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Economische aanraders 08-10-2017

economische aanraders

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.

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Be Careful What You Wish For: Inflation Is Much Higher Than Advertised – Charles Hugh Smith
5 oktober

What the Federal Reserve is actually whining about is not low inflation–it’s that high inflation isn’t pushing wages higher like it’s supposed to.
It’s not exactly a secret that real-world inflation is a lot higher than the official rates–the Consumer Price Index (CPI) and Personal Consumption Expenditures PCE). As many observers have pointed out, there are two primary flaws in the official measures of inflation:
1. Big-ticket expenses such as rent, healthcare and higher education–expenses that run into the thousands or tens of thousands of dollars annually–are severely underweighted or mis-reported. While rents are soaring, the CPI uses an arcane (and misleading) measure of housing costs: owners equivalent rent. Why not just measure actual rents paid and actual mortgages/property taxes/home insurance premiums paid?
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Declining long-term interest rates and implications for monetary policy: The case of Japan – Sayuri Shirai
6 oktober

Interest rates in many advanced economies have been declining since the 1990s. This column takes a close look at the case of Japan. In 2013 the Bank of Japan pursued a policy of quantitative and qualitative monetary easing that aimed to lower the real interest rate substantially below its natural rate. The evidence suggests that this policy has had mixed success at best, and that the natural rate of interest may decline in the foreseeable future.
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2009 – 2016: Was the Eight-Year Experiment in Maintaining the Status Quo a Success or a Failure? – Charles Hugh Smith
1 oktober

Clearly, the core strategy of maintaining the status quo is to borrow and spend trillions of additional dollars every year.
The Obama presidency was a grand experiment to test this thesis: the status quo of the U.S. is a self-correcting mechanism. Left to its own devices, it will automatically correct any socio-economic-political imbalances, given enough time.
The Grand Strategy of the post-Global Financial Crisis era was simple: maintain the status quo as is. The Obama administration’s major policy initiative, ObamaCare, a.k.a. the Affordable Care Act, was nothing but the formalization of the existing status quo in healthcare, i.e. the taxpayers subsidize private-sector profiteering.
That is the Affordable Care Act in a nutshell. Costs have not declined, the health of Americans can hardly be said to have improved significantly, but garsh, did healthcare sector profits soar. Most importantly, the status quo was maintained: nothing actually changed in the insurance, pharmaceutical or hospital sectors.
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The Fed will be a New Creature Soon, and No One Knows What It’ll Look Like – Wolf Richter
6 oktober

Markets are blowing off this uncertainty for now.
On Thursday, the Senate confirmed Randal Quarles, President Trump’s first Fed nominee, as a member of the Federal Reserve Board of Governors. During his confirmation hearing, Quarles said it was time to roll back some of the regulations that were imposed on banks after they’d imploded and threatened to take down the global financial system. He will become the chief bank regulator at the Fed, filling the slot that Daniel Tarullo left behind when he resigned unexpectedly in April.
Quarles is founder of private investment firm, The Cynosure Group. Fed Governor Jerome Powell is also a Cynosure alumnus. Quarles had been a partner at private equity firm The Carlyle Group and served as undersecretary of the Treasury under President George W. Bush. WHIRRRR makes the revolving door.
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A Tax Increase on Advertising Is a Very Bad Idea – Nathan Keeble
5 oktober

Tax reform is finally coming to the front of the Republican legislative agenda, but some of the potential provisions in the upcoming bill are not exactly small government ideas. In an effort to recoup revenue which will be lost from the abandonment of the border adjustment tax, Congress is once again considering Rep. Camp’s 2014 proposal on taxing advertisments. This proposal would only allow businesses to deduct 50% of their advertising expenses, with the rest being amortized over several years. Quite simply, Congress is considering sneaking in what amounts to a tax increase.
There are rumors that staffers on Capitol Hill believe that the tax will do more than just raise revenue. Supposedly, some believe that the Camp ad tax will help curb the business cycle. These beliefs are severely flawed. Applying punitive measures to advertising will do nothing to stabilize the economy. Advertising has no connection to cyclical fluctuations in business activity, but it does play a vital role in the economy. The Camp ad tax will only get in the way of small businesses and harm consumers.
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Why the Euro Took a Dive After Merkel’s Re-Election – Philipp Bagus
4 oktober

After the German elections held on the 23rd of September, the euro started a pronounced decline. But why was there such a sharp fall of the common currency?
At the end, the election´s result does not seem to bring dramatic changes. Despite its losses, Merkel´s party, the CDU, remained the strongest force in the parliament. Merkel will continue to be German chancellor. It is true that the AfD (Alternative for Germany) with both a nationalistic and a libertarian wing won a spectacular 12.6% of the votes and made it into the parliament for the first time. Nevertheless, the euro-critical AfD is light years from being part of the government. All other parties ostracize them for supposedly being extremists.
The next German government will likely be formed by a “Jamaica” coalition of CDU, FDP (free democrats) and the Greens, because the up to now governing social democrats (SPD) will abstain from attempts to renew their coalition with Merkel.
So with Merkel remaining chancellor why did the euro take such a large dive in the wake of the election? The answer is related to French President´s Emmanuel Macron´s speech only two days after the German election, in which Macron argued in favor of a new foundation for Europe. Among other proposals, Macron called for a European financial transaction tax and for the harmonization of social security and corporate taxes within the European Union. His statist proposals also include a common budget for the 19 Eurozone member as well as a Eurozone finance ministry and eventually some sort of Europe-wide taxation.
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Mortgage default during the Great Recession came from real estate investors, not subprime credit holders – Stefania Albanesi, Giacomo De Giorgi, Jaromir Nosal
3 oktober

