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Economische aanraders 26-05-2019

economische aanraders 0

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.

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The Real Meaning of Deflation – Frank Shostak
25 mei

For most experts, deflation is bad news since it generates expectations for a decline in prices. Because of this, it is held, consumers postpone their buying of goods at present since they expect to buy these goods at lower prices in the future. Consequently, this weakens the overall flow of current spending and this in turn weakens the economy.
In this way of thinking, economic activity is presented in terms of the circular flow of money. Spending by one individual becomes the earnings of another individual, and spending by another individual becomes a part of the previous individual’s earnings.
So if for some reason people have become less confident about the future and decide to reduce their spending, this is going to weaken the circular flow of money. Once an individual spends less, this worsens the situation of some other individual, who in turn also cuts his/her spending.
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***The dozen things experimental economists should do (more of) – Eszter Czibor, David Jiménez-Gómez, John List
23 mei

Experimental economists must tackle the generalisability and applicability of the evidence they produce. This column discusses principles to enhance these when designing and conducting experiments or reporting findings. Good practice is especially important when policy recommendations are made based on experimental results.
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Subprime Profit-Machine Hiccups: Credit-Card Charge-Offs Rise Across Banking System – Wolf Richter
22 mei

Impact felt by the real economy and the most vulnerable consumers.
In the first quarter, the credit-card “charge-off” rate at the 4,650 or so smaller US commercial banks – all banks other than the largest 100 banks – ticked down to 7.37%, the sixth quarter in a row above 7%. During the peak of the Financial Crisis, the charge-off rate at these banks was above 7% only four quarters, but not in a row, topping out at 8.9%. These smaller banks have taken a lot of risk in their credit card strategies in recent years, going aggressively after subprime customers that had run out of luck at the largest banks.
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Three Charts Show Millennials Are Nowhere Close In Buying A Home – Tyler Durden
25 mei

After decades of unrestricted money printing, debt accumulation, and financial bubbles, millennials are still hibernating in their parents’ basements. The Federal Reserver’s prolonged quantitative easing, now more recently quantitative tightening, has inflated home prices that have recently peaked.
To avoid an extended housing decline, millennial first-time homebuyers will be needed to shore up bids, but their student loan debt, auto loan debt, and significant credit card balances and overpriced real estate in all major cities are delaying their purchase plans for many years, reported Bloomberg.
Since the Dot Com bust, first-time homebuyers of young Americans has dropped 9%, from 42% of total sales to 33%. America’s declining living standards have contributed to a shrinking supply of low-priced homes.
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Negative Interest Rates Spread To Mortgage Bonds – John Rubino
24 mei

There are trillions of dollars of bonds in the world with negative yields – a fact with which future historians will find baffling.
Until now those negative yields have been limited to the safest types of bonds issued by governments and major corporations. But this week a new category of negative-yielding paper joined the party: mortgage-backed bonds.
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A heterogenous response to unconventional monetary policy – Anne-Laure Delatte, Pranav Garg, Jean Imbs
21 mei

The ECB’s unconventional monetary policy package implemented in February 2012 changed collateral requirements. This column examines the effects in the French credit market, using data on corporate loans. Credit indeed increased after the liquidity injection, exclusively driven by supply. There was also strategic risk-taking by a group of banks, an unintentional implication of the policy.
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Technology Is Not Just Disruptive, It’s Disastrously Deflationary – Charles Hugh Smith
22 mei

Deflation eats credit-dependent, mass-consumption economies alive from the inside.
While AI (artificial intelligence) garners the headlines, the next wave of disruptive technologies extend far beyond AI: as the chart of technologies rapidly being adopted shows, this wave includes new materials and processes as well as the “usual suspects” of machine learning, natural language processing, data mining and so on.
While many voices seek to assure us these technologies won’t displace human workers, the reality is cutting labor inputs is the core driver. What few pundits seem to understand (perhaps because they’ve never experienced a truly competitive market?) is that the rush to incorporate these technologies into existing enterprises is deflationary not just to prices but to profits.
Reducing labor inputs and improving productivity of capital and the remaining labor force is not going to generate profits if competitors can access the same tools and processes. The race isn’t to maximize profits, it’s to survive the inevitable deflationary spiral in prices as competitors are forced to pass along cost savings to customers to retain market share.
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***Rural America Is On The Verge Of Collapse – Tyler Durden
24 mei

The Economic Innovation Group’s (EIG) Distressed Communities Index (DCI) shows a significant economic transformation (from two distinct periods: 2007-2011 and 2012-2016) that occurred since the financial crisis. The shift of human capital, job creation, and business formation to metropolitan areas reveals that rural America is teetering on the edge of collapse.
Since the crisis, the number of people living in prosperous zip codes expanded by 10.2 million, to a total of 86.5 million, an increase that was much greater than any other social class. Meanwhile, the number of Americans living in distressed zip codes decreased to 3.4 million, to a total of 50 million, the smallest shift of any other social class. This indicates that the geography of economic pain is in rural America.
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***Three guiding principles for R&D policies in the digital era – Ramy El-Dardiry, Bastiaan Overvest, Michiel Bijlsma
24 mei

