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.

——————————————————————————————————
Could 2022 Bring the Collapse of the Euro? – Alasdair Macleod
1 januari
Like the Fed, the ECB is resisting interest rate increases despite producer and consumer prices soaring. Consumer price inflation across the Eurozone was most recently recorded at 4.9%, making the real yield on Germany’s 5-year bond minus 5.5%. But Germany’s producer prices for October rose 19.2% compared with a year ago. There can be no doubt that producer prices have yet to feed fully into consumer prices, and that rising consumer prices have much further to go, reflecting the acceleration of the ECB’s currency debasement in recent years.1
Therefore, in real terms, not only are negative rates already increasing, but they will go even further into record negative territory due to rising producer and consumer prices. Unless it abandons the euro to its fate on the foreign exchanges altogether, the ECB will be forced to permit its deposit rate to rise from its current —0.5% to offset the euro’s depreciation. And given the sheer scale of recent monetary expansion, euro interest rates will have to rise considerably to have any stabilising effect.
The euro shares this problem with the dollar. But even if interest rates increased only into modestly positive territory, the ECB would have to quicken the pace of its monetary creation just to keep highly indebted Eurozone member governments afloat. The foreign exchanges are bound to recognize the developing situation, punishing the euro if the ECB fails to raise rates and punishing it if it does. The euro’s fall won’t be limited to exchange rates against other currencies, which to varying degrees face similar dilemmas, but it will be particularly acute measured against prices for commodities and essential products. Arguably, the euro’s derating on the foreign exchanges has already commenced.
——————————————————————————————————
2022: The Year of Breakdown – Charles Hugh Smith
1 januar1
In other words, our economy and society have been optimized for failure.
If we look at the fragility and instability of essential systems, it’s clear that 2022 will be the year of breakdown. Let’s start by reviewing how systems break down, a process I’ve simplified into the graphic below.
1. Regardless of whether it was planned or not, all systems are optimized to process specific inputs to generate specific outputs. Each system is pared down to maximize efficiency as the means to maximize profits. This efficiency in service of maximizing profits requires trade-offs that only become visible when some key part of the system fails.
The system that ships containers around the world offers a useful example. Shipping containers revolutionized shipping and reduced costs by commoditizing containers (all standard sizes), container ships (specifically designed to carry thousands of containers and container ports with specifically designed cranes, docks and truck lanes / queueing.
It’s possible to load a container on some other craft with a jury-rigged crane, but the efficiency of that is essentially a fraction of the optimized system: the jury-rigged crane will only be able to load a handful of containers, the ship will only be able to carry a few containers, and the likelihood of the containers shifting increases.
——————————————————————————————————
Stimulus for the Rest of the World: Imports Spike, Trade Deficit in Goods Worsens Relentlessly – Wolf Richter
29 december
Three-decade trend brought about by Corporate America and the religion of globalization.
In the US, stimulating demand for goods means stimulating demand for imports, and thereby stimulating production in the rest of the world. Imports are a drag on GDP. Exports boost GDP, but growth in exports fell woefully short of the spike in imports, and the US trade deficits in goods worsened to the worst level ever.
US imports of goods in November spiked by $40.5 billion, or 19.1% year-over-year to a new record worst of $252 billion, seasonally adjusted, according to the advance estimate by the Census Bureau today. The relentless three-decade trend was brought about by Corporate America – manufacturers, distribution channels, and retailers that have been encouraged to offshore everything to cheaper countries – according to the religion of globalization:
Note the rapid deterioration since 2019, powered by the fiscal and monetary stimulus that kicked in after the March and April 2020 slow-down. When American businesses and consumers buy goods, they buy much of it from other countries.
——————————————————————————————————
Why Doesn’t Increased Demand Bring More Supply? – Frank Shostak
30 december
By popular thinking, the key driver of economic growth is increases in the total demand for goods and services. It is also held that the overall output increases by a multiple of the increase in expenditure by government, consumers and businesses.
Following this way of thinking it is not surprising that most commentators are of the view that by means of fiscal and monetary stimulus it is possible to prevent the US economy falling into a recession. For instance, by increasing government spending and central bank monetary pumping it is held that this is going to strengthen the production of goods and services, i.e., the overall supply.
It follows then that by means of increases in government spending and central bank monetary pumping the authorities can grow the economy. This means that demand creates supply. However, is it the case?
——————————————————————————————————
The Last Great Inflation – Milton Ezrati
31 december
With inflation in the headlines, a look back at the last experience might offer needed perspective. There is no claim here that history repeats exactly. Rather a look back offers ways to dispel nonsense and identify what is important.
