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.

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Why the World Has a Dollar Shortage, Despite Massive Fed Action – Daniel Lacalle
31 maart
How can the Fed launch an “unlimited” monetary stimulus with congress approving a $2 trillion package and the dollar index remain strong? The answer lies in the rising global dollar shortage, and should be a lesson for monetary alchemists around the world.
The $2 trillion stimulus package agreed by Congress is around 10% of GDP and, if we include the Fed borrowing facilities for working capital, it means $6 trillion in liquidity for consumers and firms over the next nine months.
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Expected US macroeconomic performance during the pandemic adjustment period – James Bullard
4 April
The actions and policies taken to control the spread of COVID-19 in the US have had the effect of engineering a controlled, partial and temporary shutdown of certain sectors of the economy. This column argues that this organised ‘throttling down’ radically changes the way we need to think about and gauge the health of the US economy in the near term. The goals of macroeconomic policy will need to be very different, in some ways the opposite of what we would normally try to accomplish.
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***The Wonderful Insanity of Globalization – Charles Hugh Smith
1 april
So here’s an April Fools congrats to globalization’s many fools.
The tradition here at Of Two Minds is to make use of April Fool’s Day for a bit of parody or satire, but I’m breaking with tradition and presenting something that is all too real but borders on parody: the wonderful insanity of globalization.
Like the famous emperor with no clothing, globalization’s countless glorious benefits have been flogged by neoliberal elites and its corporate media shills with such relentlessly manic enthusiasm (let’s call it what it is: a form of greed-fueled insanity) that the average worker has come to accept the wonderfulness of globalization as a natural force much like gravity: it’s inescapable.
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The Pandemic Exposed the Frailty of the Financial System – Fábio Santos
4 april
Despite the more optimistic claims of political pundits and Federal Reserve officials (Jerome Powell, specifically), things are far from being under control. Notwithstanding archetypal Austrian objections to “loose” monetary and fiscal policies on the grounds that they create production structures that ultimately deplete the pool of real savings, the operational failures of central banks cross-globally are largely nested in faulty axioms. Intellectually corrupt frameworks of analysis also appear to be à la mode, recently inspiring Mark Carney, former governor of the Bank of England, to express his fears about a possible “liquidity trap” rendering monetary policy ineffective.
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Services Sector Falls off Cliff: First Data Points from the Eurozone where Lockdowns Started Earlier – Wolf Richter
3 april
“The ultimate economic cost of the COVID-19 outbreak cannot be accurately estimated until we get more clarity on the duration and scale of the pandemic.”
In developed economies, the services sector – finance, insurance, health care, professional services such as technology, lawyering, or architects, and many others, including transportation, travel, tourism, restaurants, bars, clubs, etc. – account for 60% to 70% of the economy. What we’re now seeing is a sudden fall-off-the-cliff collapse in the services sector in addition to a dizzying downturn in manufacturing. We got the first glimpse today, from the Eurozone where COVID-19 lockdowns were imposed well ahead of those in the US. And the data for the Eurozone released today picked up the effects.
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A Corporate-Debt Reckoning Is Coming – TYler Durden
3 april
Corporate debt is the timebomb everyone saw ticking, but no one was able to defuse. Ratings agencies warned about it: Moody’s, S&P. Central banks and international financial institutions did too: the Fed, the Bank of England, the Bank for International Settlements, the IMF. Financial luminaries expressed concern: Jamie Dimon, Seth Klarman, Jes Staley, Jeffrey Gundlach, Henry McVey. Even a presidential candidate brought the issue on the campaign trail: Elizabeth Warren. Yet, as we’ve documented in these pages for more than two years, corporations have only piled on more debt as their balance sheet health has deteriorated.
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This Is What Economic Collapse Looks Like – Michael Snyder
2 april
Approximately ten million Americans have filed new claims for unemployment benefits over the past two weeks. To put that in perspective, the all-time record for a single week before this coronavirus pandemic hit was just 695,000. So needless to say, 6.6 million claims in a single week puts us in uncharted territory. Just check out these charts…
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Keynes and the Euthanasia of the Rentier – Ohad Osterreicher
4 april
With over $12 trillion in negative-yielding debt and the yield on the ten-year Treasury bond falling below 1 percent for the first time, the days in which people could reliably count on a steady stream of income from their assets seem to be a thing of the past. And although most people would have a hard time finding anything positive about this state of affairs, it is actually a part of the grand vision set forth by the father of modern macroeconomics, John Maynard Keynes.
