Economische aanraders 20-05-2018
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.
Will the New Fed Get Rid of All its Mortgage-Backed Securities? That Seems to be the Plan – Wolf Richter
The Fed shouldn’t be getting into “allocating credit.”
The new Fed has trouble taking shape. The seven-member Board of Governors, which is at the core of the policy setting FOMC, has four vacant slots. President Trump’s nominee for one of those slots, Marvin Goodfriend, has been hung up in the Senate for months and appears to go nowhere. Two other nominees are currently trying to navigate the confirmation process: Michelle Bowman, a banking regulator from Kansas; and PIMCO executive Richard Clarida for the vice chairman slot.
Shining a light on PPP measurement – Maxim Pinkovskiy, Xavier Sala-i-Martin
Purchasing power parities have been one of the successes of economic measurement. This column asks whether these adjustments are a better measure of the underlying economy than market exchange rates, whether our successive estimates of PPP are improving, and whether we should discard past PPPs when new data become available. Using a regression of night-time lights on PPP-adjusted GDP data, it argues that the answers are yes, yes, and (for now) yes. In fact, current estimates of prices now may be better estimates of past prices than estimates of those past prices made at the time.
7 Reasons Why European Banks Are in Trouble – Philip Bagus
While the euro crisis seems far away as all Eurozone countries ran government deficits below 3 percent of GDP, there is one problem for the euro that quietly keeps growing: the unresolved banking crisis. And this is not a small problem. The Eurosystems´and euro banks´ balance sheets totaled €30 trillion in January 2018, that is about 291 percent of GDP.
European banks are in trouble for several reasons.
First, banking regulation has become tighter after the financial crisis. As a consequence regulatory and compliance costs have rise substantially. Today banks have to fulfill demands by national authorities, the European Banking Authority, the Single Supervisory Mechanism, the European Securities and Markets Authority and the national central banks. Being at a staggering 4% of total revenue currently, compliance costs are expected to rise to 10% of total revenue until 2022.
The Long Death of America’s Middle Class – Nick Giambruno
The American middle class is dying.
In 2015, it dipped below 50% of the population for the first time since data collection started on the issue. It’s now an official minority group.
Meanwhile, nearly half of Americans don’t have enough money to cover a surprise $400 expense. Many are living paycheck to paycheck, with little to no cushion. And US homes are less affordable than they’ve been in decades—possibly ever.
I’ll tell you why this is happening and how to secure your spot among the “haves” in a moment. But first, let’s take a look at the America that was.
Cryptocurrencies’ challenge to central banks – Antonio Fatás, Beatrice Weder di Mauro
Central banks are alert to the challenge of cryptocurrencies, and are contemplating reactions ranging from prohibiting private issuance to embracing such currencies. This column argues that the risks of introducing a central bank digital currency are high while the efficiency gains do not seem large. A more efficient system can be achieved via innovation in current payment infrastructure.
Global QE Dream Ends, ECB Sees Rate Hikes, “Normalization” Becomes a Thing – Wolf Richter
The Fed leads, the ECB follows.
The voices are getting clearer: The ECB will end QE likely this year and begin raising rates possibly as soon as 2019. For now, these are not official announcements, but central bankers talking — not just German central bankers anymore, who have a more hawkish bend to begin with, but now even Francois Villeroy de Galhau, the head of the Bank of France and member of the ECB’s Governing Council.
They’re preparing markets for a new reality, the era of QE Unwind and rising rates. And the end of NIRP. The key word, so effectively etched in stone by the Fed, will be “gradual.”
America’s long-term challenge #2: the looming retirement crisis – Simon Black
Last week, the financial services giant Northwestern Mutual released new data showing that 1 in 3 Americans has less than $5,000 in retirement savings.
It’s an unfortunately familiar story. And Northwestern Mutual’s data is entirely aligned with other research we’ve seen in the past, including our own.
The Federal Reserve’s most recent Survey of Consumer Finances, for example, shows that the median bank balance among US consumers is just $2,900.
And Bank of America’s annual report from last year showed that the average balance per HOUSEHOLD (i.e. -not- per person) was $12,870… which was actually LESS than the average account balance that Bank of America reported in 1997!
Monetary Fallacies and Inflationary Bubbles – Richard M. Ebeling
Looking to the next few years ahead, is America and the world going to continue riding a wave of economic growth, improving standards of living, falling and lower unemployment, and technological changes that will continue to raise the quality and variety of life? Or will this turn out to be, at least partly, an artificial economic boom that will end in another economic and financial bust? Reading the economic tealeaves is never an easy task. But the “Austrian” theory of the business cycle offers a guidebook to better see through the confusions and complexities of what the future may hold in store.
