Economische aanraders 22-07-2018
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.
The economics of blockchains – Markus K Brunnermeier, Joseph Abadi
Cryptocurrencies and the underlying distributed ledger technology have exploded into public consciousness over the last few years, with devotees insisting that the technology will revolutionise financial transactions and ownership data. This column identifies a ‘blockchain trilemma’ whereby no ledger can fully satisfy the three desirable properties of decentralisation, correctness, and cost-efficiency. It further explains how distributed ledgers enhance competition but introduce costs above and beyond the well-known electricity costs.
Which Yield Curve “Inverts” First? US, Japan, Germany, or China? – Wolf Richter
How the “Yield Curves” Stack Up in central-bank manipulated bond markets.
So we had a little bond-market upheaval this morning. After President Trump successfully manipulated bond yields down yesterday and today by griping about the Fed’s rate hikes, an inveterate Fed dove (who has also been griping about the Fed rate hikes) responded by brushing him off, and suddenly all kinds of things happened, with the 10-year yield jumping and the yield curve steepening a tad within minutes.
St. Louis Fed President James Bullard, for whom every rate hike is a mistake, told reporters this morning in Glasgow, Kentucky, that the FOMC will remain unaffected by Trump’s comments on monetary policy:
***Solutions without Historical Templates: Cryptocurrencies and Blockchains – Charles Hugh Smith
Crypto-blockchain technologies are leveraging the potential of computers and the web for direct political-social innovation.
We’re accustomed to three basic templates for system-wide solutions or improvements:
1. an individual “builds a better mousetrap” and starts a company to exploit this competitive advantage;
2. a company invents something that spawns a new industry (the photocopier, the web browser, for example) and/or disrupts existing business models;
3. the central government decrees a strategy or investment, i.e. makes something happen (the Interstate Highway system in the 1950s, the space race to the moon in the 1960s, for example).
I don’t think any of these templates really captures the eventual impact of cryptocurrencies and blockchains, which I define broadly as any decentralized, distributed ledger.
The legal cost of default: How creditor lawsuits are reshaping sovereign debt markets – Julian Schumacher, Christoph Trebesch, Henrik Enderlein
For centuries, sovereign debt was assumed to be ‘above the law’ and non-enforceable. This column shows that this is no longer the case. Building on a new dataset on sovereign debt lawsuits, it documents the erosion of sovereign immunity since the 1970s and argues that legal disputes can disrupt government access to international capital markets, as foreign courts impose a financial embargo on defaulting sovereigns. These legal developments have strengthened the hands of creditors and raised the cost of default for debtors, with far-reaching consequences for government willingness to pay and the resolution of debt crises.
Savings, not Technology, Is the Key to Economic Growth – Frank Shostak
Most economic commentators are likely to agree that in relation to the period prior to the Great Depression, the present world is many times more sophisticated in terms of advanced technological knowledge. It is then tempted to suggest that with the present advanced technology we are in a position to generate enough real wealth to prevent a severe economic slump.
On this way of thinking, ideas are not themselves scarce unlike material inputs. Consequently, new ideas for more efficient processes and new products can make continuous growth possible.
It follows then that because of the limited amounts of capital and labor, without the technological progress the opportunities for growth will eventually run out.
Six Reasons Why Credit Suisse Is Very Worried About China’s Economy – Tyler Durden
While much of the recent commentary targeting China has centered on its response to Trump’s trade war and the sharp devaluation of the Yuan, many have argued that the real focus should be China’s decelerating economy. Commenting on this paradox, Credit Suisse said in a recent note that “consensus has been far too complacent on China” for a country that in PPP terms is already the biggest economy in the world and has accounted for an average of 36% of annual global GDP growth over the past five years.
However, the Swiss bank adds, recent weeks have seen the flow of investor questions pick up significantly:
Given its importance, we find it surprising that, until just the last week or two, clients have not been asking us about China this year. Indeed in our June client survey, there was only a very low proportion of respondents believing China was the key macro risk, as we show in Figure 3 below.
Under Fire, Biggest Brick & Mortar Retailers in Europe Seek Refuge in Cartel Economics – Don Quijones
Two of the world’s biggest retail groups — France’s Carrefour and the UK’s Tesco — announced plans to form a global purchasing alliance to help drive down costs as they respond to fierce competition from German discounters and fast-growing online rivals such as Amazon.
They are not the only supermarkets in Europe opting to combine resources in a bid to fend off new rivals. Struggling French supermarket group Casino has formed a joint purchasing venture with struggling Spanish supermarket group Dia, aimed at pooling 50% of private-label volumes. It has also forged strategic partnerships with retail group Auchan and Amazon.
Is Further Intervention a Cure for Prior Intervention? – Percy L. Greaves, Jr.
