Economische aanraders 04-12-2016
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 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.
A Better Choice – John H. Cochrane
Roll up your shirtsleeves, financial economists. As reported by Elizabeth Dexheimer at Bloomberg, Rep. Jeb Hensarling is “interested in working on a 2.0 version,” of his financial choice act, the blueprint for reforming Dodd-Frank. “Advice and counsel is welcome.”
The core of the choice act is simple. Large banks must fund themselves with more capital and less debt. It strives for a very simple measure of capital adequacy in place of complex Basel rules, by using a simple leverage ratio. And it has a clever carrot in place of the stick. Banks with enough capital are exempt from a swath of Dodd-Frank regulation.
Market based alternatives to a leverage ratio – The most important question, I think, is how, and whether, to improve on the leverage ratio with simple, transparent measure of capital adequacy. Keep in mind, the purpose is not to determine a minimum capital level at which a bank is resolved, closed down, bailed out, etc. The purpose is a minimal capital ratio at which a bank is so systemically safe that it can be exempt from a lot of regulation.
Government Bond & Mortgage “Meltdown” Crushes NIRP – Wolf Richter
And the spike in mortgage rates will come in handy.
The situation in government bonds – variously labeled with “bloodbath,” “rout,” “carnage” “meltdown,” or similar propitious terms – continued on Thursday.
Already in November – so not counting the “carnage” today – the Bloomberg Barclays Global Aggregate Total Return Index lost 4% or $1.7 trillion, according to Bloomberg, “the deepest slump since the gauge’s inception in 1990.”
While global stocks rallied in November, the gains – $635 billion – were outright puny compared to the $1.7 trillion wiped out in the much larger bond markets.
Beyond Income Inequality – Charles Hugh Smith
Can the current iteration of global capitalism be reformed, or is it poised to be replaced by some other mode of production?
Judging by the mainstream media, the most pressing problems facing capitalism are 1) income inequality, the basis of Thomas Piketty’s bestseller Capital in the Twenty First Century, and 2) the failure of laissez-faire markets to regulate their excesses, a common critique encapsulated by Paul Craig Roberts’ recent book and 2) the failure of laissez-faire markets to regulate their excesses, a common critique encapsulated by Paul Craig Roberts’ recent book The Failure of Laissez Faire Capitalism.
These critiques (and many similar diagnoses) reach a widely shared conclusion: capitalism must be reformed to save it from itself.
The proposed reforms align with each analyst’s basic ideological bent. Piketty’s solution to rising wealth inequality is the ultimate in statist centralization: a global wealth tax. Roberts and others recommend reforming capitalism to embody social purpose and recognize environmental limits. Exactly how this economic reformation should be implemented is a question that sparks debates across the ideological spectrum, but the idea that capitalism can be reformed is generally accepted by left, right and libertarian alike.
Set to breach targets again? Debt and deficit outlooks for Southern European Eurozone countries in 2016 & 2017 – Caroline Gray
After dragging Greece kicking and screaming through a never-ending vicious cycle of fiscal adjustment and output decline, the European Commission seems to be softening in its attitude towards other struggling Eurozone economies. France, Italy, Portugal and Spain, among others, have all repeatedly been given extensions to reduce their debt and deficit levels after recurrent breaches of EU targets have gone unpunished, and the trend looks set to continue as our forecasts show that those economies will underperform again this year and next. Does this mark a shift in mindset within the Commission as to whether the Growth and Stability Pact is fit for purpose? Or rather just tactical maneuvering—or indeed resigned acceptance—in tough political times, as the EU faces unprecedented challenges to its legitimacy and survival?
The Faulty Logic of GDP Necessitates an Economic Paradigm Shift – Per Bylund
Nearly 80 years ago — during the height of the Great Depression — economist Simon Kuznets envisioned a system capable of measuring productivity and economic activity. In a report to Congress, Kuznets proposed charting all economic production with a single measurement that would decrease when the economy struggled and increase when it thrived. He called it gross domestic product, or GDP.
Nations throughout the world embraced GDP as the standard for measuring economic activity; Kuznets eventually won the Nobel Prize for his creation. The popularity of GDP belies its effectiveness, however, as the measure systematically under-reports the significance of production.