The Arab oil embargo of 1973 dominates most references to the last great inflation. No doubt oil played a role, but problems appeared long before the embargo.
Inflation began to build in the second half of the 1960s. After years of barely any inflation, consumer prices by 1966 were rising at a 3.5 percent annual rate and then built on themselves so that by 1969 they were rising at a 6.0 percent rate.
This initial price pressure had two clear roots.
One was the strain President Lyndon Johnson had placed on the federal budget and the economy by simultaneously pursuing a war in Vietnam and a domestic war on poverty.
Second was the willingness of the Federal Reserve (Fed) to accommodate the government’s credit needs by creating a powerful flow of new money. The broad M2 measure of the nation’s money supply rose a rapid 8.0 percent a year on average during this time.
When in 1969 Richard Nixon took over from Johnson, he continued to spend freely, even though the war in Vietnam had begun to wind down. Nixon added a new inflationary factor to the mix when in August 1971 he ended the dollar’s convertibility to gold. This move destroyed the fixed exchange rate system that had prevailed for decades. The dollar fell on global exchange markets, adding directly to American living costs by raising the prices of imports. More fundamentally, the break with gold removed any restraint on the Fed’s ability to create new money.
——————————————————————————————————
***Last Chance to Get Out Before the Crash – Charles Hugh Smith
30 december
The interesting feature of the ‘last chance to get out’ is nobody sees it until after the crash has done its damage.
Every asset bubble has a last chance to get out before the crash point that becomes obvious in the aftermath. But at the time, this last opportunity to exit before the wipeout is difficult to identify for a number of reasons.
One is the general mood at the top of bubbles is extreme confidence that there are further gains just ahead. Everyone who attempted to identify the top of the rally has been proven wrong, and everyone who shorted the rally (i.e. bet on a decline) has been wiped out.
The most anyone is willing to say publicly is that risk is elevated, some day there will be a reckoning, etc., all of which is boilerplate everyone has heard for months or even years.
The last chance to sell doesn’t give itself away; technically it’s at best ambiguous as all the conventional topping signals tend to be muddied, enabling Bulls to declare the top is far from in and bearish signals have been nullified.
The classic last chance follows an apparent breakout to new highs that exceeds previous resistance. In retrospect, the breakout proves to be false, but at the time it’s clear to Bulls that this is yet another breakout and therefore a reliable signal for more gains ahead.
Everyone who sold on downlegs is anxious to get back in and so every dip is reversed by buy the dip buyers who have been handsomely rewarded for buying previous dips.
——————————————————————————————————
The First Economics Lesson – Henry Hazlitt
1 januari
Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics, or medicine—the special pleading of selfish interests.
While every group has certain economic interests identical with those of all groups, every group has also, as we shall see, interests antagonistic to those of all other groups. While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies, having such a direct interest in them, will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.
In addition to these endless pleadings of self-interest, there is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.
——————————————————————————————————
Africa’s Poised For A Bitcoin Revolution In 2022 – Guantai Kathurima
28 december
The continent has ripe conditions for Bitcoin to become the most common way to store and preserve value…
Africans stand to gain the most from Bitcoin and they are quickly realizing this fact and spreading the word. Most know that our corrupt “leaders” will not embrace the path to prosperity that El Salvador is on, due to their own self-interest. By opting out of the fiat-based legacy financial systems holding us back, we will create the change we want to see.
Bitcoiners in Africa are building and actively engaged in this peaceful monetary revolution. Let’s explore themes that will ensure more Africans are onboarded to the Bitcoin standard in 2022.
Orange-pilled Africans are leading the charge toward hyperbitcoinization by building the infrastructure needed to onboard fellow Africans to this idea whose time has come.
Ejara founder Nelly Chatue Diop is an inspiration for the world-class platform she is building while empowering women and girls in the continent to be all they can in this new industry. The Ejara wallet is true to the Bitcoin ethos of “not your keys not your cheese.” Self-custody will shift Africans’ mindsets to self-sovereignty, ensuring they do not give their hard-earned wealth to banks in unsecured loans, aka deposits.
——————————————————————————————————
***Why the Debt Ceiling Won’t Limit Debt or Spending – Jacob G. Hornberger
1 januari
Not surprisingly, both houses of Congress approved another increase in the debt ceiling and have sent the bill to President Biden, who will most assuredly sign it. The bill raises the debt ceiling to $31.5 trillion. This debt ceiling is expected to last through the upcoming midterm elections so that incumbent elected officials don’t have to deal with it in their campaigns for reelection.
