Economische aanraders 17-11-2019
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.
***Exposure to frequent price changes shapes inflation expectations – Francesco D’Acunto, Ulrike Malmendier, Michael Weber
Policymakers seek to manage inflation expectations, but we understand little about how households form and update their expectations of inflation. The column tests Lucas’s conjecture that the price changes households observe, rather than all price changes, drive expectations. A measure of individual household consumption weighted by the frequency of purchase is a statistically and economically significant driver of households’ expectations. This challenges the modelling assumptions that central bank policymakers currently make.
Medicare-for-All “Socialism” Is Just Another Racket – Charles Hugh Smith
The entire system of health needs to be re-organized from the ground up, and funding the rackets will only speed the collapse of the system.
The core problem with “socialist” proposals such as Medicare-for-All is that they don’t actually fix what’s broken–they just expand existing rackets such as the healthcare/sickcare racket, the higher education racket, and so on.
Let’s start by separating “real socialism” (state ownership of the means of production) from “faux socialism” (the state borrows trillions of dollars to fund self-serving public-private rackets).
The basic idea of classic socialism is that state ownership of the means of production enables the state to harvest the surplus production and invest it in the public good. If the state is organized as a democracy, then the public gets a say in defining “the public good” and changing course if the national surplus is being mal-invested or diverted into the hands of the few under the guise of “the public good.”
Resolving the missing deflation and inflation puzzles – Jesper Lindé, Mathias Trabandt
The alleged breakdown of the Phillips curve has left monetary policy researchers and central bankers wondering if we need to develop completely new models for price and wage determination. This column argues that a relatively small alteration of the standard New Keynesian model, combined with using the nonlinear instead of the linearised solution, is sufficient to resolve the two puzzles – the ‘missing deflation’ during the recession and the ‘missing inflation’ during the recovery – underlying the supposed breakdown.
Global Debt To Hit All Time High $255 Trillion, 330% Of World GDP
– Tyler Durden
There are three certainties in life: death, taxes and that global debt will keep rising in perpetuity.
Addressing the third, yesterday the Institute of International Finance reported that global debt has now hit $250 trillion and is expected to hit a record $255 trillion at the end of 2019, up $12 trillion from $243 trillion at the end of 2018, and nearly $32,500 for each of the 7.7 billion people on planet.
After Years of Decline, Competition in Banking Finally Grows Again – Josh Reini
US Banks are seeing a larger number of new entrants into the industry. Chime, a mobile-only bank, has opened two million online checking accounts and is adding more customers each month than Wells Fargo or Citibank. Firms from outside traditional consumer banking including Square, Goldman Sachs (Marcus), and Robinhood are entering the industry as well. The consulting firm CG42 said in a recent report on the vulnerability of retail banking that it expects the ten largest banks to lose $344 billion in deposits over the next year.
Mexico’s Cancelled $13-Billion Zombie-Airport Refuses to Die – Nick Corbishley
The people voted to scrap the project that was one-third finished, $4 billion over budget, mired in allegations of corruption, and built on an unstable lake-bed. But it has a life of its own.
A year ago, the Mexican people — albeit a small fraction of the electorate — voted to scrap a new $13-billion airport for the capital that was almost one-third finished, at least $4 billion over budget, and mired in allegations of corruption. Around $5 billion had already been poured into the new Texcoco airport, which was to feature a futuristic, X-shaped terminal designed by Norman Foster. Another $8.3 billion was earmarked to finish it.
The political colour of fiscal responsibility: Trump’s fiscal policy is in the wake of Republican tradition – Fabrizio Zilibotti, Andreas Müller, Kjetil Storesletten
The growth of the US national debt during the Trump presidency is particularly remarkable given its overlap with a period of economic expansion. But in this regard if few others, the Trump administration is no outlier. This column challenges the claim that Republicans adhere to fiscal conservatism in debt policy. Instead, it shows that Republican administrations since WWII have been more prone to expand government debt than their Democratic counterparts. And broadly speaking, the same pattern emerges in a panel of OECD countries.