Employment subsidy schemes: Firm-level evidence from the 2012 Spanish labour market reform – Elisa Gamberoni, Katerina Gradeva, Sebastian Weber
Employment subsidies have been widely used in OECD countries to counteract the recent job crisis, but their effectiveness is difficult to assess. This column summarises the findings of a recent study analysing a 2012 Spanish employment subsidy given to firms with fewer than 50 employees that make use of a new type of permanent contract. Consistent with other country studies, it fails to find robust evidence for increased employment growth due to the subsidy scheme.
Why It’s Important to Define Money Correctly – Frank Shostak
Most economists hold that, since the early 1980s, correlations between various definitions of money and national income have broken down. The reason for this breakdown, it is held, is that financial deregulation has made the demand for money unstable. As a result it is held the usefulness of money as a predictor of economic events has significantly diminished.
To fix the instability of the demand for money, economists have introduced a gauge of the money supply known as the Divisia monetary indicator. (The indicator is named after its originator, François Divisia).
By assigning variables rather than equal weights to the money-supply components, it is held, one could remedy the issue of an unstable money demand. (By assigning suitable weights one is likely to improve the correlation between the weighted monetary gauge and various economic indicators.) Consequently, one could employ this indicator to ascertain the likely future economic events.1
The Shocking Truth About How Barack Obama Was Able To Prop Up The U.S. Economy – Michael Snyder
Barack Obama is one of the biggest “Keynesians” of all time, but unfortunately most Americans don’t even understand what that means. In this article, I am going to share with you the primary reason why Barack Obama has been able to prop up the U.S. economy over the past eight years. If Barack Obama had not taken the extreme measures that he did, we would be in the midst of a historic economic depression right now. But by propping things up in the short-term, he has absolutely demolished our long-term economic future. But like most politicians, Obama has been willing to sacrifice the future for short-term political gain.
If you take any basic college course in economics, you are going to learn about John Maynard Keynes. Without a doubt, Keynes was one of the most famous economists of the 20th century, and one of the things that he believed was that governments should go into debt and spend more money when an economic downturn strikes. By injecting additional funds into the economy during a time of crisis, he believed that the severity of recessions and depressions could be reduced. This approach ultimately become known as “Keynesian economics”, and in the post-World War II era virtually the entire world embraced it at least to some degree.
***The Great Unwind Unravels Hottest Rental Markets in the US – Wolf Richter
Now in San Francisco, New York, Boston, Chicago, Washington DC, and perhaps a city near you.
Averaged out across the US, asking rents for apartments still rose in November on a year-to-date basis, though more slowly than before, with the median asking rent for a one-bedroom up 1.8% and for a two-bedroom up 2.2%, according to Zumper’s National Rental Price Index. In July, rents had still been up over 4% year-to-date. Since then, they’ve started ticking down on a monthly basis. But averages can cover up more than they reveal.
On a city-by-city basis, a different scenario emerges, with rents going totally crazy in some la-la lands, as if it were still the summer of 2015, and in other cities, including the three most expensive rental markets in the US, rents are coming down hard.
Trump Vs China: Credit Cycles & Gold – Alasdair MacLeod
The Trump shock produced some unexpected market reactions, partly explained by investors buying into a risk-on argument,equities over bonds and buying dollars by selling other currencies and gold.
This is because President-elect Trump has stated he will implement infrastructure investment and tax-cut policies. If he pursues this plan, it will lead to larger fiscal deficits, and higher interest rates. The global aspect of the markets recalibration focuses on the strains between the dollar on one side, and the euro and the yen on the other, both still mired in negative interest rates. The capital flows obviously favour the dollar, and are putting the Eurocurrency markets under considerable strain.
Gold has been caught in the cross-fire, being a simple way for US-based hedge funds to buy into a rising dollar by selling gold short. While this pressure may persist, particularly if the euro weakens further ahead of the Italian referendum, it is essentially a temporary market effect. This article explains why this is so by analysing the next phase of the credit cycle, and the implications for interest rates and prices, which will be fuelled by higher US fiscal deficits in addition to China’s stockpiling of raw materials. It concludes that there are factors at work which were originally identified by Gordon Pepper, who was acknowledged as having the finest analytical mind in the UK Gilt market in the 1960s and 1970s.
