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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The Fed Is Doing “Whatever It Takes” to Prop Up the Economy. That’s a Very Bad Thing – Samuele Murtinu, Peter G. Klein
26 mei
No sooner had the COVID-19 recession hit the US economy—with its mandatory business and school closures, travel bans, shelter-in-place orders, and a massive drop in commercial activity—than politicians, academics, journalists, and business leaders began calling for the Fed to save it.
The Fed’s response didn’t take long: a) $2.3 trillion in new loans to households, businesses, markets, and state and local governments; b) a cut in the federal funds rate to 0–0.25 percent and a promise to keep it low indefinitely; c) open-ended purchases of Treasurys and government-guaranteed and commercial mortgage-backed securities; d) short-term loans to “primary-dealer” financial institutions in exchange for collateral, including investment-grade debt; e) support for money market mutual funds; f) direct lending to banks, households, consumers, small firms, and corporations, also by purchasing investment-grade corporate bonds and commercial paper; and g) lowering banks’ loss-absorbing capital and reserve requirements. No one would accuse the Powell Fed of standing idly by!
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COVID-19 and non-performing loans: Lessons from past crises – Anil Ari, Sophia Chen, Lev Ratnovski
30 mei
Non-performing loans are a crucial policy consideration, especially in times of wider economic crisis. This article uses a new database covering 88 banking crises since 1990 to draw lessons for post-COVID-19 resolution of non-performing loans. Compared to the 2008 crisis, the pandemic poses some different challenges. Despite some respite from the credit-crash of 2008, policymakers today are faced with substantially higher public debt, less profitable banks, and often weaker corporate sector conditions, making resolution of non-performing loans even more challenging.
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First the Deflationary Deluge of Assets Crashing, Then the Tsunami of Inflation – Charles Hugh Smith
29 mei
Once the pool of greater fools dries up, stocks crash regardless of what the Fed does or bleats.
The conventional view is the Federal Reserve creating trillions of dollars out of thin air will trigger inflation. Not so fast. Yes, creating trillions of dollars out of thin air will eventually devalue the purchasing power of each dollar–what we call inflation–but first all the unprecedented asset bubbles will pop and valuations will crash.
Let’s call this a deflationary deluge as unsustainable asset prices are eroded by a hard rain of reality. To understand the enormity of the current bubbles, please glance at the charts below. The first chart depicts recent stock market bubbles; note the extreme height of the current bubble.
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To Prevent Problematic Inflation, We Need More Production. Which Means There’s Trouble Ahead – Thorsten Polleit
25 mei
The science of economics is different from natural science. In natural science, it is possible to detect regularities in the form of “When A, then B” or “If A rises by x percent, B changes by y percent.” As a result, in natural science it is in principle possible to come up with more or less reliable quantitative predictions. This is impossible in economics, for there are no quantitative regularities, or behavioral constants, in the field of human action comparable to those to be found in natural science. Different people—and even the same people—at different instants of their lives react differently to the same external stimulus.
At the same time, however, there are inexorable economic laws such as the law of supply and demand or the law of diminishing marginal utility. These laws govern human action and can be logically derived from the irrefutably true proposition that “humans act.” It is in this sense that we can know the outcome of various modes of action in qualitative but not in quantitative terms. Take, for instance, the case of the central bank increasing the quantity of money in the economy.
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It Starts: The Corporate Mega-Bailout Bonanza in Europe, Germany on Top – Nick Corbishley
26 mei
Airlines, automakers at the forefront. And it has only just begun. EU waives rules banning state aid. Ryanair, which doesn’t need a bailout, is furious.
Governments around Europe have rolled out a dizzying array of measures, including loan programs, tax payment deferrals, and furlough schemes, to help companies, large and small, withstand the fallout of the Covid-19 lockdowns. Large companies have also benefited from massive central bank purchases of their corporate bonds, which has helped to keep their debt costs low. But for some companies, including many of Europe’s largest corporations, it’s not enough.
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***Unemployment insurance weaning – John H. Cochrane
28 mei
As the economy recovers, public policy faces an inevitable dilemma. How do we wean the economy from support?
This comes to the head with federal support for unemployment insurance — $600 per week, set to expire at the end of July. The unemployment rate will still be high in July. Congress seems to have largely given up, in public, of thinking clearly about the economic purpose of policies, and now the discussion is entirely in terms of who deserves additional “help,” often in moral terms — “people” vs “corporations,” various regions, sizes of business, “communities,” and so on. How can we reduce “help” while unemployment surely ravages the land?
