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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Inflation-Loving Governments Are Now Blaming Private Businesses for Inflation – Daniel Lacalle
27 september
Last week, Ned Davis Research published a note titled “Turns Out, Growth Looks like It Was Transitory—Inflation Is More Sticky.” There are many factors that show us that consumers and salaries are being eaten away by inflation, leading to an abrupt halt in the recovery. Autos and new home sales plunged, real disposable personal income has plummeted, and real median wage growth is lower than inflation.
Policymakers have pushed inflation at any cost with the most aggressive monetary policy in decades and it took a normal recovery after the reopening to prove why inflation is always a monetary phenomenon: in 2020 G7 central banks increased money supply well above demand and faster than ever since 2009. This led to massive inflation spikes in essential goods and services. The rhetoric of “transitory” inflation and “supply chain disruptions” has been rapidly debunked. We have seen three Consumer Price Index (CPI) prints after the so-called base effect ended, and prices continued to rise. Furthermore, the price of commodities where there is overcapacity has risen as fast as others. Inflation is always more money chasing scarce assets and that is the reason why we see shipping or aluminum rise to all-time highs when there is ample capacity in the segment, even excessive capacity.
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Trust in the ECB during the pandemic – Carin van der Cruijsen, Anna Samarina
3 Oktober
In turbulent times, trust in our central banks is important. This column uses the survey data on consumer expectations to gauge trust in the ECB during the Covid-19 pandemic. The authors find that trust in the ECB depends on consumers’ financial knowledge and on how severely they are affected by the pandemic, and that this trust and financial knowledge both contribute to better anchoring of consumers’ inflation expectations around the ECB’s inflation target. Possible routes to improve trust include activities that enhance financial knowledge, tailoring central bank communication in terms of content and targeting it at people with low trust.
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The Market Crash Nobody Thinks Is Possible Is Coming – Charles Hugh Smith
29 September
The banquet of consequences is being served, and risk-off crashes are, like revenge, best served cold.
The ideal setup for a crash is a consensus that a crash is impossible–in other words, just like the present: sure, there are carefully measured murmurings about a “correction” but nobody with anything to lose in the way of public credibility is calling for an honest-to-goodness crash, a real crash, not a wimpy, limp-wristed dip that will immediately be bought.
What I’m calling for is a rip your face off, weeping bitter tears over the grave of the speculative wealth that you thought was forever crash. All those buying the dip because the Fed will never let the market go down will be crushed like scurrying cockroaches and all those trying to rotate into the next hot sector or asset class will also be crushed like scurrying cockroaches because when the Everything Bubble pops, well, everything pops. There is no shelter in a risk-off cascade.
The crash is coming as a result of multiple mutually reinforcing dynamics, the first being that no “serious person” believes a crash is possible, much less imminent. In no particular order, here are a raft of other causally consequential triggers of a cascading market crash
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“Transitory” is the New Spandex: Powell Admits it, Still Denies its Cause. Why this Inflation Won’t Go Away on its Own – Wolf Richter
29 september
Blames tangled-up supply chains but not what’s causing supply chains to get tangled up in the first place: The most grotesquely overstimulated economy ever.
Fed Chair Jerome Powell, during a panel discussion hosted by the ECB today, admitted again that inflation pressures would run into 2022 and blamed “bottlenecks and supply chain problems not getting better” and admitted they are “in fact at the margins apparently getting a little bit worse.”
“The current inflation spike is really a consequence of supply constraints meeting very strong demand, and that is all associated with the reopening of the economy, which is a process that will have a beginning, a middle and an end,” he said.
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How Can Houses Be Unaffordable And Booming? – John Rubino
30 september
Home prices have never been higher when compared to the average family’s income.
This kind of imbalance is normally a sign of an impending crash in home sales, followed by a drop in prices. But that’s not happening.
Some recent headlines:

• Home prices set records in July; Tampa 4th highest in nation
• With no slowdown in sight, Dallas home prices go up 23.7%
• Asking Price On Homes Increases 12% To An All-Time High
• How is it that homes are both unaffordable and soaring in price?

As with so many other things that shouldn’t be, the answer can be found at the intersection of Wall Street and easy money.
During the previous decade’s Great Recession, hedge funds and private equity firms figured out that they could borrow for next-to-nothing and buy up the houses that banks were repossessing, then rent those houses back to millions of newly homeless Americans for good returns. Combine these positive cash flows with massive recent price appreciation, and those foreclosed houses turned out to be phenomenal investments.
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It’s Not Good Enough to “Look at the Data” – Frank Shostak
30 september
According to popular thinking, it is held that by means of statistical and mathematical methods one can organize historical data into a useful body of information. This in turn can serve as the basis for the assessments of the state of the economy. It is also held that the reality is elusive. Hence, it is not possible to know its true nature.
