Economische aanraders 20-01-2019
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.
The ECB’s performance during the crisis: Lessons learned – Ashoka Mody, Milan Nedeljkovic
The ECB’s actions in the wake of the Global Crisis have been described as hesitant, relative to other central banks. Based on analysis of financial markets’ response to the ECB’s interventions during the euro crisis, this column argues that central bank interventions are effective if they clearly signal a commitment to reinvigorating the economy and if they address the source rather than the symptom of financial stress. The ECB did not follow these principles, limiting its ability to improve financial market sentiment.
The Crisis of Argentina and How to Reduce Country Risk – Daniel Lacalle
Argentina maintains a high country risk. In fact, it is currently the second highest in Latin America and the third of the emerging countries if we include Turkey.
What is the country risk? It is the spread between the yield of the sovereign bond of a nation compared with the United States Treasury bonds, the lowest risk asset. Investors demand higher-yielding bonds due to the risk of the issuer’s economy, to compensate for the currency and solvency risk.
Argentina’s country risk increased by 130% in 2018 due to delayed reforms, constant devaluation and loss of foreign exchange reserves. The country risk has fallen significantly from its high of 817 basis points to the current 706. However, it remains the second highest in the region after Venezuela.
Bottom Suddenly Falls Out of Demand in China in Many Sectors – Wolf Richter
“What we witnessed in November and December was just extraordinary.”
“I’ve been a manager for almost half a century, but this is the first time I’ve seen such a large single-month drop in orders for us,” said Nidec CEO Shigenobu Nagamori. “What we witnessed in November and December was just extraordinary.”
Nidec, a Japanese company with $14 billion in revenues last year, makes a wide range of electric motors, from tiny devices that make the iPhone vibrate to industrial motors. It’s the world’s largest manufacturer of motors for disk drives. For the automotive industry, it makes things like engine and transmission oil pumps, coolant pumps, control valves, and fans and blowers. It makes motors for industrial robots, etc.
Predicting recessions using term spread at the zero lower bound: The case of the euro area – Ralf Fendel, Nicola Mai, Oliver Mohr
The flattening of the US yield curve has left academics, central bankers and market commentators divided, with one camp interpreting it as a sign of impending recession (in line with historical patterns), and the other camp arguing that this time is different given unprecedented changes in monetary policy and other structural forces. This column argues that the ECB’s quantitative easing programme undermined the performance of term spreads as predictors of recessions. It suggests and tests a modified term spread and several other variables that are more successful at predicting recessions.
France’s Crisis Is the Latest In a Long History of Conflict over France’s Un-Free Markets – András Tóth
Even after ten weeks, the “yellow vest” protests in France continue. Mass protests such as these, with their violence and destruction, have not been seen in France for decades.
The basic narrative of these events is well known. Macron was elected with a program, which the promise he would enhance the competitiveness of the national economy through liberalization reforms. It was a kind of “Make France Competitive Again” program to ensure that France not be dependent on the goodwill of Germany. He enjoyed some outright support among the electorate (about one quarter of the voters) and a larger pool of voters half-heartedly accepted his proposal, given that his archrival campaigned under the banner of Frexit, leaving Europe completely. His steps toward reform, it turned out, were not well liked, and his popularity went into free fall. Nonetheless, the reform process was not scuttled by violent resistance from the unions — a fate which undermined the reform attempts of his predecessors, including the left-wing Hollande and the right-wing Sarkozy.
***China Pledges US Buying Spree to Reduce Trade Surplus With US to Zero By 2024 – Mike Shedlock
China pledges to buy over $1 trillion in US goods and services by 2024 to eliminate the trade gap with the US.
In discussions that are not yet public, and will likely be empty promises, sources say China Offers a Path to Eliminate U.S. Trade Imbalance.
China has offered to go on a six-year buying spree to ramp up imports from the U.S., in a move that would reconfigure the relationship between the world’s two largest economies, according to officials familiar with the negotiations.
Brexit: Blame it on the banking crisis – Nicholas Crafts
Brexit in 2019 and the banking crisis in 2007 to 2009 are usually seen as unrelated events. This column argues that they are in fact closely connected. The austerity policies embarked on in response to the fiscal damage resulting from the banking crisis triggered the protest votes of left-behind voters, which at the margin allowed Leave to win the referendum vote. The implication is that the economic costs of the banking crisis are much larger than is usually supposed.
Volalitily, now the whole thing – John H. Cochrane
What’s causing the big drop in the stock market, and the bout of enormous volatility we’re seeing at the end of the year?
The biggest worry is that this is The Beginning of The End — a recession is on its way, with a consequent big stock market rout. Is this early 2008 all over again, a signal of the big drop to come?
