Economische aanraders 27-01-2019
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.
Will Policy Makers Turn a Global Economic Slowdown Into a Crisis? – Daniel Lacalle
The recent macroeconomic data of the leading economies point to a widespread slowdown. What is more concerning is not just a logical moderation in the path of growth, but the acceleration in the weakening of economies that were supposed to be stronger and healthier. It is even more concerning that this aggressive worsening of key leading indicators in China, the EU, and most emerging economies happens at the peak of the largest monetary and fiscal stimulus in decades.
It is easy to blame this widespread weakening on political headlines, trade wars, and — of course —Trump, but it would be disingenuous to believe those are the real factors behind the negative economic surprise.
Negative interest rate policy and the bank lending channel – Gauti Eggertsson, Lawrence H. Summers
Several central banks implemented negative policy rates in response to the financial crisis, but there is little consensus on the overall effect of this policy. This column examines the transmission of policy rates to bank lending rates, focusing on the case of Sweden. While the first two cuts in negative territory by the Riksbank appear to have been transmitted to lending rates, transmission seems to have broken down for the second two cuts. The findings suggest diminishing returns on interest rate cuts at negative rates.
We’re Flying with Eyes Partially Closed into Turbulent Markets & Economy – Wolf Richter
But for the markets: “No Data is Good Data”
“NOTICE: Due to a lapse in federal funding this website is not being updated,” it says in big lettering against a bright red background at the top of the data sites of the Department of Commerce.
This morning, the Commerce Department was supposed to release crucial data for the housing market: sales and inventories of new single-family houses (“new home sales”). This includes sales and inventory figures, how many months of supply there was, and the median sales price of the new houses that sold. Today’s release would have been for sales that closed in December. But the Commerce Department is part of the shutdown, and no data was released.
***Gentrified Urban America Will Be Hit Hard by the Recession – Charles Hugh Smith
Combine sky-high commercial rents in homogenized, gentrified urban areas and sharp declines in the incomes of the limited populace who can afford gentrified urban areas and what do you get?
A number of macro dynamics have set up gentrified urban America for a big fall in the coming recession. What does gentrified mean? Gentrified means only the gentry (top 10%) can afford to enjoy the urban amenities as commercial rents and the cost of doing business in desirable urban areas have skyrocketed along with residential rents.
As a result, low-margin businesses have been squeezed out of desirable urban neighborhoods along with lower-income residents. The top 10% is the only demographic who can afford to live in gentrified urban America.
Government Spending Doesn’t Create Economic Growth – Frank Shostak
According to many commentators, outlays by government play an important role in the economic growth. In particular, when an economy falls into a slower economic growth phase the increase in government outlays could provide the necessary boost to revive the economy so it is held.
The proponents for strong government outlays when an economy displays weakness hold that the stronger outlays by the government will strengthen the spending flow and this in turn will strengthen the economy.
In this way of thinking, spending by one individual becomes part of the earnings of another individual, and spending by another individual becomes part of the first individual’s earnings.
Carbon tax update – John H. Cochrane
An interesting question emerged from some discussion surrounding my last carbon tax post. How big will the tax be? The letter says $40 a ton, but then rising. But how far? And in response to what question?
It occurs to me that the two obvious targets lead to radically different answers.
1) The social cost of carbon. This is what economists usually think of as the appropriate Pigouvian tax. In order to pollute, you pay the cost you impose on others by your pollution.
Even the worst-case scenarios now put the cost of carbon emissions at 10% of GDP in the year 2100. Discount that back, divide by all the carbon emitted between now and then, and, you’re going to get a pretty small tax.
2) Temperature or quantitative guidelines. Or, “whatever it takes to stop the global temperature from rising more than 1.5 degrees C.” Such a tax has to be high enough to basically stop us from using fossil fuels. It would be radically higher, and impose economic costs far higher than 10% of GDP.
When you set a goal of a quantity with no attached price, the price can get pretty high.
Retooling Europe’s economy – Debora Revoltella
Europe is at risk of falling behind its global competitors. In a period of radical technological transformation, European firms are investing too little, with a gap both in tangible and intangible investment compared to the US. This column calls for a ‘retooling’ of Europe’s economy in relation to skills, innovation finance, the business environment, infrastructure, and deepening the Single Market.
The Upside-Down World of MMT – Robert P. Murphy
[Editor’s note: MMT is back in the news, championed by Congresswoman Alexandria Ocasio-Cortez and former Bernie Sanders advisor Stephanie Kelton. Economists like Brad DeLong and Paul Krugman are giving MMT at least faint praise, and even National Review has favorable things to say. Ironically, MMT is neither modern nor truly “monetary;” instead it is a combination of tired fiscal and monetary policies. Our Senior Fellow Robert Murphy first wrote this article debunking MMT in 2011, but every word applies today.]
Modern Monetary Theory (MMT) is a hip economic/financial paradigm apparently sweeping a world unsatisfied with mainstream economics. Over the past year, I have been hearing a growing number of people refer to MMT: either fans who think it blows up my Austrian views, or foes who think it deserves a full-scale critique.
