Economische aanraders: 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.

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The Rise and Fall of the Phillips Curve – Ed Walker
27 oktober 27
The Phillips Curve says that there is an inverse relation between unemployment and inflation. Low unemployment is correlated with a rise in inflation. It’s an article of faith to economists of all stripes. It’s listed in the popular introductory economics textbook by N. Gregory Mankiw as one of the Ten Things All Economists agree on. It’s especially loved by the Fed, which raises or lowers interest rates depending in part on its predictions. Its critics point out that its predictions are poor.
In this post, I discuss the derivation of the Phillips Curve, its adaption by Samuleson and Solow to manage the economy, its breakdown in the 1970s, exploitation by neoliberals of that breakdown to replace Keynesian demand-based economics with monetarism and supply-side economics, its rejuvenation, and the evidence that it doesn’t make accurate predictions.
I conclude with some observations based on an important paper by Simcha Barkai that challenges the core beliefs of neoliberalism. It suggests we can raise wages substantially without causing inflation by lowering corporate profits.
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Price Inflation Is Not the Worst Part of Easy Money Policy – C. Jay Engel
31 oktober
There are many critics of the Fed’s recent money supply expansion, especially since 2008, whose chief criticism is that it will result in consumer price inflation. While proponents of the Austrian School agree that high consumer price inflation is one possible result of an expansionary monetary policy, we neither hold it as necessary nor as the worst consequence of money creation.
For the Austrian, who defines inflation as an expansion of the money supply, rising consumer prices only take place to the extent that this new money drives demand for more consumer goods. But as Mises pointed out, new money does not enter the economy neutrally; that is, it enters in specific ways and in accordance with specific mechanisms. This affects where the rising prices will show up first. And if it takes decades for the newly created money to reach consumers, then it will take decades for the consumer prices to rise.
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***What Could Pop The Everything Bubble? – Charles Hugh Smith
28 oktober
As central bank policies are increasingly fingered by the mainstream as the source of soaring wealth-income inequality, policies supporting credit/asset bubbles will either be limited or cut off, and at that point all the credit/asset bubbles will pop.
I’ve long held that if a problem can be solved by creating $1 trillion out of thin air and buying a raft of assets with that $1 trillion, then central banks will solve the problem by creating the $1 trillion out of thin air—nothing could be easier.
This is the lesson of the past eight years: if a problem can be solved by creating new money and buying assets, then central banks will solve that problem.
Problem: stock market is declining. Solution: create new money and buy, buy, buy stock index funds. Problem solved! Market stops falling and quickly rebounds as “central banks have our backs.”
Problem: interest rates are inhibiting lending and growth. Solution: create a few trillion units of currency and buy enough sovereign bonds to drop interest rates to near-zero.
Problem: nobody’s left who can afford to buy the new nosebleed-priced flats that underpin China’s miracle-grow economy. Solution: create new currency, lend it to local government agencies who then buy the empty flats.
Problem: stagnant employment and deflation. Solution: create a trillion in new currency, buy a trillion in new government bonds that then fund infrastructure projects, i.e. bridges to nowhere.
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Spillovers from venture capital investment – Monika Schnitzer, Martin Watzinger
31 oktober
Conventional wisdom holds that venture capital-financed start-up companies generate positive spillovers for other businesses, but these spillovers are hard to measure accurately. This column uses a broader analysis of patent spillovers than previous studies to argue that venture capital-financed start-up companies help established companies innovate, and play a significant role in the commercialisation of new technologies. This suggests that subsidies for venture capital investment should be at least as large as current R&D subsidies.
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The Fed Actually Begins its QE Unwind – Wolf Richter
2 november
But what’s happening with mortgage-backed securities?
Thursday afternoon, the Fed released its weekly balance sheet for the week ending November 1. This completes the first month of the QE unwind, or “balance sheet normalization,” as the Fed calls it. But curious things are happening on the Fed’s balance sheet.
On September 20, the Fed announced that the QE unwind would begin October 1, at the pace announced at its June 14 meeting. This would shrink the Fed’s balance sheet by $10 billion a month for each of the first three months. The shrinkage would then accelerate every three months. A year from now, the shrinkage would reach $50 billion a month – a rate of $600 billion a year – and continue at that pace. This would gradually destroy some of the trillions that had been created out of nothing during QE.
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Falling Pound Might Not Bring UK Trade Balance Boost – Yves Smith
1 november
As most readers know a depreciation of a currency is not always a bad thing. In normal circumstances cheaper currency will make imports more expensive and lead to lower standards of living but it will also make exports cheaper and this will normally lead to more job creation. That’s the theory anyway. If it works out this way a depreciation might help rebalance a current account deficit. The UK could sure do with some rebalancing. It’s current account deficit is now a whopping 5.2% of GDP, the highest it has ever been since the statistics came online.
I’m posting this article that Philip Pilkington wrote in 2014 because it highlights some interesting things about the UK current account and the sterling. Pilkington argues that the sterling is only propped up by financial inflows into the City of London and that any scare to these financial flows can easily result in a sterling crash (he made a similar argument in this Guardian article which came out around the same time). He argues that the UK is not like the US which, because of its reserve currency-issuing status, can run very large current account deficits with little or no consequences for the dollar. The sterling crash after the Brexit confirms his argument: all it took was a big scare.
