Economische aanraders: 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 samenvatting of de eerste (twee) alinea’s hier gegeven worden.

Sinds december 2015 nemen we 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.

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Bail-ins and bailouts: Incentives, connectivity, and systemic stability – Benjamin Bernard, Agostino Capponi, Joseph Stiglitz
18 oktober
Worried about the cost of public bailouts, governments have proposed bail-ins whereby banks contribute to rescuing their debtors. This column analyses the conditions under which bail-in strategies can be credibly implemented, showing that this heavily depends on the network structure. While earlier work has suggested that denser networks are socially preferred to more sparsely connected networks, the opposite holds in the presence of the government’s strategic intervention.
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How does inflation work anyway? – John H. Cochrane
20 oktober
Monetary policy, central banking and inflation are hard. It’s well to remember that. Today’s blog post adds up a few things that seem like they’re obvious but are not.
Inflation is hard.
Central bankers are puzzled at persistently low inflation. From WSJ,
Ms. Yellen said, as the “biggest surprise in the U.S. economy this year has been inflation.”
“My best guess is that these soft readings will not persist, and with the ongoing strengthening of labor markets, I expect inflation to move higher next year,” Ms. Yellen said, adding that “most of my colleagues on the [interest-rate-setting Federal Open Market Committee] agree.”
Of course, they’ve been expecting that for several years now. And she seems fully aware that they may be wrong once again:
She cautioned, however, that U.S. central bankers recognize recent low inflation could reflect something more persistent. “The fact that a number of other advanced economies are also experiencing persistently low inflation understandably adds to the sense among many analysts that something more structural may be going on,”
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The Fed Is Confused about What Drives Inflation – Frank Shostak
16 oktober
On October 4 2017, the former governor of the Federal Reserve Daniel Tarullo in a speech at the Brookings think-tank in Washington said Fed policy makers do not have a reliable theory of what drives inflation. According to Tarullo, central bankers should pay less attention to theoretical models and more to actual data. However, how is it possible to make any sense of the data without having a reliable theory?
The Importance of Theory
One purpose of a theory is to enable one to ascertain the definition of a phenomenon that is subject to investigation.The correct definition attempts to identify the essence of the phenomenon (i.e., the key parts that drives the phenomenon). For instance, the definition of human action is not that people are engaged in all sorts of activities, but that they are engaged in purposeful activities – it is purpose that gives rise to an action.
So when Tarullo states that Fed policy makers do not know the causes that drive inflation he basically says that Fed policy makers have not as yet established the correct definition of inflation.
Is it then valid to be practical, as suggested by Tarullo, to focus only on the data to understand what inflation is all about? If Fed policy makers respond to changes in price indices without establishing what drives these changes this runs the risk of making things much worse.
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Is the Fed Getting Cold Feet about the QE Unwind? – Wolf Richter
20 oktober
Curious things are happening on its balance sheet.
The last Fed meeting ended on September 20 with a momentous announcement, confirming what had been telegraphed for months: the QE unwind would begin October 1.
The unwind would proceed at the pace announced at its June 14 meeting. It would shrink the Fed’s balance sheet – “balance sheet normalization” it calls that – and undo what serial bouts of QE have done: gradually destroying some of the money that had been created out of nothing during QE.
The pace of the shrinkage would be $10 billion a month for the first three months, and then it would accelerate every three months until it hits $50 billion a month at this time next year. That was the announcement.
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Global risks from rising debt and asset prices: Views of leading economists – Wouter den Haan, Martin Ellison, Ethan Ilzetzki, Michael McMahon, Ricardo Reis
16 oktober
The outgoing German finance minister, Wolfgang Schäuble, has recently expressed concerns about the risks posed to the world economy by high levels of debt. This column presents the latest Centre for Macroeconomics and CEPR survey of leading economists, in which a strong majority of respondents agree that an excess of public and private debt together with inflated asset prices mean that the world economy faces heightened risks. A similarly strong majority of the experts also agree that the loose monetary policy of major central banks is responsible for the recent increase in global leverage and asset values.
