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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The real questions the Fed should ask itself – John Cochrane
8 november
When Federal Reserve Chair Janet Yellen spoke at the Fed’s annual monetary policy symposium in Jackson Hole, Wyoming, this August, her topic—financial stability and the Fed’s role in financial regulation and supervision—said a lot. Financial regulation, supervision, and direction is much more centrally a part of what the Fed is and does these days than is standard monetary policy. Whether overnight interest rates go up or down a quarter of a percentage point may be the subject with the greatest ratio of talk to action, and of commentary to actual effect, in all of economics. (Bottom line: interest rates in the United States are likely to stay around 1 percent for the foreseeable future. Get used to it.) But the Fed is deeply involved in running the financial system, and all the talk points to it becoming more so.
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The productivity slowdown and labour’s income share – Gene Grossman, Elhanan Helpman, Ezra Oberfield, Thomas Sampson
11 november
Many countries have experienced both a slowdown in aggregate productivity growth and a decline in labour’s share of national income in recent years. This column argues that the productivity slowdown may have caused the decline in labour’s income. Calibrating the authors’ model to US data suggests that a one percentage point decline in the productivity growth rate accounts for between half and all of the observed decline in the US labour share.
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How Will Bitcoin React in a Financial Crisis Like 2008? – Charles Hugh Smith
7 november
If the ownership of bitcoin is as concentrated as some estimate, then the liquidity issue distills down to the actions of the top tier of owners.
Whenever I raise the topic of bitcoin and cryptocurrencies, I feel like an agnostic in the 30 Years War between Catholics and Protestants. There is precious little neutral ground in the crypto-is-a-bubble battle; one side is absolutely confident that bitcoin and the other cryptocurrencies are in a tulip-bulb type bubble, while the other camp is equally confident that we ain’t seen nuthin’ yet in terms of bitcoin’s future valuation.
I’ve stated here more than once that in my view the real value of bitcoin will only be revealed in a financial/market crisis/crash like 2008-09. Longtime correspondent Mark G. recently proposed three tests that illuminate some of the dynamics that might come into play in the next financial/market crash/crisis.
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Tax Cuts will Balloon US Debt to 120% of GDP, but Boost to Economy will be “Short-Lived” – Wolf Richter
7 november
US is the “most indebted AAA-country” and runs “the loosest fiscal stance,” but the dollar as Reserve Currency still props it up: Fitch
It’s uncertain what if anything in the mix of tax cuts and tax increases being kicked around in Congress will become law. But Fitch Ratings believes that some combination will make it, and that it will sap US government revenues. “Under a realistic scenario of tax cuts and macro conditions,” the US deficit would rise to 4% of GDP next year, and balloon the US debt to 120% of GDP by 2027.
And that might be the best-case scenario.
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Why Does the Euro Area Have Such Low Growth and High Unemployment? – Philip Arestis, Malcolm Sawyer,
9 november
Since the euro was adopted as a virtual currency in 1999 (and the exchange rates between the currencies of the then 11 countries fixed en route to adopting the euro), growth among the euro-area countries has been lacklustre. The euro-area annual growth rate was just under 2% in 2002 to 2007, followed by 0.3% in 2008, -4.5% in 2009, then 2% in 2010, and an average of 0.8% 2011 to 2016. Over the period 1999 to 2016, the average was 1.1%. Unemployment declined through to 2007 down to 7.5%, then rose in the aftermath of the financial crises and the effects of fiscal austerity programmes to 12% in 2013, and has gently declined since to 10% in 2016 and likely to come close to 9% at the end of October 2017. There are notable disparities between different countries’ experiences, with Italy’s growth 1998 to 2016 being an annual average rate of 0.2%, and unemployment in Greece over 23% and Spain close to 20% in 2016.
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Parent firms’ resources and productivity of foreign subsidiaries – Kaoru Hosono, Daisuke Miyakawa, Miho Takizawa
12 november
Several studies have examined the profitability and productivity of foreign subsidiaries, but less is known about the determinants of success. This column looks at the contribution of resources from 3,800 Japanese parent firms to the business activities of their 20,000 overseas subsidiaries. The results suggest a positive contribution of parent firms’ intangibles to subsidiaries’ production, in particular for smaller subsidiaries.
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***Is There Any Way Out of the ECB’s Trap? – Daniel Lacalle
9 november
The ECB faces the Devil’s Alternative that Frederick Forsyth mentioned in one of his books. All options are potentially riskly. Mario Draghi knows that maintaining the so-called stimuli involves more risks than benefits, but also knows that eliminating them could make the eurozone deck of cards collapse.
Despite the massive injection of liquidity, he knows that he can not disguise political risks such as the secessionist coup in Catalonia. The Ibex reflects this, making it clear that the European Central Bank does not print prosperity, it only puts a floor to valuations.
