Economische aanraders 04-09-2016
Veren of Lood biedt u op zondag wekelijks een inkijkje in (minstens) 10 belangrijke of informatieve artikelen en interviews die 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.
Sinds begin december 2015 nemen we 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.
How a Small-ish Stock Market Swoon Might Unleash the Next Credit Nightmare – Wolf Richter
The “weakest links,” according to S&P Global Ratings, are financially squeezed companies that S&P rates B- (neck-deep into junk), with “negative” rating outlooks or negative implications on CreditWatch. They’re uncanny predictors of corporate defaults. When the number of “weakest links” rises, the default rate will soon rise as well. The last three times it rose enough, a recession kicked in. The last two times were accompanied by fabulous fireworks in the markets.
In August, the number of “weakest link” companies rose to 251, the highest since October 2009, up from 140 two years ago, and heading toward the record of 300 in April 2009 when the financial world was coming unglued.
These weakest links have $359 billion in debt outstanding.
What else can central banks do? – Laurence Ball, Joseph Gagnon, Patrick Honohan, Signe Krogstrup
This column presents the latest Geneva Report on the World Economy, in which the authors argue that central banks can do more to stimulate economies and restore full employment when nominal interest rates are near zero. Quantitative easing and negative interest rates have had beneficial effects so far and can be used more aggressively, and the lower bound constraint can be mitigated by modestly raising inflation targets.
The limits to “whatever it takes”: Lessons from the gold standard – Stefano Ugolini
When Mario Draghi famously declared that the ECB was “ready to do whatever it takes to preserve the euro”, he also specified “within our mandate”. This column examines the institutional limitations to central bankers’ actions. It argues that institutional constraints are essential in determining the sustainability of monetary policies, and hence central banks’ ability to pursue their targets. The weakness of the Bank of England in the heyday of the gold standard is a case in point.
No “Free Money for All,” only for Corporations & Governments; Consumers Need Not Apply: ECB’s Nowotny – Wolf Richter
I’m not sure what, if anything, Ewald Nowotny, Member of the ECB Governing Council and Governor of the Austrian National Bank, and I agree on in terms of monetary policy. But today he said something that is exceptionally truthful – and a glaring expression of just how hypocritical a central bank and the people that run it are.
Nowotny’s keynote speech today at the European Forum Alpbach in Switzerland was titled (my translation from German), “Low Interest-Rate Policies: Free Money for All, or Savior in an Emergency.”
A rhetorical question which he then proceeded to answer with utmost clarity: Free money, or worse, money with negative interest, is not for everyone. Only governments and corporations are allowed to benefit from it, but not consumers.
Selected takeaways from the ECB’s Sintra Forum on “The Future of the International Monetary and Financial Architecture” – Vítor Constâncio, Philipp Hartmann
The ECB’s 2016 Sintra Forum on Central Banking focused on the international monetary and financial system. In this column, the organisers of the forum highlight some of the main points from the discussions, including concerns that the world economy may be suffering from a shortage of safe assets and proposals for which areas international regulatory reforms should be further developed.
We’ve Reached the “Zero Point” of Debt Creation – Harry DEnt
Forty-five years and counting: We’ve been on a debt spree since the early 1970s when we went off the gold standard, covering every possible angle. Trade deficits, government deficits, unfunded entitlements, private debt – you name it! Our total debt has grown 2.5-times GDP since 1971.
How could economists not see this as a problem? How is this the least bit sustainable?
It isn’t. We’re hurtling toward a massive financial crisis, and all we have to show for it are financial asset bubbles destined to burst. And when they do, they’ll wipe out the artificial wealth they’ve created for many decades… in just a few years, as they did from late 1929 into late 1932!
The chart below shows the common-sense truth.
***Central Banks = Welfare for the Wealthy – Charles Hugh Smith
Central banks can only do one thing, and that’s provide monetary welfare for the wealthy.
The fact that central banks provide welfare for the wealthy is now entering the mainstream. The fact that all central bank policies since 2008 have dramatically increased wealth and income inequality is now grudgingly being accepted as reality by mainstream economists and the financial media.
The central banks’ PR facade of noble omniscience on behalf of the great unwashed masses has cracked wide open. Even The Wall Street Journal is publishing critiques of Federal Reserve policies that suggest the Fed has no idea how the U.S. economy actually works because their policies have failed to help the bottom 95%.