Maybe. But maybe not. Maybe it’s 2010, 2011, 2016, or the greatest of all, 1987. “The stock market forecast 9 of the last 5 recessions,” Paul Samuelson once said, and rightly. The stock market does fall in recessions, but it also corrects occasionally during expansions. Each of these drops was accompanied by similar bouts of volatility. Each is likely a period in which people worried about a recession or crash to come, but in the end it did not come.
China’s Consumers Rattle Global Automakers as Sales Plunge – Wolf Richter
Welcome to the Big Club of Saturation & Decline.
For the month of December, light new-vehicle sales in China plunged 13%, compared to a year ago, to 2.23 million vehicles, the China Association of Automobile Manufacturers (CAAM) announced on Monday. Sales through June had risen 6%, but then came July, and now there have been six months in a row of year-over-year declines – with the last four months dousing any remaining enthusiasm about China’s consumers with double-digit declines
Why We Need Savings to Produce What We Need – Frank Shostak
Conventional wisdom says that savings is the amount of money left after monetary income was used for consumer outlays, implying that saving is synonymous with money. Hence, for a given consumer outlays an increase in money income implies more saving and thus more funding for investment. This in turn sets the platform for higher economic growth.
Following this logic, one could also establish that increases in money supply are beneficial to the entire process of capital formation and economic growth. (Note increases in money supply result in increases in monetary income and this in turn for a given consumer outlays implies an increase in savings).
The mixed success of the Stability and Growth Pact – Jasper De Jong, Niels Gilbert
The Stability and Growth Pact has been criticised by some for imposing fiscal tightening during recessions, and by others for a lack of compliance. Using a database of all country-specific Excessive Deficit Procedure recommendations since the introduction of the euro, this column shows that the corrective arm of the pact, which is procyclical by design, is an important driver of euro area fiscal policy. The preventive arm, which is designed to avoid the need for such procyclical policies, is much less effective and reform of the pact should focus on addressing this.
“Modern Monetary Theory” Is a Joke That’s Not Funny – Michael Strain
Yes, a government that issues its own currency can pay its bills. But piling up debt for no urgent reason is lunacy…
If you follow the debates over U.S. economic policy, you had probably heard of modern monetary theory well before freshman Democratic Representative Alexandria Ocasio-Cortez spoke favorably about it earlier this month.
If you thought from the start that the whole idea sounded like lunacy, you were right, even if it’s possible to admit some sliver of sympathy for it. So why is MMT, as it is known for short, generating such intense interest now?
Disruption, Concentration, and the New Economy – Raghuram Rajan
The rise of Big Tech has ushered in broad structural economic changes that academics and policymakers are only just beginning to understand. Still, some trends are already discernible, and they raise urgent questions about the future of competition, innovation, and inequality in the United States and around the world.
CHICAGO – The growing dominance of leading technology firms has occasioned an intense debate about the tradeoffs between efficiency and market power, while raising questions about what the changing structure of markets will mean for innovation and the distribution of wealth in the future. The annual Jackson Hole Economic Policy Symposium in Wyoming, organized by the Federal Reserve Bank of Kansas City, offered an excellent set of papers and commentators on the subject.
***Creativity under fire: The effects of competition on creative production – Daniel P. Gross
Creativity, despite its importance, is rarely studied by economists. The column uses the outcome of design competitions to evaluate whether positive ratings and strong competition spur creativity. Positive feedback with little competition reduces creativity, while the presence of small numbers of highly rated competitors increases it. But as the numbers of strong competitors increases, designers are increasingly likely to give up entirely.
Will Globalists Sacrifice The Dollar To Get Their ‘New World Order’? – Brandon Smith
Trade is a fundamental element of human survival. No one person can produce every single product or service necessary for a comfortable life, no matter how Spartan their attitude. Unless your goal is to desperately scratch an existence from your local terrain with no chance of progress in the future, you are going to need a network of other producers. For most of the history of human civilization, production was the basis for economy. All other elements were secondary.
At some point, as trade grows and thrives, a society is going to start looking for a store of value; something that represents the man-hours and effort and ingenuity a person put into their day. Something that is universally accepted within barter networks, something highly prized, that is tangible, that can be held in our hands and is impossible to replicate artificially. Enter precious metals.
ECB’s huge forecasting errors undermine credibility of current forecasts – Zsolt Darvas
In the past five years ECB forecasts have proven to be systematically incorrect: core inflation remained broadly stable at 1% despite the stubbornly predicted increase, while the unemployment rate fell faster than predicted. Such forecast errors, which are also inconsistent with each other, raise serious doubts about the reliability of the ECB’s current forecast of accelerating core inflation and necessitates a reflection on the inflation aim of the ECB.
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.