claims Made By ZeroHedge

“Since 2009, a scientist named Peng Zhou has been the leading Chinese scientist researching the immune mechanism of bats carrying and transmitting lethal viruses in the world. His primary field of study is researching how and why bats can be infected with some of the most nightmarish viruses in the world including Ebola, SARS and coronavirus, and not get sick. He was genetically engineering various immune pathways to make the bats more or less susceptible to infection, in the process potentially creating a highly resistant mutant superbug. As part of his studies, Peng also researched mutant coronavirus strains that overcame the natural immunity of some bats; these are “superbug” coronavirus strains, which are not resistant to any natural immune pathway, and now appear to be out in the wild. As of mid-November, his lab was actively hiring inexperienced post-docs to help conduct his research into super-coronaviruses and bat infections.”¹

Although the above quoted summary of the article is very juicy, this story has not yet been verified. The Golden Investor is very cautious on taking these kind of claims as the truth. However, the story becomes better as yesterday a preliminary study was shared on BioRxiv by several scientists which pointed at an interesting finding.

Pieces of the coronavirus’s genetic code found by Indian researchers, led by Prashant Pradhan at the Indian Institute of Technology, may have been ’embedded’ from HIV, which belongs to an entirely different family of viruses. According to ZeroHedge this indicates that human engineering of corona viruses possibly may have been at the base of the current outbreak. However, many fellow researches point to the fact that it is not that interesting that the viruses have 96 percent overlapping, this could purely coincidence.

Reaction by Indian scientists

However after this picture was widely shared on social media Pradhan was quick to make a statement:

“This is a preliminary study. Considering the grave situation, it was shared as soon as possible to have [sic] creative discussion on the fast evolution of SARS-like corona viruses. It was not our intention to feed into the conspiracy theories and no such claims are made here. While we appreciate the criticisms and comments provided by scientific colleagues at BioRxiv forum and elsewhere, the story has been differently interepreted and shared on social media and news platforms. We have positively received all criticisms and comments. To avoid further misinterpretation and confusions world-over, we have decided to withdraw the current version of the preprint and will get back with a revised version after reanalysis, addressing the comments and concerns. Thank you to all who contributed in this open-review process.”²

Reaction by the authors of the preliminary study

The Golden Investor in no way wants to feed into the conspiracy theories. Interestingly, this was the first big case where, in the point of view of Twitter at least, coronavirus fake news was spread. The Golden Investor thinks several of the claims made by ZeroHedge do hold interesting coincidences and could be related to the outbreak of the conflict. In this case it seems like more research must be done to take conclusions and Zerohedge, known for its far fedged theories, was too soon to take conclusions. Even though several points stated in this article seem to point at a possible human origin of the current outbreak, The Golden Investor firmly believes the outbreak could not have been intentional. For now lets hope that Twitter is at the right end and the outbreak does not spread further.




Corona Theories By ZeroHedge