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 Question of Jackson Hole: Will the Fed Bail Out the World? – Daniel Lacalle
31 augustus
If we analyze the consensus expectations of analysts and investment banks at the end of 2017, the conclusion was unanimous: Buy Europe and emerging against the United States amid weakening US dollar estimates in 2018. And it has been exactly the opposite. I’ve already warned a few times about the risk of such a biased consensus towards a weak US dollar.
Indeed, the reality is that, at the end of this article, Europe showed a decline of almost 3.5%, led by banks, while emerging markets plunged almost 20%, while the United States marked record highs with the dollar recovering much of of what was lost in 2017.
What does this tell us about the next few months? We must ignore the “crowded trades” and look for value in a different way.
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US Yield-Curve Looks Hell-Bent on Inverting, “Flattest” Since Aug 2007 – Wolf Richter
26 augustus
How does it compare to German, Japanese, and Chinese yield curves?
On Friday, the US Treasury 2-year yield rose to 2.63% and the 10-year yield remained at 2.82%. This squeezed the spread between them to just 19 basis points, the lowest since August 2007.
This is a further step in the “flattening yield curve,” where short-term yields and long-term yields move closer together. Unless the 10-year yield gets on the rate-hike bandwagon and jumps, it might soon be lower than the 2-year yield – a condition called yield-curve “inversion.” This happens as shorter-term yields rise following the Fed’s rate hikes but long-term yields refuse to budge.
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Why Is Productivity Dead in the Water? – Charles Hugh Smith
30 augustus
As the accompanying chart shows, productivity in the U.S. has been declining since the early 2000s. This trend mystifies economists, as the tremendous investments in software, robotics, networks and mobile computing would be expected to boost productivity, as these tools enable every individual who knows how to use them to produce more value.
One theory holds that the workforce has not yet learned how to use these tools, an idea that arose in the 1980s to explain the decline in productivity even as personal computers, desktop publishing, etc. entered the mainstream.
A related explanation holds that institutions and corporations are not deploying the new technologies very effectively for a variety of reasons: the cost of integrating legacy systems, insufficient training of their workforce, and hasty, ill-planned investments in mobile platforms that don’t actually yield higher productivity.
Productivity matters because producing more value with every unit of energy, every tool and every hour of labor is the foundation of higher wages, profits, taxes and general prosperity.
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The effect of house prices on household borrowing: A new approach – James Cloyne, Kilian Huber, Ethan Ilzetzki, Henrik Kleven
31 augustus
House prices are strongly correlated with borrowing, but little is known about which one is causing the other. The column uses UK house price data between 2005 and 2015, and also exploits unusual features of the UK mortgage market, to show that a 10% rise in house prices led to a 2% rise in the amount of equity extracted. This is mostly because higher house prices could be used as collateral.
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No Other Banks Are This Exposed to Turkey, Argentina, Brazil…. Emerging Markets Haunt Spanish Banks – Don Quijones
31 augustus
To diversify from the euro-debt-crisis, the biggest Spanish banks pushed deeply into Emerging Markets. Now, they’re in a new crisis.
Almost exactly six years ago, the Spanish government requested a €100 billion bailout from the Troika (ECB, European Commission and IMF) to rescue its bankrupt savings banks, which were then merged with much larger commercial banks. Over €40 billion of the credit line was used; much of it is still unpaid. Yet Spain’s banking system could soon face a brand new crisis, this time not involving small or mid-sized savings banks but instead its alpha lenders, which are heavily exposed to emerging economies, from Argentina to Turkey and beyond.
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Central Banks Enrich a Select Few at the Expense of Many – Thorsten Polleit
30 augustus
The message unanimously churned out by politicians, central bankers, and ‘mainstream’ economists is that central banks are there for the ‘greater good’. They provide the economy with sufficient money and credit, and they fight inflation, thereby supporting output and employment growth. What is more, central banks, are supposedly in a position to effectively fend off or at least mitigate financial and economic crises. However, unfortunately, nothing could be further from the truth.
Throughout history, central banks have been created, first and foremost, to fill governments’ coffers. To increase the king’s or elected government’s financial means through an inflationary scheme – usually too elaborate and too treacherous for most people to see through. Central banks are instrumental for putting the ruler — or the ruling class — into a position where they can plunder the people on a grand scale and, by way of redistributing the loot, making a growing number of people financially and socially dependent on it.
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China is the world’s new science and technology powerhouse – Reinhilde Veugelers
30 augustus
Scientific knowledge and its use in technology and economic and societal development has become increasingly global and multipolar. While Europe and the U.S. have traditionally led in scientific development, China in particular has emerged as a new science and technology (S&T) powerhouse.
A key indicator of the rise of China in S&T is its spending on research and development (R&D). Chinese R&D investment has grown remarkably over the past two decades, with the rate of growth greatly exceeding that of the U.S. and the EU.
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Italian risk spreads: Fiscal versus redenomination risk – Daniel Gros
29 augustus
Over the last few months, the risk premia on Italian government bonds have increased considerably. This column uses data on sovereign credit default swaps and governments bonds denominated in different currencies to disentangle fiscal risk from redenomination risk (i.e. the risk of Italy leaving the euro). Redenomination risk appears to be responsible for about half of the overall increase in the spread, suggesting that playing with the idea of exiting the euro can be costly even if public finances remain under control.
