Economische aanraders 27-09-2020
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.
Inflation: Its Effects and Failures – Ludwig von Mises
Inflationism is that policy which by increasing the quantity of money or credit seeks to raise money prices and money wages or seeks to counteract a decline of money prices and money wages which threatens as the result of an increase in the supply of consumers’ goods.
In order to understand the economic significance of inflationism we have to refer to a fundamental law of monetary theory. This law says: The service which money renders to the economic community is independent of the amount of money. Whether the absolute amount of money in a closed economic system is large or small does not matter. In the long run the purchasing power of the monetary unit will establish itself at the point at which the demand for money will equal the quantity of money. The fact that each individual would like to have more money should not deceive us.
New Lockdowns Could Lead Europe to Economic Depression – Daniel Lacalle
The rise in Covid-19 cases in countries like France and Spain has increased the risk of new
lockdowns. Governments should understand by now that shutting down the economy is highly
inefficient and devastating for jobs and business solvency. However, as we have seen in Spain, many governments simply decide to start new lockdowns in order to show that they are taking aggressive measures, even knowing that these generate more negative effects and have no real impact on preserving health. Instead of looking at the examples of South Korea, Taiwan, Sweden or Austria, where simple but effective measures have resulted in better management of the health crisis, some European governments are ignoring the economic and social long-term disaster that closing down the economy has created and seem prepared to repeat the past mistakes.
Should Investors Focus on Risk Rather Than Profit? – Frank Shostak
According to the modern portfolio theory (MPT), financial asset prices always fully reflect all available and relevant information, and any adjustment to new information is virtually instantaneous. In this way of thinking, asset prices respond only to the unexpected part of any information, since the expected part is already embedded in prices.
For instance, if the central bank raises interest rates by 0.5 percent, and if market participants anticipated this action, asset prices will reflect this expected increase prior to the central bank raising interest rates. Note that once the central bank lifts the interest rate by 0.5 percent this increase will have no effect on asset prices, since it is already embedded in asset prices.
Lessons On Inflation From The Past – Alasdair MacLeod
This article examines two inflationary experiences in the past in an attempt to predict the likely outcome of today’s monetary policies.
The German hyperinflation of 1923 demonstrated that it took surprisingly little monetary inflation to collapse the purchasing power of the paper mark. This is relevant to the fate of the “whatever it takes” inflationary policies of today’s governments and their central banks.
The management of John Law’s Mississippi bubble, when he used paper money to rig the market is precisely what central bank policy is aimed at achieving today. By binding the fate of the currency to that of financial assets, as John Law proved, it is the currency that is destroyed.
There Will Be Permanent Changes: Apple CEO Tim Cook Weighs in on Working from Home – Wolf Richter
“Some things actually work really well virtually”; but “the vast majority of us can’t wait until we can be back in the office.”
Apple CEO Tim Cook, during an interview at The Atlantic Festival, took on work from home, after having long been quiet about it, even as other companies have either jumped on the bandwagon with permanent work-from-home visions, such as Twitter and Facebook, or refused to jump on the bandwagon, such as Netflix’s CEO who called it a “pure negative,” or JP Morgan’s CEO who warned about the negative consequences of working from home.
Monetary capacity – Roberto Bonfatti, Adam Brzezinski, K. Kıvanç Karaman, Nuno Palma
Monetary capacity refers to a state’s capacity to circulate money that is accepted by the public, while fiscal capacity refers to its capacity to tax. This column argues that monetary and fiscal capacity and, by extension, markets and states have a symbiotic relationship. The long-run European evidence from antiquity to the modern period corroborates this mutual dependence, with money stocks and tax revenues moving in close synch. History also offers a natural experiment to estimate the causal effect of monetary capacity on fiscal capacity, with New World silver increasing money stocks and in turn tax revenues in a significant and substantial way.
***Should Billionaires Exist? – Bradley Thomas
A mantra popularized by Bernie Sanders and like-minded progressives declares “billionaires should not exist.”
The statement serves as both a declaration of the “immorality” of wealth inequality as well as a justification for steep confiscatory taxes on wealth favored by the likes of Sanders and Elizabeth Warren.
While on the campaign trail last year, Sanders said, “I don’t think that billionaires should exist,” adding that his tax proposal “does not eliminate billionaires, but it eliminates a lot of the wealth that billionaires have, and I think that’s exactly what we should be doing.”
The goal, according to Sanders, is to “reduce the outrageous and grotesque and immoral level of income and wealth inequality.”
***Late-movers outperform first-movers in export markets – Jamal Ibrahim Haidar
The relationship between first-movers and late-movers in export markets has important policy implications. First-movers need to be productive enough to pay market entry costs; in turn, they generate information externalities for late-movers. This column uses a unique disaggregated export-level customs dataset to test whether first-movers outperform late-movers in export markets. Using a variety of specifications and controlling for demand and supply shocks, it shows that, surprisingly, late-movers outperform first-movers. Furthermore, this effect is mainly driven by a differential in export quantities, not prices.
