Economische aanraders 18-10-2020
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.
The Recovery Is Stalling. We Need Pro-Market Reforms Now – Daniel Lacalle
The Economic Sentiment Index of the European Commission for August shows that the recovery of the European economy is slowing down. Not only has the pace of recovery slowed significantly, but the data for Spain reflected evidence of being the only economy in the euro area where the index fell compared to July. If we look at the Organisation of Economic Co-operation and Development (OECD) leading indicator index, the evolution is also worrying. 60 Bloomberg also tracks the daily activity in most economies, and the evidence points to a deceleration in August in most developed and emerging economies. Only the United States seems moderately better in comparison, although the slowdown in the recovery process is also evident.
Legal air cover – Patrick Bolton, Mitu Gulati, Ugo Panizza
The Covid-induced economic harm may soon result in multiple sovereign debtors moving into default territory – a situation that the global financial architecture is not built to tackle. This column makes the case for ex post state intervention in debt contracts to provide temporary legal protection to debtor countries while they divert resources to deal with the Covid-19 crisis. It shows that in the case of Greece, when such intervention was necessary, there were no negative spillovers on periphery euro area debt markets associated with the Greek ex post modification of contract terms.
Central Banks and the Problem with Playing God – Pascal Hügli
Today’s Western institutions have long been deemed to be sacrosanct. As a matter of fact, though, nation-states are increasingly met with reservation or even outright resentment. Public trust in government is near historic lows, and pillars like the media or democracy are suffering from a loss of confidence.
But one modern institution seems to be standing as strong as ever: central banks. Although their role has changed significantly over the course of a few decades and their mandate has been infringed on more than once, they are still met with a high level of trust by financial experts, economic actors, and investors. With every looming crisis heating up, global liquidity is seeking refuge in government bonds and cash, while central banks are being called for immediate help.
Extend-and-Pretend Caused Bankruptcies to Plunge in Germany, France, Spain. Now Central Banks Tell Banks to Prepare for Bankruptcy Surge – Nick Corbishley
The “second wave,” if prolonged, could cause bad loans to almost triple, to €1.4 trillion, says the ECB.
German banks need to prepare themselves for a sharp spike in corporate bankruptcies early next year, the Bundesbank warned this week in its 2020 Financial Stability Review. It anticipates around 6,000 insolvencies in the first quarter of 2021. While this would be a little lower than at the peak quarter of the Global Financial Crisis, the Bundesbank cautioned that it “cannot rule out that … a lot more companies will go bankrupt than is currently expected.”
Toward a Political Economy of Climate Change – Jörg Guido Hülsmann
The following thoughts have been presented on October 10, 2020, at a broader public conference in Germany. The conference was intended to discuss environmental policies from a free market perspective. Although my research does not concern this field, I have always been interested in the general theory of interventionism and therefore agreed to comment on climate change policy. Sometimes the fresh look of an outsider can be helpful. If my remarks spur further thought on climate change policy, they will have fulfilled their purpose.
Our Simulacrum Economy – Charles Hugh Smith
In the hyper-real casino, everyone has access to the terrors of losing, but only a few know the joys of the rigged games that guarantee a few big winners by design.
Readers once routinely chastised me for over-using simulacrum to describe our economy and society. The problem is this word perfectly describes the hollowed-out, rigged economy and social order we inhabit and so synonyms don’t quite cut it: it’s not the same as simulation or imitation or counterfeit.
My use (or over-use) dates back to the 2009 publication of my book Survival+, which included a chapter titled Simulacrum and the Politics of Experience. I use simulacrum to describe a carefully constructed representation of a once-authentic system that is intended to shape our behavior to suit the interests of those constructing the simulacrum.
The simulacrum has the look and feel of the once-authentic system but it’s rigged to benefit the few whose interests are better served by the simulacrum than they could ever be served by an authentic system.
Why There’s So Much Confusion over What “Inflation” Means – Frank Shostak
Understood properly, inflation is not a general increase in prices but is an increase in the money supply “out of thin air” which brings about the impoverishment of wealth generators.
When inflation is seen as a general increase in prices, then anything that contributes to price increases is called inflationary. In this framework, not only does the central bank have nothing to do with inflation, on the contrary, the bank is regarded as an inflation fighter.
Stimulus & Debt-Deferral Economy: Americans Splurged. Huge Price Increases Boosted Auto Sales. Liquidation Sales Pumped up Department Stores – Wolf Richter
Depicted by my 13 whiplash-charts.
Total retail sales – sales of goods in stores and online, but not including services such as doctor’s visits, insurance, airline tickets, hotel bookings, rent, etc. – in September jumped by 1.9% from August, to a record of $549 billion (seasonally adjusted), according to the Census Bureau. Compared to September 2019, retail sales were up 5.4%.
But as we’ll see in a moment, there were huge differences between categories, from sales at clothing stores and restaurants which, though they bounced a lot, were still below where they’d been years ago; to sales at stores for building materials and garden supplies, which jumped from record to record during the crisis
The international dimension of a central bank digital currency – Massimo Minesso Ferrari, Arnaud Mehl, Livio Stracca
The majority of central banks around the world are working on their own digital currency. This column argues that central bank digital currencies would not only have domestic macroeconomic and financial implications for the issuing economy, they would also have implications for the rest of the world. In particular, the unique characteristics of a central bank digital currency, if used internationally, would create a new ‘super charged’ uncovered interest parity condition which would induce stronger international linkages in a quantitatively relevant way.