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The Tax-and-Spend Health-Care Solution – John H. Cochrane
29 juli verschenen als Op-Ed in de Wall Street Journal
Honest subsidies beat cross-subsidies. They’d encourage competition and innovation.
Why is paying for health care such a mess in America? Why is it so hard to fix? Cross-subsidies are the original sin. The government wants to subsidize health care for poor people, chronically sick people, and people who have money but choose to spend less of it on health care than officials find sufficient. These are worthy goals, easily achieved in a completely free-market system by raising taxes and then subsidizing health care or insurance, at market prices, for people the government wishes to help.
But lawmakers do not want to be seen taxing and spending, so they hide transfers in cross-subsidies. They require emergency rooms to treat everyone who comes along, and then hospitals must overcharge everybody else. Medicare and Medicaid do not pay the full amount their services cost. Hospitals then overcharge private insurance and the few remaining cash customers.
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***Nafta is Dead. Long Live Nafta – Wolf Richter
27 augustus
The biggest problem with Nafta that hurt US workers, Mexican workers, and the Mexican economy, though it hugely benefited profit margins of global automakers and Corporate America, remains unaddressed: Wage repression in Mexico, including via “protection contracts” as condition for building a plant.
The deal was announced with fanfare at a press conference in the Oval Office this morning: The US and Mexico had reached a new deal that would govern their totally out-of-whack trade relationship.
“A big deal looking good with Mexico,” President Trump tweeted.
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Luongo: Trump Doesn’t Want Peace With The EU – Tom Luongo,
1 september
Donald Trump is on a mission. His goal? Destroy the post-WWII institutional order that has outlived its usefulness.
And there have been a number of major moves that fundamentally tear at the fabric of that order. In a span of a day we’ve had the following things occur in quick succession.
French President Emmanuel Macron holds a press conference calling for a new “strategic relationship with Russia and Turkey.”
At the same time he softened the EU’s stance on Russia’s reunification with Crimea, saying Russian – EU relations needed “to be brought up to date.”
On the trade and tariff war with Trump, Germany called Trump’s bluff about free trade on cars by offering to scrap all import tariffs on theirs in exchange for the U.S. lifting them on light trucks and pickups, which Trump promptly rejected.
Trump then called the EU “Worse than China” and threatened to pull the U.S. out of the World Trade Organization.
Ayatollah Khamenei put pressure on the EU to stand up to Trump over the JCPOA, clearly threatening a return of their nuclear program.
Just last week German Foreign Minister Heiko Maas, clearly frustrated with Trump’s endless dollar belligerence called for the EU to develop, like Russia and China, it’s own electronic interbank payment system to skirt U.S. sanctions.
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How global factors affect banks’ foreign currency funding: It depends on the exposure – Signe Krogstrup, Cédric Tille
29 augustus
Volatility in international capital flows can disrupt international trade and finance. This column explores the role of agents’ exposure to risk in this dynamic, focusing on domestic financial firms. It finds that the impact of an increase in risk aversion on foreign currency funding is conditional on the bank’s initial net currency exposure. This suggests that the empirical link from global factors to cross-border bank funding depends on country-specific characteristics of financial institutions.
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The Economy: Winter Is Coming – Christopher P. Casey
29 augustus
Fans of HBO’s hit series Game of Thrones know well the motto of House Stark: “Winter is Coming.” This motto warns of impending doom, whether brought on by the Starks themselves, devastating multi-year, cold weather, or something far more ominous north of the Wall.
At least since Soviet economist Nikolai Kondratieff wrote The Major Economic Cycles in 1925, recessions have been associated with winter weather.1 Although Kondratieff’s theories contained as much fantasy as Game of Thrones, using seasons as an analogy for the stages of a business cycle is intuitive. If spring represents recovery, and summer the peak of economic growth, then the U.S. economy may well be in autumn. All should be as wary as the subjects of Westeros (the realm of focus in Game of Thrones).
Why Winter is Coming
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Fed Economists Deliver Ammo for Hawkish Approach to Inflation – Wolf Richter
26 augustus
“Because monetary policy acts with a lag, waiting for inflation to materialize before reacting is undesirable, particularly when economic conditions are such that outsized deviations of inflation from its target are a plausible outcome.”
Let’s break the above quote apart and put it in perspective:
Waiting with rate hikes until inflation materializes is undesirable.
This is particularly true today after years of global QE and zero-interest-rate policy, when “outsized deviations of inflation” – such as a sudden and hard-to-control surge – “are a plausible outcome.”
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***Electoral pressure amplifies the protectionist effects of higher imports – Banri Ito
01 september
With protectionism on the rise around the world, the question of why politicians often call for protectionist trade policies in their election campiagnsis becoming more important than ever. This column introduces empirical evidence from Japan to show that politicians from constituencies facing a substantial increase in imports, and therefore stronger electoral pressure, are more likely to advocate protectionist trade policies.
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