Category Archives: GIS Statements

GIS Statements

The value of data

GIS Statement by Prince Michael of Liechtenstein

Information – data – is supposed to be the critical “raw material” for the economy, business and society heading into the future. We must therefore conclude that data have value.

the value of data
GIS statement: The value of data.

We know from experience that if goods and services are not scarce or do not have a price, they will be spoiled or misused. Damaging misallocations occur especially when such goods or services are under the control of the state, appropriated by the public or subsidized.

Personal data are now collected by many people and organizations, for various reasons.

Governments, public agencies and supranational institutions are requiring an ever-increasing amount of “transparency” from individuals and companies, frequently overstepping individuals’ right to privacy, a human right. Unfortunately, governments frequently distrust their own people – a phenomenon becoming more and more common in the West’s so-called “liberal democracies.”

Mandatory compliance

The result is a strange state of affairs: Individuals are increasingly forced to be fully accountable and transparent to the authorities. This is a complete reversal of the basic principle that governments must be accountable to the citizen, who also has the right to privacy and protection against arbitrary intrusion from the government.

The hypocritical justification given for this illicit but forced collection of data is crime prevention. Of course, the practice does not prevent crime, but the information does help in prosecuting criminals. It is doubtful, however, that such prosecutions justify government surveillance, intrusion into citizens’ everyday lives and putting the general population under a blanket of suspicion …

Read the original article here ->
The value of data


*GIS is a global intelligence service providing independent, analytical, fact-based reports from a team of experts around the world. We also provide bespoke geopolitical consultancy services to businesses to support their international investment decisions. Our clients have access to expert insights in the fields of geopolitics, economics, defense, security and energy. Our experts provide scenarios on significant geopolitical events and trends. They use their knowledge to analyze the big picture and provide valuable recommendations of what is likely to happen next, in a way which informs long-term decision-making. Our experts play active roles in top universities, think-tanks, intelligence services, business and as government advisors. They have a unique blend of backgrounds and experience to deliver the narrative and understanding of global developments. They will help you develop a complete understanding of international affairs because they identify the key players, their motivations and what really matters in a changing world. Our experts examine the challenges and opportunities in economies old and new, identify emerging politicians and analyze and appraise new threats in a fast-changing world. They offer new ideas, fresh perspectives and rigorous study.

A choice for economies: Freedom or socialism

GIS Statement by Prince Michael of Liechtenstein

Last week the OECD again cut its forecasts for the global economy in both 2019 and 2020. The organization cited Brexit and insecurity due to the United States-China trade dispute as the reasons behind its decision. Under the same pretext, the European Central Bank decided to postpone its first postcrisis interest rate hike. Officials at the ECB said they consider the two above-mentioned “threats” as damaging for the eurozone economy.

freedom or socialism
freedom or socialism

We can agree that Brexit is not helpful to the global economy and has caused quite a bit of collateral damage. Yet, it is not a major threat. The so-called U.S.-China “trade war” may soon be settled and, as we have seen before, is a dispute, not a war. True, it is louder than most trade squabbles, but we can expect a settlement eventually. In fact, an agreement could put some constraints on China that might even improve the efficiency of its economy in the long run.

In light of this more pragmatic, longer-term perspective, one can easily come to the cynical conclusion that Brexit and the U.S.-China trade conflict are godsends to the OECD and ECB: they have a ready-made excuse for the failure of their prognoses and their refusal to accept basic economic facts.

Dangerous doctrine

Officials at the bank say they are worried about deflation. Indeed, we are in a deflationary environment. However, deflation is only damaging if it is due to overcapacity. Today’s deflation is due to production having become more efficient: goods and services can be provided at lower cost at equal or better quality. This is actually advantageous.

A certain credo prevails with many economists that economies can be enhanced and kept stable by strong government intervention, tax harmonization at a high level, some inflation and excessive debt policies. This principalist, authoritarian, centralist, and also socialist doctrine leads to planned economies. Yet it is seemingly accepted and even promoted by the OECD. Little wonder its forecast was wrong.

Unfortunately, these practices and perspectives are symptoms of a more general global trend that has been embraced by a wide group of decision- and policymakers. Excessive regulation is blocking good regulations from being implemented.

It is an old tenet of authoritarian, and especially socialist, systems that people and economies should be planned and controlled by governments. We know from experience that we need the rule of law and legal frameworks, but these should limit rather than augment government influence and control. Here, the authoritarian regimes of the past failed. We also know that the essential ingredient for prosperity is a market economy, based on individual responsibility, competition and entrepreneurship.

The very successful German system, which helped the country rebuild and then develop quickly after its defeat in World War II, was based on the principles of a free market and personal property rights. A legal framework set parameters that were not excessive and allowed everyone, including the weaker members of society, to participate. Most importantly, it also limited government intervention. The principles were called Ordoliberalism but unfortunately it has since been watered down.

We should worry that the world’s democracies – and for this, the so-called populists or “illiberal democrats” cannot be blamed – are now approaching the same level of planning and control in which the autocrats of the past were trapped. This creeping socialism threatens free society.