The grudging admission that central bank policies have enriched the rich while failing to benefit the bottom 95% is a breakthrough–the stone wall of denial has finally been pierced. The mainstream media and the Establishment have resolutely clung to the self-serving fantasy that the Federal Reserve 1) knows what’s it’s doing and 2) is boosting a “recovery” that will soon achieve self-sustaining “escape velocity”–that is, the economy will generate its own growth and the Fed can dial back its zero-interest rate policy and all its other unprecedented monetary easing measures.
Spain in the wake of the crisis: Reforms versus adjustment – Ramon Xifré
Spain implemented a host of structural reforms following the Global Crisis. But questions remain about whether the current economic condition is due to the reforms or to ‘automatic’ adjustment in public and private sectors. This column sheds light on these questions by examining changes in a set of economic indicators following the introduction of the reforms. Five stylised facts are presented that suggest limitations of the reforms. Much of the current climate appears to reflect inherent limitations of the Spanish economy.
***New Leak Confirms: Brussels Has Learnt Nothing from Brexit – Don Quijones
The European Commission seems determined to make itself even more unpopular among Europe’s disaffected public. This is just about the only conclusion that can be drawn from its latest decision to steam ahead with plans to adopt a controversial ancillary copyright law — A.K.A. snippet tax — that would open the way for Big Media in Europe to charge news aggregators and other websites a special fee for linking to their works.
The Commission has repeatedly denied that it has any intentions of introducing such a tax. Just two days ago Commissioner Ansip state unequivocally: “This Commission does not have any plans to tax hyperlinks.”
It was a hugely disingenuous claim, as was confirmed by the publication on Friday of a leaked draft of the Commission’s own impact assessment on the modernization of EU copyright rules.
Investors Are Thwarting the Bank of England’s Latest QE Scheme – George Pickering
Last week it emerged that, for the second time in two weeks, the Bank of England has been unable to buy back enough government bonds to achieve its target. The attempted bond buyback was part of the Bank’s post-Brexit emergency strategy, in which it hoped to execute £60 billion of new quantitative easing (QE) by re-purchasing UK Treasury gilts from private businesses. However, two weeks ago the Bank was forced to reveal that, for the first time in its history, it would be unable to complete its bond buyback, as businesses were unwilling to part with their gilts at what the bank construed to be the market rate. While the Bank attempted to dismiss this problem by promising to make up for the £52 million shortfall in six months time, the fact that it has run into the same roadblock yet again, a mere two weeks later, will make this promise appear far more tenuous.
The impact of corruption on taxation and growth: Evidence from the US – Philippe Aghion, Ufuk Akcigit, Julia Cagé, William Kerr
The relationship between taxation and economic growth is complex, and relies in large part on the efficiency with which taxes are used. This column examines the impact of corruption on this relationship. The boost to welfare from reducing corruption is substantially larger than the marginal gains from optimising the tax rate for an existing level of government efficiency.
Free Trade Wins: The TTIP Is in Trouble – Mark Thornton
You have probably heard of the controversial TPP, the Trans-Pacific Partnership, the deal that Hillary Clinton can’t make up her mind on. However, you probably have not heard of the Transatlantic Trade and Investment Partnership (TTIP). It is referred to as a free trade pact between the United States and the European Union. I only recently read about it in European media sources. Negotiations have been going on for years and it only recently surfaced because top European officials have declared it a de facto dead deal.
Record Low Yields On Deck? Abe Advisor Urges Japan To Buy US Treasuries – Tyler Durden
With skepticism rising with every passing day that Japan’s monetary dead end could mean the BOJ is forced to be the first developed central bank to admit outright policy failure, resulting in suggestions for a “massive stimulus program” and “creating shock and awe at this point in the cycle”, overnight Koichi Hamada, an adviser to PM Shinzo Abe, penned on Project-Syndiate Op-Ed titled “Japan vs. the Currency Speculators”, in which he said that “what the MOF should do is intervene courageously in currency markets to stem the yen’s appreciation.” The benefit of this proposed doubling down would be that “Speculators will learn a tough lesson, and Japan’s economy could get back on track. Though Japan may become a scapegoat for the failure of the TPP, it seems unlikely that the deal would be ratified in any case, given the current political climate in the United States. An alternative would be for the BOJ to purchase foreign securities.”
In short, according to Hamada 30 years of monetary failure can be fixed if only the BOJ does, well, even more of the same.
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.