Economische aanraders 01-09-2019
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.
The future of digital money: A new Vox debate – Stephen Cecchetti, Antonio Fatás
The announcement of the launch of Libra, a private global cryptocurrency, has reignited the debate on the costs and benefits of digital forms of payments controlled by the private sector. This column introduces a new Vox debate on the future of digital money intended to foster a conversation among academics and policymakers about the costs and benefits of some of these innovations and future scenarios for digital money.
Het debat volgen en er aan deelnemen kan hier.
Challenges in the digital age – Vincent Labhard, Peter McAdam, Filippos Petroulakis, Lara Vivian
The fourth industrial revolution is bringing about numerous challenges and opportunities. This column summarises selected takeaways from a recent ECB conference which brought together leading minds from academia, institutions and the private sector on the expected effects of digitalisation on the economy, including labour markets, productivity, investment and inflation, and possible implications for monetary policy.
The Hidden Tax in Central Banks’ Low-Interest Policy – Brendan Brown
Under the regime of the two-per-cent inflation standard, governments are levying a vast new tax. This shows up nowhere in public sector or private sector accounts and has so far created little if any resentment among those subject to its burden. Many live in the illusion that there is a continuing escape possible. This is a dream tax from the viewpoint of the collectors and their political masters.
As such the monetary repression tax (MRT) triumphs over the older and better-known inflation tax in terms of political efficiency. As regards economic efficiency, by contrast, both taxes are potentially devastating. For now, the new tax is more dangerous than the old, which may yet return in much more vicious form, as a huge confiscation in real terms of government debt and related monetary claims.
How best to define the MRT?
This is the amount by which the yield on “core” government bonds and bills (say US, Germany, France, UK, Japan) is depressed by monetary manipulations in the pursuance of “stable prices” as defined for the purposes of the 2 per cent inflation standard.
The Fantasy of Central Bank “Growth” Is Finally Imploding – Charles Hugh Smith
Having destroyed discipline, central banks have no way out of the corner they’ve painted us into.
It was such a wonderful fantasy: just give a handful of bankers, financiers and corporations trillions of dollars at near-zero rates of interest, and this flood of credit and cash into the apex of the wealth-power pyramid would magically generate a new round of investments in productivity-improving infrastructure and equipment, which would trickle down to the masses in the form of higher wages, enabling the masses to borrow and spend more on consumption, powering the Nirvana of modern economics: a self-sustaining, self-reinforcing expansion of growth.
But alas, there is no self-sustaining, self-reinforcing expansion of growth; there are only massive, increasingly fragile asset bubbles, stagnant wages and a New Gilded Age as the handful of bankers, financiers and corporations that were handed unlimited nearly free money enriched themselves at the expense of everyone else.
July Money-Supply Growth Rate Climbs to Six-Month High – Ryan McMaken
The money supply growth rate rose in July, climbing to a six-month high, but remaining well below the growth rates typically seen during 2017 and 2018.
In July, year-over-year growth in the money supply was at 2.19 percent. That was up slightly from June’s rate of 1.98 percent, but was well down from July 2018’s rate of 4.07 percent.
The industry anatomy of the transatlantic productivity growth slowdown: Similarities outweigh the differences – Robert J. Gordon, Hassan Sayed
Since 2005, productivity growth in the US and Europe has dipped below 1%. Using new industry-level from the US and ten EU countries, this column shows that that the industrial composition of the slowdown was similar in Europe and the US. Falling multifactor productivity growth explains both the magnitude and composition of falling productivity growth on both sides of the Atlantic. Decelerating technical change, rather than slowing investment, was the primary driving force in the transatlantic slowdown.
Does the Boom-Bust Cycle Ever Result from Commodity Money? – Frank Shostak
Following the Austrian Business Cycle Theory (ABCT), the boom-bust cycle emerges in response to a deviation in the market interest rate from the natural interest rate, or the equilibrium interest rate. As a rule it is held, the tampering with the market interest rates by the central bank sets the boom-bust cycle in motion. Would it be possible for the boom-bust cycle to emerge in the free market economy where the central bank does not exist and where gold is money?
If, following the ABCT it is possible to show that on a gold standard an increase in the supply of gold (i.e., the supply of money) will lead to the lowering of market interest rates, then this is likely to cause the deviation of market interest rates from the natural or the equilibrium interest rate. Consequently, this could set in motion the boom-bust cycle.
***China Imposes New Capital Controls, Targets Foreign Real Estate Purchases, as Yuan Falls to 11-Year Low – Wolf Richter
“Wiring money overseas is not allowed for the purposes of purchasing real estate or insurance products”: banker in China
China’s State Administration of Foreign Exchange (SAFE) has rolled out a new set of currency controls to crack down on capital flight from China to other countries, particularly targeting real estate investments by Chinese individuals and companies. This new set of currency controls include limits for real estate investors that make raising funds via foreign currency debt nearly impossible and stricter oversight of China’s banks that handles these transactions.
