Economische aanraders 14-01-2018
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.
What Has QE Wrought? – Ron Paul
The Great Recession began in 2007. It didn’t take long for the money managers to recognize its severity, and that a little tinkering with interest rates would not suffice in dealing with the economic downturn. In Dec. 2008, the first of four Quantitative Easing programs began which did not end until Dec. 18, 2013. Some very serious consequences of this policy of unprecedented credit creation have set the stage for a major monetary reform of the fiat dollar system. The dollar’s status as the reserve currency of the world will continue to be undermined. This is not a minor matter. As our financial system unravels, the seriousness of it will become evident to all, as the need to pay for our extravagance becomes obvious. This will make the country much poorer, though the elite class that manages such affairs will suffer the least.
GDP at risk – Stephen Cecchetti, Kim Schoenholtz
The likelihood of another crisis-induced plunge in GDP is much lower today than it was a decade ago, but we are still at an early stage of building a financial stability policy framework that corresponds to the inflation-targeting framework that forms the basis for monetary policy. This column describes a step forward in developing such framework – the concept and measurement of GDP at risk, which helps us to understand the linkages between the financial sector and the real economy at an aggregate level.
Will the Dollar Survive the Rise of the Yuan and the End of the Petrodollar? – Alasdair Macleod
This might seem a frivolous question, while the dollar still retains its might, and is universally accepted in preference to other, less stable fiat currencies. However, it is becoming clear, at least to independent monetary observers, that in 2018 the dollar’s primacy will be challenged by the yuan as the pricing medium for energy and other key industrial commodities. After all, the dollar’s role as the legacy trade medium is no longer appropriate, given that China’s trade is now driving the global economy, not America’s.
China Threatens to Quit Buying US Treasuries, Cites “Trade Tensions” – Wolf Richter
A financial shot before the bow of the White House.
China – which holds $1.19 trillion of US Treasury securities as part of its $3.1 trillion pile of foreign exchange reserves, and thus is a crucial factor in demand for US government debt – is having second thoughts about this deal.
Officials reviewing China’s foreign-exchange holdings and discussing investment strategies have recommended slowing or even halting purchases of Treasuries, “people familiar with the matter” told Bloomberg.
Drowning In The Money River – Adam Taggart
If you suspect society is unfair, that there’s a different set of rules the rich live by, you’re right.
I’ve had ample chance to witness first-hand evidence of this in my time working on Wall Street and in Silicon Valley. Simply put: our highly financialized economy is gamed to enrich those who run it, at the expense of everybody else.
A recent experience really drove this home for me.
Having received my MBA from Stanford in the late 90s, I remain on several alumni discussion groups. Recently, a former classmate of mine, who now runs her own asset management firm, circulated her thoughts on how today’s graduating students could best access an on-ramp to the ‘money river’.
What’s the ‘money river’? Good question.
The money river is the huge tsunami of investment capital sloshing around the globe, birthed by the historically-unprecedented money printing conducted by the world’s central banks over the past decade. Since 2008, they’ve more than tripled their collective balance sheet:
Tight monetary policy is not the answer to weak productivity growth – Maurice Obstfeld, Romain Duval
The widespread and persistent productivity slowdown witnessed since the Global Crisis had already begun in advanced and low-income countries prior to the crisis. This column argues that the crisis amplified the slowdown by creating ‘productivity hysteresis’, and that monetary policy played an ambiguous role. Policymakers must now address the legacies of the crisis through innovation, education policies, and structural reforms.
The Swiss Franc and The Euro: What Now? – Mihai Macovei
In January 2015, the Swiss National Bank (SNB) unexpectedly removed the de facto peg of the franc to the euro.1 The move was welcomed by free-market economists, including in contributions on Mises Wire2. It was deemed that the short-run adjustments to the Swiss economy triggered by the appreciation of the franc were preferable to the macro-economic stability risks posed by the inflation imported from the euro area during the peg. Yet, it would have been difficult to anticipate that the SNB’s interventionist monetary policy would continue aggressively also after the peg.
ECB Spawned Mass Culture of Financial Dependency that’s Now Very Hard to Undo – Don Quijones
Right at the front of the monetary welfare queue is the government of Italy.