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This is What it Looks Like When Credit Markets Go Nuts – Wolf Richter
19 oktober
Pricing of risk kicks bucket in record central-bank absurdity.
As the days pass, the perverse effects of central bank policies on the financial markets are getting more and more amazing. This includes the record-setting nuttiness now reigning in the European bond market, compared to the mere semi-nuttiness in the US bond market.
The 10-year yield of US Treasury Securities closed at 2.34% yesterday and at 2.33% today. This is low by historical standards. It’s barely above the rate of consumer price inflation as measured by CPI, which was 2.2% in September. This means that coupon payments barely make up for the loss of purchasing power. If inflation ticks up just a little, bondholders will be left in the hole. And a yield this low doesn’t compensate bondholders for any other risks, including duration risk, which can be significant. In other words, this is a bad deal.
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GDP Is Bogus: Here’s Why – Charles Hugh Smith
19 oktober
Here’s a chart of our fabulous always-higher GDP, adjusted for another bogus metric, official inflation.
The theme this week is The Rot Within.
The rot eating away at our society and economy is typically papered over with bogus statistics that “prove” everything’s getting better every day in every way. The prime “proof” of rising prosperity is the Gross Domestic Product (GDP), which never fails to loft higher, with the rare excepts being Spots of Bother (recessions) that never last more than a quarter or two.
Longtime correspondent Dave P. of Market Daily Briefing recently summarized the key flaw in GDP: GDP doesn’t reflect changes in the balance sheet, i.e. debt.
So if we borrow money to pay people to dig holes and then fill them with the excavated dirt, GDP rises to general applause. The debt we took on to fund the make-work isn’t accounted for at all.
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Tyler: Equity financed banking is possible! – John H. Cochrane
19 oktober
Tyler Cowen wrote an extended blog post on bank leverage, regulation and economic growth on Marginal Revolution. Tyler thinks the “liquidity transformation” of banks is essential, and that we will not be able to avoid a highly levered banking system, despite the regulatory bloat this requires, and the occasional financial crisis. As blog readers may know, I disagree.
A few choice quotes from Tyler, though I encourage you to read his entire argument:
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The Next Generation of Currency Wars: Private vs. State-backed Crypto – Tho Bishop
20 oktober
Recently Russia announced that it will be unleashing a CryptoRuble, just a week after Vladimir Putin strongly criticized Bitcoin and other private cryptocurrencies. When announcing the move, Minister of Communications Nikolay Nikiforov acknowledged that it was in part inspired by the aim of getting ahead of other governments:
I confidently declare that we run CryptoRuble for one simple reason: if we do not, then after two months our neighbors in the EurAsEC will.
In doing so, Russia is following the lead of another country that too has become hostile to private crypto, China. Last July the People’s Bank of China became the first central bank to announce it had developed a crypto-prototype that it plans to offer alongside the traditional renminbi.
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The Gold-Backed-Oil-Yuan Futures Contract Myth – Koos Jansen
15 oktober
On September 1, 2017, the Nikkei Asian Review published an article titled, “China sees new world order with oil benchmark backed by gold”, written by Damon Evans. Just below the headline in the introduction it states, “China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry”. Not long after the Nikkei piece was released ‘the story’ was widely copied in sensational analyses throughout the gold space. However, ‘the story’, as presented by Nikkei, doesn’t make sense at all. Allow me to share my 2 cents in addition to what I shared previously on the Daily Coin.
All the rumours and analyses on gold, oil and yuan that are making rounds now in the blogosphere are based on the Nikkei article. But the Nikkei article itself contains zero official sources. Basically, the whole story has been invented by Damon Evans. So, let’s start addressing the claims made in the Nikkei piece.