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Valuations Point To A Decade Of Anemic Returns Ahead – Joseph Carson
30 mei
Macro measures of equity market valuations offer investors a fundamental assessment of the risk-reward ratio in investing at various points in the cycle. Macro equity valuation measures highlight “richness” and “cheapness” in the broad equity market.
History shows that investors who time their entry into the broad equity market at depressed levels of macro valuations far outperform investing strategies that remain fully invested. Current macro valuations indicate a very poor risk-reward ratio for investing in the equity market and the potential for an extended period of anemic returns .
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***The World Health Organization: A GRID for reform – Lucie Gadenne, Maitreesh Ghatak
30 mei
As debates about the future of the World Health Organization rage on, the Covid-19 pandemic is a reminder of the vital importance of global public health institutions. This column considers what principles should guide WHO’s missions and tools to deal with pandemics, which are distinguished from other health risks by their high contagion, extreme potential outcomes in terms of mortality risk, and the ‘weak-link’ aspect of global collective action. It argues that reforms should centre around having a narrower mission – Global Response to Infectious Diseases, or GRID – and creating better incentives to prevent contagions from spreading globally using stronger legal and financial tools.
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Defining “Inflation” Correctly – Frank Shostak
30 mei
Inflation is typically defined as a general increase in the prices of goods and services—described by changes in the Consumer Price Index (CPI) or other price indexes.
If inflation is a general rise in measured prices, then why is it regarded as bad news? What kind of damage can it inflict? Mainstream economists maintain that inflation causes speculative buying, which generates waste. Inflation, it is maintained, also erodes the real incomes of pensioners and low-income earners and causes a misallocation of resources.
Despite all of these assertions regarding inflation’s side effects, mainstream economics doesn’t tell us how all of these bad effects are caused. Why should a general rise in prices hurt some groups of people and not others? Why should a general rise in prices weaken real economic growth? How does inflation lead to the misallocation of resources? Moreover, if inflation is just a rise in prices, surely these effects can be offset by adjusting everyone’s incomes in accordance with this general price increase.
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This Is How Systems Collapse – Charles Hugh Smith
30 mei
Flooding the financial system with “free money” only restores the illusion of stability
I updated my How Systems Collapse graphic from 2018 with a “we are here” line to indicate our current precarious position just before the waterfall:
For those who would argue we’re nowhere near collapse, consider that over 20% of the Federal Reserve’s $2 trillion spew of free money went directly into the pockets of America’s billionaires: $434 billion by the latest estimates, while most of the rest went into the pockets of the top 10% who own all the assets that the Fed is goosing higher while millions of households are worried about feeding themselves: (American billionaires got $434 billion richer during the pandemic).
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From patents to products: Product innovation and firm dynamics – David Argente, Salome Baslandze, Douglas Hanley, Sara Moreira
28 mei
Patents are at the heart of policies designed to incentivise innovation and productivity growth. In recent years however, while patent activity has skyrocketed, innovation and productivity growth have not. This column collects data on product innovations and links those to their respective patent. While patent filings are found to be followed by product innovations overall, this relationship is much stronger for firms with lower market share.
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Airlines and information – John H. Cochrane
28 mei
Airlines are in big trouble. Even after reopening, nobody wants to fly, perceiving them as dangerous.
But are airline flights dangerous? As I read the super-spreading literature, I have not seen a single case of an airline flight charged with spreading the virus. (Please chime in if you have seen any documented cases of virus spread on airline flights.) That’s remarkable. From January to March, people were flying all over the world. People were flying from Wuhan to all over the world. But while we have seen super spreading events in restaurants, bars, cruise ships, aircraft carriers, nursing homes, jails, beach parties, Mardi Gras, choir practice, and more, I have not seen one from an airline flight. Even though people are cooped up for hours in close quarters.
One can speculate why. Airliners actually have very good ventilation systems and hospital grade HEPA filters. Except for the occasional chatty seat mate with cat videos to show, people are usually completely silent. Talking loudly seems to be a big part of spreading the virus. An airline with reasonable extra precautions, such as taking temperatures, certifying no symptoms (and you get your money back if you say you have symptoms, please), masks, wipe downs, is likely safer still. The worry may be for nothing.
