Tuesday, February 11, 2025

Polaris of Enlightenment

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Young Swedish adults do not understand economics

Published 7 April 2024
– By Editorial Staff
Many young people have a significant lack of financial literacy.

Only one in five young adults can answer three basic financial questions correctly, according to a Swedish study. At the same time, half of the study’s participants reported having financial problems themselves.

A study conducted by the Department of Psychology in Lund, Sweden, asked 2050 young adults aged 18-29 to answer questions about their financial situation, their psychological well-being and questions about economics, in order to see how well young people are able to manage their own personal finances. Participants were asked three quick and basic questions about inflation, interest rates and risk diversification, in other words, things that are important to keep track of for good household finances.

Around 20% answered all the questions incorrectly and around 20% answered them correctly. At the same time, two-thirds of all participants answered the question about inflation incorrectly.

– Financial literacy is a basic skill that every person should have in order to survive and thrive in society, says Henrik Levinsson, senior lecturer in psychology at Lund University, in a press release.

“Alarming” lack of knowledge

Women were more likely to have fewer correct answers and were more often unsure than men. At the same time, half of all participants stated that they themselves had some form of financial problem, and a quarter stated that they had taken out consumer loans. 10 per cent also responded that they had turned to the municipal budget and debt counselling service for help.

The researchers say that the lack of knowledge is “even more alarming today given how easy it is to take out SMS loans”.

– It is highly urgent that we start talking more about “financial health” and how the risk of over-indebtedness early in life can be reduced. In particular, schools have a key role to play in teaching more about personal finance, an issue that is highly topical and has been highlighted both nationally and internationally, says Levinsson.

The next step is to follow individuals over time to better understand the links between financial ability, personal finances and mental health.

The questions the researchers asked:

Question 1: Suppose you had SEK 100 in a savings account and the interest rate was 2 per cent per year. After five years, how much do you think you would have in the account if you let the money grow?

a) More than SEK 102
b) Exactly 102 Swedish kronor
c) Less than SEK 102
d) Don't know

Question 2: Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, how much would you be able to buy with the money in this account?

a) More than today
b) Exactly the same
c) Less than today
d) Don't know

Question 3: Is the following statement true or false? "Buying shares in an individual company usually provides a more secure return than an equity fund."

a) True
b) False
c) Don't know

Source: Forskning.se

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North American trade war underway – Canada and Mexico respond with countermeasures

Donald Trump's USA

Published 2 February 2025
– By Editorial Staff
Claudia Sheinbaum, President of Mexico.

Both Canada and Mexico have responded to Donald Trump’s recent tariffs by imposing 25% punitive tariffs on US goods themselves. The decision was taken overnight and marks the start of a trade war in the region.

Canadian Prime Minister Justin Trudeau announced at a press briefing that the Canadian countermeasures will be comprehensive and include everyday products such as beer, wine, fruit, vegetables and clothing. According to Canadian Global News, Trudeau emphasized that Canada has tried to avoid this situation, but is now forced to act.

He also urged Canadians to support domestic products and consider staying in the country for their summer vacations.

– It might mean changing your summer vacation plans to stay here in Canada and explore the many national and provincial parks, historical sites and tourist destinations our great country has to offer, he added.

Mexico has also responded with punitive tariffs, according to a post by President Claudia Sheinbaum on the X platform. However, further details on the scope and design of the Mexican tariffs have not yet been made public.

Meanwhile, China, the third country targeted by Trump, has sharply criticized the US measures. In a statement issued by the Chinese Ministry of Commerce, China said it plans to complain to the World Trade Organization (WTO) and take “corresponding countermeasures”.

China believes that Trump’s 10% tariffs are unfair and violate international trade rules.

Czech central bank wants to build Bitcoin reserve

The new crypto economy

Published 1 February 2025
– By Editorial Staff
The Czech Republic could become the first EU and Western country to actively invest in Bitcoin.

The Czech central bank is considering including bitcoin in its reserves, according to Governor Ales Michl. It is the first Western central bank to consider buying cryptocurrency.

