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El Salvador’s Bitcoin law is destined to be caught in the FATF’s regulatory web
Full text linkAbstract. In the middle of the night of June 8th, El Salvador’s Congress hastily passed the Bitcoin Law. This law will make bitcoin legal tender (actually, forced tender). Since the modalities concerning the implementation of the Bitcoin Law change with each passing day, we cannot opine on the details surrounding the scheduled launch of the Bitcoin Law on September 7, 2021. That said, it’s abundantly clear that if the Bitcoin Law is actually implemented, El Salvadoran banks, merchants, and their customers will cross swords with Financial Action Task Force regulators and be ensnared in the FATF’s web of regulations.Keywords. Bitcoin law, Bitcoin, El Salvador.JEL. H56, D74, J51, J52, D39
Impact of institution building and foreign direct investment on economic growth
Full text linkAbstract. This study tests the hypothesis that institution building leads to FDI inflows and promotes economic growth rates. We also compare the estimation results when multiple institutional variables are used, and examine whether broad legal and institutional stability is important and whether specific articles are important for FDI inflows. The results of the verification revealed that (1) institution building leads to FDI inflows and promotes economic growth rates, (2) robust results are obtained regardless of multiple legal and institutional indicators, and (3) among the legal systems, the specific deregulation of capital account regulations, laws affect FDI inflows and economic growth, and (4) the combination of an increase in broad-based legal system stability and the relaxation of capital account regulations together will promote FDI and economic growth. In other words, it is confirmed that investor and public confidence in the government and judiciary for the stability of the extensive legal system, including the protection of property rights, will bring about an inflow of foreign direct investment. (5) While FDI inflows are critical to economic growth, the study found that among institutional factors, improvements in legal and institutional capacity, in particular, are highly effective in bringing about economic growth through a rise in FDI. The importance of both capital account regulations, which are indicators that have a direct impact on foreign investors considering FDI, and legal system indicators, which show the degree of legal compliance by domestic residents, indicates that relaxing capital account regulations alone is not enough to fully promote FDI inflows. It means that the degree of legal compliance of domestic residents must be high to further promote FDI inflows. In other words, FDI inflows will bring economic growth through the maturation of the rule of law.Keywords. FDI; Barro regression; Economic Growth; Institution.JEL. O47; F30; F33; O43
Disruptive innovations in quantum technologies for social change
Full text linkAbstract. The purpose of this study is the technological analysis of trajectories in quantum technologies to clarify new directions of disruptive innovations that can generate economic and social change. Patent analysis and models of time series are applied to assess the growth of quantum technologies. Findings reveals that path-breaking innovations in quantum technologies are driven by quantum information, quantum communication, quantum optics and semiconductor quantum dots. This study can explain new directions in quantum technologies to support decisions of R&D investments towards growing technological trajectories generating having a high potential impact in markets and main benefic effects in socioeconomic systems.Keywords. Quantum technologies; Radical innovations; Disruptive innovations; Technological trajectories; Technological change; Social change.JEL. G2, G10, F21, F68, O53, K23
Will the pandemic bulge in money cause high inflation?
Full text linkAbstract. The monetary aggregate M2 increased from 19,670 billion in February 2021, or by 27.1%. Real M2 (M2 deflated by the CPI) increased similarly by 25.3%. This monetary acceleration, unprecedented outside of wartime, is apparent in a longer-run perspective. From the trough of the last business cycle in June 2009 through February 2020, annualized monthly growth rates for M2 averaged 5.9%. Over the interval March 2020 through June 2020, they averaged 65.6%. Although diminished, rapid M2 growth continued, averaging 12.9% from July 2020 through March 2021. Milton Friedman famously said that inflation is always and everywhere a monetary phenomenon. If he is right, should not this bulge in money lead to an undesirably high rate of inflation? Section 1 summarizes what the Fed must do to avoid an undesirable increase in inflation. Section 2 lays out the argument in terms of a need for procedures that ensure monetary control. Section 3 describes the Fed’s new monetary policy called “flexible-average-inflation targeting” (FAIT). It highlights how radical a departure FAIT is from the policy of the Great Moderation as a consequence of making the unemployment rate an independent goal rather than using its changes as an indicator variable for whether the economy is growing unsustainably fast or slow. Section 4 draws out the parallels between FAIT and the monetary policy followed in the 1970s. It makes the argument that unless the FOMC reinstates the policy of preemptive increases in the funds rate guided by the necessity of unwinding the 2020 bulge in M2, it will inaugurate an undesirably high period of inflation. Section 5 argues that in many ways with its dismissal of money FAIT resembles modern monetary theory (MMT) adapted to exploitation of the trade-offs promised by a Phillips curve. Section 6 contends that money remains at the heart of any serious conceptual framework for discussing the powers of a central bank. An appendix provides a more formal quantity theoretic framework using the New Keynesian model.Keywords. Pandemic bulge, Money cause, High inflation.JEL. C71, H56, D74, J51, J52, D39
Energy and emissions on the African Continent: Can and will the COP21 treaty be implemented?
Full text linkAbstract. African nations share a common situation in that they pollute little in terms of CO2s globally speaking, but at the same time global warming may have terrible consequences for the continent, set to face a sharp population increase. They have now access to few energy resources, which is conducive to their poverty. New renewables belong to the future (solar, wind, geo-thermal), whereas old renewables – wood coal – are a thing of the past. The coal or oil and gas dependent giants must start energy transformation, as must the many countries relying upon traditional biomass. The use of wood coal is simply too large for the survival of the African forest. Under the COP21, African countries have right to financial assistance, especially for more electricity to connect its rural and also many urban people to heating, air-conditioning and the electronic high ways. Without the COP21 promises, decarbonisation will be impossible in Africa, and thus its large need for more energy will lead to more CO2:s.Keywords. COP21 Agreement, African energy diversity, new and old renewables, coal or oil and gas dependency, Super Fund.JEL. A10; A22; A23; B10; E10
Disregard of the empirical; optimism of the will: The abandonment of good government in the covid-19 crisis
Full text linkThe ‘lockdown’ policy adopted in response to an outbreak of SARS-CoV-2 has been the worst example of government failure in peacetime history. Justified by the perceived grave emergency, lockdown was based on epidemiological and medical advice at the heart of which was a Report by the Imperial College Covid-19 Response Team. This Report predicted 510,000 deaths on the basis of absurd assumptions about a zero probability event and advocated a ‘suppression’ policy the empirical possibility of implementing which was never remotely adequately assessed. But though it had consequences of a quantitatively different order to other government failures, lockdown was qualitatively merely an example of the common form of such failures. The work of assessing empirical possibility is rarely adequately addressed, and difficulties of implementation are dismissed by what will be called the ‘ceteris paribus reasoning’ which follows from, as the Report makes particularly clear, an inchoately communist belief in political will.Keywords. Covid-19 pandemic; Ronald coase; Government failure; Blackboard economics; Ceteris Paribus reasoning.JEL. F51; F52; P16; P26; P48