Economische aanraders 22-09-2019
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.
***Automation and the Crisis of Work – Charles Hugh Smith
Technology, like natural selection, has no goal.
When it comes to the impact of automation (robots, AI, etc.) on jobs, there are two schools of thought: one holds that technology has always created more and better jobs than it destroys, and this will continue to be the case. The other holds that the current wave of automation will destroy far more jobs than it creates, but the solution is to tax the robots and use these revenues to distribute the wealth to everyone who no longer has a livelihood.
In either case, weâ€™ll get richer: if technology generates more high-quality jobs, replacing lower-quality jobs lost to automation, weâ€™ll collectively get richer, and if technology destroys jobs but creates immense profits that can be distributed to everyone as Universal Basic Income (UBI), then weâ€™ll get richer via distributing profits to everyone.
But what if neither option is realistic? What if the jobs that are created in the wake of automation are lower-quality, lower pay and far more insecure? And what if automation leads to much lower profits rather than much higher profits? What if thereâ€™s nowhere near enough profits to distribute to everyone as Universal Basic Income? If thatâ€™s the case, weâ€™re collectively becoming poorer, even if a small percentage of the population is reaping wealth from automation.
The extraordinary rise in trade policy uncertainty – Scott Baker, Nicholas Bloom, Steven Davis
Tariff threats, hikes, and retaliations have become a major source of economic uncertainty and stock market volatility. This column draws on three initiatives to demonstrate that recent rise in trade policy uncertainty, driven by the US withdrawal from the Trans-Pacific Partnership, tariff hikes on US steel and aluminium imports, ongoing Brexit uncertainty, and escalating US-China trade tensions, is extraordinary by several metrics.
Fed’s Powell: No Negative Interest Rates at Next Crisis – Wolf Richter
The Fed has different priorities than the ECB, the Bank of Japan, the Swiss National Bank, et al.
During the press conference today following the FOMC meeting, Fed chair Jerome Powell was asked if and when the Fed would push its policy interest rate into the negative. Powell did not respond with his usual, “we will act as appropriate.” He had a real answer.
For months, there has been clamoring from Wall Street and speculators, and from the White House, that the Fed should or would cut its policy rates into the negative. Peak of the negative-interest-rate momentum was likely in late August or early September.
Since then, longer term yields have risen across the board, and a substantial part of the $17 trillion in negative yielding debt has turned into slightly positive-yielding debt. So maybe folks are worried that the negative interest rate era is coming to an untimely end, and they want the Fed to step in and save the day.
Greenspan Expects the US to Embrace Negative Interest Rates. Here’s Why That Would be “Catastrophic.” – Alasdair Macleod
One’s own bookcase provides the perfect illustration of time preference, which is the greater value of possession over non possession. There will be books bought on a whim which just clutter a bookshelf and have no value. Next time there’s a clear-out, they are destined for the charity shop: there’s no difference in time value, being worthless to the owner today and in the future.
Then there are the first editions, which have a commercial value. Books in this category will have a high current value to you compared with their non-possession. But perhaps the books with the highest personal value are the ones that have little value to anyone else: that battered copy of Wren’s Beau Geste, or the translation of Hoffmann’s Struwwelpeter read to you when you were a child. You may have even visited the museum in Frankfurt dedicated to Hoffmann and his famous book of moral tales for children. The value of these books in possession is far greater than their absence, even though you rarely open their pages.
Increasing business cycle synchronisation: The role of global value chains, market power and extensive margin adjustments – Francois de Soyres, Alexandre Gaillard
The recent increase in business cycle synchronisation is significantly associated with trade in intermediate inputs. This is an important consequence of global value chains, but we cannot understand it if we use a model in which real GDP movements are simply decomposed into changes in technology and factor supply. This column argues that accounting for profits and extensive margin adjustments reconciles theory and data and enriches our understanding of what makes countries interdependent, offering the first quantitative solution to the ‘trade co-movement puzzle’.
***What John Law Taught Us About the Perils of Printing Money – Joakim Book
In the same year that the Bank of England was created – 1694 – John Law became a fugitive. He killed a man in a duel, was thrown in prison awaiting execution, and escaped to Europe. After some years of gambling his way through the European courts and writing surprisingly prescient texts on monetary economics he landed in France. One of history’s first grand experiments with unbacked paper money was about to begin.
Law’s monetary extravagance between 1715 and 1720 was not simply a Ponzi scheme by a monetary quack, but — at least initially — a real value-add. He set up the General Bank (“Banque Générale”) and received a charter in 1716. The bank’s notes were not legal tender, were redeemable on demand in gold, and looked to the world as another private joint-stock company. As the paid-up capital was only partly subscribed and three-quarters of that was paid with billets d’état (government debt that traded at 40% of par value), his effective capital was only around 825,000 livres – a fairly small company. His charter permitted him only to accept deposits and discount creditworthy bills.
***Peer effects in product adoption – Drew Johnston, Theresa Kuchler, Johannes Stroebel, Arlene Wong
Our consumption decisions are affected by our friends, but how large is the effect? The column uses Facebook data to show that when a person buys a new phone, the peer effects that tempt friends to purchase too are large and long-lasting. The effects are strongest for the young and less educated. Peer effects may also cause friends to switch operating systems when they buy new phones.
