Economische aanraders 08-05-2016
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 zijn.
Sinds begin 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.
Restructuring the National Debt – Peter G. Klein
US presidential candidate Donald Trump made more waves yesterday by suggesting he might attempt to reduce the US national debt by renegotiating with creditors. “Such remarks by a major presidential candidate,” intoned the New York Times solemnly, “have no modern precedent. The United States government is able to borrow money at very low interest rates because Treasury securities are regarded as a safe investment, and any cracks in investor confidence have a long history of costing American taxpayers a lot of money.”
But the idea that the US can never restructure or even repudiate the national debt — that US Treasuries must always be treated as a unique and magical “risk-free” investment — is wildly speculative at best, preposterous at worst.
*** R.I.P. TTIP? – Don Quijones
TTIP, the once super-secret transatlantic trade deal that is now broadly despised on both sides of the Atlantic, may not be alive yet but it could soon be dead. And all thanks to leaks which confirm a longstanding suspicion in Europe that the ultimate goal of TTIP is to pry open European markets for big U.S. corporations, with little offered in the way of reciprocity.
The UK Independent reports that the 248 pages of documents released by Greenpeace show that the “hated” deal would grant US corporations “unprecedented powers” over any new public health or safety regulations to be introduced in the future:
If any European government does dare to bring in laws to raise social or environmental standards, TTIP will grant US investors the right to sue for loss of profits.
It is iron-clad confirmation that many of our biggest fears were well-founded. At long last the treaty that should not be named is being exposed to the harsh light of day, all its darkest intentions splashed across the front pages of Europe’s biggest selling newspapers. As the European Green party notes, “every single publicly voiced suspicion concerning the lack of transparency in these TTIP negotiations has been justified by the revelations stemming from the leak.”
Here’s a check list of other widely held fears that appear to have been confirmed in the last two days:
How Brexit Presents a Roadblock to the EU-US Establishment – Brendan Brown
It is no surprise that President Obama has weighed into the Brexit referendum debate firmly on the side of the EU establishment. Nor is it surprising that the British PM Cameron should have given the opportunity to the president to threaten UK citizens that if they do not vote in favor of the establishment they will be punished by being put at the back of the queue for future trade deals with the US. The threat may indeed be empty, not least because the president will be out of office soon, but also because Washington could conclude a trade deal with the UK much more easily than with the EU. Thanks to French insistence on guaranteed safeguards for its agriculture and service sectors, as presently protected by tariffs and regulations, trade deals with the EU present many more roadblocks than deals with the UK alone.
Empty threat or not, President Obama, PM Cameron, and Chancellor Merkel, judging by their recent pronouncements and their long previous histories in office, all have a keen interest in the maintenance of the European status quo.
Why I Think there Will Be a “Dollar Panic” – Bill Bonner
Please remember this warning when you go to the ATM to get cash — and there is none.
While we were thinking about what was really going on with today’s strange new money system, a startling thought occurred to us. Our financial system could take a surprising and catastrophic twist that almost nobody imagines, let alone anticipates.
Do you remember when a lethal tsunami hit the beaches of Southeast Asia, killing thousands of people and causing billions of dollars of damage? Well, just before the 80-foot wall of water slammed into the coast an odd thing happened: The water disappeared.
The ‘real’ explanation of the Feldstein-Horioka puzzle – and what it means – Nicholas Ford, Charles Yuji Horioka
The Feldstein-Horioka puzzle concerns why levels of investment and saving are correlated across countries. This is puzzling because financial markets can rapidly move capital between countries, and there is no reason why the best investment opportunities should be in a saver’s home country. This column posits a disarmingly simple solution to this longstanding puzzle – global capital markets cannot by themselves achieve net capital transfers between countries. This solution may have implications for related issues such as the interaction of interest rates, exchange rates, and current account imbalances.
Myth of China As Exporter Turned Domestic Consumer – Chris Hamilton
If a business could foresee that it would have a declining consumer base (declining number of total potential customers), that would likely be a pretty good reason for serious concern and significantly lower growth expectations. However, when it comes to China, the shrinkage of it’s under 65yr/old population and particularly the 20-59yr/old adult population declines is somehow coinciding with the story of China transitioning from an export to a domestic consumption based economy?!? To wit, with a declining population of 0-64yr/olds and likewise 20-59yr/old adults, China will transition from exporter to consumer (while all those grown “one child” policy adults support their 65+yr/old parents) and still grow 6%-7% annually? Inquiring minds wonder how it’s possible a declining base of consumers would consume more??? And in a word…CREDIT!!! And, the growth of credit in China has simply gone, to use the technical term, “apeshit” or parabolic or feel free to substitute any of the terms meant to indicate highly unsustainable and likely ruinous.