The Global Crisis narrative has suggested that an expansion of subprime credit was the reason for rising mortgage defaults, leading to the large-scale recession in 2007-09. Taking a closer look at the characteristics of subprime credit holders over the period, this column argues that the growth in mortgage defaults did not occur predominantly amongst subprime credit holders. Instead, it was real estate investors that played a critical role in the rise in mortgage debt, specifically among the middle and the top of the credit score distribution.
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Atlas on Health – John H. Cochrane
4 oktober

My colleague Scott Atlas has a superb oped in today’s (October 4) Wall Street Journal. Instead of just arguing about health insurance and how we, via the government, will subsidize and pay for health care demand, let’s fix the equally catastrophically broken health supply system.
“Republicans have now failed twice to repeal and replace ObamaCare. But their whole focus has been wrong. The debate centered, like ObamaCare, on the number of people with health insurance. A more direct path to broadening access would be to reduce the cost of care. This means creating market conditions long proven to bring down prices while improving quality—empowering consumers to seek value, increasing the supply of care, and stimulating competition.”
This is the kind of out of the box, out of the usual left-right mudslinging idea that might someday spark a bipartisan reform, if our legislators could someday get past scoring symbolic points and sit down to actually fix something. (I have written similar ideas, but nowhere near as clearly, or as based in lots of fact-based scholarship and detail as Scott has.)
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An Accountant Smells a Rat in Our Global Credit Bubble – Peter Diekmeayer
2 oktober

Twenty years ago Doug Noland was so worried about imbalances surrounding the dot.com boom that he began to title his weekly reports “The Credit Bubble Bulletin. Years later, he warned the world about the impending 2008 crisis. However a coming implosion, he says, could be the biggest yet.
“We are in a global finance bubble, which I call the grand-daddy of all bubbles,” said Noland. “Economists can’t see it. They can’t model money and credit. However, to those outside the system, the facts are increasingly clear.”
Noland points to inflating real estate, bond and equity prices as key causes for concern. According to the Federal Reserve’s September Z.1 Flow of Funds report, the value of US equities jumped $1.5 trillion during the second quarter to $42.2 trillion, a record 219% of GDP.
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Limits of digitisation – Bruno Frey
2 oktober

One of the major effects of digitisation has been to drastically lower costs of measurement in a wide range of activities and areas. This column argues that this has prompted many to react against the domination of measurement and the loss of intrinsic preferences, often by escaping into areas not yet captured by measurement which will likely be preserved.
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***Is Population Decline Catastrophic? – Peter St. Onge
3 oktober

In the 1970’s we heard the earth was going to get so crowded we’d be falling off. Now the panickers have flipped to population decline. They were wrong in the 70’s, so are they wrong again? Is a declining population catastrophic?
Countries from Germany to Japan are investing in mass immigration or pro-birth policies on the assumption that they must import enough warm bodies to stave off economic collapse. I think this is mistaken. Falling population on a country level is certainly no catastrophe and, indeed, may be positive. I’ll outline some reasons here.
Historically, the first question is why population declined. If it’s the Mongols invading again then, yes, the economy will suffer. Not because of the death alone, but because wholesale slaughter tends to destroy productive capital as well.
On the other hand, if the population is declining from non-war, we have a well-studied natural experiment in the Black Plague. Which is generally credited with the “take-off” of the West. Because if the population declines by a third while capital including arable land stays the same, you get a surplus. Same resources divided by fewer people.
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“This May Be The End Of Europe As We Know It”: The Pension Storm Is Coming – John Mauldin
6 oktober

I’ve written a lot about US public pension funds lately. Many of them are underfunded and will never be able to pay workers the promised benefits – at least without dumping a huge and unwelcome bill on taxpayers.
And since taxpayers are generally voters, it’s not at all clear they will pay that bill.
Readers outside the US might have felt safe reading those stories. There go those Americans again… However, if you live outside the US, your country may be more like ours than you think.
This week the spotlight will be on Europe.
The UK Is Headed to a Retirement Implosion
The UK now has a $4 trillion retirement savings shortfall, which is projected to rise 4% a year and reach $33 trillion by 2050.
This in a country whose total GDP is $3 trillion. That means the shortfall is already bigger than the entire economy, and even if inflation is modest, the situation is going to get worse.
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***Bismarck’s health insurance and its impact on mortality – Stefan Bauernschuster, Anastasia Driva, Erik Hornung
7 oktober

The model for today’s health insurance systems was Otto von Bismarck’s compulsory health insurance, introduced in the German Empire in 1884. This column uses contemporary mortality data to show that, by extending access to healthcare, Bismarck’s health insurance significantly reduced mortality rates for blue-collar workers, probably by increasing the public’s knowledge about communicable disease transmission. This supports theories about the fundamental role of hygiene in reduced mortality at this time.
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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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