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.

——————————————————————————————————
Fiscal Inflation – John H. Cochrane
3 januari
From its inflection point in February 2021 to November 2021, the CPI rose 6 percent (278.88/263.161), an 8 percent annualized rate. Why?
Starting in March 2020, in response to the disruptions of Covid-19, the U.S. government created about $3 trillion of new bank reserves, equivalent to cash, and sent checks to people and businesses. (Mechanically, the Treasury issued $3 trillion of new debt, which the Fed quickly bought in return for $3 trillion of new reserves. The Treasury sent out checks, transferring the reserves to people’s banks. See Table 1.) The Treasury then borrowed another $2 trillion or so, and sent more checks. Overall federal debt rose nearly 30 percent. Is it at all a surprise that a year later inflation breaks out? It is hard to ask for a clearer demonstration of fiscal inflation, an immense fiscal helicopter drop, exhibit A for the fiscal theory of the price level (Cochrane 2022a, 2022b).
What Dropped from the Helicopter?
From December 2019 to September 2021, the M2 money stock also increased by $5.6 trillion. This looks like a monetary, not a fiscal intervention, Milton Friedman’s (1969) classic tale that if you want inflation, drop money from helicopters. But is it monetary or fiscal policy? Ask yourself: Suppose the expansion of M2 had been entirely financed by purchasing Treasury securities. Imagine Treasury debt had declined $5 trillion while M2 and reserves rose $5 trillion. Imagine that there had been no deficit at all, or even a surplus during this period. The monetary theory of inflation, MV=PY, states that we would see the same inflation. Really? Similarly, ask yourself: Suppose that the Federal Reserve had refused to go along. Suppose that the Treasury had sent people Treasury bills directly, accounts at Treasury.gov, along with directions how to sell them if people wished to do so. Better, suppose that the Treasury had created new mutual funds that hold Treasury securities, and sent people mutual fund shares. (I write mutual fund as money market funds are counted in M2.) The monetary theory of inflation says again that this would have had no effect. These would be a debt issue, causing no inflation, not a monetary expansion. Really?
——————————————————————————————————
Inflation or Recession? The Fed Faces a Choice – Siddharth Gundapaneni
3 januari
On December 15, the Federal Reserve announced numerous quantitative tightening measures that have the intended goal of combating the rising inflation that has been bogging down the American economy. As of November 2021, the rate of inflation has reached 6.8 percent, the highest since 1982, and is unlikely to have peaked yet.
Despite Federal Reserve chairman Jerome Powell originally proclaiming this inflation spiral to be transitory, the Federal Reserve has announced that they will end their bond buying program three months earlier than expected, in addition to speculating three interest rate hikes in the coming years as opposed to the originally planned single rate hike.
With the quantitative easing policy maintained throughout the covid-19-induced recession finally ending, the federal funds rate is expected to rise to 0.9 percent in 2022, 1.6 percent in 2023, 2.1 percent in 2024, and 2.5 percent in the undetermined long run. Mortgage-backed security and bond purchases will be reduced by $10 billion and $20 billion a month, respectively, in order to expedite the conclusion of the program by March 2022, rather than June. While this course of action is likely to mitigate the soaring inflation, it may lead to a myriad of detrimental effects to other facets of the economy.
——————————————————————————————————
Rising inflation is worrisome. But not for the reasons you think – Francesco D’Acunto, Michael Weber 4 januari
Commentators and policymakers are deeply divided about the causes, consequences, and persistence of the surge in inflation around the world as the economic activities resume after the COVID-19-induced closures. This column discusses how recent research on the dynamics of inflation and inflation expectations inform the policy debate. Consumers’ inflation expectations are an important missing piece in the puzzle policymakers are trying to solve. To avoid the self-fulfilling prophecy of inflation, central bankers might seek to communicate directly also with ordinary consumers, rather than only with financial market experts, and convince them that price increases will only be temporary.
——————————————————————————————————
The Federal Reserve Keeps Buying Mortgages – Alex J. Pollock
8 januari
Runaway house price inflation continues to characterize the U.S. market. House prices across the country rose 15.8% on average in October 2021 from the year before. U.S. house prices are far over their 2006 Bubble peak, and remain over the Bubble peak even after adjustment for consumer price inflation. They will keep on rising at the annual rate of 14–16% for the rest of 2021, according to the AEI Housing Center.