This really isn’t a difficult story to understand although many go to great lengths specifically not to understand it…something to do with what Upton Sinclair said. “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
Why Government Hates Gold – Murray N. Rothbard
When a country goes off the gold standard and onto the fiat standard, it adds to the number of “moneys” in existence. In addition to the commodity moneys, gold and silver, there now flourish independent moneys directed by each government imposing its fiat rule. And just as gold and silver will have an exchange rate on the free market, so the market will establish exchange rates for all the various moneys. In a world of fiat moneys, each currency, if permitted, will fluctuate freely in relation to all the others. We have seen that for any two moneys, the exchange rate is set in accordance with the proportionate purchasing-power parities, and that these in turn are determined by the respective supplies and demands for the various currencies. When a currency changes its character from gold-receipt to fiat paper, confidence in its stability and quality is shaken, and demand for it declines. Furthermore, now that it is cut off from gold, its far greater quantity relative its former gold backing now becomes evident. With a supply greater than gold and a lower demand, its purchasing-power, and hence its exchange rate, quickly depreciate in relation to gold. And since government is inherently inflationary, it will keep depreciating as time goes on.
Eight “New Normal” Charts That Are Insanely Abnormal–and Dangerous – Charles Hugh Smith
Anyone questioning the sustainability and rightness of The New Normal is immediately attacked by the mainstream-media defenders of the crumbling status quo. Not only is everything that broke in 2008 fixed, everything’s going great globally, and anyone who dares question this narrative in a tin-foil hat conspiracy nut or simply an annoyingly doom-and-gloomer who recalcitrantly refuses to accept the positive glories of official statistics: low unemployment, rising valuations of stock market Unicorns, etc.
But the New Normal is anything but normal; all the readings of artificial life-support and manipulation are off the charts. If the New Normal were indeed a return to normalcy, we’d see a rapid and sustained decline in official life-support of the economy.
Instead, we see official life-support efforts rising to new and dangerous levels. The only reason stocks are at nose-bleed valuations globally is massive, sustained intervention on multiple levels.
We also see increasing dependence on debt to sustain increasingly weak growth. The New Normal is all about diminishing returns on additional debt.
Estimating border effects in international trade: User beware – Cletus C. Coughlin, Dennis Novy
Borders impede trade, and a major objective of research in international trade has been to identify by how much. This column argues that bilateral trade data can give a misleading picture. Larger countries have inherently smaller border effects because their data aggregate over more space and economic activity. Trade economists need to think harder about how slicing up the map at the level of countries drives estimates of important policy variables.
US Manufacturing Sinks Deeper into Mire, Sep. 2009 evoked – Wolf Richter
The decline of US manufacturing in the cacophony of regional and national indices, which started in mid-2014, is a sight to behold. Today we got two national indices for April. Both added more gloom to the scenario.
Of the national manufacturing indices, Markit’s PMI, which is based on surveys of purchasing managers, had been the more positive one – if that’s the right word. But it too has steadily been losing ground since mid-2014, when it hovered around 57 (above 50 = expansion).
In April, the index dropped to 50.8, from 51.5 in March on a seasonally adjusted basis, which as the report put it, “signaled the slowest improvement in overall business conditions” since September 2009.
No Wonder We’re Poorer: Wages’ Share of GDP Has Fallen for 46 Years – Charles Hugh Smith
The majority of American households feel poorer because they are poorer. Real (i.e. adjusted for inflation) median household income has declined for decades, and income gains are concentrated in the top 5%:
Even more devastating, wages’ share of GDP has been declining (with brief interruptions during asset bubbles) for 46 years. That means that as gross domestic product (GDP) has expanded, the gains have flowed to corporate and owners’ profits and to the state, which is delighted to collect higher taxes at every level of government, from property taxes to income taxes.
When Commodity Prices Fall – C.P. Chandrasekhar
There was a period in the 2000s when primary commodity prices appeared to have bucked their long term trend of stagnation or decline. As Chart 1 shows, between the trough of December 2001 and the peak of August 2008, the price index for all primary commodities (in US dollar terms) rose by 445 per cent, that is nearly four and a half times.
This increase came after a decade of relative stagnation in nominal dollar prices (which reflected a decrease in relative prices of commodities) over the previous decade. The strength and rapidity of the increase in prices over the 2000s led some analysts to argue that changing patterns of global production and consumption meant that there would be secular tendencies towards increase in such prices in the medium term. In particular, the more rapid growth of and therefore increased demand from China, India and other “emerging markets” was seen to indicate a structural shift in global demand that would generate continued increases in primary commodities prices for some time.
*** What Brexit surveys really tell us – Stefan Gerlach
Financial markets are increasingly concerned about the outcome of the upcoming Brexit referendum, and considerable attention is therefore focused on surveys of voting intentions. Using a Financial Times dataset covering 201 surveys conducted over the past five years, this column reveals that we can learn surprisingly little from these surveys. While in general they predict the vote will be in favour of remaining in the EU, the organisation that conducted each survey seems to be as important as respondents’ voting intentions in determining individual survey results. Moreover, there is a large number of undecided voters who are likely to decide the outcome of the referendum.
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.