The Holy-Cow Moment for Subprime Auto Loans; Serious Delinquencies Blow Out – Wolf Richter
But it’s even worse than it looks. And this time, there is no jobs crisis. This time, it’s the result of greed by subprime lenders.
Serious auto-loan delinquencies – auto loans that are 90 days or more past due – in the third quarter of 2019, after an amazing trajectory, reached a historic high of $62 billion, according to data from the New York Fed today
Apple Is Now Bigger Than The Entire US Energy Sector; Disney Is Bigger Than Europe’s Top 5 Banks – Tyler Durden
Something fascinating took place on January 3: on that day AAPL slashed its revenue guidance, blamed China, and triggered a cascade of flash crashes across various carry currency pairs. More importantly, that day also saw the lowest stock print for AAPL since the summer of 2017, and triggered an unprecedented ramp in AAPL stock which since then is up a mindblowing 86%…
Why Friedman Is Wrong on the Business Cycle – Frank Shostak
According to an article in Bloomberg on November 5, 2019, Milton Friedman’s business cycle theory seems to be vindicated.
According to Milton Friedman, strong recoveries are just natural after particularly deep recessions. Like a guitar string, the harder the string is plucked down, the faster it should come back up.
On the decline of R&D efficiency – Tsutomu Miyagawa, Takayuki Ishikawa
Following the Global Crisis, some countries increased expenditures on research and development (R&D) to address secular stagnation. This column investigates how successful this rise in R&D scale was in supporting productivity growth in Japan and other advanced economies. It argues that R&D efficiency has declined in many of these countries in the past decade, compared to the preceding ten years. This suggests that increasing R&D spending is not enough to foster growth, and that countries need to do more to support innovation and collaboration in carefully chosen sectors.
***Intellectual Property as the New Guild System – Frank Hollenbeck
The standard justification for intellectual property — i.e., patents and copyrights and trademarks — is that the creative process would be significantly reduced if such protection did not exist. The underlying assumption is that the financial reward must be augmented by a grant of exclusivity enforced by the coercive power of government. Because we can freely copy an invention, innovation or other creative ideas, a financial reward is viewed as necessary for these intangible ideas unlike a tangible object sold in the marketplace.
The real effects of money supply shocks: Evidence from maritime disasters in the Spanish Empire – Adam Brzezinski, Yao Chen, Nuno Palma, Felix Ward
During the early 16th to 19th centuries, Spain received large amounts of monetary silver from its colonies in America. Vagaries of the sea thus affected Spain’s money supply. This column investigates the effects of money supply shocks on the economy using the case of maritime disasters in the Spanish Empire. It finds that a one-percentage-point reduction in the money growth rate caused a 1.3% drop in real output that persisted for several years. Analysing monetary transmission channels, it shows that price rigidities and credit frictions account for most of this non-neutrality result.
*** Ludwig von Mises, Sociology, and Metatheory – Christian Robitaille
This paper discusses the epistemological status and potential scope of the discipline of sociology based on the writings of Ludwig von Mises. More specifically, it presents his epistemological distinction between theory and history, and argues that sociology can be integrated in this framework as a historical discipline. As such, it must be a praxeologically guided study of general or specific social phenomena that already occurred or are likely to occur. Additionally, this paper addresses the general insights provided by Mises to questions of interest to the field of sociology—the division of labor and the evolution of society, the social effects of socialism and capitalism, class analysis, and the role of ideas in social change—in order to infer from it the general tasks that sociology, as a historical discipline, can accomplish in its study of social phenomena.
Even With Better Education, Millennials Earn 20% Less Than Baby Boomers, Study Finds – Tyler Durden
The generational wealth gap has widened to historic levels, according to a recent study comparing millennial earnings to older generations’, according to CNBC.
When adjusted for inflation, millennials earn 20% less than baby boomers did at the same stage in their careers, according to the study, entitled “the Emerging Millennial Wealth Gap”. Median incomes for workers aged 18 to 34 are way down from their levels in the 1980s. The disparity is nothing new: Other studies have arrived at a similar conclusion. Despite being the most well-educated generation of all time (aside from Gen Z, probably), millennials earn comparatively less than their older peers did during similar periods.
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