Some scholars, such as Milton Friedman, hold that since it is not possible to establish how things really work, then it does not really matter what the underlying assumptions of a theory employed to ascertain the facts of reality are. In fact anything goes, as long as the theory can yield good predictions.1 Other theorists, such as Ludwig von Mises, hold that various pieces of data utilized by economists in their analysis are an historical display, which by itself cannot provide the economists with the facts regarding the real world. According to Mises, “Experience of economic history is always the experience of complex phenomena. It can never convey knowledge of the kind the experimenter abstracts from a laboratory experiment.”
Economists do not just randomly arrange the data before starting an analysis. On this Mises wrote, “The arrangement of various price data in groups and the computation of averages are guided by theoretical deliberations, which are logically and temporally antecedent.”
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***The demise of Doing Business: Goodhart’s Law in action – Thorsten Beck
29 September
The World Bank permanently suspended its Doing Business project earlier this month. This column argues that the suspension puts an end to a very useful data-collection exercise that went astray by focusing on rankings and political publicity. Beyond specific conflicts of interest within the World Bank, the demise of Doing Business reaffirms Goodhart’s Law that when an index becomes a policy target, it ceases to be a good measure.
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“The Great Reset” Is the Road to Socialism Mises Warned Us About – Tho Bishop
30 september
Through the sheer power of his intellectual output, Ludwig von Mises established himself as one of the most important intellectuals of the twentieth century. His work Human Action remains a foundational text of the Austrian school. His critique outlining the impracticality of socialism was vindicated with the fall of the Soviet Union and remains without a serious intellectual challenge today.
Just as important, but often overlooked, is his work on the economic system that continues to infect the world today: interventionism.
Like contemporaries such as James Burnham, Mises discerned that the true threat to free markets in the West was not a true socialist revolution, but rather a “middle of the road” approach that so attracted an intellectually shallow political class.
In 1950, during one of his most important speeches, Mises identified the most dangerous ideology on the global stage:
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Shortages and Inflation Are Ripping the World’s Face Off – David Haggith
2 oktober
HM Stoops? (the name signed to 2 of the 6 illustrations on the page of the newspaper—they all seem to be from the same hand, despite this particular image is unsigned)
The evidence that inflation is ripping everyone’s face off is now widespread, and the situation is rapidly getting worse all over the world, making it harder for both US bonds and stocks to ignore it:
The US stock market took it on the chin again Tuesday, plummeting on worries about sustained high inflation that pushed bond yields higher…. The S&P marked its worst session since May, while the Nasdaq had its worst day since March. For the Dow, it was just the worst decline since last week’s selloff.
CNN
It surprises me that, after months of inflation that haven’t abated, I still have to argue with some people that inflation is hot and is not transitory. (Sometimes I even have to argue that it is actually happening, if you can imagine that.) Let me present some of the most glaring examples of inflation that is screaming like a banshee and clearly has been and will continue to be persistent by nature.
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Sorry, Fed, Inflation is Already Embedded – Charles Hugh Smith
27 September
The Fed and its minions are about to get what they so richly deserve: the full blame for the coming catastrophe.
The key justification for the Federal Reserve’s zero-interest rate policy is that inflation is transitory. Sorry, Fed, inflation is already embedded, i.e. inflation is now a self-reinforcing feedback loop: price leaps trigger wage increase demands, supply constraint expectations are now built into wholesale cost increases, and all these increases in wholesale, retail and wage costs drive each other higher as participants now understand that higher wholesale costs drive higher retail prices which feed higher wages which feed higher costs.
The conventional consensus holds that globalization and technology are deflationary. But globalization is no longer deflationary as fragile supply chains logjam and break and prices on the margin soar as demand skyrockets due to hoarding and attempts to restock depleted inventories.
As for technology, the move to remote work is only selectively deflationary, for example, demand for commercial office space has cratered, driving lease rates off a cliff. But in the larger scheme of things, the major “advances” in tech have been concentrated in social media, which is arguably reducing productivity rather than increasing productivity.
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Rethinking pension systems in Europe for a post-Covid-19 world – Armand Fouejieu, Alvar Kangur, Samuel Romero Martinez, Mauricio Soto
2 Oktober
The past three decades have witnessed reform efforts to contain pension expenditures, the cost of which is born mostly by younger generations. This column assesses the sustainability, fairness, and intergenerational equity of pension systems in Europe by comparing the pension contributions and benefits over the lifetime of different cohorts. Reforms legislated in the decade from the onset of the Global Crisis reduced the lifetime benefit-contribution ratio by nearly 25% for younger generations. However, subsequent policy reversals have partly eroded these gains, suggesting additional reforms are needed.
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***US Dollar Status as Dominant “Global Reserve Currency” amid Reckless QE & Government Deficits – Wolf Richter
30 september
The decline of Dollar Hegemony. But other options are also shaky.
