Economische aanraders 18-02-2018
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 Just Changed? – Charles Hugh Smith
The illusion that risk can be limited delivered three asset bubbles in less than 20 years.
Has anything actually changed in the past two weeks? The conventional bullish answer is no, nothing’s changed; the global economy is growing virtually everywhere, inflation is near-zero, credit is abundant, commodities will remain cheap for the foreseeable future, assets are not in bubbles, and the global financial system is in a state of sustainable wonderfulness.
Macroprudential stress tests – Ron Anderson, Chikako Baba, Jon Danielsson, Heedon Kang, Udaibir Das, Miguel
Current stress testing of banks is focused on the resiliency of individual banks to exogenous shocks. This column describes how the next generation of macroprudential stress tests aim to capture the endogenous nature of systemic risk caused by the interaction of all the institutions and markets making up the financial system. This will lead to a better policy mix aimed at preserving financial stability.
Is it a Transatlantic, Transpacific or Eurasian global economy? – Nicolas Moës
A look at the data on bilateral trade, services, investment and protectionism between Asia, Europe and the US in recent years gives some indication of the future shape of the world economy.
As the US trade policy has changed with the new administration, many now consider that the EU and Asia have to step up as champions of globalisation. However, Eurasian economic relations have already been more intense than each side’s relations with the US in some dimensions. In this post we look at the data on bilateral trade, services, investment and protectionism between Asia, Europe and the US in recent years.
How to Manipulate Stocks: Chinese Authorities Step in to Stop the Rout – Wolf Richter
For proper effect, the directives were purposefully leaked to the media.
The Shanghai Composite Index plunged 10.2% last week, the largest weekly drop in two years, and was down 11.4% since January 26. But it wasn’t just last week that things became unglued. The Shenzhen Composite Index had plunged 14% since January 24, only about half of it last week.
The Spring Festival holiday is coming up this week, and there were fears that traders want to unload additional positions ahead of it. There are other factors lined up against the stock market, including China’s off-and-on-again crackdown on leverage. So it was time for authorities to step in and set things right.
What Is Optimal Monetary Policy, Anyway? – Karl-Friedrich Israel
Ever since the important contributions of new classical economists Finn E. Kydland and Edward C. Prescott during the 1970s and 80s, modern macroeconomics seeks optimal rules for monetary policy. Indeed, Milton Friedman had previously emphasized the importance of a binding rule for monetary policy. He recommended a constant but moderate expansion of the money stock over time as well as the abolition of fractional reserve banking in order to improve the central bank’s control over the money stock. Neither of these two measures has ever been implemented over an extended period of time.
As Bitcoin Nears $11,000, Here’s A History Of Its Biggest Ups And Downs – Tyler Durden
The cryptocurrency rebound off Feb 5th’s bloodbath lows (below $6,000 for Bitcoin) has been impressive, as a ‘mysterious’ massive buyer ‘bought the dip’ and momentum took care of the rest.
With Bitcoin now nearing $11,000 (almost a double off the lows), CoinTelegraph details, this is just the latest down-and-up in the roller-coaster ride that cryptocurrencies have been over the past few years.
Can New NAFTA End Systematic Wage Repression in Mexico? – Don Quijones
Chronic low salaries in Mexico have become a big bone of contention in the ongoing renegotiation of the North American Free Trade Agreement (NAFTA). In a talk at the University of Chicago last week, Canadian premier Justin Trudeau reiterated that if the labor standards of NAFTA were improved, companies would have fewer incentives to move factories to Mexico for cheap labor while Mexican workers would get a better deal. But that’s the last thing the Mexican government and global manufacturers with operations in Mexico seem to want.
Moody’s offered a bleak prognosis for Mexico’s low-cost regime.
Should We Use Probability in Economics? – Frank Shostak
Modern economics in addition to sophisticated mathematics also employs probability distributions. What is probability? The probability of an event is the proportion of times the event happens out of a large number of trials.
For instance, the probability of obtaining heads when a coin is tossed is 0.5. This does not mean that when a coin is tossed 10 times, five heads are always obtained.
However, if the experiment is repeated a large number of times then it is likely that 50% will be obtained. The greater the number of throws, the nearer the approximation is likely to be.
***Urban concentration and economic growth – Susanne Frick, Andrés Rodríguez-Pose
Urban concentration is typically deemed to lead to greater national economic growth. This column challenges this view, using an original dataset covering 68 countries over the past three decades. Urban concentration levels have decreased or remained stable on average, though these averages hide widely diverging trends across countries. Although concentration has been beneficial for high-income countries, this hasn’t been the case for for developing countries.
Freedom and the Minimum Wage – Richard M. Ebeling
Most of us both value and take for granted the ability to make decisions about our own lives. When busybodies put their noses and their mouths into our personal affairs, we often say or at least think, “Mind your own business.” Unfortunately, we live in a world in which too frequently government won’t leave us alone, and instead, very actively tries to mind our business for us.
Let us briefly look at one such instance in which Uncle Sam puts his nose in other people’s business, that being the legal hourly minimum wage. The federal government began dictating the minimum lawful amount an employer must pay someone working for them in 1933, as part of Franklin Roosevelt’s New Deal legislation. It was declared unconstitutional in 1935 by the U.S. Supreme Court, but was reinstituted in 1938 as part of the Fair Labor Standard Act, and the Supreme Court (with other judges now on the bench) upheld it in a 1941 decision.
Big Reset Looms for Corporate Credit Market – Wolf Richter
Market still blows off Fed, Treasury selloff, and volatility in stocks.
“Leveraged loans,” extended to junk-rated and highly leveraged companies, are too risky for banks to keep on their books. Banks sell them to loan mutual funds, or they slice-and-dice them into structured Collateralized Loan Obligations (CLOs) and sell them to institutional investors. This way, the banks get the rich fees but slough off the risk to investors, such as asset managers and pension funds.
This has turned into a booming market. Issuance has soared. And given the pandemic chase for yield, the risk premium that investors are demanding to buy the highest rated “tranches” of these CLOs has dropped to the lowest since the Financial Crisis.
Deutsche: “Nobody Can Understand What’s Going On With The Dollar… The Answer Is Simple” – Tyler Durden
Earlier this week, the bizarre, unexplainable, ongoing plunge in the dollar and US bond prices in the aftermath of the stronger than expected CPI print which also sent equities surging, prompted at least one trader at Citi to explode: “Wake Up Folks, It’s Not Risk Positive.
Then again, maybe it is not all that unexplainable.
As Deutsche’s FX strategist, George Saravelos, writes, he has been getting numerous inquiries as to how can it be that US yields are rising sharply, yet the dollar is so weak at the same time?
He believes the answer is simple: the dollar is not going down despite higher yields but because of them. Higher yields mean lower bond prices and US bonds are lower because investors don’t want to buy them, or as he puts it “this is an entirely different regime to previous years.”
***Average income per capita, health outcomes, and the allocation of development assistance for health – Olivier Sterck, Max Roser, Mthuli Ncube, Stefan Thewissen
Large multilateral organisations like WHO and the UN rely heavily on average income data in determining eligibility for, and the allocation of, development assistance for health. This column tests this paradigm by analysing the determinants of health outcomes for 99 countries. A country’s epidemiological surroundings, poverty gap, and institutional capacity appear to be much better predictors of health outcomes than gross national income. These findings suggest alternative metrics that could be leveraged in allocating development assistance for health.
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.
Eerdere afleveringen van dit wekelijkse overzicht vindt u hier.