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Economische aanraders 16-02-2020

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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U.S. Budget: Spending Is The Problem – Daniel Lacalle
10 februari

Every time there is a budget debate, politicians from both parties will discuss the deficit and spending as if the first one did not matter and the latter could only increase. However, the main problem of the US budget in the past four decades is that total outlays rise significantly faster than receipts no matter what the economic growth or revenue stream does. For example, in the fiscal years 2018 and 2019 total outlays rose mostly due to mandatory expenses in Social Security, Medicare, and Medicaid. No tax revenue measure would have covered that amount.
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Government “Fixes” for the Trade Balance Are Worse Than Any Trade Deficit – Frank Shostak
14 februari

In December 2019, the US trade account balance stood at a deficit of $48.9 billion, against a deficit of $43.7 billion in November and $60.8 billion in December 2018.
Most commentators consider the trade account balance the single most important piece of information about the health of the economy. According to the widely accepted view, a surplus on the trade account is considered a positive development while a deficit is perceived negatively. What is the reason for this?
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Wicksteed on Surplus Value – David Gordon
14 februari

Eugen von Bőhm-Bawerk wrote the most famous criticism of Karl Marx’s economic theory, and all students of Austrian economics know his Karl Marx and the Close of His System and his discussion of Marx in the first volume of Capital and Interest. Marx’s labor theory of value could not withstand the criticisms that Bőhm-Bawerk, writing from the standpoint of the subjective theory of value, directs against it. Bőhm-Bawerk, though, is not the only proponent of the subjective theory to examine Marx’s economics.
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The accuracy of long-term growth forecasts by economics researchers – Masayuki Morikawa
10 februari

Although long-term macroeconomic forecasts substantially affect the sustainability of government debt and the social security system, they cannot avoid significant uncertainty. This column assesses whether academic researchers in economics make accurate long-term growth forecasts, comparing ten-year growth forecasts made by Japanese economists in 2006–2007 with the realised figures. Even excluding the years affected by the Global Crisis, the results show that forecasts tend to be biased upwards and involve significant uncertainty, even for economics researchers specialising in macroeconomics or economic growth.
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US Mandatory Spending Projected to Increase Over a Trillion Dollars by 2023 – Daniel Lacalle
12 februari

Every time there is a budget debate, politicians from both parties will discuss the deficit and spending as if the first one did not matter and the latter could only increase. However, the main problem of the US budget in the past four decades is that total outlays rise significantly faster than receipts no matter what the economic growth or revenue stream does. For example, in fiscal years 2018 and 2019, total outlays rose mostly due to mandatory expenses in Social Security, Medicare, and Medicaid. No tax revenue measure would have covered that amount.
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“Harrowing Reality” – Central Bankers Clueless About Implications Of World Financial System Interlinkages – Richard Breslow
14 februari

It’s Friday before a long weekend in the U.S. I expect that, barring any unexpected news, shortly after the University of Michigan data is out, many traders will be thinking about their Valentine’s Day plans rather than the next move in the FRA/OIS spread. Still, how risk goes out will be an important indicator of sentiment. Even if the price action of any individual asset should be taken with a grain of salt.
It was another day and another German data miss. This time it was a flat Q4 GDP print. To be fair, it wasn’t a large shortfall, but their data, relative to both expectations and on an absolute basis, remain worryingly consistent. The currency didn’t take any particular notice. But people already have the position. The options market is skewing more and more to euro downside. And it doesn’t seem like there is much appetite, at this point, to add. Yesterday, ECB Chief Economist Philip Lane said the “low-interest-phase is temporary.” Traders are skeptical and EGBs have stayed bid
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Foreign exchange swaps: Hidden debt, lurking vulnerability – Claudio Borio, Patrick McGuire, Robert McCauley
13 februari

Foreign exchange swaps and forwards are a key instrument in the global financial system for hedging, position-taking and short-term funding. They involve the exchange of notional amounts at a future date and, as funding vehicles, they are akin to other forms of collateralised borrowing (e.g. repo). The amounts involved are huge, but the instruments remain mysterious in some ways: because of an accounting peculiarity, they are treated very differently from other forms of collateralised debt. This column examines their geography and draws implications for both academics and policymakers. It finds that non-US residents’ US dollar forward payment obligations arising from foreign exchange swaps and forwards are likely to be even larger than the corresponding on-balance sheet US dollar debt. It also highlights the favourable regulatory treatment that these instruments receive, and argues that they represent a critical pressure point in international financial markets.
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***Credit-Card Interest Rates Soar to Record High, Bond Yields Drop to Record Low: What Gives? – Wolf Richter
12 februari

My “Credit-Card Spread Index” blows out. Heck if I knew what that means, but it doesn’t mean anything good.
The average yield of investment-grade bonds (as per ICE BofAML US Corporate Yield index) dropped to a record low of 2.62% this week. This comes after the Fed cut its policy rates three times last year, from already low levels, to even lower levels, and after it bailed out the repo-market with over $400 billion over a period of just three months. Bond yields across the board have fallen, and it made borrowing for companies extremely cheap
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Europe Can’t Afford a New “Green Deal” – Andrew Moran
10 februari