Euro area reform: No deal is better than a bad deal – Peter Bofinger
The recent proposals for euro area reform from a team of French and German economists have initiated an intensive debate. This column, part of VoxEU’s Euro Area Reform debate, argues that the specific insolvency risk of euro area membership is the main risk that should be covered by joint risk sharing, and that the modest proposals for public and private risk sharing are insufficient in this regard.
***Why Do Economists Make so many Arbitrary Assumptions? – Frank Shostak
Various assumptions employed by mainstream economists appear to be of an arbitrary nature. The assumptions seem to be detached from the real world.
For example, in order to explain the economic crisis in Japan, the famous mainstream economist Paul Krugman employed a model that assumes that people are identical and live forever and that output is given. While admitting that these assumptions are not realistic, Krugman nonetheless argued that somehow his model can be useful in offering solutions to the economic crisis in Japan.
Ranking the Most (and Least) Productive Industries
A common complaint for people about their workplace is that things never get done. Bureaucracy, politics, and coordination costs among teams means that projects are completed at a snail’s pace, if it all.
You often see this complaint among people at large companies, where these dynamics can be especially pronounced. You also tend to hear about it in certain industries with a reputation for slowness.
But is that actually true? Does it take longer for big companies to get work done than small companies? Are certain industries more or less productive than others? We decided to analyze our data to find out the answers to these questions.
But Who the Heck Bought the $1.2 trillion in New US Debt Over the Past 12 Months? – Wolf Richter
Japan systematically dumps US Treasuries while China hangs on.
China increased its holdings of US Treasury bonds, notes, and bills by $11 billion in March to $1.19 trillion, the highest since October last year, according to the Treasury Department’s TIC data released Tuesday afternoon. Thus China is the number one holder of US Treasuries, a position it gave up for eight months during its era of peak capital-flight from October 2016 through March 2017.
At the low point, in November 2016, China’s holdings of Treasuries fell to $1.05 trillion. It has since added $138 billion to its stash.
***Sustainability Boils Down to Scale – Charles Hugh Smith
Only small scale systems can sustainably impose “skin in the game”– consequences, accountability and oversight.
Several conversations I had at the recent Peak Prosperity conference in Sonoma, CA sparked an insight into why societies and economies thrive or fail: It All Boils Down to Scale. In a conversation with a Peak Prosperity member who goes by Mememonkey, Mememonkey pointed out that social / economic organizations that function well at small scales (i.e. localized) fail when scaled up and centralized (i.e. globalized).
7 Lessons Business Owners Can Learn from Austrian Economics – Fernando Monteiro D’Andrea
Apart from dealing with government intervention, understanding markets is probably the most challenging task of any business owner or entrepreneur. It was for good reason that Ludwig von Mises insisted that economists and institutions that teach economics go out of their way to share economics theory with business owners and the general public. Economics, as Mises wrote: “deals with society’s fundamental problems; it concerns everyone and belongs to all.” This applies, not least of all, to the daily problems of owning, starting, or running a business.
And Mises wasn’t alone. The Austrian School has long concerned itself with being accessible, and not positioning itself as a school of esoteric knowledge for a few scholars. So what can business owners learn from the basic insights of the Austrian economists? There are at least seven lessons that can be quite helpful for those seeking to grow and sustain business ventures:
Structural change and the productivity slowdown – Georg Duernecker, Berthold Herrendorf, Akos Valentinyi 16 mei
Baumol argued that structural change may lead to a productivity slowdown due to a reallocation of production to service industries with low productivity growth. This column uses a new framework to estimate the effects of Baumol’s disease on future productivity growth in the US. The results suggest that future structural change will not reduce productivity much further thanks to substitutability within the broader service sector.
***Alexander Hamilton’s solar panels – John H. Cochrane
I think I finally have figured out why California is mandating solar panels on top of houses. (WSJ story here.)
As energy, environmental, or housing policy, it borders on the absurd, as pretty much everyone quickly figured out.
Just to recap, remember that most rooftop solar does not power the house underneath it. The energy goes out to the grid. Why not, you ask? Well, the rooftop energy comes at the wrong time, and we don’t yet have economical storage, so you have to be connected to the grid anyway. Given that, the costs of switches to let the roof partially power the house at sometimes, power the grid at other times, is not worth the zero benefit. After all, electricity is electricity and your light bulb does not care where it came from.
So rooftops are just a place to put the electric utility’s solar panels. Now let’s consider, where is the best place to put solar panels that feed the grid?
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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