Economische aanraders 04-02-2018
Economische aanraders: Veren of Lood biedt u op zondag wekelijks een inkijkje in (minstens) 10 belangrijke of informatieve artikelen en interviews die 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.
Sinds december 2015 nemen we 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.
The 1% Get A Scare — More To Come? – John Rubino
Most Americans have spent the last few years pressed up against the proverbial bakery window, watching the 1% enjoy a life of ever-increasing wealth and seemingly total indifference to the multitudes who aren’t favored by zero interest rates, big trust funds and political/corporate connections.
The one consolation for the have-nots has been that, by owning few stocks and bonds, they would suffer less when those bubble markets did what bubbles always do, which is burst. Today was a small but satisfying taste of that eventuality. From Bloomberg:
Fed’s QE Unwind Accelerates Sharply – Wolf Richter
With a sense of urgency. No more dilly-dallying around.
The Fed’s balance sheet for the week ending January 31, released this afternoon, completes the fourth month of QE-unwind. And it’s starting to be a doozie.
This “balance sheet normalization” impacts two types of assets: Treasury securities and mortgage backed securities (MBS) that the Fed acquired during the years of QE and maintained afterwards.
The Fed’s plan, as announced in September, is to shrink the balances of Treasuries and MBS by up to $10 billion per month in October, November, and December 2017, then to accelerate the pace every three months. In January, February, and March 2018, the unwind would be capped at $20 billion a month; in Q2, at $30 billion a month; in Q3, at $40 billion a month; and starting in Q4, at $50 billion a month.
Nine Reasons Why Globalization Can’t Be Permanent – Gail Tverberg
Since the late 1990s, globalization has seemed to be the great hope for the future. Now this great hope seems to be dimming. Globalization sets up conflict in the area of jobs. Countries around the world compete for development and jobs. If there is not enough cheap-to-produce energy to go around, huge wage disparity is likely to result.
We know from physics and history that economies need to grow, or they collapse. The wage disparity that high-wage countries have been experiencing in recent years is evidence that the world economy is already reaching energy limits. There are no longer enough jobs that pay well to go around. Any drop in energy supply is likely to worsen the job situation.
Trump’s China policies are working a treat – David Llewellyn-Smith
Say what you like about Donald Trump’s rhetoric on trade. The MSM is in a constant meltdown over it. But the fact is he is engineering the fastest reboot of the US/China imbalance that anyone can remember without having to fire much more than a beebee gun. China response has been to let the yuan roar higher.
Of course, China may also be happy to see the yuan rise to push forward its rebalancing. Especially since the last time it tried in 2015, the yuan crashed and threatened to take down the global economy. This time, the higher yuan is giving consumers greater purchasing power as it works against industrial over-capacity while capital outflow has been contained.
Monetary policy with negative nominal interest rates – Gauti Eggertsson, Ragnar Juelsrud, Ella Getz Wold
Economists disagree on the macroeconomic role of negative interest rates. This column describes how, due to an apparent zero lower bound on deposit rates, negative policy rates have so far had very limited impact on the deposit rates faced by households and firms, and this lower bound on the deposit rate seems to be causing a decline in pass-through to lending rates as well. Negative interest rates thus appear ineffective in stimulating aggregate demand.
Misleading with Numbers: It’s Worse When the Government Does It – Gary Galles
Major international comparisons have long concluded that Americans’ ability to effectively utilize mathematics is inadequate. Such conclusions divide students, parents, teachers and administrators into camps that share little more than blaming others for the problems. However, it is unclear whether all the finger-pointing indicates a real desire to overcome our innumeracy. In fact, we systematically misuse numbers to distort reality because we want to fool ourselves, making our ineptitude no surprise.
***Political Correctness Serves the Ruling Elite – Charles Hugh Smith
No wonder the Ruling Elites loves political correctness: all those furiously signaling their virtue are zero threat to the asymmetric plunder of the status quo.
The Ruling Elites loves political correctness, for it serves the Elite so well. What is political correctness? Political correctness is the public pressure to conform to “progressive” speech acts by uttering the expected code words and phrases in public.
Note that no actual action is required. This is why the Ruling Elite loves political correctness: conformity is so cheap. All a functionary of the Ruling Elite need do is utter the code words (“hope and change,” “we honor diversity,” “thank you for your service,” etc.) and they get a free pass to continue their pillaging.
