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Economische aanraders 29-10-2017

Economische aanraders

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.

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Crisis or Stagnation: Why China Cannot Deleverage – Daniel Lacalle
26 oktober

The latest figures of the Chinese economy show a third quarter GDP growth of 6.8%, suspiciously in line with the government mandate and consensus estimates. However, it is not the top line that worries me. It is the evidence of debt saturation and diminishing returns of the central-planned model.
Chinese total debt has surpassed 300%. In the first nine months of the year, money supply has increased by 9.2%, significantly above estimates.
China has added more debt in the first nine months of 2017 than the US, Japan and the EU combined.
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Economists and taxes – John H. Cochrane
27 oktober

My last post on taxes continued the question, who bears the burden of the corporate tax? Will a reduction in corporate taxes benefit stockholders or workers? It was a fun technical discussion.
But the whole time I want to scream: That is the wrong question! And the public economists job should be to scream from the rafters, that is the wrong question! By just accepting the question, we are doomed to bad answers.
The public, and politicians, analyze taxes entirely through the lens of who gains and who loses. Income redistribution, yes, but also redistribution from renters to homeowners, married to unmarried, young to old, city dwellers to farmers, Texans to Californians, and so on. The political and popular discussion is about taxES, and who pays what.
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The EU Just Did the Big Banks a Massive Favor – Don Quijones
25 oktober

“Testimony to the iron grip the financial industry’s lobby still exerts on governments and legislators.”
The European Union’s executive arm, the European Commission, made a lot of bank executives very happy this Tuesday by abandoning its multi-year pledge to break-up too-big-to-fail lenders. Despite the huge risk they still pose to Europe’s rickety financial system, big European banks like Deutsche Bank, BNP Paribas, ING, and Santander can breathe a large sigh of relief this week in the knowledge that they will not have to split their retail units from their riskier investment banking arms.
Breaking up the banks would remove much of the risk from today’s government-backed banks, such as derivatives and other instruments that were heavily involved in the Financial Crisis. Without these hedge-fund and investment-banking activities, even large banks would be smaller, less interconnected, and could be allowed to fail without jeopardizing the entire global financial system.
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Two percent or not two percent? Interpreting the ECB’s definition of price stability – Maritta Paloviita, Markus Haavio, Pirkka Jalasjoki, Juha Kilponen
24 oktober

Price stability is an explicit target for the ECB, but the definition of the 2% target is less clear in its monetary policy stance over time. This column presents two alternative interpretations of the ECB’s definition of price stability. First, the ECB dislikes inflation rates above 2% more than rates below 2%. Second, the ECB’s policy responses to past inflation gaps are symmetric around a target of 1.6% to 1.7%. Out-of-sample predictions of the reaction function based on the second interpretation track well an estimated shadow interest rate during the zero lower bound period.
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How Much Illusion in GDP? What You See Is Not What You Get – Wolf Richter
27 oktober

The US economy, as measured by “real” GDP (adjusted for a version of inflation) grew 0.74% in the third quarter, compared to the prior quarter. That was a tad slower than the 0.76% growth in Q2, but up from the 0.31% growth in Q1.
GDP was up 2.3% from a year ago.
To confuse things further, in the US, we cling to the somewhat perplexing habit of expressing GDP as an “annualized” rate, which takes the quarterly growth rate (0.74%) and projects it over four quarters. This produced the annualized rate of 2.99%, or as we read this morning all over the media, “3.0%.”
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The Latest Innovation in Inflation Targeting – John Chapman
26 oktober

In 2016, I wrote a piece at mises.org highly critical of inflation targeting. At that time the idea of a 2% inflation target was fast becoming mainstream. Since then it has become a routine yardstick for assessing economic policies.1 It was a hit with politicians, liberal economists, and borrowers around the world because with inflation running below that level in most major economies it was a license to keep printing money. And now, with inflation closing in on 2%, the easy money crowd has done exactly what I expected and trotted out phase II: the new target is to average 2%. In other words since we were below 2% for so long, a rise to 3% or 4% for a while is somehow desirable.
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Stagnation Nation: Middle Class Wealth Is Locked Up in Housing and Retirement Funds – Charles Hugh Smith
25 oktober

The majority of middle class wealth is locked up in unproductive assets or assets that only become available upon retirement or death.
One of my points in Why Governments Will Not Ban Bitcoin was to highlight how few families had the financial wherewithal to invest in bitcoin or an alternative hedge such as precious metals.
The limitation on middle class wealth isn’t just the total net worth of each family; it’s also how their wealth is allocated: the vast majority of most middle class family wealth is locked up in the family home or retirement funds.
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NAFTA Effect: Global Manufacturers Bet on Dirt-Cheap Mexico – Don Quijones
26 oktober

