Economische aanraders 06-09-2015
Veren of Lood biedt u op zondag wekelijks een inkijkje in belangrijke of informatieve artikelen en interviews die de voorafgaande 7 dagen op economisch terrein verschenen.
De kop is de link naar het oorspronkelijke artikel, waarvan de eerste (twee) alinea’s hier gegeven zijn.
The Concept Of Money And The Money Illusion
Awareness about the concept of money is making a comeback. Gone are the decades in which the global citizenry was fooled to leave this subject to economists, governments and banks – a setup that has proven to end in disaster. The crisis in 2008 has spawned debate about what money is, where it comes from and where it should come from. These developments inspired me to write a post on the concept of money and the money illusion. (All examples in this post are simplified.)
The Case For Liberating Oil Exports
Imagine this: US iron miners, thanks to revolutionary technology that can extract iron from once-useless rock, double their production in 5 years, creating hundreds of billions of dollars of wealth, contributing to steel production for billions of people around the world, and making America a world leader in iron once again.
Wat gebeurt er toch weer veel op de beurzen. Met name de problemen in China worden aangewezen als de grote boosdoener. Nu is er natuurlijk altijd meer aan de hand, maar China lijkt inderdaad een trigger te zijn geweest voor de huidige volatiliteit.
Er zijn echter wel wat verschillende invalshoeken wat betreft het hoe en waarom. Vandaag laat ik enkele van deze invalshoeken de revue passeren.
‘Quantitative Tightening’ Is A Myth (But That Doesn’t Mean There Isn’t A Problem)
For China, this is bad news. It’s the same mistake that the US made in 1929-31, when it tightened monetary policy despite rapidly deteriorating economic conditions in order to remain on the gold standard. You would think by now the world would know about the economic dangers of fixed exchange rate systems, even when there are large reserves backing them. But it’s China’s funeral, not the US’s. The US, if anything, stands to benefit from easier monetary conditions and a lower dollar versus the yuan than would be the case if the yuan were floated.
Eastern Europe’s post-2004 Convergence with EU: Unimpressive to-date
EU Commission latest report on real economic convergence in the EU10 Accession states of Eastern and Central Europe (CEE10) sounds like a cheerful reading on successes of the EU and the Euro. The report overall claims significant gains in real economic convergence between the group of less developed economies post-joining the EU and the more advanced economies of the EU.
However, there are some seriously pesky issues arising in the data covered.
No Inflation Friday: The Government Admits Its Own Statistics Are Phony
In an article that first appeared in Fortune magazine on December 10, 2001, Warren Buffett penned a great letter about falling prices:
“When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying– except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.”
He’s right. Any rational human being actually LIKES falling prices.
Bank of Japan Drops Ball, Government Pension Fund Stops Buying Stocks, Nikkei Plunges, J-REITs Eviscerated
On Tuesday, Japanese stocks took the worst drubbing of the major Asian stock markets. The Nikkei plunged 725 points or 3.84% to 18,165. On August 10, it had set a multi-year high of 20,808. At the time, Japanese stocks gleamed; they’d elegantly skirted the China swoon. But over the past three weeks, the Nikkei has dropped 12.7%.
Japan has some, let’s say, issues. Private consumption dropped 0.8% in the last quarter, and GDP dropped 0.4%. The economy shrank in six of the past 12 quarters. That’s how well Abenomics has worked out for the economy.
Steve Williamson has a very nice post “Historical Fiction”, rebutting the claim, largely by Paul Krugman, that the late 1970s Keynesian macroeconomics with adaptive expectations was vindicated in describing the Reagan-Volker era disinflation.
The claims were startling, to say the least, as they sharply contradict received wisdom in just about every macro textbook: The Keynesian IS-LM model, whatever its other virtues or faults, failed to predict how quickly inflation would take off in the 1970, as the expectations-adjusted Phillips curve shifted up. It then failed to predict just how quickly inflation would be beaten in the 1980s. It predicted agonizing decades of unemployment. Instead, expectations adjusted down again, the inflation battle ended quickly. The intellectual battle ended with rational expectations and forward-looking models at the center of macroeconomics for 30 years.
Is the Stock Market Now “Too Big to Fail”?
Correspondent Bart D. recently speculated that the U.S. stock market was now “too big to fail,” that is, that it was too integral to the global financial system and economy to be allowed to fail, i.e. decline 40+% as in previous bubble bursts.
The U.S. stock market is integral to the global financial system in two ways. Now that investment banks, pension funds, insurers and multitudes of 401K retirement plans are dependent on current equity valuations, a crash would impair virtually the entire spectrum of finance from hedge funds to banks to insurers to pension plans.
A decimation of these sectors would impact the U.S. economy and thus the global economy very negatively.
More Evidence that Global Economic Inequality is Decreasing
Over time, the claim that there is increasing income inequality globally has looked increasingly like a fairy tale. The assertions of inequality consist of the popular notion that the spread of capitalism leads to an immense increase in income inequality. The differences between rich and poor, we are told, are rising so fast that the situation is no longer sustainable. The narrative further asserts that there is an intrinsic tendency in capitalism toward inequality. This story is so often repeated that nobody questions it.
The Importance of Your Time Horizon
I ran across two interesting articles today:
Volatility Doesn’t Equal Loss—Unless You Sell from Oppenheimer Funds, and
Buying the Dips Doesn’t Work for Everyone by the estimable Jason Zweig.
Both articles are exercises in understanding the time horizon over which you invest. If you are older, you may not have the time to recover from market shortfalls, so advice to buy dips may sound hollow when you are nearer to drawing on your assets.
Disclaimer: De 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.