In an interview with the Financial Times, Michl revealed that he plans to submit a proposal to include bitcoin in the central bank’s reserves. However, he later wrote on X that the proposal requires further analysis and discussion before a decision can be made.

No decision is imminent”, he writes. “Bitcoin has significant volatility, which makes it harder to take advantage of its current low correlation with other assets”, Michl continues.

If approved, up to 5% of the central bank’s reserves, equivalent to €140 billion, could be invested in bitcoin. This would make the Czech central bank the first Western central bank to hold cryptocurrency in its reserves.

Since Michl took over the leadership of the Czech central bank in 2022, he has focused on diversifying the bank’s reserves. This has included gradual gold purchases and an increased share of equities in the portfolio.

Bitcoin reached a new record high after Donald Trump took office. Meanwhile, financial giant BlackRock’s CEO Larry Fink predicts that the cryptocurrency could reach $700,000.

In January, Italy’s largest bank, Intesa Sanpaolo, invested over €1 million in bitcoin.

EU may resume Russian gas imports

The war in Ukraine

Published 31 January 2025
– By Editorial Staff

The possibility of resuming Russian gas imports via pipelines could be part of a potential peace deal with Russia, according to the Financial Times. Proposals backed by Germany and Hungary, among others, would aim to lower energy prices in Europe while bringing Moscow to the negotiating table.

There is pressure from some big member states on energy prices and this is one way to bring those down, of course, what is described as an anonymous EU official told the Financial Times.

The idea, meanwhile, is facing strong criticism in some quarters, including concerns in Brussels that a resumption of imports would increase Russia’s export revenues and counter previous efforts to reduce dependence on Russian energy.

From 40 to 10 percent

The EU’s direct gas imports from Russia have fallen dramatically since the start of the war in Ukraine in 2022. Before the war, Russian gas accounted for around 40% of the EU’s total gas supply, but in 2024 this share has dropped to around 10% as a result of sanctions, diversification of energy sources and the Nord Stream pipeline terror attack.

To compensate for the shortfall, the EU has increased imports of liquefied natural gas (LNG), particularly from the United States and Norway, while imports of liquefied gas also from Russia have increased through gaps still left in the sanctions.

Overall, the situation has led to a sharp increase in energy prices in Europe and has had a very negative impact on the European economy, with the EU’s largest economy Germany, for example, experiencing economic contraction for two years in a row.

In the end, everybody wants lower energy costs, said a senior EU official, according to the Financial Times.

Growing opposition

Some EU countries, such as Slovakia and Hungary, have expressed open concern about their energy supply, arguing that the political leadership in Ukraine has jeopardized their energy security by stopping gas transfers through the country from Russia.

In Germany, the leader of the opposition party Alternative for Germany, Alice Weidel, recently pledged to restart the Nord Stream project if the party comes to power.

Sweden donates new major package to Ukraine

The war in Ukraine

Published 31 January 2025
– By Editorial Staff
Minister of Defense Pål Jonson.

Swedish production of military equipment will be included in the next aid package to Ukraine. The package will be the largest to date and amounts to a total of SEK 13.5 billion (€1.2 billion).

The Government and the Sweden Democrats have presented the 18th aid package to Ukraine, where Sweden will now procure military equipment specifically intended for donation to the country. For example, €90 million is set aside to manufacture long-range missiles and long-range drones.

We are moving from donation to production, said Pål Jonson (M) at a press conference on Thursday.

Approximately €500 million will be used for procurement from Swedish and foreign defense industry, €250 million will be donated and a further €250 million will be donated from existing equipment from the Swedish Armed Forces, including 146 trucks, 16 combat boats, 1,500 TOW anti-tank missiles and 2,000 anti-tank shells. Sweden will also provide extensive training.

In total, Sweden’s military support to the Ukrainian war now amounts to approximately SEK 61.9 billion (€5.5 billion), which is roughly equivalent to the entire annual expenditure of the state budget on pensions. Previously, Sweden has donated aircraft, armored vehicles, missiles and artillery shells.