Unbelievably, in this situation the Federal Reserve keeps on buying mortgages. It buys a lot of them and continues to be the price-setting marginal buyer or Big Bid in the mortgage market, expanding its mortgage portfolio with one hand, and printing money with the other. It should have stopped before now, but the purchases, financed by newly created fiat money, or monetization, go on. They proceed at the rate of tens of billions of dollars a month, stoking the house price inflation, making it harder and harder for new families to afford a house. A recent Wall Street Journal opinion piece was entitled “How the Fed Rigs the Bond Market”—it rigs the mortgage market, too.
The balance sheet of the Federal Reserve has grown to a size that would have amazed previous generations of Federal Reserve governors and economists. Although we have become somewhat accustomed to it, so fast do perceptions adjust, it would also have surprised readers of Housing Finance International of five years ago, and readers of 15 years ago would probably have judged the current reality simply impossible. Over time, we keep discovering how feeble are our judgments of what is possible or impossible.
——————————————————————————————————
The Economy / Market Look “Healthy” Until They Have a Seizure and Collapse – Charles Hugh Smith
5 januari
So one index or asset or another hits a new high, wow, more proof everything is so robust and healthy, we never had it so good–right up to the seizure and collapse.
Some readers occasionally make the point that I’ve been predicting a market crash for ten years and been dead-wrong for ten years. I’m all for mocking presumptuous pundits of either the tin-foil hat or mainstream variety, but that’s not quite what I’ve been saying for 13 long, tedious years.
What I’ve been saying is that living on junk food and sugar-cocaine speedballs isn’t “health” just because a handful of pills has dropped cholesterol readings to “healthy” levels. If we define “health” by a metric that is easily manipulated, then the illusion of “health” can be maintained right up until the supposedly “healthy” individual has a seizure and drops dead.
Since the 2008-2009 financial-coronary and emergency-intervention that revealed the abjectly poor health of the global financial system, central banks and states have jacked up stocks and other assets as the metric of a “healthy” economy. Just as banging down cholesterol doesn’t actually make a chronically ill person subsisting on junk food, sugar and cocaine healthy, jacking stocks to new highs doesn’t make the economy or financial system healthy. All it does is mask the decay of real health and amplify the eventual reckoning.
There are three dynamics at work in the artifice that ever-greater monetary and fiscal stimulus and jacked-up stock markets will restore the health of a decaying, sickly economy. One is that sugar-cocaine speedballs generate miraculous results at first: the manic rush of energy and the delusional confidence in god-like powers looks like robust health if viewed through a distorted lens that filters out all the hidden trade-offs and costs to depending on speedballs to function.
——————————————————————————————————
Will Artificial Intelligence Create a Socialist Paradise? – Doug French
4 januari
Relating a quip by Soviet economist Nikolai Fedorenko, Yuri Maltsev illustrated the problem with socialism in his foreword to Ludwig von Mises’s Economic Calculation in the Socialist Commonwealth. Fedorenko said, at the time, in Maltsev’s words, “[A] fully balanced, checked, and detailed economic plan for the next year would be ready, with the help of computers, in 30,000 years.”
Victor Shvets believes computing power has caught up and “technology could soon create an environment where state planning might be able to deliver acceptable economic results while simultaneously suppressing societal and individual freedoms.” Mr. Shvets has worked all over the world as an investment banker and has now put down his dystopian ideas of the future in the book The Great Rupture: Three Empires, Four Turning Points, and the Future of Humanity.
——————————————————————————————————
***Hard to Imagine the Labor Market Will Go Back to Pre-Pandemic Dynamics. Too Much Has Changed –
7 januari
People got thrown out of a rut and thought about how to move forward differently. We can see that increasingly in the numbers.
Momentous shifts in the labor market, brought on by the pandemic, are percolating to the surface, with millions of people not joining the labor force, with companies having trouble hiring as people don’t want to be hired under the current conditions, and with people striking out on their own to get out of the rat race and chase after their dream. Side-gigs that were started while working-from-home may have turned into full-time businesses, and these people quit their W-2 jobs – contributing to the record number of “quits” – and are now chasing after their dream, and the creation of tiny businesses has exploded. And wages are surging.
