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Economische aanraders 02-08-2020

Economische aanraders 0

Economische aanraders: Veren of Lood biedt u op zondag wekelijks een inkijkje in (minstens) 15 belangrijke of informatieve artikelen en interviews die vooral de voorafgaande 7 dagen op economisch terrein verschenen op onafhankelijke sites.

De kop is de link naar het oorspronkelijke artikel, waarvan de samenvatting of de eerste (twee) alinea’s hier gegeven worden. Er zijn in deze rubriek altijd verschillende economische scholen vertegenwoordigd, en we streven er naar die diversiteit te handhaven.

We nemen wekelijks ook een paar extra links op naar artikelen die minder specialistische kennis vereisen. Deze met *** gemerkte artikelen zijn ons inziens ook interessant voor lezers met weinig basiskennis van economie.

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Trump’s Spending Is Delaying a Recovery. Biden Would Be Even Worse – Daniel Lacalle
31 juli

The dramatic economic decline due to the COVID-19 crisis and the unprecedented recovery spending plans approved by President Trump will drive the fiscal 2020 United States budget deficit to a record $3.8 trillion, or 18.7 percent of US gross domestic product, according to the Committee for a Responsible Federal Budget (CRFB). According to the same estimates, the fiscal 2021 deficit will reach $2.1 trillion and average $1.3 trillion through 2025 as the economy recovers from the impact of the forced shutdowns.
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The Fed’s Dollar Debasement Will Trigger An Unprecedented Structural Shift – Tyler Durden
31 juli

Whether it is merely the continued debasement of the dollar by a Fed that has gone full-tilt on money printing, or a historic transition away from the current global reserve currency, the recent sharp drop in the US currency is all Wall Street is talking about, with some such as Goldman going so far as to warn that “real concerns are emerging” about the US Dollar as global reserve currency (and is a reason why the bank is buying gold instead).
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Quantitative easing and helicopter money: Not so distant cousins – Alex Cukierman
27 Juli

The use of helicopter money as a monetary policy response to Covid-19 has drawn significant attention over recent months. This column offers a comparison of helicopter money and quantitative easing, as used in the wake of the global financial crisis. By evaluating the similarities and differences, as well as the contrasting contexts of each crisis, key advantages and disadvantages are identified. It concludes that the two policy mechanisms may not be as different as first thought, and helicopter money could well be crucial in combating the economic effects of COVID-19.
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The United States Will Not Recover Raising Taxes Or Printing Money – Daniel Lacalle
26 juli

The dramatic economic decline due to the Covid-19 crisis and the unprecedented recovery spending plans approved by President Trump will drive the fiscal 2020 United States budget deficit to a record $3.8 trillion, or 18.7% of U.S. gross domestic product, according to the Committee for a Responsible Federal Budget (CRFB). According to the same estimates, the fiscal 2021 deficit would reach $2.1 trillion in 2021, and average $1.3 trillion through 2025 as the economy recovers from the impact of the forced shutdowns.
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Say’s Law and the Effects of a Growing Money Supply – Alasdair Macleod
31 juli

The credit cycle drives the business, or trade, cycle. It should be obvious that changes in the quantity of money, mostly in the form of bank credit, have an effect on business conditions. Indeed, that is why central banks implement a monetary policy. By increasing the quantity of money in circulation and by encouraging the banks to lend, a central bank aims to achieve full employment.
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Russell Napier: Central Banks Have Become Irrelevant – Tyler Durden
1 augustus

Two weeks ago, we wrote that one by one the world’s legendary deflationists are taking one look at the following chart of the global money supply (as shown most recently by DB’s Jim Reid) and after seeing the clear determination of central banks to spark a global inflationary conflagration, are quietly (and not so quietly) capitulating.
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Having the cake, but slicing it differently: how is the grand EU recovery fund allocated? – Zsolt Darvas
23 juli

The European Commission’s original allocation mechanism really favoured lower-income countries and to a large extent was based on pre-COVID economic data. The modification adopted by the European Council gives more consideration to the country size and the adverse economic impact of COVID-19. As a consequence, by using the Commission’s May 2020 economic forecasts, I estimate that only Germany and France will get more grants from the EU’s recovery fund compared to the Commission’s original proposal, while other countries will get less.
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The Dual Mandate Of The Fed “Appears To Be The S&P 500 And Nasdaq” – Sven Henrich
1 augustus