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***Short-term impact of Brexit on the UK’s export of goods – Hiau Looi Kee, Alessandro Nicita
22 oktober
More than a year has passed since the UK voted for Brexit. This column analyses the short-term fallout of trade in goods due to potential changes in trade policies. It argues that if the UK fails to secure a new trade deal with the EU and must face tariffs with no preferences, total UK’s exports to the EU would drop by at most 2%. The impact is small because the EU’s import demand for UK exports is fairly inelastic, especially for products that that may face higher tariffs.
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What a Gold-Backed Yuan and Cryptocurrencies May Mean for the Dollar – Doug French
19 oktober
Amoungst all the crypto news this, and crypto news that, was a tiny item appearing in the Nikkei Asian Review on September 1st. Reporting from Denpasar, Indonesia, Damon Evans wrote, “China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry.”
Not bitcoin backed, not ethereum backed, g-o-l-d backed. How low tech of the Chinese. For the moment, oil is priced in dollars, whether it’s Brent or West Texas Intermediate.
Evans explained,
China’s move will allow exporters such as Russia and Iran to circumvent U.S. sanctions by trading in yuan. To further entice trade, China (the world’s largest oil importer) says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.
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***Wheezing Consumers & Slowing Economy, No Problem: UK Inflation Jumps Most in 5+ Years. Rate Hike Due in November – Wolf Richter
17 oktober
The Fed leads, other central banks follow.
The UK is not the only one. But it’s furthest ahead. In the US, consumer prices as measured by the Consumer Price Index rose 2.2% in September compared to a year ago. In the Eurozone, prices rose 1.5%. And today the UK’s Office for National Statistics reported that consumer prices in the UK jumped 3.0%, after having already risen 2.9% in August. It was the biggest increase since April 2012.
And inflation is outpacing wage increases, which inched up a meager 2.1%, slamming consumers further, and hampering the UK economy that is already showing signs of strain, with, for example, new vehicles sales plunging over 9% in September from a year ago.
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Goldman Expects Trump To Withdraw From NAFTA, Congress Readies For A Fight – Tyler Durden
20 oktober
With NAFTA negotiations going badly, Goldman Sachs has published a report, “Thoughts on the Potential US Withdrawal from NAFTA”, that concludes that the US is likely to withdraw from the trade agreement next year “At this point, efforts at revising the agreement look likely to be unsuccessful, though a deal is still possible, in our view. If the talks do not result in a revised agreement by early 2018, we believe that the Trump Administration could announce its intent to withdraw from NAFTA.” The NAFTA agreement calls for a six-month notice period before a nation can withdraw and “we believe it would follow a similar pattern to the strategy the White House has used in recent decisions on immigration (the DACA program), Iran, and health subsidies. Each involved a disruption to the status quo pursuant to a campaign pledge, with delayed implementation and an expectation that a new arrangement might be negotiated in the interim.”
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Big or small cities: On city size and economic growth – Susanne Frick, Andrés Rodríguez-Pose
20 oktober
Big cities have historically been seen as an important prerequisite for a country’s economic growth. In recent decades, however, developing countries have rapidly urbanised, and large cities are increasingly found in relatively poor countries. This column uses a new dataset to revisit the relationship between city size and economic growth. It finds that relatively small cities (with populations under three million) have been more conducive to economic growth, while very large cities are only growth-enhancing in countries with a very large urban population.
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***The De-Digitisation of India – Jayati Ghosh
18 oktober
So it’s official: cash use is back in almost full force in the Indian economy. Cash withdrawals from ATM machines – a reasonable if incomplete proxy for the use of cash in the economy – are nearly back to the level of just before the demonetisation shock of 8 November 2016. RBI data on use of debit and credit cards to withdraw money from ATMs show that such withdrawals, which had collapsed to only Rs 850 billion in December 2016 largely because of the sheer unavailability of cash with such machines, amounted to Rs 2.27 trillion in July 2017, only slightly below the Rs 2.55 trillion withdrawals recorded for October 2016.
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