Read the original article here ->
Freedom or socialism


*GIS is a global intelligence service providing independent, analytical, fact-based reports from a team of experts around the world. We also provide bespoke geopolitical consultancy services to businesses to support their international investment decisions. Our clients have access to expert insights in the fields of geopolitics, economics, defense, security and energy. Our experts provide scenarios on significant geopolitical events and trends. They use their knowledge to analyze the big picture and provide valuable recommendations of what is likely to happen next, in a way which informs long-term decision-making. Our experts play active roles in top universities, think-tanks, intelligence services, business and as government advisors. They have a unique blend of backgrounds and experience to deliver the narrative and understanding of global developments. They will help you develop a complete understanding of international affairs because they identify the key players, their motivations and what really matters in a changing world. Our experts examine the challenges and opportunities in economies old and new, identify emerging politicians and analyze and appraise new threats in a fast-changing world. They offer new ideas, fresh perspectives and rigorous study.

Planning the economy

GIS Statement by Prince Michael of Liechtenstein

An economy is a complex, interactive structure. On one side, it engages suppliers and providers of goods and services; intermediaries such as trading companies, the transport industry and the financial system; and, finally, on the other side, consumers. It is a matrix of collaboration involving millions of agents with differing interests and business models.

Dark clouds gathering global economy

Competition and freedom of choice allow these interactions to find a balance. The shorthand for this system is the market. Markets underpin the interaction between individuals and businesses, and also between countries. This mechanism can only work with free exchange and individual freedom of contracts. It requires some rules to function smoothly – helping markets develop and forming a legal framework and a judicial system to secure the enforcement of contracts. Also, failures must be accepted.

Taken together, these elements provide the foundation of probably the most efficient and sustainable economic system in human history. It was this system, called ordoliberalism, that made possible the German economy’s rapid recovery and modernization (the so-called Wirtschaftswunder) after World War II. The essence of ordoliberalism is to reduce the state’s role to a provider of the economy’s supporting framework. As much as possible, the public authorities abstain from any attempt to intervene in the economy or plan its development …

Read the full article here ->
Planning the economy


*GIS is a global intelligence service providing independent, analytical, fact-based reports from a team of experts around the world. We also provide bespoke geopolitical consultancy services to businesses to support their international investment decisions. Our clients have access to expert insights in the fields of geopolitics, economics, defense, security and energy. Our experts provide scenarios on significant geopolitical events and trends. They use their knowledge to analyze the big picture and provide valuable recommendations of what is likely to happen next, in a way which informs long-term decision-making. Our experts play active roles in top universities, think-tanks, intelligence services, business and as government advisors. They have a unique blend of backgrounds and experience to deliver the narrative and understanding of global developments. They will help you develop a complete understanding of international affairs because they identify the key players, their motivations and what really matters in a changing world. Our experts examine the challenges and opportunities in economies old and new, identify emerging politicians and analyze and appraise new threats in a fast-changing world. They offer new ideas, fresh perspectives and rigorous study.

In der Schuldenfalle

Billiges Geld hat neue Schulden erzeugt. Die Lage ist bedenklich. Es ist Zeit zur Umkehr. Ein Kommentar von Michael von und zu Liechtenstein, erschienen am 24. Januar in “Finanz und Wirtschaft”, Vaduz (FL)

Noch selten war das Ungleichgewicht von Wirtschaftsleistung und Staatsdefizit so ausgeprägt wie heute. Die Eurozone zählt zu den Spitzenreitern und verstösst mehrfach gegen die im Maastricht-Vertrag festgelegten Regeln. Damit stellt sich die Frage, wie es denn nun weitergehen kann.

Zumal das Problem sich langfristig verschärft, seitdem die Politik des billigen Geldes vorherrscht: Um die Wirtschaft anzukurbeln, ist Privathaushalten der Konsum auf Pump schmackhaft gemacht worden. Unternehmen sollten über Verschuldung zu weiteren Investitionen motiviert werden – dieses Ziel wurde aber nicht erreicht.

Staaten wiederum sind ihrer Spar- und Reformpflicht entledigt worden und haben – verhaftet in der alten Denke, dass Europas Wirtschaftsentwicklung wie bis anhin «schon» günstig voranschreiten wird – stattdessen billig Geld erhalten, mit dem sie ihrer Ausgabenpolitik weiter unbeirrt nachgehen konnten.

Es ist schon richtig, dass überbordende Staatsschulden kein rein europäisches Problem sind. Auch die USA, Japan und weitere Länder sehen sich damit konfrontiert. Staatsschulden sind ein globales Phänomen und existieren seit langem. An Europa aber lässt sich die Dramatik der heutigen Situation beschreiben …

Lesen Sie den gesamten Beitrag hier ->
“In der Schuldenfalle” (FuW, 24. Jan 2019)


Dark clouds gathering over the global economy

GIS Statement by Prince Michael of Liechtenstein

Typical economic cycles last about seven years. Since the 2008 financial crisis, we have seen continuous growth in the global economy, and more is expected. The International Monetary Fund forecasts global growth of 3.9 percent for this year and next. We would like to believe that these are realistic predictions and not wishful thinking.