Today’s brand of the left-leaning politician is all about substituting what sounds good for what actually works. Modern politics, whether in the US or Europe, is about taking a chainsaw to everything that produced even a modicum of success to appease the deities espousing progressive orthodoxy. There is no better example of this than fossil fuels, an energy source that has lifted us out of destitution and darkness, and given us incredible wealth that the world had never witnessed. What is the Left interested in doing? Using confiscation, cronyism, centralization, and coercion to combat climate change. The European Union will achieve these objectives through the boondoggle-in the-making Green Deal (GD).
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The Violent Collision of Market Fantasy and Viral Reality – Chalres Hugh Smith
14 februari

When the stampede tumbles off the cliff, buyers vanish and markets go bidless.
The shock wave unleashed in China on January 23 is about to hit the U.S. economy and shatter everything that is fragile and fantasy, starting with the U.S. stock market. The shock wave is still reverberating through the vulnerable Chinese economy, toppling all that is fragile: auto sales, sales of empty flats in Ghost Cities, shadow banking loans that cannot be paid, workers’ wages that won’t be paid, businesses that won’t re-open, supply chains dependent on marginal enterprises and most saliently, the faith of the people in their hubris-soaked, self-serving leadership.
The fantasy in the U.S. is that the shock wave doesn’t exist. Since the shock wave has been hurtling with undimmed force toward the shores of all-mighty American complacency beneath the Pacific, unseen, America’s laughable fantasy has spread through the thundering stampede triggered by the fools in the Federal Reserve in early October.
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How to deal with Big Tech mergers – Massimo Motta, Martin Peitz
11 februari

Big Tech mergers increasingly require regulatory authorities with enhanced toolboxes. To ensure genuine competition in the digital marketplace, novel theories of harm will need to be elaborated and applied. This column provides guidance on these issues, arguing that to properly investigate Big Tech mergers, competition law will need to restructure the standards and burden of proof.
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The Gold-Silver Ratio
31 januari

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China’s Economic Schemes Hurt the Chinese Most of All – Patrick Barron
12 februari

In his State of the Union Address—February 4, 2020—President Trump outlined his reasons for punishing nations that manipulate their economies in order to achieve some internal policy goal, such as China. The president claimed that such manipulation was unfair and harmful to its trading partners. His main concern is that by manipulating its economy China “steals” jobs. It does this in several ways
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“Speculative Energy in the Market is Incredibly out of Control” – by Wolf Richter
14 februari

“It is a mind-numbing exercise for investors who see the cognitive dissonance”: CIO at Guggenheim Partners.
This market has been an astounding experience for people who’ve traded through the prior stock market bubbles and the last three crashes, who’ve seen a national and several regional housing bubbles form and implode, who’ve seen the subprime-auto-loan Asset Backed Securities bubble blow up in the mid-1990s and again during the Financial Crisis, and now it’s starting to head the same direction again. But no one can remember ever having seen markets like these that have formed the Everything Bubble.
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***Terror and tourism: How bad news can harm economic development – Tim Besley, Thiemo Fetzer, Hannes Mueller
14 februari

Reporting on violence draws attention to countries not typically covered by international news outlets. This leads to a ‘bad news’ bias, which can affect not only how people view these countries, but whether they choose to visit. Using aggregated spending data to proxy tourist activity, this column documents a robust relationship between the intensity of reporting on violence and subsequent drops in tourist spending, suggesting that a bad news bias can have serious economic consequences for the countries that suffer from it.
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***Three Reasons Why Decentralization and Secession Lead to More Open Economies – Ryan McMaken
15 februari

When we hear of political movements in favor of decentralization and secession, the word “nationalist” is often used to describe them.
We have seen the word used in both Scottish and Catalonian secession movement, and in the case of Brexit. Sometimes the term is intended to be pejorative. But not always.
When used pejoratively — as was the case with critics of Brexit — the implication is that the separatists seek to exit a larger political entity for the purposes of increasing isolation, throwing up greater barriers to trade, and pursuing a more autarkic economic policy. In other words, we’re supposed to believe that efforts at decentralizing political systems leads to states becoming more oppressive and more protectionist.
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Cascading trade protection: Evidence from the US – Aksel Erbahar, Yuan Zi
12 februari

Less than two years after his steel and aluminium tariffs came into effect, President Trump decided to increase the coverage of these tariffs to several downstream products whose domestic producers were hurt by the original tariffs. This column, first published in 2016, presents evidence for such ‘cascading protection’, showing how US protection of inputs increases the probability of petitions for protection by their downstream users.
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***Small Countries Are Better: They’re Often Richer and Safer Than Big Countries – Ryan McMaken
11 februari

In the wake of the Brexit vote, Scottish nationalists have renewed their calls for a new referendum on Scottish independence. But many remain unconvinced, and many claim Scotland is “too small” to be an independent country. Others claim that Scotland is too poor, since Scotland’s GDP per capita is only 90 percent that of England.
But by no measure is Scotland a “poor” country. It may be poorer than England, but Scotland’s GDP per capita puts it about halfway down the rankings of all Organisation for Economic Co-operation and Development (OECD) countries. That means it’s similar to France and Japan by this measure.
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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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