With a furious rally in the last hour (when else?) markets closed the month of July slightly above the June highs bringing the S&P 500 to green on the year. This following GDP prints of -5% and – 32.9% for Q1 and Q2 respectively. Bears may be rightfully asked:
If you can’t get anything but a momentary decline in markets with historically disastrous readings such as this then what will it take?
After all markets rose in 2019 on flat earnings growth and are rising in 2020 with negative earnings growth. Are markets destined to rise forever and are bear markets simply a thing of the past as the overlords of markets, the central bankers, are simply too powerful and determined to never let the consequences of recessions, slowing growth and ever expanding valuations matter?
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Confession Time for Big Banks in Europe: Banco Santander Reports $12.7 Billion Loss – Nick Corbishley
29 juli

Too-Big-To-Fail Santander is also one of the Eurozone’s worst capitalized banks.
Banco Santander, Spain’s largest lender and one of the Eurozone’s eight global systemically important banks (G-SIBs), has posted its first ever loss in 163 years of operations. And it was gargantuan. During the first half of the year, the bank racked up a loss of €10.8 billion ($12.7 billion).
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The Nation Is Falling Into the Abyss Between Wall Street and Main Street – Charles Hugh Smith
28 juli

The abyss between the Fed’s illusion of phantom wealth for Wall Street and the collapse of Main Street is bottomless, and our descent into the abyss is accelerating.
I know this runs counter to every dominant narrative, but a vaccine doesn’t really matter, opening up doesn’t really matter, and the size of the “free money” stimulus checks doesn’t matter.
What matters is that the nation is falling into the abyss that’s opened between Wall Street and Main Street, and nothing will stave off the collapse of the social order other than a fundamental re-ordering of the way we create and distribute money and political power, as money buys political influence.
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MMT’s Very Odd Definition of “Savings” – Robert Blumen
30 juli

Modern monetary theory, which is now experiencing its fifteen minutes of fame, contains a number of strange and counterintuitive propositions.1 Proponents claim that these propositions are not an economic theory, only an accounting identity. One of these is that the private sector can save only if the government runs a deficit. Within the self-consistent, tail-chasing world of MMT, these statements are true by definition. However, when MMT aphorisms are interpreted using their normal meaning in the English language, their conclusions are not only false, but foolish.
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***Consumers should own their data – Chad Jones, Christopher Tonetti
28 juli

Data are nonrival in nature. Using a standard model in which firms produce differentiated goods using labour and data as fundamental inputs, this column explores the economic implications of this nonrival nature of data. It suggests that having consumers own their personal data instead of firms may help achieve two important goals. First, consumers would respect their own privacy. Second, consumers would have incentives to sell their data to multiple organisations, thus taking advantage of infinite usability.
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JPMorgan Finds That Shorts Across The Globe Have Capitulated – Tyler Durden
1 augustus

Three months ago, shortly after the March crash bottom, JPMorgan’s strategist Nikolas Panigirtzoglou predicted that stocks would rise, among other things, because there was a massive short overhang, one which would squeeze prices higher as the Fed injected liquidity, providing a secondary thrust to the market.
Then, one month ago, in the June 16th version of Flows and Liquidity, the JPM quant doubled down by asking if there is a regional bias to the shorting activcity, namely “how much higher is the short base outside US equities?”, arguing that the regional short base backdrop favored non-US equities, in particular European stocks, something which subsequent price action confirmed.
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Hopes for “China-ization” of Europe’s Economy Fuels the Latest Investor Frenzy – Brendan Brown
30 juli

The emergence of the European Recovery Plan, taking final form during marathon negotiations in Brussels (July 18–21), has run in parallel with the euro and Italian government bonds, joining a wider asset market frenzy in the midst of a still depressed global economy. Income famine investors, desperate for yield in a world of monetary repression, are chasing yet another dubious narrative, this time about Europe, even though key storytellers have an obvious interest in captivating a wide audience.
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No, GDP Didn’t Plunge “32.9%” in Q2, it Plunged a Still Terrible 9.5%: Time to Kill “Annual Rates” – Wolf Richter
30 juli