Collapse Is Already Here – Chris Martenson
Many people are expecting some degree of approaching collapse — be it economic, environmental and/or societal — thinking that they’ll recognize the danger signs in time.
As if it will be completely obvious, like a Hollywood blockbuster. Complete with clear warnings from scientists, politicians and the media. And everyone can then get busy either panicking or becoming the plucky heroes.
That’s not how collapse works.
Collapse is a process, not an event.
And it’s already underway, all around us.
Collapse is already here.
However, unlike Hollywood’s vision, the early stages of collapse cause people to cling even tighter to the status quo. Instead of panic in the streets, we simply see more of the same — as those in power do all they can to remain so, while the majority of the public attempts to ignore the growing problems for as long as it possibly can.
For both the elite and the majority, their entire world view and their personal sense of self depends on things not crumbling all around them, so they remain willfully blind to any evidence to the contrary.
***Brexit’s Ironic Twists Hit Spain’s Biggest Industry – Don Quijones
“Peak Tourism” has already set in. Brits account for 22% of tourists in Spain. Now add Brexit.
In a delectable irony, two of the biggest corporate victims of a disorderly Brexit could turn out to be Spain’s flagship carrier Iberia and low-cost airline Vueling. Both companies are majority owned by British Airways’ parent company International Consolidated Airlines Group (IAG), which is UK-based. And current EU rules require European carriers to be both majority-owned and operated in the bloc.
If the UK leaves the EU on March 29, IAG will no longer meet those requirements. If the current legislation is not changed or a new loophole inserted into it, Iberia and Vueling’s European fleet could find themselves grounded in 70 days’ time. As absurd as it may sound, even planes shuttling between Spain’s two biggest cities, Madrid and Barcelona, could be refused permission to take off.
The Euro Shows That a Fiat Money System Is More Expensive than We Thought – Friedrich Israel
The traditional argument for fiduciary media and ultimately unbacked fiat money was based on the costs of production. The real resources otherwise used for gold mining and minting could, under a fiat standard, be used for other productive purposes and thus enrich society as a whole. The argument goes back at least to such great names as Adam Smith and David Ricardo.
More recently, Milton Friedman reinvigorated the argument, and we are still today presented with it in standard textbooks. However, a recent study published in the Economics Bulletin demonstrates that the argument, at least in the case of the eurosystem, does not carry much weight.
Economic uncertainty and fertility cycles: The case of the post-WWII baby boom – Bastien Chabé-Ferret, Paula Gobbi
Between the early 1940s and the late 1960s, the secular decline in fertility that started at the turn of the 19th century in most developed countries was interrupted by a massive baby-boom. This column argues that although much attention has focused on this boom, fertility rates preceding it were abnormally low. The evidence suggests that economic uncertainty can explain a substantial part of the major swings in fertility over the 20th century.
Huge Backlog Could Trigger New Wave Of Shale Oil – Nick Cunningham
Just what the crude oil market needs.
The number of drilled but uncompleted wells (DUCs) in the U.S. shale patch has skyrocketed by roughly 60 percent over the past two years. That leaves a rather large backlog that could add a wave of new supply, even if the pace of drilling begins to slow.
The backlog of DUCs has continued to swell, essentially uninterrupted, for more than two years. The total number of DUCs hit 8,723 in November 2018, up 287 from a month earlier. That figure is also up sharply from the 5,271 from the same month in 2016, a 60 percent increase. The EIA will release new monthly DUC data on January 22, which will detail figures for December.
***Venezuela’s Economic Collapse Was Enabled by its Central Bank – Maria Horat
One of the most remarkable aspects of the economic meltdown in Venezuela is just how far the country has fallen in terms of economic prosperity.
After all, Venezuela was the fourth richest economy in the world in the 1950s. The Venezuelan currency, “the bolivar” was one of Latin America’s strongest currencies during Venezuela’s peak from the 1950s to 1970s.
However, the economic meltdown in Venezuela has its origins, in part, in the founding of the Venezuelan central bank in 1939. This was followed by the nationalization of the oil industry in the 1970s by Venezuelan president Carlos Andrés Perez, which was coupled with the central bank’s easy money policies. The final crisis has come with the socialist /communist measures of the past twenty years.
***Low-Cost Airlines Are Crashing into Bankruptcy One After the Other as Financial Conditions Tighten in Europe – MC01
But traffic is up, and these are still the good times.
Ryanair lowered its 2018 profit guidance from a range between €1.1 billion and €1.2 billion to a range of €1.0 billion to €1.1 billion, in what Ryanair CEO Michael O’Leary called “a disappointment.” While over one billion euro in profit can be hardly called a catastrophe, it’s easy to understand the reasons of Mr O’Leary’s disappointment.
Ryanair saw passengers throughout 2018 grow by 9% to 142 million and “strong ancillary sales,” meaning sales of additional services such as premium seats with more legroom and on-board catering. In spite of all the bad publicity – for example, Ryanair was named “worst short-haul airline” a couple of weeks ago — it remains not merely Europe’s most popular low-cost carrier, but also a model for turning what has long been considered a loss-making enterprise into a profitable business.
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