The global share of US-dollar-denominated exchange reserves – these are financial assets such as US Treasury securities, US corporate bonds, US mortgage-backed securities, etc., held by foreign central banks – declined to 59.2% in the second quarter, according to the IMF’s Composition of Official Foreign Exchange Reserves (COFER) data released today. In Q4 last year, the dollar’s share hit a 25-year low of 58.9%. And by the dreary looks of it, the dollar continues on its long, slow, uneven downward trajectory (2014 is the beginning of the quarterly data, prior data is annual)
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***The Inflation That Central Banks Don’t See Doesn’t Count – Ven Ram
1 oktober
A sundial near Venice is engraved with the words, “Horas non numero nisi serenas.” That line — attributed to the philosopher William Hazlett — roughly means, “I don’t count the time that isn’t tranquil.”
Modern-day central bankers have taken that adage to heart when it comes to inflation: they don’t count things that seem to matter to most of us. On Wednesday we heard from the Big Four — Jerome Powell, Christine Lagarde, Haruhiko Kuroda and Andrew Bailey, all pressing home, more or less, the same message: inflation is here, but it’s transitory.
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The effectiveness of ECB euro liquidity lines – Silvia Albrizio, Ivan Kataryniuk, Luis Molina Sánchez, Jan Schaefer
29 September
Swap and repo lines have become an integral part of the ECB’s toolkit. During the Global Crisis and the Covid-19 pandemic, the ECB announced more than 28 agreements to provide euro liquidity to foreign exchange markets, mainly within Europe. This column shows that the mere announcement instilled confidence in foreign exchange markets, reducing the premium paid by recipient country agents to borrow euros. Moreover, these lines not only prevent negative spillbacks to the euro area, but also push domestic bank equity prices in euro area countries highly exposed via banking linkages to targeted countries.
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***While Everyone Cheers Soaring “Wealth,” America’s Social Order Is Unraveling – Charles Hugh Smith
1 Oktober
So by all means, focus on the inexorable rise of stocks, cryptos and housing as “proof” of America’s soaring “wealth” while the social order unravels beneath our feet.
It is a supremely tragic irony that while the corporate media ceaselessly touts America’s soaring financial “wealth,” the nation’s true wealth–its social order–is fast unraveling. While we’re encouraged to cheer billionaires blowing a tiny sliver of their wealth on space tourism and $500 million yachts as evidence of “prosperity,” our media and leadership (ahem) professes to being mystified by The Great Resignation, known here on Of Two Minds as The ‘Take This Job and Shove It’ Recession, and other unmistakable signs of unraveling.
(This era’s anthem should be Johnny Paycheck’s timeless classic, Take This Job And Shove It 2:31).
In my analysis, the social order is comprised of all the intangible social elements which serve to bind a nation’s people beyond their legal rights. The social order includes (but is not limited to) social (upward) mobility–the ladder to advancing one’s agency (control of one’s life) and opportunities for improved security and well-being.
The social order also includes civic virtue, the willingness to share the sacrifices of one’s fellow citizens for the common good in proportion to one’s wealth and power, and equal treatment before the law, not just as an abstraction but in the real world of the judicial system.
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Incomes Got Chewed Up by Inflation. Americans Spent Heroically on Goods, But Not on Services. Eviction Moratoriums & Forbearance Implicated – Wolf Richter
1 oktober
Millions of people didn’t spend on two big services: rent and interest. How spending got skewed in bizarre ways.
Before taking inflation into account, personal income from all sources – from wages, interest, dividends, rental income, transfer payments such as unemployment compensation, stimulus checks, and Social Security benefits, etc. – rose by 0.2% in August from July.
But after taking inflation into account, it’s uglier: Inflation-adjusted – or “real” – personal income fell by 0.2% in August from July, to an annual rate of $17.8 trillion (in 2012 dollars), according to the Bureau of Economic Analysis on Friday.
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The current bail-in design does not resolve the too-big-to-fail problem – J. Doyne Farmer, Charles Goodhart, Alissa Kleinnijenhuis
1 Oktober
Since the Great Financial Crisis, bail-in has been introduced as an approach to address too-big-to-fail and contagion risk problems. This column uses a multi-layered network model of the European financial system to study the implication of bail-in design on financial stability. It shows that early implementation of a bail-in and stronger bank recapitalisation lead to lower contagion losses. However, current bail-in design seems to be in the region of instability and the political economy of incentives makes reforms unlikely in the near future.
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***France Begins “Price Protection” Measures To Shield Consumers From Soaring Energy Prices – Tyler Durden
2 oktober
French Prime Minister Jean Castex announced several “price protection” measures to counter rising natural gas and electricity prices to thwart discontent ahead of the presidential election, according to FT.
“We’re going to introduce what I would call a tariff shield for gas and electricity,” Castex said during a televised speech on Thursday evening.
“We are going to protect ourselves from these price increases.”
He said any new natgas tariffs following Friday’s scheduled 12.6% hike would be postponed until prices decrease in late March/April, adding that it will shield 5 million households who are on floating-rate contracts.
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