Interactive Graphic: Beyond Bailouts, What is Cronyism?

Writes Matthews Mitchell, research fellow at the George Mason University (interactive graphics included) [hat tip Scott Lincicome]

While the bailouts of hundreds of firms in 2008 are, for many, the most prominent example of cronyism in modern American history, they are only the tip of the iceberg. Bailouts are but one example in a long list of privileges that governments give to particular businesses and industries.

Scroll over each form of cronyism to learn more, and read the full paper "The Pathology of Privilege: The Economic Consequences of Government Favoritism."

Interactive Graph of the European Crisis

Here is a nice interactive chart from the Economist partially depicting the region's strain from the current PIIGS crisis


For a better view and for the complete article please proceed to the Economist page here

Graphics: Emerging Market Bubble Watch

The Economist has a nice interactive graph which tries to measure “economic overheating” in 27 emerging market economies.

That’s actually euphemism for bubble watch.

For a crispier view pls proceed to the Economist website.

Notes the Economist, (bold highlights mine)

Countries are first graded according to the risk of overheating suggested by each indicator (2=high risk, 1=moderate, 0=low). For example, if the growth in excess credit is more than 5% it scores 2 points, 0-5% 1 point, and below 0% nil. The scores from each indicator are then summed and turned into an overall index; 100 means that an economy is red-hot on all six measures.

There are seven hot spots where a majority of the indicators are flashing red: Argentina, Brazil, Hong Kong, India, Indonesia, Turkey and Vietnam. In particular, the growth in credit is sizzling in all seven. Argentina is the only economy where all six indicators are on red, but Brazil and India are not far behind. China, often the focus of overheating concerns, is well down the rankings in the middle of the amber zone, partly thanks to more aggressive monetary tightening. Russia, Mexico and South Africa are in the green zone, suggesting little risk of overheating.

This just goes to demonstrate how credit signifies as the sine qua non fuel of a bubble.

Nevertheless, aside from the indicators presented in the graphic, there are property prices, yield curve, leverage in the banking sector, off balance sheet exposures, sentiment indicators and the national stock market bellwether.

Argentina, among the rest as shown by the above chart from stockcharts.com, evinces formative signs of euphoria since 2009.

Meanwhile, Vietnam’s equity market continues to drift in the negative return territory as the country struggles to contain unwieldy domestic inflation by working to drain liquidity in the system

All the rest have had positive gains but seems unlikely a manifestation of a maturing bubble in progress.

Of course, bubbles can happen in other parts of the economy as in the real estate sector such that this would not necessarily get manifested on stock prices.

That’s why it would pay to look deeper.

Global Debt Time Bomb

Here is a nice interactive counter of the world’s cumulative debt from the Economist.

According to the Economist (bold emphasis mine)

The clock is ticking. Every second, it seems, someone in the world takes on more debt. The idea of a debt clock for an individual nation is familiar to anyone who has been to Times Square in New York, where the American public shortfall is revealed. Our clock shows the global figure for all (or almost all) government debts in dollar terms.

Does it matter? After all, world governments owe the money to their own citizens, not to the Martians. But the rising total is important for two reasons. First, when debt rises faster than economic output (as it has been doing in recent years), higher government debt implies more state interference in the economy and higher taxes in the future. Second, debt must be rolled over at regular intervals. This creates a recurring popularity test for individual governments, rather as reality TV show contestants face a public phone vote every week. Fail that vote, as the Greek government did in early 2010, and the country can be plunged into imminent crisis. So the higher the global government debt total, the greater the risk of fiscal crisis, and the bigger the economic impact such crises will have.

The global debt time bomb is no more than a symptom of the fundamental flaws of the fiat based money system which has been anchored on policies predicated on mainstream economics. As the Economist rightly points out, the larger the debt, the riskier the economic environment. Yet, there are two possible outcomes to these unsustainable conditions: massive inflation or default (restructuring).

Presently, policymakers are taking on the inflation path.