Digitalisation is transforming human life – from the way we interact with each other to the way we work, relax, and create. R&D within companies is no exception. This column lays out pathways for policymakers to successfully adapt R&D policies to these changes based on three guiding principles: direct policies towards spillovers, make policies technology-neutral, and do not favour superstars over challengers.
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US-Traded Chinese Stocks & ADRs Totally Crushed, Many by 50% or 60% or More – Wolf Richter
25 mei

Bloodletting after record IPO Hype in 2018 of Chinese companies in the US.
There are about 300 Chinese companies that are traded in the US, either on exchanges or over the counter, either as American Depositary Receipts (ADRs) or as shares. And they’re just about all getting crushed, crushed, crushed.
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“This is Going to be One for the Record Books” – Doug Casey
20 mei

Just because society experiences turmoil doesn’t mean your personal life has to. And a depression doesn’t have to be depressing. Most of the real wealth in the world will still exist—it will just change ownership.
What is a depression?
We’re now at the tail end of a very long, but in many ways a very weak and artificial, economic expansion. At the same time we’ve had one of the strongest securities bull markets in history. Both are the result of trillions of new dollars created over the last decade. Right now very few people are willing to consider the possibility of tough times—let alone The Greater Depression.
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Cross-border banking supervision for small host countries in Central, Eastern and South Eastern Europe – Ismael Ahmad Fontán, Thorsten Beck, Katia D’Hulster, Pamela Lintner, Filiz Unsal
20 mei

The banking systems in Central, Eastern, and South Eastern Europe are dominated by subsidiaries of multinational banks, many with parent banks from the EU. This column analyses the effects of regulatory and supervisory changes within the EU and euro area on host regulation and supervision in these countries and on their cooperation with home supervisors and resolution authorities in Western Europe. It also offers some recommendations for authorities both at the EU level and in the small host countries.
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Central Banks’ Forecasts Are Basically Garbage – Joakim Book
22 mei

Animals are a curious topic in finance, and we find them all over the place. We describe upward, downward or side-ways moving markets as bull, bear or deer markets. We have investment strategies ( “Dogs of the Dow”) and trading behavior ( ‘dead cat bouncing ‘) named after pets. We have “pigs” and “wolves” and “ostriches” and Nassim Taleb’s “black swans,” all of which reflect this tendency to name stock market phenomena after wildlife.
Most people are also aware of central bank language wrapped in similarly zoological terms: hawks and doves refer to central bankers preferring higher and lower interest rates, respectively. In the rest of the economics profession, this animalistic naming trend has been associated with certain iconic graphs, most famously through Branko Milanovic’s ‘Elephant Graph ‘ that aims to show how economic growth has been distributed among global income deciles.
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Clemens on minimum wage – John H. Cochrane
21 mei

Jeff Clemens offers a “roadmap for navigating recent research” on minimum wages in a nice CATO policy analysis. A review and a doubt.
He discusses the recent claims that minimum wages don’t hurt low-skilled people. This is an impressive and readable account of a vast literature. It’s not as easy as it seems to evaluate cause and effect in economics. Evidence from small increases in the minimum wage over short time intervals in some locations in good economic times may not tell you the effects of large increases over longer time intervals in all locations in bad economic times.
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Deutsche Bank Death Spiral Hits Historic Low. European Banks Get Re-Hammered – Wolf Richter
20 mei

Just bumping along the bottom, from hopeless to hope and back to hopeless.
The amazing thing with Deutsche Bank shares is this: Since 2007, so for 12 years, bottom fishers have been routinely taken out the back and shot, every time, with relentless regularity – as have big institutional investors, from Chinese conglomerates to state-owned wealth funds, that thought they were picking the bottom. A similar concept applies to European banks in general. May 2007 was the high point. And it has been brutal ever since – 12 years of misery.
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***Government-Created Monopolies Are Everywhere – Mike Holly
23 mei

Ludwig von Mises and other free market economists have argued correctly that monopoly results from government intervention. However, they have largely ignored the prevalence of monopolies (including oligopolies). Throughout American history, politicians have incessantly awarded preferential policies (e.g., “corporate welfare”) to special interests that has allowed them to create monopolies dominating virtually every major market.

Pro-regulation economists have falsely blamed markets for creating monopolies. But their view has been common, perhaps because they have better recognized the pervasiveness of monopolies. Monopolies have created wealth disparity by: increasing incomes and profits for certain politically-favored groups while blocking opportunities for other businesses; decreasing wages by reducing the competition for workers; and especially increasing prices on consumers and others.
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Public debt and the risk premium: A dangerous doom loop – Cinzia Alcidi, Daniel Gros
23 mei

The relationship between high public debt and low interest rates is once again at the forefront of debate.This column shows that countries with high debt levels pay a risk premium. This creates the potential for self-reinforcing loops of high debt and high risk premia, which can become explosive.
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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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