These new rules regarding the banks kick in when SAFE declares the financial situation in China “abnormal,” which would then allow SAFE to crack down on outflows via the banks. But according to the Nikkei Asian Review, SAFE had not revealed what criteria will be used to classify the situation as “abnormal,” and fund transfers overseas locations could be blocked at SAFE’s whim.
The Real “Helicopter Money”: Since 2009, China Has Created $21 Trillion Of New Money, More Than Double The US – Tyler Durden
Back in the days of the Fed’s QE, much of thinking analyst world (the non-thinking segment would merely accept everything that the Fed did without question, after all their livelihood depended on it), was focused on how massive, and shocking, the Fed’s direct intervention in capital markets had become. And while that was certainly true, what we showed back in November 2013 in “Chart Of The Day: How China’s Stunning $15 Trillion In New Liquidity Blew Bernanke’s QE Out Of The Water” is that whereas the Fed had injected some $2.5 trillion in liquidity in the US banking system, China had blown the US central bank out of the water, with no less than $15 trillion in increases to Chinese bank assets, all at the behest of a juggernaut of new credit creation – be it new yuan loans, shadow debt, corporate bonds, or any other form of debt that makes up China’s broad Total Social Financing aggregate.
Attitude matters: Investor ambiguity, leverage cycles, and asset prices – Marzio Bassanin, Ester Faia, Valeria Patella
Macroeconomic models with credit frictions do a good job of explaining debt falls during financial crises, but fail to account for pre-crisis debt increases and level pro-cyclicality. This column introduces a model in which investors’ beliefs about future collateral values are non-linear. Greater ambiguity optimism during booms and greater aversion during recessions closely model the empirical shifts seen before and during financial crises, highlighting the joint role of financial frictions and beliefs distortions for market developments.
The Benefits of a Profoundly Shattering Recession – Charles Hugh Smith
Does anyone really think The Everything Bubble can just keep inflating forever?
What do I mean by a profoundly shattering recession? I mean, a systemic, crushing recession that can’t be reversed with central bank magic, a recession that only deepens with time. The last real recession was roughly two generations ago in 1981; younger generations have no experience of a profound recession, and perhaps older folks have forgotten the shock, angst and bitterness.
A profoundly shattering recession leaves tremendous damage and pain in its wake. Millions of people who reckoned their position was secure get laid off, businesses that looked solid melt into air, large corporations flip from hiring thousands to firing thousands, and everyone on the edge of insolvency gets a hard push over the cliff.
Profoundly shattering recessions feed on themselves in a self-reinforcing dynamic: the first domino could be a supply-shock, or a decline in demand due to credit exhaustion. Since businesses have cut everything to the bone in the past decade, there are no buffers left: layoffs begin immediately, and those layoffs further reduce demand as households have to tighten their belts to survive as even those who escape the first round of layoffs find bonuses and overtime have been slashed.
Dollars and sense: The sterling depreciation and UK price competitiveness – Giancarlo Corsetti, Meredith A. Crowley, Lu Han
An immediate impact of the Brexit referendum in 2016 was the large, rapid depreciation of the sterling against all other currencies.The weak pound did not boost UK export volumes, but less clear is whether UK firms lowered their export prices in line with the weaker pound. This column shows that the UK export price response to depreciation depends on the currency in which UK firms invoice their cross-border transactions. Firms invoicing in sterling gained competitiveness by passing the sterling’s weakness through to prices, unlike firms invoicing in vehicle or destination currencies,which adjusted their mark-ups.
Why the 100-Year Bond is Unethical – Justin Murray
With central banks globally once again suppressing the borrowing cost of sovereign entities to near zero rates, with yields in some countries even going negative, there is significant talk of issuing a 100-year bond to take advantage of these rates. Part of the argument is to lock in low rates now to hedge against future increase; though if the past decade is any consideration, central banks globally will fight until they collapse to keep sovereign borrowing near zero permanently because they legitimately have no choice in the matter. Even if governments do lock in these rates now, it won’t matter considering interest rate manipulations have placed banks on shaky ground. But if we assume this is a good idea on a purely financial basis (it’s not, I’ll get into that later), the concept of these ultra-long bonds are highly unethical.
Government AdmitsiIt has No Intention
Do Consumers Know What’s Best for Them? – Murray N. Rothbard
31 augustus (re-published)
This criticism of the market is more existential than ethical. It is the popular argument that laissez faire, or the free-market economy, rests its case on the crucial assumption that every individual knows his own self-interest best. Yet, it is charged, this is not true of many individuals. Therefore, the State must intervene, and the case for the free market is vitiated.
The free-market doctrine, however, does not rest on any such assumption. Like the mythical “economic man,” the Perfectly Wise Individual is a straw man created by the critics of the theory, not implied by it.
***How Roman transport network connectivity shapes economic integration – Matthias Flückiger, Erik Hornung, Mario Larch, Markus Ludwig, Allard Mees
Against the backdrop of megaprojects such as the TEN-T Core Network or the Belt and Road initiative, assessing the role of transport infrastructure in fostering economic integration has gained renewed interest. While there is clear evidence that reducing transport costs increases economic integration in the short run, this column emphasises that we should be aware of the profound and lasting effects that past infrastructure investments have on economic and cultural integration.
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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