Interest Rate Derivatives Trading Explodes to $6.5 Trillion/Day – Nick Corbishley
The volume of over-the-counter (OTC) interest rate derivatives traded globally soared by 141% in three years to $6.5 trillion per day in April 2019, according to the Bank for International Settlements’ new Triennial Survey of Global Derivatives Markets. In the prior survey period, April 2016, $2.7 trillion per day in trades were executed. Since 2001, the magnitude of trading volume has multiplied by a factor of 13, from $490 billion per day to $6.5 trillion per day, with a gigantic spike over the past three years
Walter Bagehot and the Problem of the “Lender of Last Resort” – Joseph Calandro Jr.
“If an archeological seeker of the origins of the socialization of risk in high finance wants to find clues, let him or her begin with an excavation of Lombard Street.”
— James Grant, Bagehot, p. 268
In August of 2019, the amount of global debt yielding negative returns hit $15 trillion. How did we get here, and where will it lead? The latter question is impossible to answer because we have never been in a situation like this before: global negative returns are a new phenomenon across the thousands of years of recorded interest rate history.
How we “got here,” on the other hand, is another story altogether and, significantly, it is a story that can be told, especially how it all began.
Several years ago, I was having lunch with financial journalist/historian/analyst James Grant. I asked him what he was working on, and he mentioned a biography of Walter Bagehot, who was a nineteenth-century financial journalist, long-time editor of the Economist, and author of what many consider “the bible” of central banking, the book Lombard Street: A Description of the Money Market (1873). It was the perfect pairing of subject and author.
Working conditions on digital labour platforms: Opportunities, challenges, and the quest for decent work – Janine Berg, Marianne Furrer, Ellie Harmon, Uma Rani, Michael “Six” Silberman
Cross-border, digital labour platforms permit real-time hiring for a range of jobs, from IT programming to graphic design, copywriting and routine clerical tasks. But little is known about working conditions on these platforms or about their employees. This column begins to fill that gap in the scholarship using an ILO survey of 3,500 workers from 75 countries and five major microtask platforms. It finds that even workers who perform valuable labour for successful companies often do so for low wages and without the protections of a regulated employment relationship.
Debt-Wracked Chinese Companies Dump US & Other Foreign Assets, Become Net Sellers Overseas for First Time – Wolf Richter
Another piece in the Chinese capital-flow puzzle.
Chinese conglomerates that had gone on a debt-fueled buying binge over the past decade but have come under heavy pressure from the government to sell their overseas holdings in order to reduce their astronomical debts – well, they’re doing it.
In the US, Chinese conglomerates have dumped $26 billion in assets so far in 2019, up from $8 billion in the full year of 2018.
***Rent Control: A History of Failure – Gregory Bresiger
Governments can and do try to fix prices, but history tells us it never works.
From the price-control dikats of the Roman Empire’s Diocletian, to the wage and price controls of President Richard Nixon, governments have tried and failed.
The historian Edward Gibbon said the Roman Empire imploded owing to economic disasters and less to barbarians at the gate. More recently, President Nixon imposed wage and price controls before the 1972 elections. He was re-elected when they seemed to be working. However, owing to the Watergate scandal, he wasn’t around when his price control scheme failed and dragged down millions of Americans in the disastrous decade-long horror show called stagflation.
New York’s Economic Madness
Yet governments continue to try various kinds of price controls, even though most people with even the barest acquaintance with economic history or basic economics understand they’re the equivalent of economic crack. However, most New York pols, for instance, are economic illiterates.
The New Orthodoxy: Blasphemy, Heresy and the New Inquisition – Charles Hugh Smith
A corrupt Orthodoxy devoid of new ideas, an Orthodoxy devoted to maintaining the wealth, status and power of insiders regardless of cost, is a brittle, fragile, unstable system.
When the ruling Elites sense their control of the populace is waning, they seek to regain full control via the imposition of a strict Orthodoxy, enforced by an Inquisition. We are living in just such an era. Everywhere we turn, a New Orthodoxy reigns. Dissent is blasphemy, and any narratives outside the approved Orthodoxy are heretical and subject to suppression and punishment.
New Orthodoxies abound, and woe to those who fail to signal their virtue publicly. One New Orthodoxy is that one’s sexual and ethnic characteristics are all-important signifiers of identity. This orthodoxy is critically important to the ruling Elites, as this fragments the populace into tribes warring over their relative degree of victimhood and indignation.
This orthodoxy insures the populace can never gain class consciousness, i.e. an awareness that the ruling Elites and their apparatchiks (the Federal Reserve, Big Tech, the security agencies, et al.) are their class enemies, as the Elites rule at the expense of everyone beneath them.
How Currency Controls Affect Doing Businesses in Argentina – Bianca Fernet
Face it: Argentina is out of money.
There’s a lot of commotion in the media regarding Argentina’s current mid-meltdown economic status. And while I won’t go so far as to brand it #FakeNews and attest that Argentina is a “very stable genius”, it’s a lot. And if you run a business that operates in or with Argentina, let’s face it! You’re like that irritating Scientologist from that 90’s movie that was vaguely about sports – “Show me the money!”
So I’ve taken the time out of my very busy day to share with you, from one businessperson to another, what currency controls mean for your business in Argentina.
Restarting asset purchases in the euro area: Lessons from €2 trillion of ECB purchases – Ralph Koijen, François Koulischer, Benoît Nguyen, Motohiro Yogo
Recent economic performance in the euro area has once again raised the possibility of the ECB conducting asset purchases. This column sorts security-level portfolio holdings data by investor type and across countries in the euro area to study portfolio rebalancing during the ECB purchase programme from 2015-17. There was a material difference in the impact on investors by geography – with foreign investors selling more than half of purchases.
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.