That wages have remained so low for so long is not by accident; it’s by design.
President Trump’s repeated bashing of the North American Free Trade Agreement between the US, Canada, and Mexico has failed to dull the allure of Mexico’s maquiladoras for global manufacturers looking to cash in on the country’s much cheaper labor costs. Tecma Group, a firm that helps US and Canadian firms relocate to Mexico, has more business than ever. In the past few weeks alone, it has helped a cleaning equipment company and packaging company move.
Mexico Consulting Associates, headquartered in Chicago, has three new clients interested in Mexico. Keith Patridge, who heads McAllen Economic Development, estimates that at least 12 companies will be installed this year in the north-western city of Reynosa. Another firm, Tacna Services, has helped two companies get set up in the Baja California area.
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***Corruption uncertainty and corporate practices – Jan Hanousek, Anastasiya Shamshur, Jiri Tresl
29 oktober

The idea that corruption hinders investments is not new, but the literature has tended to focus on the impact of average corruption levels. Based on 140,000 firm-level observations for 13 Central and Eastern European countries, this column explores the impact of corruption uncertainty. The evidence suggests that while foreign-controlled firms are unaffected by the corruption uncertainty factor, domestic firms decrease investments significantly when uncertainty about corruption practices increases. This decrease in investment is accompanied by a decrease in cash holdings, which points to a possible motive to build off-balance sheet funds for bribery purposes.
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What Makes a Good Economic Model? – Frank Shostak
25 oktober

In order to make the data “talk,” economists utilize a range of statistical methods that vary from highly complex models to a simple display of historical data. It is generally held that by means of statistical correlations one can organize historical data into a useful body of information, which in turn can serve as the basis for assessments of the state of the economy. It is held that through the application of statistical methods on historical data, one can extract the facts of reality regarding the state of the economy.
Unfortunately, things are not as straightforward as they seem to be. For instance, it has been observed that declines in the unemployment rate are associated with a general rise in the prices of goods and services. Should we then conclude that declines in unemployment are a major trigger of price inflation? To confuse the issue further, it has also been observed that price inflation is well correlated with changes in money supply. Also, it has been established that changes in wages display a very high correlation with price inflation.
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Understanding the destination-based approach to business taxation – Alan Auerbach
26 oktober

The rising importance of multinational companies and the changing nature of production represents a challenge to the traditional ways that countries try to tax corporate profits. This column examines one potential policy response – a destination-based cash-flow tax – which it argues would confront the key international problems of existing tax systems. It also addresses some of the concerns arising in particular from US proposals to introduce such a tax.
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***Einhorn vents his frustrations about the Crazy Markets – Wolf Richter24 oktober
Why trying to bet against this madness is a widow-maker trade. Logic has nothing to do with it.
Investors who’ve approached this stock market and its ludicrous valuations over the past few years from a point of view of fundamentals and “value” – thus, often on the side of short-selling those stocks – have gotten clobbered, or were at least left in the dust by buy-buy-buy fundamentals-don’t-matter automatons.
This has become an exercise in frustration-management for many – including, apparently, David Einhorn, founder and president of Greenlight Capital, a $7 billion hedge fund that became successful by searching for overvalued and undervalued companies and betting one way or the other. This strategy has hit the rocks in recent years. So far this year, the fund is up 3.3% while the S&P 500 is up 14%.
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The tyranny of benchmarks – Marlene Amstad, Eli Remolona, Jimmy Shek
28 oktober

Global investors are assumed to differentiate between economies using economic fundamentals. This column uses returns on sovereign CDS contracts for 18 emerging markets and ten advanced countries to argue that fundamentals do not drive these decisions. Instead, most of the variation across sovereigns reflects whether or not the country is designated as an ‘emerging market’. Investment strategies tend simply to replicate benchmark portfolios.
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Observations on Wealth-Income Inequality (from Federal Reserve Reports) – CHarles Hugh Smith
27 oktober

There’s a profound difference between assets that produce no income and those that produce net income.
To those of us nutty enough to pore over dozens of pages of data on wealth and income in the U.S., the Federal Reserve’s quarterly Z.1 reports and annual Survey of Consumer Finances (SCF) are treasure troves, as are I.R.S. tax and income reports.
Allow me to share a few observations on family wealth and income drawn from my review of these documents:
Changes in U.S. Family Finances from 2013 to 2016 (42 pages)
Financial Accounts of the United States (198 pages)
Corporate profits clock in at $2.135 trillion annually, around 11% of the nation’s GDP (gross domestic product). (Page 10 of Z.1) This has changed very little over the past few years; corporate profits totaled $2.140 trillion in 2014.
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Cryptocurrency: Birkins for Geeks – MIchael Olenick
25 oktober

Women bring pawnbroker Tabach-Bank their Birkins as collateral for loans. “We get socialites and a lot more divorcees in Beverly Hills than New York for some reason,” Tabach-Bank, CEO of New York Loan Company, told the New York Times.
Birkins are apparently a handbag by Hermès that cost thousands of dollars and can run into fix-figures. Unlike most hedge funds, Birkin bags consistently outperform the S&P 500 as an investment. Also, like hedge funds, only the rich and famous can buy them.
Google returns 567,000 results for “knockoff hermes birkin” which, predictably, cost slightly less and are more democratically distributed. Expert Tabach-Bank says he can usually tell a fake but “if you haven’t bought a fake, you haven’t been dealing in enough bags.”
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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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