Commercial Real-Estate Fallout Even Douses the Queen of England – Nick Corbishley
Office Workers Are Again Told to Work from Home, Retailers Don’t Pay Rents, UK Commercial Property Owners Sink Deeper into the Mire.
Crown Estates, which manages the Queen of England’s portfolio, recently wrote down the value of 17 shopping and leisure centers by 17%, cutting Her Majesty’s net worth by £552 million. As The Economist points out, this is “fairly small beer” set against the £13.4 billion valuation of the Queen’s property portfolio, which includes some of London’s toniest real estate.
The Road to Nowhere: Whatever Can’t Be Politicized Ceases to Exist – Charles Hugh Smith
Just as time is a one-way arrow, “the politicization of everything” is a one-way road to dissolution and collapse.
The essence of any Totalitarian society is the politicization of everything, as everything must be either supporting the status quo or it’s a threat to the status quo.
There is no middle ground in a Totalitarian society and so everything–literally everything– must be politicized to assess its true nature of being “for” or “against” the status quo.
In such a society, what cannot be politicized ceases to exist. It isn’t counted or recognized, and so it fades into a netherworld of shadows, a dangerous realm where the mere act of attempting to recognize a non-politicized experience is itself a threat to the status quo.
Sovereign risk after Covid-19: Don’t forget domestic debt – Wojtek Paczos, Kirill Shakhnov
The sharp reductions in economic output and large-scale government expenditures prompted by the Covid-19 pandemic have led to an enhanced risk of sovereign defaults, especially in emerging economies. This column argues that an output drop alone increases the risk of foreign default, while a sudden expenditure hike alone increases the risk of domestic default. Thus, given the double nature of the Covid shock, recent proposals that would ease the burden of foreign debt after COVID-19 in emerging economies are necessary but may not be sufficient to prevent a wave of defaults on domestic debt.
The Shift from City Centers to Suburbs: New House Sales Soar for 3rd Month, +46% YoY, to Highest Since 2007 – Wolf Richter
But the median price declined. Households paying for office space to work from home?
This is a massive shift. It’s not that the numbers are huge – there are just not that many new single-family houses sold in the US. But the increases in sales are huge, and they’re becoming persistent.
Sales of new single-family houses, based on contracts signed in August, jumped by 45.6% year-over-year to 83,000 deals, not seasonally adjusted, matching July deals, and a notch above June deals (79,000), according to the Commerce Department today. All three of them were the highest monthly sales since April 2007, but still well below the peaks in 2004 through 2006
***“Buy British”: UK efforts to turn a slogan into government policy in the 1970s and 1980s – David Clayton, David Higgins
After Brexit, the UK government will enjoy greater freedom to encourage domestic consumers to “Buy British”. But as this column explains, attempts by successive UK governments in the 1970s and early 1980s to initiate such import substitution policies were fraught with economic and legal difficulties. Indeed, accelerating globalisation and the rapid growth of imports in intermediate products for assembly into ‘British’ goods raise significant problems in defining a ‘national’ product – and the growth of tradable services (such as insurance, education and healthcare) presents an even more intractable problem.
Three Barriers to Improving Poverty Rates in America – Eben Macdonald
As the election is well underway, the United States’s political discussion has intensified about the living standards of the poorest in the country and the solution to their poverty. The Democrats, as usual, have proposed extended welfare benefits and greater government aid to poor families.
This experiment began in the 1960s when President Lyndon Johnson initiated the War on Poverty programs. As he signed them into law, poverty levels were already plummeting, according to data collected from the Census Bureau, thanks to substantial increases in productivity and wages. Since the 1960s, although approximately $20 trillion have been spent on the programs, poverty levels have basically flatlined, often ticking up due to the occasional recession.
“An Extremely Dangerous Game” – Central Bankers ‘Extend & Pretend’ Has Increased Risk Of “Catastrophic Collapse” – Tyler Durden
In recent weeks, there has been a lot of talk about the role of the world’s central bankers going forward. With that in mind, now seems like a good time to recap the market bailout operations during the past few years… to get some insights into how this all ends (spoiler alert – not well)!
GnSEconomics.com’s Tumoas Maalinen has written a detailed (and ominous) twitter-thread on the ‘stealth socialization’ of the financial markets by the central bankers.
***How the Pandemic Upended the Video Game Industry – Adam Williams
Hardware, software, peripherals: If it has to do with staying at home…
Typically, revenue growth the year before a new console generation arrives is slow. But 2020 is the year of the Pandemic, with people losing their jobs or working from home and in many areas not being able to go to indoor venues and events, video games have exploded. Microsoft and Sony have now announced the details of next-gen consoles, and we are set for a banner year of an all-time sales high, despite the slow-down in the global economy. COVID has created a situation where virtual technologies advanced, international markets were shaken, and gaming just gets bigger and bigger.
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.Economische aanraders