For the second month in a row, households reported large gains in people who are working – including the self-employed and people starting their own businesses. But employers reported that they’d added only a smallish number of employees to their payrolls, which don’t include the self-employed and those striking out on their own.
——————————————————————————————————
***Why Don’t We Cut Out the Middleman and Just Elect Pfizer and Merck? – Charles Hugh Smith
7 Januari
If we no longer have the capacity to distinguish between moral legitimacy and self-serving corruption, then we might as well eliminate the Middleman and vote directly for Pfizer or Merck.
There’s a fancy word for cutting out the Middleman: disintermediation. Removing intermediaries who take a cut but neither produce nor add value makes perfect sense, reducing costs and increasing efficiency.
Maybe it’s time to eliminate the politicians who soak up hundreds of millions of dollars in campaign contributions from corporations and the super-wealthy and just elect Pfizer, Merck, Amazon, General Dynamics, etc. directly. Since corporate lobbyists write most of the legislation anyway, why not cut out the intermediaries in the process?
The super-wealthy buy political power via Political Action Committees (PACs and Super-PACs), think tanks and philanthro-capitalist foundations (Gates Foundation, et al.). Now that it takes tens of millions of dollars to buy the conventional “winning campaign,” the political class spends much of its time fund-raising, i.e. lavishing kisses on the derrieres of corporations and the super-wealthy, implicitly promising to do their bidding better than the alternative candidates that the corporations and super-wealthy could buy.
Recall Smith’s Neofeudalism Principle #1: If the citizenry cannot replace a kleptocratic authoritarian government and/or limit the power of the financial Aristocracy at the ballot box, the nation is a democracy in name only.
——————————————————————————————————
Turkey’s Economy Is in Big Trouble – Joseph Solis-Mullen
5 januari
Over the years observers of Turkish politics have become somewhat inured to erratic swings in policy coming out of Ankara. Particularly since the political reforms of 2017, his high degree of control over the primary functions of the state mean President Recep Tayyip Erdoğan faces few hurdles to executing abrupt changes he views as correct or necessary. This lack of any effective institutional check to his authority is, at present, leading the country off an economic cliff.
Already since 2018 the country was mired in a multifront crisis. Characterized by stagnation, unemployment, dramatic swings in the price of the lira, rising inflation, a declining balance of trade, growing borrowing costs, and an increase in corporate defaults, Erdoğan’s present interference with the central bank invites blowing the whole thing up into a monumental catastrophe. While comparisons to the hyperinflation that overcame Weimar Germany are often hyperbolic, the danger in Turkey is real.
——————————————————————————————————
***Comparing online to in-person meetings – Shivani Taneja, Paul Mizen, Nicholas Bloom
4 januari
COVID-19 resulted in a shift towards working from home. This column discusses the findings of a survey of over 2,000 UK working adults, which suggest that online meetings are more efficient for smaller gatherings of 2 to 4 people, while in-person meetings are preferred for gatherings of 10 or more. Online efficiency is also dependent on demographics, with women and more educated employees reporting that online meetings are relatively more efficient. Unsurprisingly, employees who work from home more and with good internet quality also report higher relative online meeting efficiency.
——————————————————————————————————
Workers See Their New Power, Quit in Record Numbers to Get Better Jobs at Companies Struggling to Fill 10.6 Million Openings – Wolf Richter
4 jamuari
Workers come out ahead, a phenomenon not seen in many decades, as desperate employers poach workers from each other amid widespread labor shortages.
The number of workers who quit jobs to work for another company, or to stay home and fix up the house or take care of the kids or who feel like they don’t have to work anymore after booking big gains in their stocks or cryptos, or whatever, spiked in November to a record of 4.53 million (seasonally adjusted).
In the private sector, “quits” spiked to a record of 4.31 million, 30.6% higher than in November 2019, a year when the job market had also been hot and the number of quits had reached record levels. Private sector quits accounted for over 95% of total quits. Only about 216,000 folks quit jobs at federal, state, and local government agencies.
This is not based on online job postings that can be all over the place, but on a survey of the payroll departments of 21,000 nonfarm businesses and government entities by the Bureau of Labor Statistics, released today in its JOLTS report.