The truth about trade agreements – and why we need them – Chad Brown
U.S. trade agreements could be the first economic casualty of the 2016 election. One of President-elect Donald Trump’s signature campaign promises was to renegotiate NAFTA and even potentially pull the United States out of the World Trade Organization. And as Democratic leaders now contemplate their party’s future, they, too, are questioning the wisdom of such international deals.
Existing U.S. trade agreements rose from the ashes of World War II and the Great Depression. Understanding how they protect the U.S. economy, American workers and consumers is critical to avoiding a repeat of the policy mistakes of the 1930s.
Fiscal space and low interest rates: A Eurozone perspective – Marco Buti, Nicolas Carnot
The European Commission has just called for a fiscal stance that is more supportive of the recovery and of monetary policy in the Eurozone. This column argues that the case is strong for spending now on investment and other targeted programmes supporting growth and employment. However, fiscal space is heterogeneously distributed across the Eurozone, with some countries able to exploit a clear margin, and others needing to pursue a more prudent approach of gradual debt unwinding. A common stabilisation capacity would help for managing shocks that cannot be absorbed by national stabilisers alone.
Zie voor hetzelfde type EU-argument ook:
Why we need a positive fiscal stance for the Eurozone and what it means – Marco Buti, Lucía Rodríguez Muñoz
With growth still weaker than is desirable and challenges originating from geopolitical developments further complicating the economic outlook, responsible growth-friendly fiscal policy needs to play a bigger role in supporting demand in the Eurozone today. This column presents a new European Commission Communication on Eurozone fiscal policy, which outlines what a “positive fiscal stance” for the Eurozone would look like.
*** Sudden, Infectious Enthusiasm for “Current Economic Conditions” after Trump Called them “Terrible” for Months? – Wolf Richter
No major consumer confidence measure has been more relentlessly negative since the Financial Crisis than Gallup’s weekly Economic Confidence Index. It has become notorious for its gloomy depiction of Americans’ feelings about the economy. It was in positive territory only twice: in January 2008, when the index commenced as it was plunging, and in the weeks of December 2014 and January 2015, which Gallup ascribed to the drop in gasoline prices. The rest of the nine years of its existence, the index has been negative.
But in the three survey weeks since the November 8 election, everything changed. And today, the index hit record highs.
Exploding myths about the gig economy – Jacques Bughin, Jan Mischke
The ‘gig economy’ refers to the independent workforce, including those drawing income from new digital platforms such as Uber and Airbnb. This column uses a survey of 8,000 respondents in the US, the UK, Germany, Sweden, France, and Spain to explode some myths about this relatively new and controversial side of the economy. Among the findings are that existing statistics severely underestimate the size of the gig economy, and that 30% of those working independently do not do so out of choice.
The Role of Technology in Limiting Privilege and Bias – Charles Hugh Smith
Technology cannot eliminate human bias or poor decisions, but it has the potential to eliminate systemic bias and privilege.
Technological skills are often viewed as the dividing line between globalization’s “winners” and “Losers.” Those with high technology skills tend to be paid considerably more than those with lower skills, and have more opportunities to advance.
In this view, technology is the purview of the highly skilled, highly paid “winners” of the 4th Industrial Revolution, and “the rest of us” are merely consumers of technology.
In The Year Of Fake News, Finance Cannot Be Entertainment – Raoul Pal
Let’s call 2016 the year of “fake news“, when scandalous, entertaining algorithm-based headlines helped usher in one of the biggest political upsets of all time in the US Presidential election. Coverage was driven by candidates’ sensationalized commentary, but missed capturing the real temperature across half of America. As The New York Times’ Jim Rutenberg wrote, “the news media by and large missed what was happening all around it, and it was the story of a lifetime.” Media became somewhat of a manipulation game that discouraged us from understanding the crux of the real news.
Online, aggregated viewpoints bombarded us on a personalized internet and rarely did we encounter a scenario that we have to disagree with. People were sick of the establishment, and forced themselves to be heard.
Investment investigator Gordon Dee Smith forecasted on Real Vision TV how the hyper-connectivity communication revolution can mean major consequences for the world of politics and business. Disparate rebels with an agenda can quickly form tribal affinity groups and emerge without warning, potentially taking down companies and governments, changing policy, shaping or even destroying careers, or bankrupting a company. We’ve witnessed it firsthand.
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.