In the last chapter of his influential 1936 book The General Theory of Employment, Interest, and Money, Keynes concludes by inferring a number of lessons from his previous discussions. One of those lessons became famous for the phrase it contains, “the euthanasia of the rentier”: the notion that once high interest rates become history due to expansionary monetary policy, the class of people who live off their savings will gradually and silently disappear. But why did Keynes advocate low interest rates in the first place, and embrace the annihilation of the rentier class which it would bring?
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The normality of extraordinary monetary reactions to huge real shocks – Stefano Ugolini
4 April
The bold reactions by central banks to the COVID-19 crisis have been called ‘unprecedented’. But the global economy has experienced real shocks before, with monetary authorities implementing similarly assertive policies. This column reviews three relevant historical precedents. In each case, intervention targeted the private rather than public sector, and succeeded in preventing an economic collapse. The larger difficulty lay in finding the right ‘exit strategy’ once the shock had passed.
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The Fed Is Running Out of Bubbles to Create – Klajdi Bregu
3 april
The Fed came out with a series of unprecedented measures on March 22, 2020. They announced the Fed will buy an unlimited amount of Treasurys and mortgage-backed securities (MBS), or as Peter Schiff refers to it, “QE infinity.” This has been very positively welcomed by many in the mainstream media and by businesses. Yet, what many are ignoring is that the Fed has to do this to keep the bubbles that it has created going. Recently, I wrote that the Fed has created many structural problems in the mortgage market, corporate bond market, and the car loan market. These issues have only been “waiting” for such a situation to come to the surface and severely hurt the economy.
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The Lesson of a Crash that Cured Itself – Wendy McElroy
3 april
If a government wishes to alleviate, rather than aggravate, a depression, its only valid course is laissez-faire—to leave the economy alone. Only if there is no interference, direct or threatened, with prices, wage rates and business liquidation, will the necessary adjustment proceed with smooth dispatch. — Murray Rothbard, America’s Great Depression
The economic disruption caused by the government’s coronavirus clamp-down may lead to a deep recession or depression; arguably, it already has. President Trump’s $2.2 trillion relief package indicates what his answer to such an economic disaster will be: mega-spending on hand-outs and social projects. Trump is setting himself up as a modern version of Franklin D. Roosevelt (FDR) whose New Deal programs defined 20th century America by diverting it from a largely free-market path down a largely statist one. Trump wants to be an activist president — the type that history books applaud. Congress’s near-unanimous support of the relief bill means that no real brake will be applied on the speed or depth of federal spending. Few voices even question the need for government to lift up the economy by its bootstraps.
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EU solidarity in exceptional times: Corona transfers instead of Coronabonds – Daniel Gros
05 April
The countries hit hardest by the COVID-19 crisis already have too much debt. Lending from the European Stability Mechanism or via Coronabonds would add to that debt, potentially making it unsustainable. This column suggests that European solidarity should take the form of transfers, not credit. A substantial transfer could be organised via the EU budget simply by exempting the weakest countries from their contributions to the EU budget for the duration of the programming period 2012-2027.
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A Word About Hong Kong’s Retail Sales Collapse: It’s a Mess – Nick Corbishley
1 april
Sales at luxury goods stores, once the largest category, collapsed by 86% since their peak in 2013-2014.
As Hong Kong tourist arrivals collapsed by 96% in February, with travel essentially banned since late January and borders to mainland China blocked, and with mainland visitors down 97.8%, retail sales at brick-and-mortar stores plunged 44% compared to February last year, the 13th month in row of year-over-year decline — and the sharpest yet — after having plunged 21% in January. But as you can see, this collapse in sales started long before COVID-19
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ESM loans or Coronabonds: A legal analysis from the German perspective – Julian Pröbstl
4 April
The massive fiscal packages being deployed in Europe raise issues of financing. Economists have proposed three main models. This column offers a pragmatic legal perspective on the options, focusing on their compatibility with EU Law, the ESM Treaty, and German Constitutional Law. It argues that, from a practical legal standpoint, the use of the ESM is preferable to issuing Coronabonds, because it offers more legal certainty and could be implemented more quickly. However, jointly issuing Coronabonds would send the stronger political signal.