——————————————————————————————————
The Bitcoin challenge: How to tame a digital predator – Ulrich Bindseil, Patrick Papsdorf, Jürgen Schaaf
7 januari
Bitcoin’s market capitalisation reached new peaks in November 2021. This column suggests it is hard to find arguments supporting the cryptocurrency’s current valuation. Even if the financial stability risks of a Bitcoin collapse could be contained, the burst of the bubble would imply painful losses for many retail investors and society at large. The authors conclude that public authorities should refrain from taking measures supporting additional investment flows into Bitcoin and should treat it as rigorously as the conventional financial industry to combat illicit payments, money laundering, and terrorist financing.
——————————————————————————————————
***The second sanction wave – Peter A.G. van Bergeijk
5 Januari
The use of economic sanctions as a foreign policy tool has increased sharply over the past decade. Drawing a comparison with the first sanction decade of the 1990s, this column analyses the drivers of the recent sanction wave and argues that the increased use of economic sanctions will be sustained in the foreseeable future.
——————————————————————————————————
Treasury Yields & Mortgage Rates Spike: Markets Begin to Grapple with Quantitative Tightening – Wolf Richter
8 januari
This is now moving fast.
The two-year Treasury yield started rising in late September, from about 0.23%, and ended the year at 0.73%. In the five trading days since then, it jumped to 0.87%, the highest since February 28, 2020. Most of the jump occurred on Wednesday and Thursday, triggered by the hawkish Fed minutes on Wednesday.
Markets are finally and in baby steps starting to take the Fed seriously. And the most reckless Fed ever – it’s still printing money hand-over-fist and repressing short-term interest rates to near 0%, despite the worst inflation in 40 years – is finally and in baby steps, after some kind of come-to-Jesus moment late last year, starting to take inflation seriously. Treasury yields are now responding:
Even though the Fed hasn’t actually done any hawkish thing, and is still printing money and repressing interest rates to near 0%, it is laying the groundwork with innumerable warnings all over the place, from the FOMC post-meeting presser on December 15, when Powell said everything would move faster, to hawkish speeches by Fed governors, to the very hawkish minutes of the FOMC meeting, which put Quantitative Tightening in black-and-white.
The Fed is now spelling out that it will make Quantitative Tightening – QT is the opposite of QE – its primary policy tool in battling inflation. It even spelled out in the minutes why QT won’t blow up the repo market, as it had done last time in September 2019, because last July, the Fed established the Standing Repo Facilities (SRFs) to calm the repo market while the balance sheet gets unwound sooner, faster, and by more than last time.
——————————————————————————————————
The unemployment-risk channel in business cycle fluctuations – Tobias Broer, Jeppe Druedahl, Karl Harmenberg, Erik Öberg
6 januari
Early signs of a recession can lead to a negative feedback loop, with workers’ concerns about unemployment dampening demand and thus deepening the recession. This column uses a heterogeneous agent model to quantify the importance of the ‘unemployment-risk’ channel for business cycle fluctuations in the US economy. It shows that the channel accounts for around one-third of observed unemployment fluctuations. As the demand amplification through precautionary savings is inefficient, this finding provides an additional rationale for stabilisation policies by policymakers.
——————————————————————————————————
Japan’s Inflation Is Hidden behind Central Bank–Financed Subsidies – Taiki MuraiGunther Schnabl
3 januari
Whereas inflation rates in the US and Europe have risen steeply in the course of 2021, consumer price inflation in Japan stood at 0.1 percent for October 2021 (figure 1). Also, Japan’s producer price inflation of 8 percent lagged far behind the US and Europe. Even more, Japan’s extremely low inflation has persisted for more than thirty years—despite an extremely loose monetary policy and soaring government debt. There are three reasons for Japan’s “inflation miracle.”
First, Japanese companies have been able to keep prices low because the costs of capital and labor have fallen significantly since the bursting of the bubble economy in the early 1990s. The Bank of Japan’s prolonged loose monetary policy has lowered the average interest rate on corporate loans from 7.5 percent in 1991 to 0.75 percent recently. Public loan guarantees have depressed risk premiums on loans. Unlike in the euro area, Japanese companies do not have to pay negative interest on their deposits with banks.