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***Booming economies foster the spread of communicable disease – Sara Markowitz, Erik Nesson, Joshua J. Robinson
28 mei
High levels of economic activity can foster the spread of communicable diseases through frequent person-to-person interactions. This column discusses how research on high levels of employment affects the spread of influenza and other viruses transmitted via droplet-spread, such as SARS-CoV-2. The results show that the high levels of employment in the US encourages the spread of influenza, especially when employment in service sectors are high. Our results provide support for social distancing measures aimed to slow the growth of cases of COVID-19.
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Hertz Bankruptcy & Fleet Liquidation Threaten to Make Mess of Used-Vehicle Prices with Burst of “Pent-Up Supply” – Wolf Richter
24 mei
Here come the “bankruptcy-remote special-purpose subsidiaries” and $14.5 billion in rental-vehicle-backed securities. The stock market – other than Carl Icahn – smelled a rat for years.
The Chapter 11 bankruptcy filing of Hertz Corporation and its US and Canadian subsidiaries Hertz, Dollar, Thrifty, Firefly, Hertz Car Sales, and Donlen – but not its subsidiaries in Europe, Australia, and New Zealand – on Friday May 22 threatens to make a royal mess of used-vehicle wholesale prices, as creditors may take possession of their collateral and dump hundreds of thousands of vehicles on the wholesale market starting in late July, pushing down wholesale prices further and creating further valuation pressures and bigger losses for Hertz creditors, the entire rental car industry, and leasing companies that also have to dispose of their vehicles.
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The Road To Recovery: Which Economies Are Reopening? – Tyler Durden
30 mei
COVID-19 has brought the world to a halt – but, as Visual Capitalist’s Iman Ghosh details below, after months of uncertainty, it seems that the situation is slowly taking a turn for the better.
Today’s chart measures the extent to which 41 major economies are reopening, by plotting two metrics for each country: the mobility rate and the COVID-19 recovery rate:
This refers to the change in activity around workplaces, subtracting activity around residences, measured as a percentage deviation from the baseline.
The number of recovered cases in a country is measured as the percentage of total cases.
Data for the first measure comes from Google’s COVID-19 Community Mobility Reports, which relies on aggregated, anonymous location history data from individuals. Note that China does not show up in the graphic as the government bans Google services.
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***Two Analogies for the Economy That the Media Keeps Getting Wrong – Mark Thornton
30 mei
In an attempt to maintain the lockdown and their authority over our lives, politicians, health experts, and the mainstream media have been misusing some unusual analogies to describe the current economy.
By using these analogies, our political overlords hope they can continue to keep the economy shut down, force companies to produce what the government forgot to purchase before the virus hit, and toss out trillions of dollars of handouts and bailouts to their friends. The results have been disastrous for an already badly weakened economy.
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An Economy That Cannot Allow Stocks to Decline Is Too Fragile To Survive – Charles Hugh Smith
26 mei
The fragile ice shelf of speculative bets and debt clinging to the mountainside is making strange creaking sounds– will you listen or will you ignore it because ‘the Fed has our back’?
Feast your eyes on the chart below of the Nasdaq 100 stock market Index, which is dominated by the six FAAMNG (rhymes with “famine”) stocks: Facebook, Apple, Amazon, Microsoft, Netflix and Google which now account for over 20% of the entire U.S. stock market’s capitalization.
Notice that despite the global economy sliding into a debt-bust depression, the NDX is within kissing distance of new all-time highs. You’re joking, right? Sales and profits won’t slide as the depression steps on the neck of hundreds of millions of households?
As you’ve probably heard by now, sales don’t matter, profits don’t matter, costs don’t matter, and indeed, nothing matters but the Fed has our back so buy stocks, never mind the valuations. In other words, the U.S. stock market has reached the spiritual level where the corporeal tangible world no longer matters: in a word, Nirvana, or Heaven if you prefer.
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Regulatory arbitrage and the G20’s global derivatives market reform – Pauline Gandré, Mike Mariathasan, Ouarda Merrouche, Steven Ongena
30 mei
Managing global financial risks requires coordinated policies and a firm commitment by national actors. In the absence of such commitment, risks are reallocated and concentrate where they are least effectively addressed. Using data on the staggered implementation of the G20’s global derivatives market reform, this column documents US banks’ response to reform progress. It finds that banks shift trading activities towards less regulated jurisdictions and adopt riskier portfolios overall. The effects are driven by agenda items – like the promotion of central clearing – that are costly and do not benefit banks directly.
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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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