All varieties of (government) interference with the market phenomena not only fail to achieve the ends aimed at by their authors and supporters, but bring about a state of affairs which — from the point of view of the authors’ and advocates’ valuations — is less desirable than the previous state of affairs which they were designed to alter. If one wants to correct their manifest unsuitableness and preposterousness by supplementing the first acts of intervention with more and more of such acts, one must go farther and farther until the market economy has been entirely destroyed and socialism has been substituted for it. (Ludwig von Mises, Human Action, p. 854)
The mass myopia of our age has been a reactionary reverence for government intervention. When anything goes wrong, from a train wreck to a change in stock market prices, the craven crowds always clamor for just one more law. Throughout the world there is a spirit of egalitarianism and trust in government omnipotence that blinds people to the inevitable and undesirable consequences of the very intervention they currently advocate. There can be little question that the great majority of our fellow men believe that governmental action is the best answer to every economic problem of poverty or prosperity.
This general trend toward government intervention has been spurred on by the thought that majorities can continue to take by legal force from the rich and give to the poor to the perpetual benefit of society as a whole. Government intervention is therefore considered a moral and economic weapon to be used for the welfare of all the “have-nots.” The crusade for creature comforts is no longer considered to be a struggle against the niggardliness of nature. Instead, it is dreamily idealized as a campaign for the political allotment of each group’s “fair share” of the wealth produced by others.
Trump’s Trade War May Spark a Chinese Debt Crisis – Anne Stevenson-Yang
A tighter dollar will make the bursting of the credit bubble an inevitability.
There’s no chance China will cut its trade surplus with the U.S. in response to President Donald Trump’s tariff threats. For starters, Washington has made no specific demand to which Beijing can respond. But its efforts may have an unexpected side effect: a debt crisis in China.
The 25 percent additional tariffs on exports of machinery and electronics looked, at first blush, like a stealth tax on offshoring. The focus on categories like semiconductors and nuclear components, in which U.S.-owned manufacturers in China are strong, recalled Trump’s 2016 promise to tax “any business that leaves our country.”
Nobel Symposium on Money and Banking Day 1 – John H. Cochrane
I attended the Nobel Symposium on Money and Banking in May, hosted by the Swedish House of Finance and Stockholm School of Economics. It was a very interesting event. Follow the link for all the presentations and videos. (Click on “program”)
This review is idiosyncratic, focusing on presentations that blog readers might find interesting. My apologies to authors I leave out or treat briefly — all the presentations were action-packed and even my verbose blogging style can’t cover everything.
Nobel Symposium on Money and Banking Day 2 – John H. Cochrane
Day 2 of the Nobel Symposium on Money and Banking focused on monetary policy. (My last post covered Day 1 on banking.)
Declining business dynamism and information technology – Gert Bijnens, Jozef Konings
Evidence from the US indicates that business dynamism is declining, and that this affects overall productivity growth. This column explores business dynamism in Belgium between 1985 and 2014. The results show remarkable similarities to those from the US, suggesting that these changes are likely due to global trends such as the rise of information and communication technology.
Backlash Against “War on Cash” Reaches Washington & China – Don Quijones
The electronic-payments industry, which gets a cut from every electronic transaction, wants to kill cash. But wait…
Not so long ago, it seemed that the death of cash was both inevitable and imminent. The war against physical money was advancing on all fronts. Cash, already with technological and generational trends stacked against it, faced an imposing array of enemies, including private banks, fintech firms, telecom behemoths, credit card giants, assorted NGOs, tech magnates like Bill Gates and Tim Cook, a bewildering alphabet soup of UN agencies and many national governments. All wanted (and to a great extent still want) to accelerate the demise of physical money, for their own disparate motives.
***The EU’s New Data Protection Rules Are Already Hurting Europeans – Kai Weiss
It’s finally over: the flood of e-mails that every single human being who possesses an inbox has received in the last few weeks thanks to the new data protection rules by the EU. These rules, called GDPR, have caused havoc even before becoming effective on May 25, and have probably caused the greatest spam wave of all time – all in the name of fighting against spam of course.
The GDPR rules were designed to protect European consumers from data violations by big tech companies (Brussels thinks that Facebook, Google and Co. are abusing the rights of its people), and include – just as a best of – a “right to be forgotten” (meaning that Europeans can ask companies to delete all their data), “consent” (meaning that the data being processed by a company has to be consented to by the individual – though what “consent” means is still disputed), an obligation to hire a data protection officer if you are a bigger company, and above all else, hefty fines for infringements. Those infringements shall “be subject to administrative fines up to €20,000,000, or in the case of an undertaking, up to 4 percent of the total worldwide annual turnover of the preceding financial year, whichever is higher.”
Delivering a safe asset for the euro area: A proposal for a Purple bond transition – Lorenzo Bini Smaghi, Michala Marcussen
The euro area debt crisis saw the region ravaged by multiple sovereign bond doom loops and has inspired several proposals for a single safe asset for the region. While a lack of political consensus has proven the main obstacle to date, technical issues relating to the complexity of splitting the existing sovereign debt stock and concerns on contagion amongst senior and junior debt structures also weigh in. This column, part of the VoxEU debate on euro area reform, illustrates how a 20-year Purple bond transition could address these issues and offer a path to genuine Eurobonds.
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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