——————————————————————————————————
Reddit’s “Antiwork” Forum Booms As Millions Of Americans Refuse Traditional Employment – Tyler Durden
9 Januari
The unprecedented economic ructions caused by the pandemic (and, more importantly, the lockdowns and job-destroying restrictions on business that governments ordered in response to the pandemic) have forced many of Americans to dramatically rethink their relationship with work.
Clearly, there’s something going on with the labor market. While JOLTS data show that millions of workers in the US continue to quit their jobs (and it’s not just low-paying jobs in retail and hospitality; increasingly white collar jobs are being left open), the last three months have yielded jobs creation numbers that have disappointed expectations (but are apparently still strong enough to justify a March rate hike by the Fed).
Massive gains in crypto and equity markets since the start of the pandemic have given many Americans breathing room allowing them to pursue “alternative” lifestyles (be it “vanlife” or taking a stab at starting a small business of their own, even if that business is a simple dog-walking business). But not everyone who has left “traditional” work over the past two years is a crypto millionaire. Some have simply been so attracted to the DIY ethos that they’ve decided to take the leap, aided by generous federal stimulus benefits).
——————————————————————————————————
What Will Surprise Us in 2022 – Charles Hugh Smith
3 januari
What seemed so permanent for 13 long years will be revealed as shifting sand and what seemed so real for 13 long years will be revealed as illusion. Magical thinking isn’t optimism, it is folly.
Predictions are hard, especially about the future, but let’s look at what we already know about 2022. Viewed from Earth orbit, 2022 is Year 14 of extend and pretend and too big to fail, too big to jail and Year 2 of global supply chains break and energy shortages.
The essence of extend and pretend is to substitute income earned from increases in productivity–real prosperity–with debt–a simulation of prosperity –that doesn’t solve the real problems, it simply adds a new and fatal problem: since productivity hasn’t expanded across the spectrum, neither has income or prosperity.
All that happened over the past 13 years is that debt–money borrowed against future productivity gains and energy consumption–funded illusions of prosperity in all three sectors: households, enterprise and government.
The explosion of debt and interest due on that debt could not occur if interest rates still topped 10% as they did 40 years ago in the early to mid-1980s. We couldn’t add tens of trillions of dollars, yen, yuan and euros in new debt unless interest rates were pushed down to near-zero (for the government, the wealthy and corporations only, of course–debt-serfs still pay 7%, 10%, 15%, 19%, etc.)
——————————————————————————————————
New Vehicle Sales in 2021 at 1978 Level: 25 Years of Stagnation Interrupted by Plunges. But Prices Explode to WTF Level – Wolf Richter
6 januari
GM and Ford sport 6 year declines of -28% and -27%. Toyota blows all away, but still -7% from 2015. Hyundai-Kia sets new record. Captured in charts.
New vehicle sales in 2021 were marked by supply-chain chaos and the semiconductor shortage. But there was sufficient demand, and consumers switched from astute car buyers to paying whatever, resulting in a collapse of price resistance among consumers, the likes of which I have never seen before, which led to a record spike in prices and obese gross profits per vehicle for dealers. Automakers, dogged by supply constraints, prioritized higher-end models. And the average transaction price exploded. GM, Ford, and others got battered by the chip shortages. Others emerged with their dignity intact. Toyota trounced GM and became Number 1 for the first time ever.
But in terms of sales volume, it was another crappy year. Total new vehicle sales – the number of vehicles delivered to ultimate retail and fleet customers – ticked up about 3.1% from the collapsed levels of 2020, to 14.93 million vehicles, about the same as in 1978, adding another year to the 25-year stagnation interrupted by plunges, where the only thing that’s booming is prices.
——————————————————————————————————
***What Facebook can tell us about the preference differences between women and men – Ángel Cuevas Rumin, Ruben Cuevas Rumin, Klaus Desmet, Ignacio Ortuño-Ortin
8 Januari
Are preference differences between men and women attenuated or accentuated in more gender-equal societies? Using information on the shares of male and female Facebook users that are interested in over 45,000 different topics, this column finds that differences are larger in gender-equal societies for interests that are systematically biased towards the same gender across the globe (such as football, war, or children), while the opposite is true for interests that do not show a gender bias (such as fitness, travel, or horses). These contrasting results are consistent with both evolutionary psychology and social role theory.
——————————————————————————————————