A perfect quarter to look at the absurdity of reporting “annual rates” in the headlines.
This morning, we were confronted with horrible news, which we’ve been expecting all along, but this news, though truly horrible, was also a result of something called “annual rate.” What we saw in the headlines was that GDP, adjusted for inflation, collapsed by “32.9%” in Q2.
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Universal Basic Income Is Not An Economic Savior – Lance Roberts
31 juli

According to a new study by the left-leaning Roosevelt Institute, a universal basic income could permanently make U.S. economy trillions of dollars larger. While such socialistic policies sound great in theory, history, and data, show it isn’t the economic savior it is touted to be.
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Growth, sustainability, and the measurement of global gross product – Aniruddh Mohan, Akshay Thyagarajan, Nicholas Muller
31 Juli

The nexus of economic development and environmental impact is at the core of current policy debates. This is often captured by an ‘environmental Kuznets curve’, an inverted-U shaped relationship between income and pollution levels. This column argues that, in contrast to conventional approaches, sustainability analysis should focus on the monetary damages of pollution, rather than the physical tonnage of emissions. It highlights a large divergence in the Kuznets curves based on these two approaches. In addition, it proposes a measure of GDP growth which adjusts for monetary pollution damages.
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The Next Leg Down: The Top 10% Are About to Take a Hit – Charles Hugh Smith
30 juli

No federal bailout or stimulus can reverse these three dynamics, and no amount of legerdemain can replace the spending of the top 10%.
Few of those anxiously seeking a rebound in consumer spending take into account the top 10% of households account for almost 50% of consumption, and that top 10% skews heavily to the older, wealthier top tier whose free-spending ways have been built on the enormous wealth effect as their stocks, bonds and real estate assets have soared in value over the past 12 years.
The top 10% has largely escaped the significant financial hits cutting a swath through the bottom 90%, but that’s about to change. Few of the top 10% have seen their pensions cut, their portfolios of stocks and bonds shredded, their home value in free-fall or their managerial / technocrat position eliminated. Most are watching the financial devastation from the security of owning 85% of the nation’s assets, and from positions in the protected-class with access to federal money, either directly or indirectly.
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***Can households in the European Union make ends meet? – Maria Demertzis, Marta Domínguez-Jiménez, Annamaria Lusardi
24 juli

Half the households surveyed by Eurostat see themselves as unable to find the resources they would need to cope with an unexpected expense within a month, estimated by experts at €375 in the case of Greece.
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***Reading between the lines of the ECB’s introductory statements – Maritta Paloviita, Markus Haavio, Pirkka Jalasjoki, Juha Kilponen, Ilona Vänni
28 juli

The introductory statements made by the ECB are some of the most important sources of insight into the central banks’ policy goals. This column presents a textual analysis which seeks to measure the tone of the statements, with the aim of estimating the Governing Council’s ‘loss function’. The results suggest that the ECB has been either more averse to inflation above the 2% ceiling, or that the de facto inflation target has been considerably below this threshold. The results also suggest that an inflation aim of 2%, combined with asymmetry, is a plausible specification of the ECB’s wider preferences.
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Coal Consumption Plunged to Lowest Since at Least 1973. Why There’s No Hope for Coal – Wolf Richter
28 juli

It comes down to costs and being bypassed by technological innovation, amid stagnating demand for electricity:
Arrival of “combined cycle” natural gas power plants in the 1990s.
Collapse in price of natural gas since 2008 due to fracking.
Surging wind power production in TX, OK, KS, IA.
Decades-long decline of industrial use of coal.
Consumption of coal by US power plants in April plunged 30% from April last year, to the lowest level in the monthly data going back to 1973, the EIA reported today. This was down 19% from April 1973.
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Disclaimer: De VoL-redactie selecteert deze artikelen op interessante inzichten, of naar wij denken nuttige informatie. Wij kunnen echter geen enkele aansprakelijkheid aanvaarden voor de gevolgen van beslissingen die op grond hiervan door lezers zijn genomen, zakelijk zomin als privé.

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