Economische aanraders 29-11-2015
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 eerste (twee) alinea’s hier gegeven zijn.
Economics Is About Scarcity, Property, and Relationships – Michael J. McKay
The other day I was having coffee with a new friend, a retired businessman who had customized luxury cars in California. I mentioned I had recently retired from owning an investment firm and had studied economics for many years, especially Austrian economics.
Like so many people, he said, “I really don’t understand economics and always have been confused by it.”
BlackRock Spreads its Tentacles in Brussels – Don Quijones
In Brussels there is one industry that is thriving better than just about any other: the bailout business. In the last five years, some of the world’s biggest financial consultancies have trousered tens of millions of euros apiece advising bailed-out governments and central banks how to reorganize their finances.
As Irish central bank governor Patrick Honohan said during Ireland’s 2011 bailout, “it’s amazing when you pay large sums of money, how the best consultants in the world can come flocking.” Those firms include Alvarez and Marsal, Oliver Wyman and Pimco.
Structure and change in economic history: The ideas of Douglass North -John Joseph Wallis
Douglass C. North was among the most important and influential economic historians and economists of the late 20th century. This column highlights four of his major contributions: his pioneering work in quantitative economic history, or ‘cliometrics’; his similarly fundamental work using neoclassical economics to understand institutions; his critique of theory for explaining long-term economic and institutional change; and the distinction he drew between institutions and organisations.
Recession Watch: the economic indicators that show what’s coming – Larry Kummer
What should we watch among the blizzard of economic data? Journalists tend to focus on the numbers most frequently reported, usually about manufacturing and housing. Such as this week’s existing home sales volume (oddly, we don’t similarly obsess over NYSE volume). It’s important for people in that biz, but tells us little about the US economy.
Also big in the news are new home sales, building permits, mortgage applications, and many other housing datapoints. For a simple measure of this industry see total residential construction spending. It shows a continued strong expansion. Tune in next month to see if anything has changed.
Why Even a Modest Disruption Will Shatter the Status Quo – Charles Hugh Smith
Any modest reduction in debt, tax revenues, consumption or new borrowing will bring the entire Status Quo crashing down.
Consider this clipping from the August 1932 San Francisco Chronicle newspaper:
“Reduction of salaries of municipal employees and limitation of city positions to only one member of a household will be sought by (Supervisor) Adolph Uhl in two amendments to the San Francisco charter. The salary reductions would run from 2.5% for the lowest bracket to 25% on salaries of $500 a month or more.”
Thanks to the handy BLS Inflation Calculator we know that $500 a month in 1932 is the equivalent of $8,680 per month (about $104,000) a year.
Expansionary or contractionary effects of capital inflows: It depends what kind – Olivier Blanchard, Jonathan D Ostry, Atish R Ghosh, Marcos Chamon
Some scholars view capital inflows as contractionary, but many policymakers view them as expansionary. Evidence supports the policymakers. This column introduces an analytic framework that knits together the two views. For a given policy rate, bond inflows lead to currency appreciation and are contractionary, while non-bond inflows lead to an appreciation but also to a decrease in the cost of borrowing, and thus may be expansionary.
Staggering Neo-Fisherian Ideas and Staggered Contracts – John B. Taylor
In a recent paper Do Higher Interest Rates Raise or Lower Inflation? and a follow-up post, John Cochrane delves into the “neo-Fisherian” idea that “maybe raising interest rates raises inflation” and lowering interest rates lowers inflation. He starts with a two-equation “new Keynesian” model (three if you include a policy rule). He then inputted a lower interest rate path and found that the inflation rate falls; similarly, with a higher interest rate path, inflation rises. St. Louis Fed President Jim Bullard replicated and discussed the findings in his recent Permazero speech at the Annual Cato Monetary Conference. And the results bear on the famous issue of the stability or instability of an interest peg.
This is obviously an important issue, but in my view the simplified new-Keynesian model used by John Cochrane and Jim Bullard is too abstract and artificial for the purposes at hand. The model is based on a Calvo version of staggered pricing with exponential weighting, resulting in a so-called new Keynesian Phillips curve. What would happen in a staggered price or wage setting model with a rich enough micro-structure to be estimated or calibrated with detailed micro data? And what more could you learn from that?
Consumers Lose Grapple with Reality, “Decline in Economic Aspirations” Sets in – Wolf Richter
The most important economic entity in the world, the one that every economist tries to decipher, the entity that is supposed to pull the world economy out of its funk with debt-fueled, beyond-their-means, damn-the-torpedoes splurges, has done a lousy job.
The American consumer has been lackadaisical despite, as the EIA gushed, the lowest gas prices “heading into a Thanksgiving holiday weekend since 2008.” Instead of spending that windfall on something else, they have the temerity to save some of it.
Perils of central banks as policymakers of last resort – Refet S. Gürkaynak, Troy Davig
Central banks around the world have been shouldering ever-increasing policy burdens beyond their core mandate of stabilising prices. This column considers the social welfare implications when central banks take on additional mandates that are usually the domain of other policymakers. Additional mandates are shown to worsen trade-offs faced by the central bank, while distorting the incentives of other policymakers. Central bank ‘mandate creep’ may be detrimental to welfare.
How Much Higher Could The U.S. Dollar Go? – Charles Hugh Smith
A move above current levels in the US Dollar Index would cause tremendous pain for many participants.
Let’s start our examination of the U.S. dollar (USD) by recalling the chart from my August 2014 essay, Why the Dollar Could Strengthen—A Lot. At that point, the USD had moved modestly off its lows, and had yet to challenge long-term resistance around 80.
Submerging Markets – Dana Lyons
After failed breakouts earlier in the year, the charts of the Asian Tiger Cub markets suggest more trouble may lie ahead.
We’ve mentioned several times how price action often times can “predict” the news. That is, the chart of a particular security, index or market may suggest a likely path for prices – bullish or bearish – long before any news comes out and is assigned as the ex post facto cause of the move. Therefore, scanning the charts of various markets can, at times, give us a head’s up on a potential source of positive or negative “news” before the market hits the mainstream radar. Such may be the case currently in the Asian Tiger Cub markets – in a negative way.
Can The Oil Industry Really Handle This Much Debt? – Ekaterina Pokrovskaya
As the crude industry has been wrestling with low oil prices that declined by over 50 percent since its highest close at $107 a barrel in 2014, many exploration and production companies worldwide and in the U.S., in particular, have faced large shortfalls in revenue and cash flow deficits forcing them to cut down on capital expenditures, drilling and forego investments in new development projects.
High debt levels taken on by the U.S. oil producers in the past to increase production while oil prices soared, have come back to haunt oil and gas companies, as some of the debt is due to mature by the end of this year, and in 2016. Times are tough for U.S. shale oil producers: Some may not make it, especially given that this month, lenders are to reassess E&P companies’ loans conditions based on their assets value in relation to the incurred debt.
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.