As the Eurozone economy continues to grow, pressure is rising on Europe’s biggest bond buyer, the ECB, to withdraw from the market, a process it has already begun. No one believes that more than the head of Germany’s Bundesbank, Jens Weidmann, who recently told Spanish newspaper El Mundo that the ECB should soon set a date to end its multi-trillion euro asset-buying program.
”The prospects for the evolution of prices correspond to a return of inflation to a level sufficient to maintain the stability of prices,” he said. “For this reason, in my opinion, it would be justifiable to put a clear end to the buying of bonds by establishing a concrete date (for ending the program).”
***Social Change Will Upend the Status Quo – Charles Hugh Smith
The nation is fragmenting because the Status Quo is failing the majority of the citizenry.
The core narrative of the Status Quo is that nothing fundamental needs to be changed: all the problems can be solved with more “free money” (borrowed from the future at low rates of interest) and a few policy tweaks such as Universal Basic Income (UBI) (the topic of my new book Money and Work Unchained).
This core narrative is false: everything needs to change, from the bottom up. And that of course terrifies those gorging at the trough of status quo wealth and power.
China Fails to Woo U.S. With Financial Sector Opening – Alicia Garcia Herrero
Now that the dust has settled, one thing is clear: President Donald Trump’s visit to Asia in November served as a milestone in the increasingly rapid transfer of power from the U.S. to China. President Xi Jinping’s enthronement during the 19th Party Congress as China’s leader for the foreseeable future did most of the work, but Mr. Trump helped by failing to advance a clear agenda articulating the U.S.’s key national interests regarding China.
The transfer of economic power to China has only accelerated since Mr. Xi came to power. It will accelerate further if and when China institutes real economic reform. But when China announced reforms to open up its financial sector—just hours after Mr. Trump concluded his visit to Beijing—the reaction from the Trump administration was muted at best, as the administration remains focused on China’s too-benign attitude toward North Korea and its nuclear missile program.
***Chap. 11 Bankruptcies Spike 107% from Year Ago – Wolf Richter
What caused the biggest jump since the Financial Crisis?
New Chapter 11 bankruptcies in the US more than doubled in December 2017 from a year ago to 699 filings. That jump of 362 filings from December 2016 was the largest year-over-year jump since the Financial Crisis.
This chart shows Chapter 11 filings back to 2011, based on data from the American Bankruptcy Institute. I marked the prior five Decembers with red dots. Note how they’re near the low point of the seasonal swings. That makes the spike in December 2017 even more spectacular:
***New Survey Reveals Staggering Number Of People Are Buying BitCoin On Their Credit Cards – Tyler Durden
A few weeks ago we presented anecdotal evidence from Joseph Borg, director of the Alabama Securities Commission, suggesting that people are taking out home equity loans and cash advances on credit cards just to purchase BitCoin in the hopes of getting rich quick (see: “It’s In The Mania Phase”: Securities Regulator Warns That “Mortgages Are Being Taken Out To Buy Bitcoin”)
“We’ve seen mortgages being taken out to buy bitcoin. … People do credit cards, equity lines,” said Borg, president of the North American Securities Administrators Association, a voluntary organization devoted to investor protection. Borg is also director of the Alabama Securities Commission.
“This is not something a guy who’s making $100,000 a year, who’s got a mortgage and two kids in college ought to be invested in.”
“You’re on this mania curve. At some point in time there’s got to be a leveling off. Cryptocurrency is here to stay. Blockchain is here to stay. Whether it is bitcoin or not, I don’t know,” Borg said in an interview with “Power Lunch.”
Now it seems that the speculation by Borg has been confirmed by a new survey conducted by LendEDU which found that, among other things, nearly 20% of people who have purchased BitCoin have done so using their credit cards.
A US economic Boom in 2018? – NewDealDemocrat
For the last several years, I have tried to identify several graphs that most bear watching over the ensuing 12 months. This year, in addition to watching bond yields like everybody else, the data that most bears watching, it seems to me, can be summed up in the question: Is the US economy about to enter a Boom?
The recent economic news has almost all been good. In particular the unemployment rate has dropped as low as 4%. Meanwhile, the GOP certaionly believes — I most certainly don’t — that the recent tax changes are going to unleash a torrent of Capex spending and wage increases (as opposed to mergers, acquisitions, stock buybacks and executive pay bonanzas).
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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