Here’s my prediction: none of the mainstream commentators who were screaming about the dire necessity of raising the debt ceiling will publish any articles or editorials calling for federal expenditures to be drastically reduced in order to meet the new debt ceiling a couple of years from now. On the contrary, they will ardently support current levels of spending and maybe even call for higher spending. In other words, now that they got another increase in the debt ceiling, it is back to business as usual, until a couple of years from now, when they will be, once again, desperately calling for another increase in the debt ceiling.
——————————————————————————————————
Fed Drains $1.9 Trillion in Liquidity from Market via Overnight Reverse Repos – Wolf Richter
31 december
Banks unloaded cash today for quarter-end window dressing. Money markets funds are biggest counterparties, Fidelity, Vanguard, Blackrock on top.
The New York Fed disclosed today that its overnight reverse repos (RRPs) spiked by $208 billion from yesterday, to a record $1.904 trillion. With these RRPs, the Fed took in $1.9 trillion in cash from 103 counterparties, and in exchange handed out Treasury securities, temporarily draining $1.9 trillion in liquidity from the market and financial system.
The RRPs mature on Monday, January 3, when the Fed gets its securities back and counterparties get their cash back. Then they’ll engage in another round of RRPs. Today’s RRPs replaced $1.70 trillion in RRPs from yesterday that matured and were unwound this morning.
——————————————————————————————————
How to Avoid Depressions? Foster Saving and Investment – Frank Shostak
29 december
In his writings, the leader of the monetarist school of thinking, Milton Friedman, blamed central bank policies for causing the Great Depression of 1930s. According to Friedman, the Federal Reserve failed to pump enough reserves into the banking system to prevent a collapse of the money stock. Because of this, Friedman held, the M1 money stock, which stood at $26.34 billion on March 1930, fell to $19 billion by April 1933—a decline of 27.9 percent.1
fs1
According to Friedman, as a result of the collapse in the money stock, economic growth also dropped off. By July 1932, industrial production had fallen by over 31 percent year on year (see chart). Also, year on year the Consumer Price Index (CPI) had plunged. By October 1932, the CPI had declined by 10.7 percent (see chart).
——————————————————————————————————
How To Survive The Mega Collapse Of 2022 – MN Gordon
31 december
Welcome to 2022!
The New Year’s edition of the Economic Prism is a place of wild guesses and rough suppositions. Today we focus our eyes through our proprietary prism. We set our sights over a 12 month viewshed. What do we see?
First off, 2022 will be a year where everything under the sun happens precisely as it should. Some good. Some bad. Each day shall unfold before you with symbiotic disharmony. You can bet your bottom bitcoins on it.
But what else?
Will gold top $3,000 per ounce? Will Beeple sell another digital art medley NFT for $69 million? Will a paper cup full of Starbucks coffee mixed with syrup and milk froth hit $10 before the year’s over?
What about the S&P 500, the yield on the 10-Year Treasury note, and the price of oil?
Will Fed tapering cause a simultaneous tantrum in both the stock and bond markets? Will Fauci finally be run out of Washington on a rail like a 19th century con man? Will China invade Taiwan? Did WWIII just commence in the Ukraine? Are we fated for complete social distortion?
You likely have opinions on these matters. Many people do. The answers to these questions, no doubt, will be revealed in due course. In the meantime, our advice is to trust your gut. Your guesses are better than most.
After a deranged 2021, and with Jen Psaki as White House Press Secretary, anything and everything can happen in 2022 – including a mega collapse!
Thus we’re eschewing a broad range of predictions for the 12 months before us. But not to worry, we won’t leave you empty handed…
Rather, with humility and modesty we’ve zeroed in on one critical – yet hated – opportunity. We offer this opportunity to you here, free of charge, with the sole intention of helping you survive the mega collapse of 2022.
——————————————————————————————————
US Dollar’s Status as Dominant “Global Reserve Currency” at 25-Year Low. And USD Exchange Rates? – Wolf Richter
30 december
Euro’s 20th birthday after dreams of “Dollar Parity” put on ice during Euro Debt Crisis. Central banks still leery of Chinese renminbi.
The global share of US-dollar-denominated exchange reserves declined to 59.15% in the third quarter, from 59.23% in the second quarter, hobbling along a 26-year low for the past four quarters, according to the IMF’s COFER data released today. Dollar-denominated foreign exchange reserves are Treasury securities, US corporate bonds, US mortgage-backed securities, and other USD-denominated assets that are held by foreign central banks.