Why Slave Economies Thwart Entrepreneurial Innovation – Lipton Matthews
The new history of capitalism (NHC) offers libertarians an exciting opportunity to defend the vitality of capitalism. Scholars like Sven Beckert, Walter Johnson, and Edward Baptiste argue that slavery provides fascinating insights into the workings of early American capitalism and that it furnished the capital to fuel industrial development. Consequently, libertarians have responded to this declaration by articulating that slavery cannot explain America’s prosperity. However, in their determination to refute this proposition they are overlooking a glaring conceptual error promulgated by the NHC: slave economies had a propensity for radical innovation. By portraying slavery as a dynamic economic system, left-leaning historians can further validate their thesis that slavery and capitalism are inextricably linked. Slave societies did employ technologies, but they were not outlets for revolutionary developments.
Hyperinflation Is Here – Alasdair Macleod
Definition: Hyperinflation is the condition whereby monetary authorities accelerate the expansion of the quantity of money to the point where it proves impossible for them to regain control.
It ends when the state’s fiat currency is finally worthless. It is an evolving crisis, not just a climactic event.
Visualizing The World’s Gold & Silver Coin Production Vs. Money Creation – Tyler Durden
Both precious metals and cash serve as safe haven assets, intended to limit losses during market turmoil. However, as Visual Capitalist’s Jenna Ross notes, while modern currencies can be printed by central governments, precious metals derive value from their scarcity.
In this infographic from Texas Precious Metals, we compare the value of the world’s gold and silver coin production to global money creation.
The Great American Oil & Gas Massacre: Bankruptcies Hit New Milestone as Bigger Companies Let Go – Wolf Richter
The American Oil Boom Was Where Money Went to Die.
The amount of secured and unsecured debts, such as loans and bonds, listed in bankruptcy filings in the third quarter by US oil and gas companies, at $34 billion, pushed the total oil-and-gas bankruptcy debt for 2020 to $89 billion, according to data compiled by law firm Haynes and Boone. And this nine-month total already surpassed the full-year total of oil-bust year 2016.
Goldman Sachs: Dump Dollars, Buy Silver – SchiffGold
Sell dollars and buy silver. That’s Goldman Sachs’ recommendation.
Peter Schiff has been warning about a dollar collapse and now the mainstream is even getting bearish on the dollar.
In response to the economic shutdowns imposed by governments to deal with the coronavirus pandemic, the Federal Reserve is printing money to infinity and beyond. On top of that, it has shifted its inflation targeting to allow inflation to run hot meaning there is no end in sight to the currency debasement. This is bearish for the dollar and an article published by Reuters last month quoted a number of mainstream analysts talking about “dollar woes.”
***Setting the Record Straight on Income Inequality – Eben Macdonald
Much Progressive thought is based on the theory of power structures. It states that all disparities, inequalities and differences in economic and cultural power in society must inevitably be attributed to innate discriminatory forces within that system. This idea originates from Karl Marx’s theory of Surplus Value: it states that an employer making profit is inherently a form of worker exploitation.
This explains the Left’s utter obsession with income inequality: the gap between what an Indian farmer and Bill Gates earn. The growing concern about income inequality rests on three premises: first, that it has risen substantially in recent decades (and that it is as bad as the public perceives it to be). Second, that it can be explained as the rich exploiting the poor. Third, that relative disparities in wealth and income are more important than the absolute living standards of the poorest. Let’s examine each in turn.
Recessions Are A Good Thing, Let Them Happen – Lance Roberts
It is a given that you should never mention the “R” word. People immediately assume you mean the end of the world: death, disaster, and destruction. Unfortunately, the Federal Reserve and the Government also believe recessions “are bad.” As such, they have gone to great lengths to avoid them. However, what if “recessions are a good thing,” and we just let them happen?
“What about all the poor people that would lose their jobs? The companies that would go out of business? It is terrible to think such a thing could be good.”
Sometimes destruction is a “healthy” thing, and there are many examples we can look to, such as “forest fires.”
***California Is Blaming Its Crippled Economy On Climate Change – Tyler Durden
With mass exodus occurring from California and the state on the verge of going broke, Democrats aren’t blaming their decades old misunderstanding of economics – but rather are using climate change as the scapegoat.
California is now turning to wildfires that have made their way through 4.1 million acres in the state to lay blame as to the state’s worsening financial state. The fires have cost just $1.1 billion to battle over the last three years, a relatively small sum for such a large state, according to Bloomberg.
Highly Leveraged Commercial Real Estate Bets that UK Local Authorities Took to Meet Budget Shortfalls Begin to Unravel – Nick Corbishley
With impeccable timing.
For the last two years, KPMG has refused to sign off the accounts of Spelthorne borough council, a tiny local authority on the outskirts of London that has taken on huge amounts of debt to buy more than £1 billion of commercial and residential property, it has been revealed. The council has an annual budget of just £22 million, yet it has amassed more commercial property than just about any other local authority in the UK, all of it debt financed.
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