Economische aanraders 21-01-2018
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.
How to reconcile risk sharing and market discipline in the euro area – Agnès Bénassy-Quéré, Markus K Brunnermeier, Henrik Enderlein, Emmanuel Farhi, Marcel Fratzscher, Clemens Fuest, Pierre-Olivier Gourinchas, Philippe Martin, Jean Pisani-Ferry, Hélène Rey, Isabel Schnabel, Nicolas Véron, Beatrice Weder di Mauro, Jeromin Zettelmeyer
The euro area continues to suffer from critical weaknesses that are the result of a poorly designed fiscal and financial architecture, but its members are divided on how to address the problems. This column proposes six reforms which, if delivered as a package, would improve the euro area’s financial stability, political cohesion, and potential for delivering prosperity to its citizens, all while addressing the priorities and concerns of participating countries.
What Will Rising Mortgage Rates Do to Housing Bubble 2? – Wolf Richter
Oops, they’re already rising.
The US government bond market has further soured this week, with Treasuries selling off across the spectrum. When bond prices fall, yields rise. For example, the two-year Treasury yield rose to 2.06% on Friday, the highest since September 2008.
In the chart, note the determined spike of 79 basis points since September 8, 2017. That was the month when the Fed announced the highly telegraphed details of its QE Unwind.
Wharton Dean: Dimon Mindset Is Wrong, Cryptos Mean “The End Of Money As We’ve Known It” – Tyler Durden
Wharton Dean Geoffrey Garrett sees a big split in how blockchain-based digital cryptocurrencies like bitcoin are viewed on Wall Street versus in Silicon Valley. On the East Coast, the idea of a cryptocurrency replacing a fiat currency is still met with skepticism. But in the Valley, they seem “all in.” In this opinion piece he offers his views on this corner of fintech.
I spent the first week of the New Year with a great group of Wharton undergraduates visiting many of our tremendous alumni in the San Francisco Bay Area. To say it felt very different from the East Coast is an understatement. And I am not talking about missing the “bomb cyclone,” which we did.
Reconsidering the ‘China shock’ in trade – Robert Feenstra, Hong Ma, Akira Sasahara, Yuan Xu
International trade has become a focus of political debates in the US and around the world, but while previous studies focus on the job-reducing effect of the surging imports from China or other low-wage countries on the US employment, the job-creating effect of exports has receive much less attention. This column employs two approaches – an instrumental variable regression analysis and a global input-output approach – to argue that the negative effects of import competition on US employment are largely balanced out once the country’s job-creating export expansion is taken into account.
***Economics Is Like Birdwatching — You Have to Know What to Look For – Gary Galles
Have you ever been birdwatching? If not, how well do you think you would recognize the birds around you the first time you tried? Even if you were specifically looking for a species present in your area, you might fail to recognize it. The reason is simple. Without additional training, there are many ways to identify birds you are unaware of — you often would not know what to look at or listen for, or where or when to look. An experienced birder might well see what you missed.
Applying economics to public policy is akin to birdwatching in this way, except for the fact that few untrained birdwatchers presume they have the expertise to “educate” others to their views, while almost everyone seems to assume they have sufficient expertise in economics to pontificate on public policies. This leads to ignorance of the predictable, even if unintended, adverse side effects that can turn seemingly helpful economic policies into harmful ones, because people don’t know where or how to look to recognize them, and massive overconfidence in government’s ability to effectively solve societal problems.
Bond Market Smells Inflation, Begins to React – Wolf Richter
Inflation expectations now exceed the Fed’s target.
The 10-year US Treasury yield breached 2.5% on January 9 and hasn’t looked back since, closing on Friday at 2.55%. The three year yield closed at 2.12%, the highest since October 2008. The two year yield, after breaching 2% on Friday intraday, closed at 1.99%, the highest since September 2008.
Bond prices fall when yields rise. And the selloff in three-year maturities and below shows that the short end of the bond market is reacting to the Fed’s rate-hike environment.
FinTech, Robo Advisers, and the Soul of Swiss Banking – Marcia Christoff-Kurapovna
This year, the European Union will start to force continental banks to open their customer interface to third-party providers. However, Swiss banking doesn’t intend to follow suit. Such is the latest development in the fight over the soul of Swiss banking, one pitting the trend-mad robo-ification of (digital) banking against the steadfast anchor and sail of the traditional Swiss model.
To its central banking fans, the payment-services-directive ‘2’ (PSD2) of the EU is being seen as a landmark decision: banks in the EU will have to open their interfaces to third-party providers of services — and that includes Fintechs (which have indeed taken root in the Confoederatio Helvetica). PSD2 is quite the controversial ream of red tape because external service providers may in theory access information about bank clients — a No if there ever was one in Swiss-minded money-mindedness. Proponents claim that customers “will profit from the rule through the best available service” and, of course, “the most innovative products”. In Switzerland, Hypothekarbank Lenzburg and Postfinance proclaimed to be favorable toward such “open banking” regulation. Most rivals however remained skeptical, calling it, by way of the Swiss Bankers’ Association, “an economic thought-experiment with substantial risk.”