Why Perfect Competition Is not So Perfect – Frank Shostak
According to the popular view, a proper competitive environment must emulate the perfect competition model.
In the world of perfect competition, a market is characterized by the following features:
There are many buyers and sellers on the market
Homogeneous products are traded
Buyers and sellers are perfectly informed
There are no obstacles or barriers to enter the market
Moreover, buyers and sellers have no control over the price of the product. They are price takers.
The US Cities with the Most Magnificent Housing Bubbles – Wolf Richter
But some flat spots are showing up!
Just after I reported on the minuscule 1.4% year-over-year growth of per-capita “real” disposable income and the lowest saving rate in 12 years — for the lucky ones — there’s another asset-bubble doozie: The S&P CoreLogic Case-Shiller National Home Price Index for November, released this morning, rose 6.2% year-over-year (not-seasonally-adjusted). The index has now surpassed by 6.1% what was afterwards called the crazy peak of Housing Bubble 1 in July 2006 and is up 46% from the bottom of Housing Bust 1:
***Algorithms Are Fine — Until Governments Use Them Against Us – Robert A. McKeown
If you’re a frequent user of social media platforms you’ve probably noticed something akin to being watched or even monitored. Suddenly, an advertisement appears for a product you might have reviewed on Amazon or eBay. A series of videos appears to the right of your YouTube page relating to something you’ve watched days earlier. Facebook only shows you news feeds for posts you may have interacted with and ignores all of your other friends. The examples go on and on.
The answer lays in algorithms. These are logical mathematic equations which are designed to produce a certain outcome. A simple example would be if A>B and B>C then A>C. Putting it another way, if John prefers bananas to oranges and oranges to apples, then John prefers bananas to apples. But, does he always?
The revaluation of international banks following the crisis – Ata Bertay, Asli Demirgüç-Kunt, Harry Huizinga
Banks that internationalise can enjoy additional profit opportunities and diversification benefits as national business cycles are not perfectly synchronised. This column uses an international sample of banks in 113 countries during 2000-2015 to show that the relative valuation of international banks from high-income countries rose following the Global Crisis as they experienced lower increases in loan losses, adjusted their international asset allocations, and received generous ‘too-big-to-fail’ subsidies. International banks headquartered in developing countries experienced no such revaluation following the crisis.
***Rising Social Disorder Is Inevitable: Here’s Why – Charles Hugh Smith
We can do better, and if we don’t, the only possible output of such an unequal system is increasing social disorder.
We are in a very peculiar point in history. On the one hand, we’re reassured that all is well because Every One of the World’s Big Economies Is Now Growing. (NY Times)
Yet at the same time, we read that “Something Is Very Wrong With The Global Economy”: Richest 1% Made 82% Of Global Wealth In 2017 and are asked, Can the World Survive a Winner-Take-All Global Economy?
Even the authors of the rah-rah NY Times piece on the wonderfulness of the global economy expressed concern that this “growth” may not be distributed any more equally than the previous 10 years of “recovery.”
Wage Inflation is Finally here, and it’s Toxic for the Fed – Wolf Richter
Even uber-doves are now looking over their shoulder.
There have been all kinds of carefully phrased semi-hawkish statements emanating from carefully contained semi-hawkish Fed governors recently. Today, Dallas Fed President Robert Kaplan repeated what he has been saying for a while – that the “base case” should be three rate hikes this year, and that there could be four, warning, “if we wait to see actual inflation, we’ll be too late.”
But it’s the most fervent “doves” – when they start getting cold feet as doves – that matter the most when it comes to tightening monetary policy.
One of the most persistent, most vocal doves on the policy setting FOMC has been Minneapolis Fed President Neel Kashkari. He voted against all three rate hikes in 2017, and was vocal about why he did: inflation was too “low.”
***Why Intellectuals Fall for Socialism – Friedrich A. Hayek
Uit: The Intellectuals and Socialism
In all democratic countries, in the United States even more than elsewhere, a strong belief prevails that the influence of the intellectuals on politics is negligible. This is no doubt true of the power of intellectuals to make their peculiar opinions of the moment influence decisions, of the extent to which they can sway the popular vote on questions on which they differ from the current views of the masses. Yet over somewhat longer periods they have probably never exercised so great an influence as they do today in those countries. This power they wield by shaping public opinion.
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