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Global Banks, City of London Raise “Disorderly Brexit” Alarm – Don Quijones
11 november
Shifting trillions of euros of derivatives positions could be hugely disruptive.
The growing prospect of a hard or disorderly Brexit is sending jitters through the global financial community. This week the Financial Times reported that a group of “large financial institutions with big London operations” had met with US Commerce Secretary Wilbur Ross to express their dissatisfaction with the lack of progress in Brexit negotiations.
“The fears over a potential Brexit no-deal are rising, as we move within 16 months of the UK’s exit from the EU,” said Joshua Mahony, market analyst at IG.
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How Central Banks Widen Wealth and Income Gaps – Hal Snarr
9 november
The Federal Reserve’s latest Survey of Consumer Finances, according to Federal Reserve Governor Brainard, shows that the share of income held by the top 1 percent of households has risen from 17 percent in 1988 to 24 percent in 2015, and that the wealth held by that same group rose from 30 percent in 1989 to 39 percent in 2016.
There are many explanations of why the gap between the rich and the poor widens. Governor Brainard attributes some of it to labor market disparities relating to geography and to race and ethnicity. She and Robert Frank say it results from the wealthiest households being much more likely to invest additional money received than those in other income groups. Vincent Del Giudice and Wei Lu blame automation and robotics. John Tamny says it is a consequence of the explosion in entrepreneurship that has benefited us all. A Tax Policy Center report concludes that it will widen even more if the president’s income tax overhaul is enacted.
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***Remember, Remember the Eighth of November: India’s War on Cash Assessed One Year Later – Jerri-Lynn Scofield
6 november
Ask just about any sentient American what s/he recalls about the eighth of November 2016, and you’ll likely get an earful to the election of Donald Trump as President– which The Hill today points out, neither party has yet to get past.
Ask any resident Indian to recall the same day, and you’ll hear an assessment of notebandi– demonetization. To recap for those new to the story, that evening, Prime Minister Narendra Modi delivered an unscheduled speech announcing the cancellation of Indian Rupees (Rs) 500 (about US$7.73) and Rs 1000 (US$15.47) notes– 86% of all cash then in circulation in what’s largely a cash-based economy– in order to ferret out black money. Holders of the cancelled notes were required to swap them for new ones by end 2016, using procedures that it soon became apparent were deeply flawed.
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Democratising finance: The digital wealth management revolution – Juergen Braunstein, Marion Laboure
11 november
Despite specialised press coverage, little is known about the potential wider socioeconomic implications of digital wealth management solutions. This column examines how ‘robo-advisors’ offer an opportunity to democratise finance and decrease wealth inequality. These algorithmic investment advisors stand to disrupt the wealth management sector through their ‘low-cost, accessible to most’ business models. However, the entrance of traditional wealth managers into the robo-advisor market could threaten this disruption.
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New Potential Credit Risk Bombs: Exotic, ‘Nonlinear’ and Private Transactions – Yves Smith
8 november
The Wall Street Journal has a story today on a new type of credit market transaction described as “nonlinear finance”. That label alone should send off alarms, since one assumes it is truth in advertising, a rare commodity in Big Finance. “Nonlinear” says that under certain scenarios, the price of the instrument goes “nonlinear,” as in behaves in a radically different, ungraceful manner or can be expected to have its price gap out if particular conditions are met. That would also suggest the instrument would be hard to hedge.
One of the reasons I can’t be as specific as I’d like, as Wall Street Journal readers pointed out, is the actual article is thin on details. However, that isn’t as surprising as it should seem. These trades sound a lot like the old CDOs, the ones that blew up so spectacularly in the crisis. Technically, those were asset-backed securities, or ABS CDOs.1 If you were reading the financial press before the crisis, the only reporter who recognized the importance and riskiness of CDOs was the Financial Times’ Gillian Tett, who doggedly kept after them and managed to ferret out critical bits of information. CDOs also became large enough as a product that there was some aggregate data, but it wasn’t terribly reliable (one huge problem was the potential for double-counting).
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Next Phase of Carmageddon: the Banks – Wolf Richter
9 novenmber
Banks have started to tighten lending standards for prime and subprime borrowers, and it shows.
Banks are further tightening their lending standards for prime and subprime auto loans. This process started in Q2 2016, when auto lending had reached the apogee of loosey-goosey underwriting that had boosted sales of new and used vehicles to record levels and had ballooned auto loan-balances outstanding to the $1-trillion mark. It also boosted risks for lenders. Inevitably, subprime auto loans started running into trouble in 2016, and it was time to not throw the last trace of prudence into the wind entirely.
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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.

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