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Behavioural economics is also useful in macroeconomics – Paul De Grauwe, Yuemei Ji
1 november 2017
Dynamic stochastic general equilibrium models are still dominant in mainstream macroeconomics, but they are only able to explain business cycle fluctuations as the result of exogenous shocks. This column uses concepts from behavioural economics to develop macroeconomic models with endogenous business cycle fluctuations. Application of the models highlights how the trade-off between output and inflation is moderated by the flexibility of the economy. The models further help to explain the international transmission of business cycle fluctuations.
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Can Gradual Interest-Rate Tightening Prevent a Bust? – Frank Shostak
Fed policy makers are of the view that if there is the need to tighten the interest rate stance the tightening should be gradual as to not destabilize the economy.
The gradual approach gives individuals plenty of time to adjust to the tighter monetary stance. This adjustment in turn will neutralize the possible harmful effect that such a tighter stance may have on the economy.
But is it possible by means of a gradual monetary policy to undo the damage inflicted to the economy by previous loose monetary policies? According to mainstream economic thinking, it would appear that this is the case.
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US Gross National Debt Spikes by $640 billion in 8 Weeks – Wolf Richter
4 november
But the debt-ceiling charade is back.
The debt ceiling charade being played out every few years in Congress makes the entire world shake its collective head and pray that Congress will for the umpteenth time raise the dang thing or at least “suspend” it. The other option is a US default, the global consequences of which are too ugly to imagine, even for Congress.
In its infinite wisdom, Congress didn’t raise the debt ceiling in September; it only suspended it through December 8, after which the horse-trading will start all over again. But Congress is busy listening to lobbyists about the tax cuts – who gets them and who pays for them – and the debt ceiling isn’t even on the back burner. So here we go again.
But this charade has some peculiar effects, beyond its entertainment value: For months on end, it covers up the true extent of US government debt, and its continued surge. Then suddenly, the floodgates open.
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***The Economic End Game Continues – Brandon Smith
3 november
In November of 2014 I published an article titled ‘The Economic End Game Explained’. In it I outlined what I believed would be the process by which globalists would achieve what they call the “new world order” or what they sometimes call the “global economic reset.”
As I have shown in great detail in the past, the globalist agenda includes a fiscal end game; a prize or trophy that they hope to obtain. This prize is a completely centralized global economic structure, rooted in a single central bank for the world, the removal of the U.S. dollar as world reserve currency, the institution of the SDR basket system which will act as a bridge for single a global currency supplanting all others and, ultimately, global governance of this system by a mere handful of “elites.”
The timeline for this process is unclear, but there is some indication of when the “beginning of the end” would commence. As noted in the globalist owned magazine The Economist, in an article titled “Get Ready For The Phoenix,” the year of 2018 seems to be the launching point for the great reset. This timeline is supported by the numerous measures already taken to undermine dollar dominance in international trade as well as elevate the International Monetary Fund’s SDR basket. It is clear that the globalists have deadlines they intend to meet.
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The mortgage rate conundrum – Alejandro Justiniano, Giorgio Primiceri, Andrea Tambalotti
31 oktober
The US witnessed an unprecedented boom in mortgage debt and house prices in the early 2000s, which precipitated the crisis in 2007. This column documents a sudden, large and persistent fall in the spread of mortgage over Treasury rates in the summer of 2003. It argues that the emergence of this ‘conundrum’ marked a crucial turning point in the dynamics of the boom, with the resulting easier credit conditions in the subprime market in particular leading to the origination of mortgages that defaulted progressively more frequently down the road.
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Tax Graph – John H. Cochrane
1 november
The tax discussion is moving to personal income taxes, and the world is waiting to hear the actual Republican proposal, due tomorrow (Thursday).
With apologies to blog readers who know all this in their sleep, I thought I might explain just why (some) economists keep chanting “broaden the base, lower marginal rates,” or why I keep saying that taxes don’t matter, tax rates matter to economic growth. This is grumpy economist, Saturday morning cartoon edition. Perhaps a colorful graph will help as you try to explain taxes to relatives this Thanksgiving.
Start with the blue line. Suppose you work 40 hours a week, and make $100,000. Suppose the government wants half of it. One way to get that is with a flat tax — for every dollar you earn, send 50 cents to the government. The government gets $50,000.
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It Gets Serious: Biggest US Cities Where Rents Are Plunging – Wolf Richter
1 november
Even Seattle rents are under pressure from new construction. But rents are surging in mid-tier markets.
Over the past few years, commercial real estate prices have boomed, and so has multi-family construction, enticed by dropping and desperately low rental vacancy rates that have pushed up rents. But vacancy rates bottomed out in Q2 2016 and have since turned up. In Q3 2017, the rental vacancy rate rose to 7.5%, the Census Bureau reported on Tuesday. While still low, it’s the highest rate in over three years:
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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.

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