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***Whack-a-mole: the long run virus – John H. Cochrane
4 april
This virus will be with us a long time. Even if the massive national shutdown stops the spread of the virus in the US by summer, there will remain hotspots. Then someone travels, reinfects a city, and here we go again.
The virus is spreading around the world. Even if the US stops the virus throughout our country over the summer, it will spread in, say Argentina. Someone with it will get on a plane back to the US in the fall, a planeload of people with the virus will disembark, and here we go again.
Viruses come in waves. The plague came in waves, cholera came in waves, smallpox and polio came
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How Easy Money Is Increasing the Devastation of the COVID-19 Panic – Brendan Brown
2 april
A counterfactual experiment helps us realize the enormity of the present situation.
What Could Have Happened
Suppose the COVID-19 pandemic had hit the globe under sound money, say a gold standard regime. In that counterfactual there would be no overhang of virulent asset price inflation, no Federal Reserve at the ready to embark on endless (and limitless) QE (quantitative easing) and zero rates, and no megaprogram feasible for guaranteeing corporate debt issues as determined by the realpolitik of crony capitalism.
Solvent governments enjoying global confidence in their commitment to uphold the convertibility of the national money into gold would be able to launch huge social insurance programs to mitigate personal economic hardship resulting from the pandemic. A key condition of that success: they must convince investors that remedial action to strengthen the public finances would follow the pandemic, meaning no resort to debasing the currency.
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***“Not All Airlines Will Go Bankrupt”: How Will Coronavirus Travel-Bans Impact Airbus, Suppliers, and Airlines? – MC01
29 maart
All eyes are on China to see how air transport will change in the aftermath of the crisis.
Airbus CEO Guillaume Fleury and CFO Dominik Adam issued a joint statement on March 23, regarding the European aerospace giant’s plan to power through the Covid-19 crisis. These new provisions include a new €15 billion credit facility, cancelling the proposed €1.80 per share dividend, and “cutting operational costs where possible.”
This gave Airbus €30 billion in liquidity to burn through. While Messrs. Fleury and Adam seem confident Airbus will not need a government bailout, they stressed the rest of the environment will need as much help as possible to get through the crisis.
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Japan Has Avoided a COVID-19 Panic. But the Global Recession Will Hit Hard – Jason Morgan
4 april
The number of COVID-19 cases in Japan had been showing a very low daily uptick until this past week. Suddenly, there were more than forty new cases a day, and the news is reporting that for most of those people the route of infection cannot be determined. The governor of Tokyo Koike Yuriko has been teleconferencing with the governors of surrounding prefectures (such as Kanagawa (Kawasaki and Yokohama), Chiba, and Saitama) to hammer out a plan for social distancing in the metropolis.
Koike is under enormous pressure to get the balance just right. The coronavirus outbreak comes just as the Japanese economy, which has limped along since the bursting of a government-induced financial bubble in the early 1990s, is showing signs of giving up the ghost altogether. An article in the Sankei Shimbun newspaper (a conservative financial daily) from Friday, March 27, reveals that the Japanese government’s carefully worded monthly economic report for March does not contain the key term kaifuku (“recovery”). This is the first time the word has been missing from the monthly report in almost seven years. If Koike shuts down Tokyo, which comprises an economy larger than that of many countries, it would throw the entire Japanese economy into a tailspin and wreak havoc across the region and the world.
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Will inflation make a comeback after the crisis ends? – David Miles, Andrew Scott
4 April
Might inflation rise as a result of policies undertaken during the current crisis and as demand comes back more strongly than supply when it ends? This column argues that it is possible, but far from clear. Indeed, there are reasons to doubt whether any rise in inflation will come. Looking back at past crises – and in particular wars – reveals some similarities but more differences with the current pandemic. There was more reason to see UK inflation rise after the three major wars of the past 220 years; and even then, the evidence that it did is not conclusive.
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