Low inflation for longer – Thomas Hasenzagl, Filippo Pellegrino, Lucrezia Reichlin, Giovanni Ricco
The ECB’s Survey of Professional Forecasters supports the ECB’s view that inflation in the Eurozone will pick up and will be back within the central bank’s target range in 2019. This column disagrees. Using a model that formalises the widely held view that inflation dynamics are a function of three components – long-term expectations, the Phillips curve, and oil price movement – it forecasts Eurozone inflation in 2019 at only 1.1%, a rate which is close to that implied by the bond markets.
The Fascinating Psychology of Blowoff Tops – Charles Hugh Smith
Central banks have guaranteed a bubble collapse is the only possible output of the system they’ve created.
The psychology of blowoff tops in asset bubbles is fascinating: let’s start with the first requirement of a move qualifying as a blowoff top, which is the vast majority of participants deny the move is a blowoff top.
Exhibit 1: a chart of the Dow Jones Industrial Average (DJ-30):
SEC Stymies Plans to Offer Bitcoin Funds Anytime Soon – Jerri-Lynn Scofield
The Securities and Exchange Commission (SEC) yesterday put the kibosh on plans to offer exchange-traded funds (ETFs) or other products based on bitcoin or cryptocurrencies to retail investors anytime soon.
In a Staff Letter: Engaging on Fund Innovation and Cryptocurrency-related Holdings, Dalia Blass, the SEC ’s Director of the Division of Investment Management, posed 31 detailed questions over how funds would value, store, and safeguard fund holdings, as well as concerns over whether investors understood the risk of these investments, and the potential for market manipulation. These concerns must be satisfied before the agency will endorse any plans to offer bitcoin-based products to mom and pop investors.
Finance and investment: Europe’s lost decade – Colin Mayer, Stefano Micossi, Marco Onado, Marco Pagano, Andrea Polo
This column draws on a new book presenting the results of a two-year research programme that brought together leading economists from around the world to examine whether finance and public policy contributed to the deep and prolonged decline in European investment after the financial crisis. The findings point consistently to the importance of debt overhang as a contributory factor and the role of both tax and regulatory policy in exacerbating the problems.
Does Bitcoin Have a Future? – Marshall Auerback
Is the bitcoin craze another in a series of history’s most infamous bubbles, or is it a genuine harbinger of a new global financial architecture? In spite of recent market turbulence, its champions see bitcoin (and its cryptocurrency peers) as an ideal market-generated solution as questions arise about the future viability of paper currencies in a global economy characterized by sky-high indebtedness and bloated government/central bank balance sheets. The enthusiasts behind cryptocurrencies produce debt clocks that relentlessly tick over to get us to believe that a Weimar–style hyperinflation is imminent. By creating an alternative store of value outside the control of easy-money-peddling central banks, and their corrupt Wall Street handmaidens, they assert that bitcoin offers a way out of this looming destruction of our savings.
Is This Now the Biggest Oil Collapse in History? – Nick Cunningham
Venezuela’s oil production plunged to new lows in December, surprising even some of the most pessimistic forecasts.
According OPEC’s secondary sources data — provided by independent groups — Venezuela’s oil production fell by another 82,000 barrels per day (bpd) in December, taking output down to 1.745 million barrels per day (mb/d). That is certainly a bad result, but not drastically different from the pace of declines from the months before.
However, data that came directly from the Venezuelan government says that the country’s output plunged by a massive 216,000 bpd in December, dropping to 1.621 mb/d. It’s a staggering figure, and points to a more serious collapse.
***A Regulated Economy Leads to a Socialist Economy – Ludwig von Mises
What is interventionism?
Interventionism means that the government does not restrict its activity to the preservation of order, or—as people used to say a hundred years ago—to “the production of security.” Interventionism means that the government wants to do more. It wants to interfere with market phenomena.
If one objects and says the government should not interfere with business, people very often answer: “But the government necessarily always interferes. If there are policemen on the street, the government interferes. It interferes with a robber looting a shop or it prevents a man from stealing a car.” But when dealing with interventionism and defining what is meant by interventionism, we are speaking about government interference with the market. (That the government and the police are expected to protect the citizens, which includes businessmen, and of course their employees, against attacks on the part of domestic or foreign gangsters, is in fact a normal, necessary expectation of any government. Such protection is not an intervention, for the government’s only legitimate function is, precisely, to produce security.)
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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