Dark clouds gathering global economy
Dark clouds gathering over the global economy

The issue is whether the recovery and the expected growth have a robust, sustainable basis – or are substantial caveats appropriate?

The growth in recent years has been largely driven by consumption. Unfortunately, this was, to a non-negligible extent, due to abundant consumer and housing credit based on cheap money, provided by the central banks in nearly all major economies. At the same time, most governments did not take the opportunity to reduce their deficits, but continued high levels of spending and increasing their countries’ debt.

The cheap-money drug

All major central banks arrived at the limit of their ability to reduce interest rates (being already near zero or below) and have begun to talk of “tapering.” The United States Federal Reserve has already started, while the European Central Bank announced its more than 2.6 trillion-euro bond-buying program would end in September. Believing in the magic that some 2 percent inflation enhances growth, the officials at the ECB have concluded that this goal has finally been reached, so they can also slowly increase interest rates.

However, there are two problems: First, even if we believe in the 2 percent magic, this figure is mainly driven by an increase of 8 percent in energy prices and some 3 percent in food prices. Significantly, core inflation rose by just 1 percent.

But what really aggravates the situation is this: an economy that grows mainly due to abundant, cheap money is a bit like a drug addict. It cannot function without additional money supply – it always needs more, or else it collapses.

The world is arriving at the possible end of a growth cycle, while households and governments have not just empty pockets, but also a high debt burden. At the same time, the central banks have used up all their ammunition. The necessary and overdue increase in interest rates will be disastrous for budgets, both public and private.

Treating the symptoms

The history of the last quarter century’s fiscal and monetary policies mainly consists of treating symptoms, and less so the underlying causes of economic imbalances. If we look at the world’s financial mechanisms, we can see that they are built to avoid situations that can trigger a crisis, but lack the courage to implement real corrective measures. These could be painful, and would expose fundamental weaknesses that are less due to market conditions than significant political “manipulation” of the economy. Some of the main problems have been populist overspending, too much government involvement in the economy and excessive intervention in markets and business.

The recent increase in oil prices could be a real threat to growth. Cheap energy is a good economic driver. The rise might have initially been welcomed as boosting inflation, a sign expected by central bankers, but the increase in costs creates a braking effect. OPEC was aware of this phenomenon and decided to increase output to stabilize prices. The White House also strongly urged such action. It is concerned about the adverse impact of higher energy prices on a fragile world economy (and not only in the context of its new sanctions on Iran).

For a long time, a big problem has been protectionism. The public was not too aware of this issue until President Donald Trump, in his usual very direct way, started to retaliate against unfair practices by a number of U.S. trade partners, especially China. However, even Western blocs, including the U.S. and even more so the European Union, are not innocent. Protectionist policies have not only used tariffs as political tools, but also introduced quotas, regulatory barriers, product specifications, foreign-exchange policies, subsidies and investment restrictions. They put up layers of bureaucratic red tape and numerous other obstacles.

The U.S.’s current retaliation has certainly not created the problem, but it could trigger a crisis. It may be necessary to introduce a long overdue open debate, with the objective of freeing trade from these restrictions. Unfortunately, protectionism under the pretext of shielding consumers or securing jobs is popular, and therefore a valuable tool for populist politics. Such measures are applied – to the detriment of prosperity – in authoritarian countries and in democracies alike.

A combination of rising energy prices, trade restrictions and slowing growth in certain countries (especially China), are adverse indicators for the world economy. The staggering debt of both governments and households allow little margin for additional consumption. Due to quantitative easing and low interest rates, central banks will not have room to head off a strong recession. We have to recognize that already, central banks’ balance sheets are overextended.

And although we should also not overestimate them, political misjudgments and crises are adding to the problem. We need not panic, but it is time to make a cautious, critical assessment and not be misguided by false hope.

It is time that the real causes are treated, and not just the symptoms.

Read the full article here ->
Dark clouds gathering over the global economy


*GIS is a global intelligence service providing independent, analytical, fact-based reports from a team of experts around the world. We also provide bespoke geopolitical consultancy services to businesses to support their international investment decisions. Our clients have access to expert insights in the fields of geopolitics, economics, defense, security and energy. Our experts provide scenarios on significant geopolitical events and trends. They use their knowledge to analyze the big picture and provide valuable recommendations of what is likely to happen next, in a way which informs long-term decision-making. Our experts play active roles in top universities, think-tanks, intelligence services, business and as government advisors. They have a unique blend of backgrounds and experience to deliver the narrative and understanding of global developments. They will help you develop a complete understanding of international affairs because they identify the key players, their motivations and what really matters in a changing world. Our experts examine the challenges and opportunities in economies old and new, identify emerging politicians and analyze and appraise new threats in a fast-changing world. They offer new ideas, fresh perspectives and rigorous study.