In 2001 – the moment just before the euro officially arrived as bank notes and coins – the dollar’s share was 71.5%. Since then, it has dropped by 12.3 percentage points.
In 1977, when inflation was raging in the US, the dollar’s share was 85%. And when it looked like the Fed wasn’t doing anything about inflation that was threatening to spiral out of control, foreign central banks began dumping USD-denominated assets, and the dollar’s share collapsed.
The plunge of the dollar’s share bottomed out in 1991, after the inflation crackdown in the early 1980s caused inflation to abate. As confidence grew that the Fed would keep inflation more or less under control, the dollar’s share then surged by 25 percentage points until 2000 when the euro arrived.
——————————————————————————————————
Biden’s War against Fossil Fuels Is a War against Ordinary People – Mark Hendrickson
27 december
A few months ago, I wrote about President Biden’s anti–fossil fuel policies. Among other steps designed to restrict domestic production of oil and natural gas, the president canceled completion of the Keystone XL pipeline, banned drilling for oil in the Arctic Wildlife Refuge, and greatly curtailed the issuance of leases for companies to develop fossil fuel resources underneath public lands and waters.
Since then, the prices of gasoline, oil, and natural gas have risen smartly. As noted by one source, the last time natural gas prices were this high, “One-third of American households already had difficulty … adequately heating and cooling their homes—and one-fifth of households had to reduce or forego food, medicine and other necessities to pay energy bills.” Bank of America is predicting that the price of a barrel of oil may rise to $120 this winter, inflicting additional hardships on the poorest Americans.
——————————————————————————————————
***Sleepwalking Into the Abyss in 2022 – Charles Hugh Smith
26 december
What would be truly optimistic would be to surrender our dependence on asset bubbles and malinvested debt to prop up an unstable delusion of effortless “wealth.”
The most sacred liturgy of American culture is to always be positive and optimistic. The greatest taboo is breaking this sacred duty to say something upbeat and optimistic; it is acceptable (barely) to make awkwardly negative observations, but only if you immediately follow up the negative comments with a treacly, double-serving of sugary optimism: for example, inflation is transitory, the economy is growing strongly, wages are rising, etc.
And so we sleepwalk into 2022, ill-prepared to deal with reality which most annoyingly continues responding to systemic dynamics no matter how much sugary optimism is spread around.
The endless servings of sugary optimism serve several purposes:
1. They create an appealing illusion that systemic problems can be solved without materially changing the status quo or demanding any sacrifices.
2. They mask the inconvenient reality that the status quo is incapable of solving systemic problems because doing so would demand sacrifices of those skimming the vast majority of the benefits of the status quo, i.e. the wealthy and powerful.
3. They mask the eqnormous sacrifices being imposed on the bottom 90% to keep the status quo unchanged, i.e. benefiting the few at the expense of the many.
4. The demand to always be sugar-high optimistic is a handy tool to bludgeon critics who point out the systemic failure of the status quo as alarmists, doom-and-gloomers, etc.
In other words, you’re only allowed to point out a critical systemic flaw if you also parrot a completely unrealistic, impractical “solution” that fits the sugar-high optimism requirement: fusion: unlimited energy for everyone forever! Modern Monetary Theory: free money for everyone forever! And so on, in an endless gush of detached-from-reality “solutions” that all magically solve all problems without changing anything in the power structure of who benefits from the existing arrangement or demanding any reduction in our waste is growth Landfill Economy.
——————————————————————————————————
Western Economies Are Self-Destructing with Inflation, Debt, and Taxes – Nikola Kedhi
24 decembrer
Although reluctantly, current central bank governors and respected economists have ramped up their warnings that inflation is here to stay. However, while it took officials a considerable period of time to admit the inflationary threat, despite the signs and warnings, they are failing to name its root causes. Inevitably, and anew, a wrong diagnosis will lead to repeated erroneous remedies, which will continue the self-destructive, complacent vicious cycle our Western economies have entered.
The consensus among officials seems to be that this unexpected inflation is solely due to economies being forced to shut down and then reopen, causing disruptions in the supply chains in the process. These disruptions may push the prices of certain products upward. Yet we are seeing an increase in the overall level of prices, in all economies, which should not have happened if there is monetary stability. So, while broken chains may explain in part the price hikes, we must look elsewhere for the true reasons of overall inflation, namely damaging monetary policies and damaging fiscal signals and programs.
——————————————————————————————————

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.

Eerdere afleveringen van dit wekelijkse overzicht vindt u hier.Economische aanraders