Economische aanraders 03-11-2019
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.
Bitcoin and the Denationalization of Money – Ralph Fucetola
“The modern central bank business model is being disrupted.” claims Saifedean Ammous, economics professor and author of The Bitcoin Standard: The Dcentralized Alternative to Central Banking. Ammous’ well-written exposition of an Austrian-School understanding of the nature of money — in a free market and not — concludes with several chapters directed toward the technology and economics of Bitcoin, the original blockchain crypto-currency. He answers the key questions regarding Digital Money (Chapter 8), What is Bitcoin Good For? (Chapter 9), and Bitcoin Questions (Chapter 10).
Professor Ammous sees Bitcoin as another, and very powerful, “disrupter” technology that provides the first real challenge to the global fiat money system run by nation states in a century. That is, it’s the first real challenge since the modern state retreated from the classical gold standard.
The monetary lessons from Germany – Alasdair Macleod
Germany suffered two currency collapses in the last century, in 1920-23 and1945-48. The architect of the recovery from the former, Hjalmar Schacht, chose to cooperate with the Nazi successors to the Weimar Republic, and failed. In that of the second, Ludwig Erhard remained true to his free market credentials and succeeded. While they were in different circumstances, comparisons between the two events might give some guidance to politicians faced with similar destructions of their state currencies, which is a growing possibility.
Trump and the WTO: It’s Time to Dump Global “Free” Trade Bureaucrats – Carmen Elena Dorobăț
An article published this month by Chad Bown and Douglas Irwin (the latter one of the more consistent and effective defenders of free trade in academia) provides a rather disappointing view of the free trade ideal in scholarly circles. Their discussion highlights the confusion (or perhaps hypocrisy) that surrounds such debates at present. The recent article, published in Foreign Affairs (2019), builds on a 2018 Peterson Institute policy brief by the same authors. Both contributions discuss the effects of Trump’s approach to trade, of the potential U.S. withdrawal from the WTO, and of Trump’s overall economic nationalism—and are a disappointing display of misguided assumptions and a lot of handwringing.
Will MMT Work as Intended, Or Will It Trigger the Collapse of “Money”? – Charles Hugh Smith
MMT is presented as the solution to the “problem” of insufficient government funding, but that’s not the real problem.
Modern Monetary Theory (MMT) is presented as a means to painlessly fund the large-scale infrastructure / alternative energy spending the nation needs to rebuild and modernize.
While most people support the goal of useful fiscal stimulus (as opposed to paying people to dig holes and fill them), the question remains: Will MMT work as advertised?
Rather than dismiss it out of hand, I’m trying to approach the subject without ideological bias.
Pragmatism with a long-term vision should prevail in euro reform – Heikki Oksanen
Preparations for reforming the euro area have stalled, with experts disappointed that politicians have not heard their proposals. This column, however, is optimistic that the euro area can be reformed via a pragmatic reorientation without high-profile changes to the EU Treaty. The reforms must cover a reorientation of fiscal policy towards a long-term vision and entail revamping the Eurosystem to allow it to perform its proper role as a central bank.
***What Would Mises Think about the West Today? – Jeff Deist
Those of us who read and enjoy Mises, and he wrote so much about so many things, might well wonder what he would have to say about the state of America and the West in 2019. After all, he was a sociologist and philosopher and political theorist as well as an economist. Surely we could use his perspective today, and so much of what he wrote was prescient and still relevant.
Of course It is always dangerous to imagine what any departed intellectual or thinker would think about today’s world and today’s events, and this is certainly true of Mises too. We all love to do this, though. We all want to use Mises to make our points about topic X, Y, or Z today, to confirm our own biases or bolster our arguments—and why not? I’m always mystified by facile objections to “appeal to authority”— I recognize Mises may in fact be wrong, and you, Mr. Arguer on Facebook, may in fact be right. But I doubt it.
Manufacturing in the US vs. China, Germany, Japan, South Korea – Wolf Richter
US barely Cleanest Dirty Shirt among the manufacturing giants.
Manufacturing in the US is growing at crawl-speed or is actually declining, depending on who the beholder is. China appears to be on a similar track, with manufacturing export orders in particular trouble. But the other manufacturing giants – Germany, Japan, and South Korea – are not so lucky.
On Friday, two major beholders released their views on the US manufacturing sector: The IHS Markit US Manufacturing PMI, which saw growth in October picking up a tad for the second month in a row, from stall-speed over the summer; and the ISM Manufacturing PMI, which saw manufacturing declining in October but declining at a slightly slower rate than in the month before.
Taming the global financial cycle: Central banks and the sterilisation of capital flows in the first era of globalisation – Guillaume Bazot, Eric Monnet, Matthias Morys
The gold standard (1880s-1913) is usually portrayed as the exemplary case of the total submission of central banks’ monetary policy to the constraints of international finance. This column challenges this view by showing that central banks’ balance sheets stood as a buffer between their respective domestic economies and global financial markets. By contrast, autonomy was much more limited in the US, a country with fixed exchange rates but no central bank before 1913.
“Fundamentally Rigged” – Runaway Algos Spark Chaos, Crackdown In World’s Most Important Futures Market – Tyler Durden
The eurodollar futures market is among the most important for the functioning of global financial markets, providing faux-credit fillers for institutions everywhere as well as critical signaling (whether reflexive or not) on the future path of interest rates (and thus what The Fed is expected to do, or will do).
So, it seems appropriate to worry when that critical credit market is over-run by chaos-producing algos who seem to have moved on from front-running stocks (because it’s all buybacks all the time) to the vastly less-liquid (and notably wider tick-spreads) eurodollar market.
As The Wall Street Journal reports, over the past two months, the volume of data generated by activity in CME’s Eurodollar futures soared 10-fold, according to exchange statistics.
When Billionaires Want to Get Rid of Capitalism – Jean Vilbert
“Successful economies are not jungles, they’re gardens, which is to say that markets, like gardens, must be tended, that the market is the greatest social technology ever invented to solving human problems, but unconstrained by social or democratic regulation, markets inevitably create more problems than they solve.”
These are the words of Nick Hanauer, a self-described capitalist. And a billionaire.
Global Slowdown? Mexico’s GDP Declines Year-Over-Year for First Time Since 2009 – Nick Corbishley
Not just exports and manufacturing – but services stall.
In the third quarter of 2019, Mexico notched up its first year-over-year decline in GDP since the final quarter of 2009, when it was in the midst of a sharp recession brought on by the Financial Crisis. According to a preliminary estimate published by Mexico’s statistical institute INEGI, in the third quarter, the economy shrank 0.4% compared with the same quarter a year earlier.
***Chumps: China Is Playing Trump and His Trade Team – Charles Hugh Smith
If we put ourselves in the shoes of the Chinese negotiators, we realize there’s no need to sign a deal at all.
The world’s worst negotiating strategy is to give the other side everything they want in exchange for worthless empty promises, yet this is exactly what Trump and his trade team are doing. All the Chinese trade team has to do to get rid of tariffs and other U.S. bargaining chips is mutter some empty phrase about “agreeing in principle” and the U.S. surrenders all its bargaining chips.
If the other side are such naive chumps that they give you everything you want without actually committing to anything remotely consequential, why bother with a formal agreement? Just play the other side for the chumps they are: if they threaten to reinstate tariffs, just issue another worthless press release about “progress has been made.”
The other guaranteed losing strategy in negotiation is advertise your own fatal weakness, which in Trump’s case is his obsession with pushing the U.S. stock market to new highs. There is no greater gift he could hand the Chinese trade team than this monumental weakness, for all they have to do is talk tough and the U.S. stock market promptly tanks, sending the Trump Team into a panic of appeasement and empty claims of “progress.”
The impact of the US-China trade war on Japanese multinational corporations – Chang Sun, Zhigang Tao, Hongjie Yuan, Hongyong Zhang
The trade war between the US and China has had impacts on other countries – including Japan, one of the most important trading partners of both countries. The column uses quarterly sales data and stock market returns to show that the operations in China of Japanese MNCs have been negatively affected by the trade war, especially when Chinese affiliates rely heavily on trade with North America. This has led to a reduction in their stock prices.
Demographics, Credit Demand, & Money Creation…Why The Federal Reserve Monetization is Just Getting Warmed-Up – Chris Hamilton
Today, the annual issuance of Treasury debt crossed the $1 trillion mark for the 2019 calendar year (likewise crossing over $23 trillion, with two months still to go). Below, in red is surging public (marketable) debt versus in blue, the slowing intragovernmental (Social Security and other trust funds) debt, and the Federal Funds Rate.
The fact that all that Treasury issuance has come in the last three months should be noteworthy, but heck, the Treasury had some catching up to do after another debt ceiling impasse!?! Still, over the same period, the Federal Reserve has cut interest rates by 35%. Over that same period, the Fed has ceased QT, pivoted, and initiated some of the most aggressive QE we have yet seen. This has increased the Fed’s balance sheet over $260 billion in just over two months, since the Fed’s pivot of late August. Over the same period, the Fed has engaged in the most aggressive monetization of debt (decreasing bank held excess reserves against increasing Fed assets) we have seen since the depths of 2009?!? Suffice it to say, these are not signs of strength or confidence but instead signs of panic. But why???
***Why Austrian-School Economists Tend To Be Libertarians – Ralph Raico
There is a sense in which economic theory per se, any analytical economics, can be said to favor the market. As Hayek (1933) remarked, regarding the attack on economics in the 19th century,
The existence of a body of reasoning which prevented people from following their first impulsive reactions, and which compelled them to balance indirect effects, which could be seen only by exercising the intellect, against intense feeling caused by the direct observation of concrete suffering, then as now, occasioned intense resentment. (p. 125)
But Austrian economics has been so often and so closely tied to liberalism that it is plausible to seek the connection also in its distinctive economic theories.
Carney’s Green Crypto Currency: Prelude To A Financial Meltdown – Matthew Ehret
The momentum pushing for the overhaul of the financial system from its current disorderly state of unbounded speculation (amounting to over $1.5 quadrillion of derivatives) towards a “reformed central bank-driven” system of green finance is moving startlingly fast. The fact that this momentum is both coming from “top down” echelons of the City of London as well as the “bottom up” anarchist mobs of Extinction Rebellion is also not a coincidence as it has now been firmly proven that both are coordinated by the same billionaire speculators who created the economic bubble of an economy now ripe to blow.
In the case of Mark Carney’s Bank of England, the former Bank of Canada governor/Goldman Sachs man has recently led the hectic campaign for a green digital crypto-currency to replace the bankrupt US dollar. Since his announcement of this crypto plan on August 22, the Bank of Canada quickly fell into line declaring its support of the agenda on October 15.
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.